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UPS, IDC survey cites cost concerns as biggest supply chain factor

By Jeff Berman, Group News Editor
November 12, 2010

A wide-ranging survey published by UPS and IDC Manufacturing Insights based on interviews with senior-level supply chain, operations, logistics, and distribution executives at 125 high-tech companies found that taking care of the bottom line is imperative when looking back at the lessons learned from the Great Recession.

When asked what the top three business priorities during the economic downturn were, respondents to the survey, entitled “Change in the (Supply) Chain,” 72 percent listed cost containment, followed by improving margins at 61 percent, and improving customer experience at 39 percent.

UPS Vice President of Customer Solutions for the High-Tech and Industrial Manufacturing Sectors Charlie Covert told LM that in this current economic environment it is not surprising to see a focus on costs at the top of the list.

“As we went through the recession, we saw a lot of customers focusing on what they can do to rein their costs in,” said Covert. “What I find encouraging was cost was first and customer service was close behind. That really points out that companies are very cognizant of the need to control their costs, and they cannot do it at the expense of customer service, because if they really drive customer service down it is not an ‘either-or’ type of thing.”

In one of the survey’s opinion-based questions, 60 percent of respondents indicated that the White House’s goal of doubling U.S. exports by 2015 may not be feasible. Many respondents maintained that the U.S. is too expensive for high-tech manufacturing, with 3 percent saying the goal can be met.

UPS CEO Scott Davis said in a statement that the U.S. is the world’s largest manufacturer and that foreign trade is a job creator. He added that input from businesses about the challenges of meeting export goals is invaluable to a better understanding of the problem as well as working to remove barriers to international trade.

Survey respondents found that the weakest link in supply chains are a lack of end-to-end visibility (48 percent), unstable suppliers (44 percent), and challenges with demand planning (44 percent). Inventory management and flexibility for handling non-standard requests and orders at 38 percent and 33 percent, rounded out the list of weakest links.

“These things all go hand in hand with cost structure containment as well,” said Covert. “What we see shippers doing from a cost containment standpoint is looking service levels associated with specific modes when shipping. The ability to effectively break down how they are shipping and working with suppliers in different modes—and do it effectively—requires good demand planning and visibility to [know and see] where things are. If there are fluctuations in demand, shippers need to know where things are and when they are coming.”

Not surprisingly, investments in IT ranked high among survey respondents.

More than 70 percent (73 percent) of respondents said that they plan to implement new technologies to improve efficiencies over the next two years, and 44 percent noted they will implement supply chain spend analytics over that same period.

Reverse logistics also garnered significant feedback, with 46 percent of respondents saying meeting customer expectations was their biggest business concern regarding reverse logistics, and getting customers to follow their returns processes was cited by 22 percent.

“It was surprising to see the 22 percent figure,” said Covert. “Efficient reverse logistics can remove costs. If returns are easily understood, that removes costs for shippers, and if the reverse logistics processes are done well and respect shippers’ time, it can be a positive thing.”

Other notable survey findings included:
-83 percent of respondents planning to place an increased focus in achieving higher service levels in the next two years;
-40 percent of respondents ranked responsiveness as a top factor driving changes in the supply chain over the next three-to-five years;
-36 percent of respondents said engaging in “green” practices will be demanded by customers; and
-55 percent said they will rely more on global manufacturers and suppliers over the next two years, among others.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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