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Challenges can take many forms, especially during periods of political change and economic uncertainty. Around the table, a dozen or so people representing suppliers, distributors, formulators and manufacturers talked about key concerns impacting their companies. After distilling a number of issues, the following list of challenges was developed.
ChallengesLack of Predictable Future
Lack of predictability hampers planning, enactment of development programs and the ability to take advantage of opportunities. It prevents a clear understanding of available resources, makes it difficult to provide predictable commitments, can obstruct policy implementation and prevents effective and consistent management. In other words, unpredictability can freeze a business and cause it to become impotent.
Cash shortage and reduced liquidity threaten growth, infringe on research, can make a company overly or wholly dependent on lenders, and can lead to shortages of raw materials, equipment, and talent. Inadequate cash can also hamper marketing efforts, cause the business to abandon long-term plans and disappoint shareholders. In dire circumstances, cash-flow problems may force a company to seek bankruptcy protection, putting its departments and employees in a position where they cannot function. Simply put, a cash shortage can place the future of the company outside of its own control.
Slowdown in Growth of New Ideas
A tight market can often result in the refocusing of attention from growth, research and development to financial issues. This change in emphasis shifts or stops the flow of dialogue, limits risk-taking, and, in effect, changes the corporate culture. Expenditure on research and development is curtailed, creativity and reward are constrained, the development of new ideas is hindered, and the launch of new technologies is postponed or canceled. Without new technologies, there is further innovation slowdown, which imperils growth and affects entrepreneurial thinking.
Forecasting is Harder
In order to effectively operate, a company needs to predict cash flow, availability of credit, demand for goods and services, the value of the dollar, inflation, transportation costs, fuel costs, and more. Most businesses have methods of calculating these factors. However, when the economy is unstable, formerly dependable forecasting models become unreliable. As a result, long-range forecasting becomes impossible and short–term forecasting is inadequate. This makes risk management problematic; combined with today’s rapidly shifting markets, this impacts the development of successful new products.
According to a recent SAP white paper:
...forecasting customer demand is becoming more complex. Customers want more products specific to their needs and applications, and shorter cycle times from order to delivery. Consumer demand is inconsistent and difficult to predict. This makes it hard to forecast future demand based on previous patterns. Forecasts by nature are inaccurate, and forecasting new products is even more difficult. The consequences of conservative forecasts can be missed sales and lost revenue, while optimistic forecasts tie up resources and produce excess and obsolete inventory.
Fears of Recession Snowball into Fears of Economic Depression
Economic changes and instability, bank failures, and business insolvency create nervous customers. Fearful of an escalating recession or advancing depression, consumers stop spending, which limits revenue to industry. This can result in restricted opportunity for growth, cutbacks, and even cessation of business or insolvency. These risks intensify the fear, enlarge the snowball and make things worse all around until economic depression becomes a self-fulfilling prophecy.
Surviving Challenges by Seizing Opportunities
This exercise made clear the interrelated nature of the challenges companies are facing during these tough times. Relieving fears and maintaining and growing business requires finding alternatives to the bunker mentality that can paralyze some companies. This means evaluating and seizing opportunities. Here’s a list of opportunities the roundtable group developed that offer solutions to the challenges discussed. It was left to each attendee to take these back to their companies and take best advantage of them.
- Capitalize on competitor’s weaknesses
- Diversify and maintain diversification
- Get someone to take a stake in you
- Learn to play with a smaller team
- Play offense (e.g., expand your base)
- Network (e.g., exchange talent)
- Trade-up on staff
- Take advantage of government-sponsored programs
- Research growth opportunities
- Target global opportunities
- Get exposure to international markets where the dollar is strong
- Make employee development a priority - engage your team
- Help people understand their contribution
- Remove personal stresses for higher productivity and greater creativity
- Develop a scoreboard to keep employees engaged
- Clearly articulate current challenges and opportunities
- Retain your best talent
- Reduce waste
- Better manage WIP
- Make revenue-generating acquisitions if funds are available
- Find ways to increase cash, including streamlining and eliminating fat
- Work with customers on purchasing forecasting
- Plan for a lost supplier, lost vendor or lost customer in order to reduce impact
- Use the time to build infrastructure, plan and restructure
- Innovate changes
- Maintain a presence in the market
- Know your customer
- Closely communicate with vendors, suppliers and customers
SIDEBAR: Continue the Discussion!Join your colleagues and peers this spring in Austin!
ASC 2009 Spring Convention & Expo
Renaissance Austin Hotel