Supply Chain Resolution 2011
Sunday, January 16, 2011 at 10:58PM As we did last year, we would like to share our business perspective for the coming year and what it means from a supply chain standpoint.
From a macro-economic standpoint, we see the slow steady growth experienced in 2010 to continue. Our demand plans should not be overly risky or overly conservative. It is a good time to be moderate. We are keeping an eye on the following potential issues that could minimally dampen the pace of recovery or, in the worst case, cause another recession:
Unemployment in the US is still high at around 9%. There are indications that it has flattened out. Reports from month to month show decreases and increases. Things are slowly getting better. Unemployment seems chronic for older workers and it is also tough for recent college graduates. Business is still tough for search firms.
Foreclosures are quite high. This is the second shoe of the recession that many have been expecting to fall for the past three years. It just has not happened. These high rate are due to a combination of the mortgage crisis and the subsequent high unemployment levels. There are too many properties where owners have negative equity and payments they cannot afford. They default on their mortgages or their taxes. The inventory of foreclosed properties is so high they are depressing the entire housing market and related industries. If your business is housing related, your already depressed business could become even more dismal. You need to pay special attention to developments in this arena.
Governmental problems may be the nastiest of the lot. The problems of countries in the EU like Greece and Ireland have been prominent in the news. The problem of states and municipalities in the US is less well publicized but equally risky. There are serious concerns about large states like Illinois and California. Will they be able to pay their bills? Will they be able to honor the pensions of their employees and retirees? There are municipalities that are in equally dire straits.
Oil Prices have been creeping up in the past year. The growth has been slow and steady unlike the bubble experienced in 2008. We believe this trend will continue through 2011 and needs to be factored into budgets and budget revisions.
All of the above lead us to believe that we have recovered but at a new level that is somewhat lesser economically from the go-go years of earlier this century. This has become to be known as the New Normal. There can be all kinds of debates if this is really true and whether the US will return to 2006 levels or if have become more like a European country like the UK or France. No matter how this matter is debated, businesses have already adapted to the New Normal whether they admit to it explicitly or not. This is precisely why business results and stock prices have returned. Businesses have adapted to the New Normal and not staffed back to the pre-recession levels.
Businesses will only add jobs are they need too. Employees, while perhaps weary of added tasks and longer hours, are still happy to be employed and will continue to work hard especially as there is nowhere else to go.
We also believe in this New Normal. We have exported too many manufacturing jobs. Our economy is now adjusting to that reality. We most likely will not return to the levels of consumption and low prices that we had pre-recession.
So, what is the prognosis for 2011. Our call, much the same as last year, is for cautious optimism. In January of 2010, we had claimed stabilization and looked for modest growth. The economy did modestly grow. This year, we expect that modest growth to continue. The aforementioned issues will, at best, continue to hamper growth and recovery… at worst, these issues could bring about another recession.
A few questions for consideration:
- How do you see 2011 from the perspective of your business? Is the glass half-full or half-empty?
- What is your greatest hope?
- What is your biggest fear?
- Do you agree with the four issues (Unemployment, Foreclosures, Insolvent Governments, and Oil Prices)? Is there anything we missed?
Your input will be appreciated.
Reader Comments (2)
Eye opening article on unemployment and the housing crisis.
http://finance.yahoo.com/real-estate/article/111848/the-eight-states-running-out-of-homebuyers?mod=realestate-buy
Mark
Very Nice Blog