04 SCS:NEWS ANALYSIS OCTOBER 2008 SUPPLY CHAIN STANDARD
www.supplychainstandard.com
NEWS ANALYSIS: NICK ALLEN
CSR
Playing an
active role
Corporate Social Responsibility (CSR) is
an increasingly important aspect of
doing business for forward thinking
companies. Many organisations are
appointing corporate responsibility
managers charged with delivering
results against environmental policies
laid down by the board.
Cutting carbon has become
mainstream to the way companies
now think. But ethical trading
practices seem to be taking a little
longer in getting embedded in the
way companies think about their
sourcing policies. That’s not to say
things aren’t being done, there are
many conscientious firms making
great efforts.
However, a new interactive tool
called The Buying Game, launched by
Traidcraft and The Chartered Institute
of Purchasing & Supply, may help
buyers understand purchasing and
supply chain issues.
Users negotiate the supply of the
imaginary‘dimble’product. They have
to decide what to do in a series of
scenarios, for example when a
supplier faces quality problems or a
competitor reduces their retail price.
Case studies of producers run
throughout the game giving insight
into the impact buying decisions can
have on an organisation’s success.
With the damage an ill-considered
decision can have on profitability and
the brand, it’s worth having a look at
www.thebuyinggame.org
SOURCING
Will China suffer in the wake of the Olympics?
Now that the Beijing Olympic Games are over what
will happen to China’s booming economy? Will it
continue to enjoy its position as the world’s emerging
manufacturing powerhouse? Or will rising inflation, a
growing green consciousness in the west and a
slowing global economy have its impact on China as
the primary location for outsourced manufacturing?
The economies of most countries that have hosted
the Olympics suffer in the wake of the games.
According to Datmonitor, economic growth in China is
expected to drop from 11.4 per cent in 2007 to less
than ten per cent in 2008.
But while a drop in China’s growth may be
RETAIL
Taking time out
With consumers facing rising bills for fuel, mortgages and food
there can be little wonder that high street retailers are feeling a
little gloomy. Even the weather is against them.
When times are hard corporate attention turns to improving
working capital through changing payment terms with
suppliers or lowering levels of inventory. Alliance Boots
recently put the cat among the pigeons by making suppliers
wait up to 75 days for payment of invoices and several leading
retail groups are even turning to their landlords to secure rental
payments on a monthly, rather than three monthly, basis. With
pressures like these, cash is becoming more important than
profit and when that happens, margins suffer.
Those that are winning sales on the high street are at the
discount end, where middle-class shoppers trim costs by
shifting from the likes of Marks & Spencer to Primark. Here the
battle is fought over delivering value to the customer while
ensuring that the cash-to-cash cycle is highly tuned.
If a retailer is going to stand its ground then it is going to
have to ensure that its processes are well defined and IT
inevitable, is there an underlying shift in foreign
strategic investment plans and sourcing policies?
Figures published recently in the“Financial Times”
pointed to the fact that foreign direct investment from
the European Union into China fell steeply last year
from 6bn euros in 2006 to 1.8bn euros. In contrast,
India experienced an increase from 2.5bn euros in
2006 to 10.9bn euros last year. And Russia saw foreign
investment soar from 10.6bn euros to 17.1bn euros.
One explanation was that European businesses
were looking to central and eastern Europe as a
plausible alternative to China for moving production.
Interestingly, this supports the findings from the
appropriately aligned to those processes. Visibility across the
chain needs to be crystal clear. But the richest pickings will be
in thinking outside the box regarding opportunities for
collaboration. Invariably, that means starting open discussions
with key suppliers over areas of mutual advantage – that may
be sharing epos data, forecasts, transport and logistics
arrangements, or talking of ways of taking entire links out of
the chain. And it’s this sort of radical thinking that is required.
Wal-Mart is working on such an initiative with P&G in the
States, whereby sales data is not used to forecast demand but
to schedule replenishment deliveries on a store-by-store basis.
Significantly, shipments are tailored for each store at the
factory and cross-docked at the Wal-Mart distribution centre
fordeliverytostore.
In this way P&G’s distribution centre can be bypassed,
removing a whole link from the chain and radically cutting
time from factory to shelf - some ten days in this instance.
Collaboration is going to be the key to taking cost out of
the supply chain and speeding the cash-to-cash cycle.
Supply Chain Standard/YouGov survey conducted in
the spring which found that of those surveyed who
outsource the manufacture of goods to low-cost
economies, 71 per cent saw an impact of rising oil
prices on their sourcing decisions. Most supply chain
directors and purchasing directors surveyed had
noticed an increase in costs for goods manufactured
in China and sound bites indicated that many are
looking to bring manufacturing closer to home, with
several citing eastern Europe as a likely location.
I’m sure China’s economy will continue to blossom.
|Just how the UK’s will be doing after the 2012
Olympics is another question.
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