With an upcoming trip to Germany next week, my thoughts have been even more geared towards the state of the global economy. I have also been thinking about the latest topics for discussion at my meetings there, particularly with the German Association of the Automotive Industry (VDA).

I’ll be visiting the Tompkins Associates’ German office on the heels of some fairly positive news – the country’s GDP grew by 0.3% during the second quarter of this year, following a disappointing contraction of 3.5% during the first quarter.

So things are definitely on the mend in Germany even though full economic recovery will take awhile, just as it will with the rest of the world.

And we all know it’s been a very trying year for the auto industry – no matter what country you’re in. Global demand for automobiles decreased, hence auto manufacturing went down the tubes.

Despite the downturn, Germany continues research and development efforts and believes that this is their key to coming out of the recession stronger.

As a testament to this, the German auto industry has not made cuts in R&D because they know that industry pressure continues to rise and they want to remain competitive. They have a Great Comeback strategy in place, and that’s exactly what it takes to come back strong from the recession.

IT in the supply chain will continue to play a huge role in the auto industry. The downturn has no doubt strained supplier relationship management for manufacturers.

Some in the German auto industry are saying, "There are signs that a technological turning point is occurring concurrently to the worst recession since the start of car making."

Long-term success will be based on new technologies and suppliers’ involvement in promoting technical innovations. Suppliers are going to have to up the ante to stay in the game, mainly their value adds.

I look forward to discussions with the VDA and to learning more about their Comeback plans. I’d really like to hear your thoughts on the global economy, especially on the auto industry’s future.

Now I need to go brush up on my German lingo. Auf wiedersehen.

Jim

Green is the new green. What I mean by this is that the concept of "green" is not new at all in the supply chain arena.

Environmentally friendly efforts have been a hot topic for quite some time. But while many companies are implementing sustainable efforts, the initiatives that are green (financially) as well as green (pro-environment) are leading the pack.

Businesses and consumers alike are encouraging environmentally friendly trends, but many times the costs of "going green" overcome the benefits, especially as companies work to regain their strength from the recession.

Yet we also see that companies like Wal-Mart are leading the sustainability efforts as they discover that sustainability is a powerful offensive strategy.

Along with Wal-Mart, more and more organizations are realizing the impact that sustainable packaging has on energy usage, material availability and costs. The increased consumer interest in environmental issues is also a major motivator for sustainable packaging initiatives.

According to a recent Packaging Sustainability Hot Topic Report published by the Supply Chain Consortium, sustainable packaging projects are resting on the shoulders of transportation efficiency, improved package handling, and the percentage of recycled content in the packaging material. (See the chart below for the criteria used by participants from the Consortium’s Packaging Sustainability survey to evaluate packaging.)

And, to improve their use of packaging sustainability initiatives, the Consortium’s survey respondents say that that they need:

A better collection and recovery process;

Higher end-user awareness;

A better-designed supply chain, and

A life-cycle analysis process that identifies the cost effectiveness of sustainability initiatives.

So, with all of this green awareness and interest in greening supply chains, the future appears to be bright for the evolution of sustainable packaging, and I’m wondering how your company's supply chain strategy fits in with this trend. Are sustainability efforts important to you? What are your sustainability goals and what will it take to reach those goals? Leave a comment below if you would like to share your thoughts. 

To view the Supply Chain Consortium’s Packaging Sustainability Hot Topic Report, click here.

Go!Go!Go! And stay green.

Jim

What does an American expatriot living in Shanghai and working as a global business consultant do when he needs to choose a Chinese name for himself? He forms a committee, of course, made up of his Chinese friends. Kent Kedl explains in the China Business Blog and Podcast the significance of names in China, and how he got his own Chinese name with its own unique meaning.

In the post, Kent quotes from Confucius’ words on the subject of names as an indicator of roles, pointing out that if a leader doesn’t act like a leader, the result is chaos. This is especially important right now as economic turbulence can be so difficult to adjust to, with huge, sweeping changes. It can be easy to just react without thinking. Leaders whose firms will survive the economic downturn have strategy foremost in mind.

Kent is general manager of Shanghai-based consulting firm Technomic Asia, which is part of Tompkins International. Listen to Kent’s podcast or read the text transcript.

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It’s always been a question that leads to a certain kinship with others: "Where were you when it happened?" It, of course, being a major world event such as a natural disaster, the 9/11 terrorist attack, or the death of a president or a celebrity. It’s a way of remembering, bonding and healing.

And for some of the most senior folks among us, it was the 1929 stock market crash and the ensuing Great Depression. So on September 15 – the anniversary of Lehman Brothers’ bankruptcy – I ask, "Where were you when the Great Global Recession began?" I will never forget that day, as we watched the Lehman collapse trigger catastrophe in the world’s banking system.

The stock market dropped more than 500 points in one day, and a dangerous domino effect rippled through the global economy in a short period of time, turning a financial crisis into a full-blown recession. Even the most efficient supply chains ground to halt. Ironically, the agility and effectiveness of today’s global supply chains translated into a swift response to the economic downturn. September 15 will go down in history as second only to October 29, 1929 as the most shocking day in the business world. This has been the worst economic meltdown most of us will ever live through: foreclosures, bankruptcies, loss of wealth, unemployment, bailouts, falling GDP, and more.

Looking at the efforts to stimulate the economy and stem the fall-out of the recession, I see a clear pattern of what theoretically should have happened (see diagram below) versus the practical view of what actually did happen.

Lessons Learned

The real recovery and Great Comeback plan took a drastically different course than anticipated. Consider these game-changing detours that I believe have yielded the real Lessons Learned:

Lesson #1, Government Stimulus Moving Too Slowly. The government could not decide on how the final stimulus plan should look, and presidential elections slowed the process. There was a sluggish release of the stimulus, and it did not begin to impact consumers until the first and second quarters of 2009; its full impact will not be realized until well into 2010. This is in no way a political analysis, simply a financial one.

 

Lesson #2, Recovery Rides on Backs of Consumers and Their Needs. Consumers hit their highest savings rates since 1993, with most folks choosing not to spend stimulus funds but to pay down debt and save the money instead. When consumer confidence first began to show gains in the spring of 2009, it was clear that the expected pattern should have been predicted as recovery in consumer spending on necessities first, then low-cost discretionary items, higher priced discretionary items, durable goods, and finally, housing.

 

Lesson #3, Companies Rely on Inventories and Increased Productivity, Not New Hires. Even after consumer spending picked up, production did not increase, since existing inventories were used to fill this demand. Then, once inventories were drained, companies still were not hiring, because increased productivity provided for the increased demand. Finally, in the third quarter of 2009, production began to ramp up and limited hiring began to take place.

 

Lesson #4, Capital Expenditures Recover Last and Sector by Sector. Although company profits are climbing as a result of cost reductions, there is no need to invest in capital equipment since factory operating rates remain stuck below the 70% mark – well below the required 75% mark needed to stimulate capital expenditures. For the most part, increased capital expenditures will become active in third quarter 2010 and beyond to 2011 and will vary by industry sector. In fact, one could argue that failure to focus on a sector-by-sector recovery and over-emphasis on a macro-economic recovery is one of the biggest lessons learned.

Fight Uncertain Future Armed with a Plan

None of us can say with a straight face that we can predict the future. But what we can do is take hold of our own destiny through Comeback planning. Now is the time to put in place the budget scenarios for 2010 that will allow your organization to grow, prosper and claim market share as your sector moves through recovery and onto Comeback.

Many executives have been leading a dual life for the last six months. They work 10 hours a day cutting costs and trying to respond to their boards. Then they spend 5 hours each night trying to get ready for the economic recovery and return to growth and prosperity. Given that we are in the middle of "Budget Season," it is critical that these executives focus entirely on developing their Comeback Plans.

I believe the next two years will be the most exciting in business since 1938. Clearly, the firms that plan for their Great Comeback are going to have the most success in 2011 and beyond.

How are you revving up for the Great Comeback and what are your lessons learned since September 15? We can all learn more in this area!

Jim

Photo credit: David Paul Ohmer

At the recent Supply Chain Leadership Forum in Chicago, we had a great opportunity to survey executives from some of the world’s leading high-technology, retail, consumer products and pharmaceutical companies.

But what really makes this survey unique is that we asked attendees what questions they wanted answered – in other words, what keeps them up at night? What do they really want to know to be fully prepared to improve their supply chain planning? The survey was given real-time via Zarca Interactive, and the results were presented the next day in a forum general session.

The question topics ranged from demand variability to logistics network designs to sourcing and economic recovery. Basically, they covered many of the key components found in any supply chain strategy today. I want to share a few significant results with you now in hopes that it will shed light on your own organization’s goals and needs:

41% say they think the economy will turn around and "The Great Comeback" will occur in the second quarter of 2010. However, more than 90% indicate that they have not developed a significant Comeback Plan or the initiatives to carry it out. See the two graphs below for details. 

Half of respondents report that their companies are becoming more centralized toward a global supply chain structure, while 22% say there has been no change in their organizational structure to accommodate global demands.

50% say that their sourcing in Asia is moderate, and nearly 17% say their sourcing in Asia is significant. And by far, a majority (almost 70%) report that cost reduction is the main reason their company pursues Asian sourcing. More details in the graphs below.

These are interesting findings that give a broader view into global supply chains. How does your company stack up in these areas? Let me know when you think the economy will rebound, how you are handling global demands, and how much and why you are sourcing in Asia.

I will share more results of the Leadership Forum survey in a future post.

Go!Go!Go!

Jim

P.S. If you are interested in attending next year’s Supply Chain Leadership Forum, save the dates of August 31-September 1, 2010. Here’s the agenda we used for the 2009 forum, just an example of the range of topics and networking opportunities.

The 2009 Supply Chain Leadership Forum in Chicago was jam-packed with some great sessions and even greater opportunities to better understand the challenges facing executives today. I was really looking forward to the evening reception (great food and wine) and the dinner keynote, Charles Fishman.

Charles is a senior writer at Fast Company magazine and author of the national bestseller, The Wal-Mart Effect.

Even with a Target executive in the audience (and he sat the closest to the podium), Charles didn’t fail to entertain and educate the crowd. Whether you love or hate Wal-Mart or are somewhere in between, this is one man who knows his stuff on the mega-retailer. Having devoted years of his life to figuring out what makes this successful and controversial company tick, he can tell you the good, the bad, and the ugly.

While most of the country is aware of Wal-Mart’s influence on the retail world, it still amazes me to hear facts such as:

More than half of all Americans live within 5 miles of a Wal-Mart store

93% of American households shop at Wal-Mart at least once a year

While Wal-Mart may always be looking over their shoulder, they continue to raise the bar and set standards that the rest of the retail world has to live up to in order to compete. As most everyone has already heard, sustainability is their latest mandate.

Top-tier suppliers have until October 1 to complete a 15-question survey that will be used to evaluate the manufacturer’s sustainability efforts (the survey is public knowledge on Wal-Mart’s site)

This plan involves more than 100,000 suppliers globally

The goal is a labeling system that will provide a breakdown of the sustainability of each product

Charles closed with a challenge to all of us "supply chain superheroes" in the crowd. He challenged us to take a good hard look inside the day-to-day supply chain functions now and really assess where we’re headed. How can we step up and raise the bar?

While I don’t really consider myself a supply chain superhero, I’ll take that label any day if it means I’m making a difference in the supply chain world and get to wear a big colorful cape. But I’ll forgo the tights – some other superhero can take on that wardrobe challenge.

Go!Go!Go!

We kicked off the 2009 Supply Chain Leadership Forum in Chicago Monday night with a bang. What a great bunch of folks, and we’re having fun while tackling some tough issues! We are all strangely mesmerized by the innovative hand-dryers in the bathrooms at the InterContinental Hotel, but more on that later.

For those of you who aren’t familiar with the Leadership Forum, top supply chain executives from around the world come together to learn, network and gain solutions to issues in areas such as benchmarking, sourcing and trade management, core benchmarks, packaging, sustainability and technology. This year, more than 50 experts from 30 companies in retail, consumer products, food and beverage, pharmaceutical, high-tech and other industries are in attendance.

Monday night, I led an Executive Summit that began with the statement "Everyone needs a T-shirt that says ‘I survived the Great Recession of 2009.’" We all agreed that was true, as we dived deeper into the topic. Their feedback really supports what we have been saying all along about the economic recovery: You have to look at each sector individually and figure out when your industry has or will hit bottom.

Listening to the economic experts drone on and on about a macro recovery and how the recession will not be over until unemployment goes back up and the moon and stars align just perfectly is not going to help your organization grow and prosper. A strong Comeback Plan focuses on your company and your industry sector. Period.

Here are some of the best lessons that I have learned thus far from talking to attendees:

1) Beer is flat and soup is hot. Meaning that food in general – including soup, frozen pizzas and other inexpensive, eat-at-home cuisine – are doing well right now. Also, beer sales are holding their own. In fact, food and beverage really never tanked, although there have been channel and brand changes in response to the downturn. In addition, there has also been some "trading down" in this sector by consumers who are willing to settle for a less expensive or private label brand to save money.

 

2) Retaining talent is key regardless of budget cuts. More than ever, you need "the right strategy and the right people" to get things done.

 

3) An awesome realization – This is the first time we’ve experienced a recession under massive globalization. And what it has revealed is either a) we’ve gotten so lean that forecasting will have to get better in order to be of any value at all. We really need more base and accuracy measurements, or b) the new norm is that there is no norm, and it’s nearly impossible to make good forecasts today, or c) the truth is somewhere in the middle. We did all agree that companies need several different forecast scenarios for their individual Comeback Plans.

Here are some of the dumbest things businesses have done during the recession:

1) Stopped keeping track of their competitors and what they’re doing and started focusing inward, almost as if they are withdrawing into a fetal position. Wrong. This is the opposite of what companies should be doing.

 

2) Not "standing up on the hills." Failure to launch an effective Comeback Plan is like being in a bicycle race and forgetting that it is on the uphill that you need to stand up and really turn on the juice.

 

3) Cutting the people you will need later – not retaining talent. This was mentioned more than a few times.

Here are some of the smartest things that businesses have done during the recession:

1) Using the downturn as an opportunity to acquire other companies at a low cost in an environment in which private equity firms are uncharacteristically quiet right now.

 

2) Learning from other countries: look at what works there and see if it will work for your organization. Not everything will fit, but a lot of it promises to be very beneficial.

 

3) Stepping up benchmarking to understand where you need the most help, or the most appropriate time "to stand up on your bike."

 

4) Inventory: reducing levels can be smart or dumb – depends on how you optimize other areas in your network and how it affects customer expectations.

 

5) Implementing more frequent network design reviews.

Hand-dryer in the bathroom (I know you were waiting for this one)

There’s a really cool, new-fangled Dyson Airblade hand-dryer in the bathrooms at the InterContinental Chicago O’Hare hotel. Actually, I just learned that it has been around since 2007, but it is new to the majority of our attendees and seems to amaze our staff. Why am I mentioning this? Not sure, other than it is a really cool device, we have photos of it, and it’s just another positive element in the whole Leadership Forum experience.

Look for more later in the week on how the remainder of the forum went and the results of our on-site, real-time survey that attendees are filling out today and tomorrow.

With very dry hands!

Jim