Global Logistics and Supply Chain Strategies - June 2008 - (Page 14) complex supply chains that are increasing supplier disruptions, logistics delays, and product recalls and safety issues.” A recent Marsh study of 110 North American risk managers found that none considered their companies to be “highly effective” at supply chain risk management. Just 35 percent saw their organizations as “moderately effective,” while 65 percent described their supply chain risk programs as having “low” or “unknown” effectiveness. Some lacked any formal risk effort at all. Yet nearly three-quarters of the respondents believe their supply chain risk has risen since 2005, and a similar number saw supply chain disruptions as having an increased financial impact. “Concerns about supply chain risks and supplier issues are reverberating in boardrooms and among shareholder groups throughout the U.S.,” says Beth Enslow, author of the report and a senior vice president in Marsh’s Supply Chain Risk Management Practice. “Yet, at this point, most organizations are just beginning to take the steps needed to manage these challenges effectively.” Marsh recommends formation of a cross-functional team involving purchasing, manufacturing, logistics, finance, legal and risk-management. Only 31 percent of respondents have taken that step. Even worse, just 19 percent of companies with more than $1bn in revenue have created such teams. The “siloed” nature of supply chain functions makes it tough for companies to assess their supply chain risks, especially in the areas of product safety and supply dependability, Marsh says. www.marsh.com Purchasing Managers Urged to Act Now in Order to Cope with Economic Downturn Chief procurement officers (CPOs) should take a number of steps to cope with the current economic environment, according to a panel of financial and procurement experts. Here are five actions recommended by the group: 1. Get quick visibility into spending. Companies can’t control what they can’t see. In most cases, spend-visibility updates should be done on a quarterly basis at a minimum. 2. Take steps to mitigate the impact of inflation. The panel suggested renegotiating contracts with target suppliers, and sourcing with an eye toward deriving higher value from supplier relationships. 3. Renegotiate and enforce compliance to contracts. Contract compliance becomes even more critical in a recessionary environment. 4. Mitigate risks when pursuing cost reductions. One of the biggest mistakes companies make is focusing exclusively on cost, rather than evaluating overall value with suppliers. 5. Do more with less. The smart application of information technology can help companies become more efficient. In addition, the group said, companies should consider using outside consultants and services to help them achieve successful sourcing programs against a backdrop of rising fuel prices. The panel was sponsored by Emptoris, a vendor of contract management software. Visit www.emptoris.com. Armstrong Says 3PLs Will Continue to Boost Revenues in the Next Three Years U.S. third-party logistics providers boosted their net revenues by 7.2 percent, to $122bn, last year, despite a sluggish freight market. And 3PLs will continue to grow over the next three years, according to a new report by Armstrong & Associates, Inc. The firm predicts that U.S. 3PL revenues will grow by a modest 5.5 percent this year and 7.5 percent in 2009, then top $150bn in 2010. “3PL growth continues to be driven by companies outsourcing to concentrate on core competencies, the need for sophisticated supply chain information technology solutions, and globalization,” Armstrong says. In fact, 3PL revenues continue to increase at three times the growth rate of U.S. gross domestic product, with the highest numbers seen in the non-asset-based sector. International transportation management, led by Expeditors International, Kuehne & Nagel and DHL Global Forwarding, grew by 9.5 percent last year, while the U.S. domestic side, dominated by C.H. Robinson, was up 8 percent. Industry consolidation continued in 2007, Armstrong reports. Investors showed a preference for non-assetbased providers. At the same time, Wall Street analysts grew concerned about lower profit margins in valueadded warehousing and distribution, even though that sector continues to lead by a substantial margin all other aspects of 3PL activities. Visit www.3plogistics.com. 14 JUNE 2008 http://www.emptoris.com http://www.marsh.com http://www.3plogistics.com
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