Gaining a Supply Chain Edge

The Great Comeback: Part 1

The Worst of the Great Recession Has Passed: Are YOU Ready?

The Great Comeback A welcome return to a former higher rank, popularity, position or prosperity that is even larger in size, power, degree or intensity.

-- A certainty for which you must be prepared
Origin: 2009, Jim Tompkins


Typically, I do not write multi-part blog posts as I prefer to be more spontaneous in my writing. But, the events leading up to April, 2009, and occurring today are so HUGE that I feel as if I must use every weapon in my arsenal to get the message out.

So, over the next three weeks, I will be unleashing a 10-part series here that will hopefully inform you and motivate you to act. The headline and the definition above say it all: This has been "The Great Recession" and depending upon your industry sector, "The Great Comeback" is either starting now or will start soon. It really does all depend on your industry sector -- your sector has either bottomed or will be bottoming soon and it is paramount that you begin planning NOW for The Great Comeback.

Let me throw a little recession history and recovery thinking your way. Recessions occur when there is a prolonged drop in spending. Spending declines beget production declines, which beget unemployment, which begets further spending declines. Spending declines occur due to high interest rates (think 1980s) and business failures (think dot-com bust of 2000). The current recession began with housing prices being inflated and people buying homes that they could not afford, leading to foreclosures and tightening of home lending criteria, which then created a huge drop in home construction and related jobs and spending (Phase 1). This housing problem became a financial sector problem, which resulted in a further loss of consumer confidence that resulted in further spending declines (Phase 2). Phase 1 was a Recession. Phase 2 is The Great Recession.

So, the Phase 1 Recession created the Phase 2 Great Recession in the fall of 2008. The first quarter of 2009 was worse than the fourth quarter of 2008, but things will improve in the second quarter of 2009.

Due to today's global supply chains of global companies, the global economy is connected and integrated. Therefore, the efficiency and effectiveness of these global supply chains led to a rapid, responsive global downturn, and consequently, The Great Recession has been both deep and global. World trade (imports and exports) have shrunk, and this recessionary cycle driven by spending declines will continue through 2009.

I believe that investment is still lagging, and therefore capital spending will continue to be weak and unemployment will continue to rise throughout 2009. However, consumer confidence will return in the second half of 2009 within the food, cosmetics, beverage, pharmaceuticals and inexpensive consumer electronics sectors. Lower priced goods will gain demand, strength and momentum before higher priced goods do so. On the downside, housing and automotive industries will continue to suffer throughout 2009. But be ready because these markets will stabilize in 2009 and return to growth in 2010.

So what about The Great Comeback? It will begin with the return of consumer confidence and then will be followed by investor confidence. The comeback will occur first in North America, then Asia, and then Europe. But it's important to understand that the "bottom" for some industries will be the second quarter of 2009; for others it will be the third and fourth quarters of 2009; and still for others it will come about in 2010.

It is clear to me that corporate profits will rebound in late 2009, resulting in business investment hitting "bottom" in the first quarter of 2010. When the recessionary "bottom" is hit, the global marketplace will respond quickly just as the global decline occurred quickly. Over the last 50 years, the recovery lead time from bottom to recovery has been 6 to 16 months. But due to the increased connectivity, integration and responsiveness of our global supply chains, I believe that in The Great Comeback, recovery will occur from the bottom within 8 months, growth will come about in 12 months, and the real comeback will emerge within 16 months.

Hence, it is crucial to develop The Great Comeback Plan for your company that will assure readiness for not only recovery, but also a gain in market share, growth and prosperity. And for many organizations (depending upon the lead times of the process upgrades that are required to support the Comeback) there is an urgent need to begin in-depth planning NOW or it will be too late. I am confident that this recovery involves a window of opportunity that must be hit by each company in each sector in order to survive.

To help you along the path to The Great Comeback, I will unleash the next three parts of this series within the next week. I am very interested to know what you think and what questions you may have as you plan for your own Great Comeback.

GO!GO!GO!

Jim

TAGS: Supply Chain
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