The 2:00 Minute Warning

Here is a quick question for you: “How much does it cost to do nothing?” More specifically: “When it comes to managing your freight costs and supply chain, how much is doing nothing costing your company?”
 
For traditional manufacturers, retailers or distributors with revenues under $1 billion, the answer to that question is about 1% of your sales. Do the math. If you have $100,000,000 in sales revenues, chances are pretty good that your company's indifference / inactions to having a great supply chain is costing you about $1,000,000 per year. That’s the 1% profitability factor!

When my friend, Adrian Gonzalez invited me onto his recent Talking Logistics podcast, we addressed this issue in more depth. Adrian and I have both witnessed an interesting phenomena in the marketplace: While many C-Level executives talk about the importance of supply chains, their actions say something else: Having a great supply is just not a top priority! This isn't just Mike or Adrian’s opinion. Several consulting companies such as McKinsey and others have also addressed how supply chain issues can adversely affect a company's financial performance. 
 
In the podcast, I shared that over the years I have given several talks to about 3000 C-Level executives about supply chain issues. In these talks I ask them to do two things. First, when asked to stand up if having a good supply chain is critical to their company's success, virtually 100% stand up.

Second, I ask them to rate their supply chains on a 5 point scale in which 5’s represent world class supply chains, and 1’s represent companies with a “Third World” (a.k.a. weak) supply chain. When told that they can keep standing if they rate their supply chains as a 3 or higher, about 80% sit down. Despite saying that having a good supply chain is critical to their company's success, they rate their supply chains as being average or worse.

As we addressed in the interview, when it comes to building a good or great supply chain, there is a very significant gap between what these executives say and what these executives do. 
 
Perhaps that is why this interview has drawn such a strong response. In this snippet from the podcast, we note the consequences or impact of this "Say vs. Do" gap: The message to C-Level executives is direct: Average or mediocre supply chains can be very costly and have a significant impact on your company's balance sheet and financial statements!
 
That is why this question, “What does it cost to do nothing if you're managing a supply chain?” is such an important question. With 2025 approaching quickly, is it time to rethink your company's plans for next year and ask: "Do we want to continue giving away 1% of our profitability? Or is it time to stop accepting the status quo and commit to building a great supply chain that improves processes and improves our balance sheet and bottom line profitability?”

Before leaving, allow me to share a final note. Based on experience, we know that often times when C-Level executives are challenged with the need to invest in their supply chains, they will say: "I can’t / or won’t invest money now right now to improve my supply chain. We have 'other' priorities.” 

Upon hearing that, our response is pretty direct. “You can fix it now, or keep on paying forever!” Your supply chain issues aren't going to magically disappear! You can either invest the resources right now and improve your balance sheet and drive more profitability to your bottom line, or you can remain "status quo," and do nothing. But there are consequences from having an average (or even mediocre) supply chain that wastes money and resources. Can you afford to overlook or ignore your supply chain issues?

Companies with outstanding supply chains may not need to make changes. But if you are one of the 85% of executives that wants to have something better than an average supply chain, I have great news!

TranzAct, has some great tools. Even one of our solutions or recommendations could free up significant savings that can be reinvested and bring even greater savings to your bottom line. Let's have a conversation about what building a great supply chain will mean for your company. Simply give us a call, send me an email, or let’s meet via Calendly.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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