HOW TO IMPLEMENT A COST-DRIVEN SUPPLY PLANNING PROCESS?
Cost-to-serve evaluation is key to making complex decisions
Meeting demand without considering costs is a paradigm for growing businesses only. To stand out against the competition, companies must optimise their margins and supply planning must play a role.
Supply planning can contribute to margin optimisation by reducing costs. Most of the time, companies put the emphasis on optimising profitability (reducing sales penalties and the cost of obsolescence) while keeping their working capital under control (by keeping cash-in inventory as low as possible). They mainly consider the cost-to-serve (or cost-to-deliver) during supply chain design, and they do not directly optimise it within the supply planning processes.
But even in a well-designed supply chain, planning decisions have a tangible impact on the cost-to-deliver.
KEY PERFORMANCE INDICATORS (KPI)
Growing supply chain complexity leads to resource optimisation
In a global economy where demand volatility has dramatically increased over the last few years, companies have adapted their supply chain and product portfolio to capture market share. Indeed, clients are less willing to wait, putting pressure on the supply chain while competition has led to a product portfolio expansion meaning more flows to manage.
Businesses have adapted to keep control of their service level by adding agility in their supply chain. Supply networks have grown more complex: a multiplication of facilities and suppliers, the arrival of outsourcers and third-party logistics (3PL) to balance activity – all this meaning more alternatives and dealing with more cost sources.
Also, planning processes are updated more frequently to keep up with the needed reactivity, leaving less time for decisions to mature. With the number of product references increasing and shorter product life cycles, companies can no longer rely on their organisation and supply planners to learn and replicate a unique response to a given situation.
Reducing cost-to-serve is an equation that needs to be solved across all operations. Local savings doesn’t mean an overall cost reduction. Only resource planning across the entire supply chain can provide the necessary overview. Therefore, supply chain teams will need to convince operations to overcome their focus on localised savings to reach an actual end-to-end cost-to-serve reduction.
Covid-19 impact on implementing a cost-driven supply planning process
The Covid-19 pandemic has shown how fragile organisations were regarding disruptions to their supply chain.
In this era of uncertainties, companies cannot rely anymore on nominal decisions and other planning practices developed overtime in mostly unchanged circumstances.
They need their plan to quickly adapt to hazards and ensure they maintain a minimised cost-to-serve whatever the new context. Therefore, optimising resource planning to reduce cost-to-serve becomes a must have.
Download this full Best Practices white paper and discover
the 5 Key Pillars of a cost-driven supply planning implementation journey!
In this white paper, you will also learn:
- Who’s concerned by implementing a cost-driven supply planning process?
- Why is it crucial to implement a cost-driven supply planning process? What are the Benefits?
- What are the challenges that companies face when implementing a cost-driven supply planning process?
- How to implement cost-driven supply planning process? The 5 Key Pillars
- How FuturMaster can help you to implement a cost-driven supply planning process?