Will a Complex Supply Chain Inhibit Global Market Expansion?

Jan. 25, 2011
Deloitte study shows that manufacturers who effectively manage their supply chain are 73% more profitable than their peers.

Industrial products manufacturers seeking to exploit global market, supply chain and engineering opportunities are hitting an invisible but nonetheless debilitating wall: mounting complexity across the value chain, according to Deloitte.

And it is bound to get worse as manufacturers continue to globalize and accelerate new product introductions to spur growth, the consulting firm explains. They point to the fact that only one in ten companies has made significant efforts to optimize its global networks over the last three years. But those companies who diligently optimizing their global supply chain networks have seen significantly better bottom-line results. A recent Deloitte study shows that only 7% of the manufacturers surveyed effectively manage their supply chain, yet they are 73% more profitable than their peers.

Highlights of Deloitte's Outlook Report

  • After reaching record lows in 2009, manufacturers' capacity utilization rates improved in 2010 and are set to recover further as a result of a demand upturn in end markets, particularly Asia.
  • Emerging markets like BRIC will remain major drivers of sustained revenue growth and profitability as well as low-cost sourcing destinations for IP manufacturers.
  • Intense pressure to reduce costs, innovate products and expand into new markets will lead to a worldwide shift in production and spreading out supply chain and other operations well beyond home geographies.
  • New strategies for managing risk will be critical for IP manufacturers. Supply chain security, right sizing based on fluctuating demand/sluggish growth, and supplier vulnerability are the focus areas.
  • A depleting U.S. talent pool and an expected shortage of engineers, combined with global challenges in recruiting and retaining talent, pose significant hurdles to growth for the IP industry.
  • IP manufacturers are using R&D to increase customer focus and create differentiation in an era of shorter product-lifecycles.

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