What does the new year holds for the supply chain industry?
Happy New Year to all Logistics Jobshop blog followers. Can we look forward to some stability, normality and elusive growth in the UK economy? To see Ed Balls every week at PMQs making gestures representing a 'flatlining economy' then it does not look likely. But we all know that politicians are driven by self interest and are not in the 'real world'. So what is the real world looking like for the UK economy in 2012!
In retail, the picture is mixed with several smaller players mainly in the discretionary spend sectors going to the wall in the first weeks of the New Year. Even food retailers have reported to me that they are facing the toughest trading conditions for many years. But some are still expanding. Other retailers are reporting flat or increasing turnover and profits. On the manufacturing front, car manufacturers are reporting massive increases in volumes on last year, and specialist high tech niche players appear to be doing well. Exporters with predominantly Eurozone sales, however, must be looking at the prospects for 2012 with some trepidation.
Supply Chain professionals are in a good place to make a judgment on what is happening on the ground. They have to react to changes in the marketplace as quickly as possible. In 2012 never have the main tenets of the definition of logistics: having the right product in the right place at the right time, been more important. We can add two more: the right amount of product, at the right price. If cash is king for businesses as a whole. Optimum inventory levels in 2012 will be king for the supply chain professionals. Get this right and remain strong. Get it wrong and 2013 will look bleaker indeed!
But are there any signs of optimisim from the supply chain profession? Well yes actually! The latest quarterly survey of supply chain professionals across many sectors by Logistics Manager Magazine (LM), highlights some interesting trends. The LM survey shows as they put it 'a high degree of stoicism' in the face of 2011 challenges with over half the respondents saying the current level of activity is up on the previous quarter. But more significantly, 56% said that supply chain activity was up on a year ago. Looking ahead into 2012, 62% of respondents are expecting supply chain activity to increase in the first quarter of 2012. With 80% expecting increased supply chain activity throughout the year. The survey also points to continuing investment in strengthening supply chains with many companies looking to carry out significant supply chain projects in 2012. Hopefully, some logistics consultants will be reading this! Presumably companies are getting ready to take advantage of an upturn in the economy by taking costs out now!
Of course to give some balance, we must not ignore rising fuel prices which are playing havoc with the cost of transport. The Freight Transport Association has reported a 6.2% rise in fleet operating costs in 2011. Raw material costs will remain volatile, no doubt, due to changing demand and supply issues. And of course confidence in the Global Economy still looks fragile. So it is not surpising that the majority of supply chain professionals are reporting expected increases in costs in 2012. There is no doubt this will put pressure on margins or increased prices for consumers in the shops which will in turn put pressure on inflation levels.
If supply chain activity is expected to increase in 2012, then this will inevitably put pressure on finding the skilled people to do the work,or training the ones we have got. So it is pleasing to hear that Skills for Logistics has been awarded £3.9m for the next two years to support training initiatives. What is even more pleasing is that Mick Jackson and his team are genuinely trying to identify where this expenditure will have the most impact. Targeting the maximum number of employers for the minimum amount of investment. This seems to me like the sort of common sense policy that often evades our politicans who are reduced to hand gestures at PMQs!!