It's hard to know what to make of the rollercoaster financial markets of late. For supply chain operations, in this
It’s hard to know what to make of the rollercoaster financial markets of late. For supply chain operations, in this country at least, there are mixed messages in the conflicting rhetoric from economists and business leaders.
Consumer confidence is taking a hit and is likely to stifle volumes in some market segments. But is this a necessary breather, perhaps, with a domestic economy near capacity and infrastructure groaning under the weight of an escalating freight task?
Western markets are likely to contract long term, though perhaps not as dramatically as feared with governments investing billions to sure up banks and share markets. All-important Asian markets remain buoyant, with growth, albeit slowing from its unsustainable pace, holding firm.
Australia’s weakening dollar will provide headaches for procurement managers sourcing from markets that, combined with higher transport costs, may not be as low-cost as they once were. Yet it’s good news for those tapping global supply chains where locally-manufactured goods will look increasingly price-competitive overseas.
Slowing demand should put a lid on oil costs and ease record-high diesel prices here, yet oil producers are already discussing production cutbacks to protect their margins that will probably negate any cost benefit.
Meanwhile, raw material costs are higher, particularly in primary production where ongoing drought conditions around the country continue to impact prices.
Doomsday economists are predicting double-digit unemployment, but skills shortages – and the resulting wage inflation to attract workers – remain an issue in transport and logistics particularly. Industrial property rents may have hit their peak in Sydney and Melbourne, but businesses in Brisbane and Perth still face rent bills up to 10 percent higher than last year. Managing compliance, too, is proving to be a very real cost impact.
In economically uncertain times the logistics sector is in a better position than most to withstand the storm. But the costs of maintaining supply chain operations are eating into bottom lines more ravenously than ever.
So where do you stand in the market? Where are the price pressure points in your business, how much pressure comes from those up the chain to keep costs low, and how successful have you been in managing them and passing them on? What is the overall impact on supply chain operations of any recession we have to have?
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