Inner Circle: Thriving in an Economic Downturn

The economy has most companies looking for ways to increase productivity, lower costs and stay viable. Distribution operations can’t escape the microscope—or the scalpel, for that matter.

Some are better positioned than others to weather the storm simply because of the nature of their businesses, products or clients. Others are reaping the benefits of good long-term planning; a very few are just lucky. The strongest and most forward-thinking companies are taking advantage of current market conditions to beef up their capabilities so they’ll emerge as even more formidable competitors.

Warehousing Education and Research Council (WERC) members have given me some good insights into how their companies are dealing with the current downturn. In general, their suggestions fall into the following four areas:

• People. During tough times, it’s important to manage employees with consideration and respect to maintain productivity now and in the future. Whether or not your company has suffered cuts, fear of job loss is on the minds of most employees and can be one of your biggest productivity sappers. Experts recommend keeping employees in the loop as much as possible by communicating, specifying near-term goals and doing what you can to retain your stars.

• Processes. Now is the time to examine your methodologies with fresh eyes and make adjustments. Processes that were sacred cows only months ago may now be good targets for restructuring.

Adjust forecasts, inventory levels and fill-rate targets and get rid of SKUs that aren’t selling. Ask employees which processes waste time and money, and act on their suggestions. Explore vendormanaged inventory arrangements. Consolidate or decentralize operations if feasible.

Track productivity, focusing on metrics that directly impact cost and service. Develop a migration path to mitigate the risk of competitive disadvantage. Focus on the present without losing sight of the future.

• Technology and equipment. These investments are often the first to be slashed, but not all projects have to be sacrificed. Prepare strong business cases for proposed projects, and look for those with short payback periods—12 months or less. And, move forward cautiously.

• Customers. Making changes that affect customers for the better is a way to get on the short lists of your customers and your boss. Look for customers’ pain points and devise win-win situations.

And, maintain quality-assurance activities. Now is not the time to sacrifice quality. Search for ways to compress time while actually increasing customer service. Be selective about vertical industries or customers. Think Pareto—which 20% of your customers provide the greatest payback for the effort?

There’s a tendency to hunker down until the dark cloud passes, but we recommend staying current on tools and strategies. Continue to look for new ways to add value and remove cost. What was a successful strategy just a year ago may no longer be relevant.