Supply chains hold the key to survival for thousands of companies caught up in the global economic downturn. Barloworld Optimus' Global Business Development Director Fraser Ironside says that the next eighteen months will see supply chain issues come under the microscope on an unprecedented scale as the impact of the worldwide credit crunch hits home on the high street.

"We're talking 'make-or-break' time for thousands of companies - and not all are going to survive. The fall-out from the American credit squeeze is already being felt across the world and with economic advisers now openly talking of recession, companies are going to have to act if they're to remain viable"

Forecasting that the next two years will be 'a rocky ride' for everybody, he says that high-profile corporate victims of the credit crunch like Northern Rock, as well as poor and cautious Christmas period trading results published by some of the UK's major companies represent 'the tip of the iceberg' to the scale of the problem.

"We've already seen some panic measures being introduced by UK banks and credit companies which is further affecting market liquidity. This tightening of credit conditions for the consumer, combined with the inflationary impact of rising oil and food costs globally, means that there is less money to be spent on the high street," he said.

But, he adds, unlike previous down-turns, companies faced with cutting costs now have an alternative to axing jobs - and that re-focusing on supply chains holds the key to market survival 'like never before...'

Set of choices

He says that if companies are to remain profitable, they're faced with a set of choices: to produce and sell more - an unlikely remedy given the state of the world economy - or to reduce costs, adding that the cost reduction route can be approached negatively, through reactive lay-offs, or positively by proactively driving supply chain efficiency.

"With rising annual logistics costs now representing 10% of GDP, and inventory-holding costs generally held to range between some 15% for slow-moving products and as much as 45% for fast-moving lines such as fashion goods, it's clear that opportunities exist for significant cost reduction through re-focusing on supply chain efficiency.

"Streamlining and optimising are the operative words, and with the software now available to pinpoint precisely where and how savings can be made in the supply chain, inventory management and network optimisation tools represent the most effective way ahead," he said.

Fraser Ironside reckons that the last twelve years of economic growth have made UK companies complacent about consistent re-examination of their supply chains - but that the next eighteen months are set to witness a dramatic reversal of the trend as the need to free-up capital takes on a new urgency.

"In times of boom, people don't focus on costs - they're far too busy focusing on getting the product to market. But when a downturn happens and the pressure's on, the focus must return to cost containment within the supply chain and evaluating opportunities in every area involving sourcing, manufacturing, transportation and warehousing. 

"As the business world becomes increasingly less stable, making sure your supply chain is as optimal and efficient as it can be should be the number one goal for all companies. That said, this recession is likely to prove different to past recessions in that IT and software now offer the most reliable buffer to the impact of economic pressures from outside," he said. 

Reviewing the supply chain

According to Fraser Ironside, volatility and uncertainties in a number of key operating areas have prompted an increasing number of companies to review their supply chain strategies and forward-planning procedures, and that the trend is set to gain momentum as the credit crunch continues to bite.

"The speed of change in global markets, rocketing fuel prices, the growing industrial aspirations of China, Russia, India and other regions, and the after-shock of the US financial situation are all combining to force companies to face up to the major benefits that can be achieved through effective supply chain planning and management.

"It's my prediction that Supply Chain IT and software, in the form of proven point solutions delivering rapid ROI will ultimately hold the key to survival" he said.

Solihull-based Barloworld Optimus is the company behind software applications CAST and Optimiza, all of which have undergone significant recent enhancements. 

Optimiza is an advanced inventory optimization application that, unlike traditional inventory re-ordering systems, takes into account the unique supply and demand characteristics of supply chains, geared to effectively reducing stock levels by between 15-50% while increasing service levels by as much as 20%. 

CAST, released in its latest version v10, already lists more than 350 licences world-wide and over 1300 trained users. The tool is widely used by third party logistics, manufacturing, consulting and retail companies to evaluate and identify different supply chain strategies, in turn leading to significant cost savings and service improvements.