How to Tackle Supply Chain Stress on the 4 C’s

Richard Sharpe Analytics & Big Data

How to Tackle Supply Chain Stress on the 4 C's
Capacity, Costs, Complexity and Conflict

tackle supply chain stress

Supply Chain Executives are struggling with capacities that are unavailable, dramatically increasing costs and complexities and organization conflicts as to how to solve these problems. Product shortages, port backlogs, transportation capacity issues are building inflationary headwinds and driving actions that will have a “Bull Whip” impact that will bite into bottom line earnings.

Supply Chain Executives and their organizational counterparts must approach this problem by focusing on the 4 C’s: lowering the need for Capacity, driving the reduction of Costs, simplifying operational Complexities and adopting a common guiding light to deflate organizational Conflict.

The key to accomplishing this is a foundation of trusted Cost-to-Serve (CTS) and Net Landed Profit (NLP) performance insights by Product, Customer, Channel and Store. Having this specific financial performance information enables the pinpointing of opportunities to prioritize the use of resources and actions to protect the servicing of your most profitable customers, stores and channels and not allocating supply chain resources with a “one Size fits all” strategy.

Case in Point – by identifying the CTS and NLP for all Products being sold to all Customers, one company found the following opportunities by having performance visibility on Unprofitable Products being sold to Unprofitable Customers. They found multiple ways to reduce capacity requirements, lower costs and the complexity of the operation. Below are specific examples:

4 C's One Example Focusing On Total System-Wide Impact
Capacity Reducing Inventory Carrying Cost (28%)
Cost Reducing Transportation Costs (21%)
Complexity Reducing Product Sourcing (26%)
Conflict Improving Profit 146%

The resources being freed up can then be focused on prioritizing service to the Customers, Products, Channels and Stores based on their contributions to the profitable performance for the company. Equally important, they could gain internal support for these actions by have a direct measurement on the impact that these actions could have on the bottom line for the company.

Please comment on this posting or email me at [email protected] .

All the best,

Richard Sharpe

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a profit contribution analytics firm that specializes in helping clients efficiently and continuously transform multiple sources of data into actionable operational insights.

Pinpointing Profit Leakage

Richard Sharpe Analytics & Big Data

Pinpointing Profit Leakage

needle in haystack

Summary: Earnings reports are a key indicator of a company’s financial health but they are an aggregation of a vast array of incurred costs and realized revenues associated with running a business.  The financial impact of specific decisions in managing product and customer transactional costs and revenues is typically visible at an aggregate level such as categories of costs or revenues by customer or customer groupings.

However, individual actions or decisions in sourcing, supply chain or sales can significantly impact operating margins and create negative performance exceptions.  Profit leakage exceptions can be hidden in standard financial reporting.  Finding these specific profit leakage opportunities and the root cause can be like searching for a needle in a haystack.

Case In Point: On a monthly basis, a Retailer would have a team of Financial Planning & Analysis Managers perform analysis on procurement, specific supply chain activities and store sales to try and find significant opportunities associated with incurred costs or reductions in revenues.  The process was time consuming and did not catch all of the significant exceptions that needed to be analyzed.  A decision was made to create a scalable approach that would not only review all exceptions but would also track the progress of resolving previously identified items.

Action: To be scalable, the company recognized that the solution had to have several key characteristics.  It had to provide for an approach that would ensure that the data that would be analyzed would be accurate and specific.  The identification of the exceptions needed to be fast and the ones with the biggest impact prioritized.  Finally, the analysis needed to examine opportunities across the entire operation including procurement, supply chain, inventory and sales activities on a recurring basis.  The company selected a cloud-based technology platform  that provided data governance capabilities as well as robust processing and reporting.

With the initial activation of the solution, profit leakage exceptions across every functional area were identified that totaled several million dollars.  What would historically take the company weeks to accomplish was now done on a repeatable basis in a matter of days.

Takeaway:  Profit improvement opportunities can be significant by having the ability to pinpoint exceptions in financial performance by product, customer, store or channel.  For some, the root cause may not be something that can be easily changed.  But for many exceptions, actions can be taken to minimize the future impact on margin erosion.  Having this type of robust and repeatable capability insures that the company is proactively looking for all opportunities to maximize shareholder value.

I would love to know your thoughts on this.  Please comment on this posting or email me at [email protected] .

 

All the best,

Richard Sharpe

Richard Sharpe

Richard Sharpe is CEO of Competitive Insights, LLC (CI), a founding officer of the American Logistics Aid Network(ALAN) and designated by DC Velocityas a Rainmaker in the industry. For the last 25 years, Richard has been passionate about driving business value through the adoption of process and technology innovations. His current focus is to support CI’s mission to enable companies to gain maximum value through specific, precise and actionable insights across the organization for smarter growth. CI delivers Enterprise Profit Insights (EPI) solutions that enable cross-functional users to increase and protect profitability. Prior to his current role, Richard was President of CAPS Logistics, the forerunner of supply chain optimization. Richard is a frequent speaker at national conferences and leading academic institutions. His current focus is to challenge executives to improve their company’s competitive position by turning enterprise wide data from a liability to an asset through the use of applied business analytics.