BRACKNELL, England & SCOTTSDALE, Ariz.--(BUSINESS WIRE)--European manufacturers are failing to effectively use data and analytics when it comes to supply chain planning and segmentation, according to a new report from JDA Software Group, Inc., and WMG, at the University of Warwick. The "Supply Chain Segmentation: A Window of Opportunity for European Manufacturing" report surveyed 100 manufacturing organisations across Europe to benchmark their supply chain segmentation practices. The report revealed that only 18 per cent of respondents considered historic, present and future data in the supply chain planning process (tweet this), while only 39 per cent of respondents stated that their segmentation models were data-driven (tweet this). In fact, nearly a quarter (23 per cent) of organisations stated they simply utilise "rules of thumb" over any kind of data-driven methodology (tweet this).
“The survey highlights that the majority of organisations are not using dynamic or data-driven models. Indeed, more organisations are driving their supply chains forward by looking in the rear-view mirror, rather than looking at the road ahead. It is not just that there’s an over reliance on historic data, it is quite possible that organisations are being driven along the wrong road altogether,” said Hans-Georg Kaltenbrunner, vice president manufacturing industry strategy, EMEA at JDA. “The research suggests that some organisations may not have the capability to accurately navigate their supply chain along the business roadmap, and a lack of analytics capabilities is widespread, along with a consistent end-to-end analytics approach. Given the apparent general lack of maturity across the space, the first movers will quickly gain a competitive advantage.”
Strategic alignment or misalignment?
When it comes to implementing supply chain segmentation practices, only 29 per cent of respondents stated they did this in a "top down" manner, indicating that the strategic nature of segmentation is not being recognised in practice (tweet this). From a business process perspective, the need to bring together core supply chain processes (plan, source, make, deliver and return) under one umbrella, and to use them to seamlessly connect customers and suppliers has long been recognised. However, the results show that departmental and functional approaches continue to dominate.
Business process orientation isn’t well established
Only 8 per cent of European manufacturers have reached level three segmentation (out of four), while no firms demonstrated level four capability (tweet this). An effective segmentation strategy should be informed by business rules from Integrated Business Planning (IBP); however, the research revealed that only 5 per cent of organisations were at level three (of four) maturity. It is not unrelated that only 17 per cent reported a business process orientation was part of their operational design. This indicates that there remains significant room for improvement for manufacturers when it comes to keeping their supply chain management, new product development and customer relationship management aligned. Ultimately this lack of conformance is hindering overall business performance.
“Segmentation is not a new practice for supply chain management, yet our study reveals that it remains relatively under-developed. Supply chain segmentation should be the lens that focuses complex signals from the market, so that organisations can configure their supply chain assets, ensuring they are consistent with business strategy and deliver maximum profitability,” said Professor Janet Godsell from WMG, University of Warwick. “In theory, segmentation is a key business process and capability to ensure business goals are realised in the hurly-burly of operation. So it is surprising to find that only 17 per cent of respondents had business process orientation as part of their operational design. Ultimately, business processes provide a way to connect the end-to-end supply chain, create integration, enable flow and deliver customer value at the lowest supply chain cost.”
Segmentation criteria is limited at best
The survey revealed that one third of organisations (33 per cent) are utilising just a single criteria to model segmentation, while over half (51 per cent) are only employing two (tweet this). As a result, organisations are making important day-to-day commercial prioritisation decisions based on limited criteria. Furthermore, the criteria being used is often inconsistent between functions, meaning there is no end-to-end commercial perspective driving supply chain and business decisions.
Supply chain segmentation can become a significant contributor towards bottom-line profitability and service differentiation. Yet, the survey found that only in rare cases, for "product" and "customer" dimensions, margin was a goal at all – even then, as a goal, it was ranked fourth or lower. In general, volume and geographic measures dominated, further indicating a low level of supply segmentation sophistication.
Franck Lheureux, regional vice president EMEA at JDA, added: “Manufacturers are facing ever more demanding customers. For CPG organisations, this may even include developing profitable omni-channel fulfillment to support direct-selling models. This requires a heightened focus on customer centricity, which in turn implies an unprecedented level of connectivity within the supply chain. Segmentation has always had the potential to make a significant difference to an organisation’s profitability and agility; however, it lacked the underpinning technology to make it happen. However, this is no longer the case as the emergence of the digital supply chain means that segmentation has come of age.”
Study Methodology
The study was conducted by WMG in August and September 2016, surveying 101 large European manufacturing organisations online.
Additional Resources:
- Access the "Supply Chain Segmentation: A Window of Opportunity for European Manufacturing" report and resources here
- Learn how to take your segmentation strategy to the next level: "Introducing the New Age of Supply Chain Segmentation"
About JDA Software Group, Inc.
JDA Software is the leading provider of seamless supply chain planning and execution solutions for retailers, manufacturers, logistics providers and wholesale distributors. Our unmatched solution portfolio enables our clients to reduce costs, increase profitability and improve visibility so they can deliver on customer promises every time. More than 4,000 global customers run JDA, including 78 of the top 100 retailers, 78 of the top 100 consumer goods companies, and 8 of the top 10 3PLs. With JDA, you can plan to deliver. www.jda.com
About WMG at the University of Warwick
WMG was established by Professor Lord Kumar Bhattacharyya in 1980 in order to reinvigorate UK manufacturing through the application of cutting edge research and effective knowledge transfer. WMG is a world leading research and education group and an academic department of the University of Warwick.
WMG has pioneered an international model for working with industry, commerce and public sectors and holds a unique position between academia and industry. The Group’s strength is to provide companies with the opportunity to gain a competitive edge by understanding a company’s strategy and working in partnership with them to create, through multidisciplinary research, ground-breaking products, processes and services.
Every year WMG provides education training to over 1,500 postgraduates, in the UK and through centres in China, India, Thailand, South Africa and Malaysia. Students benefit from its first hand understanding of the issues facing modern industry. All tutors are highly qualified with a background in business or industry.
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