Talking Supply Chain: Think structurally for margin enhancements

As the COVID-19 pandemic raged, firms rapidly expanded their supply chains to meet increased demand and adjust to materials shortages.

What followed, though, was a return to more normal demand. But, rising labor rates, raw materials prices, and freight costs also followed, and then interest rates quickly jumped. Supply chain costs came under pressure and leaders faced a new push from the C-suite to rein in those costs.

An article from a trio of AlixPartners subject matter experts highlighted some of the challenges supply chains face today. “Price increases have led to volume declines in many businesses as customers have hit a spending ceiling. Recent year-end reporting highlights this trend: January 2023 saw Proctor & Gamble’s average sales price grow 7% versus December 2023’s 3% rise. As shown in Figure 1, from 2021 to 2023, CPG companies raised the sales value of their goods by 13%, while sales volumes declined by 6% over the same period,” the trio of Derek Knueve, director, Andrew Kerr, senior vice president, and Brett Meyer, partner, wrote in a recent Supply Chain Management Review article.

Knueve and Kerr joined the Talking Supply Chain podcast to dive deeper into the topic of how firms can increase their margins by looking more strategically at their supply chains.

Knueve said much of the low-hanging fruit to extract savings from supply chains has already been picked, leaving structural changes as the next area to attack for savings. He said companies can look at “how should your supply chain be structured? And then how should you ultimately operate your network in order to optimize on both cost and service?”

Knueve added that “it’s generally a little bit more complex to tackle right away … but it's an area that can yield big results.”

Listen to more of the conversation with Knueve and Kerr today.

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