Oracle research reveals 1 billion cost of fragmented supply chains

A new Oracle report, 'The Fragmented Supply Chain', reveals the huge cost to British businesses of poor information flows along supply chain operations.  Missed sales opportunities, an inability to supply peaks in demand and dissatisfied customers were just some of the consequences of inadequate access to information across the supply chain.  The study shows that many supply chain executives believe that ineffective information management is hampering growth and hindering recovery plans.

 
In producing The Fragmented Supply Chain, Oracle commissioned independent market research consultancy Dynamic Markets to investigate the levels of integration and collaboration between organisations and key departments in their extended network and the impact on business performance.
 
Key findings include:
Inefficient information flows result in 1.2 billion of missed sales each year for UK businesses in the manufacturing, retail & distribution and wholesale sectors alone[1]

Physical products flow faster than or as quick as information across supply chains for one in three companies

Supply chain executives spend 48% of their time sifting through spreadsheets, emails and databases
 
Information the Weakest Link in the Supply Chain
While the supply chain executives surveyed understandably acknowledged the need for timely and accurate information, they were spending a significant amount of time in gathering this data from numerous disparate sources.  On average, each supply chain executive spends 48% of their time sifting through spreadsheets, emails and databases in order to keep track of their supply chains.
 
Respondents cited a number of reasons for the fragmented flow of information across their supply chain operation:
Heavy volume of information to manage (41%)
Information held in multiple, isolated databases and spreadsheets (37%)
Constant changes in the supply chain (34%)
Complex nature of the supply chain (34%)
 
Indeed, the disjointed information flows across the business are so extreme that for one in three companies a physical product travels as fast or faster across supply chain than the information related to it.
 
Andrew Spence, Oracle's supply chain business development director, said: "Companies have spent 30 or 40 years applying lean principles to their manufacturing processes to ensure smooth, efficient and uninterrupted production.  Yet they have overlooked the importance of a smooth, uninterrupted flow of information.  When held in separate spreadsheets, databases and emails, information cannot be shared openly and easily.  You can't automate decision making but you can certainly automate the gathering and presenting of information."
 
The Cost to British Business of Fragmented Supply Chains
Supply chain executives acknowledge that such inefficient information flows are having a detrimental impact on business performance.  Almost half of the companies surveyed (47%) state that it has resulted in missed sales opportunities at a combined cost of 1.2 billion per annum for UK firms.
 
Further problems caused by fragmented supply chains included:
Limiting productivity (58%)
 Reducing competitive advantage (52%)
 Long product lead times (51%)
Dissatisfied customers (47%)
Hampering growth (38%)
 Hindering recovery efforts (26%)
 
Andrew Spence said: "The information management for many supply chains doesn't reflect the way organisations operate today.  Companies are working with systems set up and designed for an environment where a lot of the work is done within one company, rather than the vast network of suppliers, designers and partners companies that is the reality of the modern business.  People are using spreadsheets and email to bring together disparate planning systems instead of a system that matches the 21st Century requirement for collaboration across the supply chain.  The commercial impact of such inefficient ways of working is clear to see and can be mitigated with modern IT systems leveraging the power of the internet."
 
Inability to Supply Peaks in Demand The Disconnect with Marketing
In the past 12 months, 88% of supply chain managers have found their company unable to supply peaks in demand created by sales and marketing activities for reasons including marketing activities being delayed and then launched again at short notice (53%), insufficient notice being given to the extended supply chain (43%) and sales and marketing professionals failing to assess the likely impact of their activities on demand (36%).
 
On average, one in five campaigns has resulted in an inability to supply demand.
 
Andrew Spence said: "The results highlight how in many organisations sales and marketing departments are often disconnected from supply chain teams.  If promotions are communicated too late to supply teams, supply chains are simply unable to gear up quickly enough to meet the demand.  At its worst, this leads to empty shelves with the promotion creating demand that competitors then fulfil."
 
Lacking Visibility
The lack of visibility into supply chain operations has further undesirable consequences in the form of excessive inventory and an inability to effectively manage risk 87% of supply chain professionals think they would be able to reduce their inventory levels by an average of 22% if they were able to understand better the risks inherent in their tiered supply chains.
 
Rather than being accessible to supply chain members as required, information can also all too often reside with just one individual, exposing the business to further unnecessary risk 33% of supply chain managers complain that knowledge of the supply chain and key processes is owned by specific individuals.

[1] Total cost of lost sales opportunities = total number of relevant companies (3415 source; The UK Office of National Statistics, BIS small and medium enterprise statistics 2008) * percentage of companies affected (47%) *actual cost of lost sales per annum (750,000 answer from Q7) = 1,204 million