Strategic responses to supply chain trends
While forecasts are as fickle as the future they predict, trends are often more reliable, and preparations for these trends are within the capabilities of every company in every industry.
some directions Businesses must prepare for increased interest rates, global political and economic turmoil, increased efforts to reduce carbon emissions, and digital transformation. Here are some ideas on how to prepare.
Increase interest rates
The Fed has made it clear that interest rates are likely to rise again. Once they go up, they are unlikely to come down soon. In an era of tight credit and high interest rates, growth can no longer depend on investment. Instead, companies should adopt a three-pronged approach to freeing up working capital – by improving accounts payable and accruals, reducing costs and inventory, and improving services.
Higher interest rates should reduce consumer spending and demand. However, consumer spending is showing a continuous upward trend. Strategies to optimize network design and effects, reallocate resources quickly, and prepare suppliers for changing needs enable companies to meet demand, whether it is increasing or decreasing.
Global unrest will continue somewhere and sometime. Companies that focus their sourcing on a single supplier or in a single country are at greater risk than those with multiple suppliers in multiple regions. Supplier choices start with a strategic procurement department, not just a transactional one, that evaluates, manages and negotiates with suppliers, and understands sourcing allies. Communication between Procurement, Operations, Engineering and Logistics ensures that everyone is involved in the strategic role of Procurement.
By adding local, offshore and offshore suppliers to the mix, companies have the opportunity to not only enhance their supply chain but also rethink their logistics. A 3C (capacity, capacity, and cost) assessment determines whether a change in the location or size of manufacturing facilities, warehouses, and distribution centers is warranted. The improved network also enables transportation options that may reduce greenhouse gas (GHG) emissions and lead to significant cost savings.
Reduce carbon footprint
Pressure to control greenhouse gas emissions is mounting as the world approaches the deadline for cutting carbon dioxide emissions in 2030 and 2050.2 emissions. But carbon capture, utilization and storage (CCUS) technologies are still in their infancy, and companies that introduce them are at risk of failure. To make smart decisions, companies need a playbook and risk model to guide their assessment of energy transition companies and technologies. The comprehensive 360-degree sustainability forecast considers the costs, risks and impact of CCS strategies across the supply chain.
Clear goals and reliable data are also essential to meeting consumer and regulatory requirements regarding sustainability. However, definitions of “sustainability” vary from company to company, consumer to consumer, and country to country. Collaboration between companies can give them a boost to meet regulatory requirements by setting industry-wide goals, baselines, and standards and helping everyone avoid the costs of duplicating efforts.
To build collaboration within industries and with regulators, a company needs reliable, long-term emissions data from which to establish a baseline and verify improvements. Companies with well-defined KPIs and responsibility are in the best position to provide that data.
As more functions are automated—from IoT sensors to communications with customers—more data accumulates. But more data does not necessarily translate into better or more accessible data. Companies often struggle to create monitoring and reporting processes and technologies that support data-driven decision-making and give leaders clear visibility into the entire supply chain to plan, manufacture, purchase and move.
Before adopting any new technology, companies need to consider its operational readiness and the maturity of its operations. Automating a flawed process only entrenches flaws. Supply chain mapping identifies real gaps and opportunities in a company’s supply chain. A comprehensive assessment of every person, role, function, process, and system in your company, combined with a robust sales, inventory, and operations (SIOP) planning process, prepares the company to close these gaps and seize opportunities.
Once processes are optimized, communication ensures that data flows between functions and is available to the executive group. Leadership and organizational improvements may be necessary to establish clear owner-responsible, consulting and reporting (ORCI) roles, and removing silos. Executive dashboards can be created with self-generated reports to present data with speed and organization that enables quick data-driven decision-making.
What do these trends mean?
Businesses will always face the unexpected and unexpected. Economic turmoil, geopolitical instability, new regulatory mandates, and an artificial intelligence revolution are clearly visible trends – no crystal ball needed. The hard part is knowing how to prepare for these supply chain trends strategically.
Proposed strategies to prepare the company for any disruptions, whether expected or not. Through a three-pronged approach to freeing up working capital, suppliers, geographic choices, collaboration, clear communication within and between functions, companies and suppliers, and improved processes, the company gains the flexibility it needs to achieve profit and growth while facing all challenges. .
Matthew Lickstotis is CEO of SGS Maine Pointe.