Cincinnati, OH -- Now may be the best time to invest in updating and upgrading the supply chain activities of businesses saddled with getting their wares to market and into the hands of consumers. With signs that the economy is coming out of its slump, encouraging manufacturing figures and slight rises in consumer confidence suggest retailers must update their facilities or face the consequences of continuing increases in the cost of goods sold.
The Index of Leading Economic Indicators rose one percent in May, ahead of expectations by Wall Street economists. In addition, the Stanford/INSEAD study report released last week shows that businesses who have ramped up their supply chain activities show a boost in relative market cap of eight percentage points, while supply chain "laggards" show a drop in relative marketing cap and trailed industry growth averages. And to top it off, interest rates make borrowing for infrastructure purposes almost like printing money, with short term interest rates down to 1.25 percent.
"Yet, many CEOs and operations executives are not taking advantage of these opportunities and indications and taking a wait and see attitude," Forte Industries marketing director Rodger Roeser said. "I agree with (Conference Board chief economist) Ken (Goldstein) in that there remains a tremendous lack of confidence in business. The executives that take a leadership stance, invest in the infrastructure of their organization in one of its most basic forms -- getting product to market with the least cost and most efficiency -- are going to be the ones prepped to gain market share and gain a significant competitive edge in the coming year."
Roeser added that businesses must invest in programs that provide significant long term cuts to the cost of goods sold. Three main issues are the driving forces behind planning, designing and implementing an updated distribution operation -- SKU proliferation, compliance issues being imposed upon retailers, and lower consumer confidence -- each of which is a major factor in the cost of a product.
"And, with lower consumer confidence numbers, inventory tends to be higher while truck loads tend to be smaller, both exacerbating the issue," Roeser added. "At the very least, retailers and eCommerce leaders need to explore options in mitigating these risks and resolving these critical issues."
The Stanford/INSEAD study recommends aligning internal expertise with outside counsel to integrate the demand response of a business.