UnitedLog asked Logipi to interview supply chain thought leaders from around the world to hear their views on how the recession has impacted supply chain management. They asked 4 questions to these supply chain professionals, the following is a summary of one of these questions:

 Are there ways of working that need to be changed, either as a direct effect of the
economic downfall or more as to help avoid dire consequences in the future?

Leadership

David Ryan strongly believes that leadership is responsible for forward-thinking strategy and for the tactical execution. Progressive companies functioning in a vigilant and predictive mode, who are proactive and really thinking about the opportunities will always be innovating throughout the value chain. Supply chain management is a key component
of this and can help mitigate the effect of economic cycles and weather the storm better than some, if not most, competitors. These companies will be better positioned to capitalize when things do turn around and the cycle starts swinging back up.

Responsiveness and Efficiency

John Charnovich says that responsiveness is going to trump efficiency. In the past profits have come from very efficient and stable supply chains. In the future, being able to handle these disruptions and being able to be flexible will be most important. No longer is your customer just your customer. Your customer is your partner. You need to be responsive, your ability to be flexible and to work with your network in the supply chain will drive more profits than an inflexible, inefficient supply chain. Collaboration and responsiveness are key drivers moving forward.

Creative Thinking

Patricia Moser says that the "new normal" requires new thinking. Companies can no longer afford to give services away in the name of enhanced customer relations. Now is the time to practice and perfect "demand shaping", which means listening to customer’s wants and needs, and then responding with solutions that make sound economic sense for their organizations, and for yours.  Patricia Moser says that sales and supply chain need to be more strongly linked. The sales organization cannot promise things that operationally are not possible. Instead of simply giving the client whatever they ask for regardless of the impact to their bottom line, companies need to manage their customer’s expectations more effectively and try to determine what products and services the corporation has to offer that can often be as good, if not better that what they have.

Impact of Inventory

David Schneider says that CEOs are increasingly recognizing that inventory has a huge impact on the bottom line, not just how much inventory do I have, but at what point do I buy it, at what point do I control it, where do I change it, where do I recognize that it’s on my books? All of those pieces have become much more up in front in the decision processes, and they’re starting to understand those decision processes.  Patricia Moser says that many companies now have obsolete inventory that they allowed clients to return without penalty. Logistics agreements include multiple deliveries in a week versus consolidated deliveries, which not only affects the bottom line, but also increases a company's carbon footprint. Because we are operating in a very different business environment, one that many analysts say is "the new normal," now is time for companies to "retrench" and re-examine issues surrounding processes and procedures. In retrospect, perhaps these are challenges that should have been addressed prior to the economic downturn, and before sustainability catapulted from a "nice to have" to a "must have."

Localization

Paula Rosenblum discusses how many people believe that maintaining a sourcing base in one's own country is a sound business practice. Unless we are really willing to tear down our borders and be a true global village (something many are NOT advocating), then we need to be somewhat self-sustaining. This means we need the capability to build cars and trucks, make clothes, and grow enough food so that we can have enough to eat. The US has become a debtor nation, and therefore does not control its own destiny anymore. Many Americans are very uncomfortable with that.

Innovation

Pavan Vyas points out that over the twenty months or so that we’ve been in this recession, we’ve seen companies focusing on short-term strategies to ride out the recession. In the IT sector, companies will need to guard against losing the pulse of innovation, or they will need to guard against letting go of good opportunities just because there is no evident business gains at the current time.  Being the low cost leader is no longer sufficient nor will it be the sole differentiator of companies as it has been in the past. It isn’t enough to just be a cost leader or to bring out new products and services within the shortest time. It is now necessary for companies to look at the interplays of both business model innovation and new product development.  Mike Star says companies will need to focus on their core business and what differentiates them, whether it’s driving their brand, a manufacturing competency, etc. Companies will need to turn towards partners that specialize in providing innovation, best practices, technology to meet the supply chain challenges of the future.

Risk Management

Dylan Persaud says that one of the major shifts in thinking is the ability to determine risk and the consequences of not assessing them properly. Organizations should do more due diligence in assessing what the possibilities are for a failed implementation, the impact on their business, bad publicity, poor quality from suppliers, and its effect on their business.  Regarding due diligence, Atif Moin says companies need to have back-up suppliers, whether 3PLs or sources of supply. If you depend solely on one supplier your product may come to a halt if that supplier goes bankrupt.  Dylan Persaud goes on to say to assess the risk, do the necessary due diligence but don’t get carried away with projects or where you start missing the point of what the implementation was supposed to solve – running your business better.

Examples

1. With smaller companies who need to manage their spend, they have been working more towards pricing co-ops, in order to be able to get greater, better pricing and to also provide an opportunity to potentially share in profits of a group of clients versus single individual clients. Obviously, they have greater potential for volume discounts if they ban together in co-ops.

2. A lot of consumer goods companies right now are really looking to invest and to improve their trade promotions spend, and, in fact, in consumer goods companies, trade promotion spend tends to be one of the top three highest spend categories in those companies. And so, what they’re doing is they’re really forcing them to look at where they’re spending that money, where the profitability is, and really looking to reduce the number of SKUs and brands that they have in their companies when they recognize that a lot of these aren’t profitable brands and that they’re really satisfying a minority part of their customer base, and it’s adding a lot of complexity to their supply chain, and, of course, when they’re adding that complexity, they’re also adding a lot of cost and, in a lot of cases, a lot of inventory that perhaps doesn’t make its way through the supply chain to the end customer. 

3. Companies are now improving freight capacity utilization in their long-haul trucking, and there are actually services that now work freight on return trips for long-haul carriers that were otherwise coming back empty. So, that’s an excellent example of innovation spurred by not only need, but also an opportunity to improve the chain, in this case logistics.

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