How do your supply chain savings stack up?

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Billions of pounds have been saved by companies through supply chain improvements over the past year. So are you keeping up with your peers?

It’s now more than two years since cash became king and corporations started looking at their supply chains as a prime source for liberating cash.

Since then there has been a huge amount of work on redesigning supply chains to produce the required savings.

And over the past couple of months there has scarcely been a single major corporation that has not highlighted massive savings in its results. Here are just a few recent examples:

For 2010 Unilever has reported 1.4bn euros (£1.2bn) of savings in supply chain costs and indirect costs – well ahead of the 1bn euros (£860m) the group was targeting at the start of the year. Chief financial officer Jean-Marc Huët said: “This comes after savings of a further 1.4bn euros (£1.2bn) in 2009 – nearly 3bn euros (£2.57bn) taken out of our cost base in two years.”

Full year 2010 operating income rate increased 44 basis points to 6.65 per cent compared to the full year 2009, mainly as a result of improvements in product margins and supply chain efficiencies. “I’m proud of all that we achieved in 2010,” said Ron Sargent, Staples’ chairman and chief executive officer.

Chairman, President and CEO William R. Johnson said: “Heinz is on track to meet its previously announced goal of “delivering better than $1bn (£620m) in cost savings over the next five years through our global supply chain initiatives”.

Annual results show that the Nestlé Continuous Excellence programme produced savings of CHF1.5bn (£964m). This programme focuses on the cost of goods sold, distribution and administrative costs.

Sara Lee
The US food and consumer goods giant made savings of $194m (£121m) since the start of its 2009 financial year through Project Accelerate, a company-wide cost savings and productivity initiative focused on outsourcing actions, supply chain efficiencies and organisational simplification.

Of course, what each of these organisations has achieved depends very much on where it started. Even so, it is remarkable to see just how big the savings are.

But, my mind is drawn back just over a year to December 2009 when consultants Booz and Company came up with a figure of £110 billion – the amount of excess working capital sloshing around just in British companies.

Scale that up globally and we are looking at trillions of pounds of potential savings. There is no room for complacency.

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