2010 Middle East State of Supply Chain Management


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Management consulting, Procurement, Sourcing, Lean Manufacturing, Supply Chain Management, Services operation, OTC, Performance improvement, Business Process Re-engineering, Operational Due Dilligence, Change Management

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2010 Middle East State of Supply Chain Management

  1. 1. State of the Supply Chain Management: Middle East Series 2010 B2G Consulting Supporting Growing Markets
  2. 2. Foreword© 2010 B2G Copyright - Middle East Series 2
  3. 3. Foreword M iddle East benefits from an smoothen and ease business exceptional position between transactions. However, the complex Asia andchain from performing to the Europe. This confers to its challenges in the region cannot be region aoptimum source of business large level the supply chain ignored, and should be addressed as an opportunities, performing to its optimum from which are still mostly opportunity to revolution the current untapped. In this race, many GCC situation. Supply chain management is countries have started to differentiate clearly lagging compared to more themselves by launching large scale mature markets such as Europe, but we initiatives. For example, the Kingdom of believe at “Art of International Trading Saudi Arabia, one of the leading and Import (Artiti)” that the region countries, has embarked on a massive should find innovative ways to transformation through Saudi Arabian distinguish itself by providing world- General Investment Authority (SAGIA). class services. We hope to see soon Important investments have been done more GCC organizations globally to support the development of logistics recognized for their high dedication to infrastructure in the Kingdom (road and customers, outstanding quality and rail networks, ports and airports facilities operational excellence, supported by a etc…). In addition, laws and regulations dynamic and highly trained professional are in the process of being adapted to workforce. sm Mohammed H. Al Qhahtani ARTITI level the supply chain from performing to its optimum© 2010 B2G Copyright - Middle East Series 3
  4. 4. Table of contents Foreword 2 01 Introduction 6 02 Executive summary 8 03 Survey panel analysis 10 Where are your headquarters located? What is your company’s annual revenue? What is your number of employees? What is your main sector of activity? Industry insights: Conducting a cost reduction program in the transport sector 12 04 Supply Chain maturity How is the level of knowledge of your Supply Chain organization? 14 What are the Best practices currently used by your organization? 15 What are the activities outsourced? 16 What is your supply-demand model? 17 Which technology is being used to support your Supply Chain operations? 18 How is your Supply Chain considered by the top management? 19 What is the frequency of training for the Supply Chain staff? 20 Industry insights: Human Resources Management – Recruiting Supply Chain Experts 22© 2010 B2G Copyright - Middle East Series 4
  5. 5. Table of contents 05 Supply Chain performance metrics Perfect order fulfillment 24 Delivery performance 25 Total supply chain management cost 26 Cash-to-cash cycle time 27 Inventory days of supply 28 Days of payable outstanding 29 Days of sales outstanding 30 Industry insights: 3PL outsourcing in the Petrochemical Industry 32 06 Supply Chain challenges What are the top Supply Chain concerns your organization is facing? 36 How difficult is the recruitment of Supply Chain professionals? 37 What are the next initiatives you are planning to implement? 38 07 Conclusion 40 08 Appendix 41© 2010 B2G Copyright - Middle East Series 5
  6. 6. Introduction01O ptimism is back in the Middle they will struggle to counter demand further solidified in recent years as East, as the region shakes itself through scaling production, this coupled increasing volumes of finished goodsfree from the effects of effects recession, free from the global of global with unresponsive supply chains will and raw materials passed through itsand once again and once againto the recession, looks forward looks lose valuable time to market. How will borders. The collective aspiration andgood forward to the good times. times. Senior leadership of these companies face the upcoming commitment of the region, in becomingmultinational companies based within operational and supply chain a world class transit hub, is evidencedGCC is justifiably optimistic about and effects of global recession, the challenges, in an increasingly complex by unprecedented levels of investmentseconomic upswing, looks forward to the once again however upon closer global market, characterized by local in logistics infrastructure that will be able good times.inspection, one finds that only a few specificities? As a region, the GCC has to cope with expected increase in freighthave taken the opportunity during this undergone an extraordinary over the coming years, driven by double recessioptimum level the supplycrisis to strengthen their operational transformation in recent years and has digit growth in South and East Asia. chain from performing to itsreadiness. Companies that exclusively emerged as a global freight hub by However set against this present and optimumopted for short-termism through ruthless virtue of its strategic location between future context, the following reportcost cutting as a means of survival Asia, Africa and Europe. Spurred on by poses a serious question: Do currentduring the crisis, will find themselves World economic growth (before 2008), players within the region, whether atunable to respond to the upturn, since its position as a global transit hub company, country or regional level havethey will struggle to counter demand further solidified in recent years as the vision and oversight to make the© 2010 B2G Copyright - Middle East Seriesthrough scaling production, this coupled increasing volumes of finished goods necessary shift in paradigm, from a6with unresponsive supply chains will and raw materials passed through its mindset which is purely focused on
  7. 7. Introductionthe vision and oversight to make the condition, and with due care and by reducing inventories, loweringnecessary shift in paradigm, from a attention to the environment, SCM deals operating costs, speeding productmindset which is purely focused on with all business activities associated availability, and increasing service level.logistics, to one which is holistic in its with satisfying a customer‟s demand. Structuring the supply chain requires antreatment of the complete supply chain. SCM is the oversight of materials, understanding of the demand patterns,Supply Chain Management (SCM) is the information, and finances as they move service level requirements, distancecorner stone of any successful strategy in a process from supplier to considerations, cost elements and otherand yet paradoxically it is also the least manufacturer to wholesaler to retailer to related factors. These factors are highlyunderstood of all disciplines, often under consumer. SCM involves coordinating variable in nature and this variabilityresourced and devoid of investment. and integrating these flows (Information, needs to be considered to improve anyMisconceptions about the term “supply physical, financial flows) both within and supply chain.chain” abound often leading to among business partners (suppliers, The ‘State of the Supply Chainconfusion between itself and logistics. service providers, customers). It is said Management Middle East’ aims toWhile logistics involves getting the right that the ultimate goal of any effective draw a concise portrayal of thegoods, to the right place, at the right supply chain is to increase the customer current situation as seen by supplytime, at the right cost, in the right satisfaction in the most profitable way chain practitioners in the Gulf region.condition, and with due care and by reducing inventories, lowering There are six key elements to a supply © 2010 B2G Copyright - Middle East Series operating costs, speeding productattention to the environment, Supply 7 chain:Chain Management (SCM) deals with all availability, and increasing service level.
  8. 8. Executive summary02 his report is the culmination of chains as chiefly driven by customer leadership in the face of competition, T over six months of dedicatedresearch optimum level the supply chain by B2G Consulting, bringing demand, loosely linked together by collaborative end-to-end partners, increasing complexity and innovation, supply chains must continually invest intogether from performing to its optimum under one publication the 23.7% stated that their supply chains their human resource. Howevercollective level the supply chain from wisdom of over 225 were organized by function whilst only investment in training is particularly lowparticipating companies optimumwithin performing to its based 18.4% were structured in processes. in the region and the majority ofthe GCC region. Supply chain The quality of human resource is the respondents (68%) provide training lessmanagement (SCM) is the cornerstone critical success factor of any than 5 times a year to their supply chainof any successful organization and the organization and supply chains are no staff, this phenomenon becomesdiscipline increasingly finds itself exception, collaborative chains are especially acute when considering thatincluded in top management‟s strategic stretched across longer distances, 60% of their employees possess onlyagenda. This is further borne out by the across many borders, in their search for rudimentary knowledge of fundamentalfact that 28.9% of all respondents low cost resources and at the heart of concepts. Not surprisingly educationconsider their supply chains as strategic these networks are people managing reform is a top priority amongst GCCto their business goals. 39.5%, of all complexity, technology and cross counties and there is a real need torespondents‟ perceived their supply cultural relationships. To maintain develop best talent across the region.chains as chiefly driven by customer leadership in the face of competition, GCC firms face a unique challenge© 2010 B2G Copyright - Middle East Seriesdemand, loosely linked together by increasing complexity and innovation, where they are compelled to source8collaborative end-to-end partners, supply chains must continually, invest in from a small pool of qualified local
  9. 9. Executive summaryGCC firms face a unique challenge challenge facing the industry is the lack all respondents had implemented Saleswhere they are compelled to source of visibility, both internally between & Operations Planning Process, andfrom a small pool of qualified local critical processes and between critical more companies (42.1%) intend to setprofessionals, who are hard to recruit partners, leading to soaring inventory, up such initiatives within the next 12and even harder to retain, 84% of long lead times, high operating costs months. Pressures on lead-times,respondents found recruitment of and low customer satisfaction. The inventory levels and costs have led thequalified supply chain professionals volatility in the economy has been large majority of respondents to definedifficult, especially at middle mirrored by fluctuating demand, which mid-term plans to reduce logistics costsmanagement level (59.5%). Although has made forecasting, fraught with (36.8%), reduce delivery lead-timesoutsourcing presents an immediate errors and much more difficult to (34.2%), optimize inventory levelsopportunity as a promising alternative, it manage. 73.7% of respondents stated (31.6%) and improve suppliers‟is still a nascent industry in the region. that improving their level of demand performance (21.1%). Lastly, the76.3% of respondents outsource at least forecasting was on top of their agenda importance of information is oftenone logistics function. However, for 2011, followed by 63.2% who wished overlooked as a critical competitiveregardless of whether the supply chain to pursue inventory optimization. To resource, but its role is crucial tois in-sourced or outsourced, the biggest improve demand forecasting, 20.7% of achieve higher productivity.challenge facing the industry is the lack all respondents had implemented Sales responsiveness, interconnectedness © 2010 B2G Copyright - Middle East Seriesof visibility, both internally between & Operations Planning Process) in a bid (internally and externally) 9 and lowercritical processes and between critical to achieve a level of best practice and costs.
  10. 10. Survey panel analysis 03Study background The “State of Supply Chain Management – Middle East Series” represents B2G consulting‟s largest annual review of global supply chain performance focused on the GCC region. With participants from Saudi Arabia, Bahrain, UAE, Oman, Kuwait and Qatar, the survey provides deep insight into the most critical yet least understood lever, i.e the Supply Chain management, to improve significantly any company‟s operational profitability and margin‟s growth. Consisting of a comprehensive online questionnaire, participants were invited to respond to 21 key questions covering the different aspects of the supply chain management in terms of challenges, maturity and performance level. Headquarters location Number of employees 2.6% 6.0% 18.8% 18.4% 11.4% Saudi Arabia Bahrain <10 Dubai 2.9% 101 Abu Dhabi 48.6% 501 5.6% Oman 18.0% 100 Kuwait 18.8% 18.4% >50 Qatar 28.9% Other 20.0% Saudi Arabia <101 15.8% 2.9% 101-500 Bahrain 501-1000 Dubai Abu Dhabi 18.0% 1001-5000% >5000 Oman 28.9% Kuwait Qatar Other 15.8% © 2010 B2G Copyright - Middle East Series 10
  11. 11. Survey panel analysis Survey participants Nearly 230 companies participated in this 2010 survey, with data collection completed in November of 2010. The survey population is composed of organizations from a diverse set of industries, including Retail, Oil&Gas, Consumer Goods, Mining and metals, transport, industrial manufacturing, services, telecommunications, construction, health care and agriculture. The survey reflects the response of the population which is composed of more than 60% senior executives in supply chain management, with 15% at the CXO-level. The region surveyed is only focused on the Middle East region particularly on the GCC countries: Saudi Arabia, Bahrain, UAE, Oman, Kuwait and Qatar. And more than half of survey participants are companies with annual revenues superior than $500 Million with a minimum of 500 employees. Company annual revenue ($US) Main sector of activity Industrial manufacturing 17,9% Services 14,3% 13.2% 21.1% Consumer goods 10,7% 1M-25M Retail 8,9% 7.9% 26M-50M Food and beverage 8,9% 51M-150M 151M-500M Oil & Gas 7,1% 10.0% 10.5% 501M-1B Transport 7,1% 1B-10B Mining and metals 5,4% >10B 11.1% Construction 5,4% 26.3% Other 3,6% 1M-25M Health care 3,6% 26M-50M 51M-150M Telecommunications 3,6% 151M-500M Agriculture 1,8%5% 501M-1B Real estate 1,8% 1B-10B >10B 0% 5% 10% 15% 20% © 2010 B2G Copyright - Middle East Series 11
  12. 12. Industry insightsConducting a cost reduction program inthe transport sector01 Company background and 02 ResultsChallenges Which results have been obtained after theIn few words, please describe your company implementation? How long did it take to reach theactivity. expected outcomes? What are the next steps?“Mubarrad is a publicly listed Kuwait-based company, “It took six months after implementation to start seeingspecializing in land transport, logistics, heavy transport, truck improvements. The team built a 6-year strategic plan withmanufacturing and maintenance. Mubarrad is a GCC player clear objectives. At that time there was a significant drop inwith operations in Kuwait, Dubai, Oman and Egypt. With a sales, but we finally managed to increase the revenue bymarket value of 21.6 Million KD, its assets are worth 37 33%. Several strategic initiatives were launched such as:Million KD for a total of 200 employees (excluding drivers).”  Upgrading transport asset quality and improving utilization rateWhich pressures forced Mubarrad to embark on a  Securing long term contractscost reduction program?  Concentrating businesses in Oman and Dubai to“After several acquisitions and major internal increase profitabilitytransformations, a new management team has been  Building up a new executive committee with a crossappointed in mid 2010 to restructure completely the financial functional view to drive the change and bearand operational departments in order to drastically reduce decisions as a teamcosts. The situation when we arrived was a very high SG&A  Implementing a CRM system to optimize thecosts compared to the revenue, accentuated by a difficult decision making process with the market dynamicseconomical context.”  Increasing project planning and execution to increase the projects success rateWhat did Mubarrad decide to do to overcome this  Close monitoring of losseschallenge?  Focusing on employees efficiency while“The new management team decided to go for the best transforming the mindset from employees to leaderspractices in the industry, and conducted several analyses  Diversifying the logistics offering(SWOT, balanced SCORE Card, zero based costing, Porter  Expanding the regional coverageanalysis…) with the support of management consultants.”© 2010 B2G Copyright - Middle East Series 12
  13. 13. Industry Insights Mohammad E. Al-Muaili Vice Chairman - CEO Mubarrad Transport Company03 Key lessons learned 04 Which lessons to retain in conducting such initiative?Did Mubarrad face any difficulties during theproject phase?“The major issue that we faced during the project “People are definitely the most important assets for aphase was the change resistance from the existing staff, company, especially when the company decides to embark onso we had to take tough decisions in order to a major transformation program that involves changing the wayinstitutionalize a full commitment from everyone and to it operates. We can witness it every day at Mubarrad, so webring the morale up within the company. As a new team, tried to really have the right personnel with the right mindsetwe were constantly walking on eggs, as we wanted to who considers himself as an owner of the company rather thanimprove the situation but without jeopardizing the day- just an employee. In the end, the success of the company liesto-day operations. It was helpful to set up employees in a team effort and not on one-man show.SCORECard, monitor the to monitor thenot only to not only individual individual “People are definitelyperformance of each employee but as well to assure each employee but The challenge in the GCC is mainly about having the right people, and the most importantthat everyone wouldeveryone wouldmeasure its ownas well to assure that be able to unfortunately, there is a workforcecontributionbe able to the global initiative.own measure itsOne of the very first things that we did was to bring all for a company” assets deficiency in this market, which iscontribution to the global initiative. even stronger in the area of supplyOne of the very first things that wetop was to bring all top managementin the same office management (including myself)did was to bring all top management (including myself) chain and logistics. At Mubarad, we .didclose tosame office close the the operations, usedthe decided to tackle the skills issue through two educationalin the the operations, as to executive office as to(including myself) in the same officebe remotely located. It wasbe remotely located. we,was through two educational segments: segments: one with small workshops to improve the technicalexecutive office operations,important for us that It theclose to the used to as themanagement, lead thatexample and demonstrate led our and soft skills of the employees and workshops to improve one with small harmonize the levels for us by the management, by byimportant office used towe, remotelyexecutive beown acts and high commitment that we were expecting between departments,the technical other soft skills of the and the and one with extraexample Itthe demonstrated by our own acts the highlocated. was important for us thatfrom our employees.”we were expecting from our professional activities organized by theharmonize to cement employees and company the levelscommitmentmanagement, lead bywe, the that the bonds and improvebetween departments, and one with the interpersonal relationships withinemployees.” demonstrate by our ownexample and the company.” extra professional activities organizedacts the high commitment that we S “ o far, the cost reductionwere expecting from our employees.” S by the company to cement the bonds program has brought in substantial cost savings and this has o far, the results were the reduction of the loss to 71 K KD and improve the interpersonal reflected positively in the overall result. The road is long and we haven‟t finished yet our from 2.2 Million KD at the same period in 2009. The road is relationships within the company.” mandate.” long and we haven‟t finished yet our mandate.” © 2010 B2G Copyright - Middle East Series 13
  14. 14. Supply Chain maturity04#1: How is the level of knowledge of your Supply Chain organization?IntroductionMost companies enter supply chain to Knowledge of Supply Chain organizationimprove profitability, through processimprovement and technology for moreresponsiveness to consumer demands. 8,0% Mature – with knowledgeHowever maintaining a competitive about advanced modelsadvantage depends on the ability of such as SCOR and supply 32,0% chain best pratices (S&OP,each unit in the chain to apply VMI, etc…)knowledge innovatively. Knowledge is Average – with basicthe competitive advantage in a supply knowledge about supply chain (operationalchain – it not only enhances the fundamentals)efficiency of the operations but alsoenables to foresee and manage Low – with ad-hoccomplexity and change. The major knowledge on supply chainchallenge for companies is to acquire, 60,0%develop and retain skilled supply chainprofessionals to sustain efficiently theirsupply chain performance.Results Analysis nationals (Saudization, EmiratizationThe respondents were asked to indicate The supply chain is one of the most etc…). In the face of fierce globalthe level of knowledge of their supply rapidly evolving disciplines, and the competition to recruit the skilledchain organization. The results show variances in supply chain activities resources, GCC Companies shouldthat: require new set of skills and start looking at ways to develop and 32% of respondents have experiences for world class supply chain secure domestically the skilled advanced knowledge of supply professionals. The noticeable shortage manpower, required to support the chain concepts in the Middle East of supply chain expansion of their organizations. In 60% present basic knowledge professionals with the required skill-sets fact, some of the respondents have on supply chain is not something exclusive to this region already jumped on the bandwagon by 6% admit to have less but it is likely to be accentuated by establishing “learning centers” to knowledge some governmental initiatives that develop training and education encourage the employment of their programs to enhance local work force. nationals understanding of the true root causes© 2010 B2G Copyright - Middle East Series preventing the supply. 14
  15. 15. Supply Chain maturity #2: What are the best practices currently used by your organization? Introduction Everybody talks about best Best practices in place practices. But what does it really mean in the Middle East context? It Sales and Operations Planning Process 20.7% does not mean always getting the Customer segmentation 15.3% End to end Supply chain visibility tool 11.1% latest technology or doing exactly Performance management 10.2% Integrated business planning what best-in-class companies did 8.0% Real time information 6.4% lastly. “Best-practices” are the Joint service agreement (JSA) 5.7% Supply chain costing (Activity Based Costing) 5.1% methods, processes or activities Collaborative forecasting 3.2% that are the most effective at Lean methodology 2.5% Customer collaboration 2.2% delivering the highest outcome in a Competitive Benchmarking 1.9% Vendor Managed Inventory 1.6% particular context. It is critical to Supplier collaboration 1.3% understand that the way of using Formalized supply chain risk management 1.0% JIT - Just in time 1.6% best practices are business-specific. Financial supply chain (cash flow management) 1.6% Consequently success depends on Other 0.6% choosing them with a thorough 0% 5% 10% 15% 20% 25% understanding of the operations involved while considering the specific business environment.Results AnalysisThe top 5 best practices used by the The lack of visibility: internally amongst critical customers. This would logicallyrespondents are: processes, and externally between business explain the top 3 best practices partners; have incurred high inventory levels, used by the respondents. The most #1 Sales & Operations Planning process significant operating costs, longer lead times advanced companies have #2 End-to-End supply chain visibility and lower customer satisfaction. To forecast the elevated the conventional S&OP #3 Performance measurement demand more accurately and plan the supply process to integrate R&D, Product #4 Customer segmentation accordingly, the respondents have implemented management, marketing and #5 Integrated business planning one of the most powerful best-practices in financial issues into the process toDue to the recent financial crisis, there is demand planning: the Sales & Operations merge the operational and financiala noticeable growing trend for financial Planning Process (S&OP). The S&OP process plans into a seamless businesssupply chain practices, which were not provides optimum results when complemented planning and tactical execution-very popular in the Middle East in the with end-to-end visibility systems and efficient directing process: The Integratedpast years. performance measurement tools for segmented Business Planning (IBP). customers. This would logically explain © 2010 B2G Copyright - Middle East Series the position of the top 3 best practices used by 15 the respondents. The most advanced
  16. 16. Supply Chain maturity #3: What are the activities outsourced?IntroductionOutsourcing in the Middle East is a fairly Outsourced activitiesnew trend knowing that most companieshave been in-sourcing the majority of 10,5%their activities so far. In order to 28,9%optimize costs and deliver greater Logisticsefficiencies on all managed services, 23,7% WarehousingMiddle Eastern Corporate went through Manufacturingan intermediary phase of shared R&Dservices with a central department. As ITthe supply chain sector has 15,8% None - Inhouseprofessionalized along with the level of 10,5%maturity of the organizations, an Otherincreasing number of new ventureshave spun off, meanwhile developing 13,2% 18,4%the outsourcing service offerings.Results23.7% of respondents do not outsource Analysis of manpower. One of the biggestany of their activities. Amongst the Managing the supply chain has become challenges in outsourcing is to be ablerespondents, who outsource some of increasingly complex, especially to understand and master the activity ortheir functions, there are: coupled with the specific challenges in function that the company wants to 28.9% outsource Logistics the Middle East: narrow local supply outsource. Especially, before handing function base, regulated markets, level of over its operations with potential related 18.4% work with contract maturity of business partners, shortage unresolved issues. Else this will only manufacturers of qualifies manpower etc…which has limit this initiative to outsource the 15.8% outsource Warehousing services forced some companies to outsource current issues the company is facing. some of their non-core activities such as Innovative companies amongst theConsidering the enabling functions, IT logistics, warehousing or IT but as well respondents have embarked in aand R&D represent altogether slightly some of their very core activities journey, where they are accompanyingmore than 23%. including R&D, manufacturing, the service provider, as a partner, to procurement and including the provision grow at the same pace, hand in hand. of manpowerof . information and© 2010 B2G Copyright - Middle East Series financial flows along the Customers by 16 optimizing the physical, information and
  17. 17. Supply Chain maturity #4: What is your supply-demand model? Analysis Supply-demand model Inventory carrying costs count for a large portion of total costs in many 13,2% 10,5% supply chains, so unsurprisingly effective inventory management is one Make/Deliver-to-stock of the most important issues that supply chain managers are facing. Managers 18,4% Make/Deliver-to-order have the difficult task to determine which products should be made to Mixed of Make to stock / Make to Order order, and which should be made to Make-to-Engineer stock in order to reduce the inventory level while increasing (or maintaining) the level of service. For made-to-stock 55,3% products, accurate demand forecasting and proper inventory management strategies must be determined to reduce the level of inventory hold. For made-to-Introduction Results order products, approaches for reducingCompetitive pressures on lead-times, The configuration of the supply chain customer lead time must be developed.inventory level and costs have led many generally depends on the industry sector; The decision to use either a MTS ororganizations to review their production- however the respondents‟ responses MTO strategy depends strongly on theinventory-delivery practices. In their give a good indication of the leading business specificities and has aquest for “zero-inventory” goal, World- supply chain model present at the significant impact on the supply chainclass companies have started to regional level, which helps to understand performance. Indeed, with 55.3% ofdetermine the optimal conditions when the related supply chain challenges. The respondents using a combinedto hold a finished good inventory and large majority of respondents (55.3%) MTS/MTO strategy, it appears to bewhen it is not. Based on that, the indicates that their supply chain model is much more effective than using eitherresulting configuration selected, i.e. a mix of Make-to-Stock and Make-to- strategy exclusively. For this reason,Make-To-Stock (MTS) / Make-To-Order Order. For the other supply chain most companies are employing a hybrid(MTS) / Make-to- Engineer (MTE), is configurations: MTO–MTS approach, holding inventorydeterminant of the performance of the 18.4% only have Make-to-Order in some cases, and producing to ordercompany‟s supply chain. 10.5% only have Make-to-Stock in other cases. 13.2% have Make-to-Engineer © 2010 B2G Copyright - Middle East Series 17
  18. 18. Supply Chain maturity #5: Which technology is supporting your Supply Chain operations?IntroductionThe importance of information is often Technology supporting the Supply Chain operationsoverlooked as a critical competitiveresource. Indeed, its contribution to the Warehouse management system 34,2%management of the supply chain is not Forecasting tool 26,3%always very well understood. However, Performance measurement 23,7%the role of the information technology in S&OP tool 21,1%supply chain management is crucial to CRM application 18,4%achieve higher productivity, Transportation management system 18,4%responsiveness and lower costs. The SRM application 13,2%everlasting changing customers‟ e-invoicing 13,2%expectations have greatly increased Supplier management e-portal 13,2%along with the internet trend, and have Capacity planning tool 10,5%put on the spot the necessity of an Other 5,3%efficient information system to support 0% 5% 10% 15% 20% 25% 30% 35% 40%the end-to-end supply chain operations.Results Analysis that imposes a greater discipline inThe top 3 information systems used by Traditionally, warehouse management anticipating and fulfilling the marketthe respondents are: systems have been widely used to demand in a more cost-effective way. In monitor the warehouse operations and this regard, to measure and control the (34.2%) Warehouse management transactions. Indeed, WMS counts for effectiveness of their organization to system (WMS) 34.2% of respondents‟ answer. On the supply the demand, companies have (26.3%) Forecasting tool other hand, the lack of market visibility embarked on initiatives to improve both (23.7%) Performance measurement in the Middle East coupled with a the visibility of their internal performance tool versatile and hectic demand signal has and that of their business partners. The forced companies to improve their volume of information processedFurther to the growing interest in the demand planning with more accurate requires the use of BusinessS&OP process, there are 21.1% of forecasting tools. The market is Intelligence tools to segregate the mostrespondents who are using related currently shifting from a supplier-push relevant information to support keytools. model to a more customer- pull model business decisions. that© 2010 B2G Copyright - Middle East Series 18
  19. 19. Supply Chain maturity #6: How is your Supply Chain organization considered by top management? Analysis Supply Chain organization perception by top management With supply chains becoming more dynamic and complex, organizations Demand driven - Customer centric 39,5% have begun to understand the significance of having a high level Strategic function (part of top management board) 28,9% supply chain executive influence their Function oriented 23,7% (LOGISTICS/PRODUCTION/PURCHASING…) business strategy. Indeed, an efficient Considered as a Cost center 23,7% supply chain management, which is Collaborative with End-to-End partners (Suppliers / 21,1% aligned with business strategy, Customers) Process oriented becomes critical to remain competitive 18,4% (PLAN/SOURCE/MAKE/DELIVER/RETURN/ENABLE) and profitable. Competition is no longer Considered as a Profit center 10,5% companies against companies but Manufacturing driven - Internal focused 7,9% supply chains versus supply chains. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% This mindset shift has supported organizations to reshape their supply chain management in a more customer- centric supply chain. However majorIntroduction Results organizational changes, from aIn today‟s business world, operations The respondents‟ perception of the functional model to a more processand supply chain management are the supply chain is mainly demand driven- oriented model, are still slow to occur inbackbone of many companies. In this customer centric (39.5%), collaborative the Middle East. Besides this, there isregard, more CEOs are including supply with end-to-end partners (21.1%) and an increasing trend to expand thechain management in their strategic considered as a strategic department boundaries of the company‟s supplyagenda to differentiate themselves from (28.9%), but remains organized by chain to integrate more externaltheir competitors. This shift has helped functions (23.7%) rather than by partners. As a matter of fact, eachto see more supply chain executives at processes (18.4%). Although for a member of the supply chain has anthe board table and has been minority of companies (10.5%), the impact on the performance of theaccompanied by a transformation of the supply chain is considered as a profit others, the overall supply chain andway the supply chain management was generator, the majority still sees it as a ultimately the end customer.perceived within the organization. cost center (23.7%). © 2010 B2G Copyright - Middle East Series 19
  20. 20. Supply Chain maturity Supply Chain maturity #7: What is the training frequency of the Supply Chain staff?IntroductionToday, the global supply chain has Training frequency of Supply Chain staffbecome more complex with moreintegrated perspectives, linking 4,0%suppliers and customers. And one of themost important drivers for success in 28,0%deploying and running an efficient Neversupply chain is People. The challenge Below 5 times a yearfor supply chain executives, in theMiddle East, is to understand which Between 5 to 10 times aknowledge and skills are required, and yearto define the appropriate training and Above 10 times a yeareducation for their existing staff. As thescarcity of skilled supply chain 68,0%resources is exacerbated in the region,training appears to be an adequatesolution more than anywhere else.Results Analysis while in the UAE and Qatar privateThe frequency of the staff training gives Education reform is on the top priority institutions are booming, in Saudi Arabiaa good indication of the importance of the focus is less on private universities, list of the GCC governments, as theeducation to the respondents‟ but rather on improving the quality of need to develop best talents across themanagement: public universities such as KAUST. region becomes urgent to tackling the 68% of respondents provide Bahrain is making a point to differentiate skills gaps, in a globalised economy. As training to their supply chain staff itself from Dubai and Qatar by offering a recent discipline, Supply chain below 5 times a year training in services to cater for various management is lacking of universities 4% of respondents provide training sectors, including banking and between 5 to 10 times a year and private training centers to prepare a hospitals. However, Supply Chain 28% of respondents never provide highly skilled workforce for the future in management has not found its place yet any training the Middle East. In this process, several in the academic programs and degrees major initiatives in Education have been of GCC universities and private launched to enter the era of Knowledge: institutions.© 2010 B2G Copyright - Middle East Series 20
  21. 21. © 2010 B2G Copyright - Middle East Series 21
  22. 22. Industry insightsHuman Resources Management:Recruiting Supply Chain Experts01 Company background makers are not able to improve the existing processes.In few words, please describe your company Moreover, logistics companies are not using latestactivity technologies and thus, need more manpower to compensate“We are a recruiting agency which represents IESF in this lack of technology.Dubai. IESF (International Executive Search Federation) is What attracts talents in the Middle East? Howthe largest retained executive search group in the world difficult is it to retain skilled resources?identifying talent and leadership in 160 offices and 40countries globally. We look for experts/specialists and talents “Some young talents look forward to getting moreusing direct search approach. We have successfully made exposure than they would have in a mature market and tosearches in all support functions (HR, Finance, Supply endorsing real responsibilities. Besides this, the packages “Good professionals lacking in some countries of theChain, Logistics, Procurement and Project ement offered can be higher and taxManagement) and in the following industries: What levels are the most free in the Middle East?optimize cycle times. Consequently, decision makers are not can handle the who “Senior Levels and MiddleMiddle East. On not strong improve processes to increase quality, decrease costs andIT/Telecom, Logistics, Engineering, the other Management areManufacturing, Construction, Large Retailers hand, retaining talent is full supply chain cycleefficiently implemented.”because of enough to ensure that the strategies and tactics decided byable to improve the existing processes.and FMCG for UAE, Qatar and Saudi Arabia.” extremely difficult the Board/Executives are Manpower landscape in theare very hard to find” high inflation rates which have02 What attracts talents Middle How do the nationalization be reflectedaffect salary to programs in local East? How difficult is it to retainin the Middle East companies? increases. In addition, recognition & development, career training is very important to skilled resources?How is the Middle East manpower“Slandscape? ome young talents look forward to getting “I growth, promotions, incentives employees so that management should be able to offer t should be a two-way street; instead of focusing on these on target reached…” training & development, career growth, promotions,“Good professionals who they would or part supply programs, companies should make a real selection of “Good professionals who can handle fullmore exposure than can handle full orhave in amature market and to endorsing real incentives on target reached…” candidates and hire only motivated ones. Newly most What levels are the hiredpart supply chainvery hard very hard to two main reasons.chain cycle are cycle are to find for find for employees should be provided with detailed Middle Middle lacking in the job descriptions Which levels are the most lacking in the East?responsibilities. First, universities the the packages Besides,two main reasons. the region are not focusing enough on inFirst, universities in “S and expected targets. It can take some time so it is better tooffered can focusing enough on tax free in some be higher and Logistics-region are not Chain despite the huge needs of skilled East? enior Levels and MiddleLogistics-Supply start early during training and internships. New employeescountries of the the huge needs of skilled the other Middle East. OnSupply Chain despitemanpower in this sector. Moreover, we can find a lot ofhand, retaining talent is we can find difficult extremely “S Management are not strong should gain more and Middle in themselves are not helped enior Levels confidence Management and be strongmanpower in this sector. Moreover, cannot think out of thegood operational people but they enough to ensure that the by a mentor.” enough to ensure that the strategies and tactics decided bybecause of high inflation rates which have toa lot improve processes to increase but theyto decreasebox, of good operational people quality, strategies and tactics decided the Board/Executives are efficiently implemented.”be reflected of the box, improve processes addition, in salary increases. Incannot think out cycle times. Consequently, decision by the Board/Executives arecosts and optimizerecognition quality, decrease costs employees soto increase is very important to and “It should be a two-way street; instead of focusing on efficiently implemented.”that management should talents in offer© 2010 B2G Copyright attracts Series What be able to theoptimize cycle times.- Consequently, decision Middle East these programs, companies should make a real selection of 22training Middle East? How difficult is it to & development, career growth,makers are not able to improve the existing How do the nationalization candidates and hire only motivated ones. Newly hired programs affect local
  23. 23. Industry Insights Zoran Marinkovic Partner - HR Solutions BM Management Consultancies – I.E.S.F.How do nationalization programs affect local How is the educational system in supply chain?companies? “Instead of focusing on proposing Business Administration“It should be a two-way street; instead of focusing on these degrees, universities should offer Logistics and Supply chainprograms, companies should make a real selection of programs. Internships and trainings are not very developedcandidates and hire only motivated ones. Newly hired in the Middle East whereas they would give a professionalemployees should be provided with detailed job descriptions exposure and experience to students. Students would beand expected targets. It can take some time so it is better to able to work with specialists and experts in supply chain andstart early during training and internships. New employees logistics as well as discover the various functions of this industry.” industry.” “Instead of focusing foresee the future of supply chain onshould gain more confidence in them- selvesselves and be helped by a mentor.” How do you Business Administrationin the Middledo you foresee the manpower landscape How East?03 Recruiting Supply Chain degrees, universities regional competition andbebecause “With the increase of future of supply chain supply chain and logistics aremanpower landscape in critical in order to able tospecialistsAre Supply chain professionals should propose Logistics and quality of products on time and deliver the right quantity the Middle East? at the right cost, we need professionals who can challengemore demanded compared to otherareas? What is the trend? areas? What is the trend? and Supply existing chain and who are familiarand ofthe latest the procedures “With the increase competition with regional because“The world credit crunch hashas made programs” to spend time to draw-up an outstanding Supply logisticscycle world credit crunch made people realize that they technologies. Companies should understand that they need supply chain and Chain arepeople focus that they should focus andshould realizeon their core business on expertise. This is critical in order to be able to which can be implemented in a mid-term view.”their core business and professionals were less demandedthe case in Dubai where expertise. This deliver the right quantity andis the case Chain than in where professionals the bankingin Supply in Dubai wherethe real estate or in were less the case in Dubai professionals quality of products on time quality of products on time and at the right cost, we needdemanded demandedwere lessHowever, theintrend willChain a huge demand inindustry. in Supply Chain than in the real estate or in the Supply see and at the right cost, we need professionals who can challenge the existing procedures andthan in the real estate ports coming up will see a ZayedSupply Chain with newor in the banking like renewed hugebanking industry. However, the trend who are familiar with the latest technologies. who professionals can Companiesdemand However, in Abu will see aindustry.Khalifa PortChain with new ports coming nearlikePort & in Supply the trend Dhabi, Kuwaiti port up the challenge the existing should understand that they need to spend time to draw-uphuge demand Iraq, Saudi‟s Red Sea Abu Dhabi, Terminalborder with in Port & Khalifa with new Gateway Kuwaitirenewed Zayed Supply Chain Port in an outstanding Supply procedures Chain cycle which who are and can beportsnear the Port likeSalalah, Saudi‟s Red Sea Gatewayport coming up of renewed Zayedextension,the border with Iraq,extensions of several ports in implemented in a mid-term view.” familiar with the latestDubai…” extension,TerminalPort & Khalifa Portthe Port ofDhabi, in Abu Salalah, extensions of technologies. Companiesseveral port in Dubai…”Kuwaiti ports near the border with Iraq, should understand that they Which positions in supply chainSaudi‟s Red Sea Gateway Terminal need to spend time to draw-up WhichPort Middle East Series sought? © 2010 are positionsmost the in supply chain 23extension, B2G Copyright - of Salalah, the an outstanding Supply Chain are the most sought? (Procurement, sourcing, planning,extensions of several ports in Dubai…” cycle which can be
  24. 24. Supply Chain performance metrics05#1: Perfect Order fulfillmentIntroductionThe Perfect Order Fulfillment represents Perfect order fulfillment (%)the percentage of orders that are ontime, in full, with complete and accurate 9,7% 3,2%documentation and no shipping 12,9%damage. This customer-facing metric iscrucial as it measures the performance 50-60%of the organization, as perceived by the 60-80%Customer. Needless to say that this 80-90% 90-95%metric directly impacts the company‟s 35,5% 22,6% 95-100%top line and affects the relationship with Not measuredits Customer. Although the precisequantification of its contribution to therevenue growth is relatively challenging, 16,1%the benefits are confirmedly substantial.Results Analysis relationship that enhances collaborationThe respondents were asked to indicate Achieving high „perfect order fulfillment‟ and speeds up transaction betweenthe level of their perfect order fulfillment: levels demands more than just supply chain partners. Companies that 35.5% of respondents indicate that computing data from software. boast some of the highest Perfect Order their perfect order fulfillment Companies must configure their supply rates carry less inventory, experience reaches 95% and above. chain processes from end-to-end to shorter cash-to-cash cycle time, and 16.1% of respondents have a deliver the highest possible have significantly less stock-outs when perfect fulfillment comprised performance. It involves much more compared to their competitors. AMR between 90-95% than the logistics aspect of delivering a Research says the pay-off for 22.6% of respondents say that their customer. It includes putting in place companies with high rates of "perfect perfect order fulfillment ranges accurate forecasting process and tools, orders" can be substantial. A 3 percent between 80-90% building information systems that improvement in perfect order fulfillment 9.7% of respondents do not connect suppliers, customers and translates to a 1 percent increase in measure this metric. internal departments, or developing profits, AMR says. strong© 2010 B2G Copyright - Middle East Series 24
  25. 25. Supply Chain performance #2: Delivery performance (line item delivery to first commit) Analysis Delivery performance (%) The first step in improving on-time delivery is defining what it is. This is generally a major challenge. Each 6,5% customer may have his own definition of 9,7% „on time‟. Companies will need to 32,3% develop an operational definition for on- 50-60% time delivery that is aligned with their 60-80% business partners. Once done, it is 80-90% important to understand that improving 90-95% on-time delivery is mainly a matter of 29,0% 95-100% issues concerning time and expectations. Indeed, the expectations must be well understood by both parties 22,6% in order to avoid unnecessary pressures. On the process side, Forecasting, demand planning and theIntroduction Results supply chain configuration play a majorThe „Delivery performance‟ or „On-time The survey results indicate that: role in the performance of the on-timedelivery‟ is one of the key components delivery. So to address the issue, supplyof the perfect order fulfillment. On-time 32.3% of respondents outperform chain managers must examine carefullydelivery is measured as percent above 95% of On-time delivery their demand processes to identify andachievement within a window of time 22.6% of respondents deliver with a measure those that are contributing inthat brackets the customer-requested performance between 90-95%date/time and/or the business 29% of respondents reach an the desired on-time outcome. From thiscommitted date/time. While price has average on-time delivery between analysis, managers will be able to tacklealways been a key element in the 80-90% counter performance related to processpurchasing decision, a constant and 16.2% of respondents are lagging lead times, capacity bottlenecks,timely delivery is becoming increasingly with a delivery performance below process quality and etc… in the quest ofimportant due to the market‟s pressure 80% the 100% on-time delivery.for speed and product instant availability © 2010 B2G Copyright - Middle East Series 25