supply chain pain
DESCRIPTION
Presentation by John Smith of Company Watch during the September e-World Conference.TRANSCRIPT
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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”
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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
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Confidential to Apple Inc Company
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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
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Confidential to Apple Inc Company
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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?
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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
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Confidential to Apple Inc Company
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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)
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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
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Confidential to Apple Inc Company
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Costly welfare systems
Ageing population
Large deficit
High debt
Poor competitiveness internationally
Structural Problems
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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…..”
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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
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Confidential to Apple Inc Company
Watch Ltd
Recession
Recovery
One “R” word for another
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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!
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Confidential to Apple Inc Company
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Working capital to fund growth –sources?
Resources required to meet increased demand – cost and availability?
Businesses Need to Consider
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Confidential to Apple Inc Company
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Overtrading…….
Pressure on finances, staff and systems
Supply Chain/Procurement Teams should be
reviewing their key suppliers NOW
The Major Risk is:
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Confidential to Apple Inc Company
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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
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Confidential to Apple Inc Company
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High Risk
Medium Risk
Low Risk
THE RISK PYRAMID
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Confidential to Apple Inc Company
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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
.
.
.
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
.
.
.
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Forward looking
Flexible
Stress-testing & forecasting
Reliable
How good are your analytical tools?
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What you need: Early Warnings
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Early WarningsW.T. BURDEN LIMITED
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Early Warnings2E2 HOLDINGS LIMITED
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Confidential to Apple Inc Company
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Early Warnings
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Confidential to Apple Inc Company
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Early WarningsB & Q IRELAND LIMITED
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Confidential to Apple Inc Company
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Looking Forward: Stress testing & forecasting
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Confidential to Apple Inc Company
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Looking Forward: Stress testing & forecasting
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Confidential to Apple Inc Company
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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
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Confidential to Apple Inc Company
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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.
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Confidential to Apple Inc Company
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“Ours is not to reason why…
Ours is but to flog and buy”
………………………..….Arthur Daley
The Way Forward
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Confidential to Apple Inc Company
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Contact us:
John A. Smith – Client Relationship Director