Surveying 199 CEOs and Senior Business Executives in supply-chain-intensive industries, global research and advisory firm - Gartner - reports that 17% of Chief Supply Chain Officers (CSCOs) rank cost optimisation as their number one issue to focus on in the near future, followed by supply chain resilience (16%).
“CEOs are tasking their CSCOs to focus on navigating through the ongoing disruption and ensure business continuity. This includes dealing with pandemic-related lockdowns in key markets, supply chain shortages – as seen in the semiconductor industry – and challenges with the global flow of goods and increasing distribution costs,” said Thomas O’Connor, senior director analyst with the Gartner Supply Chain practice.
What is Cost Optimisation and Why is it Important?
Gartner defines cost optimisation as a business-focused, continuous discipline, to drive spend and cost reductions while maximising value.
Cost Optimisation Operations Include:
- Getting the best price and terms for business purchases
- Standardising, simplifying and rationalising all platforms, applications, processes and services
- Automating and digitalising IT and operations
Despite the evidence indicating that effective cost management supports enterprise performance, “many organisations have yet to establish three key drivers of success in strategic cost management,” says Gartner, whose research highlighted the correlation between how well organisations managed costs before COVID-19 and how well the business performed during the pandemic (as well as how ready they are to rebuild).
“A rigorous approach to strategic cost management harmonises cost categorisation across the organisation, providing a shared cross-functional understanding of cost-to-value relationships. This focus on optimising value makes it easier for all business leaders who own a budget to prioritise which costs to cut and which initiatives to fund [or] to preserve and create investments in digitalisation and growth.”
Gartner Identifies Three Pillars of Success in Strategic Cost Management:
- Define success clearly
- Adopt a consistent framework
- Leverage cross-functional collaboration
Other Findings From the Survey
As many continue to navigate the after-effects of COVID-19 alongside preparing for their future growth agenda, 60% of CEOs expect an economic boom to start by the end of 2022.
“Different regions of the world are recovering at different paces. CSCOs need to prepare for a dual-speed recovery for both supply and demand where markets with high vaccination rates bounce back far more quickly than those without,” added O’Connor.
In addition to cost optimisation, the majority of respondents (80%) want to focus on technology with plans to increase their year-on-year investments in digital capabilities. The most popular areas of digital business were ecommerce/e-business (16%), customer interactions (9%), data analytics (9%), and customer experience (7%).
Looking to the future, CEOs anticipate that the pandemic will have a lasting impact, with more than two-thirds indicating that they will use the pandemic as an opportunity to focus on redesigning the business. 79% of CEOs also expect to see significant and enduring behavioural changes in society, organisations and individuals as a result of the pandemic.
“Already, a range of companies have committed to social responsibility and sustainability goals – a huge integration challenge for supply chain leaders that manage global networks. This means supply chain leaders need to establish metrics and goals for themselves and their partners and ensure their targets are met across the whole value chain,” concluded O’Connor.