The Economy, Close to Home

Is it safe to say that the economy is on the rebound? The numbers, as well as consumer and business confidence, certainly seem to confirm that notion.

Is it safe to say that the economy is on the rebound? The numbers, as well as consumer and business confidence, certainly seem to confirm that notion.

[From Supply & Demand Chain Executive, June/July 2004] The U.S. Department of Commerce's Bureau of Economic Analysis stated that real gross domestic product (GDP)  the output of goods and services produced by labor and property located in the United States  increased at an annual rate of 4.4 percent in the first quarter of 2004. Additionally, profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $14.4 billion in the first quarter.

Federal Reserve Board Chairman Alan Greenspan, in the semi-annual Monetary Policy Report to the U.S. House of Representative issued in February, stated that the prospects are good for sustained expansion of the U.S. economy. With regard to the business sector, he noted that the increased devotion to streamlining processes has made an impressive difference: "The profitability of the business sector was again propelled by stunning increases in productivity," he commented. "The vigorous advance in efficiency represents a notable extension of the pickup that started around the mid-1990s. Apparently, businesses are still reaping the benefits of the marked acceleration in technology."

Greenspan added: "To a surprising degree, firms seem able to continue identifying and implementing new efficiencies in their production processes and thus have found it possible so far to meet increasing orders without stepping up hiring."

The editorial staff at Supply & Demand Chain Executive magazine decided to do a little of its own investigative research into the economic and business trends that our readers are facing on a daily basis in their companies. In May we launched a Reader Survey that covered topics ranging from readers' optimism about the overall economy to what they see as their planned investment initiatives for the next 18 months. In all, respondents answering the survey represented both manufacturing and non-manufacturing sectors, and with the majority of job titles coming from corporate, financial, procurement and logistics management.

When asked how optimistic they are about the overall economy over the next 18 months, the majority's answers coincided with their optimism for their own company's prospects: 52 percent said they see the overall economy improving steadily, and 51 percent see the same outlook for their own company. In contrast, while 21 percent said they are pessimistic in the short term but optimistic in the long run about the economy, 27 percent said that right now, business is booming for their companies.

When given a list and asked to check all the business issues that are the most critical to their company over the next 12 to 18 months, respondents cited growing revenue for their company (63 percent), achieving/maintaining a competitive advantage (62 percent) and increasing market share (51 percent). Also high on the list were cost containment and understanding and meeting customer needs (both at 44 percent), and building and maintaining strong supplier relationships (32 percent).

Respondents were also asked to rank how important the various areas of supply chain enablement are to the success of their company in the next 12 to 18 months. In keeping with their focus on growing revenue and achieving or maintaining a competitive advantage as important business issues, 95 percent cited business performance management as either critical, very important or important to their company. Ninety-two percent listed order/demand management, and 91 percent said business process management was key.

The market hype around radio frequency identification (RFID), as well as RFID compliance deadlines set by retail giants like Wal-Mart and Target, clearly has many companies thinking about this technology: A total of 54 percent of respondents said that RFID is going to be important, very important or critical for their companies over the next 12 to 18 months.

As for companies' supply chain enablement technology investment plans over the next 12 to 18 months, 59 percent of respondents said they plan to invest in supply chain planning, including 33 percent that have not yet selected an enabler for this initiative. Also, 57 percent of the companies are focused on business process management projects, including 28 percent that have not signed on with an enabler. Supply chain event management and sourcing technology investment tied for the number three spot, both with 56 percent.

When asked what their budget is for these projects, 23 percent said they have been given between $1 million and $5 million to invest, and an additional 16 percent put their budgets at between $5 million and $20 million. A notable 4 percent said they have budgets ranging from $20 million to $50 million, and a lucky 6 percent are flush with more than $50 million to spend on supply and demand chain enablement projects. Some 18 percent said they have budgets of $500,000 or less.