By Daniel Hunter
A combination of natural disasters, changing consumer demands and economic uncertainty have led many organisations to conclude that their supply chain operations are no longer fit for purpose.
However, recognition that a radical overhaul is necessary to improve performance is yet to result in agreement on the steps needed to transform business operations.
According to a report by KPMG, most UK organisations are adopting short-term tactics in the hope it keeps their supply chain ticking over. Only a minority are fully reorganising business operations to ensure they are able to cope with volatile levels of demand.
“Now is not the time to batten down the hatches and weather the storm. Business leaders who do will emerge only to find that opportunity has already passed them by," says Andrew Underwood, head of supply chain at KPMG Management Consulting.
"Instead, the time is right for organisations to adopt an agile approach to their supply chain and accept that the ‘one size fits all’ approach is no longer relevant in a multi-channel marketplace.”
The findings, which are based on the views of supply chain directors within FTSE-100 organisations, suggest that the UK’s executives are focused on 4 core approaches to improve supply chain maturity:
- accepting that cost-cutting measures over the past 4 years has not gone far enough, with many now identifying and implementing additional opportunities for reducing costs within, and across, their supply chain
- adopting new, low-cost, technologies to enhance transparency for customers and facilitate collaboration amongst partners
- making use of outsourcing and shared service centres to consolidate order taking, financing, logistics planning and wider elements of logistics execution
- driving better collaboration across the supply chain by integrating sales and operations planning processes.
The report goes on to suggest that C-suite executives are also concerned that efforts to reduce expenditure will be undermined by rising costs, beyond their control. Asked to identify the area most likely to have a negative impact on overhead reduction plans, respondents cited the potential cost new legislation and regulation may bring to company balance sheets.
The report quotes beverage companies in Europe, for example, trying to grapple with how proposed sugar taxes and bottling deposit requirements will impact their margins. It also highlights how, across the globe, carbon taxes, whilst viewed as necessary, are raising concerns around who will bear the brunt of the additional expense.
Respondents also suggest that with rising fuel costs, property increasing in value in Emerging Markets and labour costs also mounting, their ability to manage supply chain costs will be under threat for some time.
Andrew Underwood concludes: “New patterns of customer behaviour are combining with a range of game-changing pressures on the supply chain to put pressure on executives at the point they thought positive news about the economy would help them. It remains to be seen whether the upturn in economic fortunes translates to more available finance as, without it, organisations’ ability to improve their supply chain will remain under threat.”
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