VENDORS RELATING TO CUSTOMERS, LAGGING ON LOGISTICS: SURVEY

LINDA PURPURA

EL SEGUNDO, Calif. -- Manufacturers are forging ahead with initiatives to enhance business practices with individual customers, but they have yet to gain substantial and widespread advantages in logistics performance.

That was one of the key findings from a major survey of grocery manufacturers conducted by Computer Sciences Corp. here and sponsored by the Grocery Manufacturers of America, Washington. Highlights of the study, titled "Leveraging the Supply Chain for Competitive Advantage," will be released this week at the food industry Productivity Conference in Miami. The study, which is conducted once every three years, included responses from 53 suppliers.

Suppliers are working hard to build more effective business relationships with individual customers, a change the survey termed a "first step" toward integrating manufacturer and customer business practices.

Ninety-four percent of survey respondents said they will have dedicated customer teams to handle key accounts within a year, up from only 30% today.

The study also revealed a heightened focus on creating programs to offer customer-specific services, a trend that has greatly increased supply chain complexity in the past three years. A striking 93% of respondents said that supply chain and delivery complexity has increased during the past three years, with 54% saying it has increased dramatically.

In light of the need to develop more complex service strategies, the survey revealed, supply chain initiatives are now also succeeding in gaining the attention of top executives.

For example, 53% of supply chain executives now report to a chief executive officer, chief operating officer or president, a five-fold increase since 1988. In addition, 90% of supply chain executives now take part in corporate strategy meetings.

"It's time for manufacturers to invest in their infrastructures to provide the capabilities to deliver against customer-focused strategies," said Susan Buddenbaum, manager of education at CSC's consumer goods and retail national practice.

"As the infrastructure changes, companies will see even greater advantages. Those suppliers leading this change are able to use the supply chain as a competitive advantage," she said.

The survey, however, suggests that recasting the corporate infrastructure to complement the shift to customer-focused strategies may not always happen quickly.

Continuous replenishment program planning is a good example of an evolving service requirement, the survey said. CRP began as a specialized service provided by manufacturers to a few key accounts. Today, it represents 30% to 40% of some manufacturers' volume, and 74% of companies are engaged in CRP initiatives.

Yet, many companies' computer systems have become overloaded, inefficient and inappropriate for handling the necessary information, a finding underscored by the 75% of respondents who said they had no way to integrate CRP forecasts into their production planning processes.

The study suggests that such issues have prevented manufacturers from achieving more substantial gains in supply chain efficiency. Only 48% of surveyed organizations have all their supply chain functions unif

The days of supply of finished goods in the industry has remained essentially the same since 1993, about 34 days. As a result, the two-year industry improvement goal also has not changed from three years ago, at 17 days.

The survey suggests even greater financial insight into operations will soon come into play. Within two years, 78% of respondents said they expect to calculate service costs per customer, and 91% will measure customer profitability. Another 86% anticipate determining the costs of each service provided.

The report also indicated that 68% of respondents now outsource some of their warehousing functions, 64% outsource for special packaging, 57% outsource manufacturing, 49% outsource for value-added services and 40% outsource for standard packaging.

On the other hand, 88% of respondents do not outsource customer service, 75% do not outsource product introduction, 62% do not outsource continuous replenishment, 58% do not outsource data centers and 54% do not outsource transaction processing.