Supply Chain Capability ‘White Paper’
Why Supply Chain Capability Should Sit at the
Centre of Your Business Strategy
Every product business is a supply chain business. But not every business treats it that way.
Over the past decade, high-performing companies have quietly elevated supply chain capability from a back-office function to a central pillar of business strategy. The result? Better customer service, lower inventory holding, stronger margins, and faster response to market changes.
Meanwhile, those that underinvest in supply chain capability? They’ve been caught out — especially during periods of volatility.
The Strategic Benefits of Investing in Supply Chain Capability
Faster Response to Demand and Disruption
Companies with structured planning processes respond more quickly to demand shifts, supplier delays, or logistics disruption. According to McKinsey, organisations that had advanced supply chain visibility and agility during COVID recovered 2x faster than peers.
Lower Working Capital and Higher Inventory Turns
Best-in-class supply chains typically turn inventory 15–30% faster than industry averages. That means less capital tied up, less stock sitting idle, and more room to invest elsewhere.
Margin Protection
A well-run supply chain reduces cost variability through better sourcing, order quantities, and inbound freight control. According to Deloitte, mature procurement and supply chain functions can protect 3–6% of gross margin.
Stronger Supplier Performance
High-performing businesses don't just track supplier performance — they collaborate. This reduces lead time variability and improves delivery accuracy.
Cross-Functional Alignment
With sales, finance and operations aligned through structured S&OP or planning processes, inventory becomes a strategic asset — not a battleground.
What the Results Look Like
I’ve worked with businesses that have:
- Freed up $500K–$5M in working capital by right-sizing stock
- Cut backorders by 20–30% within three months
- Reduced annual carrying costs by 10–15%
- Shortened lead times through supplier engagement and data-led planning
In every case, the payoff wasn’t just operational, it showed real results on the P&L and balance sheet.
The Cost of Getting It Wrong
Businesses that treat supply chain as “just operations” often:
- Hold too much of the wrong stock, too little of the right
- Burn cash on storage, freight and markdowns
- Miss growth opportunities because they can’t deliver at scale
- Suffer poor customer service and eroding trust
In fact, a Bain & Company study found that poor inventory management alone accounts for 3–5% margin erosion annually. That’s not taking into account the additional carrying costs a business pays for through holding excess inventory. Or the expedite freight fees on urgent orders.
Case in Point: Kmart Australia
Kmart has become one of Australia’s most efficient retailers by making supply chain capability a strategic asset.
- Inventory turns: ~8–9x per year
- Gross margin: 33–34%
- Inventory balance (Wesfarmers FY24): A$6.1B – stable while revenue grew to A$11.1B
They’ve done this by simplifying product lines, owning private label, and building strong planning and replenishment disciplines. They’ve built a model that’s profitable, scalable and disciplined.
How to Start
Supply chain capability doesn’t require a million-dollar ERP. But it does require:
- Clear planning logic
- Defined inventory ownership
- Supplier collaboration
- Reliable data
- Cross-functional decision-making
It’s a mindset shift, from reactive ordering to managing your supply chain as a strategic enabler.
Final Thought
If you run a product-based business, your supply chain is your business. Just like marketing and advertising campaigns are hyper focused – your supply chain needs to be to. Otherwise, you’re leaving your inventory – what you sell – to chance.
Treating it this way unlocks speed, resilience, and profit that your competitors won’t be able to match.
Sources
· McKinsey & Co., “How COVID-19 Has Pushed Companies Over the Technology Tipping Point”, 2021
· APQC Benchmarking Portal, Inventory Turns by Industry, 2023
· Deloitte CPO Survey, 2022
· Bain & Company, “Getting Inventory Right”, 2018
· Wesfarmers FY24 Annual Results, 2024