If You Trim Your Supply Chain, It Will Grow

In some ways, a supply chain is like a bonsai tree. It must be regularly pruned, shaped, and defoliated if it is to take on an aesthetically pleasing shape that is sustainable in the long term. This is especially true if the supply chain is going to be the foundation of corporate success. As per this article over on Supply & Demand Chain Executive on how most companies [are] paying a ‘Coherence Penalty’, companies with very few (one to three) firm-wide strategic priorities are the most likely to … have above average profitability and revenue growth.

Furthermore, if the company’s capabilities — namely the supply chain — support the company’s strategy, profitability and revenue growth will most likely be above average. And if the company is coherent, which is only true for about 13% of companies, it is twice as likely to have above-average profitability.

Thus, since there must only be a few strategic priorities, and since the supply chain must support those priorities, the supply chain must be lean and focussed on those priorities — and those priorities alone. If the supply chain sprawls, it will not be sharply focussed on the strategic priorities, and, chances are, the lack of focus will lead to a sprawl in priorities which will, in turn, lead to a sprawl in strategy. This will cause the company to lose coherence which will in turn stunt revenue growth and profitability.

So keep trimming that supply chain. The reward will be worth it.