Gartner: Five levers for supply chain cost optimisation

Are you fully optimising your supply chain costs? This is the question posed by Gartner whose analysts have identified five key levers to manage end-to-end supply chain cost optimisation in businesses.

“Create a strategic vision for supply chain cost management,” is the message in a new report from Gartner research who has found supply chain cost management models remain short term and functionally focused. 

“Short-term cost goals are prioritised over long-term business value, and a narrow, function-specific focus limits the ability to pursue big change and meet full performance potential,” says Gartner in the paper Optimise Supply Chain Costs.

“To optimise supply chain costs, it's important to align business value (customer experience, profitable growth, compliance and sustainability) with efficient supply chain operating outcomes (demand fulfilment, product supply and new products/business),” comment Gartner.

The report points out that reducing supply chain costs is further complicated by supplier substitution, outsourcing, supplier refinancing and inventory changes.

“Not only do the best supply chain leaders control supply chain costs in the face of disruptions like pandemics, recessions and geopolitical shifts, but they also consider the relationship between diverse resources and networks. 

“Instead of reduction targets, these supply chain leaders and their key stakeholders focus on aligning and collaborating around key operating outcomes to optimise supply chain costs.”

“Supply chain leaders must adjust how they engage with their key stakeholders and propose initiatives that achieve breakthrough cost improvements. 

Analysts from Gartner have identified five key levers for a company to manage to achieve end-to-end supply chain cost optimisation, these include:

• Deals – minimise price wasting
• Operating tactics – Adjust tactics for optimal supply-demand balance
• Processes and roles – Design and enable processes and roles for efficient network operation
• Networks – Alight supply and distribution network to product and service demand
• Portfolios – Alight product and service offers with customer value and market competition

Gartner recommend companies implement this framework by taking the following three actions:

• Drive collaboration and innovation around cost-optimised operating outcomes
• Develop cost analysis models that align to the scope and performance objectives of specific operating outcomes
• Justify investments based on their potential to improve specific operating outcomes

“This framework represents a more complete and effective approach to performance improvement, compared to fragmented control of individual sites, functions and cost centres,” comments Gartner.

You can download the free Gartner guide, 5 Levers for Optimising Supply Chain Costs if you click on the link below.

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