Only 10% of companies have the supply chains required for resilience, says report
Massive turnaround needed to realise the possibilities of the supply chain as a competitive advantage
Just 10% of companies were on the right path to building customer-centric supply chains that are resilient and enable growth prior to the COVID-19 pandemic, according to a new report from Accenture. While supply chains have traditionally been a driver of efficiencies and scale, the report discusses how their role in recent years has evolved beyond mere efficiency and toward lasting growth.
Based on a global survey of 900 senior executives from nine major industries across 10 geographies, the “A License for Growth: Customer-centric supply chains” report identifies major supply chain challenges that have only been magnified by the ongoing COVID-19 global crisis including:
- Inflexibility to deliver undifferentiated customer offerings
- Poor ecosystem design lacking the right partners
- A siloed technology architecture that stifles collaboration and co-innovation.
The companies in the report have invested US$153 million, on average, over the past two years to transform their supply chains. However, it is just a small group — 10% of those surveyed — that are effectively using their investments to transform their supply chains to meet increasing and evolving customer experience demands. The report found that these leading companies follow four key practices that cement them as leaders among their peers:
- Begin with the customer in mind. Base supply chain strategy on what the customer values, which is a more complex endeavor than ever before because customer experiences are now purpose-led and personalized. More than two-thirds (71%) of the leading companies build supply chain strategies to deliver experiences linked to key customer value propositions, such as sustainability, data privacy/security and customized delivery and service
- Turn insight into innovation. Invest in building analytical, asset-light collaboration architectures, which could significantly increase the supply chain’s impact on revenue and shared success within and outside their ecosystems. In fact, more than half of the average revenue growth that the leading companies experienced came from collaboration tools and data-driven insight technologies.
- Develop targeted capabilities. All of these leading companies, whether B2B or B2C, have built capabilities to segment customers and products in real-time. They’ve partnered with procurement to design products and services and identify potential suppliers to achieve target margins. They also invest in advanced cybersecurity capabilities to address the growing security threats from data breaches and data theft.
- Engage the CEO beyond conversation. Support from the top is key to true supply chain transformation. The CEOs of these leading companies are more likely to drive supply chain discussions with their boards and translate those discussions into results. More than half (53%) of these CEOs allocate funding to drive supply chain innovation, and 49% allocate top talent to accelerate supply chain transformation
The report has found that during the period 2017-2019, companies that instituted a customer-centric approach and implemented most of the aforementioned strategies have outperformed. For instance, they grew revenues 13%, on average, compared with an average revenue decline of 5% for the other companies. Moreover, their supply chain contribution to total revenue was triple that of the other companies’ (52% vs. 17%); and they delivered EBITDA margins 2.5% higher than those of the other companies.
“The supply chain has always been the lifeline to humanity. The COVID-19 health crisis has brought to light the critical need for a resilient supply chain that produces and delivers all essential goods and services quickly, safely and securely,” said Kris Timmermans, a senior managing director and global supply chain and operations lead at Accenture. “Companies have moved quickly to prioritize transparency and enable faster decision-making. Now they must double down on building more customer-centric, purposeful supply chains that will lead to growth as economies rebound.”