When the crunch bites

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How might the credit crunch affect your supply chain? Although there has been much talk of the impact of the crisis on the mortgage market, little evidence has, as yet, emerged of it directly affecting the ‘real economy’ this side of the Atlantic. According to figures released in the last few days by the UK office for National Statistics, UK factory output has risen at its strongest annual rate in more than a year, rising 0.4 per cent. And most German business surveys reflect an air of optimism.

But consumers may well be starting to tighten their belts. The latest survey by the British Retail Consortium shows that March was the slackest month on the high street in two years.

As the year progresses it seems implausible that there will not be a slowing of Europe’s economies. Dwindling supplies of cheap money may also have a direct impact on cash within the organisation. Under these circumstances the efficiency with which a supply chain is managed will prove a decisive factor in how the financial performance of the company fares. Much will depend on how the organisation manages its inventory, how it forecasts demand and how it plans and responds to market moves. Over exposure to an inventory build up under such conditions can leave a business with less cash, more expensive borrowings and, perhaps, redundant stock. A few might recall Cisco’s disastrous $2.25bn inventory write-off back in 2001.

With tighter credit conditions more companies will look to see just how they can best release the cash locked up in the business. The key will be in understanding the end-to-end cash cycle time of the business.

All things considered, this could well be the right time to invest in tools that help you understand the mechanics of your supply chain. Having visibility and control is just what’s needed in times of uncertainty.





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