We come across four different categories of supply chains. I don’t believe we have ever encountered a company or supply chain that cannot be placed pretty accurately on the accompanying matrix. The four classifications are
- Flourishing – These are the companies and supply chains that show consistent growth, year after year. Not only is their top-line growing, but they are also consistently growing their bottom-line.
- Risking – We see quite a few of these. These are companies and supply chains that are growing their top-line—sometimes rapidly—but have not discovered the secret to making more money. They are handling more money year after year, but can’t hold onto more profits.
- Competing – Competing companies and supply chains are sometimes improving their ROA (return on assets) without growth. But, they are generally in decline. Many times the reason they are seeing improvements in ROA is only because their assets are being depleted while they are still making some profits.
- Starving – These are the saddest cases. Oftentimes, the starving companies and supply chains were once flourishing. Now, however, they have lost the ability to grow and investments in “improvements” (often, ill-considered) may be driving assets up while bottom-line growth is lagging or missing entirely.
Lost in the woods
The companies and supply chains we meet that find themselves risking, competing, or starving frequently remind me of a funny story I heard some years ago:
A family had become lost in the woods, and after a considerable time searching for them, they were finally discovered by some park rangers. One of the rangers, out of curiosity, asked the father, “How did you come to get lost in the woods?”
The father matter-of-factly replied, “We didn’t come to get lost in the woods. We came to have a picnic.”
Like the family lost in the woods, I don’t know that we’ve ever met a company or supply chain executive where their business plan was designed to keep them in the risking, competing or starving quadrants. In fact, their business plans almost always are plainly written with the intent of their being in—or, moving themselves into—the flourishing quadrant.
Yet, way more than 80 percent of the clients we meet are “lost in the woods” and unable to find their way out of the competing or risking quadrants.
Their goals are right. Their aim is high enough. But, they are constantly failing in planning and execution.
Many times they find themselves unable to execute due to conditions such as:
- Uncertainty about whether planned improvements will actually be met with higher demand
- Unexpected lag-time between expenditures on improvements and the forecast benefits (sometimes the lag-time is forever—the payoff they calculated never becomes a reality)
- Every time they reach for a bigger top-line, they find themselves swamped by working capital demands
- They make significant investments in “collaboration and coordination,” but discover no bottom-line payoff for the investments
Finding the way out of the woods
The only way to assure that top-line growth will contribute to real and effective growth in the company’s (or, supply chain’s) return on assets is to also assure that your planning and execution will lead to:
- Uncovering the hidden capacity that almost every company and supply chain has—capacity that allows for dramatic increases in Throughput while holding the line on operating expenses (and little or no additional net investment)
- Discovering how to create offers in your market that will allow you to maintain an adequate book of open orders without cutting prices
- Finding ways to create disproportionately higher capacities from relatively small investments
We are able to help companies do just that by helping them to think in new ways. (After all, the ways they had been thinking for the last decade or longer are precisely what had gotten them trapped in risking, competing or starving conditions.)
By helping to install new thoughtware, we help them uncover hidden capacities and to create innovative new offers in their markets.
Now, it’s your turn
Where do you see your company or supply chain on the matrix above? What are you doing to change your position? What has worked? What hasn’t worked?
We would like to hear your stories about finding your way “out of the woods.” Leave your comments below, or feel free to contact us directly, if you prefer.