What we now term the Great Recession spanned the period of 18 months from December 2007 through July 2009. It shook the core of most companies. Supply chain organizations cruising forward in neutral were suddenly jerked into hyper drive to answer questions about demand, cash flow, product portfolios and markets in a way that never happened before in our lifetimes. Supply chain discussions became boardroom debates. It elevated the importance of supply chain management basics.
The results are in. Business reporting for the 2009 business cycle is completed. In 2010, the average company grew .56%. Yes, revenue increased slightly while working capital was down 2%. In July 2011, CFO magazine reports that Days of Working Capital (DWC) and Days of Inventory Outstanding (DIO) each improved 1.1% in 2010. These were modest gains, but the worst performance in half a decade. Should we hang our heads and be ashamed? I think not. Surprised? Read on and see if you agree.
To make my argument, I focus first on the global process leaders in chemical, household products and pharmaceutical industries. They are unquestionable industry leaders. While CFO magazine reports slight improvements in the average supply chain in these global process industry supply chains, things were less rosy in 2010. For these leaders, the average days of DWC and DIO returned to 2004 levels. While many could argue that these companies are hoarding cash and getting lazy, I think that there is more to the story.
I then focus my argument on what I feel is the real opportunity: redefining value in the value network. To make this argument, I purposely chose a relatively simple regional supply chain-food manufacturing in the United States-where I feel that there is a clear case for change. The lessons are applicable for all value chains. Let's take a look behind the numbers.
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