Just 10% of companies were on the right path to building customer-centric supply chains that are resilient and enable growth prior to the COVID-19 pandemic, according to a new report from Accenture.
While supply chains have traditionally been a driver of efficiencies and scale, the report discusses how their role in recent years has evolved beyond mere efficiency and toward lasting growth.
Based on a global survey of 900 senior executives from nine major industries across 10 geographies, the report, titled “A License for Growth: Customer-centric supply chains,” identifies major supply chain challenges that have only been magnified by the ongoing COVID-19 global crisis including: inflexibility to deliver undifferentiated customer offerings; poor ecosystem design lacking the right partners; and a siloed technology architecture that stifles collaboration and co-innovation. The report also outlines leading practices of a few selected companies that have transformed their supply chains and created a customer experience that is both purpose-led and focused on growth.
“The supply chain has always been the lifeline to humanity. The COVID-19 health crisis has brought to light the critical need for a resilient supply chain that produces and delivers all essential goods and services quickly, safely and securely,” said Kris Timmermans, a senior managing director and global supply chain and operations lead at Accenture. “Companies have moved quickly to prioritize transparency and enable faster decision-making. Now they must double down on building more customer-centric, purposeful supply chains that will lead to growth as economies rebound.”
The companies in the report have invested US$153 million, on average, over the past two years to transform their supply chains. However, it is just a small group — 10% of those surveyed — that are effectively using their investments to transform their supply chains to meet increasing and evolving customer experience demands. The Accenture analysis found that these leading companies follow four key practices that cement them as leaders among their peers:
- Begin with the customer in mind. Base supply chain strategy on what the customer values, which is a more complex endeavour than ever before because customer experiences are now purpose-led and personalized. More than two-thirds (71%) of the leading companies build supply chain strategies to deliver experiences linked to key customer value propositions, such as sustainability, data privacy/security and customized delivery and service
- Turn insight into innovation. Invest in building analytical, asset-light collaboration architectures, which could significantly increase the supply chain’s impact on revenue and shared success within and outside their ecosystems. In fact, more than half of the average revenue growth that the leading companies experienced came from collaboration tools and data-driven insight technologies.
- Develop targeted capabilities. All of these leading companies, whether B2B or B2C, have built capabilities to segment customers and products in real-time. They’ve partnered with procurement to design products and services and identify potential suppliers to achieve target margins. They also invest in advanced cybersecurity capabilities to address the growing security threats from data breaches and data theft.
- Engage the CEO beyond conversation. Support from the top is key to true supply chain transformation. The CEOs of these leading companies are more likely to drive supply chain discussions with their boards and translate those discussions into results. More than half (53%) of these CEOs allocate funding to drive supply chain innovation, and 49% allocate top talent to accelerate supply chain transformation
The report also includes analysis proving that the efforts taken by these leading companies have paid off. Accenture’s financial analysis of these leaders has found that during the period from 2017-2019, they have outperformed other companies in several areas. For instance, they grew [revenues] 13%, on average, compared with an average revenue decline of 5% for the other companies. Moreover, their supply chain contribution to total revenue was triple that of the other companies’ (52% vs. 17%); and they delivered EBITDA* margins 2.5% higher than those of the other companies.
“The uncertainties posed by COVID-19 show no signs of abating just yet and Brexit is bringing an additional set of challenges for UK businesses,” said Stephane Crosnier, Supply Chain & Operations Lead for Accenture UK. “Learning from these leaders will be essential as UK businesses seek to handle these difficult market conditions. Now, more than ever, is the time to look at the formula that leading companies have developed and channel it in their own supply chains. Building more customer-centric supply chains will ensure they can continue to serve their customers and communities whilst driving long term growth in what remains a very uncertain future.”
About the Research
Accenture surveyed C-level executives from 900 companies from nine industries across 10 geographies during December 2019 to February 2020 to understand how they are transforming their existing supply chains into ones that deliver customer experience-led growth. Accenture used econometric modelling to estimate the impact of collaborative analytical asset-light architecture on revenue growth. Additionally, Accenture used the CapIQ database to highlight the differences in 10% of the companies surveyed, who are top performers, versus others on indicators such as EBITDA and share price movements.
*A standard accounting measure, EBITDA refers to earnings before interest, taxes, depreciation and amortisation.