The survey, from market analyst Aberdeen, suggests that with the shift to global sourcing and the pressure for low inventory levels but faster order fulfilment cycles, supply chains are now more fragile, more extended, and more time-sensitive than ever before.
On average, survey respondents perceived that their company's recovery costs from supply chain disruptions are a 6-figure to 7-figure expense for them, with a handful of companies citing that the cost was more than $10 million.
As a result, supplier failures can ripple through a supply chain, creating havoc.
The good news though, says Aberdeen, is that many manufacturers are getting their supply chains leaders in order by reducing this liability by changing the way they measure and control their suppliers, and by rethinking the way they identify and resolve supply disruptions internally.
The analyst says that fundamentally, suppliers and manufacturers need to embrace a clear set of processes and enabling technologies to drive down the frequency and cost of supply disruptions.
Aberdeen claims that companies that adopt best-in-class supplier performance management practices are two to three times as likely to achieve supplier on-time delivery and first-time fill rates that are above the market average.
Some companies are achieving supply chain efficiency in interesting ways. Yesterday we reported that Unipro Bakery, a subsidiary of CSM, has merged its Dutch logistical operations for frozen products with Douwe Egberts and Masterfoods in order to make significant supply chain savings.
As from this autumn, retail outlets will receive Douwe Egberts coffee and Unipro Bakery products from the same lorry and at the same time. Masterfoods is scheduled to join the scheme from March 2005.
The adoption of technology remains a key means of controlling the supply base and mitigating supply bottlenecks and liabilities. Nestlé, the largest food and beverage company in the world, recently selected the Quadrem eMarketplace as partner for its global eRequisitioning programme, part of an enterprise-wide initiative Nestlé is implementing to standardise and streamline e-procurement processes.
Quadrem is providing Nestlé solutions that support global eRequisitioning of services and indirect materials, including development and ongoing support of electronic supplier catalogues, supplier on-boarding services and a Web- based XML platform supporting requisitioning transactions that will be integrated with Nestlé's enterprise resource planning systems (ERP).
Aberdeen lists a number of other means by which companies can maintain cost competitiveness through their supply chains. For example, companies should insert control points at suppliers to minimise mistakes, and use predictive analytics to transform static supplier scorecards into forward-looking risk management instruments.
For smaller companies, the relative cost of supply chain inefficiencies or disruption is less the issue; for these companies, improving supplier performance is all about staying competitive with the larger players. Aberdeen also comments that industry norm companies are catching up fast with supply chain-efficient firms through a combination of process changes and aggressive technology extensions.