Undoubtedly, these are difficult times. Reaction is quite predictable. The economist who is debating whether this is technically a recession or a depression. Politicians who argue the group of people deserve their greatest mercy. Population moves from rejection to anger. This article, rather than focusing too much on the technical sense of the economic situation, or on the general psychology, or political inner-band-aid handouts, we will focus on the way out of the people’s business dilemma. In doing so, we will try to look at both the simple out two by two matrixes and the superficial three-dart-diagram traditionally used by management consultants everywhere.
Tough times call for different styles of leadership. Why? -We will quote one of the teachers to us dear to illustrate the point. Captain Rewari, our navigation instructor at the Merchant Navy Field Officer used to remind us before when every marine training session is quiet and in the open ocean wide with little traffic – even your girl friend and my wife (both untrained Navigator) can navigate Super tanks with very little training. But I’m preparing you for a period where your skills will be thoroughly tested – for example in betraying each other narrow waters of the Strait of Malacca in a tropical squall with density shipments of nearly 100 ships per square mile, and possibly a plow the sea that chases you.
To find the way forward, we must first briefly examine the dilemmas that companies currently face – large and small. On the one hand, in the absence of credit, all but most importantly demand dries up. Suddenly, even heavily-heeled watching their dollars (and Yen, Yuan, Euro, Pound and Rupee) so they are caught without liquidity. But they are in the minority. Most are already facing a liquidity crisis – as debt is called, expenditures, overtimes and benefits are canceled, and in some cases, jobs are lost. On the other hand the customer becomes even more demanding. While margins are slipping, economies of scale and scope erode overcapacity of production capacity and growing inventory and an unsafe and resigning workforce. And this is only the first wave of tsunami finance. Some analysts expect the second wave to be much more destructive.
So what has got supply chain management to do with all this? We will come to that in a minute if we observe what we believe is the way out of today’s dilemma. But first let’s see how the supply chain ‘mutates’ due to the current economic climate. While a detailed examination of this topic postponed our article in the next issue of this magazine – we outlined 4 Prime DNA mutations in the Global supply chain that could be the result of the GFC (Global financial crisis):
1. withstand the monetary flow: From the three currents forming the supply chain, perhaps the monetary flow is the most important. The saying goes of money is the life blood of the trade. As the liquidity crisis bites, Banks stop respecting each other’s letters of credit international trade grinds to a halt. The stock cargo piles at the possible locations, Service delivery is greatly disrupted and all supply chains are set up planning and scheduling is out of the window. While the current legal turmoil will take years to filter, we suspect this will leave a permanent mark on Global supply chains. Similar to the blood vessels are permanently confined from the high cholesterol diet – this will expose the future of the Global Supply chain frequently to systemic seizure threats, lower trade speeds and possibly increase transactional costs. We will discuss this full implication in the detailed article.
2. Continual Invention Price: The price started creeping down again after the explosion. In fact, with overcapacity in global production capabilities in most industries, stockpiling accumulates, and these marginal cost price trends are not easy to ascertain what a ‘good’ price pays – even for short-term contracts, let alone for long-term contracts. We believe this continual price discovery will accentuate the GFC turns into a GEC (global economic crisis) and plays out over time. The regime’s stable prices will only appear on the other side of the crisis, perhaps after the time has elapsed. While some consumers (like Brazilian Mexicans, Argentines, in, Indonesia) are used for swirling prices, most other consumers will take time to adjust their consumption behavior. Meanwhile, the Director of procurement, purchasing managers and buying office faces a selfless task similar to choosing a number from a hat and praying that their organization will make the money it buys the price. We will discuss the full implications of the price discovery dilemma facing supply chain actors in the detailed article.
3. Potential market failure: This is a condition where despite considerable demand and supply, the market is not unclear any price for various reasons, including different expectations on both sides, and, political interference. It is thought that one of the main reasons for food shortages during the great depression is market failure rather than drought or lack of capacity growth. Add to these instances where the supply chains ‘partners’ are reluctant to trade with each other because of doubts about each other’s solvency (the recent case that comes to mind in this case is the US chain of retailers of Circuit City who recently filed for bankruptcy because of this reason). The implications for supply chain managers are many fold. Multi-source strategy will stand one vendor from the last two decades on their head. Supply chain risk management takes on an entirely new dimension. Business strategies begin to dictate horizontal and vertical integration at the same time – both difficult to implement in times of credit crunch. We will explore the impact in more detailed articles.
4. only-in-case supply chains: the last three decades have been constantly marching towards Just-in-time (JIT). Even in countries where conditions are very different from Japan, experts – academics, consultants and headquarters-admonish managers to avoid just in case (JIC) and move toward JIT, looks like the time has come for JIC to get his revenge. Why? -with the increasing uncertainty about your supplier, your banker, your shippers, your logistics service providers, and many others wheels in the supply mechanism allowing for material to arrive at your door in a pre-coordinated manner, you will want to keep the buffer to one of them defaulting their appointments at any time. So that means all the network supply planning, scheduling and coordination will be futile forward. No, it will just be much more complex. The human dimension will once again be important, but this time in addition to the best network supply tool planning.
While the above look like sketches are really scenes of doom and gloom, it is really no longer different from the equivalent of super-tanker-loaded tanker maneuvers through the Straits of Malacca when compared to the conditions we have enjoyed over the past decade or so.
Human ingenuity, will and persistence have always prevailed over most obstacles can be overcome. Compared to some more extrinsic shocks like tsunamis or droughts, the current situation is somewhat more docile and ‘self-created’. This brings us to the key question – what is the way forward?
We believe that are two things that mark the way out of the dilemma facing today’s companies – leadership and supply chains therefore the title of this article. Why so? Even in the best of times of leadership it is seen as the key to distinguishing between factors over the performance of companies and their counterparts less effectively. All research (eg Sobel, Collins etc.) shows that in tough times the need for good leadership becomes paramount, if not the only, differentiating factor. The supply chain, on the other hand, has a different role. For the first time in human history end-to-end supply chain service management has been a possibility for 20-30 years. The competition rules have changed forever after that. We are no longer hunting alone. Only those who learn to organize themselves in a co-competitive symbiotic relationship with others will compete effectively in the future. However, the future supply chain will be very different that static, uni-dimensional supply chain in the past. Companies looking for a way out of dilemma will do well to focus on their networking Supply leadership capabilities.
Otto von Bismarck says ‘a truly great man is known for three signs … generosity in design, humanity in execution, and moderation in success’. So, what are some of the key attributes providing leadership network for tough times? We believe the following critical attributes 5 will separate the true network leader of supply from pretenders.
1. difficult to suppress communication: Not surprisingly, on top of our list is the ability to briefly summarize situations, formulate plans and articulate credibly. Whether it is ‘I have a dream’ of Martin Luther King’s speech, or the legendary speech of war from Sir Winston Churchill, it is difficult to call a leader who does not evade difficulty speaking. Language flowers, waffley, hedge bets and chaotic thinking there has been room in this situation. Providing network leaders who cannot summarize the succinct situation for their executive counterparts and their boards, or who cannot articulate a concise credible plan will ultimately be responsible for their fallout throughout the company.
2. The implementation of the discipline: Research by Sobel (Sobel, Robert (1972) The age of these giant corporations: A microeconomic history of American Business, 1914-1970) reveals that only companies that ran a tight ship (eg General Motors under Sloan) out on the other side of the depression in a much better condition that they enter. This is not surprising. It’s hard to talk if it’s not followed by the specified action. As the inevitable obstacle arises in the journey plan towards the goal, the effective supply chain leader must use every persuasive technique in the book to get through the obstacles. Setting up an oiled network of supply planning and control mechanisms (21st century equivalent to the well-known structure of General Motors set up during the great depression) will go a long way towards providing the ability to run tight ship through the storm. Backgrounds that have personally faced serious and triumphant adversities in the past have provided leaders with a container for the character modes necessary for disciplinary execution.
3. Thrive in turmoil: as the credit crisis hits, the market structure is under stress, and the price becomes hairy – the ability to understand, live with and thrive on the chaos will be important. Given the possibility that everybody from America to Zimbabwe may end up in the same basket in the current political climate, the successful experience of leading in a basket case a few decades ago Argentina, Brazil, China, India, Russia etc. is perhaps more valuable now that the experience in the business environment can be predicted straight ahead of the Western world. What is the ability to thrive on mean chaos? It requires the ability to keep those heads up despite the unexpected interruption. Whether it is the delivery of a single customer or a manufacturer of rationalization of traces, or the re-configuration of supply arrangements in accordance with the new market realities – it’s important not to forget the worthy supply of network destinations in the face of chaos.
4. Strategic Mindset: Facing the chaos every day shortens the attention span of people to what extent they lose the ability to formulate strategic goals and go afterwards. We believe that this ability distinguishes the real leaders of others who face chaos in the same environment as them. While it would be impossible to persuade Laxmi Mittal, Li ka Shing, Carlos Slim to take a role in the leadership supply chain within your company, many aspiring newbies will be happy to be available. How do we define a strategic pattern? The ability to simultaneously see multiple points of view and decide how they can all be true and which ones can be used for the purpose. Ability to simultaneously view and understand the situation from different levels of granularity – directly from a helicopter See dungeon view. While this can be taught in business schools, we believe the best practitioners in the art of self-educated strategic thinking.
5. persistence and ingenuity: the best persistence can be explained by paraphrasing Churchill Never give in, never give up in, never, ever, ever, in nothing, big or small, big or small – never give up unless honor criminal and reason.
On the other hand, resources are the properties developed by experience. Economists really believe that resources are limited. (Maybe that’s why some economists once became successful leaders.) True leaders find a way to gather miraculous resources from thin air when it does not appear to be at hand. And they fully use their power, Persuasion and all the other means they have to ‘release’ resources and energy toward the goal. The ability to prospect for diamonds as long as causing landslides is probably the biggest factor that differentiates leaders.
In an academic study of their attributes and causal relationships with successful supply chains, any of the above five attributes described above will fill the book and still become unconvincing. Fortunately, this article aims for practical business leaders concerned with results rather than bullet-proof theses.
Two important questions, though, are still in circulation. First of all why the technical supply of networking skills is not looking in this discussion? We are confident with now that their Ticket entry is not as important as the attributes listed above, their usefulness will erode as new techniques will need to be developed from scratch, and they can be brought in demand.
Second, the leaders of the supply network as born or trained? In other words can you bring him a mediocre player in your organization and spend money on converting training into a true supply network leader for tough times. We believe the answer is no. How about someone with leadership potential? Probably – but there are allegations as good as ours. Another quote from Malcolm Stevenson Forbes may well be summarized appropriately – ‘Ability will never catch up with this request.’
For 25 years Captain Vivek Sood has empowered companies on 5 continents to reach their peak potential – operations, in strategy and in all components of their entire supply chain. In January 2000, it established and managed the Global Supply Networking Group, a high impact Services Company composed of pioneering supply chain and thinking leaders who work only on high impact selected strategy projects with some of the world’s largest companies. Prior to that, Sood was a management consultant with top corporate strategy consultancy Booz Allen & Hamilton. Sydney residents travel 60% of the time worldwide for a single passion – create, configure and formulate effective, safe and sustainable supply chains around the world.
Dynamic, high impact professional and presenter, Sood has a unique ability to shake the status quo and change operations to maximize returns. Work experience includes more than 80 countries on 5 continents, and various clients from fortune 500 companies to some world-renowned brands. It also works with some of the most innovative green technology companies to help create exceptional supply chains from scratch for hundreds of millions of business dollars in as little as 18 months. His work has added a cumulative value of more than 500 M, combining projects in major network infrastructure investment supply decisions, favorable growth driven by the repositioning of global supply chains, supply chain systems, negotiations and other aspects of the global supply chain.