London, UK: The struggling European economy has inevitably seen the supply chain industry have to adapt during 2012 – a theme that will continue into 2013 according to supply chain consultancy Crimson & Co.
Richard Powell, managing director at Crimson & Co, says the poor economy in 2012 has changed the way the supply chain does business. “The economic climate has continued to drive an emphasis on ‘price reduction’ from suppliers to an extreme. The result has been that relationships are confrontational and actually work against collaboration rather than towards co-operation.
“Against this cost cutting background, businesses are still being asked to respond to the ever increasing pace of innovation. Innovation is vital for sales, and businesses are trying to find ways to manage the complexity this creates.”
Powell says that the natural disasters of recent years still weighed heavy on the mind of supply chain professionals with companies exploring sourcing options more actively, with risk management being a bigger factor than previously. 2012 also saw more companies look at their logistics operations and how they can get money out of it. This is especially true for high margin sectors such as pharmaceuticals and energy.
“As we look to next year, supply chain dynamics will change,” Powell says. As the Euro crisis continues, even smaller European companies are starting to look wider for markets outside Europe. Adapting from a relatively local supply chain to an international supply chain will be commonplace, presenting new challenges.
“As markets become more segmented and product lifestyles shorten, businesses need to ensure the benefits of managing at a regional or global level are balanced against the local requirements. Powell comments: “Customer demands are getting more complex and ‘one size fits all’ does not give competitive benefit. Those tailoring their chains will see a successful 2013.”
Most businesses will be affected by substantial currency challenges, commodity fluctuations, political instability and likelihood of natural disasters. “Boardroom thinking needs to change to put risk management and continuity higher up the agenda, and to take a holistic view of the supply chain rather than just looking at the headline purchase cost,” he says.
