Smart supply chains cut costs by 15%

20 February 2020

Many companies are failing to adopt smart supply chains and missing out on cost savings of up to 15% as a result, according to a survey.

The survey of more than 100 cross-sector global supply chain leaders by PA Consulting found that early adopters of smart supply chains had cut their costs by up to 15%.

The report Power your potential: the value of the smart supply chain, which was co-authored by the University of Nottingham, found that 69% of business leaders recognised their supply chain strategy was insufficiently innovative.

And four fifths (79%) recognised they did not have the right mixture of skills and capabilities.

However, three fifths (61%) said they planned to implement significant improvements, aided by digital technologies, into their supply chain within the next three years.

But while early adopters said they had seen a cost reduction of typically 10-15%, only 47% of respondents said they were interested in the potential of smart supply chains to reduce operating costs.

Respondents were asked what was driving the shift towards digital or advanced supply chain capabilities. Three quarters (74%) listed cost pressures, with globalisation, lower barriers to entry, greater competition and deteriorating margins making cost reduction imperative.

Three fifths (59%) spoke of advantages in technology such as cloud computing, mobile devices and automation as major drivers of adopting digital supply chains. Half (56%) listed changes in customer behaviour, with consumers becoming more savvy on price.

When asked about what benefits organisations hope to achieve from such a transformation, 54% mentioned enhanced visibility and transparency, 49% listed cost reduction and 43% mentioned enhanced customer focus and service and support for agile operating models.

George Marinos, senior supply chain consultant at PA Consulting, said: “Applying digital technologies in the supply chain [creates] direct, real-time connections with customers so that organisations can give them precisely what they need at the right time.

“This generates real value. As a result, our clients commonly see benefits that far surpass their original requirements.

“But as the research outlines, these will only be achieved with higher investment and a clear long-term ambition to embrace the full range of technologies and opportunities.”

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