Better supply chain planning means better business performance

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Better supply chain planning means better business performance

“Companies that run better supply chains generally perform better than those that do not …” was a comment I made many years' ago at an industry conference. While in-person conferences were an early casualty of COVID-19, replaced by virtual meeting and gatherings, so too were poorly performing supply chains.  Supply disruptions that began in January and rolled across regions and industries have affected almost all companies to one degree or another. Such disruptions have been particularly unkind to companies that neither saw nor were able to react to what they saw quickly and with conviction.

If one says something long enough, eventually you will be proven right. I take no particular solace in the fact that COVID-19 has revealed without a doubt that supply chain performance is critical to overall business success. Yet it is satisfying that the supply chain will now take its place as a critical function along with sales and marketing. After all, if you cannot make it, you cannot sell it.

Supply chain maturity and business performance

In an IDC survey conducted in late 2019, sponsored by Kinaxis, we asked a set of questions designed to identify and categorize supply chain planning maturity. The idea was to correlate supply chain planning performance with overall business results. The thesis was that companies with better and more mature supply chain planning capabilities would perform better. Clearly it is not just supply chain planning that drives business performance, but as planning is so central to how the supply chain works, the reality is that if you don't get planning right, you don't get the supply chain right.

In the design of the survey, we strove to identify a broad assessment of supply chain planning maturity by asking questions about process, collaboration and technology. Specifically, we asked how companies self-rate their planning processes and the level of collaboration between supply chain planning and other functional areas like sales and marketing. We then asked companies about the technological foundation of supply chain planning, ranging from the use of spreadsheets to a single, integrated supply chain planning suite.

Spreadsheet prevalence across companies large and small

As one would expect, some companies are quite advanced in their supply chain planning efforts while others are not. Broadly though, companies with more mature supply chain planning capabilities utilizing an integrated planning suite and broad functional collaboration outperform less mature competitors in their markets. Said another way, supply chain planning is critically important to the business.

Although it is an old saw that “supply chain people love their spreadsheets,” we were quite surprised to see the enduring prevalence of spreadsheets across supply chain planning. And use of spreadsheets was not just reserved for the small companies either! Companies report using spreadsheets as the primary planning tool more commonly in large enterprise (21%) than in small- (15%) or medium-sized (14%) companies. In other words, large companies are 50% more likely to be using spreadsheets than smaller ones. Some of this is a function of the age of the business and thus something of a legacy effect, but some of it is also the recognition by smaller businesses that technology is a way for them to win against larger competitors that have scale.

Planning for the unexpected

The notion that supply chain planning is critical to overall business success is also an emerging theme as COVID-19 rolls across the globe. In a separate IDC supply chain survey conducted in March 2020, we see the specter of business model disruption hovering over all industries, as almost 60% of businesses say that they expect to be disrupted in some form or another by the middle of 2021.

Although it's never entirely possible to plan for the unexpected, the supply chain can put itself in a position of anticipating and mitigating some things and reacting rapidly to others. Without a capable and mature supply chain planning capability in place, it is hard to see how companies do either well. In times of disruption, the ability to quickly recognize, plan and then act can be the difference between surviving and dying. Some companies may just get lucky and avoid major bumps in the road, yet while fortune may favor the bold, good luck favors the prepared.

Watch our webinar series: Powering business gains from the supply chain

 

 

 

 

 

 

 

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