Growth in global markets is slowing. Stock markets reward growth, and most supply chain leaders want to be successful in driving a growth agenda. To accomplish this goal, within the supply chain there needs to be a healthy intersection of the worlds of gray and black. In the launch of new products, companies manage a stage-gate process. This is the circle of life for new product launch. This is a world of gray. As supply chain teams work with new product launch, they must effectively dance with this world of gray. The conversations encompass wider and wider groups of people as products progress. This includes suppliers. Today’s solutions are not effective in driving this type of meaningful conversation. There are gaps. Instead, enterprise solutions drive black and white discussions. Most supply chain leaders come from the world of black and white. In operational teams there is little gray. Products are made at specification targets, and quality of design is carefully measured through Six Sigma processes. Process variation is rigorously controlled. Enterprise Resource Planning (ERP) systems strengthen the discipline of these processes. Within this world there are fixed and well-defined item codes, production locations, and material specifications. This gives rise to a question: "How will companies grow if they only automate the world of black and don't embrace the world of gray?" This leads to another question, "Are supply chain leaders hampering product development efforts by forcing black-and-white process definitions too early onto product launch processes?" As shown in Figure 2, this research suggests they are. For sourcing, discrete companies perform well on cost, lead times and delivery reliability. This is the world of black and white and the management of known specifications, sourcing arrangements, and contract performance. However, in the world of gray, in new product launch we have not cracked the code to power innovation, either internally or externally, with suppliers. Few companies have the capabilities for the collaborative review of design drawings, and a collaborative workflow to facilitate conversations on opportunities and design. A missing gap is to tie these collaborative discussions on design to sourcing. The gap between traditional Product Life Cycle Management (PLM) systems, and Supplier Relationship Management (SRM) for sourcing decisions, is large. Traditional deployments of PLM, SRM and ERP have not closed this gap.

1. Supply Chain Insights LLC Copyright © 2016, p. 1
Direct Materials Study
Summary Charts
February – September 2016

2. Supply Chain Insights LLC Copyright © 2016, p. 2
Agenda
 Study Overview
 Direct Materials Sourcing
 Direct Materials Suppliers
 Technology Providers
 Supply Chain Performance

3. Supply Chain Insights LLC Copyright © 2016, p. 3
Study Overview

4. Supply Chain Insights LLC Copyright © 2016, p. 4
Respondents Work Primarily in a Discrete Industry and
Average 12K Employees and $5.4B in Revenue

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Most Common Industries Are Auto/Heavy Equipment,
Industrial Manufacturing, and Medical Devices

6. Supply Chain Insights LLC Copyright © 2016, p. 6
Respondents Are Primarily in Executive Management or
Supply Chain and Based in North America

7. Supply Chain Insights LLC Copyright © 2016, p. 7
Agenda
 Study Overview
 Direct Materials Sourcing
 Direct Materials Suppliers
 Technology Providers
 Supply Chain Performance

8. Supply Chain Insights LLC Copyright © 2016, p. 8
Two-Thirds of Respondents are Highly Involved in Process
of Selecting and Managing Direct Materials Suppliers

9. Supply Chain Insights LLC Copyright © 2016, p. 9
The Most Common Spend Category for Respondents
Is Electronics

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Three Quarters Feel Involved in Decision Making
About Purchasing Direct Materials

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Having a Seat at the Table for Purchasing Direct Materials
Is Primarily Related to One’s Department

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Procurement, Engineering Design, and Supply Chain Are
Most Involved in Direct Materials Purchasing

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Two-Thirds Buy Direct Materials Globally

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Companies Are Most Able to Make Decisions That
Drive Total Landed Direct Materials Cost Reductions

15. Supply Chain Insights LLC Copyright © 2016, p. 15
Agenda
 Study Overview
 Direct Materials Sourcing
 Direct Materials Suppliers
 Technology Providers
 Supply Chain Performance

16. Supply Chain Insights LLC Copyright © 2016, p. 16
Innovation and Financial Viability of Direct Materials
Suppliers Are the Most Important and Challenging Factors
When Assessing Suppliers

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Companies Have Greatest Performance Gaps in Evaluating
Suppliers’ Innovation, Financial Viability, and
Manufacturing Quality

18. Supply Chain Insights LLC Copyright © 2016, p. 18
Respondents Want to Know More About Supplier Capacity,
Quality, Operations, Financials, Costs, Risk, and Customers

19. Supply Chain Insights LLC Copyright © 2016, p. 19
Agenda
 Study Overview
 Direct Materials Sourcing
 Direct Materials Suppliers
 Technology Providers
 Supply Chain Performance

20. Supply Chain Insights LLC Copyright © 2016, p. 20
SAP/ERP, SAP Ariba, Microsoft Office Tools, and
Oracle/ERP Are the Top Most Familiar Technologies

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Microsoft Office Tools Are Most Common Technology
for Direct Materials Sourcing / Supplier Management

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SAP/ERP Is Most Familiar but Not Most Used

23. Supply Chain Insights LLC Copyright © 2016, p. 23
Microsoft Office Tools and SAP/ERP Are
Most Valuable Technologies

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SAP/ERP and Microsoft Office Tools Are Among Most
Familiar, Used, and Valuable

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Less Than Half Consider Their Most Valuable
Technology to Be Effective

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Most Valuable Technologies Are Consolidated,
Customized, and Flexible

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Most Valuable Technologies Have Some Weaknesses:
Poor Integration, Hard to Use and Outdated, and
Limited Capabilities

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Most Valuable Technologies Perform Highest on
Evaluating Suppliers’ Price, Lead Times,
and Delivery Reliability

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Most Valuable Technologies Are Underperforming on
Ability to Evaluate Supplier Innovation, Design Quality,
Financial Viability, and Manufacturing Quality

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Most Valuable Technologies Have Greatest Performance
Gaps in Evaluating Supplier Innovation, Financial
Viability, Manufacturing Quality, and Design Quality

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Both the Companies and the Most Valuable Technologies
Perform Best on Evaluating Supplier Price, Delivery
Reliability, and Lead Times

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Less Than Half Report a Return on Investment on
Most Valuable Technology

33. Supply Chain Insights LLC Copyright © 2016, p. 33
Agenda
 Study Overview
 Direct Materials Sourcing
 Direct Materials Suppliers
 Technology Providers
 Supply Chain Performance

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Visibility Into the Extended Network of Order Management
to Customers Is Area of Greatest Opportunity

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Largest Performance Gaps in Visibility Are
the Extended Network Order Management and Suppliers

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Most Common Areas of Respondents’ Business Pain Are
Demand/Supply Volatility, Data Access/Use, Visibility,
Alignment, and Risk

37. Supply Chain Insights LLC Copyright © 2016, p. 37
Companies Report Performing Best on
Continuous Improvement, Corporate Social Responsibility,
and Supplier Development