Planning for Unplanned Spend
2017 and 2018 saw an uptick in unplanned spending as companies struggled with new trucking regulations, brutal weather, and tariff changes.
Original equipment manufacturers (OEMs) have high expectations of suppliers, pushing them to comply with production requirements. But because life is unpredictable, suppliers may fall behind on component production. If suppliers don't meet their deadlines, and then market conditions present further delay, unplanned spending becomes a necessary evil to make the cut.
For most suppliers, merely getting by is as good as it gets. They have just-in-time inventory, holding a small amount of goods on site. But this approach is more than risky, particularly when transportation choices are limited, the weather is torrential, or the market is working against you. When any of these things happen, expediting materials is often the sole avenue of recourse, especially if avoiding missed-deadline fines is the only way to protect your bottom line.
Because the industry is so fickle, many suppliers simply aren't in a position to increase their budgets to accommodate "what-ifs." Some suppliers have blown through their entire annual logistics budget before they get out of the first quarter, simply from whatever conditions have caused them to have to expedite or operate from an unplanned spend perspective.
Director of Global Development,