PwC Explains More on Recent Supply Chain Survey Findings: Exclusive Interview

As noted in yesterday's news story, a new PwC survey suggests that changes in customer behavior are set to disrupt businesses in all industries over the next five years. But there's a paradox: most company operations are not designed to deliver what customers value…now or for a few more years.

PwC researchers share these exclusive insights on other findings in the following Q&A:

SCMR: Were there any surprises in survey responses?

PwC: At the broadest level, I would have to say we were surprised at the relatively high percentage of companies who have already advanced their approach to operations from a function-by-function, continuous improvement focus to a strategically-aligned, cross-functional capabilities focus.

SCMR: Can you tell us more about “cross-functional” excellence?

PwC: The fact that 61% of the companies see cross-functional collaboration as the greatest potential to drive strategic goals, versus only 45% for “improving functional excellence” indicates to us that we have entered a new era where cross-functional collaboration is not just a “good thing to do” but is now a critical strategic priority for companies. Many companies have made continuous improvement in functions part of the fabric of their daily operations and have moved on to focus on true cross-functional alignment and capability-building.

SCMR: What was your next move?

PwC: As a natural result of the “surprise” I just described, it then follows that it makes sense that the definition of “Operations” itself has broadened significantly. We were expecting that the responses would be heavily weighted around the more “traditional” scope of Operations, e.g. manufacturing and supply chain for product companies, customer service and back office for services companies. But we found a much higher percentage of companies also considered functions like sales, marketing, and product/service development as Operations functions. In fact, 14% of the respondents had the broadest definition of Operations which included all of the functional areas1 we included in the survey. This increased scope of Operations is also very consistent with the decline in the COO role, with Operations becoming a more direct focus for CEOs and CFOs2

SCMR: Any other unexpected remarks?

PwC: The other big surprises were the findings around customers. While we know anecdotally that customer expectations and behaviors are always changing and increasing, we were very surprised by the degree to which this showed up in the responses. Namely that “changes in customer behaviors” received the highest response (61%) for expected disruptive factors in the next five years and that “understanding what customers value” was the most significant operations challenge (63% of respondents). The result of this high level of customer dynamisms and uncertainty is that very few companies (25%) are very confident that their operations are designed to deliver value to customers. This is an extremely low number and should be a wakeup call for companies to put increased focus on developing the capabilities needed to better align and adapt to their changing customers.

SCMR: Are there other questions you will pose in future surveys?

PwC: We want to continue to explore the linkage between strategic alignment, capabilities development, and financial performance. The strategically-aligned, capabilities-driven companies that we identified in this survey expressed higher confidence across the board in their ability to meet revenue and cost targets, adapt to change, provide distinctive customer experiences, and achieve their strategies. We believe that these companies are focused on achieving long-term, sustained success in a volatile environment and not just trying to improve for the short term. So over time and as economic cycles play out, we expect such companies to significantly outperform their peers. Future surveys will continue to test and explore this “bottom line” question.

SCMR: What other trends will be examined?

PwC: We also want to “turn up the magnification” on capabilities systems and understand competitive characteristics and capabilities that are emerging in different industry sectors and geographies. We are now mining the survey data for some of these industry-specific insights, and plan to continue to explore what makes for winning capabilities systems. Given the customer-related findings from this survey, we expect that new and emerging capabilities at the customer interface will continue to be a growing focus and that we will want to take a deeper look at that area in particular.

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