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Supply Chain Pain
The document discusses supply chain risks emerging from an economic recession. It notes that unsecured creditors like suppliers were owed billions after the collapse of major UK retailers but received very little in recoveries. Two-thirds of small shops are also at risk of failing. While construction industry output and real estate employment are rising, the major risk companies face is overtrading as growth resumes. Supply chain managers are advised to closely monitor key suppliers for early signs of financial distress using tools like stress testing and forecasting to reduce risks to their own companies.
Supply Chain Pain
- 1. “Supply Chain Pain” ManagingSupplier 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 theSupply 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 theSupply 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 theSupply 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 theSupply 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 – SomeOptimism? 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 forNational 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 welfaresystems Ageing population Large deficit High debt Poor competitiveness internationally Confidential to Apple Inc Watch Ltd Company
- 9. Hyman Minsky (1919-96) Professorof 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 ofa balanced, broadbased and sustainable recovery…” George Osborne, a speech in London, 9th September 2013 Confidential to Apple Inc Watch Ltd Company
- 11. One “R” wordfor another Recession Recovery Confidential to Apple Inc Watch Ltd Company
- 12. Recovery Kills! Businesses arenow leaner, meaner and hardened, BUT They are more at risk emerging from a recession Confidential to Apple Inc Watch Ltd Company
- 13. Businesses Need toConsider 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 Riskis: 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 forreliable & 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 HighRisk Medium Risk Low Risk Confidential to Apple Inc Watch Ltd Company
- 17. CONTRACT CHAIN YOUR COMPANY COMPANYA £ 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 . . . . . . . . . . . . Confidential to Apple Inc Watch Ltd Company
- 18. How good areyour 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. BURDENLIMITED Confidential to Apple Inc Watch Ltd Company
- 21. Early Warnings 2E2 HOLDINGSLIMITED Confidential to Apple Inc Watch Ltd Company
- 22. Early Warnings Confidential toApple Inc Watch Ltd Company
- 23. Early Warnings B &Q IRELAND LIMITED Confidential to Apple Inc Watch Ltd Company
- 24. Looking Forward: Stresstesting & forecasting Confidential to Apple Inc Watch Ltd Company
- 25. Looking Forward: Stresstesting & forecasting Confidential to Apple Inc Watch Ltd Company
- 26. Introducing a monitoringprocess 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 monitoringprocess 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 “Oursis 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