FAWCETT et al. (2008) point out, based on an extensive literature review and research with executives in the area, that one of the main objectives of companies with SCM initiatives is cost reduction. With the rapid rise of China in international trade, putting pressure on the price of manufactured goods and shifting the flow of goods, a phenomenon known as the “China Effect”, supply chain efficiency has become an important imperative in competitive strategy.
In the literature, cost reductions resulting from integrated supply chain management are generally associated with improvements in demand planning, operational evolutions or risk/return sharing between trading partners.
Improvements in Demand Planning
With regard to the demand planning process, SCM enables two major improvements: the creation of more accurate forecasts, based on the visibility obtained from sharing information, and the rationalization of asset use, with the coordination of actions between commercial partners. .
According to WANKE and FERREIRA (2006), making more accurate sales forecasts reduces uncertainties in the allocation of resources, resulting in: lower inventory levels, better supply contracts and less uncertainty in operations.
The rationalization of the use of assets, in turn, is a consequence of the coordinated planning effort among the member companies of the supply chain, eliminating duplication of efforts and resources. By jointly planning their actions, companies are able, for example, to properly position their storage facilities, improve transport flows and eliminate redundant safety stocks, significantly reducing their costs.
Operational Evolutions
In the SCM literature, the operational evolutions arising from the integration and collaboration between companies appear, quite frequently, as important cost reduction factors. According to CHEUNG et al. (2010), these operational evolutions result from the learning process (or benchmarking) that occurs with the approximation and sharing of decisions on the allocation of operational assets and/or as a consequence of the search for operational synergies, with collaborative transport, operational control centers and shared warehouses.
Operational evolutions, concomitantly with the rationalization of the use of assets, allow for a reduction in the cost of capital invested in the supply chain, improving important financial indicators, such as Return on Assets (ROA), and reducing the total logistical cost of serving customers. customers, making the chain more competitive.
Risk/Return Sharing
The third source of cost reduction with supply chain integration is directly related to improved management of financial flows. In commercial relations between companies in a supply chain, the flows of information and products are accompanied by financial flows, which take place in raising funds in the market to make production and operations viable, interest payments or in the buying and selling process. of goods and services between the different participants in the chain. As companies can have very different cost and size structures, these financial flows often end up under-optimized, hiding opportunities for gains at the interfaces between companies.
In addition, there is an extensive literature review available in the purchasing area on the benefits of sharing risks/returns in the development of new products in conjunction with commercial partners. In recent years, companies' innovation strategies are characterized by an increasing importance attributed to external sources of knowledge and by a parallel decline in the relative importance of internal R&D departments. This trend is accelerating due to technological convergence, decreasing transaction costs and shortening product cycle times.
The table below summarizes the benefits of supply chain integration related to cost savings.
Table 1 - Summary table of benefits related to cost reduction
The figure below summarizes the causal relationships presented in Table 1, helping to organize the literature presented, highlighting that while the improvement of planning and risk/return sharing have identified direct results, in the case of operational evolutions the relationships are not so direct, which means that the results often come from combined actions.
Figure 1 – Network Design for the benefits associated with cost reduction
Source: AUTHOR using Atlas.TI tool.
(Doctoral Thesis – COPPE/UFRJ – defended and approved in September/15)
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Leonardo Julianelli
https://ilos.com.brExecutive Partner of ILOS. Graduated in Production Engineering from EE/UFRJ, Master in Business Administration from COPPEAD/UFRJ with extension at EM Lyon, France, and PhD in Production Engineering from COPPE/UFRJ. He has several articles published in periodicals and specialized magazines, being one of the authors of the book: “Sales Forecast: Organizational Processes & Qualitative and Quantitative Methods”. His research areas are: Demand Planning, Customer Service in the Logistics Process and Operations Planning. He worked for 8 years at CEL-COPPEAD / UFRJ, helping to organize the Logistics Teaching area. In consultancy, he carried out several projects in the logistics area, such as Diagnosis and Master Plan, Sales Forecast, Inventory Management, Demand Planning and Training Plan in companies such as Abbott, Braskem, Nitriflex, Petrobras, Promon IP, Vale, Natura, Jequití, among others. As a professor, he taught classes at companies such as Coca-Cola, Souza Cruz, ThyssenKrupp, Votorantim, Carrefour, Petrobras, Vale, Via Varejo, Furukawa, Monsanto, Natura, Ambev, BR Distribuidora, ABM, International Paper, Pepsico, Boehringer, Metrô Rio , Novelis, Sony, GVT, SBF, Silimed, Bettanin, Caramuru, CSN, Libra, Schlumberger, Schneider, FCA, Boticário, Usiminas, Bayer, ESG, Kimberly Clark and Transpetro, among others.
