Drive Quality, Cost, and Delivery for a Happier 2012

Happy New Year to all. May 2012 be a year of health and prosperity to you and yours. May it also be a year of health and prosperity for our businesses.

As has been the case in the past few years, we like to reflect on the past year and provide a business theme for the coming year.

As we end 2011 and begin 2012, we note a few observations and news items form the past month that have shaped how we are looking at the new year:

As we were doing our holiday shopping we noticed that every single store, except The Apple Store, advertised discounts across the board. We were seeing a few such signs in early December when we were reading about the retailers being optimistic about the holiday season. Also the stores were open all kinds of hours opening at 6 am and closing at midnight. Retailers were aggressively vying for consumer traffic and dollars. They also wanted to move as much of their inventory as possible before the holiday and thus not have to discount it even more.

Click to read more ...

The Economy and Jobs: Applying a Keynesian / Chicago Model for Change

In our previous blog posting, we presented our thoughts on a November 6th New York Times article written by Mr. Adam Davidson. We offered that if we want a better future we have to do something collectively to create that future. The old approaches will not work. Mr. Davidson agrees with that much. We need to look at preparing our people, the potential workforce of the future.  

It will be hard to count on our largest businesses do anything on their own.  They are mutli-national at the minimum in their supply chains and more and more in terms of sources of revenue.  Executives will do what they have to do to keep growing revenues and profits. They will provide domestic jobs if doing so contributes to their business objectives.

We have to get our government to act on this. We have to move toward having a long term plan to determine what kind of country we should be into the future. The plan must include how to create the workforce of that future.  This means incentives to become better educated in mathematics, engineering, basic sciences, and computer science. The plan must also include incentives on a national level to attract businesses to invest in the US. It makes no sense for states to compete against each other without a national umbrella plan.  We certainly need finance bankers and attorneys, but we need a larger percentage of our best and brightest to become inventors and innovators.

What we are advocating is kind of a Keynesian and Chicago hybrid.  As neither seem to fit the bill for the predicament we are currently in, we definitely need something different.  The question we ask, is the same that Mr. Davidson asked:  Can our government change, adapt, and step up to this challenge?  Mr. Davidson does not believe so.  He has a good point.  If we look at Greece, Italy, and Japan to mention just a few, his point is even stronger.

Maybe it is a pipe dream, but we believe in this country.  We believe in the American people.  We believe we can compete with the best in the world.  We believe this recession has knocked us on our heels but that we should get up and get going.  This is best done be creating the future we want.  

It will not be easy.  This cannot be done as it might be portrayed in a one hour TV drama or even a movie. This is a long term commitment for a country that currently has a business philosophy of “what are you doing for me this quarter.”

In this blog, we generally provide much more tactical advice and insights. These two postings are the second time in a few short weeks that we have blogged on such a broad topic. It is clearly important us.  We believe it is important to this country.  We are a manufacturing, operations, engineering, and supply chain company. We believe that excelling in these disciplines have to be central to the economic health of the United States. 

The Economy and Jobs

There was an article in the Sunday, November 6, 2011, New York Times on-line.  The title of the piece was “Can Anyone Really Create Jobs” by Adam Davidson.  The author laid out many of the same points we have presented in the past especially in our October 24th posting:  “The Economy - We Need to Something Radically Different.”

Mr. Davidson noted that “Every politician has a “jobs plan,” very often a list of vague proposals filled with serious-sounding phrases like “budget framework” and “regulatory cap” that are designed, for the most part, to mean both everything and nothing at all.”  He is spot on.  We believed and have advocated that this country and its place in the world has changed creating a new equilibrium, the new-new, that we have referred to. 

Mr. Davidson referred to two schools of thought the Keynesian and the fiscally conservative University of Chicago School. In the Keynesian school, the adherents mostly Democrats believe we have to stimulate our way back to economic health. He goes on to say that the goal in the Keynesian school “is to goad consumers into spending again. And President Obama’s jettisoned $400 billion jobs package, hard-core Keynesians argue, is nowhere near what it would take to persuade them.”  This stimulation comes by increasing our deficit.

Then Davidson goes on to note that both schools agree on one thing.  This is an important thing that he claims politicians will never admit at least not in an election year. “An economy is truly healthy only when its people know how to make and do things that others will pay them a decent amount for. Jobs, in other words, are not the cause of a healthy economy; they’re the by product. And that’s another thing most national politicians know but will never say.”

He is absolutely correct.  We have to create products that people want to buy. He does not point out that we have to create products that appeal to global customers and markets.  We are still focused like we are the greatest and end all market in the world.  Consumer product companies have long known to look globally. Companies like Proctor & Gamble, Unilever, Kraft, and Colgate are in every major market in the world. As they grow, it is not likely the jobs growth will be in the US. The growth will be elsewhere in the world where the markets are.

The only hope for growth here is that if transportation costs increase enough, it will make sense for companies to make products here and thus increase jobs.  Even then it is likely states will compete like crazy to attract new manufacturing facilities.  Who is advocating for the nation as a whole?  Who is worried about the citizens here and their long term well being and growth? The multi-nationals will worry about job growth and good citizenry here when it makes business sense.

The Economy - We Need to Do Something Radically Different

In our previous post we discussed why the recovery has been so difficult. Our common “prescription” have failed to cause any positive change. This does not mean all is lost? Not at all. It does mean that we cannot be doing the same old things and expecting to get the results we always achieved. This is especially true when the world has changed and we believe it has changed. In such a case, we need to do something different to forge our own future.

• What kind of country are we now?


• What is the current socio-economic class structure do we have?


• Is this what we want? 


• Is this what it should be? 


• If not, and there will be negative responses to the above questions, what kind of class structure should the US have?


• More importantly what kind of economy will get us there?


• What do we have to do to get to that kind of economy? 

We are not talking about a planned economy. We know those do not work. We are talking about having a general plan and investing in our people and infrastructure to make that happen. We are talking about uncovering or creating new stimulus levers that will actually work.

If we do nothing but play with taxes and interest rates as if it were 1985, factory jobs will not magically appear. In our current scenario, they will only reappear when the US is the low cost wage producer in the world. We should be in pretty dismal shape if we wait until we are at that stage.

We have to acknowledge this New Normal. As a nation, we need to acknowledge that what used to work in regards to stimulating a recovery are not enough in this New Normal. We need to re-invent and re-invigorate ourselves. We need to NOT accept this New Normal and create a newer one much more to our liking. We are mystified why none of our civic or business leaders are advocating this.

A friend of ours, Guillermo Fernandez former President of Colgate Mexico, told us recently that what the US needs is a new Marshall Plan. The original Marshall Plan was the work of George Marshall the post World War II US Secretary of State. He led the creation of what was officially called the European Recovery Program. It began as humanitarian aid to war ravaged Europe and evolved into a program to modernize Europe’s industrial infrastructure and business practices. The program began in 1947 and ended in 1951.

We definitely need a new Marshall Plan. This time, however, it has to be focused on our own ravaged industrial base. We need to work on creating a new manufacturing base in this country based on business practices that are the best in the world. This would involve training our people for the jobs of the future and creating the environment where US businesses produce in the US.

No one is going to help us they way the original Marshall Plan did for Europe We are going to have to help ourselves.

From our blog to the ears of our President and Congress…

Back to School ... Back to Work!

It is Back-to-School sale time. There are advertisements for the office superstores and the big box retailers. The goods that line the shelves, end aisle displays, and floor displays were ordered back in April and May. The goods were shipped in May from Asia and June for the goods still produced in the United States. Back then we were still in the belief that we were still in a recovery.

On August 12, it was reported that July retail sales (excluding autos) were up 8.5% from July 2010 but essentially flat from the June results. On the same day, the Wall Street Journal reported that economists that they have surveyed predicted that August sales would be the second month in a row with flat sales performance. The title of the WSJ article was “Heading Back to School, But not to the Stores” which basically sums it all up.

On August 16th, there is an article from the AP that Wal-Mart and Home Depot are upgrading their profit outlooks for this year. As we have pointed out in this blog, The Great Recession forced many companies to lean up. They have had to tighten up their planning and inventory management. They have learned to operate with less employees and adjusted the product offering and mix to cater to more and more value conscious consumers.

Retailers also have learned from 2008 when they wound up with piles of unsold merchandise that they had to discount up to 80 percent or sell to liquidators for pennies on the dollar. Some of their peers, including Circuit City, shuttered. In fact, several retailers that have survived the Great Recession by cutting costs, keeping inventories lean and pushing either low prices or high quality are reflecting confidence going forward.

Basically, with flat sales Wal Mart, Home Depot, and others are able to improve their profit outlook on flat sales.

Are you able to do the same?

The key is to tightly manage planning, inventory, and personnel.  Things our clients have been doing since the start of The Great Recession.  Any business that has survived The Great Recession has probably done this to some degree.

We believe that this is a never ending activity.  An important part of the Lean philosophy is Continuous Improvement.  Planning parameters and inventory levels must be constantly challenged, tweaked, and updated to allow your business to operate in its most efficient state.   Even if your business is not retail, evaluating your product offering is must be done with equal vigor.  Lastly, and unfortunately for the economy at large, employment must be tightly managed at well.  We are seeing an increase in hiring freezes and outsourcing of support functions.

Sound planning and optimized inventory can be achieved.  With a tool like DemandCaster and our process, this can be achieved in less time and with less people than you might think.

What are your current planning and inventory challenges?  Post them here or send us an email, we would love to discuss your challenges and suggest opportunities for improvement.

Working effectively and efficiently, we will persevere!

You may have seen my post on Twitter yesterday … Back-to-school worries weigh on teen retailers.