Posted by Mark Brousseau
The drive to control operating costs and improve efficiencies by global businesses during recession has the potential to create new risk exposures within supply chains according to insurer ACE European Group (ACE).
Speaking at The Economist Risk Summit in London, Phil Wall - Senior Account Engineer at ACE, urged businesses to recognise that initiatives designed to reduce costs and streamline operations can create unforeseen side effects, such as increasing property loss and business interruption exposures within their supply chains.
He also called on businesses to consider adopting specific measures to mitigate these exposures. These include more rigorous risk identification, ‘best of class’ loss prevention standards in supply chains, greater communication with suppliers, and creating more robust alternative supplier arrangements.
The supply chain has been a key area of focus during the economic downturn, with companies adopting a number of different measures to achieve cost savings - in a recent survey sponsored by ACE, it was revealed that close to 60% of global businesses had negotiated lower prices with suppliers over the last year. Other measures taken by businesses include more outsourcing to third party suppliers, the placing of larger contracts with a reduced number of suppliers to achieve economies of scale, the consolidation of operations into large production facilities, the use of ‘mega’ distribution warehouses and a move to ‘just-in-time’ production.
Wall said: “Whilst such measures represent short-term gains on the balance sheet, businesses need to be aware of the potential impact of these initiatives and understand the additional longer term exposures that may come with these. The failure of one supplier in a small chain or an incident in a large scale warehouse creates very real and major risk exposures that could significantly damage a company.”
The use of suppliers in new and more cost effective territories is one area that highlights the scale of the new risk exposures. Wall explained: “These emerging markets can look like attractive options with cheaper labour costs. However, issues such as unknown loss prevention standards, political and infrastructure uncertainty, cultural differences and unforeseen natural hazard exposures can make them riskier and more costly options in the long-term.”
Wall called on the Summit audience of senior European executives involved in risk, strategy, finance and compliance across a broad range of industry sectors, to ensure the appropriate level of focus on the identification of new and emerging risk exposures is being applied within their organisations. He also urged businesses to demand “best of class” property loss prevention standards at critical facilities to help ensure that the supply chain is protected. In addition he advocated building stronger relationships, adopting a team approach with key suppliers to identify potential exposures and agree action plans to address them and identifying alternative suppliers to minimise the interruption in the supply chain.
Wall concluded: “Supply chain risk management needs more Board-level priority. Businesses cannot afford to underestimate the potential impact of these emerging risks.”
What do you think?
Showing posts with label supply chain management. Show all posts
Showing posts with label supply chain management. Show all posts
Thursday, November 19, 2009
Wednesday, September 23, 2009
Companies Eye Supply Chains
Posted by Mark Brousseau
Economic pressures are forcing companies to employ their supply chains, primarily the sourcing and procurement functions, to contain costs and boost revenue, according to the 2009 Global Survey of Supply Chain Progress from CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals (CSCMP) and Michigan State University (MSU).
The survey, completed by supply chain executives representing more than 20 industries and every major geographical segment of the world, shows the extent to which the economy has impacted the supply management function. Survey respondents cited an immediate need to cut costs as the top economic pressure on their supply chains. An overwhelming 88 percent of respondents have set objectives for purchasing to generate cost savings in the next 12 months.
This enhanced focus on supply chain management (SCM) demonstrates its use as a counter-cyclical tool for improved business performance.
"The global economic downturn has impacted every aspect of business operations, and supply chain is no exception," said Chuck Poirier, author of several books on SCM and a partner in CSC's Global Business Solutions and Services group. "In the face of a renewed focus on cost reduction, supply chain management continues to show a positive impact on business performance. During the past year companies have turned to their supply chains to cut costs and grow revenues. To a large degree, the supply chain has delivered, helping companies get through some tough times."
The survey shows 33 percent of respondents indicate they leveraged supply chain initiatives to reduce costs between one to five percent in the last three years. Twenty-seven percent report realizing even higher cost reductions, ranging from six to 10 percent. "These results were comparable to last year's," said Poirier. "However, the most significant improvement over 2008 was in the number of respondents who reported no impact - or did not know the impact - of supply chain initiatives on costs. That number dropped significantly, from 22 percent in 2008 to 13 percent in this year's survey."
In spite of the difficult economy, 32 percent of respondents saw their revenues increase between one to five percent in the past three years as a result of supply chain initiatives, while another 24 percent identified revenue increases in the six to 10 percent range.
"That's a total of 56 percent, a significant number given the current downturn," noted Poirier. "We see this trend as evidence of the fact that supply chain is finally becoming entrenched as a company-wide improvement effort. Leaders are implementing strategic supply chain efforts to transform business processes to achieve near-optimum operating conditions. At the same time, most firms identified as followers and laggards have not reached the limit of what can be done to enhance financial performance with their supply chains."
While a majority of respondents indicate they are already using their supply chain to trim logistics costs, source more strategically and generate additional savings by leveraging the purchasing function, companies that are considered supply chain leaders are going a step further: accelerating revenue generation by integrating the supply chain organization with key internal groups such as finance, IT and product development. "The leaders, in short, understand the central role supply chain management can play in the company's business success and are playing that role to the fullest," said Poirier.
What do you think? Post your comment below.
Economic pressures are forcing companies to employ their supply chains, primarily the sourcing and procurement functions, to contain costs and boost revenue, according to the 2009 Global Survey of Supply Chain Progress from CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals (CSCMP) and Michigan State University (MSU).
The survey, completed by supply chain executives representing more than 20 industries and every major geographical segment of the world, shows the extent to which the economy has impacted the supply management function. Survey respondents cited an immediate need to cut costs as the top economic pressure on their supply chains. An overwhelming 88 percent of respondents have set objectives for purchasing to generate cost savings in the next 12 months.
This enhanced focus on supply chain management (SCM) demonstrates its use as a counter-cyclical tool for improved business performance.
"The global economic downturn has impacted every aspect of business operations, and supply chain is no exception," said Chuck Poirier, author of several books on SCM and a partner in CSC's Global Business Solutions and Services group. "In the face of a renewed focus on cost reduction, supply chain management continues to show a positive impact on business performance. During the past year companies have turned to their supply chains to cut costs and grow revenues. To a large degree, the supply chain has delivered, helping companies get through some tough times."
The survey shows 33 percent of respondents indicate they leveraged supply chain initiatives to reduce costs between one to five percent in the last three years. Twenty-seven percent report realizing even higher cost reductions, ranging from six to 10 percent. "These results were comparable to last year's," said Poirier. "However, the most significant improvement over 2008 was in the number of respondents who reported no impact - or did not know the impact - of supply chain initiatives on costs. That number dropped significantly, from 22 percent in 2008 to 13 percent in this year's survey."
In spite of the difficult economy, 32 percent of respondents saw their revenues increase between one to five percent in the past three years as a result of supply chain initiatives, while another 24 percent identified revenue increases in the six to 10 percent range.
"That's a total of 56 percent, a significant number given the current downturn," noted Poirier. "We see this trend as evidence of the fact that supply chain is finally becoming entrenched as a company-wide improvement effort. Leaders are implementing strategic supply chain efforts to transform business processes to achieve near-optimum operating conditions. At the same time, most firms identified as followers and laggards have not reached the limit of what can be done to enhance financial performance with their supply chains."
While a majority of respondents indicate they are already using their supply chain to trim logistics costs, source more strategically and generate additional savings by leveraging the purchasing function, companies that are considered supply chain leaders are going a step further: accelerating revenue generation by integrating the supply chain organization with key internal groups such as finance, IT and product development. "The leaders, in short, understand the central role supply chain management can play in the company's business success and are playing that role to the fullest," said Poirier.
What do you think? Post your comment below.
Tuesday, March 10, 2009
The Case for Business Intelligence
By Mark Brousseau
Wondering about the cost justification for business intelligence initiatives? Brian Ng, field enablement leader in the business intelligence solutions group at HP (www.hp.com), told attendees at the Gartner Business Intelligence Summit 2009 that business intelligence provides several key benefits:
… Enhanced decision making
… Improved insight
… Reduced risk
… Lower costs
… Improved efficiency
Ng noted that many companies already are using business intelligence to help monitor and measure their business and to make key decisions (e.g. driving supply chain management or CRM systems).
What do you think? Post your comment below.
Wondering about the cost justification for business intelligence initiatives? Brian Ng, field enablement leader in the business intelligence solutions group at HP (www.hp.com), told attendees at the Gartner Business Intelligence Summit 2009 that business intelligence provides several key benefits:
… Enhanced decision making
… Improved insight
… Reduced risk
… Lower costs
… Improved efficiency
Ng noted that many companies already are using business intelligence to help monitor and measure their business and to make key decisions (e.g. driving supply chain management or CRM systems).
What do you think? Post your comment below.
Tuesday, February 3, 2009
Thinking Outside the Box
By Mark Brousseau
The state of the economy has companies looking to optimize whatever solutions they have in place, according to Susan L. Terry (slterry@cds-global.com), director of business development, new markets and indirect channels, CDS Global, a leading provider of outsourced business solutions.
“Whether the optimization is in the form of supplier change, outsourcing, co-sourcing, service expansion or tighter integration with other phases of the supply chain, every opportunity for process efficiency is being reviewed,” Terry told me. “All options are on the table.”
Terry believes the pace of opportunity for outsourced services providers like CDS Global may slow down over the next 12 months, but the scope of opportunities will continue to grow. “As human beings, and as companies made up of human beings, our creativity is at its best when the status quo is removed,” Terry explained. “We are now managing our businesses in a state without status quo, which will enable creative approaches to solving business problems.”
What do you think? Post your comment below.
The state of the economy has companies looking to optimize whatever solutions they have in place, according to Susan L. Terry (slterry@cds-global.com), director of business development, new markets and indirect channels, CDS Global, a leading provider of outsourced business solutions.
“Whether the optimization is in the form of supplier change, outsourcing, co-sourcing, service expansion or tighter integration with other phases of the supply chain, every opportunity for process efficiency is being reviewed,” Terry told me. “All options are on the table.”
Terry believes the pace of opportunity for outsourced services providers like CDS Global may slow down over the next 12 months, but the scope of opportunities will continue to grow. “As human beings, and as companies made up of human beings, our creativity is at its best when the status quo is removed,” Terry explained. “We are now managing our businesses in a state without status quo, which will enable creative approaches to solving business problems.”
What do you think? Post your comment below.
Saturday, December 27, 2008
Economy Drives Shared Services
By Mark Brousseau
It has been a truly remarkable 2008 - for the world in general and for the shared services and outsourcing space in particular.
Sarah Clayton, head of strategy for Shared Services Online Network (SSON), comments: “With many organizations focused almost exclusively on the bottom line, a wave of discretionary projects are now well and truly on the back burner for 2009 as SSOs are compelled to do more – and better – with less. Meanwhile, areas such as working capital and supply chain management move into the spotlight as parent organizations struggle to cope with the most uncertain economic times for many decades.”
Jamie Liddell, SSON’s Online Editor, believes: “Next year more than ever, agility, efficiency and flexibility will be crucial to the survival of even the very biggest organizations. Great emphasis will be placed on solidifying core activities and cutting back on what might now be seen as unnecessary luxuries – which of course throws up plenty of opportunities for acquisitive-minded firms with healthy war chests. We’ve already seen the beginning of what may prove to be a deluge of hitherto captive centers being sold to major providers – who will also be looking to snap up a few of their less well-capitalized competitors.”
What do you think? Post your comment below.
It has been a truly remarkable 2008 - for the world in general and for the shared services and outsourcing space in particular.
Sarah Clayton, head of strategy for Shared Services Online Network (SSON), comments: “With many organizations focused almost exclusively on the bottom line, a wave of discretionary projects are now well and truly on the back burner for 2009 as SSOs are compelled to do more – and better – with less. Meanwhile, areas such as working capital and supply chain management move into the spotlight as parent organizations struggle to cope with the most uncertain economic times for many decades.”
Jamie Liddell, SSON’s Online Editor, believes: “Next year more than ever, agility, efficiency and flexibility will be crucial to the survival of even the very biggest organizations. Great emphasis will be placed on solidifying core activities and cutting back on what might now be seen as unnecessary luxuries – which of course throws up plenty of opportunities for acquisitive-minded firms with healthy war chests. We’ve already seen the beginning of what may prove to be a deluge of hitherto captive centers being sold to major providers – who will also be looking to snap up a few of their less well-capitalized competitors.”
What do you think? Post your comment below.
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