Sunday, August 21, 2016

Inbound Logistics Discusses Cost

As if on queue, after I wrote my article about recasting your discussion from "cost" control to "revenue" generation, Inbound Logistics published an article titled:  "Keeping an Eye on Cost Management".  The article discussed the 80/20 rule where 80% of a network's cost is baked in to the network design and 20% is about execution.  I agree.

But, again, I must say the article totally misses the point of Customer Centric Supply Chains. You do not design your network to cut costs!  You design your network to provide incredible service to your customers.  Once that is done, you figure out how to do it at the most optimal cost.

Most of the work in network design is working cross functionally with sales and strategy to identify not only what customer needs are today but where will they be in 10 years.  Where is the ball going.. not where is it today.

This is why Amazon is so brilliant in their supply chain strategy - they focus solely on the customer needs, they design to those needs and then they drive out cost.  Further, they are not looking at the needs today but rather the needs 5 and 10 years from now.  How do I know this?  Easy:  Everything Amazon does is first met with disdain, "no one can make money doing that" type statements etc.  When I hear that, I know they are on to something.

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