Preparing functions for growth
Individual functions, such as sales marketing, operations and the supply chain, can contribute to the overall objective, explains Rod Newing.
This follows on from an earlier article which looked at the overall need for organisations to keep costs under tight control, without damaging their ability to benefit from the eventual upturn.
Although these three departments constitute the internal supply chain, they are part of the multi-company external supply chain stretching from raw materials right through to the consumer.
Whereas improvements can be made internally, the largest gains come from working with suppliers and customers to find better ways of working together.
“In bad times, you are more likely to be looking for alliances that can help you with cost reduction and risk reduction,” says Vasant Prabhu, vice chairman and CFO of Starwood Hotels & Resorts, a hospitality chain. “In good times, you are thinking more about alliances that can help you with growth and investment issues.”
In most organisations more costs can be cut or more efficiencies realised by working externally to find better ways of doing business as a supply chain, than by just working internally. In particular, time must be analysed, not just volumes, to reduce response times.
“Organisations have to deal with rapid change in their supply chain,” says Epicor’s Purcell. “Raw material availability alone has become more volatile and costs have risen dramatically. Agricultural input costs are 2.5 times higher than 2008, copper 2.3 and cotton nearly five. Managing costs and availability in the supply are key to success in securing growth and future sales.”
However, there is a final warning from Deloitte’s Darby about the need for supply chain functions to have a more prominent role in delivering business performance. “Board level perceptions of supply chain as a ’back office function’ must change,” he says. “A significant investment must be made in recruiting and training the best people to lead what will be a complex, but increasingly critical area of the business.”
Take a look at Rod Newing’s initial article in his Agenda for Growth series - Surviving into growth.
Rod Newing is a freelance writer and journalist writing on general business, management, technology and health issues.