@ Supply Chain Management

As you very well know, Swine flu is in the news and its effect on the supply chains of the world is a foregone conclusion regardless of whether it peters out and dies or it becomes a full blown pandemic. As I’ve said numerous times on this blog, extended multi-country supply chains increase the number of uncertainties that get to act on the length of the supply chain. However, at least from the point of view of the  United States, this is happening next door – which only goes on to show that even shorter supply chains suffer from the same kind of risks.

But I have a very different sort of observation to make. Apparently, if these news reports are to be believed: Panasonic Sends Workers’ Families Home on Flu Risk, Nikkei Says.

Feb. 10 (Bloomberg) — Panasonic Corp. has instructed Japanese workers assigned to parts of Asia, Africa, Eastern Europe and South America to send family members back to Japan because of the risk of outbreaks of new influenza strains, Nikkei English News said, without citing anyone.

The Osaka-based electronics maker has asked workers’ families to return home by the end of September, the report said, adding it was not known how many people were affected by the decision.

Please note the date of the report: February 10th, 2009. Today is April 28th, 2009. Curiously, this was also picked up by CIDRAP (Center for Infectious Disease Research and Policy) here: Panasonic’s pandemic-related move fuels questions, concern.

Michael T. Osterholm, PhD, MPH, director of the University of Minnesota Center for Infectious Disease Research and Policy, publisher of CIDRAP News and the CIDRAP Business Source, said he fielded a number of calls today from people in several business sectors who were worried about the significance of Panasonic’s move. "They wanted to know if this is for real," he said.

Penny Turnbull, PhD, senior director for crisis management and business continuity planning for Marriott International, Inc., said she was surprised and perplexed by Panasonic’s decision, given that there has been no significant change in the number, location, or transmission of avian flu infections in humans. She said the implications for other companies aren’t clear.

"Companies might wonder on what intelligence Panasonic based this decision, but I find it hard to believe that any will be following suit in the near future, though they might start monitoring the news more closely for some time to come," said Turnbull, who is also an editorial board member of the CIDRAP Business Source.

Osterholm said heightened concern over the Panasonic news is a reminder that a company’s decisions can have far-reaching unintended consequences and that in the early days a pandemic is likely to generate hysteria, not factual or science-based information.

He also said that Panasonic’s decision isn’t a breaking news story, because the company reportedly issued the new policy in December. "If this was a real pandemic concern, companies would have minutes to hours, not weeks to months, to prepare for this," he said.

Panasonic’s decision to repatriate the families of employees in some of its locations raises more questions about the company’s motives or if its risk assessment is seriously flawed, Osterholm added. "This tells me how ill prepared some of these companies are," he said.

As you might very well note from the above, Panasonic’s move didn’t happen in a vacuum – there were other firms that observed it and decided that the factors on the ground didn’t warrant such a move. Perhaps, Panasonic was only lucky or perhaps their risk assessment model led them in an altogether different direction – that is what I’d like to know about. But one thing is for certain, if you had been waiting for CNN, you’re dealing with a wholly different set of scenarios.

Keep safe!!

As you might know, I am an IBMer now by way of acquisition of my erstwhile firm ILOG. In addition to reading The Supply-Based Advantage: How to Link Suppliers to Your Organization’s Corporate Strategy which was discussed in the last guest post – Supply Based Management in Tough Times, I am also reading All Customers Are Irrational: Understanding What They Think, What They Feel, and What Keeps Them Coming Back by William J. Cusick.

One of the opening insights that Bill presents in this book is the idea of Brand Promise. He talks about Brand Promise in the following way:

To be clear, when I say, "brand promise," I’m not asking about positioning, which is more a strategic discussion, wherein you map out the market position of you competitors and contemplate how you can carve out a position or spot in the market and in your propect’s mind. Determining your positioning is a key discussion in your company, but it is more cut and dried; it is purely a business consideration. Brand promise moves to a different, more emotional level. Positioning is really about pure strategy Brand promise is about an appeal to the customer.

and further,

We feel it’s absolutely critical to understand what it is that this particular company is promising to prospective and existing customers. What, in other words, are the customers’ expectation whey "buy" (whatever that might mean). What is the distinctive value proposition? Some might even describe it as the company’s soul. Surely a company that generates billions of dollars in revenues each year begins all work and initiatives from a common, consistent, and unique brand promise – a raison d’etre, if you will – right?

So I’ve been through the IBM orientation and having worked for IBM (my client) as a consultant before that – take a look at one of the latest ads that I’m sure that you’ve seen on the TV every now and then:

Then tell me, What is the Brand Promise here?

My answer:

Read the rest of this entry »

We’re in the show your cards stage of the shell game that we’ve been playing for a while – the greater part of more than a decade. It feels like we’ve been played but that’s only because we’re not really the players – we’re the pawns in a high stakes game.

Consider one of the players – China. Now, note how the headlines changed in a matter of weeks:

Jan 8, 2009 – U.S. debt is losing its appeal in China

At first glance, the declining Chinese appetite for U.S. debt -apparent in a series of hints from Chinese policy makers over the past two weeks, with official statistics due for release in the next few days – comes at an inopportune time. On Tuesday, the U.S.president-elect, Barack Obama, said Americans should get used to the prospect of "trillion-dollar deficits for years to come" as he seeks to finance an $800 billion economic stimulus package.

Feb 11, 2009 – China to stick with US bonds

Mr Luo, speaking at the Global Association of Risk Management’s 10th Annual Risk Management Convention, said:

For what it’s worth – Exactly what I predicted in previous posts… Geithner Unveils New Plan To Bail Out US Banks

House Democrats have been pushing for stronger lending conditions-as well a crackdown on executive pay-in the wake of criticism of former Treasury Secretary Henry Paulson’s administration of the TARP. That was seen as both too lenient on and too generous to financial firms, which critics allege were hoarding capital instead of lending it.

The new Treasury plan will “require banks to show how government assistance will expand lending and how they intend to use taxpayer dollars, which is similar in the tone and design of the House Democrat’s proposal.

Heh! The new Treasury plan will “require banks to show how government assistance will expand lending and how they intend to use taxpayer dollars… In other words, lend or bust. Now there will be two sets of bankers – one set who are cozying up with the government to swallow up the other set. But both are pondering, “If I’m forced to lend, I’ll go bust anyway. So what’s the point?”

To which any government official would reply, “And your point being?”

And that is how you and I become serfs. No matter what the actual creditworthiness of the recipient, the government intends to appropriate your future work to make bets on how the future should look like by saving house values, saving retirements, saving any and everything they see fit to save. Why do we allow them to do it? Well, that’s because we’re fully vested in our house value, in our retirement – in the way the world ought to be i.e for our benefit. Now, that is the root of entitlement.

In plain speak – no matter how “uninspired” your financial actions may have been, the government has got your back. And they intend to ride it for all that it’s worth to them. And then some.

For us in the supply chain, it means the following – The government is going to be a player in your supply chain (You don’t really see any graphic on any supply chain concept diagram that is titled – Govt., change it – now your task is how to coopt the government into your plans before the competition does) be it in the financial supply chain by guaranteeing letters of credit, imposing restrictions (either outright or through penalties) on types of materials or manufacturing processes you can use for the good of the planet/future etc, if it comes to protectionism then securing your channels through the layers of protectionism will be an imperative, price and wage controls to secure full employment, losing the investment in manufacturing assets overseas because of the governmental actions there – that would be called nationalization… the list is endless. It centers on the dynamics of currying governmental favor and how effective your firm or your industry’s organization is in making your voice heard.

But isn’t this just paranoia? Absolutely, completely true paranoia. If this is the way the government intends to play in finance, I am only looking ahead to see how it might play in the auto world for example (I hope we haven’t forgotten about that sorry set yet) because that is really where the template of governmental action in the supply chain will get its opening credits. We shall have to see.

Tags: The Bank Bailout, Directing the banks, Entitlements, The effect of government in the Supply Chain

A glimmer of sense starts filtering through… Banks still tightening loan standards

The article suggests

Many banks have made it harder for borrowers to obtain all kinds of loans over the last three months despite a $700 billion federal bailout program and a flurry of other bold moves to stem the worst financial crisis to hit the country since the 1930s.

yet brimming within you had to have detected the hardly restrained despair over the perceived double cross – It reads, “They (banks) take our money and refuse to lend it out…”. Expect the nonsense to get a whole lot more shrill just as sense was beginning to take hold.

This vindicates the following: Sense is as delicate as nonsense is compelling.

As bankers return to the norm (after that last mania has died), the question that remains really is what is the norm for a politician? Draw that norm and you have made some distance in setting the expectation of how bad this mess is going to get. There is a plethora of danged and damned danged stuff out there that form the repertoire of a seasoned interventionist (You might appreciate that the US government, and every other government in the world as well, is in full interventionist mode) – Price controls, wage controls, nationalization, funky money, funkier money, generic stimulus, targeted stimulus, “Dang, I hope this works” stimulus, quotas, protectionism, tariffs, Buy American – (What is American anymore?), unemployment, adjusted unemployment, severely one time adjusted unemployment, “we just stopped counting” – unemployment, war, senseless wars, senseless wars made sensible… In short, there is nothing sensible when it comes to politicians or the government.

So what does that mean to the supply chain at large. I can think of two possible impacts immediately.

1. Increased pace (perhaps tending to the frenetic) of lobbying efforts – When the government enters the playing field (and as of now, it is hovering and peddling influence at the periphery) as I expect that it will, firms up and down the supply chain will have to expend considerable lobbying influence to either keep the playing field as is or towards favorable terms. Naturally, the firms with deep pockets will benefits immensely from this whereas the smaller players in the supply chain (be it services such as 3PLs or carriers or actual suppliers of raw materials or intermediary products) will lose out unless they get their collective pockets together. Of course, frantic money encircling government begets not efficiency of investment (perish the thought) but beggars scandal – expectation of many money scandals is now firmly on my screen.

2. Stimuli – Can anyone put forth the reasoning behind the stimulus? Why stimulate anything in the first place and why does the government have to do the stimulating? The second part first – only the government has the “magical ability” to create something out of nothing – in other words, when the government says, “Let there be money.” Poof!! “And there was money.” Let

Something I ponder about as I survey the mess:

Strategic planning does not deal with future decisions. It deals with the futurity of present decisions. Decisions exist only in the present. The question that faces the strategic decision-maker is not what his organization should do tomorrow. It is,

I was just re-reading my earlier post on What is Credit? when this piece of managerial brilliance crossed my desk – GMAC Adds Loans as U.S. Injects $6 Billion to Aid GM. Who else but GM could one depend on to provide a consistent farce?

There is little doubt in my mind that this company ought to go bankrupt (or be forced into bankruptcy – the management needs to be replaced. And the unions – well, forcing this company into bankruptcy might very well mean the loss of a great deal of jobs and the brinkmanship that they have played in this farce wouldn’t be more well recompensed) because it doesn’t seem that its management has a clue about what brought them to the brink in the first place or maybe even left them dangling over a precipice. What brought them to the brink in the first place is the dearth of, nay, absence of profit that the firm chalked up these past years – prudent firms grow profit and trim costs. GM on the other hand does the reverse. What pushed them over the edge is the fact that the a great number of that elusive group called the US consumer is strapped for cash, not credit worthy by reason of being neck deep in debt.

Therefore, GM has decided that its flagging fortunes will be rescued thus:

GMAC will now lend to vehicle buyers with credit scores of 621 or higher, compared with a previous standard of at least 700, according to a company statement. The higher threshold had excluded about 42 percent of U.S. consumers.
The company said it won’t finance