Last week the stock market hit an all-time high – twice. Hopefully we all made back the massive losses we suffered in 2008 & 2009, but why hasn’t industry fully recovered? With unemployment still high, and business still struggling, it certainly doesn’t feel like the economy is booming. Thanks to Barry Ritholz and his website, The Big Picture, I now understand why. Historically business cycle peaks (as defined by NBER) follow market peaks by about 4 months according to Barry’s blog. As you can see from his graph, while the average is 4 months, the shortest recovery has been 1 month, but the longest has been 12 months. Now that we have hit a peak, the question is – how long this time for business to peak?
Last week we were asked to quote 500 & 1000 pcs of some brackets for Sandy. A forecast for 100 pcs a month was provided so we quoted 100 and 300 pcs as well. Our assumption was that even though we were being asked to quote larger quantities, Sandy would want quotes for monthly or quarterly deliveries in case they didn’t want to hold the inventory. The PO came across for 1000 pcs with monthly deliveries. Was trust broken? Maybe. Without asking, Sandy wants us to either carry 11 months of inventory or absorb the cost of 11 additional set-ups. Shame on us as well – we should have clarified the delivery schedule before quoting. In these situations, I go back to Speech Act Theory popularized by Dr. Fernando Flores.
With so many customers stressing that trust in their supply chain is very important, I’d like to discuss how you can improve trust in your supply chain. Last week I covered the characteristics of trustworthy people. Once you believe you are working with the right partner, there are some details you can tweak in your communication to create a complete request to a supplier (or offer to a customer) and help them build trust with you. Our free eBook can also show you ways to improve trust throughout the process so that both of you build trust with each other, or repair trust if it is broken.
In a recent customer survey, 72% cited trust as very important in their supply chain. What does having trust in a relationship really mean? We’ve recently released a FREE ebook that provides that common definition trust and helps you answer this question. First, we need to understand some of the basic characteristics in people before you decide if you want to build trust with them. People that are critical in your supply chain need to be trustworthy; they are sincere, competent and reliable.
It has been said that the true test of a supply chain partner is not when times are good, but when times are bad. When I was sourcing $460M/yr at Staples, we had port closings, ship delays and one plant even burned to the ground. The good suppliers had back up plans to recover and readily spent their profits to expedite the replacement stock. The bad suppliers never quite answered our questions directly, or repeatedly had to check with management. That forced us to come up with our own back-up plans – that didn’t include that supplier. On a smaller scale, new customers are trying to evaluate how good ETM will be in tough times. This week, both Jim and Joe are facing that decision. Here is how we work:
About 2 years ago, my family adopted a dog, Bebo, from Puerto Rico. It was clear that he had been abused; even now he doesn’t like being touched on top of his head. He doesn’t know how to play with toys. And he cowers when a big truck goes by. We think it’s because Bebo was hit on the head more than once and spent his days trying to stay alive rather than playing. We saw the potential in him and so our family has been working to help him to trust us and his new environment. I see this abused behavior at work as well.
A few weeks ago, the day after our last storm, I spent the day in our shipping area. Our customers didn’t care that UPS stopped shipping packages that night, nor that one of our shipping guys couldn’t make it in. We needed to get stuff out and I volunteered. Not only was the work needed, but I got a chance to see the back end of our operations at eye level. I learned a lot about our company and our customers. Here is what I learned:
Last week I talked about the trust by affiliation with our customer’s contract manufacturer. This week, I want to highlight trust through our employee’s affiliation. Most of you have built trust with your employees. As an example, we now have a second shift because we trust one of leads enough to run a night crew on his own. But our employees also increase the value of our network by who they trust. As a result we have lower costs or faster lead times.
This week Abner placed an order for 500 assemblies due next month. It was an order we didn’t expect to receive, based solely on how little Abner trusts us. This doesn’t mean that Abner distrusts us, he just doesn’t know us well – we’ve only worked on one other order together. We have worked frequently with his customer, Ian, and Ian trusts us. Abner trusts Ian, and Ian trusts ETM, so Abner trusts ETM. That’s the power of trust and I believe it can be a competitive weapon. It certainly is for Ian and Abner.
Thanks to Christine Sullivan of The Enterprise Center, I was invited to participate on WBNW’s “Radio Entrepeneur’s” show last Thursday. I first met Christine as a student in some her Center’s educational classes. Later, I had a chance to participate in her hosted CEO groups. Most recently, I introduced Beth Goldstein (a former ETM Advisor) to Christine to help launch her program for rapidly accelerating businesses. Christine introduced me to WBNW as a thank you and it was truly a gift.