The recession has technically ended, according to experts. Yet many of the same challenges remain for organizations across industries.

In a recent survey of more than 500 CFOs conducted by Basware, the University of Navarra's IESE Business School in Spain and Indiana University's Kelley School of Business, 64 percent cited "reducing direct costs" as their top priority.

Yet, while the majority of respondents are aware of the instability caused by constant cost-cutting efforts on the supply chain, they are struggling to find another way to meet their business goals. "Organizations are also focusing on discrete risk while failing to address the more likely and potentially disastrous scenario of sequential risk in the supply chain," Basware said in a statement.

Supply chain managers continue to worry about long-standing issues. Chief among purchasers' numerous supply- and cost-related concerns for 2010, according to the Institute for Supply Management's (ISM) December 2009 Semiannual Economic Forecast: a weak economy; health care and benefits costs; credit inaccessibility; business taxes; and high energy costs.

While these factors will continue to be a top priority in 2010, some other commonly neglected areas should not be overlooked, including supply interruption. The failure of a single supplier can have ripple effects all the way across the value network, ultimately resulting in shortages, stock-outs and lost sales.

Meanwhile, government and retailer regulations continue to grow in number and severity. As a result, companies without compliance strategies in their supply chain practices and operations will face serious consequences.

In this month's J.P. Morgan Global Trade Services newsletter, Bernie Hart, global product executive of logistics management with the financial services firm's Global Trade Services group, wrote that security remains the chief concern in terms of looming issues that "can disrupt global supply chains, sourcing strategies and the flow of working capital."

"Security changes and requirements will continue to [affect] international trade for the foreseeable future with an emphasis on advance data and self-reporting," according to Hart.

Among the new security programs, the Importer Security Filing (ISF), also known as the "10+2" rule, requires shipping data to be sent to customs at least 24 hours in advance of shipments arriving in the U.S. At the end of January, importers can face fines of up to $5,000 for each violation of an ISF that is incomplete, inaccurately filed or late.

The ISF is one example of an added regulatory concern on top of already established requirements such as the Consumer Product Safety Improvement Act in the U.S., Canada's Partner in Protection and the European Union's Authorized Economic Operator. Wal-Mart's recent launch of a Sustainable Product Index, and its refusal to partner with non-compliant manufacturers, is a prominent example on the retail side.

Risk or Opportunity?
The many challenges manufacturers will face this year will bring a number of promising opportunities, too, according to Hart.

The fragile global economy remains the largest risk in 2010, meaning that supply chain leaders will need to become more flexible, adapting to ongoing volatility to take advantage of opportunities as they arise.

In response to a question posed by ISM regarding supply chain optimization, 71 percent of purchasing and supply executives said they plan to take new steps in 2010 to improve their supply chain management practices. The favored approaches: supplier consolidation; new or improved enterprise technology and system utilization; improved inventory/asset management; lean manufacturing; and cost reduction. 


A key to mitigating risks involves remaining on good terms with partners — maintaining visibility — which helps in determining how viable a supplier will remain, Logistics Management recently reported.

"Develop integrated and collaborative relationships with first- and second-tier suppliers to better evaluate and control risk in the supply chain," Basware advised. "Fostering closer relationships with preferred suppliers will enable an organization to tap into supplier expertise to identify the source of potential threats."

Finally, whether companies want them or not, environmental efforts appear here to stay.

Public awareness of environmental issues has put green business practices at the top of the agenda. Understanding how their energy is being used and in what ways it can be more effectively managed is fast becoming a core competency of companies.

Despite the slight outcome of the Copenhagen conference, environmental efforts are gaining influence. Many supply chain leaders are beginning to realize that corporate responsibility, including sustainability measures, and higher profits aren't necessarily divergent goals.

"Leading companies will emphasize sustainability in making global sourcing and fulfillment decisions," according to Hart. "Decisions made previously based solely on cost will be held accountable to a whole new set of additional questions by executives, board of directors and shareholders. The conversation and questions will shift from 'can we?' to 'should we?' and 'how long can this last?'"

A 2006 study, the result of a multi-phased joint project between Michigan State University and the APICS Educational and Research Foundation, explored opportunities for supply chain leaders to meet future challenges. The initiatives suggested then to close the gap between current capabilities and future supply chain requirements remain just as crucial today:

• Achieve strategic visibility/alignment and information integration;
• Acquire exemplary supply chain talent and leaders;
• Use supply chain optimization models (e.g., risk, cost);
• Manage through a process orientation with appropriate measures;
• Focus on relationship building and trust both between and within companies; and
• Align and realign supply chain architecture and structure.

According to Mark Woodward, president and CEO of E2open, "2010 promises to be a year of recovery and renewal — but only for those companies technologically and operationally ready to capitalize on the many fruits of economic improvement."

"Corporate strategies should be painstaking, but they should also be deliberate, confident, and optimistic," Woodward recently wrote at Supply Chain Brain. "The winning supply chains will be those that are able to recognize and respond to potential risk, and also be flexible and efficient enough to seize opportunities when they present themselves."

Earlier

Are Importers Ready for the 10+2 Rule?

Supply Chains in Survival Mode

Risk Management a Top CPO Priority

Strategies for Cost Reduction and Risk Management

4 Sourcing Strategies During a Downturn

How to Make the Relationship Work

Spotting a Troubled Supplier

Supply Chains Prioritize Visibility

Reducing Energy Consumption and Cost

Surviving the Credit Crunch

Wal-Mart's New Game-Changing Mandate...

Resources

Cost of Control: The Real Price of Cost Cutting Report
Basware, November 2009

Supply Chain Risk Becomes Strategic Imperative as the Need for Cost Cutting Continues
Basware, November 2009

December 2009 Semiannual Economic Forecast: Economic Recovery Continues in 2010
Institute for Supply Management, Dec. 8, 2009

Seven Subjects to Monitor in 2010
by Bernie Hart
J.P. Morgan Global Trade Services newsletter, January 2010

Supply Chain 2010: Building on the Lessons Learned
by Sean Murphy
Logistics Management, Dec. 22, 2009

Many Goals Remain Unmet in 5 Nations' Climate Deal
by John M. Broder
The New York Times, Dec. 18, 2009

Supply Chain Management 2010 and Beyond: Mapping the Future of the Strategic Supply Chain
by Steven A. Melnyk, Rhonda Lummus, Robert J. Vokurka and Joe Sandor
Michigan State University, Iowa State University and Texas A&M University - Corpus Christ, Nov. 2, 2006

2010 - Risk or Opportunity?
by Mark Woodward
Supply Chain Brain, Nov. 30, 2009