Twas The Night Before Hallowe'en, And All Through The House . . .

"Quickly, Igor, the vise," hissed Dr. Frankenstein.  "We have many costs to squeeze."

In initiatives worthy of the well-intentioned doctor - either the original or the Mel Brooks version - many companies are seizing on the economic downturn as a device to wring extreme price concessions out of vendors, suppliers, and service providers.

These moves may provide momentary satisfaction, and the transient approval of superiors, but the joy could fade rapidly, like the aftermath of the sugar rush of a bagful of Hallowe'en candy.  Those briefly-satisfied superiors will soon want to know what you've done for them lately.  And, relationships forged under duress may turn into monsters when our economy discovers whatever the new "normal" is.  Consider again Dr. Frankenstein's monster, barely functional in controlled circumstances and a destructive force of nature under stress. 

The long-term consequences of forcing business partners into low-to-no margin deals that they'll take "just to hang on to the business" might turn out to be deadly in a world of competitive supply chains.  When your partners can no longer afford to invest in technology and innovation, your ability to deliver superior solutions to your downstream customers becomes impaired.

Ironically, not only will that put your customer relationships at risk, your weakened supplier or service provider might not have the resources it takes to grow with the inevitably-coming economic recovery.  That would undermine your competitive position in the good times we're all waiting to see.

So, why do companies engage in such destructive behaviors?  Are they knee-jerk responses to their customers' imperatives?  Are they simply taking advantage of weaker supply chain partners?  Can they not see beyond the challenges of the moment?  Or, do they just not know there's a better way?

What do you think?  Let us know.

Powering The Economy - Supply Chain Logistics?

Before you LOL, let's consider an egregious misconception.  Say "logistics" and many people immediately think of low-wage entry-level jobs - forklift drivers, order pickers, and the like.  Conventional wisdom considers these less than attractive for economic development, preferring the aura and glitter of high-tech and/or information technology enterprises over the mundane world of distribution centers.  Conventional wisdom might be wrong . . . again.

Here's the deal in my town (and the surrounding area).  Logistics employment accounts for over 14% of all private sector jobs, a potent force in itself.  But, the low-wage label is a base canard.

True, entry-level forklift drivers make less than bank presidents, and beginning order pickers don't earn on the same scale as surgeons.  But, thanks to research by Bill LaFayette, PhD ([email protected]), the Columbus Chamber of Commerce's resident economist and prognosticator, we now know:

• Logistics entry-level positions pay higher, on average - by more than 5% - than the average for entry-level jobs in all industry sectors in our area, and
• The average wage for all logistics positions is higher than the all-industry average
• For jobs with a degree requirement, logistics positions command a more-than-20% pay premium

Clearly, those perceived low-wage jobs bring several higher-wage positions with them into the employment mix - engineers, managers, planners, IT support, and so on.  And, the entry-level people don't stay on the bottom rung of the ladder; they make more as their skills improve and their responsibilities increase.  Equally clearly, a strong logistics and supply chain core in the local economy doesn't drag down economic performance.  Instead, we are lifting it up.

Maybe what's true in Central Ohio isn't equally the case everywhere.  I'm willing to bet, though, that it's true in more cases than we might at first think.  So, rock on, supply chain professionals; we just might be a stimulus package all by ourselves.

I'm predicting that we've not heard the last about our industry's economic clout.  What do you think?

   

A Persistent Gag Reflex Returns

A few weeks ago, I read a disturbing article in a respected business publication.  It boldly stated that tough economic times demand pulling out all stops in Customer Service, even at the expense of personal and family commitments.  The implication was that extra effort applied to all customers and prospects would create competitive differentiation.

Hey, I've got news.  I know a guy who sells insurance of all types, as well as investment instruments.  I guarantee he spends more time, effort, and creativity on customers like Alex (A-Rod) Rodriguez and Dwayne (The Rock) Johnson that he does on some weasel out shopping to save ten dollars on his auto policy premium.

This translates, I think, into lessons for B2B business relationships.  And may raise some questions.  For example, why isn't exemplary customer service (albeit stratified and customized to the situation) a minimum requirement in any economic environment?  Or, how much will a client or customer respect and value someone who can't keep work and life priorities straight?  And, do you really want a relationship with a customer who doesn't respect and value your total person?

Beyond that, at the individual level, going beyond the "extra mile" (to what, a mile and a half?) for every customer is a shortcut to burn-out and breakdown.  It is at the organizational level, too, and the breakdowns can be costly, even catastrophic.

What do you think?  Is working harder, not smarter, the answer?  (My bias may be showing.)  Is redefining customer categories and custom-crafting appropriate relationships a better way, at both individual and organizational levels?  Is more effort on the low-priority prospects robbing you of time and energy for valuable collaboration with high-potential customers?

 

What's That Circling Overhead?

My wife and I were out recently, looking at houses on behalf of our daughter.  We found - not surprisingly in the current market - a charmer.  Everything was right - the size, the lot and landscaping, the features, the extras, the quality, the view.

It wasn't until leaving that I happened to glance upward, quite by chance.  Perched on the ridgeline and befouling the roof sat not one, but five, turkey vultures.  Very impressive, and not in a good way.  A block away, another half-dozen of the buzzards circled slowly.  I hoped they'd found a deer; it would take something substantial to feed that crowd.

Was this an omen, a harbinger of certain doom at an uncertain time?  Had the house been built on hallowed ground?  Who knows?

What I took away from the experience, aside from the sure knowledge that it was not a place for a family with small dogs and/or little children, was that companies that understand that their futures lie in successful business relationships - especially those in the supply chain arena - need to be on the lookout for sign and omens.

That may mean that we've continually got to be looking beyond the superficial and the obvious, that we've always got to be looking deeply into what makes our business relationships work  - and contemplating what might jeopardize them.

It might be too late when the buzzards have already taken up residence.

Cashews And Peanuts

A recent issue of The Costco Connection, discussing the evolution of house brands, cited packaging and efficiency issues.  A prime example was the design of a "square" jar for cashews that increased pallet capacity by 50%.  That, in turn, saved 600 truckloads a year in cashews alone.  600 truckloads isn't peanuts, even for Costco.

Their liquid detergent bottle design increased pallet capacity by 33%, with proportionate transportation savings – and improved consumer utility.  Full disclosure: they’re doing something similar with gallon milk containers, but I’ve yet to figure out how to make the first pour go into the glass and not all over the counter.

These cases led me to two takeaways.  One is that “green” initiatives don’t all have to be high-concept, multi-million dollar investments with decades-long payback periods.  We are surrounded by simple opportunities that are the right thing for the environment, for business, and for customers – provided that we are willing to simplify and focus our visions.

The other is that these kinds of supply chain improvements ought to be what’s coming out of better relationships  and collaborative problem-solving with suppliers who are able to think in terms of the downstream customer, and the ultimate consumer.  I don’t know that to totally be the case with Costco, but I suspect it is, and other companies have derived similar benefits from close and progressive business relationships.

When the supplier is able to apply parallel solutions for other customers, the benefits become part of a significant ripple effect with positive consequences all up and down the supply chain.  Powerful stuff.

What has your experience been?  Do you have to drive all the improvements, or do your business partners?  Or, do you develop them together?  If together, how do you either limit or promote their application outside of your specific relationships?