The IndustryWeek Value Chain Survey: Getting Down To Brass Tacks

April 1, 2002
Value-chain management moves from dream to reality.

The short-term economic outlook aside, these are heady days for value-chain leaders. Mostly because information technology is finally beginning to live up to its promises, allowing a few intrepid manufacturers, their suppliers and their customers to effectively collaborate by merging their systems to share product designs and specifications, demand forecasts, production status, inventory information and order and shipment data. A $31 billion, Austin, Texas-based computer manufacturer comes readily to mind. How is everybody else doing?

To answer this question the IndustryWeek 2002 Value-Chain Survey was launched to track current value-chain trends, best practices, and specific performance metrics across a range of operational functions. IW editors worked with our value-chain partner, PwC Consulting, the management consulting firm of PricewaterhouseCoopers, to develop four telephone questionnaires focused on new product development, supplier management and procurement, customer order management, and logistics and distribution.

For the most part, respondents to the surveys indicate that they are only beginning to develop a value-chain perspective of their operations. That's progress.

...our basic definition of the value chain ... the entire production process from raw material to finished product, from the suppliers' supplier all the way to the ultimate customer.

Back in 1998, for IW's first major focus on this subject, we spent a great deal of time explaining our basic definition of the value chain, which we define as the entire production process from raw material to finished product, from the suppliers' supplier all the way to the ultimate customer. In the intervening years, general awareness has risen significantly. Manufacturing executives now have a vague sense of what their value chain is, and they understand that it's something that can and should be managed. The question today is, "Where to begin?"

To date, a few manufacturers have gained a competitive advantage by breaking down functional walls within their organizations, nurturing collaborative relationships with business partners and investing in communication links to more rapidly convey customer needs and desires. Granted, such business integration doesn't come cheaply -- nothing does when information technology is involved -- or without its share of headaches. As the Chinese proverb goes, "There are endless sufferings to endure and endless lessons to learn."

Still, as the respondents to the 2002 Value-Chain Survey make clear, yesterday's dreams of transparency, real-time information flow and profit-enhancing business partnerships are becoming increasingly real.

The IndustryWeek Value Chain Survey Report consists of four parts:

Project Team: This project would not have been possible without the hard work of many people who found time to contribute their knowledge and expertise during challenging operational times.

From PwC Consulting, IW wishes to acknowledge the contributions of Barry Boehm, partner; Greg Spears, senior consulting manager; Ivey Webb, consulting manager; Gordon Ziegenhagen, consulting manager; Mary Carter, consultant; Jeff Dixon, consulting manager; Don Deluca, research director; Winn Knight, research manager; Rachel Marcian, research manager; Sarah Myers, analyst; Maureen Olsen, analyst; and Monica Hopkins, telephone interview supervisor.

From IW, major contributors included Teri Mollison, publisher; Pat Panchak, editor-in-chief; Tonya Vinas, managing editor; Jill Jusko, new media editor; Richard Osborne, editor-at-large; and David Drickhamer, editorial research director.

Survey Methodology: For the initial sample, we obtained a list of 8,000 companies in manufacturing SIC codes 20-39, with 100 or more employees and annual revenues of at least $25 million, from the Dun & Bradstreet Marketplace database.

The PwC Survey Research Center screened 4,000 of these companies (1,000 for each function) to identify the executive most knowledgeable in the targeted survey areas. From mid-September to early December 2001, PwC completed 752 telephone interviews with these subject-area experts.

Each of the four surveys consisted of 25-60 questions and required 12-15 minutes to complete. The number of respondents broke down as follows: new product development (200), supplier management and procurement (201), customer order management (162), and logistics and distribution (189).

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