No matter how you manage it, transformation always comes with costs. When moving from a single, lowest-cost supply chain source to a supply web of primary and alternate sources supporting multiple options to satisfy customer demand, your company will experience new cost challenges from across the developing network.
As an example, sourcing from multiple producers across your web can add inbound shipping costs on all modes: ocean freight, multi-modal inbound delivery and outbound shipping. If your company decides to offer direct fulfillment as a service, can you identify how much additional shipping and handling costs affect your bottom line?
Moving to a supply web model is not an overnight experience. Rather, it is a process that involves understanding how all the pieces work together, how they can drive improved revenue and how to best share information and work hand-in-hand with your partners.
Becoming the Conductor of the Supply Web
When you consider managing the supply web, think of the work an orchestra conductor must do before a symphony performance. At the center, the conductor leads multiple parts that must work together to create art. Although each individual section can create beautiful music on its own, one slip from the brass, strings or percussion and the sound of the entire symphony is broken. Only by building up each part’s strengths as a collective whole can the conductor get everything performing in harmony.
In the context of the supply web, logistics leaders are the conductors, bringing multiple pieces together to create symbiosis across each part. This requires analysis on multiple metrics, including profitability by SKU category, customer types and service levels.
Without a knowledge of how granular cost components affect the supply web, you can’t achieve cost savings in both order and promotion management. Good shippers put multiple pieces together to get their supply webs operating in line, including linking order data with carrier billing data, and tracking SKU-level and order-dimensional profitability. Understanding each metric can help your supply web perform on cost targets and with more efficiency – exactly like a well-tuned orchestra ready to perform.
Engineering for Data-Forward Supply Webs
The transformation from a single-source, lowest-cost supply chain into a supply web presents the prime opportunity to start gathering previously inaccessible data from your supply network. By building in the capability to accurately determine production, storage and shipping costs at granular levels that support cause and effect analysis, your company is prepared to identify cost factors that ultimately affect performance.
This is a two-step procedure, requiring deep insights on both shipment sizes, as well as carrier analysis.
Regular investigation of network costs can help you recognize where increases are occurring, and why they are cutting into SKU-category profit. Gaining visibility and taking a deep look into each cost category gives you a deep understanding of where your costs are, and how to control them.
Furthermore, understanding costs today can help you navigate around operational peaks and valleys. With regular research into your procurement and shipping habits, you can maintain costs and drive additional value.
Bringing the Supply Web Together
Simply put: operating in a supply web model gives you visibility into your operations like never before. Operational redundancies, a deeper understanding of SKU-level profitability, the ability to adapt with changes in consumer behavior and demand, and ultimately managing costs through continued improvement gives you the opportunity to compete at a higher level. When they all operate in harmony, the supply web offers a prime opportunity to drive your business forward and use logistics as an overall competitive advantage.
Transportation Insight can help you evolve from the supply chain into the supply web, using our logistics mapping skill sets and LEAN methodology. Start your transformation by downloading our workbook to supply chain evolution, and start mastering the complete supply web.