An enterprise’s supply chain is effectively one mega-process, made up of lots of connected processes across areas like planning, sourcing, production, distribution, and returns.
So it's no surprise supply chain leaders recently told a global survey that processes are important. In fact, 83% of the 300 business leaders we interviewed for the supply chain edition of The Process Optimization Report go so far as to agree that processes are the lifeblood of their organization. And 93% think process optimization is important, or even essential, to meet their departmental objectives, which tend to be based around the triple imperatives of reducing cost, optimizing cash flow, and maintaining service levels.
As part of the research, undertaken by an independent agency, we asked supply chain leaders to indicate what’s driving the need for departmental process optimization. Their priorities are two-pronged:
With an eye on today, 68% put cost reduction among their top-five factors.
With an eye on tomorrow, the same proportion (68%) cite an interest in harnessing new technologies, including AI.
Innovation and cost cutting need to work hand-in-hand for supply chain leaders, and process optimization is recognized as a method to achieve both. Other important drivers of process optimization are:
Complying with changing regulations
Dealing with ongoing supply chain disruptions
Coping with increasing competitive pressures
Meeting changing customer expectations
Supply chain leaders are already using process optimization to improve efficiency and performance, reveals the supply chain edition of The Process Optimization Report. Almost one in five (18%) say they already optimize processes on a continuous basis. This might not sound like a lot at first, but when compared to the broader piece of research that also surveyed senior leaders from finance, IT, and process and operations functions, it’s significantly more than the cross-function average of 14%.
Asked for the top outcomes of optimized processes, the most common answers are revenue growth (55%), optimized working capital (53%), cost reduction (48%), and increased flexibility to respond quickly to change (40%).
Despite promising attitudes to process optimization, there is still a lot of room for improvement:
Over half (54%) of supply chain leaders say they haven’t optimized a process in the last year.
On average, 56% of business-critical processes within supply chain functions are seen as fully optimized, meaning 44% are running in a sub-optimal way.
In reality, the proportion of processes that aren’t fully optimized may well be higher than 44% since perceptions of process performance don't always reflect the on-the-ground reality. These sub-optimal processes are having a negative effect on supply chain performance, with loss of time and a reduction in productivity seen as the most significant impact, recognized by 60% of supply chain professionals.
Supply chain leaders identify a number of specific challenges that may be holding back process optimization:
Identifying and defining opportunities for improvement within a process (59%)
Measuring how a process currently performs (56%)
Orchestrating improvements across people, processes, and technologies (54%)
Understanding how processes interact (54%)
Understanding how processes actually run (52%)
Process mining can help supply chain functions overcome these common challenges. Over a third (35%) of supply chain leaders say they already use process mining in some form, while a further 35% are evaluating it. This is positive news and, when combined with the enthusiasm for process optimization, process excellence is set to accelerate across the supply chain function over the next few years.
To find out more about how 300 supply chain leaders across Europe and the United States are currently optimizing their processes, as well as how this compares with other functions, download the report, The Process Era is Here: Supply chain edition, How supply chain leaders are using processes as a lever for value and a driver for change.Download the Process Optimization Report: Supply Chain Edition