Supply Chain Network Optimization Goals
How can you benefit from reviewing your network design?
By Bruce Tompkins
Executive Director, Supply Chain Consortium
Major benefits can be gained from supply chain network reviews and optimization. In a recent Core Benchmarks survey conducted by the Supply Chain Consortium, nearly 60 percent of respondents believe their supply chain networks are optimized or close to optimized. These companies usually perform ongoing network reviews and focus efforts on maintaining a high-performance network design.
While 40 percent rated their supply chain as not optimized or as insufficient, 68 percent of all respondents say that cost minimization is their main reason for performing network reviews. Twenty percent noted improved customer service as their goal, and 12 percent hope to achieve either profit maximization or capital outlay minimization from their supply chain network reviews.
Through their network review and design process, participants have realized significant cost saving benefits. The average improvement level and the highest benefit realized by any one survey participant are provided in the figure below.
Network Review Realized Benefits |
Average Improvement Level |
Highest Improvement Level |
Improved Order Fill Rate |
21.4% |
37.5% |
Reduced Order Cycle Time |
12.1% |
37.5% |
Investment Return (ROI) |
10.0% |
50.0% |
Capacity Increase (Throughput) |
6.6% |
30.0% |
Reduced Transportation Costs |
5.6% |
12.0% |
Inventory Turns |
5.0% |
20.0% |
Reduced Distribution Costs |
3.8% |
12.0% |
Incremental Change in Operating Margins |
2.0% |
3.7% |
Capital Investment |
1.6% |
8.0% |
Improved Profitability |
0.2% |
1.0% |
Reduced Supply Chain Overhead Costs |
0.1% |
1.0% |
Optimizing your supply chain network is beneficial whether your company wants to minimize costs, improve customer service, maximize profits, minimize capital outlay, or make sure processes are efficient. With some companies experiencing a 50 percent Return on Investment (ROI), companies that have not recently assessed their network design should make doing so a top priority goal.
The information above comes from the 2008 Core Benchmarks Report: Getting to the Core of the Problem, Benchmark Your Way to Better Operations. For more information on the report and other key findings, view the recent press release Core Benchmark Comparisons Made Easy.
The full report is available to Consortium members, as well as to “contributing members” who add their data to the Core Benchmark database. For more information on the Supply Chain Consortium or membership, contact Bruce Tompkins.
The Supply Chain Consortium is the premier source for supply chain benchmarking and best practices knowledge. With more than 180 participating retail, manufacturing and wholesale/distribution companies, the Consortium sponsors a comprehensive repository of 17,000-plus benchmarks complemented by search capabilities, online analysis tools, topic forums and peer networking for supply chain executives and practitioners. The Consortium is led by the needs of its membership and an Advisory Board that includes executives from Campbell Soup, Hallmark Cards, Ingram Micro, Mervyn’s, Molson Coors Brewing Co., Target, The Pep Boys, and Coca-Cola Co. To learn more about how your company can become a member of the Supply Chain Consortium, contact John Foley, 919-855-5461 or visit www.supplychainconsortium.com.
Table of Contents & Core Benchmark Focus Areas
This article is available for re-print with attribution. If you would like more information or an interview, please contact Keri McManus, (919) 855-5516.
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