Improving Operations and EBITDA Through Supply Chain

Change in business is inevitable and can be driven by many variables including legislation, economic pressure, industry disruptors and innovation.  This creates shifts that can present both opportunities and challenges for commerce.  According to a Grant Thornton LLP supply chain survey, manufacturers are hopeful that the Trump administration will champion reduced corporate taxes and fewer regulatory restrictions, but they are concerned about the larger impact of trade policies.

While many variables that may impact the manufacturing sector have yet to materialize, there are ways firms can improve their position now.  For instance, supply chain is not being optimized and information to and visibility by leadership is lacking.  So, this is an opportune time to build a cost-effective, efficient supply chain strategy that prepares firms to capitalize on market changes.

The Grant Thornton study revealed that only 10 percent of respondents have implemented a strategy to optimize supply chain performance and 36 percent of respondents reported only having informal supply chain processes in place. The market is recognizing that there is room for improvement. Academia is expanding its supply chain curriculum into graduate and undergraduate studies.  The supply chain analytics industry is expected to grow from $2.5B to $4.8B in the next three years. Its aspirations include: enhancing supply chain performance/visibility for stakeholders, scaling operations, improving EBITDA, and expanding visibility of supplier value during the due diligence and valuation process.

If your organization is looking to develop a more proactive supply chain strategy, here are a few ideas to consider:

Create competitive tension

Businesses who have long-standing agreements with suppliers could find that their loyalty doesn’t translate into best pricing arrangements. Incumbent suppliers don’t usually believe you will leave and the longer your relationship is with the current supplier, the stronger these feelings tend to be.  It may make sense to keep suppliers on their toes by generating a bid process when contracts are set to expire. This could give your current supplier the incentive to ensure you are receiving competitive pricing if there is a possibility of you taking your business elsewhere.

Cultivate high-quality suppliers

Another way to build a proactive supply chain is to work with high-quality suppliers who can help you prepare for (or possibly get ahead of) market changes. You understand your businesses’ top needs and goals and your business should align with suppliers who can address those needs and help you assess market factors that can impact your business going forward. Make your needs known to your supplier and ask questions to ensure that they will be able to deliver on your expectations.

Consider sourcing locally or regionally

If you have agreements set in place with national suppliers, thinking that they can provide you with the best pricing and support, you might want to keep regional and local suppliers in mind as well as they may be able to provide services at competitive rates. Additionally, they will have greater knowledge of your local market and can apply this insight to help guide your supply chain strategies.  

Building out a proactive supply chain strategy by aligning with high quality suppliers, considering regional options when appropriate, and maintaining a competitive bidding process can help improve efficiencies and reduce expenditures across your supply chain. Improvements to education and analytics/BI are underway, but your steps towards supply chain advancements needn’t wait. 

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