Somerville, MA October 18, 2001 If you fail to plan, you plan to fail. Manufacturers that are increasingly recognizing the strategic nature of supply chains are starting to catch onto this principle. It is backed up by the early results from first-generation deployments, which are showing multi-million dollar savings as companies find ways to slash safety stock, cut product introduction cycles by 80 percent, and reduce inventory investment by 50 percent.
Dennis Gaughan, an analyst at AMR Research, wrote in The AMR Research Report on Enabling Technologies, August 2001, that supply chain initiatives are the common thread among enterprises faced with tightening budgets. "It's a logical place to focus, as supply chain technologies are designed to remove inefficiencies and provide cost reduction. In addition, most organizations have a much better understanding of their supply chain process, which increases the likelihood of successful implementations."
According to a statement released by Optiant, a provider of supply chain software, a strategically designed supply chain can easily go beyond mere cost cutting, and, when implemented properly, strategic supply chain design can yield:
§ 3 to 5 percent improvement in profit margins
§ 20 to 50 percent reduction in inventory costs
§ Customer service levels of 95 to 99 percent
§ 10 to 30 percent reduction in cycle time, from initial design to completed production
Optiant cited some of its customers as examples of this movement toward supply chain design that is being embraced by manufacturers and that is driving industry leaders to re-evaluate inventory planning to improve profitability. For instance, Kodak's Health Imaging division used PowerChain, Optiant's supply chain software suite, to optimize its inventory deployment, which ended up saving the company more than $9 million in inventory costs in less than 12 months.
"The combination of today's sluggish economy and uncertain political environment is driving companies to make changes in how they manage key aspects of their businesses and the supply chain is a critical part of that," explained Marcus Ruark, co-founder and CEO of Optiant. "Companies can see proven examples of success and rapid economic benefit, which justifies the investment."