Supply chains hold the key to survival

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Supply chains hold the key to survival for thousands of companies caught up in the global economic downturn like never before… The next eighteen months will see supply chain issues come under the microscope on an unprecedented scale as the impact of the worldwide credit crunch hits home on the high street.

The fall-out from the American credit squeeze is being felt across the world and companies are going to have to act if they’re to remain viable. Tightening of credit conditions for the consumer, combined with the inflationary impact of rising oil and food costs globally, means that there is less money to be spent on the high street. Companies are faced with a set of choices: to produce and sell more – an unlikely remedy given the state of the world economy – or to reduce costs, adding that the cost reduction route can be approached negatively, through reactive lay-offs, or positively by proactively driving supply chain efficiency.

With rising annual logistics costs now representing ten per cent of GDP, and inventory-holding costs generally held to range between some 15 per cent for slow-moving products and as much as 45 per cent for fast-moving lines such as fashion goods, it’s clear that opportunities exist for significant cost reduction through re-focusing on supply chain efficiency.

Streamlining and optimising are the operative words, and with the software now available to pinpoint precisely where and how savings can be made in the supply chain, inventory management and network optimisation tools represent the most effective way ahead.

The past twelve years of economic growth have made UK companies complacent about consistent re-examination of their supply chains – but the next eighteen months are set to witness a dramatic reversal of the trend as the need to free-up capital takes on a new urgency.

In times of boom, people don’t focus on costs – they’re too busy focusing on getting the product to market. But when a downturn happens and the pressure’s on, the focus must return to cost containment within the supply chain and evaluating opportunities in every area involving sourcing, manufacturing, transport and warehousing.

This recession is likely to prove different to past recessions in that IT and software now offer the most reliable buffer to the impact of economic pressures from outside.

Volatility and uncertainties in a number of key operating areas have prompted an increasing number of companies to review their supply chain strategies and forward-planning procedures, and that the trend is set to gain momentum as the credit crunch continues to bite.

The speed of change in global markets, rocketing fuel prices, the growing industrial aspirations of China, Russia, India and other regions, and the after-shock of the US financial situation are all combining to force companies to face up to the major benefits that can be achieved through effective supply chain planning and management. It’s my prediction that supply chain IT and software, in the form of proven point solutions delivering rapid ROI will ultimately hold the key to survival.

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