The Manufacturing Value Chain Report: Supply-chain Planning

Jan. 1, 2004

Adapting To The Times

How has political and economic uncertainty impacted your supply chain over the past five years? For most manufacturers the pain is most evident in decreased sales and increased costs, say respondents to the 2003 IW Value Chain survey. While difficult times have also increased lead times, one out of five manufacturers say they haven't been impacted at all or their sales have actually been bolstered by the market turmoil. To adapt, supply-chain leaders have been striving to increase customer responsiveness, extract and then figure out what to do with real-time information, and share risks across trading partners. As of yet, most manufacturers have only gotten their feet wet in these areas, with "real-time" information transparency and cross-organizational risk sharing remaining more hope than reality.

See the full report: The Manufacturing Value Chain Report: The Ties That Bind

Adoption Of Leading Supply-Chain Practices

  Some adoption Widely adopted
Rapid Response to Changing Market Conditions 57% 23%
Maximizing Variable Supply-Chain Costs to be Aligned with Revenues 53% 15%
"Real Time" Information Transparency Inside and Outside the Enterprise 40% 12%
Sharing Risks Across A Network, Rather than Concentrating Them in a Single Enterprise 38% 8%

A Need For IT

The more sophisticated planning and execution practices today require some level of visibility into what's going on in the supply chain. That requires information technology. Although a majority of respondents have not yet automated many business processes, for those operations that have pursued some form of electronic linkages, Internet technology is either on par with or has surpassed conventional EDI in popularity in all but a few of the older technology's original strongholds.

Electronically Implemented Business Processes

  Conventional EDI Web/Internet Enabled technology
Customer Order Entry 33.2% 30.6%
Payment Processing 40.2% 17.0%
Procurement of Direct Supplies 24.4% 23.9%
Customer Service and/or Help Desk 15.6% 31.2%
Collaborative Planning with Suppliers 21.3% 24.9%
Procurement of Indirect Supplies 17.6% 25.1%
Collaborative Planning with Customers 15.7% 20.7%

Calculating Capital Costs

Cash-to-cash cycle time measures how much working capital an organization has tied up in its supply chain. Simply put, it's the number of days between paying for raw materials and components and getting paid for a product. For our purposes, respondents were instructed to calculate cash-to-cash cycle time by adding the days of supply inventory and sales outstanding, minus the average payment period for materials.

Cash-to-cash cycle time

Days Percentage of Respondents
0-30 days 26.2%
30.1-60 days 36.4%
60.1-90 days 19.3%
Over 90 days 18.2%
Key Performance Indicators Bottom 25% Median Top 25%
Cash-to-cash cycle time, days 90 56 30
Total inventory turn rate 3.2 6.0 10.0
Production schedule attainment 77% 90% 97%
Cost of quality, percent of annual revenues 3.1% 0.7% 0.1%

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