MLCP: The Business of Tomorrow

2. TODAY’S LOGIC MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Back in the ’90s… . . . all we heard was “Short Supply Lines!”, “JIT!”, and “Zero Inventories!” Disruptions were considered unpredictable - and when they did occur, the operation would go into crisis mode, and costs would soar! Today the logic is to also have plans that allow the operation to be flexible and resilient to economic and other shocks.

3. MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Looking Back to the Early 1970s…. Lots of Power! Lots of Metal; V8 Engine; Typical N.A. car: Comfort; LARGE; but FUEL EFFICIENCY? - Not even considered!! THEN IN 1973, OPEC DOUBLED THE PRICE OF OIL! - The Japanese imports were suddenly in vogue - In terms of market share, the ‘BIG 3’ have never recovered!

4. MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES In the 35 years since OPEC, the ‘Caught Unprepared’ pattern has been repeated in many sectors - We should have learned the lesson! While many aspects of management have undergone change, the unexpected still trips up companies that are not ready for shifts in customer taste, thinking, government regulation, etc.

5. MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Resilience Re sil ience (noun) Resilience is the ability to avoid, minimize, withstand, and/or recover from the effects of adversity, whether natural or man-made, under all circumstances of use. As the global footprint of firms expands, so also do the risks they face on a daily basis: - Extended supply chains; technological interdependencies; IT vulnerabilities; mutating viruses; turbulent geo-politics; flat-world economics; and even weather phenomena all combine to increase business risk. As such, resilience is a matter of ever-increasing importance.

6. MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Desired Outcomes for this Module: Gain a clearer understanding of the kinds of emergencies that may have to be faced at work; Work with the other participants to identify how these contingencies directly affect your businesses; Explore opportunities to plan for contingencies and minimize the damage to your businesses.

7. The Speed of Change The Role of Government The Matter of Money Trade Treaties The Environment Contingency Planning Paradigm Shifts Natural, Man-Made, and Business Contingencies MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Scope of this Module:

8. CHANGE 2008 1958 TIME COMPUTERS Quality and quantity of information has been increasing exponentially. With so much data now instantly available, we can easily become lost in analysis at the expense of decision!

9. THE SHOP FLOOR CAD / CAM CNC / more Skill requirements have changed Automation yields productivity gains and allows semi-skilled operators to replace skilled trades personnel, lowering labour cost.

10. FOOD & BEV. Food & beverage systems have made quantum leaps in capacity and automation. Windows-type touchscreens are now more the norm than the exception. Maintenance has become module replacement.

11. SPEED ITSELF Today’s only constant is change itself, and even then the rate of change is changing! Today’s paper machines produce a sheet twice as fast; twice as wide; and with half the crew size than just a few years ago. To monitor automated printed circuit assembly, cameras have replaced human inspectors whose reaction times are slower than the machines.

12. Quality Control Process Control Statistical Process Control Root Cause Analysis Risk Analysis QUALITY & ANALYSIS

13. THE ROLE OF GOVERNMENT Governments have changed the way they control their economies over the years. Change factors include: - Shifts in internal economic thinking; - International pressures; - Treaties and agreements; - Influence of global corporate giants. Today no one government alone is able to substantially change many of the circumstances that businesses now face. Some changes, e.g., Globalization and Off-Shoring, are irreversible.

14. If the economy is growing too fast, they worry about inflation, so they raise the interest rate to slow growth To counteract recessions, rates are lowered to spur spending Releasing money into the economy helps improve it THE ROLE OF GOVERNMENT EXCHANGE RATES: Governments do have some influence over exchange rates: By using central banks to adjust interest rates, they can slow or speed up the rate of investment and the price of debt

15. - With trade treaties, policy change is restricted by external agencies - Tariffs and subsidies cannot be arbitrarily applied - There are mechanisms for redress when disputes arise THE ROLE OF GOVERNMENT TRADE TREATIES: Trade treaties, such as NAFTA, do good things for the economy, but there are compromises, too. Trade treaties help create a faster, more lucrative global arena, but also a more exacting place in the event of bad planning.

16. MONEY How does white Writing Stand Out? Prior to WWII the World ran on a Gold Standard: - The US backed its currency with gold held in Fort Knox - Britain backed the Pound with sterling silver & gold. Today, exchange rates between currencies depend on the extent of confidence the money markets have in each country’s economy. When confidence in the US economy falters, the comparative value of the Canadian dollar increases

17. MONEY How does white Writing Stand Out? Financial institutions, banks and investors worldwide trade in currencies & debt daily. With the speed of IT today, a change in conditions in one part of the globe can almost instantly affect confidence in a currency elsewhere. This causes exchange rate changes that can have lasting adverse effects far beyond the control of the affected businesses.

18. Above US$55 / Bbl, the Tar-Sands are profitable to exploit At US$60 / Bbl World commodity price, the Cdn$ is viewed as a stronger currency. MONEY CRUDE OIL PRICING: The World crude oil price is central to the value of the Cdn$, as we have vast Tar-Sand reserves in Alberta, as well as offshore oil. Strong currencies with stable government systems are safe havens for capital investment: Money flows in; the economy grows stronger; and the spiral continues….

19. MONEY Exchange Rate Impact: Around the turn of the century, the Cdn$ had a value of 60-70 cents US: Cdn firms received Cdn $1.50 for every US $ sold. Many US firms manufactured here cost-attractively. Auto manufacturers increased output in Canada, as wages, productivity rates, and health costs were also cost-attractive compared to in-US costs. Canadian firms providing parts and services to US did well.

20. MONEY Then in 2001, this happened: - The World changed rapidly: - The price of oil skyrocketed; - The US went into huge debt to fund its wars against terrorism; - Eventually the Cdn $ reached US par. (For exporters to the US, this cut their revenues from $1.50 to $1.00!) The Canadian government could not offset so huge a hit: The causes were bigger, faster than economic measures could handle, so profits fell rapidly. Continuous Improvement is no longer just ‘fashionable’: It has become an essential element for business survival and recovery.

21. PARADIGM SHIFTS PARADIGM A paradigm is a generally-accepted rule or belief that affects the way we view things PARADIGM SHIFT A fundamental CHANGE in belief that forces us to revise our thinking Before Columbus, the paradigm was that “The world is FLAT!” Example: He helped create a SHIFT in belief, to “The world is ROUND!” Another Example: Old Paradigm: “Carry large buffer stocks!” Paradigm Shift: Better Business Practice!

22. PARADIGM SHIFTS Paradigm shifts don’t occur overnight: Wal-Mart was a paradigm-shifter in retail thinking - but others were slow to catch on - and many still fight the ‘New Reality’ In Manufacturing, shifts are clearly evident: Magna personifies the ‘New Paradigm’: - Less and less vertical integration; - Smaller unit plant size - Fewer processes per plant - More and more specialization - More and more outsourcing • More and more automation, with ever-lower skill requirements.

23. Publisher: William Morrow & Co New York, New York ISBN 0-688-10936-5 PARADIGM SHIFTS Joel Barker, Futurist “The Business of Paradigms - Discovering the Future”

24. THE ENVIRONMENT The environment is an area where government can have major impact. Growing public awareness of global warming provides politicians with the chance to convince electorates that they are worthy of your vote. For business, resulting government regulatory change will represent opportunities for some, and considerable risk for others. - What if you produce only incandescent light bulbs, and a switch to fluorescents is mandated? - What if you produce only plastic grocery bags, and their use is discontinued or heavily taxed?

25. THE ENVIRONMENT Pollution of the air we breathe is a recognized major problem. Governments retain the right to regulate accordingly, and are under increasing global pressure to sign treaties, such as Kyoto. Internal pressures in most Western countries are intensifying, with coal-fired generation facilities and ‘smokestack’ industries becoming prime targets. If your business has high carbon emissions because of process, you’ll soon be under fire.

26. THE ENVIRONMENT GLOBAL WARMING and NATURAL DISASTERS 'An Inconvenient Truth' - Al Gore GLOBAL WARMING IS AN ABSOLUTE REALITY (Nobel Prizewinner) THERE IS AN ALARMING CORRELATION WITH THE INCIDENCE AND SEVERITY OF NATURAL DISASTERS THIS DVD IS A ‘MUST-SEE’ ‘RESILIENCE’ includes risk recognition and contingency planning / preparedness: - How comprehensive are your organization’s contingency and preparedness plans?

27. THE ENVIRONMENT GLOBAL WARMING and NATURAL DISASTERS 'An Inconvenient Truth' - Al Gore GLOBAL WARMING IS AN ABSOLUTE REALITY (Nobel Prizewinner) THERE IS AN ALARMING CORRELATION WITH THE INCIDENCE AND SEVERITY OF NATURAL DISASTERS THIS DVD IS A ‘MUST-SEE’ ‘RESILIENCE’ includes risk recognition and contingency planning / preparedness: - How comprehensive are your organization’s contingency and preparedness plans?

28. CONTINGENCY PLANNING Contingency Planning aims to best assure that a company can sustain the impact of a interruption, recover promptly, and resume ops without long-term ill effect. Most organizations have plans in place for eventualities like these:

29. CONTINGENCY PLANNING But what about something like this: A major IT wipe-out? A recent study found that malicious damage, major IT system faults, and hacking account for more ‘disaster scenario incidents’ than fires & floods! Further, that 60% of firms sustaining an IT outage for a period of 10 days, go out of business within a year! A good Contingency Plan and IT system backup process can limit the damage and in some cases, provide recovery up to the moment of destruction.

30. CONTINGENCY PLANNING How well does your company score on this assessment? - Might follow-up action be warranted?

31. Further adverse trend in Cdn/US exchange rate? Unfavourable regulatory Changes by Government? A serious oil crisis? Terrorist (or resulting) activity? Severe supply chain disruption? “There must be others, too!” CONTINGENCY PLANNING What other Contingency Plans does / should / could your company have in place for such occurrences as:

32. The Flexible Supervisor Supervisors may have only limited impact on a company’s overall policies, and lack the power to decree what contingency plans the company should have. Most supervisors are, however, at liberty to make their own. Also, supervisors have a responsibility to be able to react in the company’s best interests when disasters, emergencies, or other disruptions occur. How about the plans that ARE in place: Are you up-to-date on them? How about for bomb threats? How about your data integrity, and what your best practice should be in that respect?

35. Confucius

37. WORKSHOPS

38. #1: Reefs in the Lagoon – Who Remembers the ’70s? #2: The Best-Laid Contingency Plans . . . . #3: The Saga of the Incandescent Light Bulb #4: The Plastic Bag and the Joy of Shopping #5: The Natural Disaster #6: The Man-Made Disaster WORKSHOPS

39. Take Care, Folks! See You Next Week.