The 2013 Supply Chain Challenge

We would like to wish our clients and friends a most happy, healthy, and prosperous 2013!

The US and World economies continue to creep forward.  No one is satisfied with the pace of recovery.  The Great Recession began four years ago and no one can claim we have recovered to the pre-recession glory days of "irrational exuberance."   We are, as we at CR Supply Chain have emphasized from the beginning, in a New Normal.  We have been in it long enough that it is just the plain old normal now.

People are working harder than ever.  Folks in corporate positions are putting in long hours, often doing a job and half or two jobs given that most companies are still operating with considerably less staff.  People in hourly jobs with little or no benefits, work two and sometimes three jobs just to support themselves.  

Even in this New Normal, things do not stay static.  We have a country more polarized by politics than anytime in the past 40-50 years.  Auto sales are slumping simply by virtue that almost all makers are offering rebates or 0% financing (click here to read our recent blog on this).  Yet, unemployment is slowly coming down.  The best news is that housing marking is beginning to pick-up.  While people are keeping their cars longer and driving less miles per year than ever, there is a lot of pent-up demand for housing.  

There was an article posted today, January 2nd, in the "It's the Economy" section of The New York Times Magazine.  The article, What's It Gonna Be, 2013?, addressed the same kinds of issue that we are attempting here albeit on a more macro-scale.  The author, Adam Davidson, provided this overall summary of his article:  

Deep thoughts this week:

1. Consumption is back.

2. But many buying habits are changing.

3. Regardless, the habits of the U.S. middle class are becoming less important.

People are buying but because of the ways our lives have changed our buying patterns and habits have changed.  Davidson contends, rightfully so, that we are buying more local and not necessarily treking to the big box stores (though these big box stores are more ubiquitous than ever).  Adamson, talks about CVS and Walgreen's that are or have popped up everywhere.  These chains are no longer just pharmacies but rather the modern equivalent of corner stores.  They are the convenience store aimed to make our harried lives easier when we only need to buy a few things.

Our buying habits are changing more than just on location and size of store.  Since our free time is more precious than ever, we are buying more goods based convenience and willing to pay a bit more for that convenience.   Even the environmentally concious youth are driving up the sales of more expensive pod coffee variants, simply for the convenience... dunnage be damned.

Lastly, sadly, the middle class has been decimated in this country.  It is just a fact.  The concept of retirement is more of a pipe dream for most Americans.  This contributes heavilly to people only being able to buy a few things.  Bottom line our buying habits and patterns  will continue to change.

So, what does this mean for our Supply Chains?  Are we able to keep up with and maybe even ahead of these changes?  

At CR Supply Chain, we believe that we have to improve our planning processes.  We have to master the Sales and Operations Planning (S&OP) process.  Too many companies are still struggling with this process.  Let's face it, S&OP is a complex business process.  The S&OP promised land is indeed attractive.  The promises are what makes us implement S&OP.  But when S&OP is not implemented properly, it is very much like being lost in the wilderness for forty years. 

Our Supply Chain perscription:

1. If your S&OP process is lost in the wilderness, this is the time to re-vitalize it and get it right.  Your company will certainly benefit from this.
   
   
2. If your S&OP is stable, improve it.
   -  Make sure it is backed up by sound data management.
   -  Reduce variation in the demand plan via shortening the supply chains and reducing SKUs
   -  Look to leverage the power of your ERP by centralizing planning even more.

As always, we are ready to help.  Our S&OP audit can provide a more detailed assessment and perscription than briefly outlined here.  Give us a call, we can and will help.

Look for more blog postings on these issues in the next couple of weeks.

Again Happy New Year to one and all.

The CR Supply Chain Team