Dealing with the global downturn

The major factors in the downturn - it may still be verging on a recessionary crisis - are well documented: oil price spikes, the sub-prime fallout and credit crunch, food and fuel price increases. Less documented are the secondary effects of the downturn such as the real spectre of fuel and food shortages. Couple these to a growing imperative for governments and businesses to implement costly climate change measures in their manufacturing and distribution operations, and the global economy - distinguished in the last few years by its strength and growth at unprecedented levels - seems to be heading for a perfect storm of negative impact.

With that growth in production and consumption of the last few years, however, has come an increasing dependence on the intricate complexities of global supply chain networks, the crucial enabling structure of the global economy. Now nations and multinational companies have to look to those same supply chain networks to provide them with a competitive advantage in the downturn. It may be a truism that we all know, but it seems that we all still need compelling events to happen to occur before we will act - and those compulsions, for the global supply chain, are upon us.

The current scenario presents opportunities for nations and companies to force change where it has been needed for some time. A key one is in more effective planning and forecasting to cut costs and increase efficiencies and service levels. But this needs to be done by evaluating the commercial models organisations have with their supply chain partners and suppliers. A more flexible and sustainable approach that establishes a partnership model is more likely to enable the development of a plan that gets the organisation through the next few months, while strengthening it for the next cycle and upturn.

For those on the supplier side of the equation, flexibility is vital. Those who are tied into assets - vehicle fleets, warehouses, etc. - will struggle. Tough times always force tough decisions from companies, and those supply chain service providers who rely on cross-subsidised revenue from physical assets to their other offerings may find themselves with expensive liabilities.

On a strategic level, success in a downturn is not going to come from acting alone - no company or nation is an island, even less so in a globalised economy. It will take teams, and close collaboration between suppliers and their customers, to see it through successfully.

In sum, there are three key questions organisations need to ask themselves:

• Where am I going to find the required flexibility/agility that my supply chain needs?
  
• Is my current supply chain network the best it can be, and if not, what is the one thing that I must change now for competitive advantage?
  
• Am I getting the focus and commitment I need from my suppliers and business partners?