At the end, should we reduce costs or invest in supply chains?

Filed in archive Point of view on July 30, 2009

This is kind of difficult question; at least it seems so. The answer is simple though: You should do both.

Looking at the overall market situation, companies are currently focussing on cost cutting but will fail to invest in supply chains becuase of the future problems and is now an opportune time to invest.

John Perry, Managing Director of SCALA Logistics, said a recent survey conducted by SCALA showed 62% of the companies surveyed indicated that in fact their trading volumes were up. Only 18% said they had fallen. Despite this there was a massive reduction in capital investment with 54% of companies reducing capital expenditure. "This reflects lack of confidence and caution by both the consumer and business."

According to PR Web, Beth Cauldwell, Director of supply chain recruitment company Snowden Tate, said it was critical to see people as part of the solution - not just part of the problem. "We have moved from supply chains which were focused on cost reduction to ones which are customer driven. If we do not invest in people there is a danger that we will revert to cost cutting supply chains. The effectiveness of supply chains depends on the effectiveness of its people."

Peter Surtees, Director European Supply Chain Consumer Products, Kimberly Clark said that the reality was that in today's trading environment more than two thirds of consumers were looking for deals and promotions.

"We must cut costs if necessary - but we must realise the need to invest. We need a lower cost base - but we must not cut too much. Take out as much excess costs as you can, but only with an eye to the future. Invest wisely and make your cash work harder. There are currently excellent investment opportunities - for instance in warehousing facilities where there are deals with up to three years rent free. Now is the time to train your people. Many of them do not understand what a recession is.

I do agree with the comments made above by these experts: I believe you can't have success taking out one aspect and you should definitely need both for success. What do you think?