The supply chain organization controls 70-85% of the costs of a manufacturing organization. Cost management and supply chain are closely related. With the rising costs of transportation and commodity, labor productivity is in focus. Companies want supply chain leaders to drive cost improvement and also to improve the value of the firm. Here are some steps that supply chain leaders can take to improve value.
1. Have a balanced portfolio across the source. When companies let the functions of manufacturing, procurement, and transportation to have separate targets, they will sub-optimize the whole.
2. They should be good at Sales and Operations Planning. The team must report to a profit center manager, and the company must develop planning capabilities to analyze alternatives and align on market options. Only about 20% of businesses have this process in place today.
3. Supplier strategies and development decrease supplier issues and increase supplier reliability. Looking at the development of horizontal processes, we see that companies are stronger in the areas where there is a new product launch and weaker in the revenue management and supplier development areas. The center of the supply chain is better than the end of the supply chain. It is necessary to align all the horizontal processes to deliver end-to-end supply chain strategies.
There is a need to develop supply chain talent by focusing on the value chain. The supply chain leaders should teach the teams that supply chain is the language of business. They should do everything to improve the alignment with commercial and finance teams.