I recently had a chat with Alvarez & Marsal's Steve Gold to get his thoughts on supply chain predictions for 2012. Steve is one of the leaders of A&M's supply chain practice and the former Chief Supply Chain Officer of PepsiCo. Even though I thought the discussion would trend toward supply chain operations issues given his background, the themes and predictions actually dovetail quite well with broader procurement scenarios over the same time frame -- perhaps proof of the continued integration and collaboration between functions.
In kicking off our conversation, Steve suggested that there's a high probability we'll be "looking at an inflationary" 2012. Input costs, from potatoes to cotton to oil are likely to rise. Because of this, "large-scale companies are going to have to ask themselves how to significantly reduce costs" in the context of a consumer market where prices for most finished goods have to remain flat at best. Besides hedging and demand aggregation strategies -- which we'll get to in a minute -- Steve recommends companies continue to emulate industry leaders in reducing not just the rate of inputs but more importantly the consumption.
Perhaps most important for procurement and supply chain leaders, the need to target input costs means that cost focus must shift away from rates and unit costs. Steve argues, "Trying to find a way of redesigning products or working with suppliers collaboratively to consume less," requires a new way of thinking and acting.
Stay tuned as our conversation with Steve continues.