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Cost Top Concern For Supply Chain Management
By Mike Sachoff
Staff Writer
Article Date: 2010-11-12
A majority of industrial companies still see cost as their main priotiy when managing supplychains, despite emerging evidence that excessive focus on cost has damged relationships, and that new approaches to supply chain management are gaining hold among leaders in the field, according to a recent survey from KPMG International.
The survey found that cost cost still reigns among 66 percent of respondents as the leading consideration of their supply chain models. But 63 percent of respondents agreed that more attention should be paid to non-financial elements of the supply chain and 38 percent said that an acute focus on cost has harmed relationships with suppliers.
The survey also showed that many of the world's leading companies are applying new methods of supply chain management designed to weather an economic climate where various forms of risk have become the norm. These new approaches - more strategic than tactical - could well emerge as best practices.
"The fact that nearly 40 percent of respondents acknowledge that a focus on cost has done damage to relationships with suppliers is an alarming statistic," said Jeff Dobbs, Global Head of Diversified Industrials for KPMG. "Those businesses that continue to follow the traditional ‘low cost or bust' models in supply chain management are at risk of losing a foothold in the market."
"It used to be that sourcing decisions rested on routine considerations," Mr. Dobbs said, "like who could make the best component for the best price. This approach worked when there was little variability in input costs. Now, leading supply chain strategies must involve detailed scenario modeling to determine the appropriate response to a host of volatile elements. The most successful companies will be those who build adaptability and flexibility into their supply chains."
China remains the most common sourcing location among 35 percent of respondents. When asked where respondents expect to increase sourcing over the next two years, China also ranked first (39 percent), with India not far behind, at 26 percent. Cost remains the predominant deciding factor.
"The financial crisis dealt a blow that sent shockwaves through the industry, but those same forces are the catalysts that are helping organizations create more dynamic, resilient and responsive supply chains," Mr. Dobbs said.
"It's incumbent upon businesses to embrace new ways to use the supply chain to future-proof their business models."
About the Author:
Mike is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.
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