Cost pressure is the biggest factor driving manufacturing companies to be more responsive

In a recent survey Hitachi Consulting and AMR Research heard from manufacturers that reducing costs is the chief motivator to improving responsiveness, but success is limited due to the age-old resistance to change and company culture.

Survey responses from more than 160 manufacturers across eight industry segments show that most companies understand the need to respond to shorter product lifecycles, increased customer expectations, fluctuating inventory levels and changing costs - what Hitachi Consulting calls Building the Market Responsive CompanySM. But few recognize the impact of that strategy on the manufacturing infrastructure, or the trade-offs needed between efficiency and responsiveness, according to Tim Vaio, Leader of the Industrial Products group for Hitachi Consulting, the IT and consulting company of Hitachi Ltd.

The 2009 Supply Chain Responsiveness Survey was conducted to help companies better understand the business processes and technologies needed to become more responsive to market changes, and to learn which supply chain business practices lead to real business benefits. The study also examined how companies detect change, the levers they use to respond to change, and the barriers to being responsive.

The research shows a 1 percent improvement in return on assets for every four years of investment in supply chain excellence. Other findings include:

• Demand variability is still impacting forecast accuracy
• Cost pressure is the biggest factor driving companies to be more responsive
• Despite years of investments, order lead times have not improved
• Complexity is increasing in the form of increased outsourced volumes, item complexity and SKU proliferation

"One of the biggest surprises in these results," said Vaio, "is that respondents said the top barrier to improving responsiveness is their own culture. We believe this indicates that most performance measures are inhibiting change by rewarding siloed behavior. To become responsive companies need to take a holistic approach across all supply chain functions and develop processes and metrics that reward end-to-end supply chain success."

"Cracking the nut requires a focus in three areas: culture, right-sizing complexity, and rethinking financial reward systems. Culture is the biggest barrier to achieving agility," said Lora Cecere, Vice President of Value Services at AMR Research, in a recent article A Four-Step Program for Supply Chain Agility. Cecere led the research project at AMR Research.

"With ever-increasing volumes of data, a global economy, demanding customer requirements, focus on cost reductions and ever-more complex business processes, the goal of remaining Market Responsive is a significant one," he said. "The wakeup call for everyone who views this data is that company culture is still a huge factor in adopting, or rejecting, the customer-first mindset across the supply chain. No matter how successful you may be at driving costs down, the companies having real success over the long term are those focused on customer satisfaction," said Vaio.

Tim Vaio recently was named to the Supply & Demand Chain Executive 2009 Pros to Know listing following the 2008 recognition of Hitachi Consulting on the Supply & Demand Chain 100 as a services provider "at the forefront of innovation." Learn more about Building the Market Responsive CompanySM and Responsive Asset Management at www.hitachiconsulting.com.