@ Supply Chain Management

Adrian Gonzales ruminates on his eleven year stint at Arc Advisory in the post: The Accidental Analyst: My 11 years at ARC. It’s an interesting read about the progress of an analyst. Adrian talks about what has changed and what hasn’t changed in this arena:

[The dotcom era]. era served as a catalyst for companies to “think differently” about how they could leverage Internet technologies to transform their supply chain and logistics processes.

and,

Data quality remains a huge problem in the industry, and it’s only getting worse. Garbage still flows in, and garbage still flows out.

Companies still want their 3PLs to be more proactive, and 3PLs still want their customers to view them as partners instead of suppliers.

Everyone talks about collaboration, but when times get tough, as it did last year, it’s every company for itself.

Forecasts are always wrong.

It’s about people, processes, and technologies, but not necessarily in that order.

Data quality is never going to improve because data means different things to different people and so also the classification of what is garbage and what is not. The Internet is one big garbage dump but that’s no reason not to dive in – there’s a pony in there somewhere. Look at it this way, we’re in the stage of global search aka Google, Bing and what have you. Next, will come local search – simply because people will become attuned to the notion that they understand data better than some bot running on a google server in Sunnyvale, CA. And so on.

Forecasts are always wrong just as such statements that imply the same. Forecasts are mostly wrong because it is about the future. I’ve talked about that on my blog several times – there are two extremas to making forecasts – very detailed ones and a few milestones here and there. In my opinion, what is critical is not forecasting and its accuracy but execution and its implied capability. I’d focus more on short run forecasting with rapidly adaptable capability than the converse. When the converse is the case, people lament about the fact that “Forecasts are always wrong.” Yes, but that need not trouble anyone nor detain them.

Let me leave you with a sanguine observation about bubbles. The last bubble cannot be reflated because of the knowledge everyone has about it, especially about its bursting and the fact that a majority of the people are still vested in the last bubble and have yet to realize that it is not coming back. That implies that the mania of housing is over for a good while and that asset class has to go back to being a stodgy preserver of wealth (whatever little there is of it).

The consequence is that without an asset class so commonly found and the method of extracting value from it as the asset grew to bubble proportions, consumption cannot be financed at the previous pace. That has many implications for those who create goods for consumption and those who supply it (and transport it).

So all hail to the next bubble – contrary to the notion that the masters of our fate are pulling the strings that bind us; it is only that we’re so poor string pullers that we end up stringing ourselves up nice and dandy.

An article summarizing the keynote speech of Glen Hodgson, senior vice-president, and chief economist at The Conference Board of Canada is available here: Supply chain management ‘critical to success’ going forward, says Conference Board of Canada’s chief economist.

From the article

Technically, he said, while economic growth has returned in the US, reaching 5.7 % in the last quarter, Hodgson said there has yet been no strong recovery in private investment and consumer consumption.

The US will pay a high price for the heavy government investment that has taken place to boost the economy, he said.

and,

“At the peak of the housing bust in the US, one third of mortgages were subprime, ‘NINJA’ mortgages, i.e. no-income, no-job mortgages. The one piece of the US financial workout that’s not yet been settled is the housing market. There’s no true stability,” said Hodgson.

While there is still a significant overstock of housing inventory in the US, the supply is down to six months, and housing starts are predicted to rise but not at a great rate, he said.

About a year ago, the supply of homes was closer to nine months and so it is good news that some of that excess has been worked off. However, that in itself doesn’t mean much because homes are not yet affordable relative to income. Furthermore, unemployment still persists.

Going forward, Glen Hodgson predicts

“US consumers make up 70% of US GDP, and 15 % of the worlds, so a drop in consumer confidence is significant. China will eventually take this over as Chinese consumers move from saving 42 % of their income and gain access to credit. Americans are actually saving again-about 5 % of their actual paycheck,” said Hodgson, who predicted a ‘temperate recovery and consumption’ for the US, which is now borrowing about 1.5 billion dollars annually, a hole that represents about 10 % of GDP.

“They will have to have a serious debate about taxation,” he said.

The US will grow at about 2.8 % this year but the balance of ‘too much government’ is wrong, and represents what Hodgson called a ‘ U-shaped recovery’. He said the US won’t experience sustainable growth before 2012.

So that’s the take on the current situation as well as general forecast going forward. But why is Supply Chain Management critical to success going forward? The reasons don’t change even if the circumstances may:

In five to fifteen years, the rise of India and China, an aging demographic within the industrial world, and integrative trade and global value chains will be additional factors to deal with.

Supply chain management becomes ‘critical to success’, said Hodgson, who noted that firms having an international strategy “built around integrative trade will be in better shape.”

This is precious little to chew on for supply chain practitioners. However, I think we have known about this shift that will take place which is a fundamental driver of economic growth – a consumption hungry population (and a huge one to boot) that is getting to binge on credit.

This has all the makings of a disaster and from the looks of it Toyota Corp has the deer in the headlights look. This has all the makings of a PR disaster minus the PR.

The driver of a Toyota Prius who called 911 on Monday to report his accelerator was stuck finally got the car stopped after about 20 minutes with the help of the California Highway Patrol, officers said.

"He was reaching speeds over 90 miles per hour," CHP Officer Larry Landeros said of the driver, James Sikes.
A Toyota spokesman said Monday evening that the company, which has recalled millions of vehicles because of reports of unintended acceleration, was sending a representative to investigate the cause of the incident.

Here’s the video of the story:

I think the situation is reaching the point of breaking and if Toyota designers cannot find the root cause quickly and/or implement a safe workaround until creating a final fix – It does look like Toyota’s reputation notwithstanding TPS is about to careen off a cliff.

But the company was unsure whether Sikes took his car into a Toyota dealer to comply with the recall, Lyons said.

Why? The driver may not have but the company is unsure?