Companies reeling from supply chain breakdowns are discovering that aggressive cost cutting created new risks, like product recalls, and increased uncertainty due to the fluctuating dollar, raw material shortages, energy prices and rising costs in China. Here, PwC discusses how companies can manage their supply chains to balance a competitive cost structure with investment in the future.
Companies reeling from supply chain breakdowns discover that aggressive cost cutting has created new risks, as demonstrated by highly publicized product recalls. Uncertainty around extended supply chains has increased owing to the fluctuating dollar, shortages of raw materials, volatility of energy prices, and rising costs in China
The good news is that new opportunities have opened up for today's businesses. Consumers and investors increasingly reward companies that manage the environmental and social impact of business while delivering high quality products and services. Some leading companies see their supply chain as a source of competitive advantage. Yet during difficult economic times investing in improving the resilience of supply chains is a tough sell even in these companies. Most companies think of supply chain improvements only in terms of cost reduction, and undertake crisis management after a problem occurs.
In From vulnerable to valuable: how integrity can transform a supply chain, PwC's analysis shows that moving away from this mindset is well worth the effort. Supply chain disruption can destroy shareholder value and corporate profitability. Companies must invest in enhancing the integrity of their supply chains, in a manner which balances operational objectives with reputational risks. This requires developing "leading risk indicators" in addition to the typical Key Performance Indicators (KPIs), in order to measure supply chain performance.