I don’t know about each of you, but if your inbox is similar to mine, you’re probably inundated with a vast array of marketing generated emails instilling all sorts of prescriptions for surviving what may well be a very protracted recessionary period in the U.S. and other countries. Technology prescriptions come in many types, some very valid, Many supply chain and IT technology companies have a stake in insuring deal pipelines are larger, since sales cycles are assumed to be very lengthy. Industry Analysts are also in their marketing suits, trying to insure that prescriptions for surviving the recession contain enough technology mentions that reflect the business of their most influential current, or fleeting clients. I really do not want to pass judgment on any of these constituencies, since they all have a job to do, as well as a stake in the longer-term outcomes of a prolonged recession.
The message I really want to communicate is that surviving any crisis implies a cool head, innovative thinking, and a strong sense of practicality. Years ago, I completed a well-organized formal training program on organizational change management. Two takeaways from that training continually remain in my management toolbox. The first harkens to the Chinese proverb and character symbol of the term crisis. If you have at all seen the Chinese character for crisis, it communicates both the symbol for “danger”, as well as the symbol of “opportunity”. Crisis, therefore, is a time for diligence to danger, but also a potential opportunity. The second takeaway was that any effective or significant change cannot take place until participants have a common frame of reference. Frame of reference would include a compatible set of ideas, beliefs, or feelings. People are more likely to acclimate effectively to change if they can either help in the design of that change or, in some way, contribute to designing the future process.
Let’s apply both of these principles toward the anticipated supply chain management changes that are being brought on by a highly challenged economic climate. First, it goes without stating that supply chain management capabilities have become a key differentiator for many companies in multitudes of industries. But in times of economic challenge, CFO’s will often have no choice but to look to the supply chain for its share of potential cost savings. Any and all opportunities to either save or postpone costs should obviously be uncovered. I would recommend that you context this activity not as a response to a crisis, but as a response to competitive opportunity. As we survey the current global supply chain landscape, we find energy prices are down dramatically from July levels. Some commodity prices are now decreasing due to moderated demand or absence of speculation. Ocean container shipping rates have dropped precipitously. Previous ramp-ups of contract or offshore manufacturing capacity may lead to over or idle capacity. Are any of these opportunities for your business?
How can you make your supply chain activities more efficient, as well as more responsive? What initiatives has the organization previously postponed due to time or resources, but have compelling impact in light of the above? Some examples:
- Really get total supply chain network inventory costs identified and more in control
- Determining what total “landed” materials and/or production sourcing costs really amount to from certain outsourcing geographies and revisit global sourcing vs., near-shoring alternatives.
- Understand where current logistics and transportation costs are occurring, and how these can change under various economic, vendor, or cost of energy scenarios
- Determine where significant supply chain risk exposure currently lies, and can the organization afford to neglect that risk. Can your company afford to sustain a major incident of product counterfeiting or product safety? Will a major loss of creditability have an impact on retaining key customers?
- In what will surely be uncertain times, do you have abilities to do what-if analysis or scenario-type planning?
The other change principle applies to people, those that have to contribute to the various value-added activities that make-up your supply chain. If you know you are going to have to make tough decisions regarding reduction in headcounts, do it sooner rather than later. Those that will be impacted can at least make plans for transition and new beginnings, and those that survive can make plans for how to continue in much leaner, perhaps significantly altered job roles and responsibilities. Before you put me in the category of “heartless’, having survived, as well as being victim to, layoffs in the past, my experience is that it can be better for both impacted groups to know what has to be done. This insures that dignity is maintained among those impacted as well as survivors.
The category of people and change surely has to include your key suppliers, since they are also an extension of your supply chain. How equipped are your suppliers to survive hard times? Are you inclined to aide or assist them through troubled times?
These are just a few thoughts to generate some discussion on the topic of prescriptions for difficult times. What’s your view? How is your organization approaching these principles?
You are welcomed to add your thoughts in the Comments section below.