Optimize Supply Chain Cash Flow and Costs Using 3 Performance Lenses

The events of 2020 intensified the challenges of managing supply chain performance, driving organizations to focus on financial liquidity through cash preservation. But in 2021, as businesses commit to profitable growth, they must take a more comprehensive approach to optimizingsupply chain performance.

“Some companies are now finding that an excessive focus on cash has started to create challenges with current performance and limit their future growth potential, while some have emerged from 2020 with a renewed sense of commitment to investing in capabilities that will upgrade their resilience forfuture disruptions,” saysPaul Lord, Senior Director Analyst, Gartner.

Download guide:5 Levers for Optimizing Supply Chain Costs

Achieving and sustaining performance requires connecting short- and long-term aspirations (operation for cash and enablement of profitable growth) through an intermediate lens — optimized total performance. This lens aligns key stakeholders around both design choices (physical, commercial, organizational) and operating decisions required to efficiently fulfill demand with reliable product supply and effective service delivery.

Optimizing cash flow and costs needs a comprehensive approach

供应链组织设计和操作增刊ly networks to fulfill demand. Complex demand signals, product portfolios and supply constraints require more than simplistic trade-off discussions that promote conflict and negotiation rather than enabling optimization. Consider these aspects of the three performance lenses for supply chain cash flow and cost optimization.

Operate for cash: Zero in on near-term reductions for improved cash flow

Supply chain leaders must start with the recognition that fixed costs are sunk in the near term. They should instead focus on the operating cash levers for capturing variable margin, controlling working capital and managing discretionary spend. “Leaders need to recognize that in most cases network design choices and structural costs are out of scope for near-term improvements to cash flow,” says Lord.