Chief supply chain officers (CSCOs) have every reason to be exhausted after the disruptions and shortages of the recent past, and to be concerned about the future supply chain. Many CSCOs are asking, “How do I conserve organizational energy while increasing impact?”
CSCOs must diagnose and translate business impacts and constraints into specific supply chain responses that maintain network performance for appropriate balance between short-term cash pressure and longer-term growth aspirations. Timely and effective supply chain cost optimization actions raise the supply chain leadership profile and create the opportunity for expanded collaboration and influence on strategic design choices for even greater performance impact.
Gartner identifies the following four themes for responding to business disruptions with targeted supply chain cost optimization actions.
First, leverage scenario analysis and situational decision governance in response to disruption events. When disruptions occur in the market, the relevance of budgets, forecasts and plans must be evaluated and appropriately discounted to reflect the new reality. As part of supply chain planning, assess changes to demand drivers and supply enablers and gather sufficient information to revise your supply chain costs.
Second, pursue alternative supply and enable profitable demand balancing in response to constrained resources. As the past decade has demonstrated, the supply chain planning process must now account for resource constraints beyond asset capacity. All primary resource categories — including equipment, labor, energy, materials and freight — have experienced challenges. Maintaining optimized network performance amid these constraints requires not only supply chain cost optimization but also proactive planning practices.
Third, improve alignment and reduce complexity in response to constrained margins. Supply chain has the primary responsibility for ensuring reliable, efficient product availability and service delivery to fulfill demand. This includes applying supply chain cost optimization techniques such as avoiding the costs of product quality or service delivery failures, and minimizing the level of operating inefficiencies, waste and losses. When market dynamics create constrained margins that cannot be remedied by competitive price increases to customers or relief from suppliers, CSCOs can make proposals that would increase operating efficiency (e.g., better alignment, reduced complexity).