A well-designed supply chain is a powerful weapon, especially in fast-moving markets. Meghan Shehorn, a partner with Bain’s Performance Improvement practice, discusses four myths that keep leadership teams from their full potential when it comes to their supply chains.
Read the Bain Brief: Turn Your Supply Chain into a Competitive Weapon
Read the transcript below.
MEGHAN SHEHORN: A well-designed supply chain can be a powerful competitive weapon. Companies who do network optimization really well can see a gross margin increase by 6 to 10 percentage points. However, there are four myths that we see that keep leadership teams from achieving their full potential.
The first myth is that companies think that network optimization is really only necessary following a big disruption or a merger. But we see that the best companies really are able to use this as a continuous improvement tool and are constantly looking for opportunities to optimize their network.
The second myth is that if you've invested in the tools and technology, that you're set. But what we see is that the tools and technology are often necessary but never sufficient to get the full benefit. You need business acumen, judgment, creative ideas and additional insights to really drive the full benefit from these tools.
Myth No. 3 is that the primary benefit of this is reducing cost. But what we actually see is the benefits of customer satisfaction and revenue are really what drives the benefit here. Increasing service levels, becoming more reliable, reducing quality issues―those are the real benefits of doing true network optimization.
The last myth is that this is all about longer-term improvements. But in reality, about 60% of the benefit that our clients see from network optimization is realized within the first 12 months. And the remainder might take more time or investment to realize.
So how to know if network optimization could be a good lever for you? Looking at things like customer NPS, low or unpredictable service levels, high cost of quality, unexplained downtime, longer lead times than industry average―if any of those are symptoms that you're seeing, network optimization can be a great lever to unlock value in your company and drive a competitive advantage.