Plummeting sales disrupt supply chains

16 November 2009

16 November 2009 | Allie Anderson

Falling customer demand is one of the chief causes of supply chain disruption, a study has found.

US based research company, Aberdeen Group, questioned more than 200 supply chain executives worldwide about industry trends over the 2008/09 financial year.

A total of 62 per cent said a reduction in customer demand had impacted their supply chain. Organisations are struggling to accurately forecast requirements and are carrying greater levels of stock, the report said.

A US supply chain manager told Aberdeen: "Our retail customers are driving inventories down. When they are carrying less stock we have to carry more stock to cover their increased demand volatility."

Unpredictable raw material, fuel and commodity prices were also a major source of disruption for a large number of respondents.

Many are taking action to improve procurement practices to combat the different challenges. Economic and financial uncertainty was reported by 40 per cent as driving supply chain improvement, while 34 per cent argued rising costs had led to changes.

A further 34 per cent said the complexity of managing a global supply chain prompted better practices and 30 per cent noted that meeting escalating customer demands was driving improvement.

Nari Viswanathan, analyst at Aberdeen Group, said: "The recent global economic downturn has led to major challenges in global supply chain management. In the short term, companies can utilise a number of strategies such as reducing inventory, renegotiating partner agreements or discontinuing unprofitable product lines.

"However, in the long term, supply chain infrastructure must be improved by increasing visibility and integration, increasing responsiveness and enhancing supply chain risk management."

 

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