Sustaining Cost Reduction Across Your Organisation

 In David Lynch, David Prendiville, Performance Improvement, Transport & Logistics

Given recent challenges; we’ve seen a large amount of effort and success in delivering significant cost reductions across a number of industries.

Supply chain is often at the core of many of these programs, delivering hard earned gains and in doing so, elevating its position within an organisation. With green shoots seen in some areas and demand focused ‘austerity’ measures such as headcount freezes and travel bans being loosened, how does Supply Chain sustain these hard-fought benefits while partnering with the business for growth?

This publication explores the key elements and metrics to monitor the cost base of your supply chain.

Sustainable Cost Reduction Framework

We consider that there are eight key categories which form part of a sustained cost reduction framework within Supply Chain.

The following illustration outlines these key areas, and the relevant questions which Supply Chain should reflect on, in order to capture the benefits of implementing a cost reduction framework. 

In order to be successful Supply Chain requires a clear vision. To measure and monitor success Supply Chain should select 4-6 metrics as a health check of their cost base.

The following table provides examples of what success looks like for your organisation and how to measure it.

What are the benefits of getting the framework right?

The benefits of realising cost reductions are clear; in addition to sustaining a lower cost base, Supply Chain can demonstrate the value it brings to an organisation by strengthening relationships with key suppliers, enabling improved business productivity and allocating resources / developing the capabilities in the areas to support future business growth.

The next steps.

While there are still significant opportunities to continue to drive a lower cost base, Supply Chain departments need to continue to partner with internal and external stakeholders to deliver captured benefits. We expect that the next phase will demand a different focus and skill set within Supply Chain – with an increased focus on contract / supplier management and advanced analytics to identify and deliver benefits through collaboration.

If you wish to discuss sustainable supply chain cost reduction and how to position your supply chain to meet the needs of your business, please don’t hesitate to contact our Performance Improvement team on +61 8 6311 7011 or our lead consultants directly.



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