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Business Transformation in Action

Joe McKendrick

Transparent Supply Chains Got These Companies Through the 2008-09 Economic Chokehold

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The downturn of late 2008-2009 caught a lot of companies flat-footed, and many were left with painful choices, such as cutting staff, when business went south.However, some companies were able to see the handwriting on the wall, and throttle down their operations accordingly, thereby sailing through the economic tsumani relatively smoothly.  What made the difference? 

According to panelists at this week's Oracle OpenWorld event, having a transparent, responsive supply chain enabled them to survive, and even thrive through an uncertain business environment. Through transparency in their supply chains and close integration with vendors and suppliers, ups and downs in product sales were more predictable.

Of course, such up-to-the-moment agility depends on the implementation of transparent supply chains that conform to the latest standards and employ a service-oriented approach with partners.

Kai Hypko of Plantronics, the headset maker, observed that the downturn hit his industry fairly hard and quick, with a 40% drop in revenues in the tumultuous first quarter. "Fortunately, we had just completed a major supply chain management system upgrade, that helped  provide us near real-time ability to forecast demand," he said. In addition, supply chain partners were not caught with overstocks, either, he added. "Our suppliers had full visibility of what our demand was."

Stephen Printz of Pella said his company had began shifting its business model away from new home construction in 2007. What helped Pella through the difficult period was a "Lean" methodology that kept costs at bay. "We're a Lean company," he said. "For us, everything starts with an up-front process. Do it right the first time."

Ram Ramakrishnan of Bajaj Electricals said his company also subscribes to the Lean approach -- at which costs are wrong out of the manufacturing and development process at every stage -- and this is what helped propel Bajaj along with 29% growth over the past year. "We have a number of competitors who were not lean, did not control costs, and lost revenues," he said.

Gene Tyndall, Executive Vice President of Global Supply Chain Services, Tompkins International and co-author of Supercharging Supply Chains: New Ways to Increase Value Through Global Operational Excellence, observed that companies are simply not willing to change their processes as the greatest impediment to growth in any economic environment. "What is a smart supply chain?"  he asked. "The reason executives have smart supply chains is they have smart companies." And smart companies have learned how to employ smart supply chains as the key enabler of business agility. "Unfortunately, he added," supply chain management started in the back rooms of companies. Logistics people and finance people still do not talk to each other." 

In this blog (formerly known as "SOA in Action"), Joe McKendrick examines how BPM and related business and IT approaches can promote business transformation.

Joe McKendrick

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. View more

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