Because it manages the firm’s heartbeat — the fundamental flow of resources and information from suppliers to customers — supply-chain excellence boosts shareholder value. However, achieving that goal will not be easy.
In typical businesses, the supply chain absorbs 60% to 70% of the cost of inventory levels. It is time to adopt a new vision, one that is appropriate for the realities of the new era, draws on global resources, enhances resilience, and decreases the risk of future disruptions. Supply-chain executives must bring in new viewpoints to enable their firms to respond rapidly to global change.
Turning supply-chain operations from cost centers to profit centers was the last thing anyone thought of in the aftermath of the COVID-19 pandemic. Customers were looking to retailers to provide things that had been scarce in recent weeks. As a result, suppliers were forced to make key decisions about the correct items as well as the best strategy to reduce lead times and production costs.
During a crisis of this magnitude, businesses may be tempted to adopt conservative policies, but this is a strategic blunder. Organizations should embrace a startup’s degree of energy, hunger, agility, and aggression in order to adapt to the market with flexibility and speed.
Here are six strategies that supply chains can use to become profit centers.
Pricing changes dynamically.
Profit margins can be increased by 5% to 10% using dynamic pricing strategy models. This is due to the fact that unique, responsive prices are assigned to client segments that move along separate demand curves, even for the same product or service.
Business-to-business e-commerce.
According to the e-commerce platform Sana, most firms have “just 20% visibility into their supply chains, compared to the 70% to 90% needed to address major spots of volatility where revenue and costs are at risk.” B2B e-commerce assists firms in meeting their objectives by enabling upselling and cross-selling, generating additional income, and eventually boosting the bottom line.
A system for managing warehouses.
A warehouse management system (WMS) enables businesses to track every unit down to the smallest degree of detail, resulting in enhanced order fulfillment and inventory accuracy. Inventory management becomes faster, easier, and more efficient as a result. A good WMS implementation can yield an 18- to 24-month return on investment, with yearly benefits ranging from 5% to 10%. It has the potential to increase order fill rates, minimize freight and labor costs, open up new distribution channels, and reduce work-in-process and finished-goods inventories.
Distinctive qualities trump competitive requirements.
Create a competitive advantage by providing value to customers in ways that your competitors cannot. Every successful business focuses its strategic value offer on its unique talents. Amazon.com Inc., Apple Inc., McDonald’s Corp., and Starbucks Corp. are some supply-chain examples. Amazon’s supply network is technologically advanced. Apple’s success can be due to the company’s strong connections with its suppliers. McDonald’s has a “win-win” strategy that is centered on mutually beneficial outcomes for employees, franchisees, and suppliers. Starbucks employs a vertically integrated supply-chain model, tracing each cup of coffee from the grower to the brew sold to customers.
Customer-centricity trumps profit-centricity.
“The objective of a business is to develop a customer,” author Peter Drucker once observed. Supply-chain management should place customers at the core of a company’s strategy to ensure long-term corporate growth and profitability. Here’s how it works:
- Personalization can help to improve the consumer experience. Nike Inc. starts with a media wall. Nike sends customized material straight to the wall as consumers’ smartphones connect to free in-store Wi-Fi and the company’s app, including stock availability, recently searched-for items, push notifications, and tailored offers.
- Create supply-chain ecosystems that are purpose-driven. During the 2020 pandemic, Johnson & Johnson kept its supply chain functioning smoothly by relying on a diversified pool of vendors. With the internet of things sensors, cloud computing, and advanced analytics powered by artificial intelligence, the company has revolutionized its supply chain to ensure end-to-end traceability.
- Accept the challenge of a business-led digital transformation journey. Intel Corp.’s recent supply-chain data transformation resulted in a $208 million “sense-and-respond” platform that enables decision-making through self-service analysis, increases data quality, and enables real-time analytics. Integrating these strategies results in a customer-centric operation that can propel a company to new heights.
Collaborations with suppliers Human-to-human ties fuel supply-chain success.
Companies with nimble, adaptable, and aligned supply networks have a durable competitive advantage. Firms require a solid supplier base built on trust and long-term partnerships in order to meet newer demands. Companies must be prepared to adapt to shifting networks and, rather than focusing just on their own interests, assume responsibility for the entire chain. Only supply-chain executives can make those things happen; no technology can. Suppliers are as enthusiastic about your company as you are; they have tremendous experience, insights, and ideas.
The supply-chain function is no longer only the department that purchases parts and arranges deliveries. Cross-functional alignment is required for supply-chain excellence, with the unifying aim of ensuring the maximum availability of products at the lowest cost. As a result, profits are higher and shareholder value is higher.
