Gartner Research document - Focus on Operating Outcomes, Not Reduction Targets, to Optimize Supply Chain Cost

Description
Supply chain and business roles must align and collaborate around
operating outcomes, rather than reduction targets, to optimize total cost.
Supply chain leaders can use this research to adjust how they engage
stakeholders and propose initiatives that achieve breakthrough cost
improvements.

Table of Contents
Analysis..................................................................................................................................................2
Big Picture Approaches Are Useful but Not Fully Actionable............................................................. 4
Focus on Efficient Operating Outcomes to Sharpen Focus and Align Stakeholders...........................6
Respond to Short-Term Pressure by Clarifying Outcomes.................................................................9
Growth Strategies and Events Complicate Cost Optimization........................................................... 9
Gartner Recommended Reading.......................................................................................................... 10
List of Figures
Figure 1. Cost Management Remains Short Term and Functionally Focused.......................................... 3
Figure 2. Five Levers for Supply Chain Cost Optimization....................................................................... 5
Figure 3. Align Stakeholders on Efficient Operating Outcomes................................................................6
Figure 4. Optimize Operating Outcomes to Support Strategic Value Imperatives.....................................7

Key Findings -

■ Reduction targets for cost and inventory create apprehension and resistance among
stakeholders, inhibiting the collaboration and innovation required to drive and sustain
improvement.
■ Attempts to reduce cost within individual sites and functions put quality and service at risk, or
create constraints that limit improvement potential.
■ Companies often pursue too many initiatives simultaneously without investing in the talent and
technology required to enable improved performance.
■ Supply chain organizations focusing on improving strategically aligned outcomes have
demonstrated that trade-offs among cost, service and quality are not always necessary

Recommendations -
Supply chain leaders pursuing cost optimization should:
■ Drive collaboration and innovation for improved performance by aligning multiple functions
around cost-optimized operating outcomes.
■ Enable decisions by defining metrics and developing cost analysis models that align to the
scope and performance objectives of specific operating outcomes.
■ Justify investments by proposing initiatives based on their potential to impact performance and
deliver improvement to specific operating outcomes