SUPPLY CHAIN AUTOMATION & EFFICIENCY - MYTH OR REALITY?

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Global supply chains across the retail, automotive, financial services, manufacturing and high-tech markets are dogged with process and cost inefficiencies, according to a survey of 400 organisations across the UK, France, Germany and the US. The survey, commissioned by GXS and conducted independently by analyst group, Quocirca, cited that
increasing complexities and costs of trading electronically with multiple trading partners, using a myriad of technologies and standards have hindered many organisations' B2B process efficiencies. With more than 40 percent of respondents having more than 1,000 active suppliers and 40 percent having more than 5,000 active business customers, the survey revealed that the majority of organisations found it incredibly difficult to utilise automated technologies to optimise trading activity due to widely varying characteristics and capabilities across their global trading bases.

The continual evolution of standards and the international trading environment, complicated by language barriers, customs policies and currencies, are all contributing to the complexities facing the B2B value chain. While more than 80 percent of respondents have an electronic data interchange (EDI) or Internet-based system at their disposal for facilitating automated transactions, the combination of the identified complexities has limited their actual use. As a result, approximately 95 percent of organisations rely on manual communication via e-mail, telephone, fax and post. This causes the value chain to be littered with cost inefficiencies and errors and the lack of traceability raises serious questions about the integrity of information with respect to governance and audit compliance.

The majority of respondents are focused on growth, market share and profitability gains - 65 percent of respondents are aiming to make significant improvements in customer profitability and 59 percent are looking to reduce cost and overheads associated with the sales process to help realise such ambitions. However, with so many organisations using manual processes, the supply chain is limited by a lack of visibility and scalability.

Clive Longbottom, senior director at Quocirca, said: "The automation of transactions has long been touted as an enabler of efficiency, but the irony is that the more broadly organisations apply automation to B2B processes, the more they may suffer. Few have the capability to solve this problem cost-effectively on an in-house basis. The key to success is achieving broad and inclusive automation and realising the benefits that come from it."

Ryan Kraudel, GXS global product marketing manager, said: "This research demonstrates that global supply chains are highly complex and less efficient than currently perceived. Organisations are struggling to manage the various forms of complexity involved and have suffered from a general lack of internal skills and focus required to create a flexible value chain. They are also looking for ways to optimise the operation and outcome of the value chain, from cutting the number of suppliers to extending global capabilities to reach more customers. This research suggests that B2B transaction management isn't a core strength for most companies and highlights a need to consider new approaches to meet current and future B2B business requirements."

Interestingly, the trend for suppliers to make it mandatory to transact in a particular way is not influencing the value chain as expected, with 40 percent of respondents insisting that it would make no difference to their ultimate decisions about their approach to electronic trading. Organisations are keen to drive improvements in their procurement processes such as reducing costs, increasing the overall quality of goods, enhancing visibility and achieving greater predictability within their business.

In fact, B2B Managed Services customers saw benefits that far outweighed those expected by non-users. This contrasts starkly with many major IT projects, such as CRM initiatives, where the benefits actually realised often fall short of expectations.

Key statistics from Quocirca's research are:
The UK...
* has the highest utilisation of a core of regular suppliers
* has the lowest usage of paper-based processes and the highest EDI utilisation
* has the lowest level of loyalty to a supplier who makes a specific transaction mechanism mandatory, but the highest level of loyalty to a customer taking the same steps

Germany...
* has the lowest interest in identifying 'risky' suppliers within their partner ecosystem
* is more interested in breaking across country borders to reach new customers than other countries
* has the highest number of respondents already using a managed B2B service

France...
* is the least likely country to look to reducing the number of suppliers, or to look to automation of processes in the value chain
* is the country that finds the diversity of partner transaction mechanisms most difficult to deal with
* has the lowest level of familiarity with the concept of a managed B2B service, and the lowest capability to relate to the concept

The USA...
* is the region most actively pursuing automation or further automation of the value chain to improve procurement
* has the highest level of EDI utilisation in the procurement chain
* finds it most difficult to keep internal systems in step with the business as it changes

Trading partners
* 45 percent of respondents have more than 1000 suppliers;
* 70 percent of respondents have more than 1000 business customers;
* 40 percent have more than 5000 business customers;
* More than 20 percent of respondents are unsure about how many active suppliers they have;
* 55 percent of respondents have a core of regular suppliers that account for the bulk of their activity;
* 20 percent have a group of regular suppliers but also do a lot of ad hoc procurement; and
* 65 percent of respondents are trying to reduce the overall number of suppliers.

Business priorities
* 80 per cent of respondents are focussed on reducing cost and overheads associated with the procurement process
* 78 per cent would like to significantly increase the overall quality of goods and services that they buy
* Over 70 per cent of respondents would like to significantly reduce goods in inventory
* 60 per cent would like to automate, or further automate, the procurement process through better use of technology
* 40 per cent of respondents are generally happy with the capability of IT systems used to support the procurement process but do feel some improvements could be made

Outsourcing
* 55 per cent of respondents use IT outsourcing within their organisation
* 45 per cent use business process outsourcing within the organisation
* The most common practices that are outsourced are: the payroll function (25 per cent), call centres (18 per cent) and internal helpdesks (16 per cent)

B2B managed services
* The perceived benefits of working with a managed B2B services provider included: 85 per cent believe it would ensure they have access to up to date supplier catalogues, 82 per cent thought that it would allow them to share demand / forecasting information with trading partners and 81 per cent that it would enable them to collaborate efficiently over RFIs, RFPs and RFQs
* 100 per cent of respondents felt that when choosing a managed B2B service providers it was vital that it has existing links with trading exchanges and hubs.
* The main motivations for moving towards using managed B2B services was a reduction in transaction costs (70 per cent), less distraction to allow them to focus on core business objectives and the reduction (70 per cent), reduction in the cost of products and services procured through better management of competitive bids (70 per cent) and savings from a reduction in house IT running costs (65 per cent).

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