Holistic Approach to Supply Chain Transformations

1 In order to compete successfully in the global economy, companies across industries are hard at work trying to bring their increasingly complex supply chains to the next level of performance in order to meet the growing expectations of customers. PRTM’s research shows that companies that operate state-of-the-art supply chains capture enormous value over their competitors. For example, our 2005 benchmarking study demonstrated that profitability—as measured by EBIT (earnings before interest and taxes)—was 14% for the most mature supply chains versus 6% for immature peers. Internal and external integration enables both better demand planning and meeting of customer needs through improved sourcing of materials and asset scheduling. Inventory costs are also reduced, creating the enviable situation of better performance at lower costs. At the highest level of supply chain maturity, the supply chain network is designed to take into account the future product lines, capacity requirements, and capital plans. This longer-term view of the business allows them to make strategic investments that ultimately drive lower costs and improve supply chain effectiveness. But how do companies accomplish such a high level of performance? Based on the joint work of PRTM and LogicTools, Inc., the integration of a few disciplines in supply chain management—optimization of network and inventory, process excellence, and IT-enabled visibility and collaboration has proved to generate breakthrough operational improvements at reduced overall costs (Figure 1). In this paper, we will first describe this approach on a high level and then illustrate its application with a recent pilot project example at a major industrial manufacturer. The company has successfully incorporated the key provisions of this Title Deck