PRTM Global Supply Chain Trends Survey: Product Quality, Safety Cited by Senior Management as Critical Supply Chain Concerns

Business Wire, June 12, 2008

Delivery Reliability and Security also Worry Industry Leaders, Sixth Annual Study Shows

MOUNTAIN VIEW, Calif. -- Senior management at global companies are concerned most with product quality and safety, as well as delivery reliability and security, when expanding the supply chain globally, according to PRTM Management Consultants' Global Supply Chain Trends 2008-2010 study. In addition, the majority of the more than 300 respondents experienced issues with product safety and quality; more than one-fifth said these issues are frequent and serious.

Although product recalls in the consumer goods segment receive widespread attention, the study reveals that the problem is more extensive than many realize, with the most frequent issues reported by companies in the automotive and industrial sectors.

"Companies are acutely aware of the risks posed by globalization and are taking this challenge very seriously," said Shoshanah Cohen, Director, PRTM's Global Supply Chain Innovation practice.

The sixth annual study provides critical insight into how industry leaders are globalizing their supply chain operations to achieve competitive advantage in today's challenging business environment. It represents the views of more than 300 participants from global manufacturing and service companies. Data was collected between December 2007 and February 2008.

Although globalization is accelerating, the study found that a company's supply chain can impede that acceleration if it is not sufficiently flexible or if the company lacks the internal competency to manage supply chain partners. Sixty percent of survey participants indicated that their supply chains lacked the required flexibility to rapidly respond to changing customer demands and interruptions in supply. In addition, more than half said they lack internal competencies to adequately manage their external partners.

"This is really an indication of how difficult it is to globalize without having a solid operational strategy in place, and a tactical framework against which to execute," Cohen said. "Even companies with significant collaboration experience are struggling to manage the complexity resulting from working with multiple partners around the world."

Managing supply chain flexibility to ensure efficient product flow and on-time delivery remains a major challenge, the study shows. By 2010, the need for greater supply chain flexibility will overtake product quality and customer service as the major driver for improving supply chain strategy.

To improve supply chain flexibility across continents, almost 90% of those surveyed plan to increase their focus on delivery performance. Four out of five companies plan to better integrate key suppliers, including tighter enforcement of service level agreements with their channel partners. And 65% plan to maintain higher buffer stocks along key supply chain functions.

Other survey highlights:

* Offshore operations-By 2010, more than half of companies' total operations will be outside their original home country; and offshoring of R&D and technology development will almost double

* Planned / actual benefits gap-Despite average cost reductions of 17% per globalization initiative, many companies have difficulty realizing savings in management costs

* Accelerated globalization-Pressure to reduce cost and local market access are the key drivers

To schedule a discussion with a PRTM supply chain innovation expert or to receive a copy of the survey, please contact Sherrie Good, sgood@prtm.com, 1 949.255.5471.

About PRTM Management Consultants

Since 1976, PRTM has created a competitive advantage for its clients by changing the way companies operate. PRTM management consultants work with senior executives to develop and implement innovative operational strategies that deliver breakthrough results. The firm is a leader in operational strategy, supply chain, product development, and customer value management. PRTM has 16 offices worldwide and serves major industry and global public sectors. For more information, visit www.prtm.com.

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