Poor processes are arguably the biggest issue preventing supply chain executives from transforming performance. This is according to research from global supply chain consultancy Crimson & Co.
The most striking discovery is that 29% of supply chain processes are deficient. This insight was generated by analysing data from scprime, a powerful improvement approach designed to generate step-change improvement of the supply chain in line with a business’s strategy. Since 2010, over 1,000 scprime assessments have been completed in 20 countries across a range of sectors, making this one of the largest and most comprehensive independent studies in supply chains.
The analysis showed that 71% of processes in most organisations are executed effectively, achieving a ‘competent’ or higher rating. Alarmingly, this means that a third of all processes are carried out inadequately. This represents a significant risk to the reliability of operations and allows competitors to operate more effectively and with greater responsiveness.
Only 5% of processes achieved ‘mastery’, i.e. proven best practice performance, with the highest proportion scored as only ‘competent’. This presents an opportunity to those businesses that understand the competitive advantage that a supply chain can generate; by focusing on the right areas, a business can steal a march on its competitors.
Other notable trends identified include:
- Consistent poor performance in cross-functional processes compared to functional ones. On average, functional processes score 33% better. This demonstrates the systematic weakness in end-to-end decisions that impact the whole supply chain. It also reinforces the longstanding approach of many companies where sourcing, manufacturing, distribution and sales are treated as separate entities.
- Globally, Europe and North America appear to lag behind the rest of the world when it comes to process maturity, with fewer companies reaching the basic competency level. 32% of companies’ processes in Europe and North America were inadequate vs. only 22% overall. This is a surprising result which may reflect the tendency of processes to get worse over time. It may also be a result of the move of manufacturing out of the old markets, removing good process discipline from those markets.
- There are striking gaps between industry types. Life science companies have half as many inadequate processes as FMCG. They also have 87% of processes achieving a ‘competent’ or ‘proficient’ score vs. 65% in FMCG companies. This is influenced by the majority of life science businesses being large and global with long lead times and an absolute requirement for reliability.
Helen Chiswell, scprime leader for Crimson & Co, says that the results demonstrate the need for action: “It’s clear that businesses are struggling to evolve their supply chain processes to match business needs. This results from a ‘business-as-usual’ mindset where companies prefer to maintain the status quo instead of understanding the drivers of competitive advantage and adapting accordingly. This is a real risk to organisational performance.
“Every company needs to configure its processes to support priorities, allowing the supply chain to deliver against business objectives. The supply chain is increasingly recognised as a key enabler of competitive advantage but understanding requirements is a major challenge.
“Process improvement tools, such as scprime, provide a framework for this. Supply chain assessments identify the areas which need to be improved to maximise performance. A key stage in this is recognising the supply chain as a whole rather than simply an aggregation of functions.”