Published on November 9, 2023, 7:03 am
In today’s challenging economic climate, Chief Supply Chain Officers (CSCOs) face the pressure of stabilizing their organizations amid reactive stakeholder tendencies. As inflation rates rise and recession risks loom, CSCOs must prioritize leadership strategies to navigate through uncertainty successfully.
According to Paul Lord, a senior director analyst with Gartner’s Supply Chain Practice, CSCOs should focus on four key priorities in response to these economic challenges.
Firstly, flawless execution is essential. Many supply chain organizations have already developed plans to improve efficiency and offset normal inflation rates. It is crucial for CSCOs to encourage their teams to implement these plans while remaining dedicated to fulfilling demand and capturing margin. In uncertain times, steady leadership from the CSCO becomes even more critical for operating functions such as logistics and customer service.
Secondly, rising to the challenge is an opportunity for CSCOs to evaluate and enhance the capabilities and processes of their planning teams. Economic difficulties, such as higher interest rates and material prices, should prompt a reassessment of production batch sizes where possible. This adjustment helps rebalance capacity and working capital economics within the organization. Businesses are responding by managing margin and cash through sales and operations planning (S&OP).
A recent survey conducted in May and June 2022 revealed that 57% of manufacturing and retail companies were able to maintain margins with pricing actions without drastic changes to spending plans. However, service-centric business models are struggling more with raising prices, leading some companies to extend longer payment terms to customers.
Managing cost reduction carefully is another priority for CSCOs. While most supply chains operate with minimal overhead costs, periodic checking demonstrates due diligence to the C-Suite. Role consolidation can also help reduce costs while improving efficiency. By combining functions like site quality, safety, environmental compliance maintenance, and continuous improvement into fewer teams with improved focus and alignment, CSCOs can maximize supply chain control over inventory while optimizing product supply costs.
Protecting investment spending is the final priority for CSCOs. Learning from the last economic downturn, growth leaders reintroduced capital expenditures more swiftly than their peers, gaining a competitive edge. Consequently, CSCOs must safeguard their planned technology investments to ensure they do not fall behind competitors. The survey found that manufacturers and retailers are most protective of spending on product innovation, talent development, and technology investments such as price analytics and operations automation. Service-centric companies prioritize investments in back-office automation and operational visibility for increased efficiency.
In conclusion, CSCOs have a critical role to play in leading supply chain organizations through challenging economic times. By focusing on flawless execution, rising to the challenge, managing cost reduction carefully, and protecting investment spending, CSCOs can steer their organizations toward success amidst inflation and recession risks.
For more information on how supply chain heads can respond to inflation, please visit FutureCIO’s article “Four ways supply chain heads can respond to inflation.”