Benefits of strategic supply chain optimization

Manoj Mishra | September 20, 2019

general

This blog describes some of the benefits of strategic supply chain optimization.

Manufacturing versus service companies

Strategic supply chain management and optimization have been a key competitive differentiator for the manufacturing companies for some time. These manufacturing companies designed their supply chain not only to find opportunities to reduce spending but also to demand and ensure input quality and timely delivery. The supply chain is critical for their profitability, and the input quality is directly reflected in the quality of finished products and the willingness of consumers to purchase them.

In contrast, the service industries are often at a loss in describing the strategic and financial impact of superior supply chain management for their large strategic spend categories, such as IT services, legal services, and consulting. These companies are not able to apply the same best-practice principles as manufacturers do. The supply chain management concepts pertaining to manufacturing, such as centralizing and coordinating, sourcing, and procurement, are not fully leveraged by the service companies. In fact, service organizations often use line-of-business managers to manage important parts of the supply chain in a decentralized fashion. These managers often make vendor decisions without ascertaining the benefits of cross-company historical performance, such as on-time delivery and quality of services rendered.

The financial impact of an improved supply chain in the service industry is not much different than in the manufacturing industry. Service organizations have direct inputs to their offerings from external service providers. The quality and timely execution of consultancies affect the end quality of these offerings and the cost of their development. Controlling costs is indeed part of the story, but, service organizations must also ensure that their external service providers deliver the results.

Benefits of strategic supply chain optimization in the service industry

A strategic supply chain optimization in the service industry does the following:

Helps to develop new service with focused supply chain management tools and processes: Businesses integrate procurement processes and their enabling technology with other enterprise applications to help expand the ecosystem and increase control-related project development, cost estimation, budgeting, and financial management.
Reduces costs: For instance, in banks, the supply chain involves all the distribution channels where cash is held and through which customers transact, such as ATMs, branches, mobile devices, net banking, and agent outlets. Banks need to monitor transactions at these locations and leverage modeling to forecast requirements and plan the logistics for distribution of cash and other transactional devices. Doing this can reduce costs and optimize service levels.
Leverages better information and analytics: With the development of scorecards, based on high-quality information and maintained in the supply chain management system, companies hold vendors accountable for business results based on the quality of their services.

The following diagram illustrates strategic supply chain optimization:

Rackspace Offering

Rackspace’s Professional Services, Business Intelligence Services, and Business Application Support Services provide Oracle® Supply Chain Management (SCM) solutions that empower the modern value chain.

Our supply chain solutions transform an entire supply chain into a value chain.
Our supply chain is seamlessly integrated with Oracle Advanced Supply Chain Planning, Forecasting (out-of-the-box integration with the Demantra solution), and Oracle Enterprise Business Services (EBS)/Cloud Financials.
We have been helping various global manufacturing, consumer products, and services companies to improve their agility, transform to an adaptive supply network, and achieve real-time visibility from the top floor to the shop floor.

Conclusion

As supply chain tools and processes in the service industry mature, strategic supply chain management has the potential to become essential to building a competitive advantage. The supply chain management is a powerful strategic enabler that can better analyze categories of expenditure, services, project costs, and execution results. You can collaborate and accelerate innovation with Social, make better decisions anytime and anywhere with Mobile powered by Analytics, and scale quickly and reduce costs with Cloud.

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Manoj Mishra