Scanning my Wall Street Journal yesterday morning, I came across an article, CEO’s Call Credit Crucial to Jobs. (subscription may be rquired)

The article summarizes statements from a group of executives attending this paper’s annual CEO Council.  The essence of the headline is that executives feel that the key to recovery in the U.S. is predicated in growth of jobs, and job growth has to be fueled primarily by small and medium sized businesses.  These same executives however, point out that these businesses are restricted by a lack of credit to be able to invest in hiring and their value-chain resources.

This argument, for me makes lots of business sense.  Ever since this global credit crisis transpired in mid to late 2008, there has been a constant cry for banks to begin more lending, albeit with more prudent risk factors.  U.S. legislative leaders are constantly lambasting banks and financial institutions for paying more attention to their own recovery vs., that of the economy as a whole.

But then I began to ponder on other events that have occurred, particularly these past few months.  Have you noticed that the financial headlines these past few months have been filled with announcements of acquisitions? 

Just for curiosity, I performed an Internet search of announced acquisitions over the past three months.  I’ve screened the announcements to reflect those that would have supply-chain implications.

•  Coca Cola and China Huiyan Juice       Value: $2.5 billion
•  BASF and Ciba            Value: $5.4 billion
• Eli Lilly and Imclone    Value: $6.1 billion
• Stanley Works and Black and Decker      Value: $4.5 billion
• Berkshire Hathaway and BNSF     Value: $34 billion
• Kraft and Cadbury PLC       Value: $16.4 billion
• JDA Software and i2 Technologies      Value: $396 million
• Hewlett Packard and 3Com         Value: $2.7 billion

My very unofficial tally indicates over $38 billion in acquisition volume if you do not choose to include Berkshire’s acquisition of the BNSF railroad, $72 billion if you do.  That’s just a representative sample of these past three months.

With this evidence, the question I would pose is simply the following. Are CEO’s more concerned right now on positioning for market dominance or market share, vs. investing money in ramping-up job growth and value-chain resources to prepare for the pending recovery?  More than not, acquisitions tend to lead to the shedding of more jobs, and the consolidation and elimination of more suppliers.

I’m sure that there will be many on either side of this debate.  The strategists will argue that acquisitions are a more expedient means to seize opportunities in emerging markets, specific industry sectors,  or drive more productivity and faster sales growth.  Detractors may well argue that the history for successful acquisitions among companies is not stellar, except for the bonus payouts to the executives in the companies involved.

But back to the key point that started this thinking.  Is credit really not readily available to finance expansion and jobs?  The numbers above indicate that at least larger companies are finding a treasure trove of credit, to the tune of $72 billion in the last three months.  Are these same credit resources available to small and mid-sized businesses?  Perhaps not, at least according to the attendees of the Wall Street Journal CEO Conference.

The sum conclusion of this posting is for all to reflect on the fundamental question which I chose for the title of this posting- In preparing for the upcoming post-recession recovery, are CEO’s really positioning for market dominance, job growth, or both?  The informal evidence that I’ve uncovered concludes market dominance.

That stated, perhaps these same CEO’s would refrain from talking about the lack of job growth, at least until they are willing to invest the same level of financial resources on job growth in their own companies.  Perhaps they could convince their bankers that investing in jobs is just as productive.

To the same U.S. legislative leaders who rant about Wall Street and the banking industry, perhaps its time to stop the sound bites and wake-up to what’s really occurring in the economy. Business news network CNBC reported that U-3, the U.S. government’s broadest indicator of employment now stands at a whopping 17.5% of the workforce. One in five Americans are either out of work or under-employed.

What’s happening on Wall Street and Main Street are dramatically at odds, and sound bites from either side are not addressing the magnitude of the problem.  Small businesses can’t hire anywhere close to the 17.5% number, and large enterprises it seems have other priorities of investment.

Perhaps some readers can either clarify or chime in?

 Bob Ferrari

A couple of days ago, I heard a local TV news story that indicated that Kellogg was experiencing a nationwide supply shortage of its Eggo brand of frozen waffles.  The context of the story was that consumers across the country were bummed out. My initial reaction was to tuck this story away for perhaps an upcoming Supply Chain Matters blog post on continued difficulties in ramping-up supply chains in post recession recovery.  But today, there is a totally new and more concerning twist to this ongoing situation.

ABC News is reporting today that while Kellogg Company blamed a nationwide shortage of its Eggo brand frozen waffles on plant flooding caused from heavy rains, that is only part of the story.  The Atlanta production facility was reported to be closed during much of September and October to actually sanitize the plant after inspectors discovered Listeria monocytogenes in a sample of Eggos within the plant.

The story further indicates that Kellogg agreed to recall about 4500 cases of Eggos on September 2 after a routine state inspection discovered the presence of Listeria. A Kellogg spokesperson indicated the plant was closed for both (initial) cleaning and as a result of the later incident of flooding. In an email sent to ABC News, the spokesperson wrote: “Just as the Atlanta facility was ready to resume production, excessive rain in the region caused flooding at the facility, which delayed the start-up.”

The assistant commissioner of consumer protection for the Georgia Department of Health also indicated that Kellogg had entered into an agreement with state and federal officials on a “hygienic restoration plan”, but in late September as Kellogg was ready to reopen the plant, heavy rains hit Atlanta. That same official indicated that flood waters did not appear to enter the plant, but Kellogg wanted time to perform their hygienic restoration over again.

Meanwhile, it appears that Kellogg has been embarking on its own social and traditional media driven campaign to lament the large shortage of Eggo waffles. A posting that today appeared in the Huffington Post, of all places, notes that there will be a nationwide shortage of the popular Eggo frozen waffles because of interruptions in production at two of the four plants that produce the product. It further acknowledges the shutdown of the Atlanta plant because of flood, and notes that several production lines at its largest bakery in Rossville Tennessee are closed indefinitely for repairs. The same Kellogg spokesperson quoted in the ABC News story who half acknowledged the Atlanta shutdown was caused by both hygienic cleaning and flooding, is quoted in the Huffington Post as not knowing how long the Atlanta plant was shut down, but indicated it is back at full production now.

The Huffington posting notes that news of the shortage spread quickly on Twitter as shoppers reported not being able to find their favorite breakfast food, and are apparently in lamenting the scarcity on Facebook as well.  The final tip off is that the article closes with web links to Kellogg Eggo related web sites including www.leggomyeggo.com.

After reading both of these postings, as well as other related news accounts, I must state that from my perspective of supply chain risk management, I am totally confused as well as concerned.  Rarely have I ever heard of production lines at a supply plant being closed indefinitely without more specific information as to cause. The various accounts of what really led Atlanta to shutdown are also convoluted. And finally, comes the statement that it will take the middle of 2010 before shelves around the country are re-stocked at pre-shutdown levels.  That amounts to seven months of production and half a year’s worth of sales impact!

In the interests of rationality, and not knowing all the specific facts related to this ongoing disruption, I won’t attempt to speculate any further in my posting as to what’s really going on at Kellogg.  Hopefully more rational explanations will come forth, and I welcome any of them. 

But, I certainly hope that Kellogg is not undertaking a twisted social media campaign to have consumers lament the nationwide shortage of Eggos in order to save face to what’s really occurring in their supply chain.  

When the threat of product contamination occurs anywhere in the supply chain, it is best to err on the side of safety.  This blog has commented on many incidents over past months where this has occurred.  The most public was the recent contamination incidents involving peanut products.  Our external view indicates that Kellogg has taken extraordinary action to do the same. But a social media campaign to motivate consumers to lament the shortage of their favorite breakfast food is in my view, over the top.

 Bob Ferrari