Close look at good companies affirms biz apps improve financial performance
Staff -- Manufacturing Business Technology, 12/1/2003 7:00:00 AM
The November issue of MSI included a story on a study by consultant firm Deloitte, based on a survey of 600 manufacturers. The study's primary interest was the claim by Deloitte that it had discovered a representative minority of companies—7 percent—called "complexity masters," which enjoyed 73-percent greater profit margins than other companies surveyed.
The study further suggested that this 7 percent of companies enjoyed richer margins because they were particularly adept at product, customer, and supply chain-related operations; and that these companies had made necessary investments in enterprise business applications to support those operations.
However, in the initial preliminary survey report issued at APICS in October, Deloitte included little information—other than anecdotal—about how the positive correlation between particular kinds of operations initiatives and investment, on the one hand, and financial performance on the other, was derived.
Craig Hanson, the global benchmark project manager for Deloitte, says all due diligence was done to ensure that the complexity masters—or any of the other quadrant categories—"weren't dominated by a particular industry vertical, company size, region, or nationality."
Hanson says that data on investment dollars was not gathered as part of the survey. Rather, companies were asked to rate the intensity of their effort and investment in a particular area on a scale of 1-5.
"While there is undoubtedly a subjective element to this kind of approach, we're confident that—given an understanding of how large companies and small companies are different—we've gotten a good read as to the intensity of a given company's commitment."
The chart, above right, illustrates the results. On the Y-axis are all companies that reported 3/4/5 to "degree of implementation" for each enterprise application category. The X-axis shows the difference—or "gap"—between the average degree of implementation by the complexity masters versus the average of the other quadrants.
The smallest "gap" between the majority of companies and the channel masters is for ERP. This isn't surprising since more than 80 percent of the companies said they had an ERP system. Much greater gaps are seen for advanced planning & scheduling, customer relationship management, and—perhaps unexpectedly—transportation management systems.
"The data suggests that complexity masters have recognized the risks and opportunities of complex global supply chains, and have responded.... Synchronization of the supply chain has enabled them to better serve their customers," concludes Hanson.
