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OPPORTUNITIES IN AN ECONOMIC MELTDOWN

OPPORTUNITIES IN AN ECONOMIC MELTDOWN. Western Suppliers Association 51 st Meeting May 14 - 15, 2009 Michael Workman, PhD mike@mworkman.com. Things I’ve come to Embrace. “It’s tough to make predictions, especially about the future.” Yogi Berra

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OPPORTUNITIES IN AN ECONOMIC MELTDOWN

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  1. OPPORTUNITIES IN AN ECONOMIC MELTDOWN Western Suppliers Association 51st Meeting May 14 - 15, 2009 Michael Workman, PhD mike@mworkman.com

  2. Things I’ve come to Embrace “It’s tough to make predictions, especially about the future.” Yogi Berra “Information's pretty thin stuff unless mixed with experience.” Clarence Day “Things should be made as simple as possible, but no simpler.” Albert Einstein “92.3176% of all statistics are made up on the spot.” John Ionnadis

  3. Managing in THISEconomy First Law for any economy: Things over which you have little or no control should get very little of your time and attention. Cost Reduction Increasing Revenue Managing Receivables Sources for Additional Assets Redefining Leverage Removing Work Preparing for the Next Business Cycle

  4. Consistent Predictors ofFailure in Business Declining Margins Increasing People Costs Increasing Sales All in Concert

  5. Beyond Survival Documented, Repeatable Business Processes World Class Cost Control Metrics – Step 1 Great Customer Awareness Continual Introduction Of Value Profitable - Sustainable Growth Bench Strength / Leadership Succession Continual Stretch / Discontinuity Metrics Against a Shared Strategy Sales – Inventory – Cash Flow

  6. Action Plan; Now & Later 1. Crisis craves structure 2. Conserve cash. 3. Analyze your customers & suppliers. 4. Define profit levels for current & future 5. Stop servicing unprofitable customers. 6.Analyze sales effectiveness and reorganize. Consider Redefining your sales strategy. {Hospitals & Schools} 7. Analyze Your Customer Information Portfolio 8. Intensify Supplier Relations. 9. Analyze Response Processes; Identify costs. 10. Initiate methods for Improvement. GROW – MERGE– or HIDE

  7. Drivers of Declining Profits Inconsistent Pricing Buying for Customers {and not doing it well} Chasing the Wrong Business Internal vs External Focus Unknown Service Costs Re-distribution Carrying our Wounded Lack of Effective Metrics

  8. No Whining - Selling Fight demands for “recession discounts” Price Management “Everything’s on hold for now” recession stall (no, it’s not) Understand decision-making in the “recession bunker” – where your customers plan (misguided) strategies It’s time to use questions to uncover customer motivations and give you an edge The importance of re-prioritizing your accounts How do you keep your good customers loyal? Identify which companies will bounce back first Reposition your products and services so they have a recession benefit.

  9. If people don’t have the mindset that sharing information is good, then it doesn’t matter what technology does.

  10. Customer Communication Models Customer Single Point Multi-Point Distributor

  11. Competitive Positioning The cosmic law of business says you can excel at any two of these. Where do you want to be; with whom? Good Cheap Fast

  12. Strategy Integration Key Supplier Stratification Core A-B-C Inventory Stratification Customer Stratification

  13. Stratification Model Customer Life Opportunistic Core High Profitability Sustained Relationship Low Cost to Serve High Volume High Profitability No Relationship Low Cost to Serve Low Volume Cost to Serve Profit Service Drain Unprofitable Low Profitability Sustained Relationship High Cost to Serve High Volume Low Profitability No Relationship High Cost to Serve Low Volume Volume

  14. Supplier Position Defines Strategy Product Lines Dollars ~1-5 Vendors Primary Products Gap Fillers Mfrs. can offer greater profits Next 5-10 50% Secondary Products Everyone Else 30% These products are higher margin and get pulled through with the primary products Tertiary Products 20% Distributor’s cost to buy is normally greater with secondary and tertiary products & Real Profitability is Questionable

  15. Never Forget Distributors are channel intermediaries that play a cost transfer role This is their sole purpose They perform activities more cost effectively than those they buy from, (suppliers) & those they sell to (customers) At the heart of the distributor’s position & role is economics: • Suppliers sell through distributors only because it’s more profitable for them to do so. • Customers buy from distributors for the same reason.

  16. New Rules for Collaboration Hyperarchies Individual Pieces Loosely Joined Structurally Invisible Community of Trust (where trust is a currency – reputation is a source of power) Modular Thinking (not linear){ad hoc} Rethink: technology, customers, suppliers, inventories, logistics, offerings, goals, metrics, Leadership Succession in Your Business Strategic Implementation; Less About the Strategy, More About the Team

  17. Warning!! No magic formulas….no silver bullets; you’ve got to think faster Learn to live with paradox; accept conflict; and have response alternatives for the future How much change can you stand? Do You Want to Look Good or Be Good?

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