3 minute read
Cost or Margin Generator? Consultant Nissrine ElQobai reflects on Supply Chain efficacies.
Is your logistics and supply chain function a cost or a margin generator for your organization?
Very often you feel like you are a victim of your logistics costs, you don’t even want to talk about it. Furthermore, your supply chain team becomes the ‘persona non grata’ of your company. Nissrine Elqobai, Founder and CEO, ENY Consulting, advocates examining the ecosystem from a fresh perspective to make operations effective and cost-efficient.
Why do we always look at it as a half empty glass?
Marketing has a cost, but you must think of it as a lead generator, even when it is a long shot.
Why not think about your supply chain the same way as a margin generator and a customer magnet?
Would you change your mind after reading this? Maybe not, but at least it will help you start a thinking process with your teams.
Validation
Every year at this time of the year (Q4—the last quarter), you start validating your next year’s budget and organizing your end-ofthe-year inventory. Your teams are preparing their appraisals and computing how much the logistics operations cost this year. Heavy!
This mix of process and people should give you much more joy and results on the positive side.
How about first measuring the cost because what you cannot measure you cannot improve.
Always find simple ways to calculate your logistics costs, then challenge your team quarter after quarter to find a better way to describe that cost in letters and in figures. The more you dissect and analyse your costs, the better you understand them, the better you can optimize them.
Opportunity
The logistics and supply chain costs are not a burden. On the other hand, it is a beautiful opportunity to better understand the dark and mystery side of your company. To do that you always need competent minds, or your team may fail in its endeavours.
The first step is to understand your operations. Write down and clearly map your logistics / supply chain costs (including manufacturing, warehousing, replenishment, procurement, suppliers, in summary end to end supply chain).
Once you map them out, you group them to get five top Key Performance Indicators (KPIs). Now you can measure how
much your supply chain costs. Next step is to integrate them into your team next year objectives, make it personal!
The Supply Chain Alchemy: Go for gold!
Now that you measured the vast costs of your organization from end to end, you have put that in your budget for next year too. All this ‘supply chain’ can, at any moment, be turned into a cash generating machine. This is where your efforts can lead into Gold!
The number one condition is to get the right competency and the right people with the right skills and knowledge. Do the right thing always!
Your supply chain, once you understand it, measure it and then you can easily optimize it.
You can at least get back 10% of your logistics and supply chain cost every year back and use it for your business. The opportunities are endless, because every day it is a new story with new challenges therefore new opportunities.
Generate margins
You can generate margins from your management information systems (MIS), your payment modes (supply chain finance); or again by implementing simple tools that will allow your team to save time and be more efficient where it matters.
You can generate margin from your inventory almost every day, by optimizing the way you calculate your replenishment (and not creating only purchase orders). By tracking your deliveries and shipments (upstream and downstream), you can generate even if little savings from your routing optimization, container fill rate and other considerations.
These are but a few examples of how you turn a cost into a margin. All are linked and continuously in movement, your teams KPIs are on a dashboard and shown every month, not once a year.
Supply chain generates faster savings than any other department if you know how to kick it off and implement it.
In summary, don’t be a victim of your supply chain, however, hold your supply chain as your trump card. Always get the best people in this department, they can do wonders!
Nissrine Elqobai, Founder and CEO, ENY Consulting
