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Executive summary
The objective of this research study was to assess how the current global financial crisis has had an impact on planning activities in the supply chain and contract management of four selected supply chain organizations in Edmonton, Alberta, Canada: ATCO, SYSCO, Wal-Mart, and GFS. In order to facilitate in data collection for the survey, the study adopted a descriptive research design. A semi-structured and self-administered questionnaire was the tool of choice for data collection. Data analysis was done using the statistical tool for social sciences (SPSS). According to the research finding for this survey, it emerged that the supply chain organizations were not well prepared to handle the current global financial crisis. It is also anticipated that these organizations will experiences reduced revenues, in addition to plans for reducing part of their existing workforce, as a coping mechanism.
Introduction
The objective of this research paper is to explore how the prevailing global financial crisis has impacted planning activities in the supply chain and contract management. In particular, the study shall be concerned with examining the activities and contingency plans that supply chain organizations have sought to undertake, in response to the impact that the global financial crisis has had on them. Accordingly, issues of investment, finances, management of the workforce and supply chain relations, shall be explored. In the few years leading up to the start of the global financial crisis, many organizations had been doing well financially, but none anticipated to experience a downturn like they have now, thanks to the global financial crisis. In a bid to salvage organizations from experiencing the full impact of the global financial crisis, governments have embarked on a stimulus package plan whose intention has been to ensure that organizations remain solvent. Although such a move may be expected to have an impact on prevailing events, nonetheless it may also be expected that this shall hurt organizations in the long-term, in terms of growth. It is for this reason therefore that participants in the supply chain are even more vulnerable to the aftermath of the global financial crisis.
This particular survey is therefore an effort at further gaining useful insight into how the supply chain organizations have been affected by the global financial crisis, and how they are coping, in a bid to remain in business.
In this regard the study hopes to make use of a semi-structured and self-administered questionnaire, to gain the needed data on the subject matter. The respondents to the study questionnaire shall be the supply chain managers and purchasing agents at such supply chain organizations as ATCO, SYSCO, Wal-Mart, and GFS. The sample size shall be 12 in number. A descriptive study design shall be adopted. Data analysis shall be through the use of the Scientific Package for Social Sciences (SPSS), to provide the needed research findings for the study.
Objective of the study
To determine the impact that the financial crisis has had on the supply chain organizations.
Scope of the study
For the past two years, the global financial crisis has greatly had an impact on the various functions of the business (Pendery, 2009, par. 2). Amongst the functions that have been hardest hit is the supply chain. Accordingly, this study shall endeavor to examine the impact that the current global financial crisis has had on selected supply chain organizations. The respondents to the survey shall be the purchasing agents and supplies manager at selected supply chain organizations in Edmonton, Alberta, Canada. The study questionnaire shall attempt to gather data on the prevailing financial situation at their organizations due to the global financial crisis. In addition, the study shall also attempts to examine the budgeting activities that their enterprises have implemented in the short-term, in response to the current global financial crisis. The plight of Investment activities in these organizations shall also be explored, along with the current status of both the key customers and the suppliers to these enterprises. The customer and/or supplier base that have a higher likelihood of encountering disruptions and financial stress, in as far as the normal operations of the organizations are concerned shall also be determined. Furthermore, the respondents shall be questioned on the measures that their organizations may have implemented with regard to their key customers and suppliers, as a strategy to addressed problems associated with their operations during this period of harsh economic conditions. Ultimately, the study shall endeavor to assess how the human resource management is handling its operations, in the face of the current global financial crisis.
Literature review
Leading economists have asserted that the current global financial crisis is the worst financial crisis since the one related to the Great Depression of the 1930s (Pendery 2009 par. 3). Key businesses have failed, thanks to the current financial crisis, while the wealth of consumers ahs declined tremendously. The global financial crisis started in late 2007 and in two years, we have witnessed some of the leading financial institutions falling, one after another. In addition, the economic performance of different countries has been left in ruins, in the process also leaving customers with a certain level of fear about how assured they are of the stability of the economy in the years ahead. While this fear has impacted a certain amount of uneasiness on consumers, and in as much as their fears could be justified, nonetheless, it is important that solid solutions are provided to them. Instead of realizing growth, companies are now faced with a recession, with employment levels at an all time high. On its part, the government has resorted to offering economic incentives in the form of stimulus packages, if at all to constrain the existing institutions faced with an imminent collapse from being destroyed altogether.
One key area in the business world that has been hardest hit by the current global financial crisis is the supply chain organizations. These organizations have especially been on the receiving end, considering that competition has now intensified in their area of trade, and they are now expected to be exceedingly more efficient in their operations (MIT-CTL, 2009, p. 2). On the brighter side, the global financial crisis has presented these organizations with a perfect opportunity to seek for offshoring services of some of their operations, such as information technology, with a view to ensuring that their operating expenses are contained for increased performance and efficiency in the face of stiff competition.
Whereas there are those businesses that are destined to fail despite instituting cost cutting measures, one of the areas that may help organizations to keep afloat of the current global economic crisis is a strategic realignment of their existing supply chain. Before the business world was faced with the current global financial crisis, most business were experiencing a rapid rate of expansion, and the main concern of the management was to realize a growth for their business, gaining higher market share, and the satisfaction of the increased customer demand (Coyle, Bardi, & Langley, 2009, par. 4). As a result of these developments, most of the organizations embarked on a mission to expand their supply chain, in line with globalization, as the demand for their products and services increased. In this case, the main emphasis by these organizations was on delivery and speed, with the result that there was a rise in the inventories and costs for the companies. With the economic recession having set in, the business world was completely changed. The availability of credit facilities for the supply chain organizations was dwindling, while sales volume shrunk (Viswanathan, 2009, par. 5). The result of this is that a trading environment that is volatile in nature was created, in which suppliers and buyers alike were now more exposed to potential failure and financial stress. At the moment, the integrity characterizing the supply chain organizations hinges upon a precise evaluation of the associated risks, not to mention the ability of these supply chain organizations to become flexible in the face of the prevailing global financial crisis and quickly respond to the interruptions that have affected the supply chain organizations. More specifically, businesses faced with cash problems are now relying more on their supply chain as a remedy to help[p them remove the escalating operational costs, as well as to help them adjust inventories appropriate to the low sales activities. However, with these kinds of cuts, it may be expected that the service accorded to customers is bound to suffer.
The prevailing economic crisis that has affected the entire globe has altered the way in which various organizations views capital investment and cash. In addition, there has also been a subsequent increase in the level of complexity of the supply chain, thanks to globalization (Coyle, Bardi, & Langley, 2009, par. 4). Accordingly, suppliers, competitors, as well as customers have all gone global. As a result of companies externalizing their capabilities, this has seen corporations become asset-light, place more emphasis on core competencies, and reduce their direct costs. With an increase in the number of partners trading globally, there emerges the end for collaboration and integration with those partners who have extended supply chains (Viswanathan, 2009, par. 3). An increasing number of organizations are feeling the need to embrace outsourcing of some of their functions, such as supplies and logistics. As a response to the prevailing global economic crisis, a majority of the organizations have realized a need to restructure their existing processes in supply chain management, with a view to lowering requirements and complexities that do not add any value to them. The intention is to enhance their performance in supply chain application.
As the supply chain organizations feel the full impact of the global; financial crisis, a majority of the managers in these organizations sought to embrace a survival mode, during these tough financial times. Accordingly, most of them have had to cut down on their operating costs, even as this has meant a negative impact on their overall profitability. According to Buck (2009, par. 2), for the last one year, the supply chain organization have witnessed over 30 percent rate of business disruptions, veer since the financial crisis started. Owing to the prevailing economic pressures, a lot of organizations have been forced to make use of their existing supply chain, and more so the procurement and sourcing functions, as a way of helping the organization contain its operating cost, while at the same time also helping it boost its revenues. A survey that was carried out in September 2009 by Global Survey of Supply Chain Progress, and which had the supply chain executives from over 20 industries distributed across the main global geographical segments as its respondents. The respondents to this survey indicated a need for supply chain organizations to ensure that they cut down on their operating costs during the prevailing harsh economic times. What this appears to suggest is that the supply chain management is an important function of an organization that has to be broadly explored, and more so when an organization is faced with harsh economic conditions (The Medical News, 2009, Par. 3). Even when faced with the dire need to institute cost-cutting measures in their organizations, supply chain managers have endeavored to demonstrate how this function of the firm could play a role in ensuring that the organization realizes revenues during harsh economic times. Still, it cannot be in doubt that the global economic crisis has presented major challenges to the various organizations supply chain function. To start with, customers are demanding between services, not to mention the fact that companies have to be more transparent, in the face of the drastic fluctuations in both demand and supply for the goods that they manufacture.
It is now more than one year since the Lehman Brothers field for bankruptcy and while the dust is yet to settle due to the shock waves that this landmark bank failure had on the financial and stock markets, the supply chains are still feeling the full impact of the downturn (MIT-CTL, 2009, p. 1-12). Supply chains organizations should be more concerned with the lessons that they could learn from the failure of such organization, so that in future, they are better prepared to deal with such unexpected occurrences. The supply chain organizations have since sought to reshape their structures with a view to reducing costs, with the intention of ultimately lowering the risks that are associated with undertaking of business activities in an otherwise commercial climate that is hostile to their core business activities. Many supply chain managers reckon that what they have to deal with now in their day to day activities is very different to what they were expected to do about two years ago. Not only has competition become quite different, but the supply base has also become quite different as well. Consequently, this has also led to a different customer base. As a result, it is important hat the supply chain organization are in a position to embrace these changes that have been occasioned by the current global economic crisis, if at all they are to maintain a competitive edge in the market place.
We continue to witness a reduction in terms of demand for goods and service in the world, ever since the financial crisis occurred. Whereas such an occurrence has proved quite a hard task for supply chain organizations to contain, nonetheless, many of the forward-looking companies have embarked on a strategy that will help them better manage their existing supply chains. One of these strategies has to do with ensuring that the prices of the goods and services are kept at an all time low (The Medical News, 2009, Par. 5). This is because the purchasing power of the customer has been affected and they are now ready to shop at any supply who offers lower prices that their competitors. Accordingly, the issue of loyalty may no longer be very valid at such times. Flexibility becomes a key attribute for suppliers at this point. However, supply chain organizations are faced with the challenges of ensuring that their prices remains low, even as they endeavor to respond quickly to the issue of demand and supply in the market. Another challenge that is facing supply chain organizations is to ensure that they keep on improving the efficiency with which they provide goods and services to the market. This calls for the implementation of sound management practices, in a bid to remove potential inefficiencies within the system.
Methodology
Research design
This study shall assume a descriptive study design. Descriptive research is quite useful especially when the intention is to get the most current information regarding a certain phenomenon under investigation. Accordingly, the design helps a researcher to describe the current existing situation, in line with the conditions or variables that define such a situation. With respect to this research study, the research method shall be a survey that will examine how the current global financial crisis has had an impact on the supply chain organizations. Since the intention is to obtain the most current information regarding this situation, it was deemed necessary therefore to make use of this study design.
Participants
The participants for this research study shall be the supply chain specialist and managers to selected supply chain organizations, and these includes ATCO, SYSCO, Wal-mart, and GFS.
Study population
The study wishes to engage a total of 12 participants
Data collection
A self-administered and semi-structured questionnaire shall be the tool of choice for data collection. According to Laurel (2003, p. 24), it is important that the instrument for data collections in a survey to be strong enough so as to effectively support the potential findings of such a study. In this case, the self-administered semi-structured questionnaire shall help the study respondents to give more incite into the issue at hand, with little interference from the researcher. Prior to the actual administering of the questionnaire to the study respondents, the researcher will first seek consent from the learning institution, as well as from the supply chain organizations that he hopes to undertake this survey. Participation in the survey shall be on a voluntary basis. Ethical considerations shall be followed during the time of data collection, as well as during the period of data analysis. The data obtained from the study respondents will only be used for purposes of informing this study.
Data Analysis
Analysis of the data collected shall be via the use of such statistical tools as SPSS.
Summary of results
Current financial situation
Six of the twelve supply chain managers and purchasing agents responded that their organizations were not prepared to handle the current financial crisis. As a result, an increasing number of the respondents (eight) agreed that at the moment, their organizations were at the moment faced with a drastic reduction in revenue, for the past two years since the global financial crisis started. The respondents were also quick to agree that they anticipated this trend to go on for an extended period of time, as long as the global economic conditions remained bleak.
Budgeting activity
On the issue of the current budgeting activity at the supply chain organization surveyed by this study, four of the participants responded that for the moment, the hiring of new workforce had been put on hold, until such time as the economic conditions improved. A further two respondents said that their organizations had put on hold the budget meant for training a new workforce, until further notice. Three respondents said that at the moment, their employers were contemplating initiating a package for part of the workforce who would consider taking an early retirement.
Current investment activity
Capital investment activities appears to have been hit the hardest amongst the four organizations that took part in the study, with nine respondents agreeing that at the moment, this activity had been suspended. However, only two respondents said that their employer had suspended investments in information technology.
Supplier community status
The supplier communities to the supply chain organization interviewed have also not been spared by the current global economic crisis, with eight of the twelve respondents to the study commenting that in their opinion, their suppliers were not well-prepared to handle the prevailing economic downturn. As a result, an increasing number of suppliers have been making a request to the supplier chain organizations to reduce their terms of payment, as a cushioning effect against the economic crisis. The main reason why the suppliers have been hardest hit by the economic crisis is that it has not been easy for them to get short-term credit facilities from the banks. As a result, this has survey disrupted their business operations, and this includes the mode of supply to the organizations whose supply chain and purchasing agents were interviewed by this study. Five of the study respondents confirmed that they were well aware of a number of suppliers who have had to reduce their capital investments expansion capacity moving on to the future. This could affect the overall revenue for the supply chain organizations, because when the capital investment and expansion capacity for the suppliers is handicapped, there is the likelihood that the products supplied shall also drastically reduce.
Customer community status
70 percent of the study respondents felt that their customers had not anticipated the impact of the economic downturn to be severe to the level lit has gone to and therefore, they were not prepared. Nonetheless only two of the respondents to the study agreed that their organization had arranged to hold meetings with key customers in a bid to assess the magnitude of the prevailing global economic crisis. On the question of the customer base or supplier sectors that the respondents thought were at an increasingly higher risk of encountering disruption and financial stress to the daily normal operations of the supply chain organizations, the supply of raw materials was the leading concern, with 9 out of the twelve respondents highlighting it. This was followed by contract manufacturing, with seven of the respondents feeling that this was an issue that had the potential to seriously disrupt the operations of the supplier chain organizations. Some of the other customer base and supplier sectors that were also given priority by the respondents includes the IT infrastructure providers, as well as outsourced process providers.
The respondents also said that their organizations had taken a number of measures to attend to customers/key suppliers operational problems due to the economic crisis. To start with, five of the respondents said that their organizations were in the process of review the existing contractual; terms with their suppliers, with the intentions of strengthening them, and with a view to driving compliance. On the other hand, three respondents said that their organizations were in the process of reviewing the existing contracts with key customers and suppliers, the goal being to re-negotiate the contractual terms or purposes of ensuring that the current relationship endured the global financial crisis. The respondents also argued that such a contractual re-negotiation was also aimed at ensuring that the organizations shared rewards and risks mutually with their strategic partners, in the years to come. Only one respondent said that his organization was considering changing the existing accounts receivables/payable for their suppliers and customers, as a means for them to take into consideration cash flow challenges.
Plight of HRM
The global economic status has also not spared the human resource management department at the supplier chain organizations investigated by this particular research study. Regarding this, seven out of the twelve respondents to the study confirmed that thanks to the global financial crisis, their organizations faced a challenge of making decisions that could have an impact on their economic activities. In addition, three out of the twelve respondents to this study confirmed that their organizations were deliberating on downsizing their current workforce, as a result of the current global economic crisis. Only one respondents said that her organization had to immediate plans to downsize on its workforce, in spite of having to endure a period of harsh economic conditions. None of the respondents said that their organizations had any plans to alter the purchasing functions, arguing that this is a long range plan that has been written formally, and would therefore jeopardize the operations of the parties involved, in case it was to be altered. On the question about how the current global economic crisis could impact on a disruption of the supply chain at their organizations, five respondents cited impact on revenue, a further four respondents cited a disruption of customer service, while the reminder cited a possible shutdown of operations.
Conclusion
According to the findings of this research study, the current global financial crisis has had an impact on the supply chain organizations. While the are those organizations that have already started experiencing the impact of the financial crisis in the form of reduced revenues,. Others anticipate their current revenues to reduce further in the near future. Accordingly, a number of these enterprises have sought to implement strategies that are aimed at ensuring that they remain in business, despite the prevailing situation. For example, several of the companies seeks to reduce their workforce to reduce on their porting costs, while others are in the process of renegotiating the existing contract between them and their key customers and suppliers, so that they share in the risks and benefits mutually. It is also important to note that very few of the organizations were prepared for the current global financial crisis and for its reason, they had not planned contingency plans that they could have implemented during these harsh economic times. Some companies have sought to freeze on their training programs for new employees, in addition to suspending of the hiring process for new employees, until the financial situation improves for the better. In summary, it may be argued that the current global financial crisis has had a profound and deep impact on the planning activities of the supply chain organizations. It is important therefore for these organizations to ensure that they draw useful lessons from this crisis so that in the future, they are in a position to better manage the situation, instead of getting caught unprepared.
Reference List
Buck, G. Sharp rise in supply chain disruption. 2009. Web.
Coyle, J. J., Bardi, E. J., & Langley, C. J. (2009). Supply chain management: a logistics perspective. Stamford, Massachusetts: Cengage Learning
Laurel, B (2003). Design research: methods and perspectives. Boston, Massachusetts: The MIT Press.
MIT-CTL. (2009). Is Your Supply Chain Ready for the New Normal? Supply Chain Strategy, 5(10): 1-12. Web.
Pendery, D. (2009). Three Top Economists Agree 2009 Worst Financial Crisis Since Great Depression; Risks Increase if Right Steps are Not Taken . Web.
The Medical News (2009). Economic pressures are forcing companies to rework supply chain strategies: survey. Web.
Viswanathan, N. (2009). The Secret SaaS: On-Demand Supply Chain Management. Web.
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