purposes of demonstrate and clear strategy:

One of the purposes of this text will be to demonstrate the
importance of such a clear strategy and how a link to the business plan can result
in substantiated improvements to sales and earnings, found directly on the profit
and loss statement prepared by the firm.
In conclusion, the survey did document savings as a result of supply chain
efforts. When asked what has been the overall impact of the supply chain effort
on costs, those responding indicated:
_ Reduced by 1 to 5% 27% of responses
_ Reduced by 6 to 10% 33% of responses
_ Reduced by 11 to 20% 8% of responses
_ Reduced by more than 20% 4% of responses
_ Initiative failed to meet objectives 6% of responses
_ Not sure 21% of responses
When asked what has been the overall impact of the supply chain efforts
on increased revenues, the answers were not as definitive. Responses indicated:
_ Increased by 1 to 5% 27% of responses
_ Increased by 6 to 10% 21% of responses
_ Increased by 11 to 20% 5% of responses
_ Increased by more than 20% 4% of responses
_ Failed to meet objectives 5% of responses
_ Not sure 38% of responses
We interpret the high percentage of responses indicating a failure or not sure
as an indication that the idea of using supply chain to differentiate a firm and
its network partners from competitors to create new sales is still not an integral
part of supply chain efforts in general. Building top line performance becomes
the future challenge, as companies discover how to use supply chain excellence
in both directions on the profit and loss statement.
By combining the survey results with CSC research from other firms indicating
a solid supply chain effort, Figure 1.2 can be used as a guide to just what
might be achieved from a continued and concerted effort to use supply chain
to improve both top (revenue) and bottom (cost) line results and how five to
eight points of new profits are possible.
To use this chart effectively, a company should consider the bottom, horizontal
axis as indicating the percent of profit made before paying taxes. The
improvements are then measured in additional points of new profit as a percent
of net revenues. Beginning on the left of the chart, there can be no doubt that
inventory reduction is a viable part of a supply chain effort and can result in
as much as a two-point improvement in profits. We indicate that a much smaller
amount is actually achieved, because, as mentioned, most inventories are simply
reallocated throughout the network, rather than eliminated. Inventory remains
a frontier to be fully conquered, as supply chain efforts mature, and demand
is more closely matched with supply, visibility into the supply chain network
is established, and the need for extra stocks is eliminated. A firm using the chart
is well advised to establish a realistic target for this part of the improvement
effort.
Next we see an improvement through reduced logistics costs, resulting in
a possible point of improvement in earnings. Once again, a range is used
because most firms neglect to work as diligently on improving inbound freight
as they do on internal handling and outbound freight. These companies also tend
to overlook the possibility of using supply chain partners for storing and moving
some of the goods or fail to apply some of the contemporary logistics concepts
that include virtual ownership of assets and shared use of equipment and facilities.
(For a more detailed consideration of the contemporary view of logistics,
see Poirier, 2004.)
The areas of direct and indirect spending merit the largest potential benefits,
as purchasing covers the largest portion of costs in most businesses. We find
that the earliest efforts (levels 1 and 2) typically bring in a reasonable return
and establish sufficient savings to validate the effort, as indicated by the large
range of possible improvement. Later progress by most companies will focus
. The Potential Savings and Revenue Enhancements: Projected Benefits
from Collaborative Initiative Implementations (Source: CSC projections based
on benchmarked performance of comparable solution offerings)
attention on the indirect spend, moving into areas such as office supplies,
furniture, travel, computers, office equipment, and so forth.