Global Manufacturers Lack Supply Chain Visibility Beyond Tier 1 Suppliers

Only nine percent of the 335 global respondents of the 2013 KPMG 2013 survey say they have complete visibility of their supply chains. That number is even lower among U.S. executives, with only seven percent claiming complete visibility.

Global manufacturers are putting their supply chains at the center of their business strategies to serve as the foundation for operational efficiency and collaborative innovation, according to KPMG’s 4th annual Global Manufacturing Outlook: Competitive Advantage – Enhancing Supply Chain Networks for Efficiency and Innovation, which surveyed 335 C-level executives globally, including 95 in the U.S.

Ironically though, many manufacturing executives (49 percent globally; 54 percent U.S.) admit that their companies currently do not have visibility of their supply chain beyond Tier 1 suppliers. Moreover, only nine percent of the 335 global respondents of the 2013 KPMG 2013 survey say they have complete visibility of their supply chains. That number is even lower among U.S. executives, with only seven percent claiming complete visibility.

“Obtaining real-time visibility across all tiers in the supply chain can significantly increase speed to market, reduce capital expenditures, and manage risk,” says Jeff Dobbs, Global Sector Chair, Diversified Industrials and a partner with KPMG in the U.S. “Moving toward a demand-driven supply chain is probably the single most important step a global manufacturer can take today.”

However, this could prove challenging, as Dobbs points out that “much of the supply chain technology is outdated.” In fact, 44 percent of respondents overall say they still use email, fax, and mail as the means to communicate issues about demand in the supply chain. “The winners will be the ones who can network real-time across their entire supply chains, reducing the information lag that costs companies significant time and money,” adds Dobbs.

When asked about their ability to assess the impact of an unplanned supply chain disruption, a similarly small percentage of executives, (nine percent global; seven percent U.S.) say they are able to assess the impact within hours. However, the most frequent response among global executives was 1 and 6 days (36 percent) and U.S. respondents most frequently said 1-2 weeks (32 percent).

To help manage supply chain risk and continuity in the event of unanticipated disruptions, executives (58 percent globally; 71 percent U.S.) say they plan to regionalize or localize their supply chains.

Overall, China and the U.S. remain the top sourcing locations, but the report shows that many will keep sourcing closer to their major markets over the next 2 years. Nearly 90 percent of U.S. respondents will increase sourcing in the U.S., followed by Canada (18 percent), and China tied with the U.K. at 13 percent.

Focus on Growth and Innovation

On the growth front, a third of all companies globally and in the U.S., and 47 percent of larger companies (over USD $5 billion in revenue), are looking to pursue mergers and acquisitions over the next two years. In the U.S. specifically, executives indicate that the priority transactions for their companies will be investing in Greenfield opportunities in growth markets, M&A, and innovation driven by enhanced collaboration in the supply network seen as growth drivers.

Manufacturers also maintain that investment in R&D is essential for growth: 38 percent of U.S. respondents expect to invest four percent or more of revenue in R&D and innovation over the next 24 months, which is 20 percentage points higher than the level being invested currently, according to the findings. Seventy-one percent of U.S. respondents say their R&D will largely be incremental, with a focus on enhancing existing products and lines; 29 percent plan to invest in breakthrough innovation — comparable to overall global results.

“As companies step up investment in innovation, whether in search of breakthrough R&D or incremental improvements, they are increasingly looking to their supply network for ideas,” Dobbs says.

Innovation Born out of the Supply ‘Network’

Just over half of global respondents (51 percent) say that partnerships with suppliers will define the direction of innovation, and over the next 2 years, 57 percent expect at least ten percent of their revenues to come from innovations. Yet paradoxically, the biggest challenges manufacturers say they have with regard to innovation is aligning it to the business strategy (34 percent), and the complexity in collaborating with suppliers and partners (32 percent).

“Supply chain partners will play a critical role in a manufacturer’s innovation strategy as part of their investment in R&D,” Dobbs adds.

“Mitigating the challenges of collaborating with partners is complex; close familiarity with who your suppliers are and how they operate will certainly help optimize performance.”

KPMG’s Dobbs believes notable shifts in the way companies are redefining and investing is indicative that manufacturing is on the verge of a “hyper-innovation era. The sector may appear to be slowly evolving, but it is on the cusp of explosive change in the next 3 to 5 years. The prolonged stage of intense competition, modest growth, and a hyper-focus on cost reduction has strongly positioned companies to maximize this next phase of innovation.

“With new data technologies proliferating to enhance partnering, shared efficiencies, and visibility, we’ll start seeing some breakthrough and disruptive innovation in manufacturing — not only to the products but also to the process.”


KPMG LLP, the audit, tax, and advisory firm (, is the U.S. member firm of KPMG International Cooperative. KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.


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