22 Aug 2023 -
 General

Procurement outlook shows signs of improvement

supply-chain

Global factories have been increasing their output for the fourth consecutive month, while productivity in China recently hit an 11-month high after Beijing lifted COVID restrictions at the end of 2022. In the US, manufacturing figures dipped in June but seemed to be stabilising in July, according to the Institute for Supply Management’s latest Purchasing Managers’ Index (PMI).

“The Supplier Deliveries Index figure of 46.1 percent is 0.4 percentage point higher than the 45.7 percent recorded in June, commented Timothy Fiore, Chair of the ISM’s Manufacturing Business Survey Committee: “In the last eight months, the Supplier Deliveries Index has recorded its eight lowest readings since March 2009 (43.2 percent).”

Among the ISM’s reported comments, a purchasing manager in the fabricated metal products sector said the supply chain conditions were returning to a situation broadly comparable to pre-pandemic conditions. Logistics costs had settled down, while transit times were getting shorter. Any remaining divergence was to be found in energy and raw materials costs.

Another purchasing manager, this time from the primary metals sector, noted that their order book was “strong”. A respondent working in the food and beverages industry said that they expected production to increase soon, given the slight easing of inflation and an uptick in consumer confidence.

Although the threat of recession still looms over several economies, things are undoubtedly starting to look healthier, and more familiar, for supply managers. Looking ahead, the key questions for professionals to consider are

  • what lessons they’ve learned since 2020;
  • what changes the crisis has necessitated, and
  • whether corporate procurement teams are well enough prepared to handle the next big shock to the system.

Such questions are made more urgent by research findings suggesting that businesses are already reverting to old, short-term habits. For instance, a survey by PwC in November 2022 found that only 5% of senior executives in the US considered the task of increasing their firms’ responsiveness and resilience to be their highest priority in 2023. Only 23% included it as one of their top three priorities.

One company that’s clearly deemed the task vital is the French electrical engineering firm, Schneider Electric. It has been two years since the business adopted a supply chain strategy called “Strive” (standing for sustainability, trust, resilience, intelligence, velocity and efficiency). The firm’s main aim in doing so has been to make its supply chain more shock-resistant and customer-centred – and it seems to be succeeding. In May, Schneider topped Gartner’s rankings for the top 25 supply chains globally for the first time.

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