What to Do About the Global Economy? Follow the Big 7

[Jim Tompkins]

How many articles or blogs have you read about the global economy? I would guess I have read over 100. But I do not really know since most of the "global economy" material I start to read, I set it down after reading less than 10%.

Why? Because they all are the same -- they tell me the problem, but do not tell me what to do about it. Many of these articles tell me what the government should or shouldn't do. But, hello, I am a CEO, and my clients are CEOs and executives -- not senators or congressmen. So, OK, I get it. The credit markets are still impossible. Our financial infrastructure is in worse shape than our road infrastructure. We really are in a recession! And business in 2009 is going to be very, very difficult. I get it! But what do I do? What do you do?

As executives in business today, both CEOs of Fortune 500 companies and directors of supply chain operations, what do you do to survive in 2009? Well let me take a step back on this and then move forward. My 35 years in business, while participating and watching everyone from the best to the really crappy, has lead me to two key conclusions:

1. Strategy precedes action plans and budgets.

2. "Cut, Cut, Cut" is not a strategy.

So, to survive 2009 what you need to do is create a strategic plan and then create an action plan and budget that support the strategic plan. Then, with an intelligent view of risk mitigation and contingency plans, execute with accountability. So, again, to survive, you need the "BIG 7":

1. Strategic Plan
2. Action Plan
3. Budget
4. Risk Mitigation
5. Contingency Plans
6. Execution
7. Accountability

This blog is not going to explain how to do these Big 7, as that is not the point. The point is: Yes, times are difficult, but do not check your brain at the gate and fly off into the sky with no pilot. The process that you need to pursue in a difficult economy, in a normal economy, and in a great economy is the same.

When the economy is good, do you go out and just start hiring people? No; then why, when the economy is bad do you think you should just go out and start firing people? I know, I can read the blog comments now about "conserving capital" and "cutting costs." Cool, I am all for those activities, given those activities fall within the context of your strategic plan and the resulting action plan and budgets. But conserving capital and cutting costs may just as well be the worst advice ever, depending upon the thrust of the strategic plan.

In fact, let me share with you some of the client interactions I am having right now to help you understand how the Big 7 are the key to getting us through 2009:

1. A retail client has a bag of cash. They lost money last year. One of their competitors had an even worse year. 2009 is a great time to buy the competition, and during the next 7 months, integrate the supply chains of the two firms to result in a huge competitive advantage leading into next holiday season.

2. A traditional North American manufacturing firm saw their profits disappear in 2008 as their competition outsourced manufacturing to China. The firm realizes their core competency is not manufacturing, but brand and design. 2009 is a great time to close three plants, outsource production, transform their supply chain, and focus on the skills that have made them successful for the last 25 years.

3. A pharmaceutical firm has fought the generic firms for many years and now realizes they can not win. 2009 is a great year to redirect their efforts by entering the generic drug business and redefining their supply chain accordingly.

4. A multinational food and beverage firm had an OK year in 2008 but now realizes that their regional organizational structure is a major impediment to creating global supply chain excellence. They are beginning work to end regionalization and truly become a global company.

5. A chemical firm has only seen small impacts from the bad economy and sees 2009 as an excellent time to spend capital and consolidate their distribution organization to enhance customer satisfaction and reduce costs.

You can see in every case the strategy is driving the action plans and budget.

I suggest you stop reading the macro "Economy To Be Bad In 2009." Instead, develop the Big 7, and that will result in you coming out of 2009 stronger and more prepared for future success.

Tompkins Associates

[Abogle]

I like all but number two

it seems the ousourcing strategy in this case is a cop out. would it not have been a true strategy for them to invest in their manufacturing technology and make the necessary improvements rather than give up and cede it

[Dr Stan]

Originally Posted by Abogle

I like all but number two

it seems the ousourcing strategy in this case is a cop out. would it not have been a true strategy for them to invest in their manufacturing technology and make the necessary improvements rather than give up and cede it

You are absolutely correct. Outsourcing is nothing but an easy out for those who do not want to manage an organization, but simply want to play with the financials.

[wesdavidson]

This is a follow on to Dr Stan,
You guys are right! the management cop-out of closing plants and outsourcing is a crock.
Management USUALLY is not good at manufacturing! Most managers and salesmen usually wouldn't know a wagon wheel from a flywheel. And most have no idea what the company is good at.
For many years companies like Sears and Snap-on have tried to find an alternative to "Vise Grip" pliers. Petersen Manufacturing beat them soundly for decades! 3 reasons, (1) consistent predictable good product, (2) Honest price - logical price in regards to (1), (3) made in USA.
They have never been the cheapest, sharpest, stongest, best made, or best finished. - But they were sledge-hammer simple, consistent, affordable, and made from good materials, by good poeple, and did their job. When I broke a pair I knew that it was my fault and never had reason to blame the tool.
Every government project, every union, every industry knew that they could buy and use and abuse "vise grip" and feel good about it. They wore them out and bought more.
A monkey could have sold them by the crate. At any reasonable price. And it would have taken a herd of baboons to screw up the production.
Now it seems that for the past few years perhaps they have been sold by monkeys, certainly now they are managed by monkeys.
NOW the Nebraska plant has been closed, outsourced to china. We will never be able to trust "vise Grip" again.
The *****S who now are going to try to sell us chinese pliers will tell us they are vise grips, but there will be no reason to buy that brand, JUST ANOTHER PIECE OF IMPORTED JUNK!
SO- if you want to be just another undifferentiated piece of JUNK - OUTSOURCE.
Otherwise ask the guys what they need to do their job, and give it to them. SELL HONEST QUALITY.
-Nuff said.

[wesdavidson]

I must apologise for using the word i-d-i-o-t-s. "Racketeers" or "criminals" would be more appropriate, they having stolen or damaged the livelihoods of not only the production folks but the users as well.

[Jim Tompkins]

To say that outsourcing is bad is as wrong as saying outsourcing is good. Outsourcing is neither good nor bad.

Outsourcing is great in the right circumstances and terrible when done for the wrong reasons. The key reason a firm should or should not outsource depends upon their core competencies. If a firm’s core competency is manufacturing, then it would be a major mistake to outsource manufacturing.

However, if manufacturing is not a core competency, then it would be a mistake not to outsource it. So, I see it as not so much about financial issues, but about making sure an organization focuses on their core competencies.