Economic Curveballs and Sinkers

Even though the baseball season started a couple of weeks ago, we wish the world did not join in the fun by throwing curve-balls and sinkers at this recovery! $4 plus gallon of gasoline, supply chain disruptions in Japan, and the talk of holding the the Fed’s debt ceiling in check are a couple of massive curves that potentially place our economic growth in peril.

In the April 19th issue of APICS eNews, APICS reported:

• According to the Federal Reserve, manufacturing in the United States grew for the ninth consecutive month this March


• NPR reports that factory production—including consumer goods, business equipment, and raw materials—increased 0.7 percent over February’s figures, despite supply chain disruptions related to the ongoing crisis in Japan.


• Industrial production as a whole is up about 12 percent from its June 2009 low, but it trails the September 2007 peak by about 7 percent.


• Of all major market groups, output of construction-related goods increased the most, with 1.5 percent growth. Consumer goods also increased, with 0.9 percent growth following two months of little change. Long-lasting consumer items such as appliances, home electronics, and automotive products increased, while output of products with shorter shelf lives decreased.


• While economic recovery depended on business spending in the early stages, the March figures suggest consumers now are fueling economic growth. Consumer spending rose in March, and the unemployment rate reached its lowest point in two years.

This is all great news, but we are still concerned that the aforementioned challenges are very real land mines that we must watch and manage carefully.

Any opportunity that was recently afforded via the ever improving economy for slightly heavier inventories may be ending. Keep your demand plans as short term as possible, continue to drive down lead times, drive S&OP, and collaborate with your suppliers and partners in earnest. Those continue to be the keys to navigating this on-going period of uncertainty.

Four Strategies to Help You Meet the New Normal, Head-On

Back in January we posted our Supply Chain Resolutions for 2011. In our March newsletter, we shared our four improvement strategies for the remainder of 2011. We are posting them here for those readers that do not receive our monthly newsletter. Our four strategies are:

1. Collaborate! Now more than ever is the time to actively communicate with your customers and suppliers. Where possible use technology to share data and demand plans. Extend your planning process to include your suppliers. Imagine if you and your suppliers were tied together with a taught string. You pulling on supply prompts your vendors to react immediately to your needs. Collaboration via data sharing and active communication eliminates the natural slack in manual processes that introduce delays and demand and supply volatility and inaccuracies.


2. Become faster. Implement lean manufacturing methods to reduce waste and become more nimble. You want to be in a position to respond quickly. Reducing lead times both internally and externally is critical.


3. Measure. We are big proponents of data based decision making. As the economy is slowly picking up, you need to evaluate the following to get peak performance from your ERP.
   
   
   
   1. Are your lead times and run times all up to date?
   
   
   2. When was the last time you did an ABC reclassification your finished goods and materials?
   
   
   3. Take a hard look at your customer service performance. Are there holes in your performance. Often if there are issues inventory is to blame which in turn could mean you have capacity issues or do not have appropriate inventory policies. The new normal dictates a continual review and adjustment of these levels.
   
   


4. Refocus. It is a great time to revitalize your continuous improvement efforts.
   
   
   
   1. Asses your top issues, concerns, priorities? What improvement in these areas would provide the biggest P&L dividend to your business?
   
   
   2. Regarding collaboration, put a joint continuous improvement team in place with your major customer or supplier to improve or implement a Collaborative Planning Process.
   
   

The ongoing uncertainty and the new normal of the economy is rife with challenges. The winners are those companies that challenge their own reality and challenge the very basis they go to market.

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