Manage Success to Ensure a Successful Economic Recovery for Your Business

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Happy New Year!!  I am sure you are in the thick of developing and executing your plans for 2011.  I thought this is a good time to share with you how we at The Mpower Group see the economy shaping up and the subsequent opportunities and challenges.  We all hope that this year will be much better than 2010.  It looks like there is some good news and some not so good news as far as that is concerned.

The Good News: All Indicators point to a sustained global recovery

First the good news; almost all economic indicators seem to be coalescing around a pretty good recovery underway.  Here are some forecasts:

Nouriel Roubini (an economic sage who predicted the housing bubble and economic crisis as far back as 2005) sees a 4% growth in the global economy.  He does identify some downside risks related to the problems in the Eurozone, including housing and budgetary holes at the state and local levels, inflationary pressures in China, currency tensions, geo-political risks in Korea, Iran and Pakistan.  Conversely, he sees upside risks including the strength of the US corporate sector, Eurozone growth (driven by Germany), lower borrowing costs and the positive effects of consumption and production.  According to Mr. Roubini, “the downside and upside risks for the world economy are balanced”.

Fannie Mae Chief Economist, Doug Duncan, notes, “The economy has regained momentum entering 2011 and we see significant improvement in the economy’s ability to grow compared to 2010.

CNBC observes that the US economy has recovered ALL of the lost output since the start of the Great Recession:

  • Third-quarter GDP stood at a record $14.7 trillion, eclipsing the peak hit in the third quarter of 2008.
  • Retail and food sales, which surged 5.5 percent over the holidays, now stand at $1.12 trillion, according to the Commerce Department – just under the $1.17 trillion peak hit in the 4th quarter of 2007.
  • Consumers have driven down indebtedness, and added to their savings. The savings rate has jumped to 5.3 percent, while household debt-service burdens have been cut by $228 billion.
  • Auto sales are running at a 12.5-million-unit rate which, while below the 17-million-unit peak at the height of the economic recovery, is still three million more vehicles being sold than at the trough of the recession.
  • Household net worth, after collapsing by a staggering $17.5 trillion from 2007-2009, has rebounded sharply in the last several quarters… by nearly $6 trillion, not a trivial sum. It remains well below its historic highs, but has improved significantly and likely will continue to improve over the next several years.

The NYT declares that the US economy has grown for 5 consecutive quarters since the 2nd quarter of 2009 at an average of 2.5%.  Personal consumption, even though consumers are de-leveraging and concerned about high unemployment, has risen by 2%.  Domestic investment has risen by 12%, 27%, 29%, 26%, and 12% quarter over quarter.

Overall, it appears the economy is doing far better than most people give it credit for.  And while economists never entirely agree on anything, it seems fairly obvious that we are coming out of the recession and poised for a fairly significant expansion in economic activity worldwide.  Market based indicators (stock prices, commodity prices, interest rates, rail and truck traffic, etc.) ALL point to a robust recovery.

The Bad News: All Indicators point to a sustained global recovery

Now for the bad news. I recently ran across a report from AMR/GARTNER headlined, “Supply Chain ready to Pop”.  The gist of it is “an increase in demand will, on one hand, create some great profit opportunities, but on the other, expose weaknesses in this increasingly tightly strung global supply chain.”  They go on to identify managerial talent as one of the constraints.  “We have so little buffer in the system that sharp turns can hurt both the downside and upside”.

Clients that I speak with across all sectors anecdotally support what Gartner reports.  Ironically our own success may be our undoing; Success is the greatest risk we face today, not inflation, not deflation, not a double dip.

In summary, while it is clear that all of us are looking forward to a much better economic 2011, it is also clear that we need to acknowledge that our Supply Chains (whether we are in manufacturing or services) may have been running on fumes.  I would argue that many of us have a far greater capacity to plan for failure and very little when it comes to success.   The greatest imperative for us is to make sure that we have planned for success in 2011.  The risk to our corporations from mismanaging either is the same.  Indeed, some argue that the downside risk from mismanaging success is far greater than failure.

Questions that I have been posing to CEO’s recently:

In summation, here are 10 key questions that have helped my clients prepare for a successful 2011:

  1. Does your organization have an executable plan to flex your supply chain (NOT just the supply base but the entire end-to-end Supply Chain) to meet growth of +15%, +25% or greater, than your current projected volumes over the next 2-3 years? Have you shared this plan with the executive team?
  2. Are senior executives as involved in Supplier Relationship Management as they are in Customer Relationship Management?
  3. When was the last time the Supply Chain was discussed at the Board level?
  4. Can you list the 5 things that you are doing differently this year in your Supply Chain that will give you a clear competitive advantage? What are your plans to exploit them?
  5. Do you have the people AND competencies across your Supply Chain to give you a competitive advantage? Remember, lead time is required for competency building.
  6. Do the “right” people have the “right” information available?
  7. Are your metrics aligned to drive the right behavior both within “stovepipes” and across “stovepipes” to optimize your Supply Chain
  8. How much collaboration do you think you have in your own supply chain?  What if you include suppliers and customers in the equation?
  9. How will you ensure that knowledge being generated is being captured and shared across the entire supply chain?
  10. How are you positioned for innovation and R&D?  Is it a shared goal across your entire supply chain including suppliers and customers?

Cheers!

Dalip

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Dalip Raheja
Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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