Ying and Yang

Only some companies have what it takes to balance tough times

The economic downturn has resulted in less international trading, with companies feeling the financial squeeze worldwide. Manufacturers are struggling to use their existing capacity by sourcing additional orders, leaning their supply chain and, inevitability, reducing their workforce to save costs. They are flooded with enormous exogenous pressures due to growing uncertainties in trade and market disruption.

Small and medium enterprises, which form the bulk of the supply chain, have been badly hit and have sought substantial financial support from banks and governments to improve their cash flow.

Dr. Albert Tan, Associate Director, The Logistics Institute- Asia Pacific

Throughout the turmoil, the logistics industry has not been spared. With a dramatic drop in international trade, many companies within the industry are resorting to the following:

Carriers are reducing their capacities or cutting down trips to countries with small shipments;

• Logistics companies are willing to rationalise their services and products offered only if they still add value to their customers;
• More companies are exploiting the use of information technology (IT) to automate some of their existing manual tasks;
• Because most companies currently have lower than usual workloads, some are using this downtime to send their staff to upgrade their logistics skills or, alternatively, some employees have been asked to take unpaid leaves;
• Some companies are worrying about the survivability of their suppliers who may have cash-low problems resulting from deferred customer payments and reduced credit from the banks.

Interestingly, some logistics providers are still profitable and sustainable under such harsh conditions. Further analyses of such providers exhibit the following trends and characteristics:

• They focus on offering niche and innovative logistics services that are difficult to duplicate. For example, some offer specialised expertise in collecting, processing and storing a ready supply of umbilical cord blood units to treat patients;
• They have very strong engineering or technical staff members that form the foundation of their service offering. This includes, for example, the collection and repair of LCD monitors requiring highly technical skills, for LCD manufacturers;
• They have developed a comprehensive set of IT systems to support their business processes. For example, many successful logistics providers have scanning and imaging capabilities and offer storage facilities to legal firms and governments to archive their contracts and other legal documents;
• They offer logistics services in new and emerging markets, such as Africa and other developing countries.

While the road ahead for economic development is still unclear, some governments are stepping up initiatives to prepare themselves for recovery. Economically developing countries are investing or upgrading existing infrastructures to take advantage of lower material and labour costs. Road and port upgrading projects are being introduced to stimulate the economy and generate employment. Others are providing generous incentives to traders to stimulate international trading and, thus, generate more logistics services for the economy. In fact, some governments are subsidising training costs as part of workforce upgrading or to aid employees’ career transitions from other sectors to logistics sectors.

Dr. Balan Sundarakani, The Logistics Institute- Asia Pacific

Executives preparing their organisations to succeed will need to focus on what has changed and what will likely remain the same for their supply chains and industries. The result could be an environment that, while the economic landscape might have changed, the opportunities that arise from the change may be advantageous for those who are well prepared.