Executive Briefings

The CSCO's View of Strategic Sourcing and Segmentation

Analyst Insight: Today's chief supply chain officer (CSCO) is beset by pressures on all fronts, struggling to understand and meet customer demands for cheaper, faster and efficient logistic processes from source to final delivery. Under omnichannel competitive pressures, web and mobile orders tendered by 2 p.m. must be fulfilled and shipped in the same. These growing B2C fulfill-to-deliver flows add shipping and labor costs and, if not optimized, impact margins and profitability. This constitutes a call to action! - Bob Heaney, Research Director and Principal Analyst, Aberdeen Group

The CSCO's View of Strategic Sourcing and Segmentation

In answering the call top-performing companies in the retail and consumer products sector are looking to use a control tower approach to prescriptive optimization. Staying competitive and maintaining profitability under these conditions requires a rethinking of the inventory and fulfillment flow from source to end consumer.

Starting with strategic sourcing, Aberdeen has published a series of reports and interconnected blogs to help the office of the CSCO re-engineer or optimize their process flow from source to final delivery.

In each report we will apply a prescriptive model of optimization, involving 3 major analytical modeling phases:

Descriptive, which uses business intelligence and data mining to ask: “What has happened?”

Predictive, which uses statistical models and forecasts to ask: “What could happen?”

Prescriptive, which uses optimization and embedded decision rules and simulation to ask: “What should we do?”

Best-in-Class Capabilities in Strategic Sourcing

Top-performing companies are applying all 3 phases of analytics and optimization when it comes to their ability to segment costs and events in the area of strategic sourcing.

The Best-in-Class, those ranked in the top 20 percent of 98 retail and consumer product companies, have advantages in the following key areas compared to all other companies:

Total Spend Under Management - 89% of total spend under management vs. 51% for All Others. 35% of the Best-in-Class can segment cost and service for their products and customers vs. only 12% of All Others.

Organizational Supply Chain Intelligence - Through organization models, comparisons, optimization and simulation, the Best-in-Class turn the volume of raw data mined in the descriptive and predictive stages into business and supply chain intelligence and are able to dynamically interact with suppliers and trading partners.

Prescriptive Event-Driven Customer and Product Synchronization - Their sourcing strategy involves a segmented, control tower approach, a high degree of operational readiness, and “prescriptive” event-driven customer and product synchronization of end-to-end activities; internationally, domestically, and combined. The Best-in-Class are 3.5 times more likely to model and optimize by product, source and customer than low performers.

One key goal of strategic sourcing or inbound optimization is tying costs/rate and events together. This allows companies to segment costs and activities across each combination of customer, product and logistics flow. These and other insights are embodied in the series of interconnected reports.

Through each process step up through final delivery, these principles are subsequently applied. Top performers re-engineer or optimize their supply chain process flow from source to final delivery and gain deeper understanding of trade-offs. In turn, a keener understanding of the trade-offs in cost and service available for each customer, product and segment of the end-to-end supply chain results in superior costs and enhanced profitability.

The Outlook

In 2016, expect to see prescriptive optimization as an enabler of multichannel and omnichannel supply chain initiatives where companies move beyond sourcing to end-to end optimization through final B2C fulfillment and delivery. This new prescriptive, visionary approach requires more detailed control and segmentation of costs and events to yield profitable omnichannel and B2C product, inventory and fulfillment flows.

In answering the call top-performing companies in the retail and consumer products sector are looking to use a control tower approach to prescriptive optimization. Staying competitive and maintaining profitability under these conditions requires a rethinking of the inventory and fulfillment flow from source to end consumer.

Starting with strategic sourcing, Aberdeen has published a series of reports and interconnected blogs to help the office of the CSCO re-engineer or optimize their process flow from source to final delivery.

In each report we will apply a prescriptive model of optimization, involving 3 major analytical modeling phases:

Descriptive, which uses business intelligence and data mining to ask: “What has happened?”

Predictive, which uses statistical models and forecasts to ask: “What could happen?”

Prescriptive, which uses optimization and embedded decision rules and simulation to ask: “What should we do?”

Best-in-Class Capabilities in Strategic Sourcing

Top-performing companies are applying all 3 phases of analytics and optimization when it comes to their ability to segment costs and events in the area of strategic sourcing.

The Best-in-Class, those ranked in the top 20 percent of 98 retail and consumer product companies, have advantages in the following key areas compared to all other companies:

Total Spend Under Management - 89% of total spend under management vs. 51% for All Others. 35% of the Best-in-Class can segment cost and service for their products and customers vs. only 12% of All Others.

Organizational Supply Chain Intelligence - Through organization models, comparisons, optimization and simulation, the Best-in-Class turn the volume of raw data mined in the descriptive and predictive stages into business and supply chain intelligence and are able to dynamically interact with suppliers and trading partners.

Prescriptive Event-Driven Customer and Product Synchronization - Their sourcing strategy involves a segmented, control tower approach, a high degree of operational readiness, and “prescriptive” event-driven customer and product synchronization of end-to-end activities; internationally, domestically, and combined. The Best-in-Class are 3.5 times more likely to model and optimize by product, source and customer than low performers.

One key goal of strategic sourcing or inbound optimization is tying costs/rate and events together. This allows companies to segment costs and activities across each combination of customer, product and logistics flow. These and other insights are embodied in the series of interconnected reports.

Through each process step up through final delivery, these principles are subsequently applied. Top performers re-engineer or optimize their supply chain process flow from source to final delivery and gain deeper understanding of trade-offs. In turn, a keener understanding of the trade-offs in cost and service available for each customer, product and segment of the end-to-end supply chain results in superior costs and enhanced profitability.

The Outlook

In 2016, expect to see prescriptive optimization as an enabler of multichannel and omnichannel supply chain initiatives where companies move beyond sourcing to end-to end optimization through final B2C fulfillment and delivery. This new prescriptive, visionary approach requires more detailed control and segmentation of costs and events to yield profitable omnichannel and B2C product, inventory and fulfillment flows.

The CSCO's View of Strategic Sourcing and Segmentation