The global financial crisis has significantly affected the economic condition of Polish enterprises. According to Central Statistical Office (GUS) data, in March 2009, the domestic and foreign order book index fell from +12 a year earlier to -32, the lowest level in ten years. In many industries (especially automotive, metallurgical, and clothing), there has been a significant reduction in production levels. Limited availability of external financing has also reduced the ability of companies to meet their current liabilities.
The economic downturn is also a challenge for logistics and supply chain management. Planning production and deliveries based on statistical demand forecasting is becoming more difficult because historical sales trend data do not reflect the current decline in orders. Reduced orders lead to an increase in inventory, the excess of which can hinder loading operations in warehouses and distribution centers. A decrease in the volume of transported goods poses a risk of loss of liquidity for transport companies and, consequently, threatens the fulfillment of deliveries to customers. The economic crisis is therefore a test for logisticians, who should be able to quickly identify opportunities to reduce costs and adapt operations to rapidly changing market conditions in order to mitigate their negative impact on company profitability.
Free up working capital and optimize costs
Since the current economic situation means deteriorating liquidity for many enterprises, one of the first tasks should be to free up working capital – through more effective management of liabilities, receivables, and inventory. Potential reserves, enabling cost reduction and efficiency improvement, should also be sought in warehouse management. An audit of warehouse processes helps with this, the result of which should be the optimization of receiving, storage, picking, and dispatching processes, among other things by eliminating unnecessary activities and documents. Initiatives related to transport optimization should cover both own transport and cooperation with external logistics operators.
Analysis of costs, efficiency, and processes allows for the identification of areas for improvement that can be achieved in a short time and usually without the need for significant investment outlays (so-called quick wins). In parallel, however, actions should be taken to develop and implement a long-term supply chain management strategy that ensures the sustainable achievement of business goals.
Align supply chain strategy with product characteristics
As shown by the “Global Supply Chain Excellence” study, recently conducted by Roland Berger Strategy Consultants together with Stanford, WHU, and ETH Zurich universities, the key to sustainable improvement in the financial performance of manufacturing companies is the strategic alignment of supply chains with product characteristics (Supply Chain Fit). In companies that have applied this strategy, the Return on Capital Employed (ROCE) is up to 14-17% higher than in companies where the supply chain has not been optimized (Chart 1). The study results also point to specific actions taken by companies that have adapted their supply chains to product characteristics.
The article comes from the magazine “Logistyka” 3/2009.