Recession will drive radical changes in supply chains

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Companies need to have fitter, leaner and more agile supply chains to deal with the recession, according to LCP Consulting. And it suggests that companies should follow five maxims to deal with the recession.

1. Reduce unprofitable complexity. LCP’s experience shows that 15 per cent of either or both customers and products erode more than 50 per cent of the profit potential. Designing this group out or designing their profitability back in is a key step to connect the supply chain to the company’s performance.

2. Build in customer service excellence. Outstanding performance protects the customer base that you want to keep and avoids the costs to replace them when they leave, as well as making good your mistakes. Operational excellence led by supply chain design and planning is a critical capability.

3. Design, plan and execute for agility. Agility is about fast flexible processes to meet real customer demand and put in place only inventory that will not be a risk to the business. Speed is the key; fast and accurate processes have been shown to improve customer service and reduce inventories and manufacturing assets.

4. Synchronise and integrate to eliminate waste. Most companies have considerable scope to reduce waste. Even those that have applied this generally admit that there is still much more to play for.

5. Collaborate to leverage performance. Building and nurturing key relationships along the supply chain will help them give you more for less; whereas if you just negotiate on price you will miss out on benefits and they will leave you high and dry when times get tough. For many this will be a new skill and mindset. The future will be about co-operating and competing through shared supply, manufacturing capacity, and distribution and logistics; service providers will need to create blocks of scale and give a level of cost and service transparency that has been lacking.

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