14 responses so far ↓

• 1 AXManufacturing // Aug 20, 2009 at 11:31 am

  As the U.S. pulls out of the recession “solvency” of major suppliers will be the biggest risk. It is easy not to contract with insolvent vendors but what is worse are the ones on the edge that are hiding. The Federal Reserve has been performing stress tests on major financial institutions as part of the Supervisory Capital Assessment Program (SCAP). Consider performing similar tests on your critical supply chain links.

• 2 Northwest Corridor Development Corporation // Aug 20, 2009 at 12:53 pm

  From our transportation corridor’s perspective, we have shared the impact of global economic challenges. At the same time they have and will continue to create opportunities for the Northwest Corridor in Canada, extending into any recovery period, now or future. In these times, when many consider shortening their extended supply chains a solution, our transportation corridor’s supply chain appeal comes to the fore, being the shortest land-sea link with Asia.

  Key to our further success will be maintaining impetus for proposed expansion of container terminal operations at the Port of Prince Rupert in British Columbia, Canada. Estimated for completion in early 2014, with capacity of 2M+ TEU’s, it does take foresight by all involved, in the face of the down turn in container handlings in many ports worldwide. But, here again, the Port of Prince Rupert has well expressed its inherent supply chain value, demonstrated through higher container handlings (by 124% in the first half of 2009 over the same period in 2008).

  Of increasing importance in current times, when shortening of supply chains may entail moving plant operations and sourcing suppliers closer to home, is the Northwest Corridor undertake continual infrastructure improvements, making seamless connections with other major corridors in Canada and the USA. An example of this is major improvements underway at Winnipeg, Manitoba, Canada. The development of the inland port of CentrePort Canada there will only serve to improve our connections with major corridors such as NASCO in future.

  In closing, a greater share of infrastructure invested dollars by all levels of government is required to be expended in our multi-modal transportation corridor, with particular emphasis on north-south as well as east-west connections to it. In a region rich in natural resources, this will only return further success for Canada’s Northwest Corridor, and Canada as a whole.

• 3 Jon Hansen // Aug 20, 2009 at 8:23 pm

  Good questions Justin, the answers to which rest in a combination of paying for past sins (i.e. outdated views on vendor relationship management, over zealous vendor rationalization strategies, executive apathy), and what acclaimed IEE author Forrest Breyfogle III referred to as the exposing of the previously hidden underwater rocks that are now in plain site as a result of “shallowed” revenue streams.

  To be succinct, a good many organizations were already heading into difficult waters before the most recent economic downturn. All the recession did was hasten the process leaving both companies and their respective supply bases in what can only be described as a diminished functional state.

  Rather than consume copious amounts of space I will provide the following links to corresponding articles and PI Window on Business broadcasts that will elaborate further.

  To begin, let’s talk about outdated views on vendor relationship management. Recently I had the privilege of interviewing author and supply chain expert Bill Michels regarding the precipitous collapse of GM’s (as well as the North American auto industry’s) supply base.

  While the following provides you with the link to actual on-air broadcast (http://www.blogtalkradio.com/Jon-Hansen/2009/08/11/Intersecting-Ideals-Why-GMs-Supply-Chain-is-in-a-State-of-Ruin), some of the key points Michels stressed was as follows:

  Michels went on to say that “Andersson’s hard line approach might have been a short term win for GM, but resulted in long term supply chain problems and risk.”

  He concluded that “the view that suppliers are a source of incremental profitability rather than an extension of manufacturing capability is a gross miscalculation.”

  These sentiments echoed in a recent 21st Century Supply Chain post (http://blog.kinaxis.com/2009/08/is-your-supply-chain-creating-value-or-stealing-margin/) which asked the question “Is your supply chain creating value or stealing margin?”

  Another issue deals with the broad application of a vendor rationalization strategy that has been misaligned with the multiple areas of spend within an enterprise.

  In this regard I will provide you with the link to an interview I gave to the Australian-based Shared Services & Outsourcing Network (http://ssonetwork.com/topic_detail.aspx?id=5486&ekfrm=50) last month.

  The continuing utilization of misaligned vendor rationalization strategies was also emphasized in an article I wrote “What is Procter & Gamble Thinking?” (http://procureinsights.wordpress.com/2009/07/09/what-is-proctor-gamble-thinking/)

  Finally, let’s talk about the general apathy on the part of executives regarding supply chain risk. Here are the links to both a 90 minute Special in which I had the opportunity to talk with a lead researcher and author of a white paper outlining the risks a pandemic poses to key supply chains including energy (http://www.blogtalkradio.com/Jon-Hansen/2009/05/26/Special-Broadcast-For-Want-of-a-Nail-The-Pandemic-Effect-), and a follow-up segment on general supply chain risks (http://www.blogtalkradio.com/Jon-Hansen/2009/05/28/Securing-Your-Supply-Chain). Very interesting insights to be certain. Especially given the fact while a healthy percentage of executives recognize that risks do in fact exist, a paucity of companies many believe are actually prepared to adequately deal with them.

  The above points do not of course recognize the unique risks and their potential impact on specific industry segments such as transportation companies (cargo theft), pharmaceutical (product and process risk), distribution (business continuity/crisis management and supply chain disruptions), and hospitality (risks that will fall outside of the ambit of the traditional risk pool).

  However, it is a good starting point for discussion.

• 4 Peggy Barnett // Aug 24, 2009 at 10:56 am

  Thank you for this excellent article and related sites.
  Suppliers that are willing to share in the gain, as well as the pain, and engaged and treated as “true partners” are worth their weight in gold.
  However, Sr. Mgmt. of many organizations do not understand total cost, (nor do they care, only looking at bottom line savings). Trying to convey the importance of partnering is lost in the rush for the almightly dollar cost savings, that in the long run is lost a thousands time over due to poor quality, late deliveries, etc.

  I get tired of fighting the battle.

• 5 Supply Excellence — “Instant Amnesia” Poses Risk During Economic Recovery // Aug 25, 2009 at 1:53 am

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• 6 Cheryl Berklich // Aug 25, 2009 at 10:39 pm

  Justin, Your post is very timely and on point. If a Supply Chain Professional wasn’t Obsessive Compulsive before this economic tsunami they more-than-likely are today.

  In my particular industry, Automobile Dealership, retail environment – there are definitely revenue challenges along with projected inflationary forecasts. The “Cash for Clunkers” program has provided an infusion of revenue many Dealerships need. However, certain branded Dealerships have been busy in service and sales all spring and summer, prior to the implementation of this program; therefore, this program has been a bonus for them; however, Auto Dealers in general remain cautious.

  As I am sure most are aware, our Dealer clients have faced a contraction not only of their peers but of the supply base, particularly smaller businesses that are unable to secure credit and don’t have deep enough resources to see them through this recession.

  This supply base contraction also has affected the quality of service as suppliers reduce field staffing to cut costs. We have set an aggressive strategy to manage potential risks, such as supply disruption due to supplier bankruptcy or client dealer location contraction. These strategies include developing greater protection in contract language, pursuing secondary dual supplier sourcing strategy (while we may pursue a single source) we remain vigilant that the secondary solution is fast and easy to implement, and negotiating longer payment terms in order to maintain freer cash position.

  Within recent weeks, July and August, we have seen a quest by suppliers to gain business at any cost. This could appear too many supply professionals to be a double edged sword from a risk perspective. No one can blame the Supply Chain Professional who may take advantage of this desire of suppliers to lock in pricing and business. Suppliers have been amenable to 24 months of firm pricing and other favorable business terms (as discussed earlier). Does this make it a buyer’s market? Perhaps.

  At this point on our economic history, it is imperative that organizations take a cautious but thoughtful approach to supply chain strategy. Cutting expenses for the sake of cutting expenses without planning – which happens particularly in organizations that do not have SCM as a core function – creates its own risk both internally and externally. Bad decisions and strategy today will have longer lasting effect and more deleterious effects than in an up economy. Up economies can hide bad decisions while down economies expose them (updated from my interview with Dustin Mattison for http://logipi.com/public/item/234744).

• 7 Instant Amnesia Poses Risks in Supply Chain During Recovery | licensinghandbook.com // Aug 26, 2009 at 9:46 am

  [...] last week and asked me (and some others as well) about what we thought would be the biggest supply chain risks in a recovery.  He was kind enough to think that my response on “Instant Amnesia” [...]

• 8 John Sicard // Aug 26, 2009 at 12:53 pm

  Having had the privilege of meeting with executives of many manufacturers in the US over the past 12 months, one common dialog seems to be prevalent—first, what should we do differently to avoid a latent response to a future downturn and all the pain that implies, and second, how do we posture for the inevitable recovery while everyone around us appears to be operating with a heightened sense of insecurity. It is easy to say that “responsiveness” is at the heart of both of these problems, however, for many organizations, like the titanic, it is difficult to move quickly regardless of advanced warning of risk.

  Given that supply-chain is a team sport, what I’ve heard, and would be interested in further commentary from the readers of Supply Excellence, is that responding to downturn risk is more about individual play; that is, each enterprise must take responsibility for their own responsiveness to a downturn. There may be some that would say “we were just following our customers forecast”. Without a doubt, it is the more agile players that avoid injury.

  Preparing for the economic recovery, which I believe has already begun in many sectors, is more about team play. Regardless of how agile and responsive an individual player in the supply chain is, winning big during a recovery requires that everyone on your supply chain team be equally responsive and agile. Leading manufacturers are busy working with their suppliers to establish transparency in supply/demand data, and working hard to improve synchronization through tight collaboration.

  The top 3 strategic improvements that would improve an organizations performance would be to:

  1. Gain control over your data, whether it belongs to you, or partners. If it can adversely, or favorably affect your business, you need the visibility to the data.

  2. Establish a robust supply chain surveillance system. Knowing sooner about impending risk or reward on either side of the supply chain is key to breakthrough business performance.

  3. Empower people within the supply chain to collaborate. I’m not saying this doesn’t happen, but many people think inter-enterprise collaboration is about system-to-system data exchange, and not the old fashion human collaboration factor.

• 9 Supply Excellence — “Commodities” Blamed for Beer Price Hike // Aug 27, 2009 at 2:01 am

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• 10 Klaus Hofmann // Aug 27, 2009 at 11:50 am

  I fully support John’s comment.! In particular, his top three strategic improvement activities. However, I would reverse the order of priority:
  There is nothing more important than empowering people / partners in the supply chain to efficiently and effectively collaborate.
  In the end it’s people who make things work , neither data, nor systems, or the like. Those are merely tools to help making the right things happen at the right time. Provided you get this point right, then you inherently got a reliable surveillance / early warning system, simply because the partners in the supply chain exchange information on a reagular basis. They talk to each other and most importantly, they can ask questions about the state of health of the other partner and thus gain early insight into any prevalent risks hat might occur in the future. Mutual trust between the partners in the chain, which entails the free flow of relevant information back and forth, is the key enabler for creating and maintaining a robust supply chain which can quickly adapt to any changes in demand, thus minimizing the negative effects this might cause to an individual partner / supplier. In a nutshell: Learn to work together, be open and thrustworthy, acknoledge your interdependency, and take action jointly and swiftly whenever the need occurs.

• 11 Supply chain is a team sport - Andrew Roberts Blog // Aug 27, 2009 at 4:19 pm

  [...] 2009 | Filed under: Industrial News There’s a good article at Supply Excellence entitled “Has the Economic Recovery begun? Are you ready?” that I provided feedback on and wanted to include here as [...]

• 12 Supply Excellence — Interview: State of the Auto Dealership Industry (Part 1) // Sep 8, 2009 at 2:00 am

  [...] note: After her excellent comment on the risks companies will face during the economic recovery, I asked Cheryl Berklich, a Director [...]

• 13 Supply Excellence — Interview: State of the Auto Dealership Industry (Part 2) // Sep 10, 2009 at 8:12 am

  [...] Hofler (DH): “In your response to Justin’s blog, you mention that you have an aggressive strategy to manage supplier risk, including the increased [...]

• 14 Jeff Gordon on Supply Excellence « NET(net), Inc. // May 11, 2010 at 5:30 pm

  [...] last week and asked me (and some others as well) about what we thought would be the biggest supply chain risks in a recovery.  He was kind enough to think that my response on “Instant Amnesia” [...]

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