Manufacturers must find new ways to offset the impact of high energy costs, and they're looking to their supply chain for answers.
The findings of Industry Directions’ second annual survey focused on the influence of energy costs on the manufacturer’s supply chain strategy. The survey received 139 responses from a variety of industrial companies.
The study reported that 79 percent of respondents are focused on supply chain issues as they relate to energy costs. Manufacturing executives overwhelmingly indicated that every aspect of the supply chain is being seriously impacted by increased energy costs. Warehouse management, reverse logistics, procurement and planning are being impacted at a larger portion of companies than in the previous year’s findings.
“This year’s findings are significant because they demonstrate that companies are not simply bearing the brunt of high energy costs in the most obvious areas of the supply chain,” said William Brandel, Principal at Industry Directions. “Further, they now recognize that they cannot pass these higher costs on to customers or demand lower costs from suppliers.”
Over four times as many respondents as in 2005, at 22 percent, now recognize that energy costs may hurt their margins. Only 15 percent of respondents, however, believe they can pass higher costs on to customers, compared to 31 percent in 2005. Additionally, fewer companies expect lower costs from their suppliers to offset energy costs going forward.
The study conclusion is that high energy costs are now requiring manufacturers to develop an optimized supply chain network and improved planning and execution to support global operations.
The study was sponsored by Logility and Manhattan Associates.