At the beginning of this year, we predicted that many overly optimistic forecasters would be proven wrong about the economy's recovery by the year's end. And here we are, in January, with a global debt crisis and slower than expected economic growth.
Volatility, uncertainty, and risk will still dominate headlines in 2012. Few signs point to the economic turn-around we all were hoping to see in 2011, meaning it's time for you — and your suppliers — to prepare for more volatility.
Companies need to take a hard look at their suppliers' health to gauge how critical each is to their success as they plan for 2012. Do you know where your true dependencies are and how to mitigate that risk? You can't build your product if a critical supplier fails. To mitigate risk, focus on the assurance of your supply: Can your suppliers deliver what you need at the right price with consistent lead times?
Lead times have increased fivefold, from an average of 12 days two years ago to more than 60 today. But don't let demand dictate your inventory strategy anymore. Because if — it's no longer a definite when — demand comes knocking on your door, you don't want customers turning away empty handed. It's wiser to think smart, not lean. A good strategy is holding reasonable inventory levels; it buys much needed wiggle room in case you missed my point above about critical suppliers.
Supply chains need more flexible, responsive, and innovative networks in order to navigate whatever “normal” looks like today. It also means that some of hard-and-fast practices need to be revisited and revised.
If sales aren't increasing your top line, start looking at the bottom line. Implementing a sourcing strategy and streamlining your processes can save thousands of dollars. A recent BravoSolution UK report pointed out how dramatic the impact can be. Every pound cut from procurement costs will improve a company's net valuation five times more than a pound added to top-line revenue. (This is almost certainly true of dollars as well.)
How do you figure out where to start? You need to understand the intricacies of each spend category and the process each contract goes through before it's signed on the dotted line. It can seem like an uphill battle, but advanced spend analysis can cut down on the process and, therefore, cut your costs.