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Balaji Padmanabhan shares an article that explains why executives must rethink the goal of cost reduction in supply chain operations to maintain a competitive advantage.

With repeated disruptions impacting business in recent years—from the financial crisis to severe weather to Covid-19—ensuring continuity of supply has become a top priority for CEOs and Boards. A survey of S&P 500 annual reports[1] shows Supply Chain capability is a growing concern, with new initiatives underway to boost resilience, efficiency and flexibility. Excellence in Supply Chain operations is fast emerging as a major differentiator and a key to competitive advantage across industries.

Historically, most organizations have viewed Supply Chain operations as a “Cost Center” and focused on cost reduction and efficiency gains. For Supply Chain operations to achieve a competitive advantage, executives need to expand their thinking to integrate objectives along the following dimensions:

Managing Complexity – Globalization and the drive to cut costs at each step have created ever-more convoluted paths that, while seemingly cheaper, ingrain complexity and boost vulnerability. Tackling complexity starts with an understanding of the mid- to long-term demand/supply balance, the geographic distribution of customers, product value density, inventory positioning, and supply risk profile. Further upstream, organizations need to take a hard look at the impact of “SKU proliferation” and the net benefit of providing seemingly infinite choice to customers.

 

Key points include:

  • Value-Adding Digitization
  • Integrated Planning and Operations
  • End-to-End Execution

 

Read the full article, Supply Chain Operations as an Enabler to Delivering Business Strategy, on LinkedIn.