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Cost reduction and Profit improvement are completely different initiatives.
It’s a new fiscal year and many supply chain teams have embarked on cost reduction initiatives. A word of caution for them…
The cost reduction initiatives I have seen in many companies take a very narrow view and focus on only one element of cost at a time, often ignoring their impact on other cost elements as well as on revenue and inventory. The underlying assumption is that everything else will be business as usual, which is rarely the case due to interdependencies in an interconnected complex system like supply chain.
My suggestion would be to take each initiative and consider its wider impact on the entire system. We should move away from local cost optimisation to global systems optimisation.
Of course, a much better option is to convert the project to profit maximisation, which takes a systems view of the business.