Supply Chain Cost Reductions Fail to Fuel Mid-Market Growth

Too often, mid-market companies believe that cutting costs in the supply chain will lead to business success. Instead, these organizations need to focus on value to drive growth and enhance supply chain activities.

“Companies that have a view of the value of the supply chain rather than a focus on cost and bottom line expenses do better,” Brad Huff, executive vice president and general manager at TAKE Supply Chain told EBN in an interview. “If you are not driving top line revenue, you aren't driving growth.”

Mid-market manufacturers, then, should look at ways of increasing value with trading partners and upping customer satisfaction in order to grow business. “Supply chain in general is an operational necessity, but it needs to start thinking strategically, focusing on more than getting a certain widget for a cheaper price,” said Huff. “If you don't, then next month or next quarter when you go back, that supplier may have gone out of business because of insufficient margins.”

In these price driven organizations, a seed change is needed. Huff outlines some basic steps to shifting the focus from price to a broader and more holistic view:

  1. Consult an outsider. “An outside entity or consultant is less likely to get caught in the details,” said Huff. “They understand the supply chain in a bigger context and can look at it strategically. They can be tasked to evangelize the supply chain.”
  2. Start at the top. “The push for change and the willingness to bring in those outside people has to be a C-level process,” said Huff. “Obviously, there are political conversations that need to be had, or issues to be eliminated.”
  3. Take time. Real change takes time. “For holistic change in the supply chain, there are many elements involved in creating and supporting it,” said Huff. “It's a project that goes on for three year to five years.”
  4. Use technology. Mid-sized manufacturers in particular often have capital constraints—and technology can help. “There are a lot of investment models that don't require upfront investment,” said Huff. “These allow companies to get into business intelligence with analytics or supply chain management in ways that allow them to do more with a limited scale.”

Using these strategies, smaller organizations can move from price-focused supply chain activities, to a more strategic approach—with measurable results. “You can become more strategic becase you have more time to become strategic,” Huff added.

Let us know in the comments section below about the ways your organization is working to become more strategic in its supply chain. 

— Hailey Lynne McKeefry, Editor in Chief, EBN Circle me on Google+ Follow me on Twitter Visit my LinkedIn page Friend me on Facebook

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