Consumers have slowed the growth of their spending (up a mere 0.2% in December 2007), which translates into some significant drops in results for some US retailers. Driving consumer behavior is a concern over the direction the US economy is taking (growth of only 0.6% in the fourth quarter). A rise in the unemployment rate (up from 4.7% to 5.0% in December) added to those anxieties.
The credit crisis in housing is fueling some of this concern as homeowners see their paper wealth diminish. This is further exacerbated by the foreclosure sales that are further depressing housing prices by offering homes at far less than their appraised tax value and bringing down values of similar neighboring homes.
Reactions on the stock exchanges pushed the Dow Jones Industrial Average below 13,000, putting share-based retirement plans into a nosedive. So, in their two most significant paper assets, consumers feel more than a pinch. Personal income did rise a little faster than expected in December, but at a rate of only 0.5% it isn’t likely to assuage consumers' concerns.
The International Monetary Fund (IMF) issued a forecast which shows decreases across the board, but points to areas where growth rates remain well ahead of the US or global averages. The IMF suggests the US will see 1.5% growth in 2008 while the world economic growth rate will be 4.1%.
In the update to the IMF’s World Economic Outlook, the group forecast slowing growth in emerging markets and developing countries (6.9% in 2008 vs. 7.8% in 2007) and in China (10% in 2008 vs. 11.4% in 2007). Reports have it that the slowdown in US consumer spending is occurring at all levels on the economic ladder. It’s not yet a cessation of spending, just consumers putting more discretion in discretionary purchases.
Supply chain managers sit at the fulcrum of demand and supply. Your balancing act is to keep the cash cycle on track and to help the company quickly convert any new market or inventory strategies into action. You put agility into those policy shifts.
Get your tools and resources lined up because you may be called upon to jump quickly. And remember to look both ways because you may need to make changes at either end of the supply chain (or both) as you follow demand wherever it might occur in the world and tune the supply side for higher performance at lower cost.
At least one carmaker, Hyundai, sees a silver lining in this difficult market, saying US buyers who remain in the market tend to shift to the “value-oriented brands.” That may be true, but you still have to put the goods in front of the people with the money when they’re ready to spend. Now, more than ever, the best supply chain wins.