Create a strategic vision to manage end-to-end supply chain costs
Create a strategic vision to manage end-to-end supply chain costs
Many supply chain cost models remain short term and functionally focused.
Urgent budget pressure is real, but a strategic, programmatic cost optimization approach, versus supply chain cost cutting, helps to avoid risks to supply chain cost efficiency.
To optimize supply chain costs, it’s important to align business value (customer experience, profitable growth, compliance and sustainability) with efficient supply chain operating outcomes (demand fulfillment, product supply and new products/business).
Download the Supply Chain Costs Guide for 5 key levers to manage in pursuit of end-to-end supply chain cost optimization.
Supply chain costs span across all functions including planning, sourcing & procurement, logistics, manufacturing, customer fulfillment, supply chain technology, central supply chain management, transportation, warehousing, supply chain consulting & professional services, supply chain personnel, and supply chain capital.
Supply chain organizations are facing challenges stemming from high inflation, macroeconomic and geopolitical pressures. These challenges are coupled with rapidly changing customer expectations and an advancing technological landscape. Chief supply chain officers (CSCOs) are striving to shift resource allocation to address changes in capacity and demand, balance costs and build stronger cases for investments.
The Gartner Supply Chain Budget and Efficiency Benchmark enables CSCOs to gain more clarity on the operational and capital expenses across all the key functional supply chain areas. This interactive, online tool allows supply chain leaders to benchmark key metrics to:
Compare supply chain spend and staffing to revenue, industry and regional peers
Pinpoint areas to adjust functional spend and resourcing to drive business priorities
Establish future budgeting or efficiency goals
Gartner defines cost optimization as a business-focused continuous discipline to drive spending and cost reduction while maximizing business value. The distinction between cost reduction and cost optimization is more than rebranding. Aspirations to improve efficiency are constrained by the primary responsibility of supply chain to deliver high-quality products and timely service to customers.
Gartner research analysts found that supply chain cost management models remain short term and functionally focused. Short-term cost goals are prioritized over long-term business value, and a narrow, function-specific focus limits the ability to pursue big change and meet full performance potential. Reducing supply chain costs is further complicated by supplier substitution, outsourcing, supplier refinancing and inventory changes.
Improved operating efficiency stems from better planning decisions within and across functions. This is a short-term cost optimization effort that takes weeks to months, and involves simple planning models, reporting and analytics. Supply chain leaders are challenged to increase awareness, provide visibility and reduce waste.