Hello, my name is Jim Tompkins. I'm the CEO of Tompkins Associates and Tompkins International. I'm pleased to be with you today to present our second part of our fourth series of the Global Supply Chain Podcast.
This fourth series is going to take a slight diversion from the supply chain specifics of our first three series and look at a broader subject, that nevertheless, has a major impact on us supply chain professionals.
This broader subject is the Great Comeback. The Great Comeback is my phrase for the recovery and return to prosperity in response to the economic meltdown we have all experienced over the last half of 2008 and the first four months of 2009. In this four-part series, I will be guiding you through the things you must do to be ready for your organization's Great Comeback. In the first part of this series, I covered why this topic is so important.
In the second part of this series, I will explain the Great Comeback Process: The overall five-step process of developing a comeback is:
Step 1: Environmental Assessment
Step 2: Competitive Intelligence
Step 3: Comeback Expectations
Step 4: Organizational Analysis
Step 5: Define a Comeback Plan
Step 1, the Environmental Assessment, has to do with a look at the global economy, the domestic economy, the consumers, the investors, and the government. The questions to be answered in this Environmental Assessment is: When is your market going to begin to grow again? A quick summary of the overall economy is clear in that the consumer industry will return first, with the early recovery occurring in consumer necessities, followed by inexpensive discretionary spending, followed by more expensive discretionary spending.
The last two sectors returning will be the automotive and the housing sectors. The recovery in the retail sector will be in conjunction with the products sold by those retail sectors. The material manufacturing industries will follow much the same sequence of the materials for necessities, then materials for inexpensive discretionary, and then lastly the materials that go into expensive discretionary spending. Once plant utilization returns, we will begin to see capital expenditures again.
A significant factor impacting the timing of the market returns is the consumer. Although confidence has grown over the last quarter, the consumer is afraid, confused, uncertain, and changed. The loss of wealth, the unemployment rate, the fear of unemployment, and the number of loan foreclosures and bankruptcy, has driving the consumer to a new level of economic conservatism. This needs to be understood and addressed as you consider the timing of your recovery and return to prosperity. The last area within the Step 1 Environmental Assessment is the role the government stimulus activities play within your comeback plan.
Typically, this will be either a major factor, or a very minor factor. So if your business is involved with alternative energy sources or transportation infrastructure, you are extremely involved with government stimulus. Otherwise, for most of the rest of us, you are really not involved with the topic of government spending and there's not much to be considered. The second step of the Great Comeback process is competitive intelligence. The competitive intelligence process requires you to answer two top-level questions. First, what did your competitors do in response to the Great Recession? And secondly, what will your competitors do in response to the Great Comeback? Drilling down into these two top-level questions may be done by pursuing more detailed questions.
Questions like, What is your competition offering to your customers that you are not? Do your competitors have an advantage with certain customers, geographies and service lines, and if so, why? What innovations or creativity bringing to the marketplace? What mergers and acquisitions, what outsourcing, joint ventures, or alliances is your competitors pursuing? Do these activities give them a game changing opportunity in terms of market position, geographical reach, scale, technology or whatever? Another question may be, How are you positioned versus your competition to gain market share? And more questions to really understand how do you compare to your competition.
And there are two more competitive intelligence questions to be answered to understand your path forward. First, how will your competitors respond to what you do, and secondly, how will you respond to what your competitors do? Understanding your current position versus your competitors and how they will respond to your Comeback plan will be very important. In addition, studying your competitor's response to your past actions will provide good insight into how they will respond in the future.
Assuring that your recovery plan and your comeback plan includes how you will respond to your competitor's response is a good way of assuring your viability in your overall path forward.
The third step in the Great Comeback process is to define different scenarios of your comeback expectations. The outcome of this step is a clear understanding of what volumes of products you will sell from this point forward. Given the reality that these are difficult times to predict, these comeback expectations should be presented in a series of comeback scenarios. This third step, which has as a foundation the first two steps of the comeback process, requires a wide range of input from both pessimistic and optimistic sources. The fourth step in the comeback process is the organizational analysis.
This involves a total review of all internal processes to define an organization's strengths and weaknesses, both during the recession as well as on the road to recovery and on to growth and prosperity. Certainly, this review must take into consideration the end-to-end global supply chain to include the design of the supply chain and the buy-make-move-store-sell components of the supply chain. These processes must be viewed from the perspective of cost, performance measurement, organizational structure, technology, customer requirements, use of outsourcing and the entire range of your present performances versus your future requirements.
To perform this level of analysis well, a formal process of benchmarking and best practices should be employed. From this benchmarking and best practices review, a list of potential upgrades will become apparent. To further add to this list, leadership should encourage their organizations to proactively develop innovations that will help facilitate recovery and return to growth and prosperity. Then for each potential upgrade, a cost-benefit analysis should be developed and an implementation duration established.
The output of the organizational analysis should be a tabulation of the recorded upgrades and for each upgrade, the scope, benefits, implementation cost, implementation schedule, and the projected savings. The fifth and final step in the Great Comeback process is the culmination of the prior four steps: Defining a comeback plan is part art and part science. Certainly, there are process upgrades that should be done from a capacity perspective; others from a capacity perspective.
Still others, from a working capital, or a competitive positioning perspective. However, there will be certain upgrades that are not as clear, but are thought to be required to achieve growth and prosperity. Sorting through these upgrades and preparing a clear, focused plan for recovery, growth and return to prosperity is where the art comes in.
This is very challenging, as often the lead times for implementation of the upgrades are such that you must begin the upgrades while your organization has yet to begin to feel the uplift of the recovery from the recession. This presents leadership a real challenge since being too cautious or too slow as your organization begins to pull out of the recession could prove to be reckless.
Research on prior recessions has shown that companies that are too timid or too late to react often fail to maximize their comeback and creation of value. Therefore, the time is now for you to step up to this challenge with a bold, proactive Great Comeback plan. Once the high-level comeback plan is defined by environmental assessment, competitive intelligence, comeback expectations, organizational analysis, and then actually defining the plan is done, then what you need to do is develop a full series of detailed project plans, expectations, schedules and due dates. This set of project plans will be the fuel for your recovery, growth, and prosperity.
The timing of the company's rejection of the recession funk and the return to investing in the growth of the firm is very important in terms of sharing in the upside of the stock market gain, but it is even more important in terms of gaining long-term sustainable market leadership.
The real winners in the next 2-4 years will be those companies that get the Great Comeback message and act on it. In the third installment in this series in two weeks, I'll present more details on the timing of the Great Comeback and the timeframe of supply chain upgrades. Until then, I wish you much success in your comeback planning. Speak to you again real soon.
