Supply Chain Comes Into Focus Due to Changes in Energy Markets

Rising energy costs drive manufacturers to reassess supply chain strategy, offshoring

Rising energy costs drive manufacturers to reassess supply chain strategy, offshoring

Boston  November 1, 2005  Senior manufacturing executives believe that rising energy costs will change the way they conduct their business and are looking to their supply chain managers to minimize the pain, according to a survey conducted by the analyst firm Industry Directions Inc.

Additionally, the increasing burden of energy costs is forcing organizations to rethink not only their distribution plans, but also their operating strategies for contract manufacturing. These findings come from a survey of over 60 corporate executives from a wide range of industrial companies about the impact of energy on their business, Industry Directions said.

Over three-quarters (77 percent) of the executives surveyed indicated that they are increasingly focused on supply chain issues as a result of the rapid changes in energy markets.

The rising cost of energy is forcing companies to rethink their longer-term operational strategies, including revamping their supply chain network design, said William Brandel, principal at Industry Directions. Further, nearly half of all companies now say they are re-considering whether and how to implement offshore manufacturing, once seen as a panacea for controlling costs.

The survey also indicated differences in the way Process and Discrete manufacturers were responding to the rising costs. Although both sectors ranked Logistics and Sourcing as their top areas of concern, Process manufacturers, whose production processes are more energy-intensive and whose feed stocks are often petroleum-based, are also concerned about forecasting, production and inventory management.