Commodity price increases, margin impact and choices

A Wall Street Journal article (14 February 2011) describes the impact of commodity price increases have driven down average operating margins – by $ 500 million for Kraft and $ 1 billion for Proctor & Gamble.  The focus on productivity increases and overhead reduction during the recession generated profits even during a weak economy. But raw material price increases, which have not been passed on in the form of higher prices, will require increased overhead to manage the global supply chain to deliver improved performance.  Will managing the impact of commodity prices require a quick expansion of management ranks and thus overhead ? Will subsidized commodities available for suppliers for some countries (e.g., China) suggest a need to outsource more production ?

About aviyer2010

This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged , , , , . Bookmark the permalink.

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