Industry supply chain management teams continue efforts in achieving 2019 final quarter strategic, tactical, and operational line-of-business performance objectives and expected business outcomes, especially in this all too important final quarter. This affords Supply Chain Matters the opportunity to look back and review our prior 2019 Predictions for Industry and Global Supply Chains, which were published at the beginning of this year.
The Ferrari Consulting and Research Group, the parent of the Supply Chain Matters blog has published our annual predictions for industry and global supply chains since our inception in 2008. Our approach is to view predictions as an important resource for our clients and blog readers, thus, we do not view them as a light, one-time exercise. Unlike other industry analyst firms, our predictions for the most part, do not take a sole perspective of a three to five-year window with nebulous degrees of probability. Our belief is that industry business and supply chain management process needs are changing rather quickly and that leaders need a focused view of what could likely occur from business, functional and advanced technology perspectives in a one to three-year timeframe. An important part of annualized predictions is assessing what really occurred and why. Thus, every year in November, we look-back and score our predictions for the year.
As has been our custom, our scoring process is based on a four-point scale. Four will be the highest score, an indicator that the prediction indeed occurred. One is the lowest score, an indicator of, what-on-earth were we thinking? Ratings in the 2-3 range reflect that we probably identified the right trending, but events turned out differently. Admittedly, our self-rating is subjective, and readers are welcomed to add their own assessment of our individual predictions in feedback comments.
After looking-back at current year predictions, we will then transition into the unveiling of our 2020 Predictions expected to occur starting in mid-December.
2019 Prediction One: An Optimistic But Cautious 2019 Economic Outlook for Global Growth with Downside Risks
Self-Rating: 3.8 out of maximum 4.0 score.
We had predicted that industry and global supply chains would encounter a lot more uncertainty relative to global trade, currency, geo-political and climate change risks.
The International Monetary Fund (IMF) World Economic Outlook that was published in October 2018 had indicated that the steady expansion under way since mid-2016 would continue, but with global growth rates to essentially remain at 2017 levels. Global growth was forecasted to be 3.7 percent for both 2018 and 2019. This year’s similar forecast published last month has subsequently revised the 2019 global growth rate to be likely 3.0 percent. The Executive Summary of this year’s IMF report states:
“After slowing sharply in the last three quarters of 2018, the pace of global economic recovery remains weak. Momentum in manufacturing activity, in particular, has weakened substantially, to levels not seen since the global financial crisis. Rising trade and geopolitical tensions have increased uncertainty about the future of the global trading system and international cooperation more generally, taking a toll on business confidence, investment decisions, and global trade.”
Whereas, the J.P. Morgan Global Manufacturing PMI Index had recorded a value of 51.5 entering 2019, the same index has contracted for six consecutive months, closing at a value of 49.8 in October. The lowest value was 49.3 in July. The October value reflecting on the all-important intermediate goods production dropped to 48.8 in October.
The PMI indexes for both the Eurozone and U.S. remained at contraction levels in October, the former being 45.9, a clear sign of manufacturing recession.
China’s official government PMI value was 49.3 at the end of October while the Caixen China Manufacturing PMI. An index leaning more to private based manufacturing closed at 51.7.
We cited the Duke University CFO Global Business Outlook Survey released in mid-December 2019, indicating that almost half of U.S. CFO’s believed that recession would occur in the U.S. economy by the end of 2019. While that has not occurred, this same survey conducted two months ago provides a sentiment of more than half of those polled indicating that economic recession is likely to occur by Q3-2020. The September survey noted over 55 percent of CFO’s indicating less optimism for the U.S. economy, compared to 23 percent in the year earlier period.
Overall, this prediction at the beginning of the year signaled caution for supply chain management teams in planning for customer demand and supply network activity levels, primarily because we sensed the beginnings of. structural global supply and demand network changes occurring across certain industry sectors.
These have obviously occurred and will likely extend into the coming year.
2019 Prediction Two: Needs for Talent Recruitment, Development and Retention Will Reach Alarming Stages Possibly Impacting Ongoing Initiatives.
Self-Rating: 4.0 out of maximum 4.0 score
This prediction turned out to be on the one hand, a no-brainer, on the other, deeply concerning and troublesome for multi-industry supply chain management teams.
For the years 2017-2018, we had predicted a ‘supply chain talent perfect storm’, one that would occupy a lot of management attention for all the functions that make-up the umbrella of today’s supply chain management roles and responsibilities. When we unveiled our 2018 prediction scorecard for this specific area, recruiters and employers indicated that some progress was made in increasing supply chain management related compensation levels and working conditions. Similarly, companies and organizations stepped-up efforts to recruit candidates from colleges and universities, governmental training programs or military veteran outplacement programs. U.S. manufacturers had further been able to close some of the gaps in recruiting or training of skilled manufacturing talent. All such efforts were important.
Despite these efforts, overall demands for talent have continued to escalate management attention, along with need for a focus on skills-based recruitment vs. recruiting for a specific job that was more than likely to change over the one to three-year horizon.
The shortage of skilled talent, as reflected in multiple executive surveys has indeed reached C-level and board level awareness and will more than likely become the differentiator for industry competitiveness in the months and years to-come. With a condition of full-employment levels across the U.S., the challenge and the crisis intensified.
One particular skill area we called attention to was that geo-political developments, a building trade war and other threats would require more international sourcing experience along with senior management advisory skills. In early October, we called Supply Chain Matters reader attention to a report by The Wall Street Journal indicating that trade and tariff experts are currently in hot demand. Similarly, various supply chain professional organizations such as ASCM, CSCMP, IBF and ISM have stepped-up their respective supply chain management focused certification programs along with broader online training programs available for existing professionals seeking to train in new skill areas.
In September, we called reader attention to published blog from Argentus Supply Chain Recruiting citing a Harvard Business Review survey report among some 25,000 business leaders indicating that companies were about to have a Gen X retention problem, a sense of frustration that younger employees were experiencing perceived lower rates of promotion and recognition than that of millennial and baby boomer employees.
Small and medium businesses have been impacted most by the overall shortage of skills, not having the financial resources to be able to compete with large global-based firms to recruit for available talent in the most demand, including advanced technology skills. Large employers can attract candidates because of brand recognition and budget resources, while smaller business or up-and-coming industry disrupters must rely on more incentives related to growth, working environment and added responsibilities. One notable example of such competition was in July when Amazon boldly announced that the online retailer was investing $700 million over a six-year period, to retrain a third of its U.S. workforce on new job skills. In reporting the announcement, The Wall Street Journal indicated that effort represented one of the largest corporate retraining initiatives on record, equating to $7000 per worker and upwards of $1200 per year through 2025.
Indeed, recruitment and retention was indeed manifested from efforts directed at competitive compensation, attractive benefits, quality of work life and clear career paths that blend added cross-functional responsibilities with broader change management and program oversight skills.
This concludes Part One of our revisit of Ferrari Consulting and Research Group 2019 Predictions for Industry and Global Supply Chains. In an upcoming Part Two of this series we will revisit and assess Prediction Three, related to Unprecedented Levels of Global Supply Network Challenges, and Prediction Four, Cyber-Risk and Information Security Safeguarding Becoming Mandatory.
In the meantime, readers and clients are encouraged to continue to share their own specific assessments of what occurred in 2019, as well as their own anticipations for the coming year.
© Copyright 2019, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.