Cost reduction and allocation to drive growth

This type of discipline can also help you:

• Increase shareholder value by decreasing the average cost of capital and increasing your return on investment
• Reduce business risk by controlling the largest cost associated with business profitability and confirming that target margins are hit with greater precision

• Reducing portfolio complexity: Assess the profitability of your company’s SKUs and decide if it makes sense to abandon some variations or introduce more standardization at the finished-goods level.
• Amending the sourcing strategy: Examine supplier risk and the rationalization for having each supplier. Can economies of scale be realized by narrowing the number of suppliers for certain materials?
• Closely analyzing the company’s footprint strategy: How close are distribution centers to the customer base and to suppliers? Are there opportunities to close some centers and open new ones that can operate more efficiently?
• Synchronizing planning: Artificial intelligence and analytics can be useful in helping to determine demand, as can close collaboration with suppliers and production. Third-party data also can be purchased to supplement forecasts.
• Adjusting the supply chain operating model: Changes such as shared services, outsourcing, workforce rightsizing, organizational design and work placement, when considered thoughtfully, are worth exploring.
• Amending aftermarket services: Any of the other issues described above could be applied to spare parts and their own unique distribution networks in the long term as competitors continue to invest.