Order fulfillment processes are becoming more intricate and inventory management and delivery performance is slipping, according to a global supply chain and logistics management study by Capgemini and Oracle.
Their study, From Customer Orders through Fulfillment: Challenges in Manufacturing, High Tech, and Retail, found only one in three manufacturers is happy with their order promising and 50% of respondents say exception handling needs improvement. As a result, customer satisfaction and retention are put at risk and businesses are forced to allocate additional spending on resources to address the situation, which, coupled with rising prices of raw materials and transport costs, are a growing threat to businesses’ bottom line.
Key conclusions from the report, which surveyed almost 600 top supply chain executives in manufacturing, high-tech and retail businesses worldwide, show:
- Key challenges face manufacturing, high-tech and retail companies including maintaining customer satisfaction (44% of respondents), order management complexity (42%), and inaccurate order promise dates (39%)
- Companies need adequate multi-channel management systems – almost nine out of ten manufacturers (86%) reported their customers are ordering through multiple channels (with on average 3.1 order-taking channels including e-commerce, call centers and EDI) and this trend is on the rise – with 45% of respondents saying that multi-channel ordering has risen by 45% in the last year. The need for a platform that can provide consistent fulfillment process control regardless of the ordering or fulfillment channel used is necessary.
- Outsourcing among manufacturers is expected to continue to rise, particularly in transportation, production and warehousing – just over one third of respondents expect to increase outsourcing of production and warehousing tasks while 46% will subcontract more transportation and logistics activities
- Increasing consolidation of the market – one half of manufacturers (47% surveyed have either been acquired by or have purchased another company in the last five years and 56% report the merging onto a single ERP system
- Costs are increasing across all sectors – and are up 76% on transportation, 70% on raw materials, 65% for labor-related costs and 41% on warehousing. In the retail sector companies report costs associated with fulfillment have risen by 78%. Delivery delays and resultant expediting is the largest driver of fulfillment costs
- But at the same time order cycle times are reduced. For example, in manufacturing the period from order receipt to the outgoing shipment to the customer has contracted for 43% companies surveyed
- In terms of future challenges, generally accurately promising dates based on fulfillment planning lead times was the top issue overall. Among retailers the top issue was having visibility to planned inventories to commit. Among hi-tech firms 58% of respondents say the top future challenge will be data accuracy while 46% say this will be the timeliness of data
Ben Pivar, senior vice president and head of North America supply chain technologies at Capgemini, said: “It’s clear given the growth of multi-channel complexities, it’s time for industries to consider the impacts these requirements place on their businesses. Manufacturers should consider following retailers in embracing the new multi-channel reality by evaluating up-sell and cross-sell opportunities across product lines to create a consistent and profitable customer experience across all channels. In order to truly make this work, manufacturers need to consider how to integrate multi-channel requirements throughout their supply chain operations.”
Jennifer Sherman, senior director of applications strategy at Oracle, said: “Value chain integration is a long-term trend and there is an urgent need for more collaborative planning and execution. The threats of volatility and change in the marketplace can be mitigated by the existence of an agile and scalable supply chain platform. Businesses need to consider investing in a technology platform to create a centralized view and single face to the customer and to ease the adoption of new business processes without mandating a replacement of existing supply chain execution systems.”
Retail Times’ readers can download the full report here: http://www.capgemini.com/