It was just one year ago that the global financial crisis began with the meltdown and insolvency of Lehman Bothers, which led to a series of other crisis events that extended through the latter half of 2008. Many in the mainstream media and in the blogsphere have been providing observations and commentary this week regarding their observations and assessments from where we have all come, and where are we headed.
A year later, there are more encouraging signs and a bit more optimism relative to the future, but the executives I speak with are just as cautious. As noted in my recent positive news posting, manufacturing activity is finally up across various global regions, but the U.S. still has a long way to go to reach previous levels of activity. The ISM index notes that commodity and input prices in the U.S. are now 21.5 percentage points higher than they were just in May, and in my view, that is not going to help in sustaining momentum. Companies have been managing to maintain some level of profits, not from increased sales, but by severe cost reductions, some very painful. If these previous reductions get wiped out by increased input pricing, without any significant sales growth, than momentum is stopped.
A year ago I authored a post Manufacturing Still Matters, where I essentially agreed with Bill Ford, Executive Chairmen of the Ford Motor Company that the U.S. does not have a carefully thought out manufacturing strategy. Bailouts of General Motors and Chrysler LLC, although necessary at the time, do not constitute a long-term strategy. From where I sit, one year later, the U.S. is attempting through stimulus funding to invest in future industry capabilities related to alternative energy or battery technologies. But there still is no comprehensive long-range plan for manufacturing innovation, supply chain or transportation infrastructure capability. China on the other hand, has been making very positive strides in identifying its future strategic industries and needed manufacturing and supply chain capabilities.
A year ago we were all outraged at the potential magnitude of the financial crisis, and why a lack of regulatory controls directed at Wall Street bankers was not in place. We were also outraged by outrageous CEO salaries among companies that were failing, and bringing the entire financial system to crisis. One year later, not a lot has changed.
Yes, some supply chain professionals can reflect more optimism that growth and recovery will return for their respective companies and industry. But if your company resides in the U.S., I would continue to be very cautious in outlook.