Companies who buck the 3PL trend are reaping big rewards

Although supply chain organizations are increasingly examining outsourcing options, focusing on internal productivity improvements can also result in significant cost savings. For example, a leading manufacturer drove $350 million out of its supply chain when it adopted a well-synchronized demand strategy to overhaul its replenishing process. This demand replenishment program involved re-engineering processes and developing contractual requirements to push all the company's suppliers and electronics manufacturing service providers to deliver parts only when a customer order is logged. Raw materials and finished goods can be delivered within 24 hours.

Best Practices LLC's benchmarking report identifies tools and tactics leading companies use to manage supply chain productivity. Areas of focus include: mass customization, build-to-order and available-to-promise commitments to customers. Information in the report was drawn from primary and secondary research of more than 100 companies. For example, the following findings emerged from this research:

* Implementing a vendor managed inventory (VMI) system with an e-business infrastructure helped a leading company to: reduce inventory levels from four weeks to two weeks, cut contract costs by 50%, eliminate 80% of its manual transactions, reduce its planning cycle by four weeks, increase capacity utilization by 30%, build communication and trust with partners, increase agility and responsiveness to customer demand and market change by an estimated 10%.

* Building an order history, one benchmarked company was able to better anticipate future customer orders which built stronger relationships. In one example, a customer typically ordered a sizable batch of the same item five to ten times each week. By aiding them in reducing their order frequency and increasing the size, the cost to the customer went from $6/unit to only 85 cents/unit, i.e., an 86% cost reduction. This emphasizes that close relationships, built on trust and with a win-win mindset, can drive overall excellence in the supply chain.

* Establishing a new information infrastructure that enables collaboration through linking legacy and web systems with all functions related to product creation, allowed one top company to reduce the time needed to push design changes through a product creation team by 70% in the pilot. The system allows stakeholders to track and understand impacts of design changes as they ripple through product development into business functions.

Click here to read a summary of the report:

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