When we take a closer look at the staggering increase in the price of commodities, by all indications this upward trend in commodity prices will continue.
This is simply caused by excess demand that is not catered to due to the lack of supply.
The excess demand arises as a result of several factors, including demographic conditions, increased industrialisation of developing countries and improving standard of living on a global scale.
The shortage in supply arises owing to adverse weather conditions, labour shortages, and unstable economic conditions.
Due to this imbalance of the market forces, retailers are facing higher input costs whilst at the same time they are unable to increase the prices of their products due to intense competition. Therefore this results in a dilemma, where they are unable to increase their margins, and sometimes resulting in a loss.
We need to find ways to add 'real' value to the consumer and this can only come by active involvement of supply chain management and research and development (R&D).
Supply chain management involves a business integrating its suppliers, intermediaries, contractors, third-party service providers and customers into their value chain to ensure a smooth flow in business activities, from sourcing raw materials to delivering finished products at the point of purchase.
Today, most successful organisations from diverse sectors, ranging from automotive to food and beverage, have integrated the suppliers and R&D effectively to cater to customer requirements at a reasonable price in a cost effective manner.
Businesses should ask themselves the following questions; is every dollar you invest in the organisation converted to consumer value? Are you pursuing every opportunity to optimise the supply chain? Not only should businesses manage the backward integration but also address the concerns of its core business. Time to challenge everything!
Hispanic #1 Breaking News for Entrepreneurs, Professionals and Small Business Owners - HispanicBusiness.com
OCTOBER 31, 2014
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