Although analysts are reporting that economic recovery is just around the corner, there are still significant risks associated with this recovery. Companies who have laid off employees and reduced spending in areas such as IT investment will face a tough road ahead. In a recent study done by AMR Research, 44 percent of executives surveyed believe the biggest risk in 2010 will be recovering from the recession.
According to the study:
Respondents said they believe the recovery cycle is the biggest risk in 2010 because of potential commodity price increases, limited internal skills after workforce reductions, and problems meeting new demand with constrained capacity, low inventory and transportation constraints.
This re-enforces a point we’ve been trying to make here over the past few months – although many organizations may be facing major budget cuts across the board, IT spending, specifically in the supply chain, is one area that you cannot afford to make cuts in. Using a technology solution to ensure near real-time visibility into the status of orders, shipments and in-transit inventory can help save you money by avoiding expensive expedited shipments, reducing fees associated with detention, demurrage and per diem.
Free AnalystReport: For more tips on how technology can help you achieve optimal supply chain performance, please read this Global Supply Chain Benchmark report from the AberdeenGroup.
AMR Research recently reported that the apparel industry is investing less on IT programs than it has in previous years, possibly due to the bad economy. The lack of spending is most prevalent in ERP systems, and in systems aimed at establishing and maintaining an end-to-end global supply chain. According to a report in Supply Chain Management Review, this indicates that companies in this industry do not respect the value and potential cost-savings of a well-run supply chain.
“That includes even basic supply chain management processes and functions. Often, he said, apparel companies, rather than adopting a unified, holistic approach to the supply chain, spend time plugging holes here and there with short-term, one-shot fixes that lead to a scattershot supply chain, at best.
Aquino said this is problematic in the best of times, but with the recession crushing markets worldwide, the current supply chain model that most apparel manufacturers’ use is outdated and inflexible, and could ultimately lead to disaster.”
So while the do-it-your-self approach might be an effective cost-cutting measure in the short term, companies will inevitably begin to see the negative effects over time. The good news is that this problem can easily be avoided. Check out this Traffic World article on how one well-known retailer was able to overcome a lack in visibility with an investment in a Supply Chain Visibility solution.
Please go here to read SCMR’s full analysis of the survey findings.
Supply Chain Visibility Best Practices reports on current issues, news and events associated with supply chain management. The authors of this blog are not trade attorneys and in no way should any posting be construed as compliance advice; furthermore, the authors are not responsible for any comments posted by others.
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