08 February 2012

Hard decisions

Published:: 09 August 2010
Channel:: The Blog
Byline:: Malory Davies

A few weeks ago, I highlighted the problem Nissan was facing in obtaining supplies of key components because of a shortage of computer chips (Chips are a supply chain issue, 19th July).

Now, reports are coming out of the United States that companies such as Boeing and Caterpillar are concerned that their supply chains cannot keep pace with growth in the market.

And in the UK, the Bank of England has been speculating that the country’s supply chain capacity might have been fundamentally damaged by the recession. Professor Alan Braithwaite, chairman of LCP Consulting, believes there might be another explanation: “I believe that companies have been taking a much tougher stand on pricing and are content to stabilise their operations and margins after the pounding their balance sheets took through 2008/9, Lowering prices to utilise capacity can be a game for ‘busy fools’ when the demand generated is not real, leading to higher stocks and a subsequent drop in orders.”

Of course, these are difficulties associated with growth – always the best kind to have. The only problem is that there are now growing whispers on both side of the Atlantic that the recovery is slowing down.

In the UK, the July purchasing manager’s index produced by Markit for the Chartered Institute of Purchasing and Supply showed service sector growth weakening while in the US, there is some concern that their recovery is stalling.

All of which goes to highlight the fact that managing the supply chain in times of recession might mean making tough decisions, but coming out of recession is in some ways the more difficult task.

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