Avoid Speed Bumps

by Lora Cecere on February 11, 2010 · 0 comments

As we climb out of the recession, expect speed bumps.  You know, those brightly painted yellow concrete bumps that rock your bones, but make you slow down?  As the wheels of the extended supply chain start to turn at a higher gear, expect to navigate over a lot of these speed bumps <ouch> and navigate many troubled waters.

To help readers, I will publish a monthly post on this blog to share insights on these speed bumps.  From this week’s conversations wtih supply chain leaders, I note five trends:

 Commodity volatility:  Since September, oil prices are up 20% and corn is up 24%.  Sound like déjà vu?  Remember what happened when oil hit $148/barrel representing 6% of household spending?  Are you ready if the bulls are right and oil hits 200$ a barrel? And, what if the bears are right and it stabilizes?  The reality is that we JUST do not know what that road forward looks like. One thing is clear, it will be bumpy.  All the more need to create horizontal, cross-functional processes to drive demand orchestration (the processes of connecting go-to-market strategies with commodity buying plans) to maximize profitability through times of uncertain demand.  Hold on to the rudder in this storm and keep your head above water through what-if network analysis and Monte Carlo simulation of alternatives.  Understand the impacts before they happen and keep an eye on the trigger points in the key markets that influence your supply chain to quickly make changes.   

High and Dry:  Ocean freight is tough sledding. There are fewer ships on the water, and space is at a premium.  Prices will escalate making good planning EVEN more important. Without it, we will have the wrong stuff on the water. Ocean freight–especially outbound from China– is tight.  Plan now for the holiday and back-to-school seasons.

Big Sticks: In 2010, retailers are reaching for the big sticks.  Forget the carrots, retail compliance is escalating. While Sears is notorious for placing suppliers in the penalty box until they pay-up, Wal-Mart is upping the ante by introducing a new program that charges 3% of the value of the delivery if the load is not delivered on time and in full.  Wal-Mart is introducing new compliance programs and asking for supply chain redesign.  Don’t be caught in the squeeze of rising commodity prices and retailer demands.

Good planners are hard to find.  My inbound calls to find good planners are escalating.  Seems that in this time of record unemployment in the United states, that supply chain planners–especially good ones–are experiencing full employment. A good planner is critical now in this time of demand volatility and low inventories. The good news is that companies are recognizing it.  It is a good time to be planner.

Technology market consolidation will continue.  This week, JDA announced the completion of the i2 Technologies acquisition.  Expect more of the same.  Market consolidation will abound.  As this happens, it is a good time to double your efforts to engage with your software vendor.  Push for a definitive roadmap on future releases and push hard to understand the governance model between your maintenance spending and the future software roadmap. 

What speed bumps are you seeing as the economy rebounds?   Any tips for others to help be the bridge over troubled waters? 

Let me know…. 

Until then, I will be the Supply Chain Shaman scouring the world to help you find innovation and drive supply chain excellence.

Look for me in your travels. …

Be the Bridge over Troubled Waters

by Lora Cecere on February 4, 2010 · 0 comments

It was late November 2008. Factories were idle, demand was uncertain, and supply chain leaders were navigating new waters in uncertain times.  I met with economists, strategists and operating officers to discuss which letter of the alphabet (L, U, V, or W) best described the recession.  However, the burning question, and the one that they REALLY wanted answered to know was “how do I best manage my supply chain through the upturn of the recession?”  Their focus was intense because companies make the most $$$ in the upturn.

During this dark period, I was meeting with executives two to three times a week.  This continued for three months. It was draining. Shuttered factories and exploding inventories drove companies –business executives that had never experienced working capital issues–to their banks to beg for capital.

The supply chain quickly escalated to the boardroom.  There was no doubt that it mattered; but the layoffs, closed factories and working capital issues highlighted a new importance to company survival. 

In this critical time, it became clear, real fast, when a company’s supply chains was off track.  Putting it back on course took longer.  It took most companies five months (October 1998 to April 1999) to put their supply chain back on course.  It was a scramble to sense and re-establish demand patterns, to change product portfolios, and redesign supply networks.  Today, most  companies are beginning to manage the upturn. 

Cisco did it best.  They accurately sensed the downturn in the first month and within weeks translated true demand to their extended supply chain.  Yesterday, John Chambers, Cisco’s Chief Executive Officer reported that the company has entered “its next phase of the recovery.”  The Company posted a 23% jump in quarterly profit and an 8% gain in revenue.  It is one the most robust quarters’ in Chambers career.  It signals an up-turn in high-tech buying.   

While companies crashed and burned declaring bankruptcy if they mis-managed the downturn, the management of the upturn is critical to maintaining market share and fueling growth.  It will redefine leaders.  In the next year, we will see new case studies of supply chain leadership début on Wall Street.  The current cliché stories of collaboration will become obsolete. Instead, it will be about sensing demand, hard work to drive alignment and a return to supply chain basics.

Let me know if you see great stories of clients using supply chain excellence to be the bridge over troubled waters in the recession.

Until then, I will be the Supply Chain Shaman scouring the earth to find new solutions to help you drive supply chain excellence.