Survey: Economic Impact on Supply Chain Varies

As companies look for areas of business to reduce costs and increase revenue in a down economy, many are finding their answers in supply chain management, according to The Seventh Annual Global Survey of Supply Chain Progress.

The annual survey among supply chain professionals is conducted by CSC, Supply Chain Management Review magazine and Michigan State University, with assistance from the Council of Supply Chain Management Professionals and Supply Chain Europe magazine. This year's survey shows further savings and increases to revenues despite the economic climate, Europe still leading the way and mixed reactions to Green initiatives.

Expecting the unexpected

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What the results found in the two most critical areas: Cost reductions and revenue increases related to supply chain efforts were once again moving forward, confirming the fact that more can be accomplished. But that's not necessarily what Chuck Poirier, author of several supply chain management books and partner in CSC's Global Business Solutions and Services group who helps analyze these survey results, expected.

"Given the economic conditions, we expected the results from supply chain efforts would have tailed off, flattened out or maybe even been slightly down," he says. "But we were pleasantly surprised that there was continued improvement, cost reductions and revenue gains."

According to the results, with the maturing of supply chain efforts, Europe continues to surpass North America in cost reductions and revenue increases (by similar margins as reported in the 2008 survey).

North American firms are more likely to have a supply chain organization, but European firms have more mature supply chain organizations with CEOs likely running the organization.

Fifty percent of Europeans indicate the CEO is directly involved in running the supply chain. That's consistent with what those termed supply chain "leaders" overall do. Leaders have much greater participation by the CEO and other officers. The leaders still use supply chain as a mechanism, good times and bad, to cut costs and increase revenue, Poirier says.

The following charts illustrate the improvements being reported, first in revenue increases, and then in cost reductions.

Turning a downturn up

Many of the 176 respondents to this year's survey, which represent large and mid-size companies, said the economic slump was an opportunity to reevaluate their supply chains to save money and take market share.

Specifically, 81 percent of North American firms and 73% of European said they were rethinking their sourcing points to see if they could get better prices from suppliers. Overall, 57% of respondents said they had near-term plans to change sourcing and 88% had objectives for their purchasing functions to generate new savings.

"The bosses have come down to tell their purchasing departments to get better prices out of suppliers," Poirier explains. "Our warning to suppliers is you better get ready to face pressure because they're going to be looking for ways to save money through purchasing."

Green issues in supply chain

For the first time, this year's survey included questions about supply chain sustainability and Green initiatives. Eighty-seven percent of respondents reported they are either evaluating or implementing options related to supply chain sustainability; just under half of those have already implemented such initiatives. Sixty-two percent report paying more attention to Green/sustainability issues today than they were 18 months ago.

However, results were mixed on the so-called Green issues and their relationship to supply chain.

About half of the firms have completed some form of Green analysis or evaluation. But only 54% identified quantifiable savings, mostly in energy and transportation.

While Green is starting to catch on, execution of these issues is slow. Unfortunately, many of the firms indicated that due to the current economic conditions it's less important at the moment.

Overall, there were some quantifiable savings: 74% said Green initiatives will lead to new increased revenues.

"The good news: Green is catching on as a part of supply chain," Poirier says. "The not-so-good news is in a bad economy, some people pushed it off to the side and, in fact, are having trouble showing much savings. And less than one in four saw an increase in revenues."

Green will really start to take off when people realize that it's not just something nice to do, but that it does have a return on investment.

"As we dug deeper, we found people who have made savings and said ‘it really has worked for us, we use less energy,' run more efficiently and make more money," Poirier says. "That has to be the fact that gets people over the hump."