Presentation by John Smith of Company Watch during the September e-World Conference.

1. “Supply Chain Pain”
Managing Supplier Risk As We Move Out Of Recession
eWorld Purchasing & Supply
London, 24 September 2013
Confidential to Apple Inc
Watch Ltd
John A. Smith – Client Relationship Director
Company Watch
“Hindsight in Advance”
Company

2. 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
Watch Ltd
Company

3. 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
Watch Ltd
Company

4. 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
Watch Ltd
Company

5. 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
Watch Ltd
Company

6. 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
Watch Ltd
Company

7. 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
Watch Ltd
Company

8. Structural Problems
Costly welfare systems
Ageing population
Large deficit
High debt
Poor competitiveness internationally
Confidential to Apple Inc
Watch Ltd
Company

9. 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
Watch Ltd
Company

10. “Tentative signs of a balanced, broadbased and sustainable recovery…”
George Osborne, a speech in London, 9th
September 2013
Confidential to Apple Inc
Watch Ltd
Company

11. One “R” word for another
Recession
Recovery
Confidential to Apple Inc
Watch Ltd
Company

12. Recovery Kills!
Businesses are now leaner, meaner and
hardened, BUT
They are more at risk emerging from a recession
Confidential to Apple Inc
Watch Ltd
Company

13. Businesses Need to Consider
Working capital to fund growth –sources?
Resources required to meet increased demand –
cost and availability?
Confidential to Apple Inc
Watch Ltd
Company

14. The Major Risk is:
Overtrading…….
Pressure on finances, staff and systems
Supply Chain/Procurement Teams should be
reviewing their key suppliers
Confidential to Apple Inc
Watch Ltd
NOW
Company

15. Caution
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
Confidential to Apple Inc
Watch Ltd
Company

16. THE RISK PYRAMID
High Risk
Medium Risk
Low Risk
Confidential to Apple Inc
Watch Ltd
Company

17. CONTRACT CHAIN
YOUR COMPANY
COMPANY A
£ 100 M
COMPANY B
£ 150 M
COMPANY C
£200 M
COMPANY D
£ 250 M
Company m £25 M
Company n £25 M
Company X £20 M
Company p £40 M
Company q £40 M
Company X £25 M
Company r £70 M
Company s £60 M
Company X £30 M
Company t £80 M
Company u £80 M
Company X £35 M
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.
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Confidential to Apple Inc
Watch Ltd
Company

18. How good are your analytical tools?
Forward looking
Flexible
Stress-testing & forecasting
Reliable
Confidential to Apple Inc
Watch Ltd
Company

19. What you need: Early Warnings
Confidential to Apple Inc
Watch Ltd
Company

20. Early Warnings
W.T. BURDEN LIMITED
Confidential to Apple Inc
Watch Ltd
Company

21. Early Warnings
2E2 HOLDINGS LIMITED
Confidential to Apple Inc
Watch Ltd
Company

22. Early Warnings
Confidential to Apple Inc
Watch Ltd
Company

23. Early Warnings
B & Q IRELAND LIMITED
Confidential to Apple Inc
Watch Ltd
Company

24. Looking Forward: Stress testing & forecasting
Confidential to Apple Inc
Watch Ltd
Company

25. Looking Forward: Stress testing & forecasting
Confidential to Apple Inc
Watch Ltd
Company

26. Introducing a monitoring process
The companies you need to focus your key resources on
Weak
Risk
Suppliers
69%
5%
Search engine
Suppliers
Diagnostic
power
Strong
Low exposure
Confidential to Apple Inc
Watch Ltd
Portfolio
management
system
High exposure
Company

27. 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
Watch Ltd
Company

28. The Way Forward
“Ours is not to reason why…
Ours is but to flog and buy”
………………………..….Arthur Daley
Confidential to Apple Inc
Watch Ltd
Company

29. Contact us:
John A. Smith – Client Relationship Director
info@companywatch.net
www.companywatch.net
Confidential to Apple Inc
Watch Ltd
Company