Greater collaboration with suppliers is essential if companies are to stay healthy during the recession.
That was the main message from this week’s launch webcast on SCM World a new global community of purchasing, logistics, supply chain and operations executives.
The big challenge facing firms was to reduce costs while maintaining service levels, said Martin Christopher, emeritus professor of marketing and logistics at Cranfield School of Management, who chaired the discussion.
But in today’s complex, extended supply chains they couldn’t do this by keeping suppliers at arm’s length. “New ways of working are definitely required,” he said.
Fellow academic Yossi Sheffi, a professor of transportation and logistics at Massachusetts Institute of Technology, said companies were “grappling with how to streamline and be as agile and flexible as possible”.
Although those that were in “severe survival mode” might take an adversarial approach, if at all possible firms should work jointly with supply chain partners to cut inventories and manage increased volatility.
Focusing within your “own four walls” was not enough, Sheffi argued, even though in the short term it might improve your financial position.
Reuben Slone, executive vice-president, supply chain, at OfficeMax – a big US retailer – said the financial crisis in his sector was “very severe” and that “things would probably get much worse before they get better”.
He and his team were working hard to reduce inventory, improve forecast accuracy and make deliveries to stores more cost-effective, Slone said.
At the same time, he recognised that suppliers had a broader view of what was going on in the industry, and so good communication was more important than ever.
“The crisis here in the US creates a phenomenal opportunity to increase collaboration. It’s fabulous from a change management standpoint because the status quo is not an option.”
Robert Blackburn, senior vice-president, global supply chain operations, at BASF, agreed that collaboration was “fundamental” for his company.
Cutting inventory was one priority. But the chemicals giant was also keeping a close eye on how its suppliers – especially smaller ones – were being hit by the financial turmoil.
Blackburn emphasised that while operational excellence and cost efficiency were key in the short term, they shouldn’t be at the expense of issues such as sustainability. “It’s important not to lose sight of your long-term objectives,” he said.
Hau Lee, a professor of supply chain management at Stanford University, warned that there was “no easy fix” and that companies needed to avoid “simple-minded over-reactions” to the current crisis, such as bringing manufacturing operations back onshore.
Collaboration was needed not only to lower costs and maintain responsiveness, he argued, but also to ensure that supply chain capabilities were in place to support growth opportunities in new markets.
For more information about SCM World and its webcast programme for 2009, visit www.scmworld.org
