Steelwedge Software

The Manufacturing Sector is Healthy Despite Popular Belief – and How Supply Chain Leaders Should Respond

Posted: 27 Sep 2011 09:49 AM PDT

It has been only a month or so since I joined Steelwedge from Aberdeen Group and I have already had many great opportunities to interact with customers and prospects around Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP). I am planning to share my thoughts and ideas with you in a webcast on Thursday, October 13 on the topic, “Seven Keys to Integrated Business Planning Success." A very interesting statistic – the Purchasing Managers Index (PMI) for August 2011 – caught my eye this morning. This metric tracks the financial activity of purchasing managers connected to their acquisition of goods and services. It is calculated on a monthly basis through a survey conducted by the Institute of Supply Management (ISM). Surprisingly, the statistic concluded: “Economic activity in the manufacturing sector expanded in August for the 25th consecutive month, and the overall economy grew for the 27th consecutive month," say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.” A visual representation of the metric is below. Please note that the way the metric is captured, any value above 50 percent is an improvement and a 100 percent value indicates that everyone in the survey indicates an improvement. The degree of change month-over-month is reflected in the actual value. For instance, 65 percent PMI for a month is a bigger change than 55 percent PMI. Figure: PMI for 2010-2011 Source: Institute of Supply Management So what does this mean for the supply chain executive who is looking at S&OP and IBP initiatives? Need for Operational Efficiency: According to the ISM survey, the overall sentiment is one of concern and caution. In this sort of a situation, increasing operational efficiency and reducing waste in the end-to-end value chain is the best approach that …

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