February 8th, 2010 by Hongyan Li
The economic upturn is largely believed to be happening, and all industries make take notice, including manufacturing, to create the best outcomes for their supply chain management. With a predicted 2.1 percent rise in gross domestic product and 3.2 percent rise in US manufacturing production in 2010, manufacturers must have a solid foundation to effectively and profitably leverage opportunities for the recovering economy.
Manufacturers, especially of customer goods, must be able to react quickly to the recovery. Those companies that continue to free up unnecessary inventory will have more flexibility to change business strategies or respond to market surprises. Companies can strengthen cash position by continuing to rationalize inventory levels against the changing product mix across the entire supply chain, aligning levels with current consumer demand.
Manufacturers can also realign the supply chain to achieve financial goals by taking control of financial and operational strategies. An integrated business planning approach goes beyond aligning supply and demand and integrates time-phased strategic revenue, cost, and margin plans with a company’s operational plans. This not only improves collaboration and responsiveness to market change but also enables executives to set financial expectations for all sales, marketing, promotion, inventory, and capital expenditures plans, which is a critical element for success in any economy.
Newer supply chain technology might also be helpful for this collaborative approach. While traditional technologies have helped manufactures tactically balance supply and demand, a next-generation, integrated business planning approach will transform this into a process that integrates the entire business and enables company executives to confidently deliver on strategic objectives. Total supply chain integration, collaboration, and visibility will enable manufacturers to transform business practices, adopt new strategies and seize opportunities that arise in the recovery.
Although there’s speculation on the rate of the economic recovery, what’s certain is that there will be long-term effects on new consumer habits. History shows that those who can afford to invest during an economic recovery come out winners by capturing market share. Even as the economy rebounds, consumers will continue to be more spend conscious than ever before. Successful companies will seize these opportunities to create a strategic advantage by frequently aligning and rationalizing product offerings with the changing preferences of the new consumer. By weeding out poorly performing products, positioning the right assortments on store shelves, and setting the right pricing and promotional strategies, manufacturers can drive market share and profitability. Catering to consumer demand will also enable manufacturers to build market share and long-term brand loyalty, even as consumers find themselves with more discretionary spending income in the future. Additionally, establishing closer collaboration with retail partners can provide insight into point-of-sale and SKU data, enabling manufacturers to better respond to shifts in market conditions, inventory production planning and scheduling beyond the current economic cycle.
Timing is everything in a financial period where customers, retailers, and your own company change every day. Learning to be prepared for these changes and to anticipate your customers and retailers’ need are the ways to keep your company increasingly profitable during the upturn.