This is my fourth live posting of observations and commentary related to events at this year’s Annual Conference of Supply Chain Management Professionals (CSCMP).
When I performed my pre-planning prior to the conference, one of the sessions that had been on my “must attend” list was the session titled Wall Street’s Perspective on Supply Chain. This session did not disappoint.
It consisted of a panel of four senior investment professionals experienced in private equity and investment banking, with first-hand knowledge of how the Wall Street community looks to supply chain as a measure of value. The firms represented included Frontenac, Jeffries and Company, Inc., MERK Capital Corporation and NKF Consulting. Each panelist began by providing an overview of their firm activities as well as a perspective on how they view supply chain. The session then turned to an open Q&A exchange among the panelists and the audience.
Some of the summary messages from the consensus of the panelists follow.
The focus of mining supply chain for continued cost savings must continue over the coming months. A statement by William Hunter, Managing Partner at Jeffries was that companies have done a great job of rationalizing costs and shedding excess people. Even though most feel we have begun to turn the corner, recovery across broader industry sectors will take more time. The perspective echoed by many CEO’s / CFO’s is that top-line revenue growth will not begin to occur until mid-2010. This implies that profitability will continue to come from reductions in cost as well as increased efficiencies. Cash is still king, and Wall Street will punish unexpected surprises.
CFO’s must respond to Wall Street, and the panelist consensus was that many CFO’s will continue to not only have a keen eye toward continued profitability, but will also look to:
- Top line innovation
- Capacity rationalization
- Specifics of risk management
I was especially tuned to the validation that supply chain risk sensitivity has now become a top item of interest within the C-suite.
A slide shared by Hess addressed his view of Wall Street’s expectation as we transition to the next phase of the business recovery. Whereas the current phase has had a primary focus on optimizing business liquidity, the next will focus toward optimizing performance management and operations execution. One other noteworthy quote from Robert Hess, Managing partner of NKF Consulting specifically addressed supply chain equilibrium. Going forward, Wall Street will look negatively on companies that attempt to plan demand based on forecast history. “Forecasting on the past is dead wrong” noted Hess. Forward-looking demand planning and operational excellence, especially process-related excellence, will continue to make positive impressions on the value of a company. “It’s all about “doing fewer things better, and proving it.”
An observation by two of the panelists relates to the ability to get money for transformation and/or rationalization initiatives related to supply chain. According to the panelists, credit markets remain very tight, and access to additional money will remain a challenge. ROI and hurdle rates need to be very strong, and eliminating a couple of distribution centers may not necessarily be a positively received investment by private equity investors. Reduction in inventory turns or bottom-line inventory, on the other hand is looked on as positive.
Let’s end on a positive note. The panelists did indicate that experienced supply chain talent will continue to be in demand across multiple industry sectors, which was phrased as good news for the audience. My reaction was simply, who else in the organization has the scope and knowledge to deliver continued process excellence- supply chain, of course. But don’t ask for that raise just in salary, at least not for a few more months.