- Resiliency plans offset interruptions.
Visibility and a well-defined roadmap are essential to building resiliency and agility into business operations. A resilient supply chain increases assurance of product availability at the right place and right time. A resilient plan shapes the operating model to anticipate change and makes an organization ready for any unforeseen future pivots. Companies use a variety of stress-testing techniques, supplier risk assessments, omni-capable agile networks, alternate sourcing strategies and scenario planning to avoid bottlenecks and delays. In a recent EY CEO Outlook Pulse Survey, 53% of industrial companies say they have nearshored or re-shored operations in the last 24 months.
- Cost and cash efficiency drive immediate and long-term benefits.
An efficient operations strategy identifies requisite step changes to operating cost and working capital profile to fund transformation. These strategies not only address cost but also provide margin uplift, reduce value leakage, improve productivity and optimize capex allocations to drive long-term benefits.
An EY article highlights how some companies have experienced more than 10% reduction in cost of goods sold while improving their inventory and service levels. Organizations can also reduce selling, general and administrative costs by up to 25% due to indirect procurement cost initiatives.
- Operating models embracing sustainability generate long-term value.
Companies are pursuing better utilization of resources in their supply chains. For example, EY research shows 72% of enterprises are reducing the water intensity of their operations and 58% are reducing material waste in production processes. In addition, consumers are now placing higher importance on environmental and social concerns (two of the three components of ESG, with governance being the third). They are looking for dubious practices, such as greenwashing, limited ESG disclosures and bloated ESG metrics. COOs should respond to these changing needs by transparently addressing sustainability metrics, proactively updating ESG disclosures and driving decarbonization across the product lifecycle, including sourcing, product design choices, waste management in manufacturing, and package design.
Looking ahead, COOs should strive to build circularity in their business models through collaboration with employees, customers, suppliers and investors.
- Digital technologies provide visibility, create new revenue streams and enable a transparent ecosystem.
Digital tools and supply chain disruption have created new expectations for COOs. Advanced technologies such as control towers and supply chain analytics can help COOs gain operational visibility and enhance decision-making across the entire organization. Digital tools not only enable operational efficiencies, but also augment existing products or enable creation of new products or services, thereby creating new revenue streams.
Digital capabilities such as using advanced artificial intelligence (AI) and the latest applications can reduce forecasting errors; improve sourcing and procurement processes; improve tracing within the supply chain; optimize production and scheduling; streamline logistics and distribution activities; enhance product launch activities; and make service and returns more efficient. COOs should embrace digital disruptions and look to align their talent needs accordingly.
How to construct a transformation program
These five steps present the opportunity to improve business operations in many ways. There is even better news for COOs – benefits from the transformation can start with tangible improvements in as soon as three to six months.
Developing a successful transformation program begins with a self-assessment. Review the design, identify opportunities to provide differentiation and stress-test the resiliency of your existing operating model. These steps will help to prioritize plans and identify the appropriate leaders to own programs and initiate change. From there, organizations typically implement pilot programs, often focusing on immediate pain points and then moving on to testing larger sets, monitoring responses, and identifying gaps.
Operational transformation is a continuous process especially considering ongoing threats from cyber criminals, natural disasters, geopolitical events, new regulations, and uncertain economic conditions. By using advanced digital tools, COOs can prepare for and respond to these upending forces at a moment’s notice, turning potential disasters into averted crises. Even better, with a successful operational transformation, your enterprise could be in an optimum position to capitalize on change while competitors struggle with missed deadlines and lost opportunities.
