Optimize Supply Chain Costs

Create a strategic vision for supply chain cost management

5 Levers for optimizing supply chain costs

Gartner research analysts found that supply chain cost management models remain short term and functionally focused.

To optimize supply chain costs, it’s important to align business value with efficient supply chain operating outcomes.

Analysts identified 5 key levers to manage in pursuit of end-to-end supply chain cost optimization. Are you fully optimizing supply chain costs? Download the guide to find out.

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    Engaging with Gartner over the last 2-2.5 years has helped us drive tremendous change in the supply chain organization: Structure our team, drive cost out, increase maturity. We’ve reduced our supply chain costs year-over-year consistently.

    Manufacturing Industry

    Why is it hard to optimize supply chain costs?

    Gartner research analysts found that supply chain cost management models remain short term and functionally focused. Short-term cost goals are prioritized over long-term business value, and a narrow, function-specific focus limits the ability to pursue big change and meet full performance potential.

    Reducing supply chain costs is further complicated by supplier substitution, outsourcing, supplier refinancing and inventory changes.

    Not only do the best supply chain leaders control supply chain costs in the face of disruptions like pandemics, recessions and geopolitical shifts, but they also consider the relationship between diverse resources and networks. Instead of reduction targets, these supply chain leaders and their key stakeholders focus on aligning and collaborating around key operating outcomes to optimize supply chain costs. 

    Leaders seek to use cost optimization to set up long-term success. Winners accelerate in these turns.
    About 80% of employees expect cost optimization in their organizations in the next 12 months

    Steps towards optimizing supply chain costs

    To optimize supply chain costs, it’s important to align business value (customer experience, profitable growth, compliance and sustainability) with efficient supply chain operating outcomes (demand fulfillment, product supply and new products/business).

    Supply chain leaders must adjust how they engage with their key stakeholders and propose initiatives that achieve breakthrough cost improvements.

    Gartner research analysts recommend the following actions:

    • Drive collaboration and innovation around cost-optimized operating outcomes.
    • Develop cost analysis models that align to the scope and performance objectives of specific operating outcomes.
    • Justify investments based on their potential to improve specific operating outcomes.
    About 80% of employees expect cost optimization in their organizations in the next 12 months

    Insights on optimizing supply chain costs

    Partner with Gartner to create a supply chain cost management vision that drives tangible performance improvements while also increasing your leadership effectiveness, scope of business influence and strategic relevance.

    5 Levers for Optimizing Supply Chain Costs

    Supply chain leaders have 5 levers to manage in pursuit of end-to-end cost optimization. Are you fully optimizing supply chain costs?

    Total Cost of Ownership: A Directive for Supply Chain Leaders

    Optimize supply chain costs through Total Cost of Ownership: Understand its benefits and get practical tips for moving beyond simple/unit price.

    Use Scenario Planning to Build Supply Chain Resilience

    In this complimentary webinar, we will look at how shifting labor costs, changes in geopolitics and trade policies, and the need to be closer to customers are making companies question supply chains that have been designed specifically for cost efficiency.

    Supply Chain Cost Management Checklist for 2021

    Take the 5 actions on this checklist to manage supply chain costs efficiently while also driving innovation.

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    Resulted in savings of $1 million in expenses and 15x in membership cost.
    Client Success Story

    Implementing Network Design In-house to Reduce Supply Chain Costs

    To respond to increasing network costs and expensive corrective actions, a leading medical device manufacturer needed to create an effective network design strategy. Gartner helped the client to carry out their network design strategy in-house versus investing in software helping to save $1 million in expense and up to 15X in membership cost. 

    Experts in supply chain costs

    Gartner’s supply chain experts include more than 100 people worldwide. Meet a few of our leaders. 

    Paul Lord
    Senior Director Analyst
    Research & Advisory

    Kamala Raman
    Senior Director Analyst
    Research & Advisory

    Noha Tohamy
    Distinguished VP Analyst
    Research & Advisory

    Mike Burkett
    Distinguished VP Analyst
    Research & Advisory

    Optimizing Supply Chain Costs: 3 Use Cases

    Supply chain leaders embark on cost optimization to improve operating efficiency. Improved operating efficiency stems from better planning decisions within and across functions. This is a short-term cost optimization effort that takes weeks to months, and involves simple planning models, reporting and analytics. Supply chain leaders are challenged to increase awareness, provide visibility and reduce waste. Gartner research analysts recommend:

    •  Optimizing Supply Quantities, Timing and Sequences
    •  Maximizing the Use of Lower Cost Capacity and Supply
    •  Reducing Demand Plan Error to Control Inventory Cost
    •  Protecting Inventory Value and Managing Obsolescence Risk

    Supply chain leaders embark on cost optimization to reduce structural cost. They do this by (re)designing networks, organizations and products. This is a medium-term cost optimization effort that takes quarters, and involves using models to evaluate design tradeoffs. Supply chain leaders are challenged by sunk cost constraints and change sensitivities. Gartner research analysts recommend: 

    • Right Sizing the Product Supply Network to Optimize Capacity Cost
    • Aligning Organizational Structure for Cost Optimization
    • Designing Products and Managing Complexity for Efficient Supply

     

    Supply chain leaders embark on cost optimization to improve cost competitiveness. By transforming processes and operating capabilities, an organization can improve its cost competitiveness. This is a long-term cost optimization effort that takes quarters to years, and involves the operating technologies that improve decision and execution speed and precision. Supply chain leaders struggle with investing resources and driving adoption of new processes. Gartner research analysts recommend:

    • Creating Management Systems and Organizational Practices that Drive Cost Optimization
    • Investing in Digital Operating Capabilities for Faster and More Precise Execution
    • Transforming Supply Planning to Agile, Optimized Network Orchestration
    • Developing and Leveraging Advanced Analytics Capabilities 

    Create a supply chain cost management vision

    Gartner experts are trusted advisors for 2,500+ supply chain leaders. Use our trusted insights and objective advice to optimize supply chain costs.