CEOs mull supply chain transformation

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The majority of CEOs worldwide believe that their retail supply chains are currently "not optimal" for today's changing retail environment.

That is one of the biggest takeaways from a global retail CEO survey of over 400 retail industry CEOs conducted by PwC for JDA Software titled 'CEO Viewpoint: The Strategic Role of Supply Chain in an All-Channel World'.

According to JDA Software, digitally-connected consumers have turned retail models upside down as omni-channel shopping has transformed supply chain from an important business concern to a mission critical one.

The company points out that so profound is this change that 50% of CEOs recognise that their supply chain can be a strategic differentiator. However, 83% of the CEOs believe that their retail supply chains are currently "not optimal" for today's changing retail environment.

Coming of age

As mobile commerce comes of age, says JDA Software, one of the biggest challenges facing CEOs is managing the transformation to omni-channel retail. However, only 34% of CEOs consider the rise of omni-channel shopping to be an external threat, while only 22% said it will have a direct impact on their organisation.

"The rise of omni-channel is one of the most transformational shifts that has occurred in retail in recent times," says Baljit Dail, chairman of the board and interim CEO, JDA Software. "Retailers who don't understand the strategic alignment of their supply chain with consumer expectations are in danger of becoming non-competitive.

"This isn't about making a tweak to the operating model, it requires a massive change. The good news appears to be that there is an emerging group of visionary CEOs who understand that staying competitive during this inflection point requires a dramatic shift of their current operating models to deliver operational effectiveness and top- and bottom-line growth."

CEOs say their top priorities are on more traditional areas of growth - by entering into new regions and markets, by opening more stores, or through mergers and acquisitions. JDA Software believes that these priorities highlight potential missed opportunities for more than two-thirds of CEOs who failed to consider enhancing distribution capacity and supply chain as a key contributor to drive profitable growth.

CEOs think three fundamental risks will have the most impact on their organisation over the next three years: increasing competitive threats (41%), margin erosion and cost reduction (39%), and attracting and retaining customers (24%).

Dail is of the view that these answers reveal a potentially sizable gap between recognised risk and a strategy to address that risk. While there are plenty of exceptions, maintaining a strong customer value proposition is directly tied to supply chain proficiency, he explains.

Strategic differentiator

The research found that 50% of CEOs recognise that their supply chain can be a strategic differentiator. It also revealed that CEOs who focus on optimising their supply chains have 15% lower supply chain costs, less than half the inventory levels and more than three times shorter cash-to-cash cycles.

"Supply chain has moved from the back office to the store front as consumers seek to seamlessly shop across virtual and brick-and-mortar channels," says Bruce H Rogers, chief insights officer, Forbes Media.

"The research highlights both the opportunities and challenges today's retail CEOs face in mastering this all-important discipline. To do it well, CEOs are shifting their capital investments and business priorities as well as applying innovations to drive a more strategic supply chain that's aligned with their business growth."

Only 15% of CEOs believe that their supply chain today is resilient enough to address the threat of external disruptions. While CEOs who have focused on supply chain have seen results, there is an opportunity for additional investment in the space versus other categories of IT spending.

"Taking a cautious, incremental approach to this kind of market disruption can be a deadly course of action," says Dail. "There seems to be a clear disconnect between the actions required to make the transformation to today's retail environment with what is being currently done by many of these companies. With speed as the new currency, accelerating time to market and responsiveness through an agile, connected supply chain must be closely aligned with growth priorities to successfully compete and defend profit margins."

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