supply chain pain
DESCRIPTION
Presentation by John Smith of Company Watch during the September e-World Conference.TRANSCRIPT
Confidential to Apple Inc Company
Watch Ltd
“Supply Chain Pain”
Managing Supplier Risk As We Move Out Of Recession
eWorld Purchasing & Supply London, 24 September 2013
John A. Smith – Client Relationship Director
Company Watch“Hindsight in Advance”
Confidential to Apple Inc Company
Watch Ltd
Pain in the Supply Chain – The Collapse of High Street Retailers
Unsecured Creditors such as Suppliers, Landlords and Customers were left being owed £2 Billion
£499 Million recovered in assets from the 19 biggest retail failures since 2012
Banks and other secured lenders got at least £365 Million
Only £14 Million went to Unsecured Creditors
Confidential to Apple Inc Company
Watch Ltd
Pain in the Supply Chain – The Collapse of High Street Retailers
Two in three small shops on the brink
Based on an analysis of 40,000 companies
Review carried out by Bill Grimsey, former Chief Executive of Wickes and Iceland
Research by Company Watch
Confidential to Apple Inc Company
Watch Ltd
Pain in the Supply Chain – The Collapse of Construction
5,500 Construction and Architectural Insolvencies in the two-year period since Q2 2011
But how many Zombie companies are there?
Low profit margins? Under-capitalisation? Suicidal pricing imposed? Late payments?
Confidential to Apple Inc Company
Watch Ltd
Pain in the Supply Chain – The Collapse of Construction
Procurement could become a creditor if a builder fails
Due diligence for Performance Bonds?
Costs of replacing a builder
Confidential to Apple Inc Company
Watch Ltd
Construction – Some Optimism?
Construction Industry output rose by 1.4% between Q1 and Q2 this year – (The Office for National Statistics, August 2013)
New projects beginning to rise in almost every part of the country – (The Royal Institution of Chartered Surveyors, July 2013)
Confidential to Apple Inc Company
Watch Ltd
Real Estate (Office for National Statistics, September 2013)
562,000 people employed in Real Estate – mainly estate agents
A growth of 77,000 over the past year
Up 100,000 on 2008, pre-crisis boom
Confidential to Apple Inc Company
Watch Ltd
Costly welfare systems
Ageing population
Large deficit
High debt
Poor competitiveness internationally
Structural Problems
Confidential to Apple Inc Company
Watch Ltd
Hyman Minsky (1919-96)Professor of Economics at Washington University
“…..economic stability encourages risk taking and credit expansion until instability appears and ultimately generates
a contraction of credit and deflation…..”
Confidential to Apple Inc Company
Watch Ltd
“Tentative signs of a balanced, broad-based and sustainable recovery…”
George Osborne, a speech in London, 9th September 2013
Confidential to Apple Inc Company
Watch Ltd
Recession
Recovery
One “R” word for another
Confidential to Apple Inc Company
Watch Ltd
Businesses are now leaner, meaner and hardened, BUT
They are more at risk emerging from a recession
Recovery Kills!
Confidential to Apple Inc Company
Watch Ltd
Working capital to fund growth –sources?
Resources required to meet increased demand – cost and availability?
Businesses Need to Consider
Confidential to Apple Inc Company
Watch Ltd
Overtrading…….
Pressure on finances, staff and systems
Supply Chain/Procurement Teams should be
reviewing their key suppliers NOW
The Major Risk is:
Confidential to Apple Inc Company
Watch Ltd
Increased need for reliable & current information
Your Supplier sees you as a Customer! What is your Credit Limit?
The number of ‘Zombie’ companies
Potential for increase in fraud & corporate crime
The banking system
Insolvencies can breed insolvencies
Caution
Confidential to Apple Inc Company
Watch Ltd
High Risk
Medium Risk
Low Risk
THE RISK PYRAMID
Confidential to Apple Inc Company
Watch Ltd
CONTRACT CHAIN
YOUR COMPANY
COMPANY A£ 100 M
COMPANY B£ 150 M
COMPANY C£200 M
COMPANY D£ 250 M
Company m £25 MCompany n £25 MCompany X £20 M
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.
.
Company p £40 MCompany q £40 MCompany X £25 M
.
.
.
Company r £70 MCompany s £60 MCompany X £30 M
.
.
.
Company t £80 MCompany u £80 MCompany X £35 M
.
.
.
Confidential to Apple Inc Company
Watch Ltd
Forward looking
Flexible
Stress-testing & forecasting
Reliable
How good are your analytical tools?
Confidential to Apple Inc Company
Watch Ltd
What you need: Early Warnings
Confidential to Apple Inc Company
Watch Ltd
Early WarningsW.T. BURDEN LIMITED
Confidential to Apple Inc Company
Watch Ltd
Early Warnings2E2 HOLDINGS LIMITED
Confidential to Apple Inc Company
Watch Ltd
Early Warnings
Confidential to Apple Inc Company
Watch Ltd
Early WarningsB & Q IRELAND LIMITED
Confidential to Apple Inc Company
Watch Ltd
Looking Forward: Stress testing & forecasting
Confidential to Apple Inc Company
Watch Ltd
Looking Forward: Stress testing & forecasting
Confidential to Apple Inc Company
Watch Ltd
Introducing a monitoring processThe companies you need to focus your key resources on
Risk 69% Suppliers 5%
Weak
Strong
Low exposure High exposure
Search engine
Portfolio management system
Diagnostic power
Suppliers
Confidential to Apple Inc Company
Watch Ltd
Introducing a monitoring process
Get an early warning of potential problems.
Identify the companies you do NOT need to review.
More time to monitor the companies in depth that you DO need to review.
Significantly reduce the time spent on a high proportion of your suppliers each year.
September is a busy month for filing company accounts.
Confidential to Apple Inc Company
Watch Ltd
“Ours is not to reason why…
Ours is but to flog and buy”
………………………..….Arthur Daley
The Way Forward
Confidential to Apple Inc Company
Watch Ltd
Contact us:
John A. Smith – Client Relationship Director