Global economy could have huge impact on supply chains

on Monday, January 7, 2013

Global economy could have huge impact on supply chains With the global economy struggling to take off, many are concerned about what changes 2013 could bring to large corporations and their supply chains. While some experts view the future as bright for both producers and consumers, others fear a global financial crisis could hinder growth for quite some time.

Some see a bright future
Many corporations across the world were relieved to hear U.S. lawmakers had managed to come to an agreement to avert the "fiscal cliff," a combination of tax hikes and spending cuts that some economists predicted result in a devastating recession with global impacts. This could be the first sign of relief for some, as countries internationally try to lift themselves out of fiscal problems. The minimal tax increases in the fiscal cliff package could mean American consumers are able to spend more, therefore increasing the amount corporations find it profitable to produce. This could lead to additional corporate procurement of raw materials and the potential for additional manufacturing facilities to be constructed across the world, as companies seek lower manufacturing costs.

Others remain hesitant
While some have high expectations for 2013 and what it will hold for companies and their supply chains, others are less optimistic and hesitant to invest too much in projects that may not be successful in the long run. While the U.S. did manage to avoid going over the fiscal cliff, new battles over the debt ceiling and government spending are headed to Capitol Hill, which could drag down the economy, especially if uncertainty and partisan politics play a role in any agreement.

Skeptics have concerns about countries other than the U.S. Debt problems plaguing European countries could cause huge economic problems for countries with massive deficits, and if the euro continues to sink lower against the dollar, countries that use the currency could continue to struggle.

Asia is also a concern for some. Though countries across the region have long been revered by some corporations for their low manufacturing costs and limited regulatory enforcement, economic powerhouses like China could be headed for severe fiscal problems in 2013. If worldwide consumer demand continues to fall, companies could shut down or limit Asian production, resulting in a potential downturn for the Chinese economy.

Staying abreast of economic situations critical
With uncertainty clouding the coming months, many businesses are unaware of the positions they will find themselves in and how global economies will play a role in their operations. Remaining informed of all situations in places which a company conducts business is essential, and could offer it the opportunity to move or alter its operations to avert a crisis or take advantage of more cost savings.

Manufacturing facilities are a business component that should be closely watched in the coming months, as a firm may notice fiscal uncertainty in certain countries could make shutting or moving a plant before a countrywide financial crisis a wise decision. Companies may also find it useful to have a better grasp on their logistical operations, which could have the potential to be improved and get products to market more efficiently, perhaps resulting in higher profits and greater customer satisfaction.

Firms should also take the initiative to ensure they use proper tracking systems to be aware of all their production, logistical and strategic sourcing operations to be certain they are taking advantage of all opportunities and working carefully to avoid placing all their vital operations in countries on the brink of fiscal collapse. Supply chain management should be taken seriously and corporations may find it useful to develop strategies that take into account the economic health of the countries in which they are conducting business operations.

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