Unleash Hidden Profits: Make Your Supply Chain Work for You

Transcription

1 Unleash Hidden Profits: Make Your Supply Chain Work for You

2 Objective Learn how you can Reduce Working Capital Improve Cash Flow Increase Profits by improving how you manage your materials and supply chain

3 Setting the Stage Would you like to be more profitable? Is too much cash tied up in inventory? Is your cash-cash cycle too long? Would reducing total spend: a. Improve your competitiveness? b. Increase your profits?

4 Manufacturing Survey Results Supply Chain Costs Expected Change Supply Chain Opportunities Challenges

5 Manufacturing Survey Results Which Costs Have Affected Your Customer Prices? What Will Negatively Impact You in Next 2 Years? Labor Supply Chain Revenue & Growth Labor Supply Chain 20% 54% N/A & Other Insurance & Benefits Competition All Technology Investment Utilities 13% 27% 33% Regulation Fiscal & Monetary Policy Health Care Competition Technology Investment Supply Chain Profit Opportunities

6 Where s The Spend? 50-60% 15-25% 10-15% 5-10% Purchases, Planning & Supplier Management Operations Overhead Profit Underrealized Opportunity Traditional Improvement Focus Do you spend enough time managing your supply chain costs and opportunities? APICS Industry Study

7 Profit Impact of Savings What is the bottom line impact of $1 in additional sales vs. $1 in spend reduction?

8 Sample P&L Base $ % Sales Revenue $1, % Cost of Good Sold $600 60% Raw Materials Direct Labor Expenses Indirect Wages, Salaries & Bonuses Production Supplies & Other Costs Gross Profit $400 40% Sales, General & Administrative Expenses $300 30% Selling Expenses Wages, Salaries, Bonuses & Benefits Administrative & Other Expenses Depreciation & Amortization Pre-Tax Profit $100 10% +10% Sales $ % $1, % $660 60% $440 40% $300 27% $140 13% -3% COGS + SG&A $ % $1, % $582 58% $418 42% $291 29% $127 13% Will it be easier to find 3% savings or grow your revenue 10%? Why not do both?

9 Materials Focus Is your cost savings strategy focused on raw material? Is your Purchasing activity primarily tactical? If you answered yes to either, you are not maximizing your profits!!

10 Unleashing Your Hidden Profits

11 Unleashing Your Hidden Profit 1. Attack alladdressablespend Purchase Price of everything Freight & Logistics (including overnight) Carrying Costs Payment Terms Purchasing & Planning Costs Quality Costs Supplier Management Costs

12 Unleashing Your Hidden Profit 2. Eliminate waste in Purchasing & Planning Kanbans & Two-Bin Systems Item Re-Order Points (ROPs) Blanket POs ABC-based Order Management P-Cards Vending Machines Catalogs Electronic PO, Invoice, Ship Notification, etc. NVA

13 Unleashing Your Hidden Profit 3. Partner With Suppliers Breadman Programs Consigned Inventory VMI Forecasts Risk Mitigation Inventories Consolidated Invoices Strategy alignment Move beyond buy-sell relationships

14 Unleashing Your Hidden Profit 4. Sweat the Critical Details Discounted Pay Terms Spend Analysis, Segmentation, Consolidation Manage inventory to reduce investment, variability & risk 5. Shop Your Business Suppliers get complacent Market conditions change Supplier interests evolve

15 Unleashing Your Hidden Profit 6. Invest in your Purchasing & Planning Breakeven Purchasing ROI for bottom companies AT Kearney 2013 Return on Supply Management Assets (ROSMA) Report Accenture 2007 Study 10X Purchasing ROI for top companies

16 Unleashing Your Hidden Profit 7. Strategic Purchasing, not transactional Business intelligence Supplier management Manage spend categories Scouting Reduce inefficiencies Manage supply chain metrics Develop supply chain strategies

17 Key Take-Aways % of spend is in the supply chain - Every $1 saved falls straight to the bottom line - Look at all addressable spend not just materials - Investing in Purchasing and your supply chain management will: - Free up working capital - Improve cash flow - Unleash profits

18 THANK YOU