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ASCM Insights

Business Lessons That Will Help Us through This Recession

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Last week the National Bureau of Economic Research announced that the United States officially is in another recession. As tough as this situation is, we knew this day would come. In fact, five years ago, I wrote for this blog that we were due for a major financial disruption. Now we’re overdue, and we have to hope that we prepared enough.

COVID-19 is driving what could be the global economy’s worst economic recession since World War II. In May, the European Commission released projections that Europe’s economy will decline by 7.4% this year, driving the union’s worst economic recession in its history. Similarly, Japan — the world’s third-largest economy — entered a recession last month.

Economists note that this recession is different than those of the past. For starters, this recession was spurred by a global health crisis, rather than a financial issue. The speed of this economic collapse was much faster because COVID-19 quickly shut down economic activity in favor of stopping the spread of the virus. Millions of Americans were unemployed within a matter of weeks this time, whereas the Great Recession’s unemployment rate didn’t peak until October 2009, nearly two years after the recession started. Furthermore, the recession has hit most industries across the economy — from travel and hospitality to manufacturing to even government activities. These differences make it harder to predict how long it will take to recover.

Even if this year’s recession is unique, the lessons learned from previous recessions will be useful this time around too. The strategies used to bounce back from the Great Recession of 2007-2009 in particular could even hold some keys to success.

In a joint research project, supply chain experts at ASCM and the Center for Supply Chain Innovation at Texas Christian University’s Neeley School of Business uncovered critical success factors of supply chains that were able to rebound from this financial setback.

Specifically, the organizations that were better positioned to recover from the Great Recession reflected the following:

  • less waste that needed to be cut
  • better control over internal processes
  • a greater ability to absorb declining sales
  • better relationships with suppliers and customers, which led to lower inventories, transaction costs, and research and development expenses.

The firms that thrived also had a variable structure. They were more labor intensive and more productive and also outsourced asset-intensive and less productive processes.

Supply chain success

One cool — but not totally surprising finding — was that companies that invested in supply chain excellence outperformed their industry peers. The research findings show that these companies measured 4% above their rivals’ average return on equity decline and maintained 22% more market capitalization than their average rivals.

To find out how you can set your company and your supply chain up for success during these difficult financial times, register for ASCM’s new webinar series, “Lessons Learned: Global Insights on Supply Chain’s Role in the Economic Recovery Plan.” The first session, “Gaining Advantage Through the Recession,” which will take place Tuesday, June 23, 2020, at 10:00 a.m. CDT, will offer deeper insights into this joint research project and share the key performance indicators your organization should be focused on maximizing in order to come out ahead of this recession.

This first event in the series is open to all supply chain professionals, so be sure to invite your colleagues as well.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer at ASCM, the largest nonprofit association for supply chain and the global leader in supply chain organizational transformation and innovation. Prior to this, he was the managing director for the Operations Consulting Group of American Express Tax and Business Services. His leadership roles have included project management, business process redesign, and individual and organizational alignment. Eshkenazi may be contacted through editorial@ascm.org.

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