Ernst & Young has published a new report entitled “Global supply chain: Balancing cost reduction and performance improvement.” Among the many good insights, this graphic caught my attention:

As you can see, across a variety of different areas, the respondents are not overly confident (basically a 50:50 chance) in their ability to manage effective change.  This is important given the growing complexity of supply chains and the incredible volatility that every business is facing today.

The core premise of the white paper is a good one – how do you effectively balance what arguably are contradictory goals – that of reducing costs while simultaneously improving operations performance?  And, critically important since this needs to take place in the “real world”, how do you do so in the midst of constant change?  The paper goes on to detail recommendations.

I think one of the challenges many companies face is that their processes, tools, measurements, etc. were not designed to deal with change.  Coming at this from a tools perspective, if you look at the legacy supply chain solutions, they were designed for a much more static world that was less complex.  These tools are consistent with the way supply chains used to be.

But, we’ve entered a new era of surprise and compromise that challenges a supply chain every day with a new set of unplanned events.  As the paper accurately points out, differentiation today comes from your ability to both reduce costs and improve operations performance, but the path to success is not the same one you might have followed ten years ago.

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Tags: Operations performance, Supply chain
Posted in Supply chain management
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