New year: new challenges

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The hazards of trying to manage a long complex supply chain are nowhere better illustrated than by the tragic case of a factory fire in Bangladesh last month which killed more than 100 garment workers.

The Tazreen Fashions factory was making clothes for the world’s largest retailer, Walmart. Only Walmart didn’t know that.

In a statement, Walmart said: “The Tazreen factory was no longer authorised to produce merchandise for Walmart. A supplier subcontracted work to this factory without authorisation and in direct violation of our policies. Today, we have terminated the relationship with that supplier.

“The fact that this occurred is extremely troubling to us, and we will continue to work across the apparel industry to improve fire safety education and training in Bangladesh.”

This tragic event raises serious questions about how supply chains are managed in the current economic climate.

In a unrelated event, Crimson managing director Richard Powell recently argued that the poor economy of 2012 has changed the way the supply chain does business.

“The economic climate has continued to drive an emphasis on price reduction from suppliers to an extreme. The result has been that relationships are confrontational and actually work against collaboration rather than towards co-operation.”

He argues that companies need to take a holistic view of the supply chain rather than just looking at the headline purchase cost.

It’s a point well-made – and it is worth noting that even if companies are not taking a holistic view of their supply chains many of their investors are.

Citigroup has just downgraded Apple shares from “buy” to “neutral” after one of its analysts examined the company’s supply chain. What he found raised questions about the market strength of the iPhone 5.

As the new year looms, all the signs are that growth prospects in the global economy are modest at best. And for supply chain professionals that means a renewed focus on these challenging issues of risk management, visibility and collaboration.

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