For logistics managers who've spent the past decade trying convince their CEOs (and CFOs) of the value of a well-integrated supply chain, the good news is spreading faster than a virus through a college computer network: The smart folks at Accenture have finally come up with statistics that show a positive correlation between strong, effective supply chain management and (drum roll, please) MONEY!
It's been a long time coming. Logistics executives have for years bemoaned the lack of support from "higher-ups" when it comes to funding and championing supply chain improvements. A variety of explanations have been advanced over the years: Some have theorized that the problem lies in the complexity of supply chain strategy. Others have pointed to lingering disagreement over exactly what the supply chain is, how it should be defined, and what it means to a company's bottom line.
Well, now we know: It means a lot. Armed with the findings from Accenture's research, you can skip the two-hour tutorial on supply chain theory and open a dialogue with your CEO or CFO with a provocative question like: "Would you be interested in a way to drive our company's stock up by about 25 percent over the next 12 months?" If that doesn't get their attention, you should probably call the company nurse to get their pulse checked!
According to the Accenture research, companies that could rightfully be considered "supply chain leaders" had a market capitalization compound average growth rate (CAGR) of up to 26 percentage points above the industry average growth rate. By contrast, those companies whose supply chain performance fell into the "decliners" category paid a penalty in their relative market cap CAGR of 25 percentage points on average.
"For many businesses,the supply chain is a tremendous opportunity area, yet many companies continue to do business as usual, looking only to shave additional costs from their existing operations," laments William Copacino, managing partner for Accenture's global supply chain group. "Yet an increasing number of successful supply chain companies are looking for new strategies that gain market share by getting closer to their customer, revolutionizing their cost structure or delivering innovative products and services."
The findings cannot be dismissed as an anomaly. The results were reinforced by a supplemental survey of 104 supply chain executives from North America and Europe. The majority of the respondents (89 percent) said they considered their supply chains to be critical or very important to their businesses. The same percentage of respondents reported that their supply chains had become more important in their industry over the past three years.
And despite the greater pressure for cost savings brought on by the sluggish economy, almost one-quarter of the survey respondents indicated that increasing revenue had been the primary focus of supply chain initiatives in their companies over the past three years.
Does all this make the challenge of refocusing the CEO's attention on the supply chain any easier? We'd like to say it has. But, given the historical difficulty and the depth of the challenge, it's hard to muster a lot of optimism. Still, if this new research doesn't get their attention, it's hard to imagine what will. Here's hoping that when you ask the CEO "Can you hear me now?" the answer will finally be yes!