Aberdeen_SupplyChainDisruptionsHowTheBestInClassRespond

In this report we look at supply chain disruptions and examine
the areas targeted for improvement by Best-in-Class companies
to offset or mitigate these unplanned events.
Try as they might, Chief Supply Officers (CSCO’s) know there is
no such thing as a perfect plan. Why, you may ask? The answer is
THE CHIEF SUPPLY CHAIN OFFICER’S
VIEW OF SUPPLY CHAIN DISRUPTIONS:
HOW THE BEST-IN-CLASS RESPOND
March, 2014
 Bryan Ball, Vice President and Group Director,
Supply Chain Management
Report Highlights
Best-in-Class
companies are 153%
more likely to
identify raw material
volatility as the #1
disruptive force in
2013.
The scope of the
Chief Supply Chain
Officer is 23% more
likely to have a
broader view for the
Best-in-Class.
Best-in-Class are
50% more likely to
target visibility as a
supply chain process
for improvement.
Sustainability
initiatives provide
hidden support for
Best-in-Class
companies.
p2 p4 p6 p7

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The Chief Supply Chain Officer’s View of Supply Chain Disruptions: How
the Best-in-Class Respond
2
simple but the remedies are complex. As soon as a plan is
finalized, something, somewhere in the supply chain will have
changed. It could be anywhere, from the long tail supplier all the
way to the customer, or even something as simple as someone
calling in sick or a machine going down that causes a delay.
Typically, these types of disruptions can be offset without any
real damage to the plan. But what about those events or
conditions that stretch or go beyond the boundaries of normal
responsiveness and cause supply chain leaders to lose sleep at
night?
Business Pressures and Disruptive Events
In our December 2013 report, CSCO 2014: Top Three Supply
Chain Execution Priorities, we identified the top business
pressures as follows:
 Rising supply chain management costs
 Escalating demand for service from customers
 Growing complexity from global operations
Figure 1 shows the events or conditions that were most
disruptive to supply chain management processes over the last
12 months and there are clearly links between the business
pressures and disruptive events.
Increasing supply chain costs were deemed a pressure by all
companies, but the Best-in-Class are significantly more
concerned with raw material cost volatility than All Others, 59%
vs. 23% respectively, a factor generally outside their immediate
control. This would suggest that the Best-in-Class are less
concerned with internal costs and a review of their capabilities
reflects that these functions are already under control. Clearly,
the other maturity levels are also affected by the same volatility
of raw material, since it is an external force, but they are less
“Chief Supply
Officers (CSCO’s)
know there is no such
thing as a perfect
plan and disruptions
will always occur.
Identifying them and
taking action to
offset or mitigate
them are what set
the Best-in-Class
apart from their
competition.”

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3
The Best-in-Class Defined
In September through November
2013, Aberdeen surveyed 151 end-
user organizations to understand
the Chief Supply Chain Officers
priorities and best practices. The
performance metrics used to
define the Best-in-Class (top 20%),
Industry Average (middle 50%),
and Laggards (bottom 30%) across
these organizations are:
• Average Customer Service
Level was 97% for the Best-
in-Class vs. 84% for All
Others
• Average cash conversion
cycle was less for Best-in-
Class, 30 days, compared
All Others at 59 days
• Total Logistics Cost as a %
of Revenue was less at 12%
vs. 25% for All Others.
• Average Forecast Accuracy
at the product family level
was 85% for the Best-in-
Class vs. All Others
than half as likely to be focused on raw material volatility and
more concerned by other disruptions.
Related to the pressure of escalating demand for service from
customers, the Best-in-Class are much less concerned with
increasing demand from customers as a disruptive force
compared to the others, 31% vs. 43%. This suggests that Best-in-
Class are well prepared for upside scenarios and ready to take on
incremental business compared to the other maturity levels.
Figure I: Disruptive Supply Chain Events
Source: Aberdeen Group, December 2013
However, reduction in customer demand, also felt by all
maturity levels, is prioritized as a close second to raw material
volatility for the Best-in-Class in terms of a disruptive force. Loss
of business is always a concern for all companies but,
interestingly, it is considered less disruptive (41%) to the other
maturity levels than an increase in customer demand (43%),
which suggests that they are much more reactive to their
customers and not prepared for growth at all.
43%
41%
23%
31%
55%
59%
0% 20% 40% 60% 80%
Increase in customer demand
Reduction in customer demand
Raw materials price volatility
Percentage of Respondents, n=151
Best-in-Class
All Others

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4
The Scope of the CSCO for Best-in-Class
Given the challenges faced as a result of these supply chain
disruptions, the next question is, what steps are companies
taking to offset, mitigate or create alternatives to these
disruptions, and do the Best-in-Class have an advantage? One
factor that will influence all others is the scope of the CSCO’s role
in the organization.
As shown in Figure 2, the CSCO is more likely to have
responsibility for all of the core supply chain functions in Best-in-
Class companies, as indicated by a range of 77% likelihood or
greater compared to other maturity levels that are in the 60%–
67% range. This emphasizes a broader role for the CSCO in Best-
in-Class companies.
Figure 2: Scope of CSCO
This enables a more holistic view to address supply disruptions.
The demand planning and transportation functions, which are
not listed, are more than 50% more likely to be within the CSCO
scope for the Best-in-Class as well. This breadth in scope
60%
63%
67%
77%
77%
83%
0% 50% 100%
Distribution / warehousing or
logistics
Procurement
Supply chain planning
Percentage of Respondents, n=151
Best-in-Class
All Others
“The CSCO is more
likely to have a
broader role in nearly
every case for the Best-
in-Class companies, at
a range greater than
75% compared to All
Others in the 60%-67%
range.”
 Read the full report,
“CSCO 2014: Top
Three Supply Chain
Execution Priorities”

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5
advantage for the Best-in-Class allows the CSCO more levers to
pull to solve a problem, whether it is related to a supply,
manufacturing and operations, distribution or customer service
issue. This broad span of control across many functions further
enables the CSCO to influence the direction of continuous
improvement initiatives for Best-in-Class organizations, as we
shall see later in the report.
Supply Chain Areas Targeted for 2014 Improvement
Figure 3 shows the priorities for areas of improvement for all
respondents. The Best-in-Class are more likely to tackle these
areas than All Others across the board. They are also 50% more
likely to focus on visibility, 37% more likely to address
collaboration, 23% more likely to tackle procurement and 56%
more likely to upgrade or improve suppliers.
Visibility is important to understanding the customer and having
insight into their plans, and is absolutely essential to planning.
Knowing where the customer is going can certainly reduce the
volatility in demand and provide advance warning of any
potential loss of volume, thus limiting the impact. Increases in
volume can also be better planned in advance, which would
explain why the Best-in-Class are much less concerned than All
Others about increases in demand. Conversely, lack of visibility
may well be the cause behind the All Other’s fear of increases. If
a surprise, even growth can be disruptive.
Visibility also plays a part in supplier management. Having
insight into raw material suppliers can allow strategies to be put
in place to offset or allow for contingencies. Our 2012 report,
CSCO Priorities to Address Rising Supply Chain Costs:
Understanding the Tradeoffs in Performance Metrics, addresses
this in detail as far as strategies for supply costs.
“The scope and reach
of the CSCO, to be able
to go after
improvements across
the board from the
customer all the way
to suppliers, are
organizational
enablers and
advantages for the
Best-in-Class.”

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6
Collaboration goes hand in hand with visibility and our research
indicates that collaboration significantly improves time to
decision and problem resolution. Having a closer connection to
customers and suppliers improves the sensitivity to changes in
direction. The advantages gained by a collaboration initiative
are outlined in our May 2012 report, B2B Collaboration: No
Longer Optional.
Also directly related to raw material volatility is the emphasis on
procurement and suppliers, which addresses procurement
processes and any supplier issues.
Figure 3: Targeted for Improvement
The scope and reach of the CSCO, to be able to go after
improvements across the board, from the customer all the way
to suppliers, are organizational enablers and advantages for the
Best-in-Class. It fosters a comprehensive approach across the
entire supply suite of processes.
Hidden Actions
It is important to realize that the Best-in-Class are working in all
areas for improvement. As part of the survey, we captured the
63% 63%
53% 50%
42%
46% 43%
32%
0%
10%
20%
30%
40%
50%
60%
70%
Supply chain
visibility
Supply chain
collaboration
Sourcing /
procurement
Supply chain
suppliers
PercentageofRespondents
Best-in-Class All Others

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7
actions being taken in the areas of sustainability. Although not
100% supply chain driven processes in all cases, (where more of
a supporting role is required), supply chain is nonetheless
heavily involved. Figure 4 shows the responses and they
specifically target areas that are related to the disruptions
identified.
Arguably, energy is a raw material unto itself, however,
improving energy efficiency lessens the impact of any raw
material volatility by reducing dependence overall. The Best-in-
Class are more than twice as likely to be engaged in this type of
initiative.
Changing the way products are manufactured is a priority for the
entire business and is cross functional in nature. It involves
virtually all disciplines, such as product engineering,
manufacturing, supply chain, distribution, marketing and even
sales. It influences whether products are made to stock, made to
order, assembled to order or any possible combination or
configuration. It may only be manufacturing process related, but
could also involve packaging and distribution and cases where
product might be stocked for fulfillment. The Best-in-Class are
139% more likely to tackle this challenge (43% for Best-in-Class
vs. 18% for All Others).
Using alternate fuels or sources of energy does relate directly
back to raw materials. If it involves sourcing or dealing with
suppliers, then procurement would be involved. Regardless, this
initiative is indicative of organizations with a continuous
improvement attitude, and exemplifies the meaning of Best-in-
Class.

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8
Figure 4: Hidden Actions – Sustainability
Key Takeaways
There is no such thing as the perfect plan and there are always
disruptions. Understanding the root cause behind them is only
part of the solution. Taking steps to offset, mitigate, or provide
alternatives is what distinguishes the better companies. And the
attitude of continuous improvement to constantly advance is
what exemplifies the Best-in-Class. The Best-in-Class:
 Rank raw material volatility as the most disruptive event
to their supply chain processes over the last 12 months
(59% vs. 23% for All Others).
 Have a 97% service level vs. 84% for All Others.
 Have total logistics costs that are more than 50% less as a
percent of total revenue than All Others.
 Are 23% more likely to have a CSCO with a broader scope
over their supply chain.
 Are 50% more likely to target visibility as an area for
improvement (63% vs. 42% for All Others).
9%
18%
26%
39%
43%
57%
0% 20% 40% 60%
Using alternate fuels / sources of
energy
Changing the way we
manufacture our products
Improving energy use efficiency
Percentage of Respondents
Best-in-Class
All Others

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9
 Are 37% more likely to engage in collaboration
improvement (63% vs. 46% for All Others).
 Are more than twice as likely to have sustainability
initiatives that support improvement of energy efficiency
or alternate use of fuels.
 Are more than twice as likely to re-evaluate and change
how they manufacture their products.
Best-in-Class companies consider all disruptions as an area to be
addressed, whether it is within their immediate control or not,
such as raw material volatility. They understand the need for a
holistic view of their supply chain and empower the CSCO with a
broader scope than other maturity levels. A continuous
improvement attitude prevails and they are more likely to target
any area for improvement that might offset or limit exposure to
the disruptions they have encountered over the last 12 months.
The influence across the organization to mitigate or seek
alternatives to supply chain disruptions through continuous
improvement is what exemplifies the attitude and meaning
behind the Best-in-Class companies.

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10
For more information on this or other research topics, please visit www.aberdeen.com.
Related Research
CSCO Priorities to Address Rising Supply Chain Costs:
Understanding the Tradeoffs in Performance Metrics;
March 2012
CSCO View of Resilient Supply Chains; October 2012
B2B Collaboration: No Longer Optional; May 2012
CSCO 2014: Top Three Supply Chain Execution
Priorities; December 2013
Author: Bryan Ball, Vice President and Group Director, Supply Chain and Operations (bryan.ball@aberdeen.com)
About Aberdeen Group
Aberdeen Group conducts research focused on helping business leaders across sixteen different B2B technology
disciplines improve their performance.
Our process is simple – we conduct thousands of surveys every year to identify top performing organizations and
uncover what makes them different. We share these insights back with the market in the form of in-depth research
reports and content assets to help our readers build business plans capable of driving better results with the right
set of tools to help them get there.
This document is the result of primary research performed by Aberdeen Group. Aberdeen Group’s methodologies
provide for objective fact-based research and represent the best analysis available at the time of publication. Unless
otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be
reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by
Aberdeen Group, Inc.

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