Strategies to Increase Supply Chain Efficiency and Drive Down Costs: Insights from Industry Experts

by Editorial Team

In the rapidly evolving world of business, efficiency and cost reduction are two key elements that can significantly impact an organization’s bottom line. The supply chain, being a critical component of any business, is no exception. In a recent webinar hosted by Orkestra SCS, a panel of supply chain experts shared their insights on strategies to increase supply chain efficiency and drive down costs.

The panel comprised of three distinguished professionals with decades of experience in the field of supply chain management:

  1. Mike Krosa, the Managing Principal and Founder of Supply Chain Alliance, a leading Canadian boutique consulting company focused exclusively on supply chain management. With over 40 years of experience, Mike has built a reputation of trust and knowledge in North America, guiding numerous companies to improve their supply chains across various sectors.
  2. Nick Searson, the President and CEO of Searson Enterprises, brings 40 years of executive and consulting experience across diverse industries. Nick has built a successful career with several marquee consulting companies, including A.T Kearney, KPMG, and Bearing Point.
  3. Anders Nordal, with 30 years of experience in supply chain management, has worked with several global logistics companies, including Kuehne+Nagel and DB Schenker. Currently, he is associated with a startup called Mixmove and works with Orkestra as the Head of Supply Chain Solutions.

The webinar was hosted by Hannah Merman, who facilitated the discussion on improving supply chain visibility and reducing costs.

The Importance of Supply Chain Visibility

The discussion kicked off with a deep dive into the concept of supply chain visibility. Anders Nordal emphasized the crucial role of data in achieving visibility. He stated, “The basic is data, data, and data. You don’t get visibility out of nothing. All the participants that you have in your supply chain need to be able to communicate in a digital way in a structured Digital Way.” He further highlighted the importance of working with reputable partners that can provide data, as it’s the foundation of creating supply chain visibility.

Nick Searson added to this by highlighting the importance of defining the service promise. He said, “You cannot meet an expectation that has not been articulated and has not been agreed.” He emphasized the need to measure performance against the service promise and the costs incurred in the process. Nick also pointed out the importance of tracking the progress of every transaction to ensure it’s on schedule and warning the right people if it’s not. He stressed the need for cost visibility to enable cost-to-serve analysis, which can help in understanding cost accumulation by customer, channel, supplier, carrier, and itinerary.

Mike Krosa took a broader perspective, extending the concept of the supply chain to include commercialization and product development. He mentioned that most business systems do not provide the visibility needed to track and measure costs and volumes. Mike also highlighted the importance of ‘what-if’ scenarios in managing costs and dealing with volatility and risk. He stated, “We’ve just come out of the pandemic period where the New Normal is going to be nothing like we’ve seen before. There’s going to be continued volatility and risk.”

The Role of Data Analytics and ‘What-If’ Scenarios

Mike Krosa highlighted the importance of data analytics and ‘what-if’ scenarios in managing supply chain costs. He stated, “With all this uncertainty, being able to do ‘what-ifs’ is becoming a capability that companies need to have internally or work with a partner externally because things are going to change.” He emphasized that supply chain professionals have a great opportunity to inform the organization about potential changes and their implications.

Advanced Procurement Strategies

Nick Searson, who has built a practice on procurement, shared his insights on how to ensure visibility of supply chain costs. He explained the concept of ‘the right deal with the right supplier,’ which ranges from tactical relationships for simple transactions to strategic alliances for complex deals. He emphasized the importance of working together with suppliers to optimize costs and create capabilities for the future. He stated, “The costs then fall out of the working together. How much cost is necessary for us to achieve the service promise and how do each one of the actors work to optimize that level of cost and create capabilities in the future?”

Cost Saving Opportunities

Mike Krosa pointed out other areas of cost-saving opportunities in client operations. He mentioned the importance of tools, AI, and high-end technologies in managing supply chain costs.

The Fundamentals of Cost Saving

Mike Krosa pointed out that many operations lack the fundamentals of good leadership, clear communication, well-stated KPIs, and proper equipment matching. He emphasized the importance of starting with the basics and then adding on advanced technologies. He stated, “You need good integrated planning, good tools, good DC operations, and again back to this whole visibility and some of the tools that can help is providing the management to be able to do this record it and reflect it.”

The Impact of Real Estate Costs on Inventory Management

Mike also highlighted the impact of rising real estate costs on inventory management. He mentioned that the average cost per square foot of real estate has doubled in the last few years, making the cost of having extra inventory a significant detail. He stated, “The cost of having extra inventory that you don’t need is, it used to be a very small detail, now it makes a huge difference.”

The Role of Network Optimization

Mike shared insights on the role of network optimization in managing supply chain costs. He mentioned that the push on e-commerce during the pandemic has added complexity to the supply chain network. He stated, “The interesting part that added the complexity was if you now were a retailer and you added on a store with Opus, buy online pickup in Store, the store is actually now a part of the network that you have to account for.” He emphasized the importance of network optimization in helping companies figure out what they need to do.

The Role of Tools and Methodologies in Achieving End-to-End Cost Visibility

Anders Nordal shared his experiences with ambitious projects aimed at achieving end-to-end cost visibility. He emphasized the importance of traceability and the ability to change the direction of a product while in motion in the supply chain. He stated, “Having a better understanding of the front of the house over Warehouse operation, utilize cross-dock capabilities, identifying the Need for Speed for any kind of inbound movements but know it before the truck arrives.”

The Importance of Technologies and Tools

The panelists all agreed on the importance of technologies and tools in managing supply chain costs. Anders highlighted the need for accurate data and living a digital life. He mentioned that some companies have more than 400,000 data point changes per day in their supply chain, which is impossible for any human to manage. He emphasized the need for tools that can help normalize data and the importance of master data. He stated, “Master data is King. If you don’t have proper Master data, it doesn’t matter what you do because you don’t know what you’re dealing with.”

Mike Krosa echoed Anders’ sentiments on the importance of master data. He stated, “The whole Master data governance, the control of it, the quality of it, who inputs, who checks it, that needs to become a core competency.”

The Importance of Master Data Governance

Mike Krosa emphasized the importance of master data governance in managing supply chain costs. He stated, “Master data governance needs to become our number one core competency whether we outsource, whether we have AI, whatever we do, that is a start.” He mentioned that many companies do not have this figured out for a variety of reasons. He emphasized the need for discipline and rules around developing master data as a core competency.

Nick Searson added to this by highlighting the challenges and costs associated with fixing data quality issues. He stated, “Data quality is accuracy, it’s consistency, it’s completeness, and it’s validity. If you have 90 on all of those, you still have 65 overall data quality which is pretty lousy.” He emphasized the need for a robust taxonomy and a data quality culture.

The Role of Tools and Technologies in Leveraging Good Data

The panelists discussed the role of tools and technologies in leveraging good data. Mike mentioned that companies have ERPs that have certain capabilities, but they often need additional tools to manage supply chain costs effectively.

The Role of Technology in Managing Supply Chain Costs

The panelists discussed the role of technology in managing supply chain costs. Mike Krosa mentioned that companies need to get the most out of their business systems and then add on special functions and applications as needed. He stated, “There needs to be a very strong vision, usually this is where the CSCO comes in, of what is it that we need from the business in terms of reporting and tools.”

Nick Searson added to this by emphasizing that technology is not the problem. He stated, “Technology will always be there to be able to do what we want it to do, we have to decide what we want the technology to do.” He mentioned that once companies have clean data, they can start using technology to automate administrative tasks, verify data, clean up data, and more.

Streamlining the Supply Chain Remodeling

The panelists discussed the importance of streamlining the supply chain remodeling process. Mike Krosa emphasized the need for tools, knowledge, analytics, and ‘what-ifs’ in understanding the implications of changes. He stated, “How fast you can act, how quick you can respond in an organized fashion has a lot to do with the leadership, the organization, the processes, and clarity of how this is going to happen.” He also highlighted the importance of partnering with companies that can be as agile as you.

Nick Searson added to this by emphasizing the importance of defining expectations in the tender. He stated, “The nature of the deal and what your expectations are and agreeing the expectations in the tender because if you’re doing a reverse auction, you’re saying how cheap can I get it and you’re typically defining I want you to pick it up, put it in a clean safe truck, deliver it, and not be more than two hours late and that’s all I’m buying from you. So very, very tactical. So you can’t expect strategic support from a tactical deal.”

The Importance of Understanding Contract Terms

The panelists emphasized the importance of understanding contract terms before getting to the commercial end game. Anders Nordal shared an example of a customer who misunderstood the terms of trade, leading to unexpected costs. He stated, “You need to understand in going into a contract what are the terms or conditions that you’re actually closing in on before you get to the commercial end game.”

The Challenges of Wider Adoption of Blockchain

In response to a question about the challenges of wider adoption of blockchain, Nick Searson explained that creating a standardized solution requires someone to define the standard and a community to accept it. He mentioned that data is neutral, but information is not. He stated, “If we can share the data and what you do with that data and build into information and analysis is a whole different thing.”

The Importance of Trust and Transparency in Partnerships

The panelists discussed the importance of trust and transparency in partnerships. Nick emphasized the need for loyalty and trust in building strategic relationships. He stated, “Choose first to trust, deserve loyalty, and that’s how a relationship can evolve into a strategic initiative.”

Mike Krosa added to this by emphasizing the importance of picking the right partners and having the right rules of engagement. He stated, “Transparency to me is something that is critical in these relationships. Open book relationships have been around for a long time, but I really think rules of engagements, figuring out what happens if we do have a conflict, what happens, really on some of these and some of these have been around for a long time.”

The discussion provided valuable insights into the strategies for increasing supply chain efficiency and reducing costs. The panelists emphasized the importance of supply chain visibility, data analytics, advanced procurement strategies, understanding contract terms, building trust and transparency in partnerships, and the role of technology in managing supply chain costs.

The key takeaways from the discussion are:

  1. Supply chain visibility is crucial, and data plays a significant role in achieving it.
  2. ‘What-if’ scenarios and data analytics are essential tools in managing supply chain costs.
  3. Building trust and transparency in partnerships is vital for successful collaborations.
  4. Understanding contract terms and conditions is necessary before reaching the commercial end game.
  5. Technology plays a significant role in managing supply chain costs, and companies need to leverage it effectively.

The panelists’ insights provide a roadmap for businesses looking to optimize their supply chains and reduce costs. By implementing these strategies, companies can improve their bottom line and stay competitive in the rapidly evolving business landscape.

What are your thoughts on these strategies? Have you implemented any of them in your business? Share your experiences and thoughts in the comments section below. We’d love to hear from you!

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