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Outcomes Purspective event: Take cover or attack?
In 1962, before he became world famous, Cassius Clay went down for the first time in his boxing career. He recovered and won the fight. Although being in a small personal crisis he adapted fast, took cover, realized it wouldn’t blow over and started to attack a few rounds later.
Nowadays, in 2009, we’re facing a different kind of crisis. It’s global, it’s economic, and it’s hitting hard.
“Take cover or attack ?” That was the topic of the Purspective event, 22nd January 2009.
(Presentation downloads)
The event addressed topics as risk management, provided an insight in the financial sector, and gave a practical example of handling purchasing in the automotive industry.
Searching the internet on last years hot topic will result in 640.000 hits on Supplier Relation Management. Doing the same exercise, using financial crisis as search string will provide you over 60 million possible sources of information, where as limiting it to financial crisis in combination with suppliers will still be good for over 3 million hits. This leaves no doubt about what is keeping the world of business awake.
A small poll learned us that none of the guest present expected a positive cycle in 2009, 80% was positive on recovery in 2010, and 20% expected it no sooner than 2011.
Onno Cleere (Marsh Risk Consulting)) stated the financial crisis that this is not a totally new phenomenon. We’ve had a situation like this in 2001 -2003. Slower spreading, with less impact, indeed, but there are similarities. Lesson learned from that period is still valid today. In the end it’s all about supply chain performance and shareholder value. Making sure that your supply chain is robust and lean, is key in his opinion. Organizing your own company and your supply chain can prevent you from the reversed bullwhip effect. A disturbance in your supply chain can have an enlarged effect on your business. A loss of € “X” at suppliers side can result in € “X5” in your own business result.
The answer on how to act is captured in one word: Resilience. Resilience is the ability to recover from a shock or disturbance. Positioning your suppliers and qualifying the impact of disturbances in your supply chain are the least things to be done. Next step is making a business recovery plan. What products first ? Where to re-root?
We are critical when it comes to our own processes and risks, but when it comes to our suppliers, we hardly know how the covered these topics. How’s that, for taking a risk ?!
When it comes to risk in specific, transferring risk in to your supply chain sounds appealing, and is a short term solution. However, looking further ahead, mitigate the risk is preferred. It’s not easy, but nobody said this was going to be a walk in the park.
Siep Wijsenbeek (NIBC) enriched the understanding of the financial market and it’s contribution to the crisis at hand. The financial world slipped in to a crisis long before the rest of the world did. From that point of view they are ahead. There are signals that banks are recovering, and trust is slowly being regained. The financial market had a head start of 1,5 years. So expectations are that the world economy will follow and recover too, but the gap of 1,5 year will remain. Knowing this, it’s wise to look closer at the financial market and learn from the things they already learned the hard way. There are early warning signals, that can help identifying ‘losers’. Complex structures, no clear focus, very fast growth in the last years and distraction by big strategic processes are definitely not a plus. Add short term focus, bad transparency and an aggressive profit focused culture to that and you have the profile of companies that will most likely have and cause trouble. A winners profile on the other hand contains flexibility, timing, transparency, clear focus, controlled organic growth in the last years, the ability to adapt and loyal customers and suppliers.
Marco Knuist (ArvinMeritor) took the audience through a very practical example from the automotive industry. In theory we all know that long term relations with our suppliers are beneficial. However in a crisis like this, when things become more practical, the focus tends to become more short term. Relations are being build or kept, but only to a certain level. The most important thing is survival. Long term strategy and relations are of no value, when you’re not there in the long run. There will be an enormous shake out in the industry. Up to 1/3 of all suppliers might disappear, and supplier base consolidation is needed. But there are opportunities too. Will it be survival of the meanest, or the fittest? Sometimes you have to play hard, and of course a company has to be fit, and in good shape. But besides that most likely it will be survival of the smartest !
Several workshops on a financial health check on suppliers, multi disciplinary teams internal and external (Mercuri international) and last but not least costs, and the importance of knowing cost break down in your industry and from your suppliers, completed the day.
Risk and cost never were of such high importance to the business as they are at present times. The unfortunate conclusion however was that we are short on knowledge and skills on both. Problems are here, opportunities are here and new ones will arise. Don’t wait for the crisis to blow over but (re-)act!
Cassius Clay knew how to take cover and how to protect himself. He was prepared, well trained and fit, and therefore able to take a few on the chin. Besides that he was lean, agile and fast. He knew his opponents, the circumstances, and tried to minimize the risks. He had a plan, a strategy. Being well prepared, in shape and thinking ahead made him sportsman of the century…. The greatest! Time will tell which organisations are going to be winners, and which will go KO. Want to sit down on the sideline and enjoy the show? Or are you ready for the fight of the century, are you ready to rumble?