The state of supply chains

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The global economic downturn has impacted every aspect of business operations, and [the] supply chain is no exception. 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.” –Chuck Poirier, partner, CSC's global business solutions and services group

It should come as no surprise to anyone in trucking – much less the world of logistics at large – that companies are starting to view their supply chains less as “necessary evils” and more as cost-control and revenue-generating tools. Consistent, dependable, efficient, reliable – use whatever descriptive you like; if the supply chain does it, a business thrives. It’s just a wonder it’s taken so long for so many in the business world to realize this (which has allowed Wal Mart to keep eating everyone’s lunch).

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These are but some of the findings from the 2009 Global Survey of Supply Chain Progress – compiled by logistics firm CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals (CSCMP) and Michigan State University (MSU). Economic pressures are forcing companies to employ their supply chains primarily the sourcing and procurement functions, to contain costs and boost revenue, the study found – and demand for those two results will only increase in the future, noted Chuck Poirier, a partner with CSC's global business solutions and services group.

“We see this trend as evidence of the fact that supply chain is finally becoming entrenched as a company-wide improvement effort,” he said. “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.”

Poirier said this 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. Respondents cited an immediate need to cut costs as the top economic pressure on their supply chain, with an overwhelming 88% of respondents have set objectives for purchasing to generate cost savings in the next 12 months.

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The study also found 33% of respondents indicate they leveraged supply chain initiatives to reduce costs between 1% and 5% in the last three years, with 27% realizing even higher cost reductions, ranging from6% to 10%. "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,” Poirier said. “That number dropped significantly, from 22% in 2008 to 13% in this year’s survey.”

What does this mean for truckers? Well, a combination of things for starters. I think on the one hand it indicates a lot of shippers are again going to look at squeezing freight rates down as far as they can go. Yet I also think the data indicates the more enlightened firms are probably going to stop focusing solely on the price tag for logistics services and start looking longer term at things like value, consistency, and cargo integrity.

Here’s why I think this: Poirier explained that 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, others went step further – accelerating revenue generation by integrating the supply chain organization with key internal groups such as finance, IT and product development.

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“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,” he said.

Poirier also pointed out that while North American firms are more likely to have a supply chain management or “SCM” organization, the ones developed by European firms are more mature, with CEOs more likely to be involved in running them (over 50% compared to 30% in North America).

“It’s an old story, but most firms are simply too slow to recognize the values that can be added from a consistent focus on supply chain under the direction of professional and involved management,” he noted. “That’s a lesson the leaders wrapped up years ago.”

But it seems to be a lesson more businesses are taking to heart now – lessons that hopefully will offer opportunities for truckers in the months and years ahead to become more respected parts of global supply chains.

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Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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