Executive Briefings

The Top 11 Positive Supply Chain Value Creation Opportunities for 2011

The increased complexity of today's supply chains highlights the impacts that these operations can have on shareholder value -- positive or negative.

So, I present my "Top 11 Positive Supply Chain Value Creation Opportunities for 2011." It would be easier to write a book than 11 brief summaries on these topics, but I feel that just the key points will be of more value to you. Here is my Top 11.

1) Profitable Growth: Not all growth is profitable, and therefore, not all growth is good. View the supply chain not just as an opportunity to impact the bottom line by reducing cost, but also as a way to increase the top line by capturing new markets, new customers, providing new services and/or increasing market share.

2) Procurement: Procurement in many firms is really little more than purchasing. Procurement needs to accept a much broader responsibility beginning with strategic sourcing, to include all supply chain mega-processes (Plan-Buy-Make-Move-Store-Sell), and encompassing responsibility of supplier relationship management.

3) Outsourcing: Focus on tasks that are your core competency. All other tasks should be outsourced, as we all need to enhance our performance or our core competencies.

4) Inventory: Increase inventory turns and fill rates simultaneously. Advanced Sales Inventory and Operations Planning (SIOP) must be put in place to unleash working capital and drive customer service.

5) Transportation: Put forth efforts to develop core carrier programs, implement TMS, decouple inbound freight, and enhance shipment planning and execution opportunities.

6) Network: The uncertain economy, globalization of business, M&A, and the evolution of your marketplace all demand an annual review of your network. Evaluate the number of and justification for your locations, along with the operation strategies, in order to establish the lowest cost/highest customer service network for current requirements.

7) Service Supply Chain: View this as a profit center. Reverse logistics and end-of-life product opportunities need to be assessed with an eye toward enhancing profitable growth.

8) Speed, Agility and Productivity: Shareholder value will often be determined by how quickly the supply chain can bring product to market and fill orders. It will also be determined by the agility of the supply chain to respond to changing market conditions and by the eliminator of waste to enhance productivity. Successful organizations will be innovative in boosting speed, agility and productivity across the processes of Plan-Buy-Make-Move-Store-Sell-Return.

9) Tax-Effective Supply Chain: Include the Effective Tax Rate (ETR) in supply chain decisions and perform the analysis "pre-tax" to avoid making bad decisions. Since the ETR for multinational corporations is often in the 25-percent range, supply chain managers need to understand the ETR and tax managers need to understand the supply chain. ETR and the supply chain is a big deal, and it is often overlooked.

10) Cash-to-Cash Cycle (C2C) Management: Consider the C2C cycle in all supply chain improvements. At a basic level, the C2C cycle is the length of time a company's cash is tied up in working capital before it is returned in the form of collections of receivables. Like all assets, cash is useful when it is available and conversely not useful when it is not available, so you can see how it has a major impact on the supply chain.

11) Technology: Move forward with technology upgrades that have a strong business case. As much as I would like to skip this topic on my Top 11, it would be irresponsible not to discuss ERP, best-in-breed, SaaS, the Cloud, the obsolete systems, expensive upgrades, etc. I say this because I have experienced dissatisfaction with ROI on many technology applications of the last five years. At the same time, the business case for supply chain technology applications is compelling and helps achieve supply chain excellence.

Click here if you would like to download Tompkins Associates' paper: Leveraging the Supply Chain for Increased Shareholder Value.

Source: Tompkins Associates

The increased complexity of today's supply chains highlights the impacts that these operations can have on shareholder value -- positive or negative.

So, I present my "Top 11 Positive Supply Chain Value Creation Opportunities for 2011." It would be easier to write a book than 11 brief summaries on these topics, but I feel that just the key points will be of more value to you. Here is my Top 11.

1) Profitable Growth: Not all growth is profitable, and therefore, not all growth is good. View the supply chain not just as an opportunity to impact the bottom line by reducing cost, but also as a way to increase the top line by capturing new markets, new customers, providing new services and/or increasing market share.

2) Procurement: Procurement in many firms is really little more than purchasing. Procurement needs to accept a much broader responsibility beginning with strategic sourcing, to include all supply chain mega-processes (Plan-Buy-Make-Move-Store-Sell), and encompassing responsibility of supplier relationship management.

3) Outsourcing: Focus on tasks that are your core competency. All other tasks should be outsourced, as we all need to enhance our performance or our core competencies.

4) Inventory: Increase inventory turns and fill rates simultaneously. Advanced Sales Inventory and Operations Planning (SIOP) must be put in place to unleash working capital and drive customer service.

5) Transportation: Put forth efforts to develop core carrier programs, implement TMS, decouple inbound freight, and enhance shipment planning and execution opportunities.

6) Network: The uncertain economy, globalization of business, M&A, and the evolution of your marketplace all demand an annual review of your network. Evaluate the number of and justification for your locations, along with the operation strategies, in order to establish the lowest cost/highest customer service network for current requirements.

7) Service Supply Chain: View this as a profit center. Reverse logistics and end-of-life product opportunities need to be assessed with an eye toward enhancing profitable growth.

8) Speed, Agility and Productivity: Shareholder value will often be determined by how quickly the supply chain can bring product to market and fill orders. It will also be determined by the agility of the supply chain to respond to changing market conditions and by the eliminator of waste to enhance productivity. Successful organizations will be innovative in boosting speed, agility and productivity across the processes of Plan-Buy-Make-Move-Store-Sell-Return.

9) Tax-Effective Supply Chain: Include the Effective Tax Rate (ETR) in supply chain decisions and perform the analysis "pre-tax" to avoid making bad decisions. Since the ETR for multinational corporations is often in the 25-percent range, supply chain managers need to understand the ETR and tax managers need to understand the supply chain. ETR and the supply chain is a big deal, and it is often overlooked.

10) Cash-to-Cash Cycle (C2C) Management: Consider the C2C cycle in all supply chain improvements. At a basic level, the C2C cycle is the length of time a company's cash is tied up in working capital before it is returned in the form of collections of receivables. Like all assets, cash is useful when it is available and conversely not useful when it is not available, so you can see how it has a major impact on the supply chain.

11) Technology: Move forward with technology upgrades that have a strong business case. As much as I would like to skip this topic on my Top 11, it would be irresponsible not to discuss ERP, best-in-breed, SaaS, the Cloud, the obsolete systems, expensive upgrades, etc. I say this because I have experienced dissatisfaction with ROI on many technology applications of the last five years. At the same time, the business case for supply chain technology applications is compelling and helps achieve supply chain excellence.

Click here if you would like to download Tompkins Associates' paper: Leveraging the Supply Chain for Increased Shareholder Value.

Source: Tompkins Associates