Steps for Effective Supply Chain Management

1. Steps for EffectiveSupply ChainManagement 5

2. 5 Steps for Effective Supply Chain Management We live in difficult times where volatility is the norm. For any business leader today the top challenge is cost. As business leaders across industry sectors work towards realizing cost efficiencies, with millions of dollars at stake, the role of sourcing has become very important. Coupled with fears of W shaped recession, financial crisis in leading economies, fiscal cliff in US - cutting the gross domestic product (GDP) by four percentage, and political and natural uncertainties, CPOs today are compelled to go back to the drawing board to rethink company's sourcing strategy. Facts: • US economy likely to have a negative growth rate in 2013 on account of impending fiscal cliff i.e. implementation of the Budget Control Act of 2011 • Greece's ongoing economic contraction increasing the unemployment rate to 21.9% in March 2012, while the unemployment rate in Spain was reported to be 24.6% for May 2012 • Peter Morici, an economics professor at the University of Maryland's Smith School of Business, estimates Sandy will result in $35 billion to $45 billion in total losses • Other costly storms are Katrina causing damages more than $46 billions, Andrew resulting in loss of nearly $25billions and Ike with more than $10 billion loss

3. “Supply chains cannot tolerate even 24 hours of disruption. So if you lose your place in the supply chain because of wild behavior you could lose a lot. It would be like pouring cement down one of your oil wells.” - Thomas Friedman, American Journalist, Columnist and Author Given the events of the past five years financial crisis, natural disasters and massive supply chain failures, to name just a few procurement will need to push aggressively for the inclusion of supply chain risk on the broader business agenda in order to protect the business from uncertainties and turbulence. Today with supply base having gone global, the procurement function has become too complex to be handled efficiently through traditional manual processes. With so many uncertainties, defining company's sourcing strategy and becoming the customer of choice for the suppliers during difficult times is a challenging task. Companies have started to focus on technology to simplify this complex process of sourcing and supplier management. However, the technology adoption rate in procurement is still low.

4. As per a recent study conducted by Zycus including nearly 600 procurement professionals, • Companies in the lowest savings performance tier score technology adoption and use between 4 and 5 on a scale of 0 - 10 • Companies in the top savings tier score it at 7 on a scale of 0 - 10 • Average technology adoption is at 6 on a scale of 0 - 10 The unprecedented increase in supply chain risks has forced organizations to bring in more agility into their supply chain processes. Agility enables organizations to prepare in a much more proactive manner to avert huge financial losses arising out of costly supply disruptions.

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