83% of CEOs believe their supply chain 'not optimal': Survey

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. Majority of CEOs believe that their retail supply chains are currently “not optimal” for today’s changing retail environment.

A global CEO survey of over 400 retail industry CEOs conducted by PwC for JDA Software revealed that 50 percent of CEOs recognise that their supply chain can be a strategic differentiator, while 83 percent believe their retail supply chains are currently not optimal for today’s changing retail environment.
[caption id=“attachment_76231” align=“alignleft” width=“380”]  Representational image: Reuters[/caption]

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

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“The rise of omni-channel is one of the most transformational shifts that has occurred in retail in recent times,” said 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.”

CEOs’ top priorities are centered on more traditional areas of growth - by entering into new regions and markets, by opening more stores, or through mergers and acquisitions. 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, the survey highlighted.

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

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

Only 15 percent 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,” said 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.”