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Federal agencies can lower supply chain costs by 8 to 20 percent using leading commercial practices
It is easy to overlook the potential for savings in the federal supply chain because its routine operations generally are not considered in the context of agencies' missions. Further, responsibilities for the different portions of a supply chain generally are spread out among more than one part of an organization, making it difficult to identify the impact to other components of the supply chain of changes made to one element.
In broad terms, the major areas where savings can be achieved across the entire supply chain are sourcing, demand planning, inventory management and fleet optimization. Each of these elements contain opportunities to reduce costs while improving service to your customers
Over the past few years, many agencies have implemented strategic sourcing programs, focusing on aggregating their current spend to achieve savings with their vendors. Our research finds that while traditional strategic sourcing is a very effective way to reduce the cost of goods and services, agencies are missing an opportunity to extend those savings; agencies should also focus on the proliferation of products and vendors in their supply chain.
The first step in running a world class supply chain is proactively managing demand. This often is an area that most organizations fail to focus on, leading to missing customer expectations, excess inventory, and increased pricing from vendors. Accenture research has found that only 43 percent of organizations differentiate their planning process based on product and customer characteristics.
Managing inventory and spare parts in a federal agency is particularly challenging, with demand for supplies peaking noticeably at the end of each fiscal year even though consumption may be steady. For many agencies, this pattern may be exacerbated by long procurement lead times, operational security concerns, or other uniquely governmental characteristics.
Many agencies do not count fleet management as a core competency. Simple bulletins, such as a mandate to meet alternate fuel quotas or a potential requirement to reduce all federal fleet sizes, may appear straightforward to agency heads but present real challenges to fleet managers.
Reducing the complexity of the items you are purchasing and the number of vendors you are working with takes strategic sourcing to the next level of savings. In our experience, we have been able to help agencies achieve savings in as little as a month by reducing the number of products they are buying that meet the same requirement. In addition, through the use of sourcing analytics, we were able to identify situations where vendors were charging as much as double as other vendors for exactly the same part.
Inaccurate demand planning leads forecasts to be inaccurate and cause increased costs due to greater uncertainty. Higher safety stock levels, buying too soon and buying the wrong material—all resulting from inaccurate forecasts—contribute to wasting scarce money resources that may be expended more productively elsewhere.
In fleet management, it is crucial that fleet managers have the tools to identify the true total cost of ownership (TCO) to drive future rightsizing and green fleet decisions. By using a structured, diagnostic approach to calculate TCO, fleet managers will have the information needed to make difficult changes.
Accenture has demonstrated that federal agencies can lower the cost of their supply chain by 8 to 20 percent through the implementation of leading commercial practices targeting savings in supply chain management.
September 7, 2012
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