Hello, my name is Jim Tompkins and I am the CEO of Tompkins Associates and Tompkins International. I am pleased to be with you today to present our first 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-specific content of our other 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 all have 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 this first installment of this series I will explain why I am venturing into this topic and why I think you too should be involved in your organization's response to the Great Recession.
In the second installment I will describe The Great Comeback process, in the third I will explain the timing about the Great Comeback and in the fourth, the final installment, I will provide you a conclusion to the series and update you on the how the economy has performed.
Over a year ago, as we all began to anticipate a recession, I began working on my recommended approach to how organizations should handle the recession. I wrote on this subject, I spoke on this subject and in summary what I said was:
1. Maintain your talent
2. Remain focused on your strategy
3. Reduce all other costs as this recession, was going to be very, very difficult
I received very positive feedback on this approach, and in fact I just concluded the nine part series of this podcast on Supply Chain Cost Reduction. Then, last November the questions entered my mind:
1. When will the recession be over?
2. What should companies do to prepare for the end of the recession?
These two questions drove me to create a body of work that I now call The Great Comeback.
Now, before I continue, I must answer a question that is likely on the minds of many of you listening to this podcast. The question is: "I thought Jim Tompkins was a supply chain expert and this podcast was on Global Supply Chain, why is he now doing a series on the economy and why should I listen to Jim Tompkins on the economy when I am getting hit by economic experts' opinions almost every day."
Well, good question. Let me be clear on my qualifications and my objectives:
First, I am not an economist, I am not an expert on the economy and I don't want to be an economist and an expert on the economy. I am very happy being an engineer and an expert on the supply chain.
Second, I am a connected business executive who daily speaks to global business leaders around the world.
Third, I am not contradicting or refuting anything the economic experts are saying, but what I am doing is reading everything available and then rejecting the relevance of macroeconomics and instead looking at the recession, the recovery and the return to prosperity from a much more refined micro view of what is happening and what will be happening.
You see, the experts looking at the macro economy will get it right, because what they are looking at is data which is 2-3 months old and then predicting what is going to happen last week. Kind of like me wanting to make a prediction today about the Pittsburgh Penguins winning the Stanley Cup in 2009 or the L.A. Lakers winning the NBA Championship in 2009. Not really difficult to make those predictions.
The economists will tell us 2-3 months after half of the economy has bottomed and is starting to recover, and the other half has yet to bottom, that we have bottomed. Well this was like them telling us in January 2009 that we began the Recession in October 2008. I mean thank you very much, but we already knew this. We knew the recession had started in October of 2008.
So what I am trying to do here is not trying to be an economist, but rather trying to take all the information that's out there and to boil it down for you so that you can do your job better and you can help your company recover and return to prosperity.
OK, so where to begin?
Well, how about with how we got into this mess in the first place. Recessions result when the recessionary cycle of spending declines, beget production declines. Those production declines result in unemployment. Unemployment results in further spending declines which results in further production declines which results in further unemployment. So we have a recessionary cycle.
The current recession began with housing prices being inflated and people buying homes they just could not afford. This resulted in foreclosures and the tightening of home lending criteria, which then resulted in less homes being bought, which resulted in less homes being built, which resulted in fewer construction jobs, which resulted in less spending, which resulted in lower spending, which resulted in more people being laid off, which meant more foreclosures. So here we have the recessionary cycle around home foreclosures.
This was last early last year and resulted in phase one of the Recession. This then led to the financial sector problem, which resulted in further loss of consumer confidence and even further spending declines. This financial sector problem drove us into Phase 2 of the recession: The Great Recession.
I find a supply chain view of this story very interesting. For the first time ever, has the supply chain played a role in the recessionary cycle? In the fall of 2008, due to the integration and connectivity of the global supply chain, the US economy meltdown was instantaneously felt globally. The US meltdown beget a global meltdown as the recessionary cycle shrunk imports and exports globally as global spending declines fueled the global recession and then the great Global Recession.
So the global supply chain hurt the global economy on the way down, but it will also help as we return to health. In fact, it was the US consumer who led us into this great global recession, and it is the US consumer who will us out of this great global recession. So although unemployment will continue to increase throughout 2009, consumer confidence is returning, spending is increasing and the Great Comeback is beginning.
This return will happen first in North America, then Asia, and lastly in Europe. The bottom for some companies has already happened, for other companies it is a month away and still for others it's still a year away. A key is to understand what you must do to be ready for your organization's recovery and return to prosperity. This will be the topic of our next podcast in two weeks. Speak to you soon.
