Amid inflationary pressures, lingering supply chain disruptions, rising tariffs, and persistent labor shortages, the answer for many is “not quite.”
But falling short doesn’t have to be a foregone conclusion. What is it that separates companies that meet or exceed their AOP targets from those that miss? Often, it’s not heroic forecasting or lucky breaks, but rather the ability to realign, refocus, and execute across the key operational drivers that have the most influence on growth and profitability.
Recalibrate Sourcing to Protect Margins
Many companies treat sourcing as a one-time negotiation or as a more static part of procurement. But in today’s volatile climate, smart sourcing must be an active discipline, and one that tangibly influences profit margins.
A good place to start is to audit your current supplier mix and ask the right questions to see if it still aligns with your strategy and needs. For example, are you leaning too heavily on vendors in any particular region, or utilizing only those that are a certain size? Are legacy contracts still serving their purposes, or has the time come for an update to bring them in line with prevailing market conditions?
Too often, companies simply don’t realize how bloated and inefficient their supplier portfolios can get – until someone like TBM shines a spotlight on it. In this environment, manufacturers should be looking for opportunities to consolidate vendors, renegotiate contracts based on changing market dynamics, and formalize backup plans to mitigate future disruptions.
At the end of the day, your sourcing strategy is a delicate balancing act, including cost, quality, agility, and risk. Companies should move beyond the mindset of obtaining materials mainly due to their low prices. It’s more about ensuring you have access to the right suppliers at the right times, which can do wonders to ease market anxiety.
Make Supply Chain Visibility a Competitive Advantage
The pandemic exposed just how brittle supply chains can be. While most companies have moved on from the worst of those disruptions, few have truly reinvented their supply chain approach for long-term resilience.
Today, visibility and communication are more important than ever. Firms that establish strong lines of collaboration with vendors and keep up a two-way flow of information and insight sharing, are better positioned to respond to shocks, delays, and price swings.
Achieving a high level of visibility requires some digital dexterity. Companies that invest in the right technology platforms – be it for inventory management, supplier scorecards, or predictive analytics – have a better view of what’s coming next and can act accordingly. A digital-first supply chain strategy isn’t a luxury anymore. It is a requirement for competitiveness.
Just as important is making sure quality oversight isn’t falling through the cracks. Every defect or delay caused by subpar materials creates costly headaches downstream. Tighter quality controls, real-time monitoring, and shared accountability across the chain can go a long way toward maintaining throughput and keeping AOP progress on track.
Control Costs Through Smarter Operations, Not Cuts
Cost pressure is always a factor – what matters most is how organizations manage it. In our experience, too many tend to respond with broad cost-cutting, which can hurt performance over time. The organizations that manage costs well, on the other hand, target operational inefficiencies and reinvest the gains towards growth.
One of the best places to start looking for inconsistency or unnecessary cost is in process variation. Complex processes with lots of exceptions and workarounds are ripe for optimization, as is every changeover that slows the line or redundant approval step that delays completion and delivery.
An underappreciated cost lever is your equipment and its reliability. Unplanned downtime saps productivity and profitability, and too many companies are stuck in reactive maintenance mode – fixing something only when they need to. Predictive maintenance tools, made possible through sensors and AI, are showing their worth by helping organizations avoid expensive surprises and extend asset life.
Ultimately, a culture of cost awareness – not cost fear – should be the endgame. Get teams thinking in terms of value-added activities and empower them to identify and solve pain points. Often, the biggest savings come from the shop floor, not the boardroom.
Invest in People to Build Agility
“Our people are our greatest asset.” Firms say it frequently, but the evidence doesn’t always support it. High turnover, skills gaps, and worker disengagement are all common challenges across sectors. And yet, AOP success hinges on execution… and people execute.
Building agility requires more than just filling open roles. It means stabilizing your teams, cross-training employees so they can flex as needed, and cultivating leaders at every level. Frontline workers, in particular, often have the best insight into inefficiencies and opportunities—but they need the tools, trust, and training to take action. Once their ideas or solutions are heard, or even acted upon, it is like a magic pixie dust of empowerment and motivation.
In fact, investing in people can be one of the most effective forms of cost control. When teams are engaged and well trained, error rates drop, productivity rises, and organizations can avoid the churn that drives up HR and recruiting costs.
Also, don’t underestimate the power of process standardization to support people. Clear expectations, visual workflows, and lean practices help eliminate ambiguity and create more predictable outcomes.
Organizations that thrive treat improvement as a muscle that is continuously cared for, trained, and refined. This means monitoring performance consistently, surfacing opportunities, and acting on them quickly and decisively. While there will always be external challenges, these four areas – strategic sourcing, intelligent supply chain management, lean operations, and empowering your people – are all levers that companies can pull. Strengthen them, continuously, and you will be better equipped to meet your AOP goals not just this year but every year.
