SUPPLY CHAIN STANDARD DECEMBER 2008
www.supplychainstandard.com
the underlying performance of the supply chain
so that there are benefits to share between the
parties. Unfortunately, in too many circumstances,
the desire to measure the performance of the
other party leads to sub-optimised supply chains.
● Individual: the relationship should aim to meet
the personal objectives of the individuals.
Agreements should factor in sufficient revenue for
all involved from the dedicated operations manager
to the supplier so that the relationship is optimised.
It is true that there are solutions being
developed in inventory financing and ownership
but these are still very much in their infancy. In
many situations it would be inappropriate for a
3PL to take on inventory as they do not
control the main drivers, but without a
change of focus 3PLs will find it
difficult to change and reap
the rewards of becoming
real partners.
WHO TAKES OWNERSHIP?
performing companies (a full copy of the report can
be obtained by contacting info@obaconsulting.com).
The research focused on how some of the best
companies in the world perform in their supply chain
across the following areas:
● Strategy & Governance
● Learning & Capabilities
● IT Systems
There are some crucial differentiators exhibited by
the top performing organisations.
The programme surveyed, ran workshops and
interviewed over 150 leading organisations.
This research confirmed that common themes
exist among the top performing companies
regardless of the industry. The leading companies
have a sharp focus on the customer, their people,
and the end-to-end supply chain integration. They
are not reliant solely on key supply chain metrics
such as inventory turnover or asset utilisation.
Today’s top performing supply chains require the
different aspects of an organisation, such as its
strategy, capabilities and IT systems along with the
continued on page 8
CHARLES DAVIS IS A
PARTNER AT AT KEARNEY
WHERE HE IS
RESPONSIBLE FOR THE
OPERATIONS PRACTICE
AND HAS EXTENSIVE
EXPERIENCE IN SUPPLY
CHAIN IN THE
CONSUMER GOODS,
RETAIL, PROCESS AND
HIGH-TECH
INDUSTRIES.
STRATEGIES FOR SURVIVAL
As unemployment rises and companies retrench, maintaining
supply chain continuity in a rapidly changing global market
will be challenging.
PENELOPE ODY
We may or may not yet be officially using the “R”
word but with the stock market in freefall, house
prices plummeting and the sterling exchange rate
reminiscent of the 1990s, it certainly feels as
though recession has well and truly arrived.
One of the few economic factors on the increase
is, of course, unemployment – two million or more
out of work in the UK by Christmas, say the
pundits. For anyone involved in supply chains the
numbers imply a raft of looming problems. UK car
sales for example, were down by 18.6 per cent in
August – to the lowest figures since 1966
according to the Society of Motor Manufacturers
and Traders. By October the knock-on effect on the
supply chain was apparent: automotive parts
supplier GKN was predicting a 30 per cent fall in
fourth quarter profits, along with global job cuts
and plant closures, as its shares slumped 20 per
cent. It was one of many companies in a similar
position: in the UK business failures increased by
28 per cent in the third quarter.
In the high street the more gloomy forecasters
were predicting the worst Christmas sales for 30
years – which also inevitably meant cut-backs in
orders from suppliers worldwide. In China, for
example, Wang Zhiguang vice chairman of
Dongguan Toy Industry Association told the
Guangzhou Daily: “..of the 3,800-odd toy
companies in Dongguan, no more than 2,000 are
likely to survive the next couple of years”. “Toy
companies go broke in Dongguan” may seem as
exciting a news headline as “Small earthquake
no-one hurt” but the supply chain considerations
are significant.
Over the past few years it’s been a buyer’s
market: plenty of suppliers to choose from, plenty
of alternative sources, plenty of eager sellers after
your business. As the numbers of buyers dry up
then obviously those numerous suppliers are
fading from the scene – be that the closure of a
local car automotive plant or a remote contract
factory in the Far East. And, of course, shutting
things down is a great deal easier than starting
them up again.
While some pessimistic economic forecasters
make comparisons with the Great Depression of
1929, the more optimistically pragmatic talk in
terms of an 18-month dip in trade. As the orders
are cancelled and production staff join the dole
queues, then trading relationships nurtured over
many years also hit the dust. When demand picks
up, those helpful suppliers at the end of a
telephone might no longer be there to make those
just-in-time deliveries. Instead of having half a
dozen possible component suppliers to choose
SCS:VIEWPOINT 07
from, maybe there will be only two or three – all
with filling order books and premium prices.
Maintaining business continuity and whatever
B2B relationships that can be salvaged from the
current chaos will also be important: keeping track
of people and databases, of capabilities and skills
to get those supply chains moving quickly again
come the day.
Over the past few years much has been said,
and written, about the virtues of global datapools
and trading exchanges, about how easy they can
make it to find new product sources and ensure
information consistency. Much of the message has
fallen on deaf ears as companies prefer to go it
alone in a competitive and booming market.
Perhaps in a year or two such datapools really will
come into their own as the survivors search for
new global trading partners?
Indeed, as the current “downturn” reminds us,
our world is truly “global” and is likely to become
Come that upturn it could
make not only global
sourcing more complex
but global distribution too.
more so. A survey by Deloitte of 105 chief
financial officers, published in October, concluded
that more than half planned to cut current
employee numbers and capital spending while 70
per cent expected to cut future hiring and –
significantly – 29 per cent were contemplating
moving capacity offshore (up from 13 per cent in
a similar survey six months earlier).
Obviously if these “contemplations” turn into
reality then it is bad news for UK plc, equally –
given the global nature of large corporates – it
makes sense from their perspective to move
activities to low cost areas to maximise profitability.
Come that upturn it could make not only global
sourcing more complex but global distribution,
too, as products move to those markets which
emerge most quickly from recession.
Long before the credit crunch hit home,
futurists were talking about the shift eastwards in
economic power as growth in the likes of Russia,
India and China continues to outstrip the
traditional “Western” economies. Who knows what
patterns of trade will emerge when the credit
crunch is finally over?
PENELOPE ODY IS A REGULAR COLUMNIST FOR SCS
AND IS A RETAIL MARKET SPECIALIST.
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