Over the past few years, we have seen companies outsource more and more, and as a result supply chains have grown more complex. The goal of this outsourcing was to reduce costs – if a manufacturer can get their supplies cheaper by using an outside source, then of course they are going to go with the most economical decision. The more a company outsources, the more complicated their supply chain becomes, and according to a new study released by the Business Continuity Institute, the greater the risk for supply chain disruption. The manufacturing industry in particular has been the hardest hit from supply chain failure – manufacturers have reported a 58% increase in disruption to their supply chains over the last 12 months, compared to 35% across all industry sectors.
The reason for this increased supply chain disruption is because if more parties are involved in the supply chain, there is a higher risk for one of those parties having a problem, such as financial failure, and causing issues for the entire supply chain.
According to one director at the Business Continuity Institute, quoted in the press release,
“We’re now seeing the downside of years of outsourcing, extended supply chains and focus on core competency; organizations are now much more vulnerable to supply chain disruption than in the past. While companies have banked the cost savings, this research indicates they have still to make the corresponding investment in resilience. The economic recession, in particular, is exposing vulnerabilities and dependencies through supplier insolvencies, reduced capacity and the tightness of credit markets. Business continuity management provides a robust and proven approach to prepare an organization for and protect against disruption in its supply chain.”
Communication among suppliers, forwarders, carriers, customs brokers, and all trading partners involved is very important to avoid the risks associated with a complex supply chain. For tips on how large, mid-market, and small companies are improving their supply chain performance, please read the Aberdeen Group’s Global Supply Chain Benchmark Report (free download!).
A summary of the above BCI report is available for download here, and the press release can be found here.
PricewaterhouseCoopers and the Supply Chain Management Institute recently did a study, Transportation & Logistics 2030, which looks at how supply chains will evolve over the next 20-plus years. The first volume of the study, the only one that has been release so far, is an analysis of the ramifications of energy scarcity and its impact on the design of future supply chains.
Here are a few key findings:
Oil prices will increase and so will the use of alternative fuels, however neither are likely to revolutionise T&L – but the need to track, document and allocate costs for emissions just may.
Patterns of individual mobility vary in different regions; however concerns about cost and carbon footprints will spur individuals to reduce holiday and business travel and consume more locally produced goods.
Supply chain design, including the location of production sites, will need to take energy and emission costs related to logistics processes into account. There will be no reverse of globalisation, but many supply networks will be established at a regional level.
Volume 1: How will supply chains evolve in an energy-constrained, low-carbon world?, along with further details and methodology for the study, is available for download here on PricewaterhouseCoopers website.
To stay with this week’s theme of establishing an environmentally-friendly supply chain, here are a few more tips from Logistics Management on going green while at the same time cutting costs: Green logistics: Industry expert cites ways of going green and cutting costs at the same time. In the article, supply chain expert Jack Ampuja discusses strategies such as redesigning packaging and logistics systems, and the effect that oil price fluctuations can have on supply chains:
Right now, Ampuja said, the smart companies are working on “what if” plans for oil prices at $100, $120, or even $150/barrel, ready to implement when and if prices go that high. With each plan, companies have to think about how many distribution centers they have, how efficient the routes are between them, how they manage inventory to feed those routes, and other issues.
“The (plan based on) $150 oil is going to give you a different network than $80, I guarantee,” he said.
Another area that companies need to revisit is packaging optimization. Ampuja said packaging can cost companies much more money than it needs to, and use too many raw materials. Companies that cut packaging down to size can cut as much as 40 percent of their shipping costs.
While there has been a buzz across the industry about the environmental sustainability issue for quite some time now, I have noticed that press coverage on the topic has picked up significantly in the past few weeks. Many of these articles, including the one above, cite presentations that various supply chain experts have given at industry events (a lot of big industry events and conferences are held around this time of year). To me, the fact that this has become such a recurring theme among industry experts is an indication that in upcoming months, “going green” will start to become the norm, and not just a competitive advantage that companies can have, as their customers will start to expect it.
Here’s a video I found that explains how Walmart plans to track supply chain emissions in order to provide carbon footprint information for all of their products. This follows up on a couple of blog posts I’ve made recently on this topic. Enjoy!
A recent survey conducted by GTM Research on 74 supply chain executives had some surprising results. Interestingly, sustainability is not at the top of the list of priorities – it falls in the middle of the pack. Companies are still investing in this area though, and the quest for energy efficiency is more popular than any other sustainable supply chain activity this year. Three fourths of respondants feel that their company’s environmental stance will have a direct effect on customer relationships within three years. Approximately one third feel it is a issue with customers today.
The below chart from GTM Research shows what their respondants believe will be the most influential supply chain activities in the next 12 months, for industry leaders and laggards:
Source: GTM Research
To read more on the study findings, please read the press release from GTM Research. SupplyChainBrain also has a nice summary of the findings on their website.
While this blog is focused on all things related to supply chain management, Management Dynamics also maintains a few other blogs you might be interested in, on an array of topics. Go check ‘em out!
www.tradecontent.info - Featuring up-to-date information on global trade tariffs, duties, and import/export controls.
www.globaltradesuccess.org - This blog is created to post recent news that discuss global trade topics, offer information and post relevant webinars and white papers from top Global Trade Management companies.
http://gtmbestpractices.org - Dedicated to sharing ideas and advancing global trade management for all industry players.
In last week’s post about greening the supply chain, I referenced an article that suggested starting with overseas suppliers (specifically those in China) to increase the supply chain’s energy efficiency. The article also discusses how Walmart has established a supplier energy efficient program in China, where the company has set a target of improving the energy efficiency of 200 factories by 20 percent over the next three years.
Today I found a bit more info on setting up a sustainability program such as Walmart’s. This article from Logistics Management explains that the benefits go beyond being good environmental citizens:
“Shoppers are looking for a good deal, but they also expect transparency,” she said. “They want to know that retailers are sensitive to global warming and other threats to future generations.”
Regina Edwards, director, supply chain compliance, for MeadWestvaco, concurred, stating that shippers were asking for “green” metrics placed on suppliers.
“Given the fact that we are so diversified and global, our leadership realized that we had to develop a principal code of conduct for suppliers that included more than just basic compliance,” she said.
It would not surprise me if, before long, going green becomes standard operating procedure, rather than something companies implement when they can.
A 3% increase in manufacturing production is expected in 2010, according to Stan Gwizdak from the consulting firm, Celerant. According to an article in Supply & Demand Chain Executive, Mr. Gwizdak gives a few main factors that will contribute to this upturn:
Declining imports as companies review their supply chain strategies;
Continued market consolidation and acquisition activity; and,
Green products and companies in the solar, wind, and geothermal space.
So, good news! However this will not come without challenges. Mr. Gwizdak states that the biggest challenge for manufacturers will come from “the complex supply chain with global operations, logistics, warehousing and reduced time available for new product introduction and time to fulfill a customer order.” Not too surprising. Anytime a company increases operations or expands globally, there will be new supply chain issues that need to be addressed. And, most importantly, the more complex a supply chain is, the more imperative it becomes to communicate with trading partners so that no one is left out of the loop.
Registration is now open (and free!) for The Next Generation Supply Chain virtual conference, hosted by Logistics Management and Supply Chain Management Review. This conference will offer plenty of informative webinars and networking opportunities, right at your desk! Below description is from Logistics Management:
Learn how emerging global developments are catapulting logistics and supply chain managers into the forefront of their organizations. Listen to experts describe the new technology that will make global supply chains both more sustainable and more secure. Understand the increasingly important role that transportation providers and 3PLs will play in supply chain success. This is the “Next-Generation Supply Chain” where logistics and supply chain management are the main drivers in business success.
Definitely worth checking out! The event will be held Tuesday Oct. 27, and registration is now open.
Britannia may rule the waves, but it’s fallen behind on its supply chain. An article, MoD given two years to improve army logistics systems, found on computing.co.uk, discusses the drab condition of the United Kingdom’s army supply chain. In the United Kingdom, the Ministry of Defense has given the army two years to improve its logistics system. Many MPs are furious over the delay in getting troops supplies in Afghanistan, and even through a great deal of urging, the army is still using manual supply chain systems. The department is lacking complete supply chain visibility as well as an inventory management system. The army has elected a committee to deal with this problem, yet the outlook looks grim. Committee chairman, Edward Leigh, said “The process of getting equipment and supplies out to our forces in Iraq and Afghanistan is undeniably an extremely demanding one. But the fact that the MoD continues to fail to meet its own supply chain targets is of concern.”
Perhaps they should take a look at Management Dynamics’ solution for Supply Chain Visibility.
![[Facebook]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/facebook.png)
![[LinkedIn]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/linkedin.png)
![[Twitter]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/twitter.png)
![[Windows Live]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/windowslive.png)
![[Yahoo!]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/yahoo.png)
![[Email]](http://www.supplychainvisibility.org/wp-content/plugins/bookmarkify/email.png)
