@ Supply Chain Management

In an earlier post titled – What is Credit?, a common sense definition of credit was offered:

“There is a strange idea abroad, held by all monetary cranks, that credit is something a banker gives to a man. Credit, on the other hand,is something a man already has. He has it, perhaps, because he already has marketable assets of a greater cash value than the loan for which he is asking. Or he has it because his character and past record have earned it. He brings it into the bank with him. That is why the banker makes him the loan. The banker is not giving him something for nothing. He feels assured of repayment. He is merely exchanging a more liquid form of asset or credit for a less liquid form.”

Henry Hazlitt, Economics in One Lesson.

Of course, this is not what the term means if you were to look it up – you would find a transactional meaning of credit. What I mean is that, credit in practice is the money made available to you by a lender in return for deferred repayment with interest on a fixed schedule. This is the transaction character of the agreement. But embedded in this transaction is an evaluation of the debtor by the creditor as well as the creditor by the debtor.

Now, Credit has a cousin which is Leverage. Now, leverage is an artifact of physics i.e. from Lever. Archimedes said, "Give me a lever long enough and a place to stand and I will move the earth." With a lever, the same effort multiplies the result which is to say that one is exploiting this principle of physics. Fast forward to the present time, we use the notion of leverage similarly in human interactions or transactions. To lever up in this context means to be able to obtain credit to multiply the result of one’s (or a firm’s) efforts. But for a moment, go back to the physical world: you borrow a lever, use the lever and return the lever a little longer in length. Doesn’t happen in the real physical world this way but I suppose that would be a way of making a parallel. In fact, you probably paid some money to the owner of the lever which is about equivalent to adding on to the lever’s length.

Now, housing is an accessible form of leverage for the common man. Say, a new homeowner puts down 0%, 10% or even 20% of the value of the home down – that’s what they’re doing, using leverage. In other words, using 20% of their money to control 100% of the house and whatever increase in the value of the home for as long as they make their mortgage payments. But leverage is neutral with respect to the direction of the change in value of the home. If the value of the home was $100,000 and it increased by 10% in one year, then the homeowner who put down 20% of the value of the house or $20,000 increased his worth by $10,000 (not accounting for the interest payments he would have paid out over that period). That’s a 50% increase. But suppose the value of the home decreased by 10%, then, it’s a $10,000 loss which is a 50% decrease in the amount of money the homeowner had to begin with.

Leverage is great in boom times because it multiplies the positives handsomely but in bust times, it magnifies the losses as well especially if you’re unable to ride it out. Now, what possible bearing does all this have on the field of supply chain management for crying out loud.

It does but only as far as how consumption or demand was being paid for – whose been underwriting our checks for our fancy gizmos. If during the last decade, demand was being paid for out of income, then this trouble would have some impact (not a devastating one for what it’s worth) on the various supply chains of the world. But if the demand was being paid by milking the fruits of leverage (either directly by taking equity out of the home or indirectly by running up debt via credit cards) during the boom time, then the impact on the various supply chains of the world will be dramatic.

So, the appropriate question is for us in the supply chain world is: What is demand going to look like when leverage is contracting or disappearing? Or in other words, what is demand going to look like when there are no assets left to lever against? What happens when the creditworthy character of the populace upon whom everything depends is in question?

Then add this to the mix, Supply Chain Management is a middle-man activity for the most part. When, this space burst onto the scene, we cut out ten middlemen and inserted three of our own along with  a whole host of technological and automated marvels. Being asked to do more with less – a good problem to have but less to do on the whole is a bad problem any which way one cuts it.

But all is not bad – we have on our side the relentless succor of economic experts to help us out of this mess, this predicament. whatever you want to call it. Perhaps, (and I’m stretching to hope here) against every expectation, by the time the fourth stimulus bill would have been passed, things would return to as it where circa 1990. Maybe. By the time the fourth stimulus bill is passed, the populace would be very akin to treating a trillion as nothing more than a billion and congress would have no problem dealing stimulus bills in trillions aka the stimulus bill to cure all earlier stimulii.

My next post should be titled: If economists were running a manufacturing floor? Or something to that effect. My aim is simple, I want to fire the operations manager of my floundering firm and install an economics expert to tell me how to run the place.

It is time to stick your neck out and predict the future. Oh! well, it is time for me to stick my neck out and predict the future of supply chain management. And unfortunately for everyone in this space, it is going to be a dismal one. In short, I’m predicting dark and gloomy times ahead for supply chain management and allied activities. Let’s start with the different constituents:

Supply Chain Software – Bug fixing and maintenance is in your future and not code rewrites from scratch with some fancy new hookups. Unless you plan to dramatically hunt overseas for markets. I am thinking that this space is probably dead for another 3-5 years.

3PLs – A lot of consolidation will happen in this space as smaller and medium firms are pushed to the brink – the larger firms will get to binge in a bit.

4PLs – I think we can safely consign them to the dustbin of history – a bridge too far and a manager of managers is not where this space is headed.

Supply Chain Integrators and Consulting services – I think that the ones that have an overseas presence will stand to make something of the shift that is occurring. As for stateside, they will get leaner and leaner still.

Green Supply Chain – I think you’ll hear a lot of noises, needless calculations and carbon offsets in this space but any growth here is predicated on a robust global economy or rather one would need a green supply chain if there was a real growth in the supply chain to begin with. What if the scope and scale of supply chains themselves decrease? Of course governments are willing and able to tack on numerous regulations to the activity of global commerce but global commerce at what level – at the 2007 peak or the 20xx trough. Further, why would consumers be willing to accept the increased costs that producers will pass on to them in an environment in which consumption itself is being curtailed? Besides the green supply chain is a malady of the developed world and there is every indication that the growing economies of the world would discard it outright.

Supply Chain Prognosticators (such as moi) – Twiddle dum and Twiddle dee. I suppose I’ll find something else to blow hot air about.

On a more serious note, there is likely going to be a lot of work to do overseas but just not here. Don’ t take my word for it but growth is what higher and more complex abstractions of Supply Chain Management products and services manage, not flat lining or worse yet contraction. Some time ago, the refrain used to be, “Go West, young man, go west.” Well, I think we’ve come to the point where it begins to ring true yet again. And don’t let a trifle such as the pacific ocean get in the way.

On a still more serious note, such reading of the entrails demands extraordinary evidence. Actually, it doesn’t. It just demands ordinary evidence of which I have one very important data point. Better yet, it is available for free (Actually not, you just paid for it already) : U.S. Household Deleveraging and Future Consumption Growth

It’s a short piece. It’s timely and absolutely worth reading.

Some highlights,

Where we came from,

U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007.

Where we are at now,

Since the start of the U.S. recession in December 2007, household leverage has declined. It currently stands at about 130% of disposable income.

I’ll let that number sink in a bit. And I’ll tell you why – if you felt like the world was ending, that was in reality based on a mere 3% reduction of leverage. In other words, we received something like a pin prick. Further, there is a hammer the size of the Empire state building coming straight at you.

A parallel can be found in the Japanese experience (but treat it as illustrative and not indicative of anything)

After Japan’s bubbles burst, private nonfinancial firms undertook a massive deleveraging, reducing their collective debt-to-GDP ratio from 125% in 1991 to 95% in 2001. By reducing spending on investment, the firms changed from being net borrowers to net savers. If U.S. households were to undertake a similar deleveraging, their collective debt-to-income ratio would need to drop to around 100% by year-end 2018, returning to the level that prevailed in 2002.

I suppose the comparison to Japanese household would have been skewed because of their natural saving habits. Who knows? If a similar scenario were to occur stateside and a reduction in household leverage of about 30% were to take place or say even 15%, what effect would that have on the supply chain industry? That is my question, to you and to myself. To me, it seems that all this shaking and quivering has taken place before the real earthquake hits.

In their conclusion of the likely scenario going forward,

Assuming an effective nominal interest rate on existing household debt of 7%, a future nominal growth rate of disposable income of 5%, and that 80% of future saving is used for debt repayment, the household saving rate would need to rise from around 4% currently to 10% by the end of 2018. A rise in the saving rate of this magnitude would subtract about three-fourths of a percentage point from annual consumption growth each year, relative to a baseline scenario in which the saving rate did not change. An even larger subtraction from consumption growth would occur relative to a baseline in which the saving rate were declining, as occurred prior to 2005. In either case, the subtraction from consumption growth would act as a near-term drag on overall economic activity, slowing the pace of recovery from recession.

By the way, everything in this post can be condensed into one sentence – “Leverage is gone. And it is not coming back for a long time.” I think you will find that this statement will be a sort of touchstone for many in these times.

“Go west, young man, go west.” Go where the growth is going to be.

No, it’s stagflation. Perhaps, not. Whatever it is, it is indignation to me. Not because we find ourselves in this pickle. It’s that all the bright minds in the world cannot tell whether it is pickle or jelly. Or something else. Well, whatever it is, it has rendered very many individuals rather immobile. And that’s all one can say about it.

Personally, I find little sense in talking about Demand or Supply and therefore Supply/Demand Chain Management when everything is just downright frozen, moving neither here nor there. Of course, where you might be, you might be seeing activity galore but from where I am it is quieter than the Western front. And there is a foreboding in it even though perhaps in hindsight, one might ask oneself, what the fuss was all about? There is, I think, in ignorance and obliviousness a kind of remedy that one would be warned to do well without but in curiosity a persistent malady of wrong turns and guesstimates that exacts a terrible price on the mind. In so far as much, you find yourself tired, buffeted and tossed, let me hope that is because of the latter and not the former.

First off, the oft quoted standard definitions (from Investopedia):

Inflation:

.a sustained increase in the general level of prices for goods and services.

Deflation:

.the general level of prices is falling. This is the opposite of inflation.

Hyperinflation:

.unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation’s monetary system.

Stagflation:

.the combination of high unemployment and economic stagnation with inflation.

But what about the causes? For brevity’s sake, I’ll delve into inflation and deflation as the other two are shades of inflation.

Two mainstream theories about the cause of inflation:

Demand-Pull Inflation

This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.

Cost-Push Inflation

When companies’ costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

And from the Austrians,

The idea here is that,

inflation is an increase in the money supply, rising prices are merely consequences.

And further,

This interpretation of inflation implies that inflation is always a distinct action taken by the central government or its central bank, which permits or allows an increase in the money supply. In addition to state-induced monetary expansion, the Austrian School also maintains that the effects of increasing the money supply are magnified by credit expansion, as a result of the fractional-reserve banking system employed in most economic and financial systems in the world.

On the other hand, what causes deflation?

The following causes are referred to depending on the school of thought that provide  them.

From Wikipedia,

In mainstream economics, deflation may be caused by a combination of the supply and demand for goods and the supply and demand for money, specifically the supply of money going down and the supply of goods going up.

From a monetarist perspective deflation is caused primarily by a reduction in the velocity of money and/or the amount of money supply per person.

And from the Austrians,

Growth Deflation

If supplies of certain goods in the economy increase due, for example, to increased saving and investment in additional capital goods or to technological progress, as is the usual case in the historical market economy, then, all other things equal, their producers will be induced by competition to offer more units of their product for a dollar. [Assuming a fixed supply of dollars].

Cash-building Deflation

[Cash] hoarding is nothing but an increase in what is called the “cash-balance” demand for money, that is, the average amount of money that the individual desires to keep on hand over a period of time.

Bank Credit Deflation

. a decline in the supply of money that results from a collapse or contraction of fractional-reserve banks that are called upon by their depositors en masse to redeem their notes and demand deposits in cash during financial crises.

Confiscatory Deflation

This form of deflation involves an outright confiscation of people’s cash balances by the political and bureaucratic elites.

So what’s happening right now? Staking an answer to this question with some timeframes is key to deciding how to orient oneself during this period. If you chose inflation (or its cousins), then you’re banking on some sort of a recovery in the next two or three quarters. Another open question here is whether such a recovery would be accompanied by an employment recovery. If you chose deflation, then you’re thinking that the situation might meander along for another quarter or so before worsening significantly as the unemployment situation worsens. The situation is really no different for firms either – the more astute managers will have a plan for any of the economic scenarios outlined above. The problem is that these scenarios unfold over multiples of quarters as we search out the way forward with a good dose of personal biases thrown in.

As for me, I’m biased towards deflation. Deflation has its vicious cycle that plays out in the following manner:

Falling Demand -> Falling prices -> Debt defaults -> Bankruptcies -> Layoffs and Wage Reductions which leads to further fall in demand and so on. Meanwhile, the signs of a second wave of destruction are beginning to emerge and I hope to write up a post on that. Also, as  I was traveling, I had some time to think about the rationale of the stimulus and how the debate and execution of economic stimulus parallels experiences in the manufacturing world. The idea here is that government stimulus is quite like push-based manufacturing unlike pull-based manufacturing.

At long last, I am posting the review of this book The Supply-Based advantage by Stephen Rogers about which the author had contributed a summary some time ago. Actually, this is the second time I am writing the review because unfortunately, the first one was deleted from my hard drive (pesky, pesky little thing).

When reading this book, the first thing that jumped out at me is that the book is really divided into two parts – the first three chapters are a sort of conceptual and definitional gambit. The fourth chapter is a short introduction into what the blueprint for a supply-based advantage should look like and the rest of the chapters in the book are a study in erecting the different elements of a successful supply based strategy illuminated through the metaphor of a house i.e. foundation, walls, roof, utilities. you get the rough picture.

In the first part of the book, Steve introduces the concepts of competitive advantage, value, complexity and risk (rapid change not being a concept but a reality). It is a good idea to keep those concepts in mind (but because they’re in some way detached from the metaphor of constructing a good house, they float somewhere in the ether and you need to suffuse your reading with the implicit relation to these concepts).

There are some interesting questions asked in the first part of the book (that which I pored over in my previous review but will only touch on briefly now):

1. Why do smaller companies understand better how to structure a good relationship with suppliers and larger companies (and even smaller companies that grow large) forget this? Steve’s answer takes the form that in most small businesses, owners are usually spending their own money and therefore seek to get the most value of their spending. I think that is a good observation. I would only add that a small business entrepreneur is risking everything with the idea that there is something about a particular niche or segment that is uniquely appreciated by him and he proposes to fill that gap with the expectation of reward. Therefore, I infer, that if deriving supply advantages are part of that gap equation, then the owner will set about creating some measure of defensible value that will add to his overall advantage. Now, as the company grows, others come in that do not share the owner’s appreciation of the gap or of the value – the further the owners are pushed from this basic equation, the less of an understanding the organization now possesses of the situation. However, those who add to the firm’s headcount bring along their own ideas of what is really important to the equation or their understanding of the equation – sometimes better and sometimes not.

2. The importance of timing. This important idea is illustrated through the example of P&G before the American Civil War and how the owners of the firm seized the import of securing the supply of a key component before the outbreak of war that served them well through and after the war. In fact, the claim goes that the additional profits generated from this strategic move funded their future operations and growth. This is a lesson of life – cut your losers short before they consume you but press your winners home before they are undone by others.

As for the second part of the book, there is a litany of plans, activities and processes that can be marshaled towards building up (or conversely breaking down) supply-based advantages. These chapters deal with the nitty-gritty of structuring these activities and processes for success. Also, what I found helpful in the reading is the well distributed “Practitioner’s take” in grey boxes that provide reflections every step of the way which by itself renders these chapters within the framework of “Here’s a good way to structure things” – “Oh! by the way, here’s how I found it”. Now of course, your straddle upon this framework is going to be different but you have a reference point in these appraisals of salient supplier planning and engagement processes.

Lastly, a shortcoming of the book is the use of an overarching metaphor (of constructing a home) which on the surface seemed very useful but as one gets through the chapters, the metaphor finds little depth beyond the first paragraph of a chapter. Metaphors are tricky to begin with but a good metaphor not only permeates but also reaches deep into a subject and allows a reader to connect beyond the prose so that long after the particulars have escaped one’s grasp, the metaphor resonates and its particulars return on a superficial recounting.

Overall, I think its a worthwhile addition to your library as a reference if you work in the supply management field.

P.S: I am on vacation till mid-June and that will explain the lack of updates. Not that I have explained the lack of updates this month but I am just saying. I have  reason this time. Wish you all well!!

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!!

I attended the Supply Chain Resilience for Competitive Advantage seminar by Professor Yossi Sheffi today. Some notes from that webinar:

1. Examples of disruptions that companies have faced and a firm’s reaction to them:
   • Disruption of the electronic supply Chain illustrated through the March 2000 Philips fire and the effect that it had on Nokia and Ericsson supply chains. More information about this story can be found here in one of my previous posts: Creating the Optimal Supply Chain – Review (Flexibility in the face of Disaster : Managing the risk of supply chain disruption).
   • Another case, UPF Thompson filed for bankruptcy and its effect on Land Rover because UPF was a sole supplier of chassis for Land Rover Discovery. Recounted here: Land Rover calls for legal change.
   • February 1997, The fire which disrupted the sole supply of proportional valves to Toyota (12 hours for all Toyota plants to come to a halt because of JIT model). All the other suppliers of Toyota raced against time to manufacture proportional valves for Toyota – two weeks to bring all Toyota plants back to round the clock operation. A good review of the disruption, recovery and participants can be found in this article: Exploring Knowledge Emergence: From chaos to organizational knowledge (Pg 9-10).
   • September 1999, Taiwan Earthquake disruption of semiconductor equipment manufacturers.
   • August 2001 dialysis filter deaths problem at Baxter
   • February 2001, Foot and Mouth disease in the UK. 6 million animals were killed but more importantly the UK govt. closed down tourism to UK countryside, the financial impact of which was much higher than the initial problem.
2. Why are some companies more resilient than others?
   • Culture
     • Continuous communication (informed employees, environment, status)
     • Distributed power – which is driving decision making to a lower level within the organization.
     • Passion for work and the mission
     • Deference to expertise
     • Conditioning for disruption
   • Culture Change
     • Safety
     • Quality
     • Many others (smoking, drinking-and-driving)
3. What kind of resiliency should one aim for in procurement?
   • If you have a single supplier – work towards a deeper supplier relationship, it has to be an investment.
   • If you want a shallow relationship – you need multiplier suppliers.
4. The development of and investment in Supply Chain resilience is very hard to justify because like insurance, it isn’t needed until is needed.

The part that Professor Sheffi didn’t get into was Competitive Advantage – perhaps because of the numerous disruptions in the webinar itself – Ahem!!. However, it is a barely hidden point, it can be inferred readily. But I don’t think that it is competitive advantage here but relative advantage and there is a crucial difference. Why is it relative advantage and not competitive advantage?

If you look at one of the examples above – Ericsson vs Nokia with respect to the Philips fire, better relationships with suppliers can be had easily if not within an organization context but at least in a process context (procurement process, if you’d like). There is no real barrier to copying such advantages and so it doesn’t rise to the level of a true competitive advantage. However, organizational culture is a different beast which can be a source of competitive advantage simply because the disruption example was in the context of procurement here. What if the disruption was in the context of assembly or transportation or even financing? Properly, organizational culture and its effect on supply chain resilience as well as competitive positioning is a good indicator of which firms will survive the inevitable hit just as national culture is a good indication of resilience in the face of adversity.

Disruption of the supply chain, as was presented in the webinar, can be cast into a quadrant based on High-Low Impact and High-Low probability, Similarly Relative Advantage can be cast into a quadrant against High-Low disruption of the supply chain. You may even go to the extent of scenario planning and training and that is better than not engaging in it but you have no way of knowing which part of the organization is going to be the leading edge as it encounters new adversity/disruption i.e. the first point of contact with the initial rumbling of a disruption which if not contained/dampened/prepared for will snowball into a wide-scale disruption. In this case, you need to fall back on the only real insurance policy there is – a team of talent properly tasked, engaged, authorized and networked.

One symptom of such organizations should be easy to identify and I must thank Professor Sheffi for highlighting it, in individuals – a character trait, in organizations – a cultural trait and in nations – a traditional trait. “Those who succeed are praised for their success but those who fail are not reprimanded for it. Failure becomes a point of reexamination and reflection.”

Now, take a step back – take a wide eyed view of events that transpire in your life, firm and nations. Resilience? Or are you being taken with the current?

More quickly that it began, the Banking crisis is over screams the headline from this Time article. You might as well believe it now that the experts journalists have declared it over:

But, the great banking crisis of 2008 is over. It began last September 15 when Lehman Brothers filed for bankruptcy and bottomed when Citigroup (C) traded below $1 last month. Most analysts believe that mortgage-backed securities which included packages of subprime home loans failed when mortgage default rates went up and housing prices raced down. That is only partially true. Banks made a tremendous series of ill-advised loans to private equity firms, hedge funds, commercial real estate holders, and the average man with a credit card balance which he cannot pay.

Yes, those are pretty much all the actors in this saga. However, what the article fails to deliver is why despite identifying these actors, it doesn’t explain how the crisis has indeed passed i.e. it is high on events and actors but low on rationale – it reminds me of cherry picking the evidence. For example,

Wells Fargo (WFC) indicated that it made about $3 billion in the first quarter of the year and declared its buyout of the deeply troubled Wachovia to be a success. Wells Fargo (WFC) said that the low cost of money from the government combined with a surging demand for mortgages was all the medicine that it required.

So where is this surging demand for mortgages coming from? Mortgage applications surge 30% and that’s just for the week of March 20. But,

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2% to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5% of all applications.

Now, putting just these two data points together, one would hazard a guess that a stabilization of home prices is not what this points to. What about housing inventory and also the prices of homes given the current conditions? You can get the data from the National Association of Realtors Statistics: Existing Home Sales and Sales prices of Existing Homes.

The inventory (in terms of months of supply of existing homes) is unchanged from 1 year ago and as we enter the season for home sales, we shall have to see how it goes.

However, what should be noted from the two tables above is that for virtually unchanged supply of homes, the average home prices have decreased 15.5% nationally. So what belies this sort of optimism? But Ian MacIntyre is talking about the crisis and not whether the residential real estate is about to improve. But what if this is but a temporary floor which soon gives way – wouldn’t the banks be back in the doghouse then? On a side note, perhaps, the best indicator of the fact (some time in the future) that the housing market has stabilized will be an onslaught of “How to get rich through foreclosures” schemes. I’m not trying to be funny here but honey to be had does bring bees.

So what does this have to do with the supply chain for crying out loud? Take a look at the consumer confidence which is at the lowest level since it was instituted as a measure.

The road to recovery looks like a long and winding one.