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Next Generation Supply Chains

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  • 1. www.pwc.com/GlobalSupplyChainSurvey2013Global Supply Chain Survey 2013This year’s global supply chain survey byPwC shows how Leaders are moving aheadof the pack. They’re tailoring their supplychains to customer needs and investing innext-generation capabilities while keepingthe focus on supply chains that are both fastand efficient.Next-generationsupply chainsEfficient, fast andtailored
  • 2. 2 Next-generation supply chains: Efficient, fast and tailored 3Next-generation supply chains: Efficient, fast and tailoredMore than 500participants frommanufacturingand service industriescontributed tothis year’s survey,with data collectedfrom May toJuly 2012.ContentsExecutive summary 3Introduction 6Detailed survey findings 8Industry-specific dashboards 20About the survey 32Acknowledgements 33Related reading 34Macroeconomic cyclesof growth, contractionand recovery havebecome erratic. Togetherwith natural disastersthat affect bothoperations and sales,they have made reliableend-to-end supply anddemand planningincreasingly challenging.Executive summarySuccessful management of extrememarket and demand volatility hasbecome the new mantra of supplychain managers around the globe.Macroeconomic cycles of growth,contraction and recovery have becomeerratic, making reliable end-to-endsupply and demand planningincreasingly challenging. Disruptionscaused by recent natural disastershave added to supply chain volatility.In business-to-business relationships,long-term loyalty and predictable orderflow seem to have become relics of thepast. At the same time, customers aretightening their requirements in termsof throughput time and perfect-orderdelivery while demanding continuousreductions in supply chain cost.The increasing use of online channelsis driving the reduction of responsetimes and forcing supply chainmanagers to find new answers forglobal micro-delivery of multiplesmall-customer orders, instead ofthe large-batch movements.Maximising supply chain flexibilityand managing multiple supply chainconfigurations have become the newimperatives for today’s supply chainexecutives. In addition, radio-frequency identification (RFID) andother digital technologies lead to newfrontiers in supply chain transparencyand process automation. Thosetechnologies enable multiple supplychain partners along the value chainto seamlessly interact in the jointdesign, manufacture, delivery andservice of complex customer orders.But even with this kind of innovationavailable to enhance efficiency, supplychain executives everywhere facesome tough challenges. So, how arethey handling them? In this report weshare the findings from our ninth andlargest-ever global supply chain survey.We’ve drawn on the insights of morethan 500 supply chain experts inEurope, North America and Asia, fromcompanies of all sizes and across awide range of industries. We’ve alsopicked out two groups of companiesand compared their performance.The Leaders, as we’ve called them,have consistently outperformed theirpeers, while the Laggards haveconsistently underperformed —both financially and operationally.The Leaders in our survey point tothe future. They have supply chainsthat are efficient, fast and tailored —a model that lets companies serve theircustomers reliably in turbulent marketconditions and that differentiatesbetween the needs of different sets ofcustomers. We’ve come up with six keyfindings that point the way towardshow they do it.
  • 3. 4 Next-generation supply chains: Efficient, fast and tailored 5Next-generation supply chains: Efficient, fast and tailoredThe Leaders have succeeded in copingwith those challenges by focusing onthree key drivers: perfect orderdelivery, cost reductions and supplychain flexibility. They’ve invested innew tools and technologies, builtextensive supply chain networksto maximise the flexibility andresponsiveness of their supply chainsand simplified their processeswherever possible. That’s helpingthem respond to customers, whoserequirements are becomingincreasingly demanding.Finding 3: One size does not fitall: Leaders tailor their supplychains to the needs of differentcustomer segmentsThe Leaders recognise that one sizedoes not fit all. They’ve createddifferent supply chain configurationsfor different customer segments byusing distinct processes and supplynetworks to offer different levels ofservice at different prices. They’re alsomore focused in the ways they go tomarket: 35% use only one channel,whereas 80% of the Laggards havemore than one. Clear channel focus,while configuring the supply chainto meet the needs of individualcustomers, has proved to be awinning formula.Finding 4: Leaders outsourceproduction and delivery butretain global control of corestrategic functionsThe Leaders typically outsource about60% of their warehousing and logisticsactivities and nearly 50% of theirmanufacturing and assembly activities.But they keep core strategic functionssuch as sales and operations planning(SOP), strategic procurement andresearch and development (RD)in-house.They also manage most core strategicfunctions centrally while steering morethan three-quarters of their manufac-turing and logistics activities regionally.Regional manufacturing and distribu-tion give them greater flexibility andmake it easier for them to respond tolocal customer requirements.Finding 5: Leaders in matureand emerging markets invest moreheavily in differentiating supplychain capabilitiesMost companies have implemented thebasic capabilities required to deliverefficiently and cost-effectively. Leadershave gone much further than onlymastering the basics. They’ve alsointroduced differentiating processes,such as integrated real-time demand-and-supply planning with key suppliersand customers, effective supplier andpartner management or tax-efficientsupply chains.That includes supply chain Leadersfrom the emerging markets. They haverapidly adopted best-in-class practicesand avoided the painfully slowdevelopment process used by manyof the traditional-market companies.And many emerging-market Leadersare now leading the way by introducingnew and innovative supply chainpractices to the global supply chaincommunity, especially in the areasof supply chain flexibility andcost efficiency.Finding1:You can have it all:companies that acknowledge supplychain as a strategic asset achieve70% higher performanceCompanies that beat the competition onsupply chain performance also achievesignificantly better financial results.Supply chain Leaders deliver on time infull (OTIF) on 95.7% of occasions andhave an impressive 15.3 inventoryturns, while the Laggards achieve only3.8 turns. That means greater efficiencyand customer satisfaction withoutdriving up working capital —essentially, having it all. Those aremetrics that really impact the bottomFinding 6: Interest in next-generation technologies andsustainable supply chains is growingThe existing suite of innovative supplychain technologies includes RFID andother digital capabilities, new visibilityand statistical decision tools andtechnology to facilitate further processautomation and efficiency. Manycompanies aren’t yet taking advantageof all those possibilities. But that looksset to change: more than half of allrespondents say they’re implementing,or they plan to implement, new tools toimprove visibility and provide moreprocess automation. Those in thePharmaceuticals and Life Sciences,Technology and Telecom and Retailand Consumer Goods industries planto make particularly significantinvestments in those areas over thenext couple of years.More than two-thirds of allrespondents also say sustainability willplay a more important role in thesupply chains of the future. A numberof companies have already started(1) investing in technologies to reducetheir carbon dioxide emissions and(2) excluding any supply chainpartners that don’t adhere to thehighest ethical standards.But such examples are not yetwidespread — aspirations tend toexceed action unless there is a clearcost reduction benefit or regulatoryrequirement being met.line; the Leaders in our survey enjoyaverage earnings before interest andtaxes (EBIT) margins of 15.6%, whereasthe Laggards can manage only 7.3%.But, surprisingly, only 45% ofrespondents say their companies viewthe supply chain as a strategic asset, andjust 9% say the supply chain is helpingthem outperform their peers. Thatneeds to change, because better supplychain efficiency has a measurableimpact. Supply chain managers acrossthe globe need to step up to their topmanagement and claim their rightfulplace as one of the major elements inthe success — or failure — oftheir company.Finding 2: Leaders focus onbest-in-class delivery, cost andflexibility to meet increasinglydemanding customer requirementsSupply chain executives are copingwith a wide range of challenges,with profitability and cost managementtopping the list, followed by supplychain flexibility and the need tomeet customer requirements. Butthose represent just the tip of theiceberg — adapting to competitivepressures, volatility, skills gaps,sustainability — because the range ofincreasingly important trends thataffect supply chain success is wide.Six key findings from PwC’sGlobal Supply Chain Survey 2013Figure 1: 45% of the participants acknowledge that supply chain is seenas a strategic asset in their company [% of participants]… supports the company in constantly outperforming the market… is at an advantage to peers… is at parity with industry peers… is at a disadvantage to industry peersOur supply chain…46%36%9% 9%Technology and TelecomAutomotiveIndustrial ProductsChemicals and ProcessPharmaceuticalsand Life SciencesRetail and Consumer GoodsOther56504643414026Source: PwC, Global Supply Chain Survey 20131 You can have it all:companies thatacknowledge supplychain as a strategicasset achieve 70%higher performance25Leaders focus onbest-in-class delivery,cost and flexibility to meetincreasingly demandingcustomer requirementsLeaders in mature andemerging marketsinvest more heavily indifferentiating supplychain capabilities3 One size does not fit all:Leaders tailor theirsupply chains to theneeds of differentcustomer segments46Leaders outsourceproduction and deliverybut retain global controlof core strategicfunctionsInterest innext-generationtechnologies andsustainable supplychains is growing
  • 4. 6 Next-generation supply chains: Efficient, fast and tailored 7Next-generation supply chains: Efficient, fast and tailoredIntroductionIn our ninth — and largest-ever — global supplychain survey, we heard from over 500 executivesaround the world which key trends they seereshaping the supply chain.The need to cope with a whole rangeof supply chain challenges is puttinggreater pressure than ever on supplychain executives. In our ninth — andlargest-ever — global supply chainsurvey, we heard from over 500executives around the world which keytrends they see reshaping the supplychain. Coming from companies largeand small, across a wide range ofindustries, our respondents shareddetails of their operating models andthe practices their companies areusing, outlined the ways they’reorganising their supply chains anddescribed the levers they’re pullingto maximise the value of thosesupply chains.We’ve supplemented this research witha comparison of two distinct cohortsof companies: those in the top quintileand those in the bottom quintile (perindustry sector), measured in terms offinancial and operational performance.The differences between those Leadersand the Laggards are illuminating.The most-successful companies haveconfigured their supply chains forspecific customer segments, adopteddifferentiating practices such ascollaborative planning with customersand suppliers and reduced complexity.The Leaders in our survey point tothe future. They have next-generationsupply chains that are fast, flexibleand responsive — a model thatenables companies to serve theircustomers accurately and efficientlyin turbulent market conditions anddifferentiates between the needs ofdifferent sets of customers.We’ve discussed our main findings inthe following pages. We’ve also includedsix dashboards with details of howwell the supply chains of companies indifferent industries perform, how thosesupply chains are typically organisedand the value drivers that matter most.
  • 5. 8 Next-generation supply chains: Efficient, fast and tailored 9Next-generation supply chains: Efficient, fast and tailoredDetailed survey findingsFinding 1:You can have it all:companies that acknowledgesupply chain as a strategicasset achieve 70%higher performanceFigure 2: Companies that focus on improving their supply chain performanceconsistently outperform their peers financially+30% +8% +87%Average EBIT margin (%)OpportunityLaggards Average LeadersAverage deliveryperformance (OTIF) (%)OpportunityAverage inventoryturns per year (#)OpportunityLaggards Average Leaders Laggards Average Leaders7 12 16 79 89 96 4 8 15Figure 3: Leaders deliver on time in full more frequently and simultaneously optimisetheir working capitalDeliveryperformance(%)Delivery heroes Supply chain top performersSupply chain rookies Working capital optimisersInventory turns (#)15175959820Laggards Leaders% of Laggards % of LeadersLaggards LeadersLaggards Leaders Laggards Leaders181 530396 263Companies that focus on improvingtheir supply chain performance achievemuch better financial and operationalresults than their peers do. The topcompanies we surveyed deliverOTIF at 96% compared with 89% onaverage. In addition, they have 87%more inventory turns per year thancompanies with average results do.That doesn’t just mean more satisfiedcustomers. It directly affects thebottom line: Leaders also enjoy 30%higher EBIT margins than the average(see Figure 2).Perhaps more important, Leaders showthat it’s possible to deliver orders veryefficiently without driving uptheir working capital, which refutesthe still widely held belief thatdelivery performance is a function ofinventory. More than half of themdeliver OTIF more than 95% of thetime and have more than 15 inventoryturns a year — evidence that deliveryperformance is the product of amature supply chain set-up, processesand systems. By contrast, 96% of theLaggards in our survey are supplychain rookies. Their deliveryperformance, inventory turns and EBITmargins are much lower than those ofthe Leaders (see Figure 3).Our analysis suggests that theimportance of the supply chain isstill insufficiently recognised in theboardroom. In fact, even supply chainexecutives themselves usually don’trealise the full value they bring to theirorganisations, or they don’t promotethat value sufficiently to the C-suite.That’s because most supply chainexecutives are focusing on theday-to-day aspects of establishing andmanaging an end-to-end supply chainand fostering collaboration both withother functions and within the supplychain itself. But taking the time topromote the importance of the supplychain can have significant benefits.Once the C-suite recognises that amature supply chain is truly a source ofimportant competitive advantage, itwill be easier to persuade executives tomake the investments needed to bringsupply chains up to the next level.Source: PwC, Global Supply Chain Survey 2013Source: PwC, Global Supply Chain Survey 2013
  • 6. 10 Next-generation supply chains: Efficient, fast and tailored 11Next-generation supply chains: Efficient, fast and tailoredIndeed, the war for talent is already infull swing. Nearly three-fifths of oursurvey respondents see the acquisitionor development of supply chain talentand skills as essential to their currentsuccess. Even more rate it as importantfor 2013-2015. Some companies haveresponded by establishing dedicatedsupply chain academies to train theirown staffs. They’re also offeringattractive compensation and benefitspackages to acquire and retainsuccessful supply chain managers.Respondents say supply chains alsoneed to support demand growth inemerging markets and be moresustainable. Most companies have sofar devoted relatively little effort to theidea of the sustainable supply chain,largely because their customers seemunwilling to pay for it. But theimportance is now rising sharply —one-third more respondents saysustainability will play a major rolein 2013-2015 compared with now.All of these challenges present a lotto deal with at one time, but theintroduction of digital technologies suchas RFID and process automation toolsis likewise rising up the agenda.Such technologies require massiveinvestment and typically take severalyears to implement. But they providemuch greater transparency andprocess automation throughout theentire supply chain, so they can helpreduce costs and increase efficiency.Hence the fact that many supply chainexecutives now regard them as vital.So, in light of all these challenges,what priorities are Leaders setting tomaximise the value of their supplychains? As Figure 5 shows, many ofthem have focused on the same valuesdrivers, and it’s the first levers thatprovide the highest impact.The two levers that create the highestvalue are maximising deliveryperformance and minimising supplychain costs: 90% of all Leaders haveachieved a delivery performance ofmore than 96%, thanks to integratedsupply chain planning, throughput/cycle time reductions and optimisationof their buffer stocks. Many of them arealso using best-cost country sourcingand lean management techniques andare simplifying their processes in orderto cut costs.Maximising volume flexibility andresponsiveness comes next: 75%of Leaders regard it as important.They’re creating value by increasingvolume flexibility in their internalmanufacturing or shift models,improving supply-and-demandbalancing and collaborating closelywith their partners. They make suretheir supply chains are responsiveand that volatility risks are sharedwith partners and suppliers.Once they’ve pulled those three levers,the Leaders tend to focus on reducingrisk and managing complexity. Just howdo they do it? One way is by (1) workingtogether with RD and sales executivesto reduce the number of productplatforms and variants and (2)consistently pruning obsoletecomponents. This results in lowerinventories and reduced supply chaincomplexity. In addition, the Leadersmanage key suppliers moreprofessionally, automate supply chainprocesses that can be automated andswitch from make-to-stock to make-to-order whenever possible. Finally, theLeaders turn to reorganising theirsupply chains to minimise tax exposure.The result? The Leaders consistentlyachieve above-average supply chainperformance and financial results,while the Laggards get bogged downby ever-increasing supply chain costs,complexities and inefficiencies.Figure 5: Leaders pull seven levers to maximise the value of their supply chainsActivated value driversPATH TO SUPPLY CHAIN VALUE CREATIONMaximum deliveryperformanceComplexity managementMinimised risksSustainabilityMinimised costsMaximum volumeflexibility andresponsivenessTax optimisationand efficiencyValuecreationSupplychainvaluedriverFigure 4: Costs, profitability and increasingly demanding customers top the agendaFinding 2:Leaders focus on best-in-classdelivery, cost and flexibility tomeet increasingly demandingcustomer requirementsStaying resilient is one way to copewith customer requirements. Nearlytwo-thirds of supply chain executivessay they’ll need to build in greaterflexibility to respond to shiftsin volume. Here, too, the importancewill increase by 2015, which isconsistent with the shift we notedin our 2010-2012 trends report.That’s only the beginning of thechallenges supply chain executives face.Respondents see a whole range of trendsas increasing in importance, from theneed to respond to competitivepressures and ensuring supplierperformance through to concerns overrisk and skills (see Figure 4).Supply chain executives see increasingthe profitability of their companies’supply chain and reducing total supplychains costs as their top priorities(see Figure 4). In addition, more thantwo-thirds say it’s vital to meet therequirements of customers, who arebecoming more demanding about thedelivery performance, flexibilityand service levels they expect. Andawareness of the need to keep up withcustomer demands is increasing;that number will jump to 78% by2015. As one respondent put it, “We’rejuggling multiple supply chain ballsfaster and faster and just hope thatnone of the efficiency or customersatisfaction balls drops to the ground.”Significant1supply chain trends in 2013 [%] In 2013-20152[%]% increase by2015 vs. 2013Managing profitability of total supply chainReducing total supply chain costMeeting increasing customer requirementsPreparing supply chain for up/downwards volume flexibilityResponding to competitive pressuresAcquiring and developing supply chain talent and skillsEnsuring supply and supplier performanceImplementing techniques to automate and increase transparencySupporting demand growth in emerging marketsManaging supply chain security and riskMaking the supply chain more sustainableResponding to changing regulatory requirements+10%+6%+14%+14%+18%+19%+15%+26%+19%+31%+34%+12%Top 4 supply chain trendsRemaining supply chain trendsImportance increase by: 20% 10% and 20% 10%Notes1 % participants who judge trend as critical or significant in 2013.2 % participants who say that trend is significant, critical or moderately important in 2013 and who say it will increaseby 2015, or who think that trend is critical or significant in 2013 and believe it will stay the same for the next two years7980696461586052524642368510911119141014144Source: PwC, Global Supply Chain Survey 2013Source: PwC, Global Supply Chain Survey 2013
  • 7. 12 Next-generation supply chains: Efficient, fast and tailored 13Next-generation supply chains: Efficient, fast and tailoredMarket characteristics Supply chain requirements Supply chain architectureGeography/CountryMarket/DemandLeaders:DifferentiatedofferingLaggards:One-size-fits-allProduct/TechnologyChannel/MarketSupply chain configuration 1One-size-fits-allsupply chain configurationSupply chain configuration 2Supply chain configuration 3CostsFlexibility/ResponsivenessDeliveryperformanceCostsFlexibility/ResponsivenessDeliveryperformanceOf course, many organisations recognisethat different customers have differentneeds — and hence different supplychain requirements, too. But it’s onlythe Leaders that have started usingthe concept of configuration to designtheir supply chains from the outside in.This enables them to provide optimalservices for a wide range of customersby making the best trade-offs betweendelivery performance, cost andflexibility to satisfy each customersegment (see Figure 7). So, supplychain configurations are majorelements in achieving superior supplychain performance.Figure 7: With different supply chain configurations, companies can make the best trade-offs to satisfy each customer segmentFigure 6: Leaders configure their supply chains for different customer segmentsLaggards Leaders+40%# supply chain configurations # channels # configurations per channel3.1 4.3Laggards Leaders-10%2.3 2.0Laggards Leaders+55%Leaders are more focusedthan Laggards because theyoperate in fewer channelsLeaders operate up to50% more configurations perchannel than LaggardsLeaders operatemore supply chainconfigurations1.4 2.1Finding 3:One size does notfit all: Leaders tailor theirsupply chains to the needs ofdifferent customer segmentsMore than 83% of all Leaders configuretheir supply chains for different customersegments. And, on average, they use55% more configurations per channelthan the Laggards do (see Figure 6).In other words, the Leaders recognisethat one size doesn’t fit all. The demandsimposed on a supply chain are as mucha function of the channel the supplychain serves and of the requirementsof the customers who use that channel,as they are of the products a companysells and the technologies the companyuses. Each combination results in adifferent set of customer needs thatrequire a tailored solution.What is a supply chain configuration?A supply chain configuration is a version of the supply chain that has beenoptimised to meet the needs of a specific customer group. For example,a manufacturer might have two different supply chain configurations:one for complex/high-end products and one for standard products. Eachconfiguration might serve the same customers and source from the samesuppliers by using different production locations and even, perhaps, differentdistribution networks. Similarly, a manufacturer might have two differenttransportation and logistics configurations: one with fast delivery times and ahigher cost for top customers and one with lower performance for price-conscious customers.That’s not the only difference betweenthe Leaders and the rest of the surveypopulation, though. The Leaders alsohave a clearly defined go-to-marketapproach: 35% focus on only onechannel versus 20% of the Laggards,and on average, they generate 66%more revenue per channel thanthe other companies in our sample.This suggests that critical mass is aprerequisite for creating tailoredsupply chain configurations.Source: PwC, Global Supply Chain Survey 2013Source: PwC, Global Supply Chain Survey 2013Clear channel focus, while configuring the supplychain to meet the needs of individual customers,has proved to be a winning formula.
  • 8. 14 Next-generation supply chains: Efficient, fast and tailored 15Next-generation supply chains: Efficient, fast and tailoredFigure 9: Leaders and Laggards alike are very wary about outsourcing all functionsbut their manufacturing and distributionparticipants do outsource are confinedprimarily to the areas of manufacturingand distribution, and even then,they’re very selective. Due to globaldisasters in past years, some companieshave actually brought some supplychain activities back, close to home,to reduce risks.Both Leaders and Laggards outsourcehalf of their transportation andwarehousing activities, regarding themas commodities that can be handled bya partner. But they keep the customerorder desk in-house to maintain controlover interaction with customers. Andthey outsource only 36% of theirmanufacturing and assembly activities,suggesting that many companies stillsee manufacturing as a core componentof the supply chain and one of the vitalelements in achieving closer supplychain integration (see Figure 9).Finding 4:Leaders outsource productionand delivery but retainglobal control of corestrategic functionsFigure 8: Leaders manage strategic functions globally and execute functions regionallyAs a rule, the Leaders in our surveymanage core strategic activities such asstrategic procurement, SOP and newproduct development globally whilepositioning production and deliveryregionally (see Figure 8). This allowsthem to maintain control over standardsand maximise synergies whileremaining flexible and responsiveto local needs.Many Leaders also use near-shoringto keep prices competitive. And themost-advanced companies areswitching from low-cost countrysourcing to best-cost country sourcing,recognising that lead times are parts ofthe total cost of ownership. But bothLeaders and Laggards use very similarorganisational models, suggesting thatorganisational models alone are notmain elements in higher performance.It is, rather, a company’s practices andcapabilities that determine how wellthe company’s supply chain operates.While the outsourcing of supply chainfunctions has grown rapidly in the pastyears, our 2013 survey indicates thatthe percentage of value creationachieved by partners has reached aplateau. The activities that surveyInteresting to note is that on average,only 36% of manufacturing and assemblyis being outsourced, indicating thatfunctions like manufacturing and sourcingremain cores of the supply chain andkeys to achieving tighter supplychain integration.Demand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSupply chain centre of excellenceLeaders Laggards% of supply chain activities outsourced 255%2%5%6%36%22%11%45%49%12%7%0 50PlanSourceMakeDeliverEnablerLeaders’ geographic organisationLeaders’ organisational model% of global and regional functionsGlobalNew product developmentStrategic procurementSupply chain centre of excellenceSOPManufacturing and assemblyDemand planningCustomer order deskServiceOperational procurementWarehousingInbound and outbound logisticsStrategicfunctionsExecutionfunctionsRegional: Regional and local functionsGlobal: Global business unit (cross regional and cross enterprise)Regional• Strategic functions: Demand planning, SOP,Strategic procurement, New product development,Supply chain centre of excellence• Execution functions: Operational procurement,Customer order desk, Inbound and outbound logistics,Manufacturing and assembly, ServiceGlobal Regional7066604938342424222018303440516366767678808254 2446 76100%Source: PwC, Global Supply Chain Survey 2013Source: PwC, Global Supply Chain Survey 2013
  • 9. 16 Next-generation supply chains: Efficient, fast and tailored 17Next-generation supply chains: Efficient, fast and tailoredFigure 11: Leaders are investing in a number of differentiating practicesSupply chain value driver Top three differentiating practices of LeadersMaximum deliveryperformance1. Collaboration with key customers on planning(e.g., effective forecasting)2. End-to-end supply chain planning and visibility3. Vendor-managed-inventory direct-replenishmentmodelMinimised costs 1. Best-cost country sourcing2. Differentiated order-to-delivery time3. Differentiated service level, including potentialreductionMaximum volume flexibilityand responsiveness1. Internal capacity flexibility 80%-120%2. Flexible shift models/payment structure3. Regional supply chain set-upMinimised risks 1. Multiplication of sources and sole-sourcingavoidance2. Regular review of suppliers’ financial risk andmitigation through risk-sharing partnerships3. Visibility and regular monitoring of main suppliers’operational indicatorsComplexity management 1. Development of multiskilled employees to copewith complexity2. Late-stage product customisation3. Use of distributors and other channel partnersSustainability 1. Agreement with supply chain partners to adhereto highest ethical standards2. Responsible supply chain partner footprint andprocurement framework3. Internal carbon footprint optimisationand improvementTax optimisation and efficiency 1. Manufacturing and assembly optimisation(toll manufacturing)2. Localisation of inventory ownership in tax-efficientcountries3. Localisation of procurement organisation intax-efficient countries (e.g., Singapore, Switzerland,Cayman Islands)This emphasis on differentiatingcapabilities is characteristic of Leadersin both mature and emerging markets.One of the most notable features ofthis year’s survey is the number ofemerging-market companies withstrong supply chains and high EBITmargins. In fact, 26% of the Leaders inour sample are based in the emergingeconomies. And on average, emerging-market companies command EBITmargins that are 22% higher thanthose enjoyed by mature-marketcompanies (see Figure 10). They’vealmost caught up with mature-marketcompanies in terms of inventory turnsand delivery performance.That’s especially impressive giventhat emerging markets are typicallymore volatile and more competitive.Mastering differentiating capabilitieshas played a large part in emerging-market companies’ success. A remarkable44% of emerging-market companiesare investing in differentiatingcapabilities — evidence that they’rerapidly implementing best practiceswithout going through the painfullearning curve many mature-marketcompanies have endured. And manyemerging-market Leaders are evenleading the way by introducinginnovative supply chain practices tothe global supply chain community,especially in the areas of supply chainflexibility and cost efficiency.Two-thirds of the companies in oursurvey are still focusing on the basics ofrunning a supply chain in a cost-effectivemanner and delivering goods sufficientlywell to satisfy their customers. They’reconcentrating on achieving continuousimprovements in cost, lead times andwaste reduction. But those basiccapabilities are simply preconditionsfor doing business; they don’t enable acompany to outperform the market.Finding 5:Leaders in mature andemerging markets invest moreheavily in differentiatingsupply chain capabilitiesFigure 10: The supply chain performance of companies in emerging markets isalready close to that of companies in mature marketsConversely, the Leaders have alreadymastered the basics. They’re moreconcerned with the skills that separatea company from the crowd: 51% saydifferentiating capabilities are thereal keys to success. Figure 11 showsthe main areas in which thosecompanies are investing to createadded value. But before attempting toimplement such practices, it’s essentialto make sure the basics are in place.The Leaders already excel in terms ofdelivery, cost and flexibility. That’sgiven them a robust platform on whichto invest in more-advanced capabilities.EBIT margin [avg.]Mature Emerging+22%Based on participant’s country of origin.11% 14%Delivery performance [avg.]Mature Emerging-4%90% 86%Inventory turns [avg.]Mature Emerging-7%8.4% 7.8%Differentiating supply chain capabilities [avg.]Mature Emerging0%44% 44%Source: PwC, Global Supply Chain Survey 2013According to our analysis, Leaders achieveexcellence and competitive advantage by focusingon differentiating capabilities.
  • 10. 18 Next-generation supply chains: Efficient, fast and tailored 19Next-generation supply chains: Efficient, fast and tailoredThat means a company has to keeptrack of all the risks in its supplychain to in addition to its as well asprofiting from opportunities thesustainability movement might offer.At present, respondents see four mainreasons for investing in sustainablesupply chain management: to managethe risk of unintended environmentalor social damage, to manage theircompany’s reputation and theexpectations of its shareholders, toreduce costs and realise productivityimprovements and to createsustainable products, therebyincreasing revenues and enhancingthe corporate brand.Optimising their own internal carbonfootprint is the top priority for 87%of those respondents who saysustainability is highly important.But there’s an equally strong trend,as more companies begin to adoptsustainable supply chain practices:to provide support for supplierswhile assessing and auditing them.As Figure 13 shows, 87% of thoserespondents who say sustainability isvery important are saying it’s best toreach an agreement with theirsuppliers on adhering to the highestethical standards. Similarly, 81% favourcollaborating with their suppliers tocreate a responsible supply chainfootprint and procurementframework. And 71% say effectivetrack-and-trace capabilities areimportant, too. As public expectationsrise, companies will come underincreasing pressure to report on theenvironmental and social impacts oftheir activities and on the steps they’retaking to mitigate those impacts.Finding 6:Interest in next-generationtechnologies and sustainablesupply chains is growingThe suite of innovative supply chaintechnologies now available includesRFID and other digital capabilities,new visibility and statistical decisiontools, as well as technology to enablefurther process automation andefficiency. Those technologiesopen new frontiers in supply chaintransparency and process automation.Survey respondents recognise theimportance of moving their supplychains to this next level: over50% report that they are implementingor planning to implement new toolsfor better process automation ortransparency. And nearly two-thirdssee automation as being vital by 2015.This is a consistent theme across allindustries, but the Pharmaceuticalsand Life Sciences, Technology andTelecom and Chemicals and Processindustries are leading supply chaintechnology innovation (see Figure 12).In some cases, the dramatic increasein interest in automation reflectsfundamental changes that arehappening in those sectors. For example,demographic shifts and the emergenceof e-health are reshaping demandpatterns for Pharmaceuticals andLife Sciences companies, while theemerging dominance of mobiledevices is having a major impact onthe Technology and Telecom sector.The technologies companies aredeploying are far more sophisticatedthan before. Companies in every sectorare looking for holistic solutions thatencompass everything from order todelivery — solutions that areFigure 12: Pharmaceuticals and Life Sciences, Technology and Telecom andChemicals and Process Industry companies see automation as particularly importantsupported by enterprise applicationsand that draw on so-called big datato provide greater transparencywithin the supply chain and to helpthem optimise their logistics anddistribution operations.Designing a holistic planning platformthat can be implemented across thesupply chain is challenging, though.Unfortunately, many organisationshave adopted point solutions focusingon particular issues, which hasprevented them from addressing allof their business objectives equally.A growing number of companies arealso beginning to pay closer attentionto the concept of the sustainablesupply chain. Managing a supplychain in a sustainable manner entailstaking account of the impact of majorenvironmental, social and economicfactors throughout the life cycle of aproduct. In the long term, it’s also whatgives a company its licence to operate.To date, most firms have done verylittle on the sustainability front, butdemand for sustainable productsmanufactured with sustainable rawmaterials is increasing; indeed, it nowoutstrips supply. Investors’ expectationsare also rising, and manufacturingregulations are getting tighter. At thesame time, greater use of low-cost andbest-cost country sourcing is making itmore difficult to control sustainabilitythrough the entire supply chain.And though a company can outsourcespecific business activities, it can’tabdicate responsibility for them.High importance1ofautomation in 2013 [%]Increaseby 20152[%]% Increase by2015 vs. 2013Pharmaceuticals and Life SciencesTechnology and TelecomChemicals and ProcessRetail and Consumer GoodsAutomotiveIndustrial+43%+49%+38%+10%+9%+39%Notes1 % participants who judge trend as critical or significant in 2013.2 % participants who say that trend is significant, critical or moderately importantin 2013 and who say it will increase by 2015 or who indicate critical orsignificant for 2013 and indicate that it will stay same for the next two years.Importance increase by: 20% 10% and 20% 10%5451505453412325195516Source: PwC, Global Supply Chain Survey 2013Figure 13: Creating a sustainable supply chain requires collaboration with suppliersSource: PwC, Global Supply Chain Survey 2013Highly important (critical and significant)Importance of sustainabilityLess important58%42%Important practices for sustainability adherenceInternal carbon footprintoptimisation and improvementAgreement to adhere tohighest ethical standardsResponsible footprint andprocurement frameworkEffective track-and-tracecapabilitiesIntegrated risk managementPeer cooperation and strategicalliances to align on targetReturn supply chainto manage recycling87878171585548A full 81% of respondents who rate sustainability asimportant favour collaborating with their suppliersto create a responsible supply chain footprint andprocurement framework.
  • 11. 20 Next-generation supply chains: Efficient, fast and tailored 21Next-generation supply chains: Efficient, fast and tailoredIndustry-specific dashboardsTop 3 practices per value driverMinimising costs (90%):• Decreased manufacturing costs through reductionof waste• Inventory reduction• Best-cost country sourcingMaximum delivery performance (87%):• Collaborative planning with key suppliers• Collaboration with key customers on planningand execution• Order fulfilment cycle-time reduction improvemanufacturing timeMaximum volume flexibilityand responsiveness (83%):• Flexible shift models/payment structure• Internal capacity flexibility 80%-120%• End-to-end supply chain planning and visibilityComplexity management (67%):• Making to order• Automation of processes in order to cope with complexity• Assortment/inventory policies distinguished byproduct family and storing locationMinimising risks (67%):• Visibility and regular monitoring of main suppliers’operational indicators• Multiplication of sources and sole-sourcing avoidance• Regular review of suppliers’ financial risk and mitigationthrough risk-sharing partnershipsSustainability (53%):• Agreement of supply chain partners to adhere tohighest ethical standards• Internal carbon footprint optimisation and improvement• Return of supply chain to manage recyclingTax optimisation/Efficiency (48%):• Import/export optimisation (e.g., bonded warehouse)• Manufacturing and assembly optimisation• Localisation of procurement organisation intax-efficient countriesSupply chain performance:The leading Automotive companiesachieve the lowest EBIT marginscompared with other industries (10.4%).But they have the highest number ofinventory turns (18.2) and a nearlybest-in-class delivery performance(97.3%). The performance gap betweenthe Leaders and Laggards is quite small,signalling that the industry has alreadyadopted mature supply chain practices.Figure 14: The key attributes of Automotive companiesAutomotive:Leaders achieve lowest EBIT margins with highest inventoryturns and strong delivery performanceOrganisational set-up:Automotive companies typicallymanage their planning,manufacturing, operationalprocurement and delivery functionsregionally, and their new productdevelopment and strategicprocurement functions globally.They outsource less than 10% oftheir planning, sourcing and enablingactivities; a relatively low, 15% oftheir manufacturing and assemblyactivities; and 10%-35% of theirdelivery activities.Leading practices:The most important value drivers forAutomotive companies are minimisedcosts (90%), maximum deliveryperformance (87%), maximum volumeflexibility and responsiveness (83%)and complexity management (67%).The Leaders focus on continuousimprovements in production efficiencyand inventory management — togetherwith best-cost country sourcing, todrive down costs and on collaborationswith key customers and suppliers.Outsourcing level Geographic organisationGeographic organisationfor supply chain functions% of supply chainactivities outsourcedPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnabler0 18 36 55Organisational set-upLocal Regional GlobalSupply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/Efficiency90878367675348Source: PwC, Global Supply Chain Survey 2013EBIT margin (%)+82%Laggards Leaders5.7 10.4Inventory turns (#)+199%Laggards Leaders6.1 18.2Delivery performance (%)+24%Laggards Leaders78.7 97.3Supply chain performance
  • 12. 22 Next-generation supply chains: Efficient, fast and tailored 23Next-generation supply chains: Efficient, fast and tailoredFigure 15: The key attributes of Chemicals and Process Industry companiesChemicals and Process Industry:Leaders achieve average EBIT margins with high inventoryturns and strong delivery performanceOrganisational set-up:Chemicals and Process Industrycompanies typically manage theirplanning, manufacturing,operational procurement and deliveryfunctions regionally, and their enablingand strategic procurement functionsglobally. They outsource about 5% oftheir planning, sourcing and enablingactivities; only 13% of their manu-facturing and assembly activities; and7%-45% of their delivery activities.Source: PwC, Global Supply Chain Survey 2013EBIT margin (%)+29%Laggards Leaders10.5 13.5Inventory turns (#)+166%Laggards Leaders6.5 17.3Delivery performance (%)+22%Laggards Leaders80.2 97.5Supply chain performanceSupply chain performance:The leading Chemicals and ProcessIndustry companies achieve averageEBIT margins (13.5%) with a highnumber of inventory turns (17.3) anda better delivery performance thandoes any other industry except Retailand Consumer Goods (97.5%).The supply chain performance gapbetween the Leaders and Laggardsis also the smallest.Leading practices:The most important value driversfor Chemicals and Process Industrycompanies are minimised costs (87%),maximum delivery performance(87%), maximum volume flexibilityand responsiveness (77%) andcomplexity management (72%).The Leaders focus on continuousimprovements in production efficiencyand inventory management — coupledwith process simplification — to drivedown costs and on end-to-end supplychain planning and visibility.Supply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/Efficiency87877772585242Geographic organisationOutsourcing levelGeographic organisationfor supply chain functions0 18 36 55% of supply chainactivities outsourcedOrganisational set-upLocal Regional GlobalPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnablerTop 3 practices per value driverMinimising costs (87%):• Inventory reduction• Decreased manufacturing costs through reduction of wastes• Reduction in process flow complexityMaximum delivery performance (87%):• End-to-end supply chain planning and visibility• Collaboration with key customers on planning(e.g., effective forecasting)• Order fulfilment cycle-time reduction to improveinformation flowMaximum volume flexibilityand responsiveness (77%):• Internal capacity flexibility 80%-120%• End-to-end supply chain planning and visibility• Involvement of partners for capacity reservationComplexity management (72%):• Development of multiskilled employees in order tocope with complexity• Making to order• Assortment/inventory policies distinguished byproduct family and storing locationMinimising risks (58%):• Multiplication of sources and sole-sourcing avoidance• Visibility over short-term supply through ordertraceability, vendor-managed inventory and so on• Visibility and regular monitoring of main suppliers’operational indicatorsSustainability (52%):• Responsible supply chain partner footprint andprocurement framework• Integrated risk management• Agreement of supply chain partners to adhere tohighest ethical standardsTax optimisation/Efficiency (42%):• Transfer pricing• Localisation of procurement organisation intax-efficient countries• Manufacturing and assembly optimisation(toll manufacturing)
  • 13. 24 Next-generation supply chains: Efficient, fast and tailored 25Next-generation supply chains: Efficient, fast and tailoredFigure 16: The key attributes of Industrial Products companiesIndustrial Products:Leaders achieve high EBIT margins despite low inventoryturns and low delivery performanceSource: PwC, Global Supply Chain Survey 2013EBIT margin (%)+173%Laggards Leaders6.3 17.3Inventory turns (#)+283%Laggards Leaders3.2 12.1Delivery performance (%)+19%Laggards Leaders77.9 92.9Supply chain performanceOrganisational set-up:Industrial Products companiestypically manage their planning,manufacturing, operationalprocurement and delivery functionsregionally, and their enabling andstrategic procurement functionsglobally. They outsource about 7% oftheir planning, sourcing and enablingactivities; nearly 35% of theirmanufacturing activities; and upto 50% of their delivery activities.Supply chain performance:The leading Industrial Productscompanies achieve relatively high EBITmargins (17.3%) despite low inventoryturns (12.1) and a lower deliveryperformance than any other industry(92.9%). The marked gap betweenthe supply chain performance of theLeaders and Laggards represents a bigopportunity for Laggards to improvetheir financial results.Leading practices:The most important value driversfor Industrial Products companiesare maximum delivery performance(98%), minimised costs (93%),maximum volume flexibility andresponsiveness (74%) and complexitymanagement (61%). The Leaders focuson collaboration with key customersand suppliers and continue to placegreat weight on continuousimprovement and lean processes toreduce order fulfilment cycle timeand decrease costs.Outsourcing level Geographic organisationGeographic organisationfor supply chain functions0 18 36 55% of supply chainactivities outsourcedOrganisational set-upLocal Regional GlobalPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnablerSupply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/Efficiency98937461603838Top 3 practices per value driverMaximum delivery performance (98%):• Collaborative planning with key suppliers• Collaboration with key customers on planning(e.g., effective forecasting)• Order fulfilment cycle-time reduction improveinformation flowMinimising costs (93%):• Decreased manufacturing costs through reductionof wastes• Inventory reduction• Decreased overhead costs through increasedlabour productivenessMaximum volume flexibilityand responsiveness (74%):• End-to-end supply chain planning and visibility• Regional supply chain set-up• Internal capacity flexibility 80%-120%Complexity management (61%):• Making to order• Late-stage product customisation• Assortment/inventory policies distinguished byproduct family and storage locationMinimising risks (60%):• Multiplication of sources and sole-sourcing avoidance• Visibility and regular monitoring of main suppliers’operational indicators• Regular review of suppliers’ financial risk andmitigation through risk-sharing partnershipsSustainability (38%):• Agreement of supply chain partners to adhereto highest ethical standards• Internal carbon footprint optimisation and improvement• Responsible supply chain partner footprint andprocurement frameworkTax optimisation/Efficiency (38%):• Localisation of procurement organisation intax-efficient countries• Import/export optimisation• Transfer pricing
  • 14. 26 Next-generation supply chains: Efficient, fast and tailored 27Next-generation supply chains: Efficient, fast and tailoredFigure 17: The key attributes of Pharmaceuticals and Life Sciences companiesPharmaceuticals and Life Sciences:Leaders achieve average EBIT margins with high inventoryturns and strong delivery performanceSource: PwC, Global Supply Chain Survey 2013EBIT margin (%)+52%Laggards Leaders11.1 16.9Inventory turns (#)+326%Laggards Leaders3.8 16.3Delivery performance (%)+21%Laggards Leaders80.5 97.4Supply chain performanceOutsourcing level Geographic organisationGeographic organisationfor supply chain functions0 18 36 55% of supply chainactivities outsourcedOrganisational set-upLocal Regional GlobalPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnablerOrganisational set-up:Pharmaceuticals and Life Sciencescompanies typically manage theirplanning, operational procurementand delivery functions regionally, andtheir enabling, manufacturing andassembly and strategic procurementfunctions globally. They outsourceabout 6% of their planning andsourcing activities; a relatively high,25% of their new product developmentactivities; and 20%-40% of theirdelivery activities.Supply chain performance:The leading Pharmaceuticals and LifeSciences companies achieve averageEBIT margins (16.9%) with a highnumber of inventory turns (16.3)and excellent delivery performance(97.4%). The gap between the Leadersand Laggards is relatively low whenit comes to EBIT margins anddelivery performance but relativelyhigh when it comes to inventoryturns (16.3 turns versus 3.8turns, respectively).Leading practices:The most important value drivers forPharmaceuticals and Life Sciencescompanies are maximum deliveryperformance (100%), minimised costs(94%), maximum volume flexibilityand responsiveness (78%) andminimisised risks (78%). TheLeaders focus on collaboration withkey customers and suppliers andend-to-end supply chain planning.They also continue to place greatweight on continuous improvementsin manufacturing.100947878726753Supply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/EfficiencyTop 3 practices per value driverMaximum delivery performance (100%):• End-to-end supply chain planning and visibility• Order fulfilment cycle-time reduction improvemanufacturing time• Collaborative planning with key suppliersMinimising costs (94%):• Decreased manufacturing costs through reductionof wastes• Inventory reduction• Decreased overhead costs through increasedlabour productivenessMaximum volume flexibilityand responsiveness (78%):• End-to-end supply chain planning and visibility• Outsourcing to service provider• Involvement of partners for capacity reservationMinimising risks (78%):• Visibility over short-term supply through ordertraceability, vendor-managed inventory and so on• Multiplication of sources and sole-sourcing avoidance• Regular review of suppliers’ financial risk andmitigation through risk-sharing partnershipsComplexity management (72%):• Use of distributors and other channel partners• Differentiated distribution strategies• Development of multiskilled employees in order tocope with complexitySustainability (67%):• Return of supply chain to manage recycling• Responsible supply chain partner footprint andprocurement framework• Integrated risk managementTax optimisation/Efficiency (53%):• Import/export optimisation (e.g., bonded warehouse)• Intellectual property and patent royalty optimisation• Localisation of inventory ownership intax-efficient countries
  • 15. 28 Next-generation supply chains: Efficient, fast and tailored 29Next-generation supply chains: Efficient, fast and tailoredFigure 18: The key attributes of Retail and Consumer Goods companiesRetail and Consumer Goods:Leaders achieve average EBIT margins with highest numberof inventory turns and best delivery performanceSource: PwC, Global Supply Chain Survey 2013EBIT margin (%)+131%Laggards Leaders6.2 14.2Inventory turns (#)+461%Laggards Leaders3.3 18.2Delivery performance (%)+27%Laggards Leaders76.4 97.5Supply chain performanceOrganisational set-up:Retail and Consumer Goods companiestypically manage their planning,manufacturing, operationalprocurement and delivery functionsregionally and their enabling andstrategic procurement functionsglobally. They outsource about7% of their planning, sourcing andenabling activities; only 30% of theirmanufacturing activities; and10%-55% of their delivery activities.Supply chain performance:The leading Retail and ConsumerGoods companies achieve averageEBIT margins (14.2%) with the highestnumber of inventory turns (18.2)and a better delivery performancethan companies in any other industry(97.5%). The supply chainperformance gap between the Leadersand Laggards is about average, butLaggards have a major opportunityto improve their inventory turns anddelivery performance.Leading practices:The most important value driversfor Retail and Consumer Goodscompanies are maximum deliveryperformance (95%), minimised costs(90%), maximum volume flexibilityand responsiveness (79%) andcomplexity management (70%). TheLeaders focus on collaboration withkey suppliers and vendor-managedinventory and continue to placegreat importance on continuousimprovements in production efficiencyand inventory management.Outsourcing level Geographic organisationGeographic organisationfor supply chain functions0 18 36 55% of supply chainactivities outsourcedOrganisational set-upLocal Regional GlobalPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnablerSupply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/Efficiency95907970604645Top 3 practices per value driverMaximum delivery performance (95%):• Collaboration with key customers on planning(e.g., effective forecasting)• Collaborative planning with key suppliers• Vendor-managed-inventory direct-replenishment modelMinimising costs (90%):• Decreased manufacturing costs through reductionof wastes• Decreased overhead costs through increased labourproductiveness• Inventory reductionMaximum volume flexibilityand responsiveness (79%):• Internal capacity flexibility 80%-120%• End-to-end supply chain planning and visibility• Regional supply chain setupComplexity management (70%):• Automation of processes in order to cope with complexity• Development of multiskilled employees in order to copewith complexity• Late-stage product customisationMinimising risks (60%):• Visibility and regular monitoring of main suppliers’operational indicators• Multiplication of sources and sole-sourcing avoidance• Regular review of suppliers’ financial risk and mitigationthrough risk-sharing partnershipsTax optimisation/Efficiency (46%):• Transfer pricing• Import/export optimisation (e.g., bonded warehouse)• Manufacturing and assembly optimisation(toll manufacturing)Sustainability (45%):• Agreement of supply chain partners to adhere tohighest ethical standards• Internal carbon footprint optimisation and improvement• Effective track-and-trace capabilities to ensuresustainable supply chain
  • 16. 30 Next-generation supply chains: Efficient, fast and tailored 31Next-generation supply chains: Efficient, fast and tailoredFigure 19: The key attributes of Technology and Telecom companiesTechnology and Telecom:Leaders achieve best EBIT margins with fewest inventory turnsand average delivery performanceSource: PwC, Global Supply Chain Survey 2013EBIT margin (%)+344%Laggards Leaders4.4 19.8Inventory turns (#)+170%Laggards Leaders4.4 11.9Delivery performance (%)+17%Laggards Leaders81.9 95.5Supply chain performanceOrganisational set-up:Technology and Telecom companiestypically manage their planning,manufacturing, operationalprocurement and delivery functionsregionally, and their enabling andstrategic procurement functionsglobally. They outsource about 15%of their planning, sourcing andenabling activities; as much as 55%of their manufacturing and assemblyactivities; and 20%-50% of theirdelivery activities.Supply chain performance:The leading Technology and Telecomcompanies achieve the highest EBITmargins (19.8%) with the fewestinventory turns (11.9) and an averagedelivery performance (95.5%). There’sa bigger gap between the EBIT marginsof the Leaders and the Laggardsthan there is in any other industry,but their inventory turns and deliveryperformance are relatively similar.Leading practices:The most important value drivers forTechnology and Telecom companies aremaximum delivery performance (94%),maximum volume flexibility andresponsiveness (90%), minimised costs(83%) and complexity management(71%). The Leaders focus oncollaboration with key customers andsuppliers and end-to-end transparency.They also continue to place great weighton dual sourcing with key electronicsmanufacturing services providersand regional supply chain set-ups.Outsourcing level Geographic organisationGeographic organisationfor supply chain functions0 18 36 55% of supply chainactivities outsourcedOrganisational set-upLocal Regional GlobalPlanDemand planningSOPStrategic procurementOperational procurementManufacturing and assemblyServiceCustomer order deskWarehousingInbound and outbound logisticsNew product developmentSC centre of excellenceSourceMakeDeliverEnablerSupply chain value driver (%)% of participants indicating very importantor important.Maximum deliveryperformanceMaximum volume flexibilityand responsivenessMinimised costsComplexity managementMinimised risksSustainabilityTax optimisation/Efficiency94908371585050Top 3 practices per value driverMaximum delivery performance (94%):• Collaborative planning with key suppliers• Collaboration with key customers on planning(e.g., effective forecasting)• End-to-end supply chain planning and visibilityMaximum volume flexibilityand responsiveness (90%):• Multisourcing/dual sourcing• Outsourcing to service provider• Regional supply chain set-upMinimising costs (83%):• Inventory reduction• Outsourcing to service partners• Best cost country sourcingComplexity management (71%):• Outsourcing• Making to order• Automation of processes in order to cope with complexityMinimising risks (58%):• Multiplication of sources and sole-sourcing avoidance• Visibility and regular monitoring of main suppliers’operational indicators• Visibility over short-term supply through ordertraceability, vendor-managed inventory and so onSustainability (50%):• Internal carbon footprint optimisation and improvement• Agreement of supply chain partners to adhere tohighest ethical standards• Return of supply chain to manage recyclingTax optimisation/Efficiency (50%):• Manufacturing and assembly optimisation(toll manufacturing)• Import/export optimisation (e.g., bonded warehouse)• Transfer pricing
  • 17. 32 Next-generation supply chains: Efficient, fast and tailored 33Next-generation supply chains: Efficient, fast and tailoredDr. Reinhard GeissbauerGermanyreinhard.geissbauer@de.pwc.comJoseph RousselFrancejoseph.roussel@fr.pwc.comStefan SchraufGermanystefan.schrauf@de.pwc.comMark A. StromUSmark.a.strom@us.pwc.comEditorial BoardVincent Espie, FranceMark Fabisch, GermanyWilliam B. Householder, USDr. Elizabeth Montgomery, GermanyOz Ozturk, SwitzerlandDr. Eric Pohlmann, GermanyNitin Soundale, IndiaCostas Vassiliadis, GreeceResearch and Data AnalysisPwC’s Performance Measurement GroupSteffen Holm, GermanyKara Kardon, USJudith Vaupel, GermanyAdvisory GroupKoen Cobbaert, BelgiumGordon Colborn, UKJoseph Ippolito, UKCraig Kerr, ChinaHans Kühn, GermanyJohnathon Marshall, UKBernhard Raschke, UKJames E. Takach, USMarketing and Project ManagementHelen Gill, UKViktoria Kaminski, GermanyShannon Schreibman, USDesignOdgis + CompanyAcknowledgementsCore Editorial TeamGlobal supply chainsurvey overviewThis year’s survey is the ninth suchsupply chain survey to be conductedby PwC. From May to July 2012, wesurveyed 503 supply chain executivesin a wide range of industries. Forty-four percent of them hold seniormanagement positions, while 34% holdC-level posts. (Figure 23 provides fulldetails of the survey population.)As part of our research, we assessedeach company by using two criteria:its financial performance (based on itsEBIT margins and revenue growth)and its supply chain performance(based on the average annual numberof inventory turns and the percentageof occasions on which it delivered ontime in full). We gave each company ascore for each performance category.Then we combined the two scores toAbout the surveycreate a total performance score,comprising 35% of the financialperformance score and 65% of thesupply chain performance score.We used these total performance scoresto find two groups of companies withineach industry sector: Leaders (thetop 20% of the sector population)and Laggards (the bottom 20%).We compared those two groups witheach other to find out which featuresmake the Leaders so successful.We also distinguished between basicand differentiating supply chaincapabilities. We defined basiccapabilities as those that Leaders andLaggards regard as equally importantor where there’s very little difference intheir views. We defined differentiatingcapabilities as those that Leaders treatdifferently than Laggards do.Figure 21: Geographic distributionFigure 22: Company sizeFigure 23: Seniority levelFigure 20: Industry affiliationStudy populationcharacteristics• 503 completed questionnaires• All three global regions arewell represented• The participants represent abalanced mix of company sizes• More than half of the participantsare senior executivesAsia22%Americas30%Europe48% USD 5B30%USD 1B –USD 5B25% USD 1B45%Non-management22%Management44%CXO34%Source: PwC, Global Supply Chain Survey 20138% Other8% Automotive9% Pharma/Life Sciences12% Technology and Telecom15% Chemicals/Process20% Retail andConsumer Goods28% Industrial Products
  • 18. 34 Next-generation supply chains: Efficient, fast and tailored 35Next-generation supply chains: Efficient, fast and tailoredRelated readingFrom vulnerableto valuable: Howintegrity cantransform asupply chainDriving CO2outof the supplychain and offretailers’ shelvesGlobal supply chaintrends 2011supplement: Achievingoperational flexibilityin a volatile worldNot your father’s supplychain: Following bestpractices to manageinventoryPharma 2020:Supplying the futurePowering theservice-orientedsupply chainAPEC’s evolvingsupply chain: 2012APEC CEO SummitPwC issues spotlightResilience:Sustaining thesupply chainRethinking thebusiness operatingmodel: Corporatesimplification in theautomotive sectorSparing no effort:Lessons on managingservice inventory forgreater profitabilityand growthSupply chainglobalizationplanning andanalyticsSupply chainmanagement:Achieving agilitythrough the salesinventory operationsplanning processTransformingmaterial supplychain for US electricutilities: Materiallogistics benchmarkstudy 2011Value chaintransformation:transforming yourbusiness to achievefinancial, legal andoperational alignmentWinning in India’sretail SectorHow to fortify yoursupply chain throughcollaborative riskmanagementTransportation Logistics 2030 Vol. 2:Transportinfrastructure— engine or handbrake for globalsupply chains?Sustainabilitymatters: Carbonaccounting in thevalue chainThe best of bothworlds: Strategiesfor a high-service,low-cost supply chain10Minutes on supplychain risk managementTransportation Logistics 2030Vol. 3: EmergingMarkets — Newhubs, new spokes,new industryleaders?Transportation Logistics (TL) 2030Vol. 1 : How will supplychains evolve in anenergy-constrained,low-carbon world?Transportation Logistics 2030Vol. 4: Securing thesupply chain
  • 19. www.pwc.com/GlobalSupplyChainSurvey2013PwC firms help organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with close to 169,000 people who are committed to delivering qualityin assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com.This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act on the information contained in thispublication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in thispublication, and to the extent permitted by law, PricewaterhouseCoopers LLP its members, employees and agents do not accept or assume any liability, responsibility or duty of care forany consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.© 2012 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is amember firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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