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Gartner highlights four ways chief supply chain officers can respond to inflation
As inflation rates rise in economies around the world , and a recession might be looming , there are four ways chief supply chain officers ( CSCOs ) can prepare their leadership response over the next months , according to Gartner .
“ While CSCOs primarily focus on developing strategy and enabling organisational capabilities , the economic headwinds they experience these days call for a steadying influence amid reactive stakeholder tendencies , such as defunding strategic investments and slashing overhead costs ,” said Paul Lord , Senior Director Analyst with the Gartner Supply Chain practice .
Gartner analysts have identified four leadership priorities for CSCOs to respond to high inflation and recession risk .
Position flawless execution as the supply chain ’ s primary mission
Most supply chain organisations have already developed plans for improving efficiency to offset a normal inflation rate . CSCOs should encourage their teams to implement these plans while remaining focused on their critical role in fulfilling demand to capture margin .
Let the planning team rise to the challenge
An economically difficult situation is a good opportunity for CSCOs to evaluate and develop their planning teams ’ capabilities and processes . For example , higher interest rates and material prices should prompt reductions in production batch sizes , where possible , to rebalance capacity and working capital economics .
Businesses are responding to high inflation with actions to manage margin and cash within sales and operations planning ( S & OP ).
Findings from a Gartner survey , conducted in May and June 2022 among 130 business executives , found that 57 % of manufacturing and retail companies have been able to maintain margins with pricing actions and are making little or no changes to their spending plans . It also found that service-centric business models are having more difficulty raising prices to maintain margins and 17 % have been forced to extend longer payment terms to their customers .
Manage cost reduction carefully
Most supply chains already operate with very little overhead costs . However , periodic checking demonstrates due diligence to the C-suite .
Another way to reduce costs and further improve efficiency is role consolidation . CSCOs can , for example , consolidate functions such as site quality , safety , environmental compliance maintenance and continuous improvement into fewer teams with improved focus and alignment .
Protect investment spending
One learning from the last period of the economic downturn was that growth leaders reintroduced capital expenditure after a recession much faster than their peers . That ’ s why CSCOs should be protective about their planned technology investments to not fall behind their competitors .
According to the Gartner survey , manufacturers and retailers are most protective of spending on product innovation , talent development and technology investment for price analytics and operations automation .
Service-centric companies are most protective of technology investments such as back-office automation and operational visibility for increased efficiency . x
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