2012 Industrial and Equipment Mandates for Value Creation

Looking around the industrial and equipment markets of the world, 2012 will be a mixed year for anticipated growth:

• Europe will be slow.
• North America will be good.
• South America will be very good.
• Asia will continue to explode for this industry.

Despite this variation, the value creation mandates for this industry will not be mixed. Independent of geography, the hot topics in the boardroom of every industrial and equipment company will be twofold: Strategy and supply chain transformations.

Strategy

Strategies for the business itself, acquisition strategies, supply chain strategies, and operational strategies are all going to be major trends and challenges for 2012 in this industry. Each of these four pieces requires company leaders to be able to explain the strategy behind the company itself, understand how the business will grow, and where the growth should come from (product line extensions, new channels, etc.).

It is also important when considering merger and acquisition strategy to understand what risks there are, how the acquisition supports business strategy, and the potential supply chain impacts it would have. Lastly, new technology is bound to greatly impact strategy in 2012.

Supply Chain Transformations

The concept of supply chain transformation refers to a powerful combination of sales and operations planning, aligned organizational structures, and the right technology. The end result of supply chain transformation is supply management linked with demand planning leading to top-notch customer service while reducing costs for suppliers.

Although there are many possibilities for achieving and improving supply chain transformations in 2012, the four hot issues that will impact supply chains the most are network planning, outsourcing, creating demand-driven supply chains, and adaptability.

	Network Planning: Do you have the right DCs with the right inventories, located in the right locations with the right transportation? Are your real estate and energy costs being managed? Have you pursued the correct incentives and are you providing awesome customer service? How does your network support your strategies going forward? What can be done to assure you use the network transformation to result in true value creation?
	Outsourcing: Have you done an evaluation to determine which of your processes are core competencies and which are not? Have you then gone a step further and outsourced the processes that are not your core competencies? The fatal flaw often encountered when outsourcing is that once a function is outsourced, your team thinks their jobs are done. This is like thinking a relationship is done once a couple gets married. The next step is the ongoing evolution of the relationship into a true partnership. It is really only after the relationship moves to a continuously improving partnership that the outsourcing transformation results in true value creation.
	Demand-Driven Supply Chain (DDSC): Have you harnessed the power of the DDSC? The power of the DDSC to both increase product availability and inventory turns while reducing cash-to-cash cycle times and costs to serve is really compelling. Four major transformations occur when moving to a DDSC: First, from push to pull; then, from a link strategy to a chain strategy; thirdly, from capturing sales data to really using this data; and lastly, switching from poor supply chain visibility to synchronization. These transformations are opening supply chains up to extraordinary benefits and major value creation.
	Adaptability: Risk, instability and rapid change are all here to stay. They challenge the validity of all planning processes: strategic planning, contingency planning and financial planning. To be successful today, your organization must develop the ability to adapt on top of the backdrop of its strategic, contingency and financial plans. A required transformation that will lead to tremendous value creation is the ability to adapt to do new things quickly. Being adaptive is not about having a great plan, but it is instead about being able to move and change very quickly to stay ahead of the market.

The mandates for value creation in 2012 for companies in the industrial and equipment industry are based on holistic strategies, along with a robust set of supply chain transformations. Keeping with the status quo simply is not an option for 2012. It is only by pursuing strategy and supply chain transformation that 2012 will be a success for you and your company.

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