As if a shattered economy isn't bad enough, the prospects of supply chain disruptions on a global scale have manufacturers taking a closer look at their risk management strategies. According to Bernie Hart, global product executive, logistics management, with financial services firm J.P. Morgan's Global Trade Services group, while 2009 will have plenty of challenges for manufacturers, a number of promising opportunities will emerge as well. Hart lists the following nine trends that will characterize global supply chains throughout the year.
1. Supply chain risk mitigation in an economic downturn
Supply chain risk mitigation will receive increased focus in 2009 versus past downturns due to the following factors:
- supplier financial risk,
- volatility in energy, commodity, labor rates and currency exchange,
- unpredictable economic recoveries.
2. Searching for working capital
"This trend will bring increased scrutiny to the supply chain as companies look to reduce inventory and lower operating or carrying costs," Hart says. "In addition, buyers will look to extend payment terms, while suppliers will drive to collect receivables more quickly, creating the need for a liquidity buffer -- such as supply chain financing -- to mitigate this brewing payables/receivables conflict. The current credit environment is pushing buyer/supplier partnerships to look to their trade flows to drive the creation of additional liquidity."
3. A resurgence in letters of credit
Hart reports that his firm, financial giant J.P. Morgan, has seen a resurgence in the use of letters of credit to facilitate the financing of international trade. With credit getting tighter in all sectors, the supply of letters of credit have been declining while the cost has risen dramatically, Hart notes. "For the right borrower and the right transaction there are still deals to be done, but the market will remain tight for the near future."
4. Shortening the supply chain
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