The business climate in 2024 shows a range of challenges. High energy cost, inflation, and central banks’ interest hikes led to a business slowdown in Europe.
In addition, the aftermath of the Covid disruptions and wars in the Ukraine and in the Near East contribute to the supply chain issues. Together, these external factors impact the success of organizations across industries.
Therefore, executives need to confront critical issues that threaten their companies results and earnings. Key issues are:
- Liquidity and Working Capital
- Falling Sales and Earnings
- Supply Chain and Procurement Disruptions
- Inefficiencies and Bottlenecks
1. Liquidity and Working Capital
Many firms face high inventory stemming from the Covid era. This led to high working capital levels and ties lots of cash in the warehouse.
In addition, higher interest rates require more cash for financing. Together with old customer contracts from before the inflationary period, the strain on cash squeezes profit margins and liquidity.
Now, the goal is to preserve cash, reduce inventory and increase gross profit to ensure liquidity and profitability.
2. Falling Sales and Earnings
Sales growth targets were missed because of low product availability, unpredictable delivery dates and recessionary market issues. These lost sales add to the embattled margins due to inflation of supply cost. The inflationary pressures and the higher cost undermine traditional pricing strategies.
To counter falling profits, urgent actions are needed to win customers in new market segments, reset pricing agreements and counter the cost increases and margin losses.
3. Supply Chain and Procurement Disruptions
Stressed out purchasing teams trying to improve supplier responsiveness and to mitigate supply chain risks. The low supply chain reliability for at-risk purchased goods & materials is the result of lack of modern supply chain planning software and reliance on Excel sheet make-do.
The lack of parts availability caused a negative impact on timely customer delivery, production costs, and overall supply chain risks. There is an urgent need for improvements in cost, time, quality, delivery, & safety leveraging Lean problem-solving and supply chain excellence.
4. Inefficiencies and Bottlenecks
The unfavorable utilization of expensive capacity like machines and manpower caused by suboptimal supply chain and production planning & scheduling (S&OP, ERP, Kanban, POLCA) led to low inventory turnover and big cash sink, adding to the blown-up stock levels.
With a renewed push for end-to-end operational excellence ensuring reliable demand planning, order entry, warehousing, transportation, and accounts payable processes. High earnings, then, are the deserved result from strong efficiency, sound compliance and safety in quality & process management systems (IATF 16949, ISO 9001, EN 9100, ISO 27001, ISO 45001 / OSHA).