Supply Chain Measurement Delivering Financial Improvement

With the globalization of commerce and the explosion of the internet, companies are better able to expand their product offering, penetrate new markets, and access new channels. With this market expansion comes growing complexity within a company’s supply chain. As a result, Supply Chain Management (SCM) solutions have become popular to help companies optimize the relationships with their vendors/suppliers and customers. SCM can be simplified into four core steps. In this paper we will outline those steps and expand upon the first – supply chain measurement. It is critical to do this step correctly and to do it first. In our experience, an accurate supply chain measurement system often identifies opportunities that can more than double profits.

Supply chain measurement

• Identifies in great detail the specific per unit costs for every activity in your supply chain, per product, across all potential flow paths.
• Identifies the financial impact of alternative flow paths, taking into consideration all trade-deal funding implications between trading partners.
• Compares the financial advantages and opportunities associated with changes to existing flow paths.
• Identifies the most cost effective flow path for new products.
• Delivers results in a usable form (e.g., cost per return) that can be shared across the organization and with trading partners.

In a recent AMR study on cost-to-serve, a CEO comments

"Supply Chain Measurement helped us refine how much inventory we keep in each location, which warehouses we serve customers from, whether we might be better off not servicing some customers at all, changing minimum orders and mix requirements."

Effective measurement also provides information that will help win support for your supply chain efforts both internally with executive and operational management, and externally with supply chain partners. In this step, you can benchmark departmental performance over time, with other branches, and with industry peers.

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