The Supply Chain Management (SCM) value-stream encompasses the planning, sourcing (acquisition), making (integration), and delivering of goods and services. The implementation of SCM optimization strategies for; spend management, strategic sourcing, category management, risk management and supplier management create an SCM that becomes a strategic asset to the execution of any project/program. Considering that “non-labor” (supply chain) spend constitutes a significant percent of all project/program expenditures, it represents an often-untapped source of potential profitability.
Pumex has identified several key areas of importance when optimizing the supply chain value-stream. Each of these areas are defined and outlined below to help you better understand the process of increasing profitability through SCM.
Spend management (SM) is the process of identifying, capturing, and controlling expenditures on direct and indirect goods and services that convert dollars saved into profitability improvement. Spend management represents a logical building block of strategic importance and growth. Each project/program has a component of direct and indirect acquisition of goods and services that have an impact on execution and profitability.
SCRM attempts to reduce supply-chain vulnerability via a coordinated, holistic approach which involves all supply-chain stakeholders. It is imperative to identify and analyze the risk of failure points within the supply chain. Risks to the supply chain range from unpredictable natural threats to counterfeit products, and reach across quality, security, resiliency, and product integrity. Supply chain risk management typically involves four processes: identification, assessment, controlling, and monitoring of supply-chain risks.
The main benefits of optimizing your supply chain are the same ones that underpin virtually all businesses. However, they are more specific to your suppliers. The focus is on reducing resources required to execute, while maintaining and/or increasing over-all efficiencies. Input considerations are those of manufacturing and production costs, operating costs, costs of transportation, storage and delivery among others. Outputs are measured in terms of revenue income, reduced bills and improved sales figures. The precise advantages of optimization include the following:
To successfully optimize a supply chain, businesses cannot rely of software applications alone; only business experience can lead to the right decisions. In evaluating options, it is important to combine the use of processes, application, human business experience and tools. This combination yields comprehensive optimization where all resources are utilized accordingly, and available efficiencies are captured to maximize revenue while reducing production and operating costs. The advantage of using various approaches is that each is applied appropriately where it will induce desired change. Software and tools can be optimized for automation and process control to reduce efforts spent in the same. Strategies and methodologies on the other hand are implemented for long-term results such as sales increase, fewer inputs and reduced cost of operation. Supply chain optimization is a requirement for any business with efficiency, success, and growth ambitions. Contact us to discuss how Global Supply Chain Consulting can support you and your organization in establishing or accelerating your own GSCl Excellence initiative.