Eurozone fallout set to impact supply chain sector into 2013

FALLOUT from the problems in the Eurozone will continue to affect the UK’s supply chain industry during 2013, sector analysts have said.

Richard Powell, managing director at supply chain consultancy Crimson & Co, said the poor economy of 2012 had changed the way the suppliers did 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,” he said.

“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.”

He said recent natural disasters such as the Japanese tsunami and Italian earthquake still weighed heavily on the mind of supply chain professionals with companies exploring sourcing options more actively, with risk management a bigger factor than previously.

2012 also saw more companies look at their logistics operations and how they could get money out of it. This is especially true for high margin sectors such as pharmaceuticals and energy, he added.

“As we look to next year, supply chain dynamics will change,” added Powell. “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.”

He said customer demands were getting more complex and ‘one size fits all’ did not give competitive benefit, while those tailoring their chains would see a successful 2013.

“Next year, like this year, most businesses will be impacted by the world’s 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,” said Mr Powell.