Major Moves

Dec. 21, 2004
Logistics is becoming a major market for information technology.

Anyone who has served in the military forces knows the importance of logistics. General Dwight D. Eisenhower often claimed that the greatest contributor to American victories in World War II was our superior logistics management rather than our firepower. The results of a recent study of current national logistics practices conducted jointly by KPMG Peat Marwick and the University of Tennessee proves the importance of logistics in winning markets, as well. The study provides benchmarking information on competitive issues, information technology, logistics management, and supply chain performance measures. According to this study, the promise of a fully integrated logistics process--one that is linked to a corporation's business goals, its core processes, and its outside suppliers and customers--has not yet been realized by U.S. manufacturing companies. Among the key findings in this area

  • Logistics management continues to move from the warehouses and loading docks to the executive suites of major manufacturing companies, as more corporate leaders view logistics as a significant way to build competitive advantages.
  • The selection and deployment--and especially the integration--of information technology is the major challenge facing logistics professionals today.
  • Logistics professionals feel that they are not doing as well as their best competitors in managing their supply chains, information systems and inventory, or in their marketing and speed of bringing new products to market.
  • Outsourcing of supply chain functions is growing--and will continue to grow in the coming years. The survey also updates major trends: The function of logistics management is gaining in stature. The number of logistics managers reporting directly to the president, CFO, or COO increased from 21% in 1995 to more than 30% in 1996. To be successful, supply chain operations need to deploy and integrate technology in order to respond more quickly to customers' needs. The study also shows that companies are investing their faith--and their dollars--in information technology. Nearly one-third of the study's respondents are investing from 2% to 5% of their gross sales in IT. An additional 13% are spending even more. The highest priorities: order-processing, software, EDI, and telecommunications enhancements. Inventory management has become less of a concern as the ratio of inventory to sales has dropped significantly in recent years. More than half of the respondents reported inventory levels lower today than five years ago. Performance measures such as order cycle time and back orders are becoming more important benchmarks for improving the movement of products through the supply chain. Executives from a wide range of industries and company sizes responded to the survey. Thirty percent of the respondents work in organizations with more than $1 billion in annual sales and 40% had sales between $100 million and $999 million. Customer service, responsiveness, and the ability to meet customers' needs were named the most critical attributes for future success. More than one-third of the respondents indicated that the use of third-party providers will increase this year, with more than 40% already outsourcing some components of their supply chain.
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