Henry_Hudson arrived in 1609 in America and founded New York

Luckily, the 400th anniversary of Henry Hudson’s arrival in America is being celebrated in both the Netherlands and the US this year. All of the VOC’s power lay in the hands of a collective: the Assembly of the Lords Seventeen. Nobody had the last word and there was no single final authority. It was the start of successful decision-making by consensus, the so-called polder model.

With a worldwide supply chain network, the VOC controlled practically all trade and shipping to Asia for two centuries. It built numerous outposts along the way, including on the Cape Peninsula (now Cape Town) and in Batavia (now Jakarta). The VOC never engaged in colonisation, remaining instead, in the words of Dutch historian Geert Mak, ‘a trading company: powerful and forceful, to be sure, but nevertheless a business, which had just happened to set up operations on the edges of Africa and the Indonesian Archipelago’. The Dutch ability to adapt to the local culture enabled the VOC to become the only trading company to obtain a trading post on the Japanese island of Dejima.

The Dutch were also far ahead of their time from a financial perspective. Amsterdam ship owners held shares in dozens of ships, instead of being sole owners. During the VOC years, Amsterdam was the financial capital of the world. In 1609, two institutions crucial to trade were established there: a commodity exchange, a unique trading place for all merchants, and an exchange bank, which profoundly modernised the international flow of money by converting every conceivable currency into indexed certificates. These financial institutions adeptly served the needs of global trade and shipping: supply chain and finance of which we can be proud.

Martijn Lofvers, Editor-in-Chief & Publisher Supply Chain Magazine
martijn.lofvers@springer.com

Sailing through the storm, paint by Franz Josef Frühbeck (1795-after 1830)

While in Switzerland last week, I met with executive managers of several Fortune 100 companies in the Fast Moving Consumer Goods (FMCG) and Healthcare industries. Contrary to the capital equipment and the automotive industries, the FMCG and Healthcare companies were typically well on track as regards their 2008 targets both from a top line and bottom line perspective. However, they did say their outlook for next year is conservative, especially with respect to high end, premium-related products. So the impact of the credit crunch and the likely recession differ by industry vertical and the liquidity position of each individual company, but the sense of urgency has touched us all. It is now time to act accordingly. Therefore, I recommend that you review five useful strategies to navigate through the storm.

Five strategies
The first strategy is to focus on the cash-to-cash cycle as over the next few months, and possibly even beyond, cash is king. Squeezing every euro out of the supply chain ought to be high on the agenda for all of us. Strategy number two is to focus on inventory reduction throughout the chain. Sustainable savings will most likely require fundamental improvements in sales and operations planning (S&OP), point of sales visibility in the chain, stock-keeping unit rationalization to shorten the long tail, production planning and lead time compression.

The third strategy is to restructure the network and increase the frequency with which the network is reviewed. Given the globalization wave and the major shift to low-cost country sourcing, significant costs are locked into the supply chain. In today’s volatile environment, the long lead times through sourcing in Asia will automatically lead to high working capital and exposure to risks (currency risk, market risk, fuel, quality assurance, et cetera). More and more companies should be reviewing the near-shoring and postponement alternatives in Central and Eastern Europe, including countries such as Romania, Bulgaria and the Ukraine. A few years ago, AMR Research revealed that 80 percent of supply chain lifecycle costs are locked in at the start. Making changes at an operational and/or tactical level will therefore have a limited effect. Given the uncertainty at hand, companies need to increase the frequency of assessing the effectiveness of the current network in order to realize step change and pro-actively plan for unforeseen risks and events (scenario planning to have a plan B readily available).

The fourth strategy is to align the Supply Chain Management function with that of Sales & Marketing. A recent survey amongst CEOs revealed that 93 percent of the respondents feel that Supply Chain Management is critical or very critical to the overall business strategy. Interestingly, however, the CEOs put growth (75%) before cost reduction (25%) and perceive supply chain initiatives as being focused predominantly on cost reduction (82%) rather than top line growth (18%). Good examples of companies that have mastered the alignment aspect besides being highly capable of executing the supply chain are typically found in the AMR Top 25 listing. These companies have demonstrated excellence in such things as customizing their supply chains per product-market-channel, demand shaping/sensing, service/lifecycle management and innovation/launching of new products.

Last but not least, the fifth strategy relates to transforming fixed costs into variable costs. In a volatile environment, swapping fixed costs for variable costs is generally a good idea. This includes selling and leasing back assets, contract manufacturing, third-party warehousing, etc.

There is an old saying that strong currents and gusty winds favour the competent sailor. I trust these strategies will help you sail through the challenging storm ahead.

Patrick Haex is Managing Partner Supply Chain Management at Buck Consultants International.
patrick.haex@bciglobal.com

Stephan Satijn

What worries me more is the response of the market itself. The current situation provides opportunities for those who aim to benefit from short-term goals. They will immediately go out in pursuit of squeezing another company dry. As always, it will be a safe bet for the short term but a potential loss for the future, when markets will recuperate.

My organization, the Holland International Distribution Council, has more than twenty years of experience in helping North American companies establish their business in Europe. We advise efficient ways for setting up businesses enabling them to get the maximum effect with the most propitious organization. With tailor-made advice and mediation services, we help build a solid foundation for developing a strong business in Europe.

It will not be easy to navigate against the tide but there are still plenty of safe routes. It might be painful on occasion, but there are proven ways to ride the storm. Lance Armstrong said once: ‘Pain is temporary. It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever.’

I hope to see you soon in Europe.

Stephan Satijn is Vice President Logistics at Holland International Distribution Council (NDL /HID C).
s.satijn@hidc.nl

Paradise Australia, but not yet for the consumer?

Getting my life started in Australia, I wondered though if the laid back attitude, the nice weather, the lattés on the numerous terraces and all the great facilities available were numbing the Australian consumer to the high prices they pay for basic goods. I realised that although many companies on this island where monopolies, duopolies or something close to not ideal for the consumer, nobody was complaining about it. Now I don’t dislike monopolies for the sake of it, but I hate not having a choice and being ripped off on top of that. Furthermore, my background as an Operations Researcher and Supply Chain professional gives me goose bumps for the wrong reasons on a lack of efficiency and innovation.

It all started with getting a phone line. Living in an inner Melbourne suburb I could choose from exactly one option: Telstra. The biggest competitor Optus could not deliver this very basic service in my area, probably because of the massive network fee Telstra charges their competitors. Lazy as I am, to make things easy, I wanted my internet connection through the same provider. The shock came a month later when my first monthly internet bill was AUD$500. It seemed Telstra charges for both downloads and uploads, and my frequent usage of Skype didn’t help there! In their monopolist minds it had not appeared yet to Telstra that internet is more or less like a toilet. If you have a need you use it. 24-7, no exceptions, it’s just there waiting to be used. The service should be for the connection and the speed, not how often I use it.

Going shopping it makes you realise that Australia is the third densest retailing country in the world, Switzerland being number one. Coles and Woolworths control 70 percent of the packaged grocery market and that’s highly felt by your wallet once you pay your weekly shopping at the cashier. In walking distance in a densely populated suburb I have two major retail locations. In terms of supermarkets, I can choose between Coles and Coles! The Australians I see there don’t seem to wonder if they’re overcharged.

Now I’m looking to buy a house, it appears to me that the big four banks, which are all backed by the government, can get away with interest rates up to 3 percent above the national Reserve Bank rate. The Australian public does not rebel at all. They finish their latté and cross the road to one of the nearest big four. Currently 90 percent of the new mortgages are now dealt through the four big banks. Some estimates say that it’s indirectly closer to 100 percent . Guess who’s laughing?

But change is coming. In telecommunications Telstra is being forced by the government to split its activities in wholesale and retail, preventing it from charging competitors unfair prices just because they can. It is widely expected and proven in many countries that this will increase competition and be a major benefit for the Australian consumer. In retail land Aldi just opened their 200^th store and the American giant Costco just opened the doors in Melbourne. The Australian Competition and Consumer Commission struck a deal with Coles and Woolworths to end restrictive leases in shopping locations. This will open the door for other retailers like Aldi, who will aggressively expand. Hallelujah, we will have choice! And the big four banks? Well, they probably stay the big four for a long time, but as consumer I start to see positive signs and look forward to Australia as a consumer paradise island.

Niels van Hove,  S&OP Manager Cheese, National Foods