w w w . s c e m a g a z i n e . c o m - Supply Chain Europe

the model that appears to have just failed is predicted
on demand that is predictable and steady or increasing.
for storage in Western Europe. You might
consider selling the now surplus finished
goods in their country or region of origin,
rather than bringing them to the West at
all. Or, of course, seek another market;
even in a recession, some countries are
better placed than others and it may be
possible, for example, to divert shipments
to Latin America rather than Iberia. Of
course, your downturn may have happened
after your shipments have arrived. You can
store these goods (with all the relevant
charges and the risk of damage, decay and
obsolescence) or sell on, perhaps at little or
no profit, into secondary markets. (That, of
course, carries its own risks; if consumers
get used to finding your branded goods in
low cost outlets, they may not be happy,
come the upturn, when you try to reimpose
your normal cost margins.)
Figure 2: The biggest benefits are from actions early in the cycle.
Given the above strategic choices, it
should be obvious that small things such
as changing your IncoTerms are not really
relevant in the greater scheme of things.
But perhaps more importantly, the figure
works in reverse; whereas in a downturn,
you want to be at the left hand side of
the graph where the earliest and least
damaging actions can be taken, to take
advantage of an upturn you need to be at
the right hand side — where goods are
instantly available to meet new demand.
If your strategy to meet demand involves
ordering from a distant supplier, with whom
you did not keep faith during the recession,
you are unlikely to succeed.
Planning for Recovery
So, how do we avoid the extended (in
time or distance) supply chain becoming
an issue as sales and demand recover?
First, we have to understand the problem.
If the ‘cost’ (in inverted commas because
this won’t show up on the typical balance
sheet) of lost sales and the very real costs
of shipping, repackaging/remarketing,
obsolescence and so on are included, it
may be that ‘low cost sourcing’ from, for
example, Asia, isn’t so low cost any more.
The model that appears just to have failed
us is predicated on the idea that demand
is predictable and steady or increasing.
For several years of the next upturn, that is
not going to be true — demand and sales
patterns will be febrile, unreliable — yes,
the ‘fashion’ element of demand may still
be there, but not perhaps in the predictable
volumes that we have become used to.
And whatever patterns emerge, there will
be a significant time lag between noticing
2009 may/June www.scemagazine.com 23