Better technology integration and closer attention to customer needs rank among the best-in-class behaviors of distributors.
Posted Apr 17, 2006
Best-in-class companies that adhere to a dynamic distribution network--one that can ship from any point in the supply chain to any point in the world--have high levels of customer service along with the highest proficiency in reduction of cycle time and inventory within supply chains, according to an Aberdeen Group study "The Supply Chain Integration Benchmark Report: Warehouse Without Walls."
One of the factors distinguishing the best companies from their average peers and the industry laggards is verification that their initiatives bring value to their customers. Some companies that supply consumer-goods stores are large enough to dictate terms (minimum order size, shipping requirements, etc.) to retail outlets, for example, but best-in-class firms meet with their customers to determine win-win solutions that benefit both sides, according to John Fontanella, Aberdeen senior vice president of research and author of the report.
"Best-in-class companies lead in creating relationships that aim to distribute value fairly," Fontanella says. "These companies aren't looking to handicap you. They're looking to work with you and your processes. They lead in the use of third-party data hubs, allowing them to share information with every partner in their networks."
Third-party technologies are more likely to be accessible by everyone in a supply chain, so industry leaders tend to adopt XML and SOA technologies at twice the rate of laggards and average performers, according to the report. Additionally, the top companies have the highest rate of supply chain analytics and are most likely to have standardized them company-wide.
"Best-in-class companies are technology opportunists," Fontanella says. "They have no hesitation in employing third-party technologies. Their high-level of use of EDI and other electronic communications protocols also tell us that they are better skilled at integrating external data into their internal operations."
Small companies need to cater to customer needs to move up in the market, but larger suppliers are also doing a better job at focusing on customer needs, according to Fontanella. Frequent planning is another key strategy for the top companies, according to the report. "Departmental rivalries, misaligned goals and performance metrics, and poor partner management policies all contribute to a company's inability to create more fluid and flexible fulfillment operations," Fontanella sayss. "Top performers have enough confidence in themselves and partner organizations to rewrite the book on how fulfillment in a global supply chain is done."
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