In Calhoun’s opening paragraph, he says, “The Citigroup Economic Surprise index set a record this year for the length of time it stayed in the negative column [actual results falling below expectations]… of over 200 consecutive days. Even in the depths of the Great Recession we never had more than 100 consecutive days in negative territory. It is odd that economists have remained so optimistic – overly so – even as the data continues [sic] to defy their sunny outlook.”
His somber tone and warning continues: “The trends that have been in place for over a year continue. The industrial/manufacturing economy is in recession and has been for months in my opinion.”
I am certainly not trying to be purveyor of doom and gloom. But, I am a realist; and I believe that businesses and supply chains that want to be healthy and thriving in the years to come will face challenges unlike most have seen up to this point in time.
Like the Boy Scouts say: “Be Prepared.”
Lora Cecere’s article highlights the real world in which we find ourselves, as well. She opines: “Growth is slowed, and supply chain is more important to success [than ever before].”
But, as one who works day-in and day-out with Fortune 500 giants with worldwide reach, she still affirms that these “leaders” in industry are engaged in struggles not significantly different from the struggles we see in our own day-to-day exchanges with those in the small-to-midsized enterprise marketplace. Cecere says, “[W]e are horrible at figuring out what adds value…. [N]ine out of ten companies are stuck.”
What Has Not Worked?
Cecere’s experience with industry-leading giants confirms that
- Vertical excellence has not brought the desired results. Companies having the best manufacturing, procurement or logistics still seem to achieve only marginal gains over their less sophisticated competitors.
- Project focus has failed to produce anticipated ROI (return on investment).
- “Big Bang” technology approach has also not been effective. In fact, Cecere says, “[M]any companies move backwards… when they try to implement” large technology programs intended for improvement.
What Has Achieved the Best Results?
Here, according to Lora Cecere, are some of the things that have contributed to real and effective improvement for some enterprises and supply chains:
- Leadership – enlightened leadership that focuses on the management of the supply chain as a complex system: We could not agree more! We are absolutely convinced that executives and managers who take steps to understand fully their enterprise and supply chain from a complex adaptive system (CAS) standpoint (rather than a mechanistic approach) are more likely to reap rewards in terms of rapid ROI than are their counterparts.
- Outside-in Processes – Here again we are fully in agreement with Cecere’s assessment. The evidence clearly shows that companies that become truly demand-driven are able to do more with less and, thus, achieve rapid growth and substantially better ROI than their industry peers that continue to rely on outmoded thinking. (By demand-driven, we do not mean, necessarily, make-to-order. However, we do mean a vastly reduced reliance on forecasts for determining actual execution. Planning and buffering may rely on forecasts, but execution should not.)
- Supply Chain Design – Active, and intentional, design of the supply chain: Yes! So many supply chains we come into contact with in the companies we meet have just sort of evolved—and not (frequently) in a good way. There is nothing intentional about them. Most decisions about where, when and how much stock should be held in the supply chain is localized and (quite evidently) not strategic in any sense of the word.
- Aligned Metrics – To ensure the [proper] management of the complex [adaptive] system, the metrics… need to be managed as a non-linear system: Right on, Lora! Bad (poorly designed) metrics are a huge source of bad supply chain decisions and create conflict between divisions, departments and supply chain partners.
Getting Ahead of the Game
Despite the sun-shiny faces on so many economists worldwide, unless things change dramatically, the days of fast-growing economies are not in our foreseeable future. It is far more likely that we will be facing days of slow economic growth accompanied by increased competition.
Now! Right now is the time to begin changing the way you look at your enterprise and your supply chain.
The old things are not working any longer. In fact, you’ve probably discovered that they have not been very effective for a decade or longer.
Let us know your thoughts on these matters. We would be delighted to hear from you.