Staying Steady with a Focus on Supply Chain

By Simpactful Senior Partners, Lindsay McShane and Neal Dellett, and Senior Consultant, Whitney Hodge

CFOs are walking a tightrope of high interest rates, cash availability, consumer spending shifts, and retail pressure. Supply Chain and Operations are cost centers making them an obvious place to look for opportunities to reduce cost.  In fact, we recently uncovered hundreds of millions in potential savings for a client. Savings small or large can provide a path to profitability, or a buffer to manage through risk-taking or new headwinds.

Historically, Supply Chains are often neglected from a resource and investment standpoint and/or built with bolt-ons during times of rapid growth. While the COVID-induced supply chain crisis has eased for most, the margin is tight across the board, driving a focus on profitability as brands work to shore up their sales plans. Retailers are instituting cost-to-serve increases and coming for more margin from brands in the form of fines and fees, warehouse allowances, terms, etc. Simultaneously, 3PL freight, warehousing, and manufacturing costs have increased as wage, overhead, and raw material costs are passed along to brands.

So, what are the most critical areas in need of intervention and transformation, and why?

1.) Inventory Management: Many brands are carrying excess inventory and/or not positioned to respond to changes in consumer or retailer demand. Inventory is expensive and ties up cash and space. This is true for owned inventory – and can also trigger retailer fees. Common drivers include:

• Defects along the end-to-end supply chain that increase inventory levels.
• Failure to effectively leverage an ERP system to manage inventory transactions and trigger replenishment to desired safety stock levels. This happens when key inputs are not maintained, item data is inaccurate and/or key functionality is not being leveraged.
• Lack of a SKU rationalization/new item transition process to regularly identify slow moving and obsolete inventory to free up cash and space.

2.) Sales & Operations Planning (S&OP) / Integrated Business Planning (IBP): Demand forecasting is a critical capability in a world in which retail partners require both accuracy and agility. Brands need a forecasting process that leverages the right cross-functional inputs and communication to enable real-time supply and demand planning.

3.) Supply Chain Network Design: The shift in retailer and consumer spending and behavior requires brands to re-evaluate their end-to-end supply network design to meet the new environment, recover cost, and reduce excess inventory while maintaining service levels with their customers. This evaluation starts with sourcing and manufacturing through distribution and fulfillment. Last mile transportation solutions should also be included.

If you are facing any of these same challenges, Simpactful is uniquely positioned to help. Our team of experienced Brand and Retailer practitioners have firsthand experience operating within brands and retailers in this environment and delivering tangible, impactful results. Some examples of recent work include: 

• Conducted an end-to-end value stream mapping (VSM) session to identify cost, cash, and service opportunities – with savings opportunities of over $300 million dollars.
• Led DC network analysis, modeling, and optimization to re-evaluate supply network design which delivered 2-4 days of improved customer responsiveness, and reduced transportation costs by over $2 million annually.
• Developed new S&OP processes for a Food & Beverage company including monthly process, KPIs and decision triggers, and the formalization of roles and responsibilities within the organization.
• Managed 3PL warehouse assessments and conducted 3PL RFPs for eCommerce and retail channels to select and implement the best partner for a company’s evolving business needs.

Need help assessing and optimizing your Supply Chain strategy? Simpactful can help!  To learn more, contact our team today at contact@simpactful.com or 925-234-6384.

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