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McKinsey Global Survey results:
The challenges ahead for supply chains
Senior executives say their companies manage key trade-offs well, yet see barriers to better performance: rising risk, lack of collaboration, and low CEO involvement. As economies around the world step back from the financial brink and begin
adjusting to a new normal, companies face a different set of supply chain challenges than they did at the height of the downturn—among them are rising pressure from global competition, consumer expectations, and increasingly complex patterns of customer demand. Executives in this McKinsey survey1 are divided on their companies’ preparedness to meet those challenges, and fully two-thirds expect supply chain risk to increase. What’s more, the survey highlights troubling signs of struggle associated with key, underlying supply chain processes and capabilities, including the ability of different functions to collaborate, the role of CEO s in supply chain planning, and the extent to which companies gather and use information. Emerging from the downturn
As companies have managed their supply chains over the past three years, the challenges 1
The online survey was in the field from October 12 to October 22, 2010, and received responses from 639 executives representing the full range of regions, industries, and tenures. At the C-level, the range of functional specialties is also represented.
they faced and the goals they set have reflected a single-minded focus on weathering the financial crisis. The most frequently cited challenge of the past three years is the increasing volatility of customer demand (Exhibit 1). This is no doubt a result of the sharp drop in consumer spending that has reverberated throughout all sectors across the globe. Looking at challenges over the next five years, though, the focus shifts: respondents most frequently cite increasing pressure from global competition. Some issues that receive a lot of public
Jean-François Martin
2
McKinsey Global Survey results
The challenges ahead for supply chains
Survey 2010 Supply chain Exhibit 1 of 6 Exhibit title: New challenges lie ahead Exhibit 1
New challenges lie ahead
% of respondents,1 n = 639
Over the past 3 years
Companies’ challenges in supply chain management Increasing volatility of customer demand Increasing consumer expectations about customer service/product quality Increasing cost pressure in logistics/transportation Increasing pressure from global competition Increasing volatility of commodity prices Increasingly complex patterns of customer demand 1Respondents
Over the next 5 years
21
37
Increasing financial volatility (eg, currency fluctuations, higher inflation) Increasingly global markets for labor and talent, including rising wage rates Growing exposure to differing regulatory requirements in the areas where we operate Increasing complexity in supplier landscape Increasing environmental concerns Geopolitical instability 2
22 24 17
32 28 30 25 27
23
14
24
35
14 15 12
2
“Managing global supply chains: McKinsey Global Survey Results,” mckinseyquarterly.com, August 2008. 3 For example, since April 2009, McKinsey Quarterly’s research on economic conditions has tracked executives’ thoughts on customer demand, and the share of those expecting an increase in the next six months has fluctuated greatly over time, from 12 percent to 60 percent. However, expectations for customer demand have held steady since June, with about half expecting an increase. The data suggest that expectations for demand are beginning to stabilize.
25 24 24 27
21
7
who answered “other” or “don’t know” are not shown.
attention, such as climate change and natural-resource use, have remained a low priority since our 2008 survey.2 Still, the share that identify environmental concerns as a top challenge in the next five years nearly doubled, to 21 percent, over the proportion saying it was a...
The challenges ahead for supply chains
Senior executives say their companies manage key trade-offs well, yet see barriers to better performance: rising risk, lack of collaboration, and low CEO involvement. As economies around the world step back from the financial brink and begin
adjusting to a new normal, companies face a different set of supply chain challenges than they did at the height of the downturn—among them are rising pressure from global competition, consumer expectations, and increasingly complex patterns of customer demand. Executives in this McKinsey survey1 are divided on their companies’ preparedness to meet those challenges, and fully two-thirds expect supply chain risk to increase. What’s more, the survey highlights troubling signs of struggle associated with key, underlying supply chain processes and capabilities, including the ability of different functions to collaborate, the role of CEO s in supply chain planning, and the extent to which companies gather and use information. Emerging from the downturn
As companies have managed their supply chains over the past three years, the challenges 1
The online survey was in the field from October 12 to October 22, 2010, and received responses from 639 executives representing the full range of regions, industries, and tenures. At the C-level, the range of functional specialties is also represented.
they faced and the goals they set have reflected a single-minded focus on weathering the financial crisis. The most frequently cited challenge of the past three years is the increasing volatility of customer demand (Exhibit 1). This is no doubt a result of the sharp drop in consumer spending that has reverberated throughout all sectors across the globe. Looking at challenges over the next five years, though, the focus shifts: respondents most frequently cite increasing pressure from global competition. Some issues that receive a lot of public
Jean-François Martin
2
McKinsey Global Survey results
The challenges ahead for supply chains
Survey 2010 Supply chain Exhibit 1 of 6 Exhibit title: New challenges lie ahead Exhibit 1
New challenges lie ahead
% of respondents,1 n = 639
Over the past 3 years
Companies’ challenges in supply chain management Increasing volatility of customer demand Increasing consumer expectations about customer service/product quality Increasing cost pressure in logistics/transportation Increasing pressure from global competition Increasing volatility of commodity prices Increasingly complex patterns of customer demand 1Respondents
Over the next 5 years
21
37
Increasing financial volatility (eg, currency fluctuations, higher inflation) Increasingly global markets for labor and talent, including rising wage rates Growing exposure to differing regulatory requirements in the areas where we operate Increasing complexity in supplier landscape Increasing environmental concerns Geopolitical instability 2
22 24 17
32 28 30 25 27
23
14
24
35
14 15 12
2
“Managing global supply chains: McKinsey Global Survey Results,” mckinseyquarterly.com, August 2008. 3 For example, since April 2009, McKinsey Quarterly’s research on economic conditions has tracked executives’ thoughts on customer demand, and the share of those expecting an increase in the next six months has fluctuated greatly over time, from 12 percent to 60 percent. However, expectations for customer demand have held steady since June, with about half expecting an increase. The data suggest that expectations for demand are beginning to stabilize.
25 24 24 27
21
7
who answered “other” or “don’t know” are not shown.
attention, such as climate change and natural-resource use, have remained a low priority since our 2008 survey.2 Still, the share that identify environmental concerns as a top challenge in the next five years nearly doubled, to 21 percent, over the proportion saying it was a...
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