Malcolm Harrison
CEO, the Chartered Institute of Procurement & Supply
The pressure to meet targets and tackle the challenges of inflation and shortages should not distract manufacturers from the real issues.
It is tough managing supply chains in the manufacturing sector. The sector is faced with soaring energy and raw material costs, adjusting to greater protectionism and cross-border complexities, the impacts of war, skills shortages, the continued effects of the pandemic and greater unpredictability of both supply and demand.
Data shows decline
After decades of low-cost sourcing and long and lean supply chains, manufacturers are looking to their procurement and supply teams and asking: “What do we do now?” There is no single answer. The S&P Global/CIPS UK Manufacturing PMI® data for October showed another decline in manufacturing production as higher costs affected new business for the UK’s producers. Orders fell at the sharpest pace since May 2020 as customers reined back spending due to higher costs and delivery delays.
What others are doing
Companies such as Europe’s largest carmaker Volkswagen have gone public about their difficulties, citing permanent sourcing delays. With 150,000 cars left unfinished, this demonstrates that even large companies are severely affected. Society expects that supply chains deliver the goods and services needed by its citizens. That’s why organisations must build resilient and agile supply chains to better cope with unpredictability and offer the greatest value to organisations and their customers.
The pressure to meet targets means
businesses could be tempted to cut corners.
Quality control
The pressure to meet targets means businesses could be tempted to cut corners. For instance, our research found that one in five UK supply chain managers were choosing cheaper materials to mitigate against price rises. Another quarter had to find alternative suppliers, and 36% had switched their products due to the inflationary costs of doing business. Could this mean poorer quality goods or inferior service for consumers?
Protecting businesses
We must not lose sight of important issues such as sustainability, the management of carbon and ethics in supply chains. Recently, car manufacturer Hyundai found underage workers employed by one of their suppliers in the US. They severed ties immediately, but some companies may choose to ignore those issues when faced with huge financial pressures.
Supply chains must be resilient, sustainable, ethical and deliver real value. Trained and skilled procurement and supply management professionals can ensure this and protect businesses in this higher-risk world. The procurement profession must build the resilient supply chains manufacturing firms need.
