The Capgemini Supply Chain Agenda 2011

1. The 2011 Global Supply Chain Agenda
Market and demand volatility drives
the need for supply chain visibility
Cover-Reference Number

2. The Supply
Chain
agenda in
2011
2 The 2011 Global Supply Chain Agenda

3. Contents
The supply chain agenda in
2011: Volatile environment
drives the need for visibility 4
300 respondents shared their supply chain
agenda with Capgemini Consulting 4
Dealing with market volatility is the key
business driver for 2011 5
Need for visibility tops the supply
6
1
chain agenda
8
Reflections on 2010 and the
2011 outlook: Developing the
supply chain function
The 2011 Global Supply Chain Agenda 3

4. The supply chain
agenda in 2011:
Volatile environment
drives the need for
visibility
These are the results of Capgemini important supply chain projects
Consulting’s annual international supply for 2011.
chain survey. The study assesses the
views of supply chain executives around 300 respondents shared their
the world on their key priorities. supply chain agenda with
Capgemini Consulting
Growth in China and Although the general economic outlook In this year’s edition of Capgemini
Latin America is at the start of 2011 seems positive, a Consulting’s annual international
significant number of the respondents to supply chain study, 300 leading
promising but demand in this year’s supply chain survey, indicate companies participated from Europe
Europe and the US is not they are uncertain about market demand (59%), the US and Canada (25%),
that certain yet. At the in 2011. This year’s survey reveals that Asia-Pacific (10%) and Latin America
operating a reliable supply chain in a (6%). In addition to the survey, we
same time availability, volatile environment, while conducted face-to-face interviews with
security and costs of raw simultaneously dealing with rising supply chain senior executives, which
material costs, will be the primary provided additional insights.
materials is being challenge for supply chain managers in
jeopardized. Suppliers 2011. This challenge entails improving In this report we will first look at the
have gone due to the control of both the internal and external business drivers for companies in
supply chain. Consequently, improving 2011 and consequently the resulting
crisis and the challenge supply chain visibility ranks as the top supply chain project calendar.
is now how to secure this type of supply chain project planned for Secondly we will give insight in why
2011. 45% of the respondents recognize the project calendar of last year was
again against supply chain visibility as the main focus not executed as planned and the
competitive prices area for the coming year. Business implications of this for the position
process redesign (44%), business and development of the supply chain
innovation (41%) and improving long function. Finally we will look at what
term (demand) forecasting and planning we can learn from leading companies
(41%) follow close in the list of most on the topics mentioned in this report.
4 The 2011 Global Supply Chain Agenda

5. Business Drivers 2011 vs 2010
Market/Demand volatility* 40%
Increased material/service costs* 35%
Meeting (changing) customer requirements 58%
34%
Sustainability 50%
33%
30%
Develop emerging markets 30%
38%
Introduction of new product-market market combinations
25%
36%
Economic recovery
24%
Globalisation 23%
23%
20%
Regulatory compliance 21%
20%
Supply Chain security 17%
Increased business risk* 17%
New (type of) competition 19%
10% 2010
Other (please specify) 14%
9% 2011
Economic downturn 25%
8%
*New entry in 2011 survey 0% 10% 20% 30% 40% 50% 60%
Dealing with market volatility is in comparison to last year’s survey.
the key business driver for 2011
First we asked the participants the Meeting (changing) customer
question: “What business challenges requirements, the number 1 business
drive your supply chain agenda for driver in the 2010 survey, now ranks
2011”. 40% of the respondents the number 3 position. Sustainability
answered that dealing with market/ remains high on this list, and
demand volatility is now the most respondents reported more green
important challenge. Dealing with initiatives for the coming year. We are
demand uncertainty after the excited to see what these initiatives
recession is now playing a key role will be.
in the supply chain manager’s
business decisions. Second in the With the global economy improving
list of business drivers is increased at the beginning of 2011, the
material/service costs with a score of economic downturn has now moved
35%. Both topics are new in the list all the way down to the bottom of the
The 2011 Global Supply Chain Agenda 5

6. Top 10 Supply Chain Projects 2011
Supply Chain visibility improvement 45%
Business process (re)design programs
(e.g. process harmonisation, reorganisation) 44%
Business innovation
41%
(e.g. new channel, new technology, etc)*
Improve long term (demand) forecasting 41%
/planning
Operational excellence (e.g. LEAN) 39%
Network redesign/Distribution strategy 36%
Sustainability program 35%
Supply Chain talent program (e.g.acceleration
34%
training, project management, etc)*
Inventory optimisation program 34%
Contract renewal with Logistics Service Provider 33%
* New entry in 2011 survey 0% 10% 20% 30% 40% 50%
agenda, although it is still mentioned visibility improvement tops this year’s
by 8% of the respondents. When agenda. In the interviews, both internal
looking back at last year’s survey, we and external visibility are mentioned as
reported that one year on from the key elements for realizing a reliable
start of the global financial crisis, the supply chain. Visibility was reported
customer was back on top of the as knowing where products and
supply chain agenda for 2010. But the inventories are, being able to monitor
results of this year’s survey show that order progress and being able to
We want to get more grip last year’s intentions were not anticipate to unplanned events, like
necessarily that well executed in the delayed transport or non-conformance
on our external eyes of customers: many companies quantities in the production process
manufacturing partners. experienced a drop in service levels of subcontractors.
during 2010 while some companies
Visibility on their order
reported to be proud that they were The interview participants indicated
status and the quality of just able to keep service levels stable. to have different understandings of
production batches is supply chain visibility. Transport
Need for visibility tops the oriented people define visibility as
key to this supply chain agenda insight in the material and order flow
Next we asked the participants about in the distribution network while
their planned supply chain projects for manufacturing oriented people define
2011. The outcome is that supply chain visibility as insight in stocks, production
6 The 2011 Global Supply Chain Agenda

7. Rank % %
2011(2010) Project 2011 2010
1 (4) L+3 Supply Chain visibility improvement 45% 48%
2 (1) M-1 Business process (re)design programs 44% 55%
(e.g. process harmonisation, reorganisation)
3 NEW Business innovation 41% -
(e.g. new channel, new technology, etc) *
4 (3) M-1 Improve long term (demand) forecasting /planning 41% 49%
5 (2) M-3 Operational excellence (e.g. LEAN) 39% 54%
6 (5) M-1 Network redesign/Distribution strategy 36% 40%
7 (9) L+2 Sustainability program 35% 34%
8 NEW Supply Chain talent program 34% -
(e.g.acceleration training, project management, etc)*
9 (8) M-1 Inventory optimisation program 34% 35%
10 (6) M-4 Contract renewal with Logistics Service Provider 33% 40%
quality and monitoring of production highest new-comer with a score of
order progress in the supply network. 41%. Business innovation is not only
about exploring new channels, new
To realize visibility supply chain markets or new business models but
managers need to establish trust also about utilizing new technologies
among supply chain partners, support like Software-as-a-Service (SAAS),
cross-department coordination, utilize collaborative transport platforms
technologies to share information, (supply chain control tower) and other
simplify and synchronize supply chain technologies to transform the supply
activities. To achieve this goal, chain. Improving long term
companies need to optimize their ways forecasting/planning, and operational
of working, remove unnecessary excellence initiatives have slightly
process steps and improve the dropped, but remain in the top five
collaboration between up and down projects list. Planning processes like
stream business partners. Sales & Operations Planning continue
to be seen as essential to balancing
Compared to 2010, the number one demand, investment and supply.
project from last year – business Most of the managers expressed
process (re)design programs – has the urgency and importance of
moved to second position with a score improving their planning processes
of 44%. Business innovation is the and forecast accuracy.
The 2011 Global Supply Chain Agenda 7

8. Reflections on 2010
and the 2011 outlook:
Developing the
supply chain function
We also asked the participants to look supply chain, such as agreements made
back to 2010. The biggest gaps in with customers, the supply foot-print
implementing a supply chain strategy and manufacturing policies determine
occur in improving long term (demand) the service level to a large extent.
forecasting and planning and
centralizing/decentralizing supply chain In the interviews, most supply chain
functions. Finding or implementing managers see the role of the supply
transport management solutions is also chain function as becoming increasingly
Unfortunately, it is still a a weak spot for companies. important. As a result of this, it was
often stated that supply chain managers
common belief in our Looking at the cause, over 40% are increasingly being added to the
company that Supply respondents identify non-supply chain management team or seeing their
Chain Management is a business priorities as the major management scope increased.
bottleneck for not fulfilling supply
cost driver, not a chain plans: supply chain executives are Do we really develop our supply chain
business opportunity often faced with business priorities that people?
do not support their objectives. In
addition, IT capability and lack of The changing position of supply chain
people talent also raise alerts. management also puts new
requirements on people working in that
I would like to get all our The business prioritization bottleneck is function. After a period dominated by
key leaders and line more cause for concern than the often running the show and keeping costs
recurring IT capability bottleneck. For under control, expectations are now
managers aligned behind the supply chain manager this means changing. This reflects to the third
our vision so they lead he/she must get a bigger say in the bottleneck mentioned which is about
overall company’s business agenda. having sufficient talent in the
themselves Supply chain managers must also gain a organization. 34% of companies
broader influence. The reason for this is therefore plan to launch a supply chain
that at the current level of “operational people development program in 2011.
excellence”, factors outside of the One of the participants said “I would
8 The 2011 Global Supply Chain Agenda

9. Top 3 bottlenecks for implementing a Logistics/ Supply Chain Strategy
Business prioritization 40%
IT capability 34%
People talent/performance 26%
0% 10% 20% 30% 40% 50%
like to have more staff with the right execution of the planned supply chain
capabilities.” In the interviews the projects in 2011, there are some
ability to understand supply chain interesting insights from leading
dynamics, to coordinate between value companies to overcome the
chain partners and to innovate end-to- implementation gaps for 2010.
end supply chain processes are
mentioned as the main required key First, implementing supply chain
supply chain management visibility will drive the benefits in
competencies. cutting the waste hiding in the
processes, lowering pipeline inventories,
and improving overall cost efficiency.
Learning from leading Visibility will give you all the
companies information you need to improve
All in all 2011 is going to be an planning, to make business decisions at
interesting year with a dual agenda. the right time, and to better anticipate
On the one hand, traditional to unplanned events in the internal and/
management of costs and efficiency or external supply chain. Recent
will still be required although the era implementations of for example logistics
of major restructuring is hopefully control towers show this.
behind. At the same time the supply
chain function must increase its role Second, any business transformation
as an innovating entity, capable of is founded on process, technology and
supporting the organization as it people. Usually, the improvement
enters new markets and new efforts are concentrated on process
(e)-channels and adopts an and IT, and forget the people aspect.
increasingly sustainable way of Leading companies are investing in
working. To be successful in the their people. Supply chain
The 2011 Global Supply Chain Agenda 9

10. communities and training programs
are initiated in order to assimilate
knowledge and improve
understanding of the supply chain
dynamics. An exchange of people
from other functions into the supply
SCM has proven to be a chain function (and vice versa) should
differentiator in the past therefore be encouraged.
and will continue to be so Third, in most companies supply
in 2011. It will play a chain topics still don’t reach the board
room. This leads to the question
major role in achieving where the supply chain function
my company’s goals for should be positioned in a company.
the year to come Since the supply chain function
cannot stand alone in an organization,
supply chain managers struggle to
improve operational excellence
without senior management support.
Companies don’t compete. When organization structures are not
that easy to change a clear road-map
Supply chains compete for supply chain development, which
translates the business agenda into
supply chain initiatives, can support
these efforts.

11. About Capgemini
®
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More information is available at
www.capgemini.com.
The 2011 Global Supply Chain Agenda 11

12. Ramon Veldhuijzen Richard van Schip
Global Logistics & Fulfilment Lead Managing Consultant Supply Chain Management
Tel.: +31 30 689 900 97 Tel.:+31 30 689 55 74
Email: ramon.veldhuijzen@capgemini.com Email: Richard.van.schip@capgemini.com
©Capgemini Consulting - March 2011
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