Disruptions to Supply Chain Can Have Major Impact On Shareholder...

Disruptions to Supply Chain Can Have Major Impact On Shareholder Value

By Manufacturing Technology Insights | Wednesday, May 08, 2019

Again, it's earnings season, with managers and shareholders analyzing from the numbers for revenues, profitability and business growth. However, there's another area of business operations that specialists said should be more thoroughly examined not just to enhance corporate performance, but also to increase shareholder value: the supply chain.

Researchers outlined the correlation between developing a holistic supply chain strategy and increasing shareholder value in a new report from Maine Pointe and the Global Supply Chain Institute. As per the Global Supply Chain Institute, with only 16 percent of businesses reporting having a multi-year supply chain management strategy, this suggests that this area is undoubtedly overlooked when reporting on earnings. Risk management is also an essential element to drive shareholder value through supply chain standardization, the report said, as disruptions to the supply chain can have a major impact on shareholder value.

The correlation between supply chain management and shareholder value has been illustrated late by most profitable groups in the world. Last November, after analysts at Nikkei evaluated that the latest iPhone sales were slowing down, Apple have seen a temporary nosedive in share prices, pointing to rumors of product cuts across the supply chain. Tesla also saw her own share of shareholder woes, linked to the challenges of the supply chain. Analysts said delayed last year and late vendor payments caused the automaker to disrupt the supply chain. In October, Safkhet Capital Founder and Chief Investment Officer Fahmi Quadir cautioned that a lack of diversification in the supply chain of Tesla could have a significant impact on Tesla if some of these vendors left business.

Share values have been negatively impacted in both these cases— in the shorter term. But, supply chain management strategies may have a longer-term impact on shareholder values, according to analysts.  Talent management and logistics management in the supply chain, as well as the implementation of innovations, are essential components to improve supply chain operations. Organizations also need to focus on improving their supplier bases and implement a win-win scenario like increasing payable terms and, offering longer-term contracts, and open data sharing. Finally, to match supply with demand, businesses must break supply chain siloes.

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