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Are you a Sophisticated Practitioner?

Conventional wisdom is that most companies today, particularly the larger ones, have adopted the practices associated with sound supply chain management. But that may not always be the case. New research reveals a clear gap between adopters and the laggards—or the “sophisticated” and “less sophisticated” practitioners. This article explains what differentiates the two groups on key dimensions, and tells what you can do enhance your level of sophistication.
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New research reveals a clear gap between adopters and the laggards—or the “sophisticated” and “less sophisticated” practitioners. This article explains what differentiates the two groups on key dimensions, and tells what you can do enhance your level of sophistication.

By Peter Duchessi and InduShobha Chengalur-Smith
Dr. Peter Duchessi (.(JavaScript must be enabled to view this email address)) and Dr. InduShobha Chengalur-Smith (.(JavaScript must be enabled to view this email address)) are both associate professors in the School of Business at University at Albany.
May 21, 2010

Modern supply chains are networks of material and information flows from raw material suppliers to end users. Many companies today participate in multiple supply chains, as determined by their mix of products and services. Knowledgeable professionals and academicians for some time now have recommended certain supply chain management (SCM) practices to effectively manage the supply chain flows. These practices include, for example, collaboration, performance measurement, and implementation of pertinent information systems such as transportation and warehouse management systems (TMS and WMS). If properly applied, these proven practices bestow supply chain competencies that result in valuable business benefits. Recent studies, however, have revealed a patchwork pattern of adoption of these practices and a modest uptake overall.1

One new study conducted among manufacturers by the authors confirms that many companies may not be as advanced in their SCM practices as publications and academicians have led us to believe. In particular, our survey findings reveal that the adoption of highly recommended SCM practices is less than 100 percent. The findings further identify two distinct groups of companies—what we term the “sophisticated” and the “less sophisticated” practitioners. Sophisticated practitioners, overall, use the recommended practices to a greater degree than less sophisticated practitioners. Notably, the distinctions between the two groups are most apparent across three dimensions of SCM practice that are critical to business success. These are supply chain design, vendor managed inventory (VMI) programs, and information technology (IT) investment.

There are opportunities for supply chain improvement in even the largest, most successful companies.

Our findings are especially surprising because the survey participants are large, international companies belonging to the upper quartile of Fortune’s top-100 list. (For more on the survey, see accompanying sidebar). Apparently, there are opportunities for supply chain improvement in even the largest, most successful companies operating today.

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Modern supply chains are networks of material and information flows from raw material suppliers to end users. Many companies today participate in multiple supply chains, as determined by their mix of products and services. Knowledgeable professionals and academicians for some time now have recommended certain supply chain management (SCM) practices to effectively manage the supply chain flows. These practices include, for example, collaboration, performance measurement, and implementation of pertinent information systems such as transportation and warehouse management systems (TMS and WMS). If properly applied, these proven practices bestow supply chain competencies that result in valuable business benefits. Recent studies, however, have revealed a patchwork pattern of adoption of these practices and a modest uptake overall.1

One new study conducted among manufacturers by the authors confirms that many companies may not be as advanced in their SCM practices as publications and academicians have led us to believe. In particular, our survey findings reveal that the adoption of highly recommended SCM practices is less than 100 percent. The findings further identify two distinct groups of companies—what we term the “sophisticated” and the “less sophisticated” practitioners. Sophisticated practitioners, overall, use the recommended practices to a greater degree than less sophisticated practitioners. Notably, the distinctions between the two groups are most apparent across three dimensions of SCM practice that are critical to business success. These are supply chain design, vendor managed inventory (VMI) programs, and information technology (IT) investment.

There are opportunities for supply chain improvement in even the largest, most successful companies.

Our findings are especially surprising because the survey participants are large, international companies belonging to the upper quartile of Fortune’s top-100 list. (For more on the survey, see accompanying sidebar). Apparently, there are opportunities for supply chain improvement in even the largest, most successful companies operating today.

SUBSCRIBERS: Click here to download PDF of the full article.

End notes

1 Clegg C. W., Wall T. D., Pepper K., Stride C., Woods D., Morrison D., Cordery J., Couchman P, Badham R., Kuenzler C., Ide W., Takahasi M., and Kogi K. (2002). An international survey of the use and effectiveness of modern manufacturing practices. Human Factors & Ergonomics in Manufacturing, 12: 171 – 191.

2 Duchessi P. and Chengalur-Smith I. (2008) Enhancing business performance via vendor managed inventory applications. Communications of the ACM. 51: 121 – 127.

3 Harrison A. and New C. (2002). The role of coherent supply chain strategy and performance management in achieving competitive advantage: an international survey. Journal of Operational Research Society. 53: 263 – 271.

4 Jharkharia S. and Shankar R. (2005). IT-enablement of supply chains: understanding the barriers. The Journal of Enterprise Information Management. 18: 11 – 27.

5 Harrison A. and New. C (2002). The role of coherent supply chain strategy and performance management in achieving competitive advantage: an international survey. Journal of Operational Research Society. 53: 263 – 271.

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