The Economy: Big Picture

In the last month, we’ve participated in at least six economic forecast presentations or discussions with experts (economic, banking, investment, manufacturing). Although they each had nuances, common themes emerged. Adding our expertise into the mix, we see volatility on the horizon. 

The bottom line is that inflation is likely to continue, interest rates are unlikely to decline near-term without creating additional down-the-line inflation, unemployment will have fits and starts and trend up slightly yet the labor participation rate will remain lower than pre-pandemic. From a jobs standpoint, low skilled jobs are being automated, yet high-skilled jobs are experiencing a severe skills gap. Overall, the economy will be slower than it has been. Last but not least, geopolitical risks are concerning every expert, leaving volatility the name of the game in the foreseeable future.

The Economy & The Data

A summary of findings from recent research on the state of the economy includes the following:

• Stimulus (COVID money flooded the economy): Inflation would need to rise by 30% to absorb the stimulus. So far, inflation has gone up around 20%. Thus, there is around 10% left to absorb to get supply and demand in alignment. If interest rates stay put, the COVID funds will run out in about a year. Otherwise, we will have spurts & starts.
• Government spending: Government spending has continued at historic levels. For example, in 2023, nominal GDP was up $1.5 trillion yet federal debt increased $2.5 trillion, leaving a gap. Debt is increasing at what some see as an alarming rate.
• Inflation rate: It has gone up by 20%, but to absorb the stimulus, there is still 10% to go. It is likely interest rates will remain flat to work through the COVID money. If not, there will be bursts of inflation and recession (volatility). Inflation is likely to stay higher than the goal around 3-3.5%.
• Unemployment rates & labor participation rates: Layoffs surged 136% in January to the second-highest level on record with financial companies, the technology sector, food production companies, and retail with the highest levels (in order of sequence). On the other hand, these findings led the experts to think employers would show the latest hiring at 180,000 workers yet the number came in double that amount (353,000). The unemployment rate stayed about the same at 3.7% with the labor force participation rate at 62.5% (which close to 1% lower than pre-pandemic, 63.4%). There is 1.3 jobs for every person looking for a job. From a client point-of-view, they simply do not have the high-skilled resources required although they are automating low-skilled jobs, and depending on the industry, they have put a pause on hiring.
• Wages: Workers’ wages are improving but they still have not caught up with inflation. In the last three years, real average hourly earnings are still down 2.4%. Thus, people are not feeling better.
• GDP (gross domestic product): Real gross domestic product has largely recovered. It increased 3.3% in the 4th quarter and consumer spending has remained relatively strong. It shifted from goods to services, but has held up overall even with the interest rate hikes thus far.
• Banking: There is concern about the regional banks. They hold most of the commercial real estate loans that will need to be refinanced at higher rates over the next few years. Also, bank’s liquidity requirements are driving concerns with the changing of bonds prices with the quick increase in interest rates.
• Geopolitical risk: Every expert mentioned concern around geopolitical risk. It will lead to inflationary pressures with reshoring, increased prices (for example, the Red Sea rates, diversion costs, and/or expedite costs), impact on energy prices, etc.

The bottom line can be summed up in with the misalignment of demand and supply, the shrinking workforce (with Baby Boomer retirements – by 2030, the youngest of the largest generation in history will be older than 65) combined with the divergent needs for high-skills vs low skills, and the emergence of high geopolitical risk. Thus, volatility and uncertainty will remain.

What Should We Take Away

Smart executives will take bold actions to ensure they can supply their key / ideal customers while pruning low margin/ non-value added customers. They are adding customer/ product profitability, pricing, and costing trends into their SIOP (Sales Inventory Operations Planning) processes to evaluate options, set strategy and make decisions.

They will invest in the best high-skilled resources, supplement with additional options (refer to our article, Where the Talent Has Gone, and create a high-performance culture. Strong leaders will be pivotal to ensuring success. People follow leaders; not companies.

Proactive clients are upgrading ERP systems to ensure the basic processes (blocking and tackling) are in place. Additionally, they are rolling out advanced technologies including artificial intelligence (AI) to automate, digitize and thrive. To read more about these strategies, refer to our article, Automate, Digitize and Thrive in Supply Chain. It will be cornerstone to success in the next decade.

Additionally, smart clients are upgrading business processes, cleaning up their data to better utilize their ERP and peripheral systems, and building flexibility and scalability into their future thinking. The core processes include demand planning, production planning, engineering (for engineer-to-order ETO and configure-to-order CTO companies), production and inventory control, and replenishment/ distribution planning processes. From a data perspective, it is important to review bills of materials, routings, work centers, item masters, customer and supplier masters, and MRP parameters. Proactive clients are ensuring the basics are intact and they are focusing on the roadmap to stay at least a few steps ahead of changing conditions.

If you are interested in reading more on this topic:
Supply Chain Volatility, Risk & Capacity Remain Critical Priorities

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Special Report: How Companies Should Reshape to Succeed in 2023 & Take Advantage of Huge Opportunities Coming Down the Pike

The world remains in chaos and businesses are conflicted about what to do. The next year will separate the market leaders from the rest. We talked with top notch trusted advisors about what their most successful manufacturing, supply chain and technology clients are doing to not only succeed in 2023 but to prepare to take advantage of the huge opportunities on the horizon. Twenty-seven trusted advisor experts discuss what companies need to do to reshape in 2023 to thrive for decades to come.

Insights from 27 Trusted Advisors

There is much going on in the world from navigating stubborn inflation to fears of recession to geo-political risk. In addition to my foreword (executive summary), we cover a wide variety of key topics impacting manufacturers, distributors, retail, and healthcare including:

• Commercial relocation
• Cyber
• Geopolitical & natural resources risk
• Human capital – Planning & scheduling, labor law compliance, talent
• Insurance – Commercial
• Logistics (airports, cargo, distribution, global supply chain, ports)
• Marketing – Artificial intelligence & communication
• Manufacturing – Nearshoring (Central America, Latin America, Mexico, etc.)
• Manufacturing – Reshoring
• Manufacturing – Offshoring (India)
• Manufacturing – Talent
• Supply Chain – Software, artificial intelligence, sourcing & architecture, mitigating risk, process & people
• Technology – Artificial intelligence, infrastructure, ERP, the customer experience

Link to Download the Report

We are pleased to offer a complimentary download to our newsletter subscribers –

Please contact us with feedback, stories, issues, and opportunities on what you’re seeing, topics of interest, and what you’re doing to succeed and differentiate yourself from the crowd. And, please keep us in the loop of your situation and how we can help your organization get in a position to thrive for years to come. Learn more about these topics in our blog and download your complimentary copy of our eBooks including our new release, SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Success.

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CLAREMONT, CA—Opportunities will abound in 2022 for those who are alert and willing to move past current challenges, according to the Society for the Advancement of Consulting® (SAC). Key trends include adoption of advanced supply chain processes, integration of AI and new technology in new business areas, and an increased focus on the importance of keeping audiences appropriately informed.

The Top Seven Trends Adopted by Successful Supply Chain Executives

“Our best clients are staying ahead of supply chain disruptions,” points out Lisa Anderson, president of Claremont, CA-based LMA Consulting Group, Inc and manufacturing expert known for creating supply chain resiliency. “They are substituting materials, developing new products and materials, and partnering with new suppliers. They’re also collaborating with customers to reconfigure their supply chain for greater control and flexibility in 2022.

“The most proactive executives are focusing on strategic customers and profitable products as they reconfigure their business,” adds Anderson. “They’re aligning demand and supply using a Sales, Inventory & Operations Planning (SIOP) process to maximize customer service, resiliency, and scalability. Key customers get the support they want while our best clients raise profitability and strengthen working capital.”

“Most importantly, these organizations are no longer relying on hiring talent externally. Instead, they’re putting plans in place to develop and retain the talent they have,” she adds.

Best Companies Going Big on AI and Chatbots

“Artificial intelligence, machine learning, and bots will be huge. I am already seeing a lot of companies use bots to interact with customers on their website, and that’s going to continue to grow into other areas of the business,” says Dr. Maynard Brusman, a San Francisco Bay Area consulting psychologist and executive coach.

According to Dr. Brusman, “In the next few years, we will see more and more businesses going digital and using chatbots for marketing and customer service. If you are in tech, it is important to get familiar with Artificial Intelligence (AI) and chatbots.”

Dr. Brusman advises his executive coaching and leadership development clients to focus on soft skills like emotional intelligence, social intelligence, and mindful leadership.

Two Ways to Avoid Supply Chain Trouble in The Coming Year

“After a chaotic year, we should be creating stability in 2022. Many companies struggled to secure talent and key materials across their supply chains in 2021, so the focus should remain on attracting the best individuals and safeguarding the right products. Both will remain critical,” explains Diane L. Garcia of Lorraine Consulting, LLC. Garcia has over 14 years’ experience in operations and supply chain management and is an expert in helping clients improve their unique business processes. She applies cutting-edge supply chain optimization knowledge and implements best practices with manufacturing and distribution companies in North America.

“To secure talent, it’s helpful to think about what people want,” adds Garcia. “Surveys show that employees are now prioritizing flexibility. I don’t see this trend reversing in 2022. To help secure the right products at the right time in the right locations, my clients find a Sales, Inventory & Operations Planning (SIOP) process vital to align their business plans. Without a strategic process like SIOP in place, each function can become siloed, which will lead to trouble.”

Video Gaining Importance in B2B and B2C

“Marketing is always evolving. What worked yesterday, may not work today—or tomorrow,” says Kathleen McEntee, president of Kathleen McEntee and Associates, Ltd, a full-service marketing firm based in Inland Southern California that helps businesses get the right message to the right audience in the right medium.

“What’s clear in both B2B and B2C is that people want to engage,” claims McEntee. “People do business with people. Video is a great way to engage people. Your brand, your message, and your story come to life through video. Make sure to include video into your marketing delivery. It can make the difference.”

Delivering Accurate, Timely Content Becomes Critical

“Those companies who proactively reached out to their customers and kept them informed over the last two years have built strong lasting relationships that will allow them to thrive as we move past the pandemic,” said Linda Popky, president of Redwood Shores, CA-based strategic firm marketing firm Leverage2Market Associates, and author of the book Marketing Above the Noise: Achieve Strategic Advantage with Marketing That Matters.

“Now, more than ever, it’s important to maintain open communication channels and to ensure the content is both accurate and timely,” she adds. “Developing an effective content delivery strategy is no longer an option but a requirement.

Four Key Trends Every Business Will See

“There are four key business trends that I am observing, said SAC Founder Alan Weiss, PhD. “First, the continuing ability to ‘live with’ COVID-19 and the need to treat non-vaccinated people differently at events and gatherings. Second, the continuing weakness and possible breakdown of the Chinese economy. Third, the ‘excuses’—such as supply chain problems and ‘the great resignation’—being used to justify mediocrity and poor service which is driving consumers away.

“Finally, there is the probability inflation will be controlled, as consumers switch from buying products to services,” he notes.

Originally posted on ExpertClick:  December 1, 2021

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In our eBook Emerging Above & Beyond: 21 Insights for 2021 from Manufacturing, Supply Chain & Technology Executives, many executives discuss the critical importance of adaptability and resiliency. The pandemic kicked off with volatility of customer demand (toilet paper and hand sanitizer were in scarce supply whereas aerospace and hospitality fell of the cliff as the lockdowns started). During the pandemic, customers changed buying patters (moving to e-commerce, trying new channels). Buying behaviors evolved with changing customer perceptions. And the supply chain tried to keep up.

Executives tried to adjust to the changing conditions. Some laid off employees; others pulled back on production schedules and found new projects to keep employees involved while the rest could barely keep up and were challenged to find enough people to keep up with customer demand. If they thought ahead, they innovated and found ways to create new products and service offerings to meet changing needs. Proactive clients explored new technologies to support adaptability and resiliency, rapidly re-evaluated their supply chain network, thought about insourcing and reshoring, and took action to reconfigure their supply chain with a regional focus.

Michael Smith, President and Managing Director at George Fischer Signet talked about the fact that 2020 highlighted the need for adaptability and cooperation. He said that continuing to develop the company culture and aligning with processes and systems will be key to success. He also talked about the importance of adopting new technologies and new solutions to foster growth and set a strong foundation for the future.

Did you like this article? Continue reading on this topic:
Collaborative Partnerships & Creating Resiliency

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In our eBook Emerging Above & Beyond: 21 Insights for 2021 from Manufacturing, Supply Chain & Technology Executives, two technology executives discuss the critical importance of personalization. With the dramatic rise in e-commerce during the pandemic and experts agreeing that it will only accelerate, hyper-personalization has emerged as a differentiator.

Kalon Stephen, Regional Vice-President at Salesforce, Inc. talked about the importance of investing in digital commerce technology and optimizing order management capabilities. He also discusses the importance of personalization with artificial intelligence. In fact, a progressive client completely aligns with this position and is investing in an ERP upgrade as well as a B2B/ B2C platform for growth because they believe it will drive growth and differentiation.

Tim Harris, Chief Strategy Officer at Arbela Technologies focused on the trend of hyper-personalization with the rise of e-commerce. He also said the right customer data platform to understand your prospective buyers and customers increased in importance with this trend of hyper-personalization. Innovation in this arena was the more robust in 2020 than in any other year.

Did you like this article? Continue reading on this topic:
Modern ERP Launchpad for Growth

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In the last few months, I’ve attended sessions on the global, national and regional state of the economy. Every executive, trusted advisor and colleague wants to know: Are we headed for a recession?

The bottom line answer is that there are no signs of a recession in the foreseeable future in terms of the economy. Instead of worrying, it might be just the time to take advantage of the opportunity. As Roy Paulson, president of Paulson Manufacturing said in our 2019 Predictions from Manufacturing & Logistics Executives report, “…expect to see more talk of tariffs, threats and waving of hands, all the while, those of us in exporting will be busy making deals, signing contracts and getting business done.”

Similarly, in manufacturing, there was concern over the worsening ISM (Institute for Supply Management) index even though it remained far above (54.2) the level that indicates expansion (50) yet the index rose significantly in March to 55.3, signaling great growth and stabilization. The largest contributor was from employment which had the biggest gain in 3 years. All cylinders seem to be firing.

Yet many remain concerned for the next shoe to drop due to the volatility and uncertainty of these tumultuous times. Perhaps it is time for us to get comfortable with volatility and pursue new product introductions, technology (automation, AI, IoT) for those that will add value in our businesses and experiment with innovative ideas. What better time will there be to get in front of the curve so that we can pass by the competition if/when a recession hits?

One tip to implement this week:

There are countless studies that prove that those people who remain calm, invest smartly while others panic and stay the course to what they know will add value to their business thrive. Perhaps we should take a page from their book.

Of course, stay up-to-date on the latest trends and don’t hide your head in the sand as issues arise. Spend the 80/20 of your day looking for opportunities. What new ideas have you had lately? Have you asked your front-line employees for ideas? Are you willing to invest in their education and give them the chance to fail?

When I was VP of Operations at PaperPak, I worked with a CEO who was constantly thinking about the ways for us to succeed. Gas prices rose (which we obviously couldn’t control), which had the potential to create pure havoc with our profitability (with a Board that didn’t consider gas prices a reasonable excuse). Instead of panicking, he would consult with key people throughout the organization and create opportunities to get ahead of the issue. We rose from the ashes more times than I can count because we kept focused, thinking of opportunities instead of becoming defeated by some rather significant curve balls.

Give it a try this week at the next sign of volatility and disaster. How can you turn it into an opportunity?

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I spoke at APICS San Fernando Valley a few days ago on the latest trends and what’s in store for 2018.  We had a great discussion on topics ranging from people (or lack thereof) to technology.  For manufacturers and distributors, a few of the highlights included:  1) The Amazon Effect – the customer experience is the ultimate!  2) Near-sourcing – I go beyond the mainstream and am boldly saying “Southern California is “the” place to be!  3) The skills gap – if I could only convey how much trouble several clients are having finding the right fit for open positions…..!!!!!  4) Technology (with lots of details behind this one!) and a few more.  Have you thought about what trends are most likely to impact your business?     

One tip to implement this week: 

I also attended a Board meeting with a client a few days ago, and this topic is quite relevant.  Staying on top of what is likely to impact your business gives you the clarity of priority!  Start by taking a few minutes with your top team to brainstorm.  Give a few customers a call to find out what’s happening with them.  Check in with a few of your key suppliers.  Drop in on your trusted advisors and attend a trade association and/or alumni networking meeting.  You’ll soon be well-versed to come up with what is trending AND relevant to you.

Once you have thought through the trends most likely to impact your business, it might make sense to think about how to transform these impacts into opportunities.  Profitable and scalable growth is the common thread among every single one of my clients – how can you leverage these opportunities to aid in creating scalable, profitable growth?   Take a tip from the lean toolkit and involve your people.  You might be surprised how many opportunities will emerge if you put ALL the brain power in your company on thinking about how to do this.

Lisa Anderson

January 22, 2018

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Recently, we worked with a large, complex organization to provide an external assessment of the supply chain organization and how well it was prepared to support scalable growth.  It reminded us of the value of taking an outside view every now and then.  Whether you take yourself outside of your organization, hire a consultant or ask an executive from another division or trusted customer to take a deep dive into your organization, you’ll likely wind up with a few ideas – or, at a minimum, a confirmation that your i’s are dotted and t’s are crossed and ready for growth.

It is MUCH easier to downsize than it is to grow successfully.  NOT more pleasant but it is simpler to cut back.  Unfortunately, we are all too familiar with this exercise.  Yet growth has many of the same challenges:

• Cash is a constant challenge – by virtue of growing rapidly, you spend money in advance of shipping and receiving payment.  The quicker you grow, the tougher it can be without a line of credit especially for a smaller organization.
• Are your people ready for growth?  What “used to work” might no longer be sufficient.  Have you prepared for these needs?
• Can your operations keep up?  Do you have the resources, equipment, and support resources?
• Suppliers are likely to be ill prepared unless they are in lock step with your growth plans.  Regardless of the preparedness of your team, nothing will occur unless your supply chain is aligned.
•  If caught by surprise, you can certainly throw resources at the issue but to achieve scalable growth, you should have thought about your processes, systems, metrics and more.  For example, determining that you’ve outgrown your ERP system as you “hit the wall” is too late.  It will take time to select the best system for your needs AND it will take between 6 months to 18 months to implement, depending on your size, complexity, ERP partner, scope etc.

Growth is a hot topic.  For example, according to our recent Supply Chain Briefing, McKinsey predicts 20% manufacturing growth by 2025.  However, regardless of your industry, if your company isn’t growing, it is dying.  We have NEVER seen an organization “stand still” and “maintain” successfully.  Have you?  Thus, growth is core to success.  The key is whether it is a plan or an after-thought.  Which is it for you and your organization? 

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