Archive for August, 2012

Can recessions represent opportunity Part I of II ?

Wednesday, August 8th, 2012

Today’s post is by Mike Figueroa, Account Manager at SafeSourcing.

Do you know what FedEx, Hewlett-Packard, Disney, Hyatt, MTV, and CNN all have in common? They were all started during periods of economic recession.
Uncertainty in the business landscape can fuel tremendous opportunity. How many corporations are trying to scale down excess inventory and are willing to sell at drastic discount to do it? How many dislocated and highly skilled professionals are willing to accept historically low salaries to find reliable work? How many consumers have drastically changed their purchasing behaviors?

To the adaptive go the spoils?

That last scenario is the one that frightens retail businesses the most.

After all, who wants to abandon their core business and cash cows? That’s a scary proposition, when traditionally most firms would prefer low risk/low reward stability over higher risk innovative adaptability (Consumers have the same career mindset, as you’ll see below). However, as our highly dynamic economic and technological environment has repetitively proven, no one can afford not to adapt if they want to survive. Some corporations and new startups have discovered that trying to convince consumers to spend the way they used to (and can no longer afford to) is a losing game, and that the real opportunity is to discover and acquire a share of the new ways consumers are spending. For instance, Target has rebranded itself as a discount designer product store. For others though, it may be more prudent to create spin-off discount brands to serve that market, but keep that brand insulated from your premium brand to prevent any negative ass
ociations of discount retail from your primary brand. Opportunity is not exclusive to consumer spending though, it exists also in the new ways consumers are seeking revenue.

Counterintuitive to what most of us might think about recession-era job seekers, is that there has been a shift in emphasis away from the pursuit of higher pay for potential job seekers. 

Due to the insecurity the population is feeling however, it should come as no surprise that security is the consistent priority, replacing pay scale as the most sought after characteristic of employment. A 2010 poll by the Associated Press showed 64% of workers under 25 years of age are unhappy with their jobs, and less than half of all Americans are happy with their jobs. What does this mean to employers? There exists opportunity in recruiting talent, and they are looking more for stability than they are looking for large salaries. Of course, savings in production are being pursued just as fervently as savings in acquisition, but everyone can benefit from these savings all along the supply chain.

Please check back tomorrow to read part II of Michaels informative post.

If you’d like more information about SafeSourcing, please contact a SafeSourcing customer services representative.

We look forward to and appreciate your comments.

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Are you wining your supply chain battles?

Thursday, August 2nd, 2012

It could be said that much of today’s thought relative to supply chain management is rooted in the history of human expansion. In fact there are many examples of how expansion which many times happened or was planned in conjunction with the conquest of others was either successful or failed based on the ability to keep supplies flowing to the expansionists or armies associated with them. If you are a growing retailer with your own expansion plans some careful thought as to your supply chain and the necessary contingencies may be your most important activity

According to Wikipedia in military science, maintaining one’s supply lines while disrupting those of the enemy is a crucial—some would say the most crucial—element of military strategy, since an armed force without resources and transportation is defenseless.

Obviously this takes us back to our opening question; are you winning the supply chain battle? What would you do today if one or more of your current suppliers were to go out of business or enter bankruptcy (a real possibility)? Have you made plans as to how your company would replace the goods or services provided by these suppliers?

An example that might resonate happened during 2009 during an H1N1 (swine flu) outbreak in the United States. Drug store chains during that time  became the first stop for much of the population in search surgical masks or other anti bacterial supplies. Many retailers ran out of stock and many suppliers were unable to meet the increased demand. Most retailers were not sure where else to turn for additional supply based on the increased demand. The trickle down effect of this could have gone on an on well beyond the impact of surgical masks or anti bacterial product shortages.
Is winning the supply chain battle important? You bet it is! Do you have the right tools in place? Where would you look for additional sources of supply? Where would your customers look if you don’t solve that problem?

If you’d like help answering this question, please contact a SafeSourcing customer services representative.

We appreciate and look forward to your comments.

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I’m tired of hearing the same old thing out of many CEO’s aren’t you?

Wednesday, August 1st, 2012

Does this sound like something you have heard before or in fact heard year after year? “XYZ Company announces the following personnel cuts due to the soft economy, increased competitive pressure or a decline in sales.”

This author has spoken to this subject a number of times. Earlier today I was speaking to a friend that sits one level away from his CEO. During the discussion he said, “I am so tired of hearing companies announce headcount reduction as their strategy for improving company results. What ever happened to creativity? A lot of times, the best ideas work their way up through an organization and result in a high level executive getting credit for a lower level individuals creative thinking. In fact, it happens all of the time. Headcount reduction creates a long term negative impact on companies as they lose these creative thinkers to a headcount reduction strategy. I sometimes think there must be an MBA course titled; “How to announce head count reduction as your strategy for tough economic times or poor results 101”.

The reality is if we want to put a creative procurement spin on this COGS or Cost of Goods Sold has not dropped dramatically if at all in any retail segment during the last ten years. It is the largest line item on any Retailers P&L including payroll and benefits which are expense items. There are also a number of expense items that are not included in COGS that could be addressed and have a resulting impact on results almost immediately beyond payroll reduction.

In three recent posts Bankruptcy Sucks Part I, Part II and Part III,  I discussed the financial impact of just assigning a reasonably small percentage of cost of goods to e-negotiation tools in order to compress pricing. And yes the fact is there may be switching related costs associated with this. What is more difficult, laying off 10% of your work force or switching suppliers?

Business is not same old same old. Successful enterprises require creative thinkers that evolve the business on an almost daily basis. If the first place you review during these economic times is your payroll or benefits costs as an opportunity to turn things around, there are better alternatives.

We look forward to and appreciate your comments.

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