Thought Leaders

With more than 178,000 people in 49 countries, Accenture has been at the forefront of thought leadership for over 30 years.

Also a highly successful enterprise which lives up to its own philosophies, the company generated net revenues of US$22.39 billion for the 2007 fiscal year.

According to Accenture’s Australian supply chain practice senior executive Don Puckridge, the most fundamental challenges facing the logistics industry relate to a shift where multinational corporations are now operating in a ‘multi-polar world’.

“Problems arise when organisations simultaneously buy and sell in multiple countries as well as design, source, manufacture, distribute, market and support products and services globally,” Puckridge tells Logistics Magazine.

“Many companies still tend to manage their global supply chain in much the same way they run their domestic supply chain.”

“They often fail to pay enough attention to cultural differences, assuming a certain level of quality assurance in the sourcing and manufacturing process across their supplier base.”

“As a result, firms underestimate the impact on their people of having to suddenly manage dozens of suppliers from different cultures around the world,” he explains.

“Moreover, they still rely on planning systems despite the fact that long-term forecasting of global trends and patterns have become virtually impossible to do with an acceptable level of accuracy.”

Puckridge says there are a number of critical steps companies should take — and alternatives they should consider — as they work to build a world-class supply chain capable of overcoming volatility, uncertainty and risk.

In 2006 and 2007, Accenture’s Global Operations Survey, global research involving 300 senior corporate executives and numerous global supply chain experts, identified several characteristics that ensure high performance in global operations.

“Accenture’s study revealed that leaders in global supply chain service provision have different approaches to those lagging behind in five key areas,” Puckridge observes.

“These include flexibility; demand visibility; performance; talent and supplier development; and strategies in emerging markets.”

“The successful organisations predominantly focused on proactively investing in new plants and equipment to boost their global operations, rather than those who operated in reactive ‘fix it mode’,” he says.

Supply chain management is a critical ingredient for high performance for many industries.

“The supply chain can represent 40-70 per cent of an organisation’s operating costs, comprising approximately half of all assets and representing a substantial percentage of promised synergies for many mergers,” Puckridge points out.

“In addition, new environmental and security-related regulations, emerging technologies and an increasingly open and global economy are providing additional opportunities for supply chain-driven competitive advantage.”

A further recent Accenture report, Supply Chain Management and the Bottom Line, synthesises findings into six characteristics common to supply chain leaders.

“Strong corporate leaders incorporate supply chain into business strategy and develop an end-to-end, integrated operating model,” Puckridge explains.

“They also make strategic in-source / out-source decisions and develop effective linkages with trading partners.”

“Finally, people at the head of the game ensure they’re adopting leading-edge practices and technologies, and execute effectively against defined goals and metrics.”

Importantly, the research shows common practice among leading organisations encompasses relentlessly shortening the supply chain to cut costs, flawlessly executing supply chain capabilities internally and with partners, and continuously evolving strategy and operating models in anticipation of new market conditions.

Accenture’s Global Operations Survey identifies five key supply chain strategies that the respondents wanted to improve or master.

These include:

Rethinking the supply chain structure

This strategy encourages multinational organisations to focus on managing value, not assets.

By shifting their focus away from managing and controlling assets, and instead towards controlling processes that ensure quality, service, market access and cost parameters, many companies can run far more effective and efficient global operations without significant investments in inflexible supply chain infrastructure.

Globalisation of all functions of the supply chain

Though Accenture’s study and experience in the supply chain field it was identified that multinational organisations that are successful in this area typically globalise the entire value chain of a product, rather than globalising specific functions, such as procurement, logistics, or manufacturing.

In doing so, they can manage a portfolio of local, regional, and global products with supply chains optimised for each product line or area of business.

Balance global and local objectives

One critical strategy Accenture clients are looking to improve is achieving accountability and balance between local and global objectives.

This issue can be addressed by having a single person or department accountable for all global operations, with a local presence to gather regional knowledge and insight.

Putting the company’s best talent in the field

Another central supply chain strategy is having a function manager in each local area in which the organisation operates.

By placing experienced managers with good local market knowledge and strong relationships with headquarters in the field, companies signal to their local markets that they desire to establish strong relationships.

Having an effective risk management strategy

By globalising supply networking and pursuing emerging markets, companies expose themselves to increased operations risk.

One of the key strategies to successful supply chain management and to ensuring high performance overall is infusing adaptability into a company’s strategy, processes, technology, and people.

This enables the business to sense and respond to changing demand and supply markets.

Furthermore, as long-term forecasting of trends becomes more difficult, a holistic, continuous and proactive supply chain risk management strategy is required.

This strategy must quantify and manage the entire lifecycle of operational end environmental risk to which a global supply chain is susceptible.

Don Puckridge also cites three innovative projects Accenture has spearheadded with cutting edge results.

1. Best Buy

Accenture’s ongoing research into the characteristics of high performance businesses reveals that leading companies establish marketing programs that drive business results.

Best Buy and Accenture recently applied these principles in a project called Purchase Path. Best Buy and Accenture examined millions of sales transactions to identify meaningful relationships between product categories and different demographic groups.

The solution studied what customers buy after a major product purchase so that Best Buy can improve product assortment and in-store placement, create unique bundles and increase replenishment and in-stock levels.

Purchase Path enables customers to purchase everything they need at the same time or over multiple visits, with fewer hassles and return visits.

The Best Buy solution combines customer analytics with the in-store experience and core supply chain principles.

The outcome was increased sales, profits and customer satisfaction.

The project has earned the client a CIO 100 award from CIO Magazine, one of the IT industry’s leading publications.

2. Staples

Some of the best innovations come from simplicity.

Staples has continued to look to find new ways to drive sustainable growth and profitability.

In 2002 one of the areas it considered was improving its supply chain. Staples’ goal was to widen its lead over competitors, and in all key industry metrics, by improving supply chain execution; decreasing costs while increasing productivity and reliability; and ensuring that customers can always find products they wanted on store shelves.

Working side-by-side with Staples’ business professionals, Accenture helped define a broad-based strategy that extended beyond the supply chain. A high-level analysis by Accenture pinpointed the drivers of inventory inefficiencies.

Accenture’s solution involved process changes—not technology.

The initiatives identified minor gaps in processes that had a substantial impact on Staples’ overall supply chain.

The biggest opportunity for Staples was in ensuring that inventory was not just in the store, but that it is on the shelf and available for sale.

A repeatable and efficient inventory management process was steadily rolled out region-by-region to Staples’ more than 1,200 US retail stores.

3. Sustainability

Accenture worked with a large UK retailer as they sought to improve distribution performance, reduce costs and begin to address carbon emissions in their supply chain.

The retailer sought to achieve these goals as they transitioned to a new distribution model. Accenture worked with the retailer to develop a new outsourcing and transport strategy. The project team also deployed a Supply Chain Carbon Footprint Calculator.

The project led to significant reductions in the client’s supply chain carbon footprint, principally from vendor inbound transportation, warehousing activities and from optimising secondary transport.

There is a strong relationship between supply chain efficiency and carbon efficiency demonstrated through the results.

Performance highlights include

  • a 33% reduction in carbon emissions for vendor inbound activities through consolidation of movements
  • an 11% saving on distribution costs as part of a 3-year change program
  • an 8% reduction in carbon emissions for home delivery fleet, through reduced distances traveled
  • a 10% reduction in overall supply chain carbon footprint.

“Sustainable business practices anchored by sustainable supply chains are coming to the forefront because they make good business sense,” Puckridge says.

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