To recap my series of posts on the Great Comeback, I’ve outlined a five-step plan. You can see all five steps here and get more details, but steps 3-4 relate to this blog post, so I will recap them here:

The results of Step 3, Comeback Expectations, will be a series of Comeback Scenarios of the future sales volumes of your product.

The results of Step 4, Organizational Analysis, will be the opportunities to upgrade processes to meet the sales volumes and to enhance your competitive position.

Step Five: The Final Part of the Plan

The purpose of Step 5, Define Your Comeback Plan, is to determine which process upgrades you should pursue and according to what time schedule. Taking this essential step allows you to not only recover from the recession, but also to grow and prosper.

Defining a Comeback Plan is part art and part science. Certainly, there are process upgrades that should be pursued strictly from a capacity perspective, others that should be pursued from a ROI perspective, others from a working capital perspective, and others that should be pursued from a competitive positioning perspective. However, there will also be several process upgrades that are not as clear, but are required to achieve growth and prosperity.

Expect different opinions on:

◦ The reality of the Comeback Scenarios

◦ The competitive benefits of some of the process upgrades

◦ The responses to be expected from your competition

◦ The necessity of pursuing certain process upgrades to achieve certain benefits

◦ And more…

The clear thing that you must be prepared for is recovery, growth, and prosperity.

Often, the lead times for the implementation of the process upgrades are such that you most likely need to begin the upgrades before your organization has felt the uplift from the "bottom" of the recession. This presents leadership with a real challenge, since being too cautious or too slow to act as your organization begins to pull out of the bottom could dampen the magnitude of your Comeback.

Research on prior recessions has shown that companies that are too timid or too late to act often fail to maximize their Comeback and the creation of value. Therefore, with the depth and global nature of the Great Recession, the time is now for organizational leadership to step up to this challenge with a bold, proactive, Great Comeback Plan.

Once the high-level Comeback Plan is defined, it must be developed into a series of full project plans, expectations, schedules, and due dates. This set of project plans will fuel your recovery, growth, and prosperity as you move forward.

The timing of a company’s rejection of the "recession funk" and the return to investing in the comeback of the business is very important in terms of sharing in the upside of stock market gains. But it is even more important in terms of gaining long-term, sustainable and end-to-end supply chain excellence for market leadership. The real winners in the next 2-4 years will be those companies that get the Great Comeback message and act on it accordingly. It is time to begin Comeback Planning today – no ifs, ands and buts. Have questions or comments about your industry or your company? Leave them below and we can talk about it.

This key aspect in planning for The Great Comeback is like the whole ball of wax. Organizational Analysis involves a total review of all internal processes to define a company’s strengths and weaknesses, both during the recession, as well as while on the road to recovery, and on to growth and prosperity.

There are several major processes within an organization that require this type of analysis that will eventually lead to a Comeback Plan. My expertise, and thus the focus herein, lies in the supply chain processes: Supply Chain Design – Buy – Make – Move – Store – Sell.

Major processes requiring review during the Organizational Analysis include:

1) Supply Chain Design: Marketing design, manufacturing design, supply design, organizational design and network design. Depending upon the scope and complexity of your organization, the time to plan organizational enhancement will vary from 1 month to 8 months, and implementation time can vary from 2 months to over 2 years.

2) Buy: Strategic sourcing, establishing joint ventures, and merger and acquisitions. Planning time: 1 to 6 months and implementation time: 1 month to 1 year.

3) Make: Manufacturing strategic master plan for facility upgrades, new existing facilities or new non-existing facilities, as well as outsourcing of manufacturing. Planning time: 2-6 months and implementation time: 4 months to 2 years.

4) Move: Domestic freight bid, global freight bid, create core carrier program, transportation transformation, outsource transportation and transform from Move-Store into more of a Flow Model via crossdocking. Planning time: 1-6 months and implementation time: 2 months to 1 year.

5) Sell: Demand planning, sales and operations planning, inventory management and reverse logistics. Planning time: 2-4 months and implementation time: 1 month to 8 months.

6) In addition, to support these processes, the related supply chain technology needs to be reviewed to include: warehouse control system upgrade/replacement, manufacturing control system upgrade/replacement, WMS, TMS, supply chain visibility, demand planning, forecasting, MES and ERP. Planning time: 1-4 months and implementation time: 2 months to 2 years.

The Organizational Analysis should answer questions such as:

Costs: Are my supply chain costs competitive?

Operations: How do my operating characteristics compare to my peers (e.g., freight terms, modes, contract relationships, etc.)? What operating characteristics are found most often in the best performing supply chains?

Performance Measurement: How do my peers measure supply chain performance? Where do they stand in developing measurement processes? What are their goals? Where do they stand in achieving those goals?

Organization: How does my organization structure compare to my peers? Are some organization structures more effective than others? Where is control for key functions vested?

Collaboration: How much real collaboration is there today with suppliers and LSPs? What is being done on performance scorecards, incentive programs and innovative contractual relationships?

Outsourcing: Where and why do my peers use outsourcing? Does outsourcing result in lower overall costs and better service?

Technology: What technologies are my peers using in their supply chain operations? What is working and what is not? Is there a correlation between the use of technology and the supply chain effectiveness? What are the near-term priorities in technology?

Value: How do my peers demonstrate the contribution their operation is making toward overall corporate goals?

Security: What are my peers doing on security? Is there something I should be doing that I am not?

Supply Chain Network: How does the design of my inbound supply chain network compare to my peers? Is my network more or less efficient? More or less reliable?

Certainly, to do this level of analysis well, a formal process of Benchmarking and Best Practices is highly recommended. The process supported by Tompkins Associates is the Supply Chain Consortium.

The application of the Benchmarking and Best Practices resources of the Supply Chain Consortium to your Organizational Analysis will:

Allow you to measure your performance against best-in-class companies and identify improvement opportunities.

 

Help you understand how your operating practices compare to your competition and impact your ability to gain competitive advantage.

 

Broaden the thinking of your management team to include issues beyond their immediate responsibilities.

 

Provide breakthrough insights by looking across performance measures, processes, roles, responsibilities, goals, vendor and customer relationships and infrastructure requirements.

 

Define scorecards with key performance indicators, data collection processes, goals and reporting formats to track supplier, carrier and third-party service provider performance.

 

Help prioritize improvement opportunities and build consensus behind the opportunities that are most important for you to address while on the road to recovery and onto growth and prosperity.

 

The conclusions to be reached from the Benchmarking and Best Practices review will be a list of potential process upgrades.

In addition to the Benchmarking and Best Practices potential process upgrades, leadership needs to encourage the organization to proactively develop innovations that will facilitate the organization’s comeback. These innovations can then be added to the list of potential process upgrades.

For each potential process upgrade, a cost/benefit analysis and a determination of lead time will need to be established. The output of the Organizational Analysis includes tabulation of the scope, benefits, implementation cost and lead time, and projected savings for each process upgrade.

This tabulation will feed the fifth and final step of developing your Comeback Plan to be presented in the next blog post. You should be well on your way to your Great Comeback, but keep reading.

Go!Go!Go!

Jim

As I write more about the Great Comeback as the time and place to progress to after the end of the Great Recession, it’s time to take a step back and ask ourselves, what are our expectations here?

That’s a tough question. None of us can say with certainty what the next several months will hold for our businesses. You could argue that this statement is always true. However, with so many industries affected by the difficulties in the economic downturn of this year, certainty about anything seems like a luxury. What I encourage you to do is to think about your plan, which is what I’ve been helping you outline in this latest series of blog posts.

To set expectations, you should understand the full ramifications of the recovery of your company after the Great Recession. Click the links below for information to help figure out expectations:

Global Economy, Domestic Economy and Business Cycles

Consumers and Investors

Government Involvement

Competition

As there are different scenarios for each of the above factors, likewise, there may be different scenarios of your comeback from the recession. In addition to the considerations outlined above, you should perform sensitivity analysis on the different Comeback scenarios.

Moving on with your plan, let’s think about the comeback expectations you have in terms of turning points and lead times.

A Complex Subject: Turning Points and Comeback Lead Times

To define your Comeback expectations, answer the following questions for each business sector within your company:

1. When are the turning points?

2. What is your comeback lead time and future volumes?

To fully appreciate the complexity of turning points, comeback lead times and future volumes, consider the automotive industry.

The "bottom" for car sales will be 2009, but recovery will take several years. However, there is a Volkswagen plant in Germany that is running 24x7 producing small cars. This plant is running at full production, and still, Volkswagen has to turn small car customers away.

Overall, Volkswagen has available capacity. But specifically in the small car division, they have no available capacity for demand. This makes the answers to the questions about turning point, lead time and future volumes very complex.

It is only by understanding an organization’s divisions, and the interdependence of some of these divisions (e.g., when a customer buys a small car, they will not buy a large car; or when a consumer eats out more often, they cook less at home), that the turning points, the comeback lead times, and the future volumes can be plotted.

Depending on the process being considered and the flexibility and the modularity of this process, combining the division’s turning points to understand the overall organization’s capacity may be realistic (or, it actually may not be realistic). For example: The flexibility of an automotive assembly plant that is tooled to assemble small cars has little ability to address large car assembly.

On the other hand, a consumer food production operation often has the flexibility to be converted to an institutional pack of the same or similar products. Other processes (for example, Transportation Management Systems) can often be used across different divisions, so the applications across the organizations are typically very relevant.

The deliverable from this third step in developing your Comeback Plan (see the complete list of steps here) is a clear understanding of what volumes of products you will sell from this point forward. This forecast should be presented as a series of Comeback scenarios, keeping in mind the divisional operations that will be affected.

In the next blog post, I will be looking more at analysis of your internal organization and what a review of that will mean for your comeback plan.

As I was thinking about this next part of the Great Comeback strategy and plan (see the post about the five-part process you need to create your own strategy and plan here), I thought about how much we as humans rely on categorization and labeling to get along in the world.

We’re always trying to identify patterns in things – after all, we were more likely to survive if we could see that a broken branch in the path, the sudden flight of birds nearby, and unusual animal paw prints in the dust were signs that, taken together in a pattern, meant there might be a predator around and to be cautious.

That’s why the game Twenty Questions is so popular. You can take anything at all you can think of, and as your friends ask you Yes or No questions about that thing, they can guess what it is according to what categories it belongs in or doesn’t belong in.

Getting back to the point of this post: Is your competition animal, vegetable or mineral? More seriously, do you know how your competition is reacting to the Great Recession and what they are planning to do after it ends?

Understanding your current positioning versus your competitors’, and how they will respond to your Comeback Plan, are important considerations. This is the second step of developing your Comeback Plan: Competitive Intelligence. The Competitive Intelligence process requires you to answer these questions in order to see if you really know how to categorize and label your competition’s actions – or if they will end up being the King of the Jungle while you’re left in the dust.

What did your competitors do in response to the Great Recession?

What will your competitors do in response to the Great Comeback?

 

And, perhaps more importantly:

How will they respond to what you do?

How will you respond to what they do?

 

The details of top level questions should be pursued by asking the following types of questions:

What is your competition offering to their customers that you are not? Are they expanding their offerings?

Do you or your competitors have an advantage with certain customers, geographic areas or service lines? Why?

Have your competitors stratified their customers differently from you?

What sales channels, marketing approaches or market segments are your competitors pursuing and why?

What innovations/creativity are your competitors bringing to the marketplace?

What are your competitors doing different geographically than what you are doing?

What merger and acquisition activities, outsourcing, joint ventures or alliances are your competition pursuing? Do these activities give them a game-changing opportunity in terms of market position, geographical reach, scale, technology, cost, etc.?

How are you positioned versus the competition to gain market share?

How well has your competition retained, grown or added to their talent?

What strategic focuses are your competitors pursuing? How does your competition view the market going forward? What do they see as the key market drivers and constraints?

What investments in IT are your competitors doing? Is this to reduce cost or enhance service? Are you ahead of your competition?

What are your competitors’ total delivered costs and how do these compare to your costs?

A significant amount of information about your competition may be obtained via holistic and ethical searches of the internet, newspapers, legal proceedings, regulatory commissions, the financial community and their market place activities and reports.

In addition, studying your competition's prior responses to your past actions will provide good insight into how they may respond in the future. A good amount of the time, your competitors will not respond. When they do respond, often it is more of a copycat, instinctive response as opposed to a well thought-out response with strategic intent. But how can you know? Not until you play the 20 questions game with them in mind and categorize and label what they are doing in the marketplace.

Assuring your Comeback Plan is ready for your competitors’ responses is a good way of assuring the viability of your plans for increased market share, prosperity and growth once the recession ends.

In this installment of my series of posts on the Great Comeback, I’m going to outline the worldwide government actions and plans that you need to consider when planning for your organization’s post-recession strategy.

Already I have outlined a five-part process for the Great Comeback, or returning to increased market share, growth and prosperity when the Great Recession ends. This post explains more about the environmental assessment part of that process and specifically, how government involvement can affect your business.

There has been much presented on the specifics of the approaches taken by the major industrialized nations of the world, so a discussion here of the dollars allocated does not add much value. What is of value, however, is to understand the underlying philosophy of economic stimulus in the different countries.

The United States, several countries in Europe, China and many other countries have all created a stimulus spending plan and have a strong desire to stabilize the banking system.

The three main economic stimulus weapons these governments will use are:

* Interest rate cuts

* Tax cuts

* Direct government spending

The quickest and most certain stimulus weapon is direct government spending. The vast majority of the government stimulus in the United States and China is direct government spending; whereas in Europe, the majority is in tax cuts.

Let’s break down each country or region specifically, and also consider the impact of the G-20 Summit and its financial strategies:

United States - The United States government has characterized its efforts to reverse the economy’s downturn as a three-legged stool:

◦ Economic stimulus

◦ Minimize home foreclosures

◦ Bring stability to the banking system

Real U.S. government spending will grow between 2.5 percent and 3 percent in 2009 and into 2010. The impact of this spending will be a growth in 2009 GDP of 0.6 percent to 0.9 percent, and in 2010, a GDP of 1% to 2%.

This U.S. government spending points to a budget deficit in 2009 and 2010 of over $1 trillion. This budget deficit presents a real threat of inflation which must too be considered when developing the Comeback Plan.

In the United States the dual objectives are to preserve and create jobs (transportation, infrastructure and health care) and to pursue the agenda of "Change" of the new administration (financial industry recovery, energy/green initiatives, tax burdens, trade regulations and labor).

The United States Treasury has put in place plans that are assuring both investors and banks of its commitment to resolve the banking crisis. Good progress is apparent here, which further enhances the claim that the worst of the Great Recession is behind us, and we are beginning the recovery. Just yesterday (mid-April), Treasury Secretary Timothy Geithner provided the assessment that "the vast majority" of the banks could be considered well-capitalized.

However, we need to look at the U.S. housing market when examining the end of the Great Recession. The home foreclosure challenge is, unto itself a United States problem, except it has a significant impact on the third topic of banking system stability. The banking stability issue is truly a global problem and is being addressed by the G-20 (Group of 20 Industrialized Nations, which I will touch on below).

China - Global organizations intent on finding growth despite the Great Recession will do well to review their China strategy when they develop their Comeback Plan.

In China it is helpful to understand that the Chinese term for "stimulus" implies "rejuvenation plan." China, more than any other country, views the Great Recession as a great opportunity to enhance their industrial competitiveness.

China stimulus is going directly into the economy in the form of upgrading energy sources and technology, reducing pollution, upgrading China’s rail network, providing for rural development, providing investment incentives for innovation and expansion of R&D, and spurring export promotion and competitiveness.

Europe - The goals of European countries are more to protect small to medium sized companies from the impacts of the recession while increasing spending on energy efficiency, infrastructure and innovations.

The G-20 Financial Strategy - On the topic of bringing stability to the global banking system and resolving the financial sector problems, although not in total harmony, the April, 2009 G-20 Summit does show some promise on:

– A unified front on dealing with the toxic bank assets.

– Regulating hedge funds and other financial institutions.

– Being committed to getting banks to lend again and therefore to restore growth.

Government Spending and Your Great Comeback Plan

The greatest direct government spending over the next year will be in China, then the United States and then the countries of Europe. The large amount of China’s direct government spending in 2009 will result in real China GDP growth in 2009 of 6-7% 7-8%.

The implications of these government involvements with recession recovery may have a very important impact on your organization’s Great Comeback. It is paramount that you understand these impacts and build them into your Comeback Plan.

This post continues my outline of the five-part process that will allow you to lead your company through the Great Recession into the Great Comeback, with a return to increased market share, growth and prosperity.

Previously, I discussed the economic and business cycles that make up the first part of the five-part process, the environmental assessment. Here, I will look at another part of this environmental assessment: consumers and investors.

The consumer of 2009 is afraid, confused, uncertain and changed.

Things were very bad in the fourth quarter of 2008, but there was anticipation that 2009 would be better. The first quarter of 2009 was even worse slightly better than the fourth quarter of 2008.

Consumer spending in the United States fell grew another 2% in the first quarter of 2009. It will be flat to remain slightly positive in the second quarter and will be up 1% and in the third quarter, and up 2% increase 3% in the fourth quarter.

The loss of wealth by the US consumer has resulted in people changing their behavior like never before. The market for luxury goods has disappeared. Wal-Mart is doing very well and the consumer’s focus is on necessities (food, health, shelter and clothing).

The unemployment rate continues to climb and will throughout 2009, but the number of people who are fearful of losing their jobs is higher than the actual number of people who will lose their jobs. Because of this, consumers have cut back, they are eliminating discretionary purchases, and they are saving more.

The good news is the consumer is getting back into the game. Both the University of Michigan Consumer Sentiment and The Conference Board Consumer Confidence Index have bottomed and are moving upwards.

The bottom for the United States consumer was February – March 2009. The recovery has begun.

This recovery will take time. This recovery is emerging from record lows in consumer confidence and has absorbed considerable pain over the last 12 months. But, the United States consumer is back and will slowly be responsible for U.S. recovery, China recovery, Europe recovery and ultimately world recovery from the Great Recession.

The business investor of 2009 is cautious but somewhat optimistic.

Business investment will experience an exaggerated cyclical decline characteristic of the economic downturn. Non-residential fixed investment and industrial production will continue to fall through 2009 and early 2010. Corporate profits will not return until 2010, and the factory operating rate will continue to be very weak until mid-2011. Capital spending will continue to be anemic.

Investors are feeling better about the overall economy then they have in the last year as they see the return of consumer confidence and the efforts by the Treasury and Federal Reserve to stimulate the economy. In addition, investors take heart from the Treasury commitment to cleanse banks of toxic assets and to stem housing foreclosures. Although home prices will continue to fall throughout 2009, residential construction will bottom at the end of the year and provide a positive boost to the GDP going into 2010.

Investor confidence will lag consumer confidence by several quarters, but will return in 2010. However, it will be 2011 before substantial capital expenditure is made by industry to upgrade industrial capacity. The last sector to return to health will be private non-residential construction in late 2011.

How do you feel?

If you are like the company leaders who are going to be part of the Great Comeback, you are confident and ready to respond. Your Great Comeback must be proactively planned and executed in response to your customers’ and investors’ strength and confidence in the the marketplace.

Consumers will certainly lead investors, and necessities will certainly lead discretionary spending. However, as 2009 unfolds, we will see the growth of spending by consumers. As 2010 unfolds, we will see the growth of investing.

Organizations that properly plan for their Great Comeback will be rewarded over the next several years. In my next post, I’ll talk about the final piece of your environmental assessment: government involvement.

In my last post in this Great Comeback series, I explained how companies that want to come back from the recession and increase market share, growth and prosperity need to have a strategy and plan. I outlined a five-part process that business leaders can use to develop this plan and strategy.

In this post, I will explain the first part of this five-part process: The environmental assessment, specifically economic and business cycles. In future posts I will be examining additional aspects of the environmental assessment, such as the role of consumers and investors and also government involvement.

Looking at economic and business cycles to create your environmental assessment means understanding the global and domestic economy. Doing this allows business leaders to find the Great Comeback pattern that may exist for their industry or specific company. Key factors that affect an environmental assessment within economic and business cycles are GDP, employment numbers, imports and investment activity, and consumer confidence.

Gross Domestic Product Projections: Both globally and domestically, the first quarter of 2009 will have an even greater reduction in GDP than the fourth quarter of 2008. The 2009 global and domestic fall in GDP will be about the same as the fall in the recession of 1973-75. For the first quarter of 2009 will be the worst quarter for the reduction in GDP, GDP dropped at a 6.1% annual rate - marginally better than the 6.3% decline in Q4 of 2008. For the end of the first quarter of 2009, the worst is behind us, and the GDP will hold steady in the second quarter. Then the third will have very little reduction and the fourth will have an increase in GDP. The U.S. percent change in GDP for 2009 will be about minus 4%. The global percent change will be about half of this. China’s GDP will be up 6-7% 7-8%. 

Employment Expectations: U.S. job losses will continue throughout 2009, though steadily diminishing over the course of the year. From the beginning of January through July, monthly losses of jobs will be between 400,000 and 600,000 for the first half of the year per month but will taper to 100,000/month by year’s end. The jobless rate will peak at the end of 2009 or in early 2010 at the 10-11% rate.

Imports and Investment: Both U.S. export and import volumes will fall in 2009 by 10-15%. The falling of corporate profits in 2008 and 2009, plus the factory operating rate of less than 70% in 2008 and 2009, will result in limited investment dollars available for capital equipment.

The Consumer is the Key: The Great Comeback from this Great Recession will take place through the actions of the consumer. Consumers will increase spending, which will eventually increase the factory operating rate and thus beget capital spending. U.S. consumer confidence will bottom in early 2009 and will increase spending by mid-year (in Q2 of 2009). The U.S. consumer will continue to spend on necessities and will gradually gain confidence as the year progresses to begin spending on discretionary and big-ticket items. The return of the U.S. consumer’s confidence will beget an increase in business volume in China, which will beget capital investment in China, which will result in the improvement of the European marketplace.

Cyclical and Non-Cyclical Industries

Viewing industry data from a rate of change basis is very useful to better understand cyclical activity. Cyclical activity applies to some industry segments, but not to all industry segments. Many industry segments follow a cycle of Accelerating Growth - Decelerating Growth - Accelerating Decline - Decelerating Decline and then back to Accelerating Growth.

The Manufacturing Alliance – MAPI (http://www.mapi.net) tracks twenty eight industry segments that follow the cycle. Individual segments clearly travel at different rates through the cycle.

Other industry sectors do not follow this cycle and are called non-cyclicals. Non-cyclicals include food, beverage and pharmaceuticals. The non-cyclicals will be the first to experience the Great Comeback.

The automobile industry and the housing starts will continue to suffer throughout 2009. Both markets will stabilize in the second quarter of 2009, but real growth will not occur until 2010. For both automobiles and houses the 2011 volumes will still be below the volumes from 1997-2007.

My view on the rest of the sectors is as follows (retail recovery will be in conjunction with the products sold below, e.g. grocery stores will rebound Q2 ’09 – Q3 ’09 in conjunction with food and beverage):

Where does your sector fall in the recovery chart? Does this match your expectations?

A reader at IndustryWeek left a comment on one of my articles referring to me as the "Prophet of Boom" versus the prophets of doom we’ve been used to hearing during this Great Recession. I’ll be posting more this week on this environmental assessment aspect of the five-part process you need to move from the Great Recession to the Great Recovery, so that the ‘boom’ is something you are well prepared for within your specific industry.

If you are a regular reader of this blog or listener to my podcasts, you know that I have been very vocal during the recession that "cut, cut, cut" is an action and not a strategy, and that I firmly believe strategy must precede action. I have strongly recommended the Recession Strategy of:

Maintain talent

Maintain focus on your organizations' strategy

Cut all other operating and capital expenditures

Although often one of the "other" costs is consulting services, I feel this recession strategy is the correct strategy. I am pleased to say many have successfully followed this strategy and have thanked me for the advice.

Now, I find organizations are flat footed. They have not even thought about recession recovery, let alone the bigger topic of a comeback that includes not only recovery, but also increased market share, growth and prosperity. This excellent article from Business Week, Getting Ready for the Recovery: Progressive companies will shift to recovery mode before rivals by tracking the key leading indicators and developing a strategic plan explains how companies should be thinking about recovery in a way that considers the business cycle, but the comeback part of the equation is just as important.

I sincerely believe your organization must upgrade your business processes to be able to claim your portion of the comeback. The steps forward may not seem clear, but I have mapped it out for you.

To be a part of the Great Comeback, I recommend you develop a Comeback Strategy and Plan by pursuing the following five-part process:

Environmental assessment
An assessment of the impacts the following factors are having and will have on your business. Click the links below for blog posts describing each factor:

Global Economy, Domestic Economy & Business Cycles

Consumers & Investors

Government Involvement

Competitive intelligence
What has your competition done in response to the recession and what are they likely to do going forward? Has your competition hunkered down in the recession or have they raised the competitive bar? Is there any evidence that your competition has developed a comeback strategy or plan? For more, see this blog post describing the questions you need to ask about your competition in preparation for your Great Comeback. 

Comeback expectations
The understanding about your business comeback from the recession from the perspective of both timing and magnitude, given marketplace demand and the response from your competition. Specifically:

When are your turning points?

What are your recovery lead time and future volumes?

Organizational analysis
How does your organization compare to others performing the same processes? What process upgrades do you need to deploy in order to not only recover, but to also gain market share, grow and prosper? What are the process upgrades you need to have in place after the recession to enhance customer satisfaction, increase capital efficiency, increase profitability and increase long-term shareholder value?

Define comeback plan
Given the levels of business we anticipate (judging from your comeback expectations) and the required process upgrades (found through your organizational analysis), what is the schedule of process upgrades that needs to occur to allow you to gain market share, grow and prosper?

Just as my confidence was high with my recession strategy, so too is my confidence that the Great Recession is coming to an end. The organizations that best plan their Comeback Strategy and Plan will be the organizations that experience the Great Comeback.

Stay tuned for more on this subject of the Great Comeback, or let me know what you think so far in the comments.

In my last post, "The Great Comeback Part One - The worst of The Great Recession has passed: Are you ready?" I defined what The Great Comeback is and how it relates to the two phases of this recession we are in. I also described the connection and importance of globalization, and how The Great Comeback will begin with the return of consumer confidence, followed by investor confidence.

Then I pointed out that we are expecting the recessionary "bottom." Once you hit bottom, the only way out is up. The decline has ended, and recovery is at hand.

We are looking at a long procession of economic "bottoms" or "turning points" for different industries. The overall economy will also experience a time when the newspapers say we have "bottomed."

I think the bottoms have begun.

Let me share my top 5 6 reasons why I think this:

1. The US GDP in the 4th quarter of 2008 dropped 6.2% 6.3%. Worse yet, the GDP dropped 6.8% in the first quarter of 2009. In Q1 of 2009, the GDP fell 6.1%. 
What happens next:
I believe the second quarter of 2009 will show a small drop in GDP is expected to begin leveling off; the third quarter will be flat and the fourth quarter will be up. The overall economy is turning and will turn by the fourth quarter of 2009. The industries that will lead this turn (food, cosmetics, beverage, pharmaceuticals and inexpensive consumer electronics) will turn in the second quarter of 2009.

2. The US fiscal-stimulus package will inject $561 billion into the economy in 2009 and 2010.
What this means:
Real government spending in 2009 will go up between 2.5% and 3%. The interest rate cuts and tax rate cuts will take longer to have an impact, but direct government spending will result in real US GDP growth of between .6% and .9% in 2009. These funds are being deployed now and we will see the impacts soon.

3. Both the University of Michigan Consumer Sentiment and The Conference Board Consumer Confidence Index, which were at record lows in the first quarter of 2009, are moving upwards.
What this means:
Although US consumers are afraid, confused, and uncertain, their overall confidence is being regained and this, starting with non-cyclic necessities, will result in sector-by-sector recovery.

4. Consumer spending fell again in the first quarter of 2009, but ended the quarter with an upward turn increased in Q1.
What happens next:
The second quarter of 2009 will be flat will also see increases. The third quarter will see an increase of 1% and the fourth quarter, 2%. This will continue throughout 2009. The US consumer is alive and getting well, and it is the US consumer who will lead the Great Comeback; first in the US, then China, then Europe and then the rest of the world.

5. This Great Recession has been severe, and so there exists a huge amount of pent-up demand.
What this means:
There is a tendency for "experts" to assume in a boom the good times will last forever, and in a bust the bad times will last forever. Of course, neither is true. Demand will begin with the lower costs items, but it has started and this too will result in The Great Comeback.

6. Although I have been on record for a couple of months sharing my view of the recession recovery and comeback, it is interesting to see new audiences appearing every day.
On May 1, the Economic Cycle Research Institute (ECRI) published their latest U.S. Long Leading Index (USLLI) and their Weekly Leading Index (WLS), both of which have proved very successful in predicting the economy. These indices are clearly showing the end of the Great Recession.

See this illustration of how an industry’s ‘bottoming-out’ really is a misnomer:

Consider a food company that has four divisions: economy consumables, high-end frozen dinners, high-end frozen desserts and broad-based institutional foods.

The economy consumables may not have a "bottom" at all. Sales are at record levels.

The high-end frozen dinners may "bottom" in July 2009.

The high-end frozen desserts in October 2009 and the broad-based institutional foods may not "bottom" until January 2010.

When does this company bottom? It does not. In fact, a better term for this company’s evolution rather than "bottom" is "turning point," as the market for the economy consumables may peak just before the other food sectors "bottom".

Sectors have turning points, and it is only in the context of these turning points that you can develop your Comeback Plan.

For many businesses the bottom is now. The evidence is apparent. Look at this recent article from IndustryWeek, "Intel CEO Says PC Sales ‘Bottomed Out’ in Q1: Company says industry is returning to normal seasonal patterns."

For many other business, the bottom is only a quarter away. So, it is clearly time now to begin in-depth Comeback Planning. What are you doing, or should be doing, to respond to this?

Much more essential information on The Great Comeback will be posted as a series in the next couple weeks. Be sure to subscribe to this blog so you don’t miss it. http://gogogosupplychain.tompkinsinc.com/page/Subscribe.aspx  

Typically, I do not write multi-part blog posts as I prefer to be more spontaneous in my writing. But, the events leading up to April, 2009, and occurring today are so huge that I feel as if I must use every weapon in my arsenal to get the message out.

Over the next three weeks, I will be unleashing a 10-part series here that will hopefully inform you and motivate you to act. The headline and the definition above say it all: This has been "The Great Recession" and depending upon your industry sector, "The Great Comeback" is either starting now or will start soon. It really does all depend on your industry sector -- your sector has either bottomed or will be bottoming soon and it is paramount that you begin planning now for The Great Comeback.

Let me throw a little recession history and recovery thinking your way. Recessions occur when there is a prolonged drop in spending. Spending declines beget production declines, which beget unemployment, which begets further spending declines. Spending declines occur due to high interest rates (think 1980s) and business failures (think dot-com bust of 2000). The current recession began with housing prices being inflated and people buying homes that they could not afford, leading to foreclosures and tightening of home lending criteria, which then created a huge drop in home construction and related jobs and spending (Phase 1). This housing problem became a financial sector problem, which resulted in a further loss of consumer confidence that resulted in further spending declines (Phase 2). Phase 1 was a Recession. Phase 2 is The Great Recession.

The Phase 1 Recession created the Phase 2 Great Recession in the fall of 2008. The first quarter of 2009 was worse almost as bad as the fourth quarter of 2008, but things will improve are improving in the second quarter of 2009.

Due to today’s global supply chains of global companies, the global economy is connected and integrated. Therefore, the efficiency and effectiveness of these global supply chains led to a rapid, responsive global downturn, and consequently, The Great Recession has been both deep and global. World trade (imports and exports) have shrunk, and this recessionary cycle driven by spending declines will continue through 2009.

I believe that investment is still lagging, and therefore capital spending will continue to be weak and unemployment will continue to rise throughout 2009. However, consumer confidence will return is returning in the second half of 2009 within the food, cosmetics, beverage, pharmaceuticals and inexpensive consumer electronics sectors. Lower priced goods will gain are gaining demand, strength and momentum before higher priced goods do so. On the downside, housing and automotive industries will continue to suffer throughout 2009. But be ready because these markets will stabilize in 2009 and return to growth in 2010.

What about The Great Comeback? It will begin with the return of consumer confidence and then will be followed by investor confidence. The comeback will occur first in North America, then Asia, and then Europe. But it’s important to understand that the "bottom" for some industries will be the second quarter of 2009; for others it will be the third and fourth quarters of 2009; and still for others it will come about in 2010.

It is clear to me that corporate profits will rebound in late 2009, resulting in business investment hitting "bottom" in the first quarter of 2010. When the recessionary "bottom" is hit, the global marketplace will respond quickly just as the global decline occurred quickly. Over the last 50 years, the recovery lead time from bottom to recovery has been 6 to 16 months. But due to the increased connectivity, integration and responsiveness of our global supply chains, I believe that in The Great Comeback, recovery will occur from the bottom within 8 months, growth will come about in 12 months, and the real comeback will emerge within 16 months.

Hence, it is crucial to develop The Great Comeback Plan for your company that will assure readiness for not only recovery, but also a gain in market share, growth and prosperity. Get started here with a strategy and plan I've outlined for you to fill in for your Great Comeback. And for many organizations (depending upon the lead times of the process upgrades that are required to support the Comeback) there is an urgent need to begin in-depth planning now or it will be too late. I am confident that this recovery involves a window of opportunity that must be hit by each company in each sector in order to survive.

To help you along the path to The Great Comeback, I will unleash the next three parts of this series within the next week. I am very interested to know what you think and what questions you may have as you plan for your own Great Comeback.

GO!GO!GO!

Jim

Retail has been one of the hardest hit industries in the economic downturn. To survive (and indeed thrive), retailers will need to have a successful strategy in place. To help give you more in-depth analysis on retail industry trends and proven strategies, I’ve invited our Senior Vice President of Global Supply Chain Services, Valerie Bonebrake, to share her expertise.  

Here’s what she had to say. 

Jim

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When Jim asked me to write something on retail for his blog, I thought to myself, how am I going to cover this topic in a relatively brief post? Well, I decided that I would start by continuing to stress that creating a good strategy for today’s economic climate is more than making rash decisions like, as Jim puts it, “cut, cut, cutting” your personnel. 

Retailing has become increasingly competitive and supply chains more complex. With tight credit markets, slowing growth, and shrinking profits, retailers are operating in a world of great uncertainty, and they must have the right merchandise mix at the right time and the right price on their shelves. From a logistics viewpoint, this means competing on total supply chain performance in order to survive and thrive. Those who will come out on top are consistently re-thinking strategies and business models. Re-thinking is the best practice of retailers who will be successful in 2009 and beyond.  

Throughout global supply chains, there are considerable opportunities that retailers can re-think to help optimize costs and ensure profitable growth. Business leaders who understand the importance of competing on comprehensive global supply chain performance and who commit to operational excellence will be the winners of the future.  

One major area in which to look for cost savings and growth opportunities is sourcing. Companies with high performing global sourcing operations are characterized by the following attributes:

Automation to increase the effectiveness of the manual processes is still used by many global sourcing operations. This process impacts areas such as offshore vendor quoting and selection, purchase order management, logistics management and customer service. 

Accurate information is used to estimate true total delivered costs. This ensures that sourcing decisions consider all factors among different alternatives. 

Uncertainty is being reduced through improved flow across the long global supply chain. This results in reduced safety stock inventories without increasing expedited costs.  

Performance is being measured accurately and with great detail. Relevant metrics are necessary to look for additional cost savings opportunities, improve negotiating power with global vendors and service providers, and drive continuous improvement in global sourcing operations. 

As the companies with these attributes know, global sourcing is an effective strategy that normally reduces overall operating costs. However, as some costs are reduced, others will increase. Global sourcing can add weeks to the supply chain and can tie up as much as 30% of product price in working capital. But, improved performance and cost savings can still be achieved with better knowledge and control of accurate supply chain information on costs, time and events. 

As an example, a $2 billion retailer with a 68% cost of goods sold ($1.36 billion) realized a 0.5% improvement ($6.8 million) by applying an objective total landed cost calculation that resulted in reduced transportation and expediting costs. This same retailer realized additional improvements in inventory reduction as well as selling, general and administrative expense reduction. 

Knowing what to do with supply chains, and how to do it, should be on all retail executive agendas. As the Vice Chairman of Limited Brands Len Schlesinger once stated, “So, you do not understand the importance of supply chains to your business? I would love to compete with you!”  Schlesinger has a great point. Make sure you have a strategy that fits the current climate. Don’t try fitting a square peg into a round hole. It just won’t work. Take these few tips -- and you can learn more details by reading my recent position paper -- and as Jim says, Go!Go!Go!  

It’s that magical time of year again when we step out of “March Madness” into “April Amazement.” Amazement at the talents of the final four teams, that is! The championship game is tonight between the North Carolina Tar Heels and the Michigan State Spartans, obviously two very talented teams.

Watching the games over the weekend, it occurred to me that the NCAA Basketball Tournament is a classic study on what it takes to reach the highest levels of performance in a highly competitive environment – one that is not unlike today’s business world.  Just like the final four teams, companies need to have talented people, leaders who can take charge, organizational balance and depth, clearly defined roles, and excellent strategies and plans.

Talented people are the main ingredient in a successful business, just as gifted players are the key to a winning team.  Talented people provide the experience and know-how. They are physically and mentally able to put forth the effort to get the job done, whether increasing market share/ROA or profitability or making the final 3-point shot to win the game.

Without the point-guard as the basketball team leader, who would run the team's offense and make sure the ball gets in the right hands? Likewise, without a good leader to set the example, where would companies look for inspiration and guidance? Great business leaders and team leaders keep engaging the right resources to bring about success both in the business markets as well as on the hardwood.  

Organizational balance and depth is the third key ingredient for success.  Teamwork, regardless of whether it involves a round ball or an important strategy is required to stay ahead in the game.  Chemistry, cooperation and collaboration are also necessities in order to optimize results – be it on the court or in the conference room.

And a team doesn’t just start running like a well-oiled machine; clearly defined roles are necessary for this to happen. People and players are coached to understand their roles in making the team better, and each one’s skills and knowledge are tapped for the benefit of the whole.

Last but not least, a successful business cannot exist without strategies and plans. I mean, could you imagine a final four team without an outstanding coach backed by a winning playbook? Doesn’t exist. This all-essential playbook is understood and supported by the team while still allowing for real-time fine tuning as the game progresses. Similarly, with company executives (just like basketball players), a strong coach and a winning playbook are required and the organization must possess the ability to shift plans and strategies based on the competition and environment.  Regardless of the score, a mindset of alignment with the strategy while deploying continuous improvement is vital to winning the game.

Although the sun is setting on this year’s national basketball tournament, it never sets in the world of global business or the global supply chain. That’s one reason I am excited to be involved in this year’s Supply Chain Leadership Forum coming up in September in Chicago. At this event, member companies learn how to continuously improve by benchmarking their performances against competitors, networking with peers, and understanding how to best utilize their talented teams.

If you’re interested, go to http://www.supplychainconsortium.com/Seminars/2009/overview.asp. This event may not be as exciting as tonight’s game from a competitive perspective, but I assure you it will be more exciting from a growth and learning perspective.

Go!Go!Go!

Jim