I hesitate to mention it, but the time is approaching when we have to use the “R” word. Not recession this time, but recovery. Everyone is being very cautious – understandably – but there is now some early evidence of a small improvement. The most notable example comes from the Organisation for Economic Co-operation and Development (OECD) which, last month, and in the most tentative way possible, suggested that we might be heading for a “trough”.
That might not sound very encouraging, but in OECD-speak a trough indicates that the figures have stopped going down and are about to go up. The OECD uses a basket of measures which it describes as composite leading indicators (CLIs) and this shows a reduced pace of deterioration in most of the OECD economies, “with stronger signals of a possible trough in Canada, France, Italy and the United Kingdom”.
The organisation is quick to hedge its bets saying it is still too early to assess whether it is a temporary or a more durable turning point. And, of course, there is still the possibility that there could be a further downturn – the so-called “W” shaped recession.
Nevertheless, for supply chain executives, it opens up a whole new range of scenarios to be planned for. Much of the focus over the past few months has been on resizing operations, managing cash and supporting suppliers – and that is still going to be important.
But thought must also be given to the problems of growth. Gordon Colborn of PRTM points out in this issue that the period coming out of a recession can be particularly dangerous. Companies that have been weakened by falling sales can run into serious cash flow problems as they struggle to fund rising demand.
It would be tragic to see supply chains tripping up on the green shoots. Managing supply chains through a future recovery will be just as critical as managing through the recession.