How Simplifying Your Supply Chain Saves Your Money
Supply chains are full of opportunities for savings and advantages for your organisation, which can be realised by simplifying the complexities of sourcing, operating and selling across borders.
Beyond the Horizons (BTH), an ongoing collaboration between Michigan State University and APCIS Supply Chain Council investigating how the supply chain management discipline is evolving, performed in-depth interviews with more than 50 firms around the world and found that supply chain complexity is one of the major challenges facing supply chain executives. Similarly, a 2018 global survey of senior decision makers found that 32% of organisations are evaluating increasing supply chain complexity and its effect on business continuity. That’s more than other risks such as climate change (30%), slow economic growth (20%), energy security (18%) and exchange rate volatility (16%).
Complexity abounds in international supply chains, along with the hidden costs of operating in foreign markets. Many organisations, including the largest global brands, have been successful in navigating such complexities and absorbing such costs thus far, but shrinking margins and increasing competition are driving keen, growth-minded decision makers to look for savings and business advantages wherever they can be found.
What is complexity costing you?
Global companies know how to evaluate tax breaks, capital expenses and labor costs associated with doing business across borders, but often these same organisations fall short when it comes to evaluating the true cost of doing business. As large companies expand into more varied global customer markets, they must grapple with multiple production sites, numerous distribution centers and widespread fulfillment partners supplying hundreds, if not thousands, of end points along the path from origin (manufacturing) to final destination (sales).
The complexity inherent in such far-reaching supply chains can result in numerous unintended consequences, each of which can have significant bottom-line impacts. Organisations dealing with complex, cross-border supply chains may experience:
- Lack of visibility and transparency
- Damage, waste and rework
- Delays in sourcing, manufacturing and shipping
- Inefficient routes and modes of transport
- Inability to anticipate customer trends and seasonality
Although it is difficult to quantify the exact cost of complexity, the benefits of properly managing these complexities (i.e., simplifying the supply chain overall) are more pronounced. For example, Under Armour’s gross margins were up 170 basis points in the second quarter of 2019, the majority of which (110 basis points, according to COO Patrik Frisk) was due to supply chain simplification efforts. In the following section we will examine some of the ways supply chain professionals can reduce the burdens on their organisations resulting from complex international supply chains.
Supply chain simplification efforts
Improve information flow
According to BTH, the top “insomnia-inducing” challenge for supply chain decision makers is understanding the end-to-end supply chain, which is defined in the context of the investigative research as the ability to track product and information flows across the entire supply chain. Information is one of the five key dynamic “flows” that determines the growth or decline of a company, along with materials, money, manpower and capital equipment.
Sharing information effectively and accurately across a global supply chain can be difficult, considering the many different links in the chain and business systems in use (ERP, WMS, TMS, etc.). Making matters worse, information woes are compounded as more systems, suppliers and trading partners are integrated into a supply chain ecosystem, or what Ernst & Young calls the “out-of-control data-growth trap.” For many supply chain professionals, the issue may be less about how information flows and more about where information goes.
“While data exists in every organisation, it is often not fully organised or understood. Rather, it may be housed in disparate sources, data marts and warehouses, trapped in systems, and in various formats with limited context. The challenge, then, for some companies is that they may not know what data they have, where it lives, what may be useful, or how to turn it into meaningful insights that they can act upon.” -Deloitte, Drowning in Data Yet Starving for Insights
Automate common operational processes
Machine learning, artificial intelligence, robotics and other advanced technologies have the potential to streamline supply chain management operations and help decision-makers better manage the compounding complexities of international supply chains—and not just in factories and distribution facilities. Robotic process automation (RPA) uses smart software bots to automate common operational processes throughout the supply chain, including order fulfillment, invoicing and customer service.
Automating common operational tasks eliminates human error and reduces administrative overhead, both significant cost drivers in themselves. Process automation also allows supply chain professionals to focus less on repetitive, day-to-day processes and more on driving value for the entire organisation. A recent McKinsey & Company study quantifies the impacts of digitisation, including robotic process automation, can achieve. On average, companies that aggressively digitise their supply chains can expect to boost their annual growth earnings before interest and taxes by 3.2%, the largest increase from digital investments in any business area.
Outsource-specific value chain activities
Working to achieve end-to-end performance in complex, international supply chains is challenging, especially for organisations that lack the internal resources necessary to integrate (and optimise) key supply chain activities across functional silos. Meeting this challenge often requires recruiting specialised (i.e., hard-to-find) professionals and investing in advanced (i.e., expensive) technologies, the likes of who and which outsourcing services providers already bring to the table. Supply chain business process outsourcing instantly simplifies any of the dozens of specific, complex activities involved with managing global supply chains.
From demand planning and transport management to packaging design and procurement, professional services organisations offer a wide range of outsourcing possibilities for companies that need help simplifying their supply chain activities. An Accenture report provides an overview of the benefits of supply chain business process outsourcing and notes the most important traits, characteristics and offerings organisations should look for in supply chain services providers:
- Analytics and industry-based insights
- Deep functional knowledge of the outsourced process
- Extensive understanding of each client’s business operations
Simplify and save with Billerud
Supply chains are complex, but your packaging is one facet that doesn't need to be a challenge. From design and engineering to sourcing and distribution, Billerud supports global brands at every step of the international packaging supply chain. Our expertise in Southeast Asia has made us one of the most trusted packaging solutions and service providers for companies with operations in that region. Customer engagements begin with a no-obligation, no-cost audit of your packaging operations to identify savings opportunities throughout your supply chain.
Read our case studies to see how we have helped some of the largest global brands uncover significant cost savings trapped in complex packaging supply chains, or connect with one of our packaging experts for a Managed Packaging solution that works for your organisation.