Tag: economy

Is There Light at the End of the Tunnel?

The Dow is plunging, financial institutions are failing, credit is drying up and long-time Wall Street icons are plummeting into bankruptcy. The U.S. economy seems to be falling like a poorly stacked house of cards. The news is full of doom and gloom and more gloom. Is there light at the end of the tunnel?

In a word, yes. But it may be a long tunnel, say manufacturing experts. There are things you can do to calm worried employees and weather the storm, says Joe Cogliano in Manufacturing & Technology eJournal.

  • Keep your staff in the communications loop, says Jay Kuhn, president of Definity Partners, a business improvement company. When the economy tightens up, employees worry about job security, providing for their family, even putting gas in their car to get to work. All that worrying takes a toll on worker productivity. Being honest about what’s happening in your company will bolster employee morale. “Workers are going home and they are hearing bad news everyday,” says Kuhn. “It’s important they know what’s going on because everything the company does is really going to be taken as a negative sign, whether it’s meant to be taken that way or not.” Employers should be prepared to answer questions and explain even minor changes like switching an insurance carrier to reign in employee nervousness. Keeping employees in the loop can alleviate their fears and keep office gossip in hand.
  • Keep things positive. Worry and stress take a physical toll on workers which can result in increased absence rates. Keeping things positive helps make workers want to come to work.
  • Embrace patriotism. Historically, Americans respond positively to hardship and sacrifice when they know they are helping their country. “Small and medium-sized businesses need to realize they’re the backbone of our economic growth and job creation,” says David Velie, managing partner of Amend Consulting/Techsolve, a manufacturing improvement consulting firm. “Remind teams that they’re the strength of the economy, not the Fortune 500s and the housing sector.”
  • Maintain your cash flow. Take a close look at factors that affect your cash flow. You may need to reign in credit terms and be more aggressive about collections to improve your cash flow. Watch for potential cash-draining trouble spots. Kuhn says business owners should base every decision on a “cash is king” model.

Things may be rough for all of us for a year or two, but as Kuhn points out, “The economy does come back; it always comes back.”

Recession Over but We’re Not Out of Woods Yet

Today’s headline blared: “Recession officially ends, with trepidation.” Ain’t that the truth! In officially declaring the recession over, the U.S. Commerce Department cited a 3.5% growth in the economy. Encouraging, certainly. Something to cheer about? Apparently Wall Street thought so as the Dow Jones Industrial average shot up nearly 200 points. But the guy or gal on the street? Maybe not so much. The effect seems more psychological than actual. Economists caution that much of the 3.5% increase in gross domestic product was fueled by the government’s Cash for Clunkers program and first-time homebuyers tax credit. Whether those programs have created an unnatural spike in economic growth that can’t be maintained or the economy really is finally throwing off the chill of recession, only time will tell. But until unemployment decreases, most analysts agree we’re not out of the woods yet.

Getting people back to work is the real challenge now. People aren’t going to start buying again — the necessary trigger for real economic improvement — until they have jobs and can stop worrying about keeping food on the table and a roof over their heads. And the jobs won’t be there until American businesses feel comfortable financially. A bit of a vicious circle: consumer purchasing fuels businesses which fuel jobs. Traditionally, small businesses provide the greatest potential for U.S. job growth; so it was interesting to read the results of the American Express OPEN Small Business Monitor bi-annual survey in Manufacturing & Technology eJournal.

Here are some of the survey highlights:

  • 51% of manufacturers have a positive outlook, about the same as last year (52%)
  • 61% are experiencing serious cash flow difficulties, compared to 47% a year ago
  • only 22% plan to hire additional employees, down from 30% six months ago 
  • only 36% are planning capital investments, down from 59% in 2008
  • 68% think U.S. economic woes are far from over

DJ Products would like to know what you think and how your business is coping with the recession.

Manufacturing Rebound Glimmers on the Horizon

With the dawn of a new political era in Washington, U.S. industry experts are cautiously predicting that manufacturing’s darkest days are over and that a rebound can be expected within the next six months. Analysts seem to agree that the Institute for Supply Management Index (ISM) finally bottomed out and will now begin to grow.

“Much depends on some proposed government actions and the reaction of the financial community,” Chris Kuehl, an economic analyst for the Fabricators and Manufacturers Association, told writer Joe Cogliano in the January 6, 2009 edition of Manufacturing & Technology eJournal, “but assuming that the credit crisis continues to diminish there will be some recovery in certain sectors.”

In anticipation of President Obama’s promised economic initiatives to create jobs, rebuild infrastructure and move to alternative fuels, Kuehl expects businesses that supply construction material and machinery and those in energy development to lead the recovery. He said that media saturation about the dire straights of the automotive and construction industries has obscured any good news about the state of U.S. manufacturing. He noted that medical manufacturing has actually grown during the recession and that the aerospace industry has held firm. 

A double digit production decline in the 4th quarter of 2008 is expected to be manufacturing’s low point. The National Association of Manufacturers (NAM) predicts a continued but gradually decreasing decline across most industry sectors for the first three quarters of 2009 before the advent of slowly rising numbers. NAM expects the final months of 2009 to bring a 1.4% increase in manufacturing rates.

Experts agree that while economic downturns take a toll on industry, they also serve to cull out weak, mismanaged and antiquated companies. Those that survive are stronger, more efficient, more resource conscious and more productive. On a larger scale, benefits of the economic crisis include a new era of better risk and credit management by both lenders and borrowers, new avenues of industrial growth, and deeper understanding and a necessary re-evaluation of global trading relationships and their impact on U.S. economy.

“The challenge for all of us is to determine if this is a ‘disaster’ or an ‘opportunity,'” Norbert Ore, Chair of the Institute for Supply Management’s Manufacturing Business Survey Committee told Manufacturing & Technology eJournal. “If we choose disaster, we will be paralyzed during a period of great change, and we will assume that there is little hope of prosperity for ourselves and our organizations. If we choose opportunity, we can view this as the time to face challenges head on and find more productive ways to create value for ourselves and society.”

Logistics Industry Down But Not Out

Considering the state of the economy, it’s not unexpected that the logistics industry is suffering along with everyone else. According to the recently released Global Contract Logistics 2009 report published by Transport Intelligence, the global contract logistics market grew at a rate of 5% in 2008, half the 10% growth experienced in each of the past few years. Of greatest concern was the noticeable drop in volume during the fourth quarter, generally considered the industry’s peak season.

“This downturn has been felt well into 2009, although there are signs that the fall in volumes may well have bottomed out by the end of the first quarter, the report suggests,” logistics industry analyst Ken Hurst noted in today’s posting on Works Management online.

Increasing, global reach provides the greatest opportunity for future success in the logistics industry, particularly when U.S. markets go stale. Developing markets in Latin America, Central and Eastern Europe and the Asian Pacific region offer the most opportunity for future growth, according to the Ti report. While the China market has cooled recently, Hurst expects it to rebound, saying, “… with GDP growth still in the high single digits, and a $585 billion stimulus package taking effect, underlying economic activity will continue to drive its [China’s] logistics sector.”

The report predicts five more years of volatile swings in the logistics industry worldwide with significant recovery not predicted until 2011. Rebuilding is expected to be agonizingly slow. According to Hurst’s post, “Ti believes that the market will grow at a compound annual rate of 2.4% between 2009 and 2012.” Stabilization of the industry will depend on the speed with which global sales increase. Until consumer confidence returns and drives up demand for goods, manufacturers and retailers will continue to keep supply costs lean. Because of its position at the tail end of the supply chain, the logistics industry may be one of the final economic sectors to achieve recovery. While contractual relationships will protect some logistics companies from the worst market volatility, “logistics providers will have to work hard at increasing their value proposition to clients if they are to avoid the worst excesses of the recession,” John Manners-Bell, Ti CEO told Hurst.

Economy Contributing to Worker Paranoia

Findings of a study published in the journal Science indicate that the uncertain economy is contributing to a certain amount of worker paranoia. As layoffs continue and unemployment rises, uncertainty about their future may have workers imagining conspiracies behind every closed door meeting and company announcement. Lack of control over how the recession will affect their employment and finances has people looking for patterns where none exist. In an effort to exert control over the unmanageable and unpredictable, the Science study found that people will create meaningful relationships between events where none exist.

In an online article on ThomasNet Industrial Market Trends, David Butcher explained, “… the desire to combat uncertainty and maintain control through structure can sometimes be so all consuming that people trick themselves into seeing and believing things that simply do not exist.”

Exploring the psychological phenomenon called “pattern perception,” researchers conducted a series of experiments to explore the effect lack of control has on human behavior. The study was conducted by Jennifer Whitson, assistant professor at the McCombs School of Business at the University of Texas in Austin, and Adam Galinsky, Morris and Alice Kaplan Professor of Ethics and Decision in Management at the Kellogg School of Management at Northwestern University in Chicago.

In the experiments, study participants were divided into two groups. One group received information that made them feel they had control over their actions in the test scenarios. Information provided to the other group was manipulated to make them feel uncertain and powerless about their ability to affect test outcomes. In the absence of control, a preponderance of study participants attempted to create order where none existed, imagining connections, relationships or cause and effect where none was intended. The tests produced some interesting results that may help business owners understand not only the psychological effects the recession is having on their employees but changes in customer perception and behavior.

  • Nearly half of those in the powerless group found discernible images in sheets of random dots that formed no images.
  • Those who felt powerless overemphasized negative information in determining investment risk.
  • In reading a story of a person passed over for promotion, the powerless blamed office conspiracies between co-workers or secret meetings between co-workers and the boss.

“The less control people have over their lives, the more likely they are to try and regain control through mental gymnastics,” Galinsky said. “Feelings of control are so important to people that a lack of control is inherently threatening. While some misperceptions can be bad or lead one astray, they’re extremely common and most likely satisfy a deep and enduring psychological need.”

Friday: Preventing worker paranoia