By  on March 23, 2010

The economy might be inching its way back after two years in the dumps, but sourcing executives still need to be hyper-aware of the financial strength of each link in their supply chain.

The importance of such “vertical awareness” was one of the key points of an HSBC Bank USA presentation by Diane D’Erasmo, executive vice president of commercial banking, and Steven Lotito, senior vice president and head of North American trade and supply chain sales.

“Despite the continued difficult economic environment, we’ve seen some moderate improvement in the general economy and retail market,” said D’Erasmo, citing sales improvements in December, January and February.

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SEE VIDEO HIGHLIGHTS FROM THE DIANE D'ERASMO AND STEVEN LOTITO DISCUSSION>>
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But even with the economy on the upswing, Lotito said brands need to keep up an active dialogue with their vendors so they’re aware of every problem or hurdle.

“Everything you do has a domino effect,” he said. “You need to understand the working capital needs of your vendors and ensure that you’re not putting more onerous terms on them than they can actually afford to take. If you are, you begin to put these stresses on the system.”

Demanding too much from vendors can impact their ability to acquire raw materials, which can lead to inventory shortages for retailers.

“It’s not just your piece of the supply chain, but the entire supply chain,” Lotito said. “So from you, all the way down to where your vendor is sourcing their raw material from.”

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