TECHNOLOGY
SUPPLY CHAIN LEADERS and executives that are failing to excel in the area of external spending – which typically makes up 30 % of revenues for service companies and half of revenues for manufacturing firms – could be driving their firms into the clutches of its completion or even onto the business scrapheap .
That ’ s the verdict from a recent study by AT Kearney ‘ Mobilising for Supply Chain Excellence ’ found that just 7 % of companies can be considered to “ demonstrate excellent supply chain capabilities ”, delivering around $ 13 for every $ 1 spent on supply chain management assets .
At the other end of the scale , more than a quarter ( 27 %) of firms are barely covering their costs , returning $ 1 or less for every $ 1 spent on supply chain management assets . Between the two ends of the spectrum , 55 % - dubbed ‘ the pack ’ are adding value , but not transforming fast enough , while 11 % are producing solid results and are making significant strides to becoming leaders .
Speaking to Supply Chain Digital , Mike Hales , a partner in A . T . Kearney ’ s Operations Practice and one of the report ’ s authors says that teams and execs that have proven the value of efficient , effective and innovative procurement operations have found themselves catapulted into rarefied air in the world of business , leaving their struggling counterparts in the distance .
“ It used to be that purchasing was purely a clerical transactional thing , and for some companies it ’ s really advanced to being a strategic function where the head of procurement directly reports to the CEO – they ’ ve got a seat at the executive table . But for the majority of the companies , they just haven ’ t really grabbed a hold of the potential ,” he comments .
“ It ’ s really hard to be great if you ’ re not excellent at managing your largest cost . It ’ s like competing with both arms tied behind your back . When you look at that last quarter ( 27 %) of companies , they ’ re don ’ t even pay for themselves , they ’ re returning a dollar or less a value for the dollar they cost the organisation . So , they could disappear and it wouldn ’ t impact the company ’ s bottom line in a negative way .
“ If you really want to be successful as a company , you have to be great in this area because it will drive your EBIT , you P & L which will drive your share price It can impact your earnings per
18 December 2017