Survive or Thrive in times of Economic Uncertainty

Posted on August 12, 2011 by
Dr. Edward F. Knab

It doesn’t matter if they call it a recession, depression or something else, the world economies are on the brink of a double dip recession. Consumer confidence is is now at its lowest level in 50 years and companies must develop effective strategies in order to survive these challenging times.

While there is little wrong with prudent cutting costs, the companies who emerge from economic downturns quickest and gain the most market share are those who applied innovation during the downturn to add value to their business and their customers. It is during these challenging times that companies often separate themselves from mediocrity by integrating high degrees of innovation.

Generally, in time of economic uncertainty, the concept of innovation is not even up for discussion, whereas it should be the basis for all ‘going forward’ decisions. Traditional supply chain issues such using innovative means to get products people want to buy to them faster and cheaper is the foundation for improving the value equation we bring to the table. Our focus should be on adding value to the customer rather than cutting costs. All of our focus as innovators should be directed at “added value”; even the act of cutting cost is in reality adding value.

Supply Chain innovators provide value to their customers by improving systems which result in improving profits. The great majority of all improvements are of an incremental nature rather than a single “big bang”, they are a result of constant and never ending improvements (CANI). Companies that can integrate some simple philosophic approaches into the customer relationships can create greater value for their customers and themselves, and will gain competitive advantage in the marketplace, especially as the economy improves.

Listen to your Customers.
Get to really know them, live with them, understand their opportunities and support them. Most companies will tell you they know their customers but it reality they know the statistics of what and when they buy but do not know what their customers’ problems and challenges are. Often, the answer is Supply Chain related, businesses need to be asking their customers; what worked? what didn’t? and what next? and often the result is technology-assisted collaboration which creates a foundation for a new and improved relationship. It starts with demand signals – knowing what quantities and mix of products are selling in each store or region for you, your customer, or your customer’s customer. Supply chain integration and visibility applications can be the conduit making channel collaboration possible.

Reduce Transportation Time and Cost
Fluctuating energy cost are an underlying cause of our current economic turbulence, with supply chains lengthening and fuel costs on a roller coaster ride, transportation costs and risks are areas that must be stabilized first. Some of the strategies that can help in the long term are network design, near-shoring, and local production and distribution. In the short term Transportation Management Systems can help reduce cost and optimize efficiency. The concept of shippers co-operatives are gaining new traction as volumes decrease and in stock inventory is a mandate. Eliminating empty miles through arranging back-hauls and continuous moves, automating yard movements and appointment scheduling, and providing portals for carrier and customer communication can significantly improve efficiency.

Optimize Working Capital and Reduce Cost
The economic challenges should result in a good long look in how we are leveraging out capital and help us identify area where we may improve our utilization. Cost reduction programs that mandate cost cutting percentages across all departments only reward those who ran too fat in the first place. More importantly, they are not geared to adding value to the customer. In fact, the opposite is usually true. The right way to reduce cost is to start with customer demand signals. Follow the demand signal up through the demand chain to manufacturing and suppliers, then down through distribution to the customer or the store shelf. Examine each point along this journey to see what adds value and what doesn’t. Cut everything that does not add value. That is the principle of lean supply chains.

Streamline Processes
Innovation requires improving processes by leveraging best practices and technology to create better flows of product, people and information. Look at order management, manufacturing and procurement, distribution and transportation. There are significant new developments in technology supporting these areas. For example, using a single system to track raw materials and purchased components, sequence them into and through production, and then tracking the combined output through distribution improves manufacturing and distribution efficiency, and has huge traceability benefits in case of recall.

Make Good Decisions based on Good Data:
Often ERP systems have failed to live up to their promise of integrated and assessable supply chain data and management has been hard pressed to make good decisions. Management needs real-time access to accurate, meaningful information which was supposed to be the promise of ERP. However, the batch nature of ERP and its lack of supply chain detail have shown the reality to be less than optimal. What are needed are business intelligence tools that link, sort and analyze data from all the supply chain systems and trading partners to present meaningful, personalized information to executives in real-time. This information is displayed on graphic dashboards that are easy to comprehend and act upon, yet can be used to drill down to get to the root cause of problems. The good news is these business intelligence systems are available today. They give supply chain management the tools they need to respond with agility to the ever-increasing variability of demand and take advantage of new market opportunities before the competition.

After years of down-sizing, right-sizing and lean, most companies are already running full out. Cutting heads may cut costs, but it also cuts customer service while raising overtime expense and blood pressures. Go from survival mode to competitive advantage by empowering your employees through a performance-focused culture. Look to innovate, everywhere! It won’t all work but your organization will learn from it, they will learn that controlled failure is acceptable providing there is a plan with predefined outcomes and a method of coordination. Promote learning to insure your organization is in tune with the latest supply chain innovation in the market. Challenge the organization to get closer to the customer at every touch point; senior management, buyer/seller, AP/AR, SCM/Customer Service and others.
If your company is attempting to cope with turbulence in your supply chain the Supply Chain Experts can help you design a program that satisfies the requirements of your customers while insuring the optimal data flows to accurately control your global supply chain.

Dr. Edward F. Knab
Productivity Constructs, Inc.
800 660 8718 office
949 413 7333 mobile
ed@edwardknab.com
www.productivityconstructs.com
More Supply Chain Experts Blogs
edwardknab.com

Dr. Knab is an academic practitioner and seasoned supply chain expert whose company, Productivity Constructs, Inc., is focused improving global leadership and thereby creating more effective organizations and higher levels of job satisfaction. Dr. Knab can be contacted for speaking engagements, coaching, or consultation at ed@productivityconstructs.com, ed@ewardknab.com or www.edwardknab.com.

November 23 SCM Visability

David Hurley
David Von
Tom Scorscune
Sandy Vosk
Adena Track

Very comprehensive
Shipment tracking tool

Web Based Visibility tool
Business rules
Designed to speed or slow down shipments
Scalable



Thomas Scorsune
Senior Vice President, Supply Chain & Logistics
Jones Lang LaSalle Americas, Inc.
777 Terrace Avenue
Hasbrouck Heights, New Jersey 07604

Office: 201-393-6844
Mobile: 562-618-6075
tom.scorsune@am.jll.com


Thursday, November 19, 2009 11:26 AM
To: Scorsune, Tom (US)

866-259-9955
2013936844

Webinar link https://mwmus.webex.com/mwmus/jm.php?PWD=&MK=941048129
Meeting Number: 941 048 129
Mon Nov 23 6am – 7:30am Pacific Time
Webex Presentation (map)EFK
Dr. Edward F Knab - organizer
honesd@ix.netcom.com

Are There Hidden Risks in your Supply Chain?

Many organizations have spent years streamlining operations, reengineering processes, integrating with partners, implementing enterprise systems, and moving production to low-cost, offshore locations. They have done all of this in an attempt to improve the service they provide to customers at a more competitive cost. However, creating a global supply chain has brought new risks that you may not have encountered before.

More recent events such as terrorism, strikes, piracy, political instability in Third World countries, and last year's shutdown of West Coast shipping docks—have awakened managers as never before to supply chain risks, some of which had been introduced or heightened by the very actions companies had taken to drive costs out of their supply chains. Currently there are a number of significant well-documented challenges facing international and domestic transportation markets such as rising freight rates, infrastructure disrepair, and the new cost of security in both time and money.

The simple fact is that in today's longer, more global supply chains, product moves over greater distances and across more borders than in the more localized supply chains of the past. The coordination and execution required for international shipments has always been a challenge, but now we find that market conditions, security considerations, and regulatory pressures are converging in such a way that increase risk significantly. But "Many risk factors have developed from a universal pressure to enhance productivity, eliminate waste, remove supply chain redundancies, and drive for cost improvement," says , of Productivity Constructs of Palm Springs, California.

Today an inverse relationship between risk and efficiency supply chains has been established; supply chain managers can no longer focus solely on cost reduction—any calculation of a supply chain's return on investment must also take customer satisfaction into account. "We're trying to make sure we operate the supply chain more efficiently and decrease costs as we increase service levels to customers," says Roy Strauss of Strauss Consulting. Risks exist across the entire length of supply chains, and are as diverse as political instability, exchange rates, carriage capacity, shelf life, and customer demand. The risks will be the subject of future Supply Chain Experts blogs but include:

1. Terrorism

2. Piracy

3. Currency Fluctuation

4. Government Instability

5. Strikes

6. Quality Considerations

7. Energy Cost

8. Transportation Problems

9. Natural Disasters

10. Rework Costs

11. Supply Chain Complexity

12. Global Interdependence

Balancing these competing priorities means that it's impossible to eliminate risk entirely. But there are steps you can take to mitigate risk while keeping your supply chain costs as low as possible. First, however, a little background on the nature of risk and how companies seek to deal with it. It may be time for you to rethink your global supply chain strategy in a manner that mitigates some of these risks and optimizes your ability to consistently deliver product to your customer at the lowest possible cost.

So, what can you do to mitigate these risks while insuring low cost leadership? You can call Supply Chain Experts who will help you assess the risks in your supply chain;

1. they will help you think strategically about risk versus cost,

2. they will help you broaden the cooperation with the trading partners in your supply chain,

3. help your organization understand the trade-offs and make better decisions that will insure your ability to take care of your customers,

and help your organization understand that you cannot ignore risk solely because it is difficult to quantify.

Your organization should be concerned about supply chain risks and Supply Chain Experts can help your organization design an effective system that creates a balanced cost/risk relationship that will protect your organization and your customers today and into the future.

Dr. Edward F. Knab BLOG

Productivity Constructs, Inc.
800 660 8718 office
949 413 7333 mobile
ed@edwardknab.com
www.productivityconstructs.com
More Supply Chain Experts Blogs

Dr. Knab is an academic practitioner and seasoned Global Supply Chain expert whose company, Productivity Constructs, is focused on driving cost and inefficiency out of the Global Supply Chain. Dr. Knab can be contacted for speaking engagements, coaching, or consultation at efk@productivityconstructs.com, ed@ewardknab.com.