Supply chain performance hampered by partner competencies

PRTM reveals the findings from its annual European Supply Chain Trends Survey

Nearly half of supply chain leaders today see a lack of partner competencies as the key barrier to better business performance, reveals PRTMs European Supply Chain Trends Survey 2006/7. The report highlights the increasing trend of leveraging alliances and partnerships in the global economy to enable greater global reach, access to new distribution channels and supplier know-how. However, the findings suggest companies are still working through the implications of forming poor partnership strategies.   

Gordon Colborn, Director at PRTM, comments:

Despite the growing importance of partnerships and alliances as a source of innovation, many companies are still not organised to do this correctly and are pursuing poor partnership strategies by trying to balance too many suppliers and failing to appreciate the effort required to manage this process. For example, partnership management activities such as performance review meetings are central to achieving anticipated performance objectives but often dont occur on a regular basis or in a structured way. We would advise companies to follow and cultivate a few deep relationships to guarantee greater success.

The survey, conducted by global management consultancy PRTM, is the fifth annual study on supply chain trends in Europe and provides unique insights into how leading companies are using supply chain operations to achieve competitive advantage. Over 150 companies participated, the majority of which are headquartered in Europe with revenues in excess of $1 billion. The analysis highlights the practices and characteristics of leaders vs. followers and the differences between their management agendas. Ranked by Stages 1 to 4, in terms of supply chain practice maturity (from basic functional processes to the highest level of cross-enterprise collaboration), leaders are defined as those at Stage 4, with followers at Stages 1 & 2 of PRTMs maturity framework.

The survey also examined the innovation spending profile of companies by asking them to break down their total supply chain improvement budgets into three key categories; operational innovation (efforts that create operational breakthroughs that significantly affect the way a company competes), operational excellence (efforts targeted at achieving best in class performance by using existing processes) and operational improvement (efforts that increase efficiency and decrease waste). In 2006, supply chain leaders spent almost 40% of their total supply chain improvement budgets on operational innovation twice as much as followers.

The statistics suggests an increasing perception of the supply chain as a source of long-term profitability, and also highlight how focusing on process improvements only is no longer sufficient to gain competitive advantage in todays market. Leaders were able to demonstrate a careful balance between spending on all three categories across their budgets.

A positive note for European supply chain practitioners is the evident increase in the number of organisations who now consider supply chain management a strategic asset 83% of all respondents stated that the supply chain is perceived as strategic by the management team, compared with only 57% from the previous year. This indicates that the supply chain is now widely accepted as a critical enabler of the business agenda with support from the board-room down.

The results place the Northern European region (UK, Ireland and Scandinavia) as leaders (with the highest levels of maturity overall), with the computer and peripherals industry sector leading the field above all other industries surveyed.