When companies benchmark their productivity, they tend to focus on manufacturing processes, not the full supply chain. As a result, they overlook inefficient distribution and transportation networks. Typically, network costs for consumer packaged goods companies range from 6% to 8% of revenues. In our experience, companies with inefficient networks can lower their distribution network costs by 10% to 25% by upgrading their systems. Just as important, they improve service, reduce inventory and avert tens of millions of dollars in unnecessary investment.
Rob Ruffin is an expert vice president in Bain & Company’s Performance Improvement practice and is based in Boston.