Launching Post COVID-19June 25, 2020
Let’s spend a few minutes talking about the anticipated launch of your post COVID-19 strategy. This event will be a once in a lifetime opportunity to reset, regroup and retool your enterprise.
The globalization of monetary and fiscal policy peaked around 2017 or 2018. The transition from global strategic thinking to a wave of protectionism hit center stage during the last election cycle in 2016. In the UK, Prime Minister Theresa May, was charged with carrying out the execution of the Brexit vote to leave the EU, and in the US, the election of President Donald Trump ascertained a move toward “America First” policies. COVID-19 will likely push localization even faster which can likely will cause inflation.
The COVID-19 pandemic has highlighted our dependency on China for our supply chain which compromises our national security. As production is moved back to US soil which will lead to cost-push inflation is nothing is done to improve the Total Cost of Operations in the enterprise.
2020 is becoming the pivotal year to focus on local and regional customers and markets. How will your enterprise win customers and earn sustainable profits post COVID-19? Essentially, the Play Book is NOTHING new; this is what should have been done for years. However, too many executives took the path of least resistance and chased cheap labor. Too often corporate leadership were seduced by incentives from foreign countries who manipulated their currencies, subsidized raw materials and provided tax incentives.
It’s time for BIG and BOLD!
If you’re going to WIN customers and disrupt the competition, you will need to keep your prices low by staying ahead of inflation, delivering a superior product with a shorter lead-time, and by being flexible and responsive to customer needs.
This is NOT business as usual! There absolutely MUST be a conscious effort made toward reducing the Total Cost of Ownership, TOC. STOP using an insignificant incremental inventory carrying cost of Prime +1%.
Art Koch’s Profit Chain®
“Dramatic improvements to inventory velocity, increased customer service and corporate profits.”
Become Zealot’s for the following principles:
- Become Zealot’s for Operational Excellence. The Toyota Manufacturing System, Lean Manufacturing, Honeywell’s model or Danaher.
- STOP, STOP, STOP measuring your success on quarterly results. Look back six to twelve months at prevailing trends.
- Become Zealots for Improving Inventory Velocity. I say Inventory is Evil™ because it hides and delays fixing problems. Delays cost profits. Actual inventory carrying cost is between 31 and 58% of COGS. I have clients that use 75% inventory carrying costs for financial models when making capital expenditure decisions.
- Focus on Lead-time reduction, flexibility and responsiveness.
- Quality is a forgone conclusion: Be certain your product meets and exceeds customers’ expectations.
- Sustainability: We have exited the single-use disposable model. It’s now all about climate change, clean energy and lasting value.
- Know your Customers: As Baby Boomers age their consumerism will decrease, the 2020’s will see a dramatic shift in spending demographics and therefore changing purchasing patterns. Gen X, Millennials and Gen Z/iGen will become the next big consumers.
- Human Capital: Invest in the human brain power of your team. This strategy will win over the Robots, Automation and the AI race.
- Moral Capitalism: Going forward, you will hear much said and written about moral capitalism and the shift from profit maximization to moral capital. Don’t believe a word of it!! Mankind is still mankind; we are competitive and driven by Wall Street investors, and our egos for the bigger boat, the better house and the fancier car!
Amateurs will not fix or reduce their total cost of ownership and will increase their prices. To WIN and to have it ALL, drive to constantly improve the Total Cost of Ownership.
If you continue to play the globalization game, refuse to change, and believe it is still business as usual, YOU will NOT be in business at the end of the decade.
“Stop letting the process manage you! Become the champion of your game plan and achieve sustainable profits.”
Categorized in: Art of Change Series™