Strategic Supply Chain Management - Supply Chain Online

266 Strategic Supply Chain Management
Within these three groups we evaluated financial measures of overall
business success, such as profitability, supply chain practice maturity,
and a variety of measures of supply chain performance. Our hypothesis
was that companies with better supply chain performance would have
more mature practices and better financial results. While we were not surprised
to find this correlation—it has been apparent in analyzing various
aspects of the database over the years—the magnitude of the discrepancy
among these three populations is compelling.
The bottom line is that the BICCs have better financial results than
their industry peers. (See Figure A-3 for the breakdown of BICC population
by industry segment.) Operating with more advanced supply chain
practices and lower supply chain management costs, these companies
have higher profit margins. BICCs have 40 percent higher profits than the
median companies in their industry. The lowest-quartile or WICCs had 60
percent lower profits than the median companies. In a high-margin industry
segment, this could be a 14 percent profit for BICCs versus a 4 percent
profit for WICCs. In a low-margin industry segment, it could mean the
difference between making good margin and losing money.
RESULTS FOR SUPPLY CHAIN PRACTICE MATURITY
Evaluation of supply chain practices and IT shows that the BICCs are more
closely integrated with suppliers and customers. The overwhelming majority
(19 of 22) of BICCs were mature stage 2 or higher, whereas 40 percent
of the rest of the population was still trying to figure out how to transition
away from the more traditional, functionally focused processes. While the
BICCs used a variety of more advanced practices, the differences in practices
were most pronounced in the plan and source areas and in their strategy
practices, including overall supply chain strategy, planning strategy,
sourcing strategy, and manufacturing strategy (see Figure A-4).
RESULTS FOR SUPPLY CHAIN PERFORMANCE
BICCs were about 10 to 20 percent better than the population median
on the majority of all metrics, and WICCs were 15 to 50 percent lower
than the median (see Figure A-5).
BICCs schedule a higher percentage of orders to customer request
date and are more likely to deliver the goods on the committed date. They
have slightly higher forecast accuracy, in terms of the number of units
required and of the sales price for the units sold (see Figure A-6).
Because our selection criteria for BICCs included inventory days of
supply, it is not surprising that BICCs have lower inventory levels, but it