Is the Buyer back in the driver’s seat?
As the financial markets and supply markets web continues to be weaved, we are seeing many indicators that demonstrate a strong supply chain organization can flourish in this economy. The unemployment rate reached a 14-year high in October at 6.5 percent and economists are projecting the rate will approach 8 percent in the next 3 to 6 months. Energy prices continue to fall as demand falls. Metals, resins, and chemicals are all down lower than they have been in months, if not years. As the financial markets continue to decline, we are going to see more companies going bankrupt, massive layoffs and worldwide demand continue to fall. Back to Economics 101, supply and demand. We are facing far less strain on supply markets from emerging economies like China and India, and we are finding surplus supply in the market places, which means buyers can now capture these lower costs and rising supplies in their bottom line. However, this is not the time to build inventories, it is a time to preserve cash until demand curves can be predicted with better certainty.With buying power, often comes attitude. I caution supply chain professionals to recognize that this economic crisis will pass. The supply chain organizations that did not abuse the power in the 90s emerged victorious in the early 2000’s. When the pendulum swings (and it always does), suppliers will once again pick and choose with whom they want to do business.
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