Supply Chain as the Means to an End: Sustainable Cost Reduction
Pick any cost model, and guess what will be at the core — supply chain productivity. As a case in point, consider the Dupont model in which every ratio is directly impacted by supply chain efficiency: profit margin, asset turns, debt to asset ratio. Gaining Productivity in the supply chain through reduced working capital and COGS, as well as improved asset utilization, yields valuable market and financial results. These areas hit the bottom line of both income statements and balance sheets, necessary Step8 in moving market capitalization.
Now, consider a popular cost-cutting measure: workforce reduction. In the Dupont model, the only ratio impacted by such an action is profit margin. Even if margin is the deciding factor, which tactic yields stronger results — workforce reduction or supply chain productivity? Given that a product supply chain makes up a consistently higher portion of costs, supply chain efficiency yields greater returns in margin optimization. Furthermore, additional performance measures like asset utilization and liquidity are directly impacted by one’s supply chain.
Supply Chain as the Means to an End: Sustainable Cost ReductionPick any cost model, and guess what will be at the core — supply chain productivity. As a case in point, consider the Dupont model in which every ratio is directly impacted by supply chain efficiency: profit margin, asset turns, debt to asset ratio. Gaining Productivity in the supply chain through reduced working capital and COGS, as well as improved asset utilization, yields valuable market and financial results. These areas hit the bottom line of both income statements and balance sheets, necessary Step8 in moving market capitalization.Now, consider a popular cost-cutting measure: workforce reduction. In the Dupont model, the only ratio impacted by such an action is profit margin. Even if margin is the deciding factor, which tactic yields stronger results — workforce reduction or supply chain productivity? Given that a product supply chain makes up a consistently higher portion of costs, supply chain efficiency yields greater returns in margin optimization. Furthermore, additional performance measures like asset utilization and liquidity are directly impacted by one’s supply chain.
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