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November 12, 2010

Supply chain issues costing £1bn a year: survey

Time to get people, process and technology integrated, says Oracle

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Poor information flows across supply chain operations are potentially costing UK firms £1.2bn every year in lost sales, according to a new report from Oracle.

The report quizzed 100 supply chain executives at firms with over 250 employees and revealed consequences of poor supply chain information flows, including missed sales opportunities, inability to supply peaks in demand and unhappy customers, which can all hinder growth and recovery.

The survey, called The Fragmented Supply Chain, turned up a number of worrying statistics about the state of supply chain management. Each supply chain executive spends an average of 48% of their time sifting through spreadsheets, emails and databases to keep on top of the information flow. Worryingly, one in three companies admitted to seeing physical products flow faster than, or as quick as, information across supply chain.

The heavy volume of information to manage (41%), information held in multiple, isolated databases and spreadsheets (37%), constant changes in the supply chain (34%) and the complex nature of the supply chain (34%) were all listed as reasons for poor information flows.

Nearly half of those quizzed (47%) said that this has led to missed sales opportunity, which Oracle has calculated to cost £1.2bn to UK firms in the manufacturing, retail and distribution and wholesale sectors, which is where this survey primarily focused.

Other issues with a fragmented supply chain include limiting productivity (58%), reducing competitive advantage (52%), long product lead times (51%), dissatisfied customers (47%), hampering growth (38%) and hindering recovery efforts (26%).

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"The information management for many supply chains doesn’t reflect the way organisations operate today," said Andrew Spence, Oracle’s supply chain business development director. "Companies are working with systems set up and designed for an environment where a lot of the work is done within one company, rather than the vast network of suppliers, designers and partners companies that is the reality of the modern business. People are using spreadsheets and email to bring together disparate planning systems instead of a system that matches the 21st Century requirement for collaboration across the supply chain."

The vast majority (88%) of those quizzed said they had been unable to supply peaks in demand created by sales and marketing activities and promotions. Reasons for this include activities being delayed and then launched again at short notice (53%), insufficient notice being given to the extended supply chain (43%) and sales and marketing professionals failing to assess the likely impact of their activities on demand (36%).

Spence said: "The results highlight how in many organisations sales and marketing departments are often disconnected from supply chain teams. If promotions are communicated too late to supply teams, supply chains are simply unable to gear up quickly enough to meet the demand. At its worst, this leads to empty shelves with the promotion creating demand that competitors then fulfil."

"Companies have spent 30 or 40 years applying lean principles to their manufacturing processes to ensure smooth, efficient and uninterrupted production. Yet they have overlooked the importance of a smooth, uninterrupted flow of information," Spence continued. "When held in separate spreadsheets, databases and emails, information can not be shared openly and easily. You can’t automate decision making but you can certainly automate the gathering and presenting of information."

"The supply chain is no longer about the traditional way of doing it," Spence added at a roundtable discussion. "It’s more about the information flow around the business. The key is people, process and technology. They are often separated, but why? It’s a critical issue and needs to be an integrated approach."

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