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Study: Manufacturers Struggle With Enormously Complex Supply Chains

Jan. 13, 2005

Compiled By Jill Jusko While many manufacturers are focusing efforts on "leaning" out their manufacturing operations, intense pressures to reduce costs and expand into new markets have resulted in supply chains that are increasing complex and ...

Compiled ByJill Jusko While many manufacturers are focusing efforts on "leaning" out their manufacturing operations, intense pressures to reduce costs and expand into new markets have resulted in supply chains that are increasing complex and fragmented. So suggest the initial results of a global manufacturing survey conducted recently by management consulting firm Deloitte & Touche. To illustrate the cost and market pressures, the study shows the following data:

61% of survey respondents moved production to lower-cost geographies;
15% of North American firms and 29% of European firms do not manufacture products in their home markets;
62% of manufacturers polled outsourced some engineering activities; and
over 40% of North American manufacturers will grow their marketing based in Central and Eastern Europe and in Mexico and Central America by 2006.

Rapid product innovation is yet a third source for growing supply-chain complexity, adds the consulting firm. In fact, of seven factors for increasing revenue over the next three years, launching new products easily ranked the highest, it said. Interestingly, the study, "The Challenge of Complexity in Global Manufacturing -- Trends in Supply Chain Management," notes that while supply chains are becoming increasingly global, efforts to optimize are local and focused on individual services, plants or countries. Additionally, just 50% of survey respondents said they have a senior- or board-level executive in charge of global end-to-end supply-chain processes. "These paradoxes strongly suggest that leading manufacturers are genuinely struggling to synchronize the pieces of their increasingly fragmented and global networks," says Philip Johnson, Deloitte & Touche's manufacturing practice leader in the United Kingdom. The complete study results will be released in September and will include detailed analysis, says Deloitte & Touche. Some 500 companies in Europe and North America participated in the survey.