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Optimising What? Why Business Transformations Fail?

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Optimising What? Why Business Transformations Fail?

Supply Chain Optimisation/ transformation

Optimisation has always been a hot topic for strategists and business transformations executives.

Now, as the mantle for leading corporations is moving from strategists to the integrationists and supply chain leaders – optimisation is hotter than ever before.

When discussing business transformations, in my workshops, presentations and speeches, in particular I enjoy the audience interaction and questions.

It does bring out many critical points that may lie embedded inside people’s minds as assumptions.

Everyone is talking about optimisation at these events today. The assumption being, there is just one kind of optimisation.

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The example I gave in a recent workshop, and in my speech at the Quintiq World Tour, to highlight various levels of optimisation was that when I was a second officer, as a navigation officer of the ship

I was in charge of optimisation of the route from a series of loading ports to a series of discharge ports.

In most cases this job was relatively simple (if you knew elementary chart work and navigation). When I grew in rank to the chief officer,

I was optimizing the cargo flow as well to make sure that the loading operations, discharging operations and stowage were carried out optimally to minimize the time taken and maximize the cargo throughput within that time.

As a master the job expanded to include optimizing the cost of the voyage by minimizing the fuel consumption (about 33% of the operational cost) and maximising the charterers’ results.

As is self-evident, multiple layers of optimisation are added on top, as the complexity and responsibility grows.

Business Transformation

From costs of one ship, you can increase it to the cost of the entire fleet, and then add on costs of the land freight to create an end-to-end freight picture, and further add on cost of warehousing and storage to optimise the logistics costs.

Further on, you can optimise the entire distribution network by relocating your distribution centres, and then start talking about optimising your inventories and move into the realms of supply chain optimisation.

Taking it further, you can include the procurement – order placement, receipt and putaways, demand forecasting and shaping, supply planning – production and fulfilment to essentially optimise the basic supply chain.

Optimising Basic Supply Chain

But now, leading companies are not only optimising basic supply chain, they are also moving into collaborating with finance to optimise budgeting.

Many are also collaborating with their suppliers and customers to optimise product development, research and marketing.

Yield management and customer behavioural analysis helps optimise the price at the point of sale and targeted coupons and offers.

Combining revenue optimisation with the cost optimisation can lead to profit optimisation which can move beyond dynamic pricing to supply chain segmentation of one.

The key point of this article would have been clear by now – everyone talks about optimisation. What matters more is WHAT ARE YOU OPTIMISING, AND HOW WELL ARE YOU DOING IT?

I have already written article How good is your optimisation? to cover the second part of this question.

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Copyright - These concepts, frameworks and ideas are copyright of GLOBAL SUPPLY CHAIN GROUP from the time of their creation. Do NOT copy these without permission and proper attribution.

Notes:

1. These ideas and concepts will be usually expressed by our thought leaders in multiple forums - conferences, speeches, books, reports, workshops, webinars, videos and training. You may have heard us say the same thing before.

2. The date shown above the article refers to the day when this article was updated. This blog post or article may have been written anytime prior to that date.

3. All anecdotes are based on true stories to highlight the key points of the article - some details are changed to protect identification of the parties involved.

4. You are encouraged to comment below - your real identity and email will not be revealed when your comment is displayed. Insightful comments will be featured, and will win a copy of one of our books. Please keep the comments relevant, decorous and respectful of everyone. All comments represent opinions of the commentators.

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ABOUT THE PRINCIPAL AUTHOR

Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

  • Started in 1983 as a merchant navy cadet at 18 years age, worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.
  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in supply chain – against all odds, sought out the co-inventor of supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities and libraries worldwide.

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If you are deeply passionate about the world of business and supply chain networks as I am, and enjoy digging answers to critical questions that will help build and steer your business with wisdom, then join me. This book is a journey of exploration through the world of business networks that run along the veins of today’s commercial world.

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OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

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UNCHAIN YOUR CORPORATION

Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

Modern Supply Chains Integrate Businesses And Economies Faster By Systematic Information Sharing From Internal And External Sources.

Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

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GREEN SUPPLY CHAIN – AN ACTION MANIFESTO

It is generally accepted that environmental consciousness is now changing to environmental proactiveness as organizations are discovering that it makes good commercial sense.

Boards are asking the management to review their policies related to environmental norms, not only to bolster their corporate social responsibility aims, but also because consumers are asking for greener supply chains

It is also widely agreed that consumers will increasingly prefer to buy more and even pay more for products or services provided in an environmentally sound manner.

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