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The Coming Recession: Why It’s Good for You

March 27th, 2007 · by Tim Minahan · 2 Comments · supply management, supply risk

Over the weekend, Spend Matters had an insightful post on signs of the emerging recession. In his post, blogmaster Jason Busch warned supply managers to step up their focus on cost management.

My opinion: Bring it on!

While bad for business, history proves that recessions are good for the supply management discipline. Why? When the going gets tough, CEOs and CFOs turn to the supply management team for help:

  • In the 1970s, executives viewed consumption management and increased control of supply chain performance and costs as the antidote to the energy crisis.
  • In the 1980s, new procurement and supplier management techniques were used to ward off lower-cost, better-quality products from offshore competitors, which, at the time, were primarily from Japan.
  • In the 1990s, supply management was tasked to lead the charge for continuous improvement initiatives, such as total quality management (TQM), just-in-time (JIT), and Six Sigma.

Now, with global competition heating up, risks increasing, and supply markets tightening, executives will once again make supply management a priority. Savvy supply executives will use this crisis as a lever to secure the resources, budget, technology, and policy changes required to drive their improvement initiatives. They will also leverage the economic downturn to demonstrate to secure a seat at the executive table.

One word of advice: be certain this go around to use this new-found status to demonstrate how supply management can do more than hold down costs. Demonstrate supply management’s value contribution potential by helping to identify innovation in the supply base, expand into new emerging marketplaces, support corporate compliance initiatives, and develop sustainable supply approaches that can reduce risks and boost long-term profits.

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2 responses so far ↓

  • 1 Chris Ruth // Mar 28, 2007 at 1:53 pm

    I agree. I have often said (only halfway in jest) that Supply Management is a “countercyclical business”. When companies can no longer hide innefficiencies in the top line growth, the influence of procurement and demand management becomes especially important.

  • 2 Tim Minahan // Mar 28, 2007 at 2:20 pm

    Thanks for the comment, Chris. You’re absolutely right. My final parting shot, if it wasn’t clear, is that supply management organizations need to use the economic down cycles — when they have the ears and wallets of their CEO/CFO and other business leaders — to not only drive near-term cost reductions but to also demonstrate their ability to deliver VALUE to the company’s long-term goals of innovation, market expansion, brand image, and profitability.

    This may involve helping identify a new innovation in the supply base. Or helping to develop the manufacturing capabilities of a supplier that your engineering team has identified as having innovative or unique technologies. (Consider how Toyota and Honda did this to get an early lead on the hybrid vehicle market.) It could also involve helping scout out and develop supply lines in new emerging markets that may help drive your company’s next wave of sales growth.

    Supply teams that can demonstrate value in the down time will be able to maintain a long-term seat at the executive table long after the economy rebounds. (Not to mention how managing supply more efficiently and effectively can help flatten out traditional economic cycles.)

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