Tuesday, August 17, 2010
More potential for leaner supply chains
3:35 PM | 
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The Food & Drink Supply Chain Health Index Survey, a first for the industry and undertaken by Culina Logistics, gained feedback from logistics management at 50 leading food and drink companies regarding the efficiency performance of their supply chains in the last year and targets and plans for the next 12 months.
More than half of the respondents (55.8%) indicated that there were some areas of the supply chain that had underperformed in terms of creating cost efficiencies during the last 12 months. 43.8% of respondents presented a mixed picture, saying that some areas of the supply chain were on target/above target but also some areas below target. However one in five (20.8%) indicated that the outcomes of their efficiency drives over the last year were above target.
With regards to the cost efficiencies gained in the last 12 months the majority (33.3%) reported efficiency gains of between 1-5%, followed by 6-10% (22.2% of respondents) and 11-15% (11.1% of respondents). 15.6% of respondents said their organisations had achieved efficiencies of between 16-25%.
Unsurprisingly most cost efficiency gains were made in the core supply chain activities, with primary transport coming out on top, with 46.7% of respondents selecting this area, followed by secondary transport and warehousing (both 26.7%). Waste management also featured in the top four performing areas (20% of respondents) and added value services, such as product reworking and pallet management, achieved best results for one in ten of the respondents.
However, whilst these areas performed best, they were also seen as underachieving, again suggesting that respondents felt there was more potential for improvement. Warehousing (42.3% of respondents) was seen as the biggest under achiever when it came to driving further efficiencies, followed by secondary transport (30.8%), waste management (26.9%), pallet management/IT systems (both 19.2%) and product reworking (11.5%).
Nearly a third of respondents reported that their companies had identified new cost efficiencies for the first time, however the majority (69.8%) are making efficiency improvements in the same areas.
Maintaining competitiveness in the marketplace was seen as the biggest factor for driving up efficiencies in the supply chain, followed by continued pressure from retailers, downward pressure on prices and the economic climate.
The study also revealed the key focuses of the year ahead in terms of achieving efficiencies in the supply chain. These were still the core areas, with primary transport coming out on top (45.5% of all respondents), despite this being the best performing area in the last year. Primary transport was closely followed by secondary transport and warehousing, 43.2% and 38.6% of respondents respectively. Waste management was seen as increasingly important with nearly a fifth of respondents indicating that this would be one of two main focuses over the next 12 months.
Many respondents are in an upbeat mood about the prospects for the year ahead. Nearly two thirds of respondents (64.3%) are looking to generate cost efficiencies in the next year in order to grow on the success of their businesses over the last year, despite the economic downturn; whilst more than one in five (21.4%) saw cost efficiency gains as putting the company in the best position for when economic recovery returns.
However, more than one in ten reported that they are driving efficiencies to ensure survival during the current harsh trading conditions due to the continued challenging economic climate.
The majority of respondents (38.6%) are targeting cost efficiency gains of between 6-10% and more than a fifth (22.7%) are being even more bullish and targeting 11-20% gains. However, more than a quarter (27.3%) are being more cautious, indicating targets of between 1-5%.
Says Thomas van Mourik, Chief Executive of Culina Logistics: “The tough economic climate for the last two years and continuing uncertainty has put an ever increasing focus on efficiencies in the supply chain".
“The Food and Drink Supply Chain Health Index has been designed to provide a barometer for supply chain efficiencies across the food and drink sector, allowing manufacturers to benchmark their own performance. In doing so it explores efficiency performance against targets over the last year and efficiency targets and plans for the next 12 months.”
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More than half of the respondents (55.8%) indicated that there were some areas of the supply chain that had underperformed in terms of creating cost efficiencies during the last 12 months. 43.8% of respondents presented a mixed picture, saying that some areas of the supply chain were on target/above target but also some areas below target. However one in five (20.8%) indicated that the outcomes of their efficiency drives over the last year were above target.
With regards to the cost efficiencies gained in the last 12 months the majority (33.3%) reported efficiency gains of between 1-5%, followed by 6-10% (22.2% of respondents) and 11-15% (11.1% of respondents). 15.6% of respondents said their organisations had achieved efficiencies of between 16-25%.
Unsurprisingly most cost efficiency gains were made in the core supply chain activities, with primary transport coming out on top, with 46.7% of respondents selecting this area, followed by secondary transport and warehousing (both 26.7%). Waste management also featured in the top four performing areas (20% of respondents) and added value services, such as product reworking and pallet management, achieved best results for one in ten of the respondents.
However, whilst these areas performed best, they were also seen as underachieving, again suggesting that respondents felt there was more potential for improvement. Warehousing (42.3% of respondents) was seen as the biggest under achiever when it came to driving further efficiencies, followed by secondary transport (30.8%), waste management (26.9%), pallet management/IT systems (both 19.2%) and product reworking (11.5%).
Nearly a third of respondents reported that their companies had identified new cost efficiencies for the first time, however the majority (69.8%) are making efficiency improvements in the same areas.
Maintaining competitiveness in the marketplace was seen as the biggest factor for driving up efficiencies in the supply chain, followed by continued pressure from retailers, downward pressure on prices and the economic climate.
The study also revealed the key focuses of the year ahead in terms of achieving efficiencies in the supply chain. These were still the core areas, with primary transport coming out on top (45.5% of all respondents), despite this being the best performing area in the last year. Primary transport was closely followed by secondary transport and warehousing, 43.2% and 38.6% of respondents respectively. Waste management was seen as increasingly important with nearly a fifth of respondents indicating that this would be one of two main focuses over the next 12 months.
Many respondents are in an upbeat mood about the prospects for the year ahead. Nearly two thirds of respondents (64.3%) are looking to generate cost efficiencies in the next year in order to grow on the success of their businesses over the last year, despite the economic downturn; whilst more than one in five (21.4%) saw cost efficiency gains as putting the company in the best position for when economic recovery returns.
However, more than one in ten reported that they are driving efficiencies to ensure survival during the current harsh trading conditions due to the continued challenging economic climate.
The majority of respondents (38.6%) are targeting cost efficiency gains of between 6-10% and more than a fifth (22.7%) are being even more bullish and targeting 11-20% gains. However, more than a quarter (27.3%) are being more cautious, indicating targets of between 1-5%.
Says Thomas van Mourik, Chief Executive of Culina Logistics: “The tough economic climate for the last two years and continuing uncertainty has put an ever increasing focus on efficiencies in the supply chain".
“The Food and Drink Supply Chain Health Index has been designed to provide a barometer for supply chain efficiencies across the food and drink sector, allowing manufacturers to benchmark their own performance. In doing so it explores efficiency performance against targets over the last year and efficiency targets and plans for the next 12 months.”
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