Deloitte's new report on supply chain improvement in crisis times

Filed in archive Point of view on January 30, 2009

Deloitte Canada has published a report on 10 ideas to improve supply chain in crisis times (you can download it here). The document is short but I liked the was it was presenting cost cutting strategies: The authors are putting emphasis on having financial aspects in mind when approaching supply chain improvement.

Among the ideas mentioned in the report, the following ones seem more interesting:

- Think like a CFO: Supply chain managers generally spend their day thinking about operations and don't pay much attention to finance and treasury issues. More often than not, inventory levels and other critical business parameters are driven by customer service requirements and operational capabilities, not financial constraints. But what if the situation was reversed? What if working capital was the company's primary constraint on inventory, and supply chain managers were given the challenge of making it work?

- Eliminate fixed costs: In times of uncertainty, it is generally a good idea to swap fixed costs for variable costs wherever you can - preserving your core business while increasing your flexibility on the fringes. Selling assets and then leasing them back is one way to raise emergency cash. You might also want to consider expanding your use of practices such as contract manufacturing, transportation fleet leasing, and third-party warehousing.

- Consider alternate supply chain financing options: One way to generate cash and expand working capital is to use your receivables as collateral to obtain short-term financing. This practice has been around for some time, but gaining traction in recent months. Another option for boosting working capital is to offer customers a discount for early payment.