Study identifies biggest challenges to SA supply chains

Planning and forecasting is considered to be the single greatest challenge to supply-chain management around the world. Several forces, driven both internationally as well as locally, work to exacerbate this challenge further. The most recent example is the financial crisis of 2008, with which companies around the world continue to grapple.

The SCIR is an annual, independent and international study into the supply chain and logistics practices of emerging economies around the world. Developed and compiled by TerraNova Research, the 2009 edition saw over 200 senior company officials, from both a strategic and supply-chain perspective across a range of industries, take part in an in-depth survey.

The Complexity Masters theorem

SCIR 2009 incorporated the Complexity Masters theorem, which says that companies in the USA and Europe with complex value chains, and the capability to manage those complex value chains properly, are 73% more profitable than their peers.

To ensure the theorem was applicable to an emerging economy such as South Africa, TerraNova Research incorporated several additional questions so as to address local complexity and capability issues. When the theorem was applied to the South African context, 6% of the total number of companies surveyed were 67% more profitable than their peers.

Over the past few months the world has experienced dramatic financial shocks as well as a steady rise in life-changing trends. The global financial crisis, environmental concerns and a broad-spectrum market slowdown are only three such events.

SA's unique issues

While South Africa is currently dealing with the effects of global market challenges, the country has to contend with its own unique issues. These include a massive rate of urban development and migration, political uncertainty and a skills shortage. Together both global and local challenges have created the conditions of a “perfect storm”, which further complicates the challenge of planning and forecasting.

SCIR 2009 asked respondents how current and pending market-changing events are affecting, or are likely to affect, their businesses and supply chains. As would be expected, some of the changes were yielding a positive effect for companies, while others were not. This was true for the total sample, however, for the most part, the Complexity Masters appears to feel the effects more intensely than their peers. This is in part due to their highly complex (which includes global complexity) supply chains.

While the effects of the Perfect Storm on local companies could easily be predicted, it is the amount of action from the respondents that is interesting. While many companies are doing something to capitalise on, or mitigate, the effects of the Perfect Storm, it is the Complexity Masters that are demonstrating a far higher degree of action regarding these events - in particular, around the areas of skills, changing and developing markets (ie. urbanisation and emerging economies), the energy crisis and technology.