Broken links in the supply chain

By Andrew Underwood, UK Head of Supply Chain

At first glance, little seems to have changed over the past twelve months.  Yes, the economy in the UK is picking up – but look at the global picture and it quickly becomes clear that some countries are still stumbling through the economic crisis.  It’s a scenario which means questions must be asked about whether the interdependence that knits partnering organisations together is at a high enough level to help business prosper today, and in the long-term.

 

The uncertainty that persists does, after all, have a dramatic impact on the supply chain.  The logic is a simple one – if market strength is immature, could the same be said of supply chains?

 

According to KPMG’s latest examination of supply chain maturity the answer is a resounding ‘yes’.  Cost and profitability has, unsurprisingly, come under intense scrutiny over the past few years, but the indications are there to suggest that there is still a lot of work that organisations can do to reduce spend, especially as they look to open new customer channels.

 

Supply chain directors also claim, in the research, that they are grappling with demand volatility. Their answer is to develop stronger collaboration with suppliers and customers in order to improve planning and reduce fluctuations.  Perhaps this is the start of a trend? Could we finally be on the cusp of a business revolution – where instead of focusing on a ‘dive and conquer’ approach, organisations co-operate to reduce risks, improve governance and positively influence the bottom line as a result?

 

Of course, reducing risk and improving checks and balances is not the only way to rescue or strengthen the supply chain.  You can have all the fail-safe procedures in place, but you cannot plan for everything.  With this in mind, I believe that supply chain directors need to focus on bringing agility to their environment.  It’s not just to manage current volatility in the markets, but also to put their organisation in a competitive position once the long-awaited upturn finally arrives.

 

Why? Simply because the organisations that will flourish in a post-recessionary world will be the ones using this time as an opportunity to better position their businesses for growth.  Now is not the time to batten down the hatches and weather the storm.  Business leaders who do will emerge only to find that opportunity has already passed them by.  Instead, the time is right for organisations to adopt an agile approach to their supply chain and accept that the ‘one size fits all’ approach is no longer relevant in a multi-channel marketplace.

 

The reason is that the marketplace and supply chain landscape is changing.  Despite efforts to reduce traditional costs, others only seem set to rise over the coming years.  One particular area of concern revolves around the potential cost new legislation and regulation may bring to company balance sheets.  Think, for example, about the impact of carbon taxes, rising fuel duty costs and the increasing levels of expense around property and operating assets.

 

And don’t forget about the financial implications of keeping up with consumer demand.  Technology is at the forefront here, with cloud computing models and the wider adoption of shared services models beginning to force a re-think about how operating models will change in the future.

 

Put all of this together and it is clear that something needs to be done.  My view is that there are 4 routes towards a sustainable supply chain:

 

  • accepting that cost-cutting measures over the past 4 years has not gone far enough, and that implementing additional opportunities for reducing costs within, and across, the supply chain is essential
  • adopting new, low-cost, technologies to enhance transparency for customers and facilitate collaboration amongst partners
  • making use of outsourcing and shared service centres to consolidate order taking, financing, logistics planning and wider elements of logistics execution
  • driving better collaboration across the supply chain by integrating sales and operations planning processes.

New patterns of customer behaviour are combining with a range of game-changing pressures on the supply chain to put pressure on executives at the point they thought positive news about the economy would help them. That’s why action needs to be taken.  Without any, organisations’ ability to improve their supply chain will remain under threat.

 

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