Dive Brief:
- There is little consensus among manufacturers on what areas of their supply chains they plan to focus on for improvements, according to a BDO survey of 100 manufacturing executives.
- The survey found that order cycle time was the most common target with 19% of respondents highlighting it as their top priority. But the top five priorities were separated by a spread of just three percentage points. Inventory turnover was the top issue for 16% of manufacturing executives.
- Maurice Liddell, a principal and BDO Digital Market Leader for Manufacturing, said he was surprised inventory turn wasn't more of a top focus after a year in which many manufacturers struggled with inventory levels as a result of high demand and supplier delays.
Where manufacturers want to improve supply chain
% response when asked about top target for supply chain improvements
Dive Insight:
Manufacturers' interest in order cycle time is likely driven by the Amazon effect, or the increased interest in faster delivery across sectors, Liddell said.
Supplier deliveries slowed over the course of the pandemic, and manufacturers have struggled to build inventories, which has led to new order backlogs growing for the last 10 months, according to the Institute for Supply Management's manufacturing report.
In this context, improving order cycle time could prove to be difficult. The task requires manufacturers to focus not just on making the product, but on distribution channels, Liddell said.
"There's more pressure for them to produce and provide the product in a more rapid fashion," he said.
Liddell said digitally-focused companies could have a leg up compared to manufacturers that rely on legacy applications. Speeding cycle times can stem from improving the flow of information across an organization and its partners.
When an order comes in, distribution partners should be made aware, so they can prepare the capacity to move the item when it's ready, according to Liddell. Planning should not happen sequentially but in parallel. Better data sharing from the beginning allows for better forecasting, he said.
The BDO survey also found interest in improving total delivered cost, with 18% of respondents calling it a top target. This comes at a time when supply chain and freight expenses cut into companies' margins. The Cass Expenditures Index has set four records over the last five months. And warehouse rent keeps going up.
Liddell said BDO is starting to see more organizations look at various options in shipping and distribution channels. Newer categories, such as on-demand warehouse providers or digital freight forwarders, provide some alternatives for shippers to consider, he said.
BDO also sees clients reevaluating their inventory levels to better understand what should be on hand to avoid out-of-stocks.
"We are expecting that the inventory turnover is going to decrease," Liddell said, adding that variability will exist depending on where companies are sourcing from.
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