What role does the supply chain play in driving revenue?

Historically, supply chains have been focused on decreasing operating costs as opposed to driving revenue. And BIE’s recent research found that reducing operating costs is still the number one goal for the supply chain.

You could say that driving revenue growth only comes from the commercial side of the business. A business’ supply chain should without doubt be an enabler to driving that revenue growth, but could an effective supply chain become a revenue generator in its own right? To what extent could something be created that other organisations would want to have a piece of?

Driving revenue through improved customer service

BIE research revealed that decreasing operating costs and driving revenue growth are the top two goals for the next three years from an organisation’s perspective. However, driving revenue growth was not as much of a priority for the relevant supply chain organisations. For the supply chain, decreasing operating costs was still the number one goal, followed closely by improving customer service.

But driving revenue and improving customer service are interlinked and influenced by each other. The supply chain recognises that driving revenue growth requires greater customer loyalty. An effective way of enhancing customer loyalty and the associated subsequent revenue growth is through delighting your customers: going above-and-beyond, having an insight or product few can rival.

One focus that has been on the operational agenda for a number of years is on shortening the supply chain and reducing the time to market; to create more satisfied customers and subsequently drive greater revenue. Fully integrating supply chains across organisations can have a tangible benefit. Involving manufacturing directors and supply chain directors in the NPD cycle from an early stage can achieve huge competitive advantages: developing products whilst minimising complexity; feeding back what the customer is saying. How many manufacturing businesses really achieve this level of long-term cross-functional integration? What is hindering this obvious step towards supply chain being viewed as strategic partners?  

The role of technology

A good supply chain leader will seek to understand what the customer wants, how they want that delivered, and to what timelines. They are following the market and reacting to changes to then drive greater sales and repeat business. And technology will have a big part to play in this.

If an organisation fully understands what raw material and finished product inventories are held, and where across the end-to-end value chain and at what stocking points, you can ascertain how much latitude you have in terms of manufacturing capacity. If this is achieved through an effective order to cash map that has the capability to link POS data with replenishment, then manufacturing capacity utilisation can be optimised.

Fundamental to this is the effective use of technology as an enabler. Cloud technology permits far greater integrations of systems across locations and organisations. Technology usage also requires greater trust and collaboration between customers and suppliers. Effective use of technology across a supply chain that’s fully integrated with an NPD process can speed-up NPI and manage the associated ramp-ups/downs.

Taking a proactive approach

Some organisations take really proactive stances towards revenue growth. Some forward-thinking companies recognise that they do something so well that others will be prepared to buy into it.

Consider procurement as a profit centre as opposed to a cost centre. Think about an international private hospital group who have put in place contracts to supply across a vast number of pharmaceutical, clinical and non-clinical spend categories leveraging their scale globally with global vendors. Despite the NHS being one of the largest employers in Europe and one of the biggest buyers of healthcare products, imagine the benefits that could be achieved through aggregating spends with the private hospital group partner. This isn’t pure fiction and such JV’s are becoming increasingly commonplace with benefits for all if well managed and truly collaborative.

The supply chain certainly can see themselves as an enabler in driving revenue, but it depends on the core priorities of the business. It may not necessarily be a target or an ambition for a business, but it’s something which could be of an added benefit to a company as a whole.

While revenue growth will always originate in the commercial side of a business, fully integrated business planning and S&OP, the supply chain and value stream management should be an enabler to driving that revenue growth. If organisations are not effectively integrating their supply chain, commercial, finance, people and technology centres with R&D functions, then you remove the potential for improving speed to market for new products whilst minimising the build-up of unnecessary complexity, which means cost. As a consequence, you remove the supply chain’s potential to be a competitive advantage.