The Opinion Page
News and comments about the issues facing today's SCM and Inventory Management professionals.
Businesses, governments, and households are painting themselves green.
Sustainable development (SD) was once the exclusive territory of activists and altruists. Today, businesses of all configurations must face the fact that SD has evolved into a virtue that is both a competitive requirement and a regulatory necessity. SD has evolved from being a philanthropic “nice to have” to an asset critical for organizational success. The United Nations defines sustainability as “the management of environmental, social, and economic impacts, and the encouragement of good governance practices”. With a sizeable proportion of many firms’ environmental footprint being attributed to the supply chain, operations management presents special opportunities. Successful firms surfing the SD wave toward improved profits routinely export socially responsible culture beyond the supply chain through the corporate strategic plan. SD transcends environmentalism: it expounds the Triple Bottom Line: social responsibility, environmental stewardship, and enduring economic prosperity - “people, planet, and profit”. In a competitive arena characterized by rapidly increasing energy prices, targeted regulatory measures, and broad social awareness, SD has become a “go to” concept for firms looking to concurrently reduce costs and improve image. SD is now a “best practice.” The best companies consider sustainable supply chain management to be a top strategic priority. Studies show that top-performers have incorporated sustainability criteria into some or all of their supply chain management processes. Four key drivers attract winners to SD: × The desire to achieve competitive advantage in the marketplace × The need to ensure compliance with current and future regulations × The urgency to improve bottom line financial performance × The requirement to fulfil customers’ demand for eco-friendly products and services Successful integration of SD principles must start with top management. Executives should enable education of the workforce, build SD considerations into the Strategic Plan, and champion its incorporation in operational objectives. Best practices that align with SD include Lean, eco-design, optimized packaging, and green building enhanced by LEED. Lean Thinking While manufacturing practitioners were the first to become familiar with Lean Thinking, the idea has been found to be beneficial in numerous functional areas throughout the typical company. Lean is green. Its purpose is to reduce use of resources, to reduce waste, to reduce space and handling (energy) and to increase output per unit of resource used. Further, it can be easily extended to non-production areas. Lean recognizes that there is no positive side to waste and that reducing energy usage and emissions can have a positive impact on cash flow. New Product Development Design for the Environment (DFE), or “eco-design” is a process that enables users to consider the potential environmental impact of a product and the processes employed to make that product. A facet of product life cycle management, DFE uses practices that recognize environmental responsibility while reducing costs, promoting competitiveness, and encouraging innovation. Impact assessments include the selection of low-impact input materials, reduction of energy use, optimization of production techniques, design of the distribution system, and end-of-life planning. Green inputs are transformed into green outputs. At the end-of-life, those green outputs become raw material for future creations. Smart packaging concepts support SD. Optimized packaging design avoids damage, thereby reducing loss of product value, minimizing second shipment costs, curtailing refurbishing effort, lessening return handling, and improving customer satisfaction. Benefits are cumulative, as products progress through the value chain, and downstream into customers’ facilities. Reductions in input materials, transportation, storage, handling, and disposal costs can be realized. Green Facilities LEED (Leadership in Energy and Environmental Design) has emerged as the definitive standard for determining the “greenness” of a building. LEED certification applies to existing buildings (EB) and new construction (NC). The program presents an array of criteria, ranging from the design of HVAC, lighting, and water systems, to cleaning and maintenance processes. Many corporations insist upon LEED certification from third party logistics providers. Green buildings can mitigate variable costs and have a direct bearing on the productivity and well-being of the people who occupy them. Best-in-Class companies define sustainable development broadly, beyond just environmentalism. SD is seen as a matter of ethics while acting as an agent of improved financial results and corporate image. While the Triple Bottom Line of people, planet and profit implies some trade-offs, appropriate balance can be found. Profitability and sustainability are not mutually exclusive pursuits. With creativity and a stakeholder-focused sense of responsibility, the best of both worlds can be enjoyed.
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This is a follow up to my article, "Facing the Reality of Risk" also published in the Durham Business Times, April 2011 edition. Ten Tips emphasizes certain issues that work to enhance the development of a high quality contingency plan.
Safety First: The continued health and safety of all operatives must be the highest priority. Ensure that all plans recognize this precept. Clearly define objectives: The mandate must be unambiguous, specific and realistic. How will your firm define success? Think holistically: Use cross functional teams to ensure that solutions meet the needs of key stakeholders, and that the tactics presented do not create unanticipated new challenges. Take a broad perspective, thinking in global terms, even while developing specific action plans. Use Creative Thinking: Be flexible. Think “outside the box”, especially where unconventional risks such as pandemics are concerned. Existing contingency models - if any exist - may be too simplistic. It’s Never Too Late: If your business does not have a plan to ensure business continuity in the event of an external threat, start one now. It is a journey, in the spirit of continuous improvement. To get on base, one must first be willing to leave the batter’s box. Clearly define risk tolerance: “Business as usual” is unrealistic. Know what is essential and what is not. Draw lines over which the firm will not cross. Define the term “critical”. List critical commodities and services: Not every item and activity is essential. Identify commodities and services that are critical to continued operations. Challenge the lists. In the event of a manifested threat, resources will have to be redeployed to support these essential items and services. Collaborate: Involve your customers and suppliers in the development of the plan. Understand their specific challenges and requirements. Engage: Understand the importance of the plan. Remove barriers to its development such as denial and scepticism. Involve key stakeholders in the plan’s development. Communicate: Show employees how the contingency plans align with their daily activities. Demonstrate its importance. Establish universal understanding and commitment. Keep it simple, and relevant. The following article, authored by "yours truly," was published in the Durham Business Times, April 2011 edition. I hope that you will enjoy:
That businesses in the Durham Region will face a significant disruption to their operations from some external, uncontrollable threat is a virtual certainty. The H1N1 pandemic of 2009, the G20 Conference of 2010, and the Great Ice Storm of 1998 are in the past. While Canada remains one of the safest and most stable countries on the planet, we are not immune from the impact of catastrophes, natural or man-made. Now is an ideal time to reflect on what we have learned, to prepare for future challenges. Threats to commerce can include blizzards, tornadoes, floods, blackouts, labour disruption, social unrest, political activism, and even Icelandic volcanoes. Developing a plan that will help a firm weather the storms of such threats is sound business practice. Well-managed companies have done just that. Indeed, some large industrial customers have demanded it of their suppliers, building it in to vendor quality assurance initiatives. The supply of items that are critical to operations is thereby secured. Companies’ supply chains present unique challenges to developing a Continuity of Operations Plan. A commercial environment marked by just-in-time (JIT) inventory management, global logistics, and international sourcing makes the supply chain particularly vulnerable. Natural disasters, pandemics, and political unrest can close borders, inhibit the flow of materials, and force enterprises to redeploy resources away from normal activities. Management at Ontario Power Generation (OPG) have been proactive in the field of risk mitigation. In 2007, Todd Hall, now Director of Sustainable Development at OPG, was assigned to study the threat of an influenza pandemic. His task, as part of a broader team, was to devise a plan that would manage the risk to supply chain operational continuity. In doing so, OPG pre-empted the July 21, 2009 report of the Conference Board of Canada that urged organizations to act in this regard while they still had time in view of the H1N1 swine flu pandemic of 2009. Being a part of Ontario’s critical infrastructure, the pandemic management plan ultimately became an integral part of OPG’s emergency response program. Hall and his team decided to manage this risk before it managed them. “Planning for any disruption to the continuity of business, influenza pandemic or otherwise, is an exercise in risk management. Simply identify and characterize the risk, and to the extent possible employ existing controls and business processes. While this is simple in principle, it can be demanding in application,” commented Hall. Fortunately the H1N1 pandemic was relatively mild. This does not undermine the importance of preparation. Simply because H1N1 is over, does not mean that another pandemic cannot strike. They happen periodically. They are unpredictable. Rates of infection tend to be high. A pandemic has the potential to significantly impact business continuity by adversely effecting economics and societal infrastructure. A future pandemic event could overload an already stressed health care system. The need for vaccine might outstrip supply. Disruption could grow as worker absenteeism becomes exacerbated not only by employee illness itself, but also by caring for loved ones, and through fear of infection. Travel bans may be put in place. Schools and businesses could close. Some might be reluctant to accept that the occurrence of an influenza pandemic is a certainty. Hall and his team overcame such scepticism and achieved success. Their mandate was clear: provide all available production capacity under all credible risk scenarios. Their task was to establish all reasonable assurance that commodities and services that are critical to the continuity of businesses are available. To build a successful plan, those items, materials, services, facilities and equipment critical to achievement of the mandate must be identified. Define essential staff positions. Recognize regulatory commitments. Review supplier and customer relationships, including contractual arrangements. The planning team should strive to facilitate effective and ongoing engagement of key stakeholders. It is important to critically review lists of critical commodities and services, and to recognize that some business units and activities may not be essential. Impacted firms may not be able to operate in a business-as-usual mode. Resources will need to be focused as strongly as possible on activities that deliver the primary objective. The impact of a pandemic, or other irrepressible challenges, can be reduced if plans are made ahead of time. Such planning activity should be done in the spirit of prudence and continuous improvement. Hall says, “Establishing a pandemic plan is like buying fire insurance – you may not need to use it, but can you afford to be without it?” I am currently writing an article for a business publication on the subject of sustainable development. It is truly a fascinating subject, punctuated with both the noblest of intentions and the worst of misinformation.
This morning at breakfast, I happened to mention my project to my two children. "What's sustainable development, Dad?" they asked. And my mind searched for a good example. It was sitting right in front of me. I asked the two of them if they could think of a business-related situation with which they were familiar. My son manages a small paper route. He commented that newspapers are a good example of poor environmental stewardship. His rationale was that producing newspapers kills trees and consumes energy, in an era where many people are migrating to the internet as their primary source of newsworthy information. Fair comment. And yes, being an environmentally-conscious young person, I was pleased that he would think critically about a business that was actually signing his paycheck. As President Obama would say, this was an excellent learning opportunity. I asked them if there were a positive side of the business. We looked at ways that we have tried to deliver our newspapers in an environmentally-friendly manner. We had lots of examples, including: - he delivers the papers while walking, with a grocery buggy. I could drive him around his route, but we would burn fuel unnecessarily. As a side benefit, the family saves some gas money - maybe just a little bit each day, but over time the savings add up. Lesson 1: being green, and lean can save energy, money, and avoid pollution. - we did an initial analysis of his customers when he started the paper route. We asked ourselves: does the customer have a mailbox? Do they have a covered porch that would protect the newspapers from the rain and snow? Using this initial analysis, were were guided in our use of materials, such as rubber bands and plastic sleeves. Rubber bands are really only needed to wrap papers to protect them from the wind. If the customer has a covered mailbox, my son simply carefully folds the paper and puts it in the mailbox. Plastic sleeves are really only needed if the weather is, or threatens to be, foul. So, he only sleeves the papers when the weather is poor, and he does not sleeve papers that are going to houses that have no porch protection. He creatively calls the three wrapping options "tortillas" (no rubber banding or sleeve necessary), "tacos" (when the paper needs a rubber band applied) and "taco deluxe" (papers requiring plastic sleeves in foul weather). Lesson 2: being lean and green can please consumers by catering to their unique needs, while reducing waste, saving materials costs, and protecting the environment.) - he reacts quickly to customers who ask that they be removed from the route, or to those who want their deliveries suspended because they are planning a vacation. He never likes to lose a customer, and he does what he can to make the customers happy about his service, but sometimes customers tastes and needs change for reasons beyond his control. We stop such deliveries promptly to avoid delivering papers unnecessarily. For the family on vacation, it improves household security. He avoids delivering papers that are destined immediately for the trash bin. Changes are communicated quickly upstream to the front office, so that production can be adjusted. We don't waste time and energy delivering unwanted newspapers. Lesson 3: being lean and green avoids unnecessary production and logistics costs, improves public relations and can have beneficial side effects such as improved household security. - he recycles any unusable scrap material, such as extra newspapers or flyers that cannot be re-used. Contributions to landfill are virtually zero. Lesson 4: Some scrap is inevitable. Try to eliminate it. But when it occurs, re-use it, or recycle it. Finally, we dicussed the fact that while newspaper production does "kill trees", and we acknowledged that newsprint producers need to exercise great responsibility vis-a-vis the environment, there was no reason for him to feel guilty about being in the industry. It is still of great value, communicating vital information to thousands and millions of people, and acting as a great social catalyst for . It was a great breakfast conversation. We could have gone on for an hour. And it taught me that lean thinking, and sustainable development, are valid philosophies regardless of the size of your enterprize. And I also learned that this is not rocket science. These principles can be understood, and applied by children. The iconic Royal Canadian Mounted Police (RCMP) have endured theor fair share of troubles lately, not the least of which is the tyrranical rule of their current Commissioner, Mr. William Elliott.
From the outset, Mr. Elliott's appointment to head up the RCMP has been problematic. In today's Edmonton Sun newspaper, Pamela Roth writes: RCMP Commissioner William Elliott says he doesn’t regret a controversial decision to carry a gun on a trip to Afghanistan last year. Following his visit to the war-torn country in April 2010, a photograph of Elliott — a civilian commissioner — wearing an RCMP uniform and carrying a holstered gun appeared in the mission’s newsletter. The photograph raised questions among rank-and-file officers about whether Elliott had the proper qualifications to carry the weapon, and eventually led to a formal complaint being launched. Elliott, who was in Edmonton on Thursday, said he was carrying the gun for personal protection and had some training before he went on the mission. “People think I should have been trained to the same standards as our men and women who are on the streets of Canada arresting people and doing law enforcement. That’s not what I was doing in Afghanistan,” said Elliott. “I have no regrets to make the decision that I took.” The Harper government announced last week that Elliott will step down this summer as the RCMP’s first civilian commissioner. Elliott has been ruffling feathers since he was appointed in 2007, forcing the government to launch an internal human resources review of his management of the force. This little incident pales in comparison to his behaviour vis-a-vis his own employees during his tenure as commisioner. It seems that he was the consummate "office bully." He regularly berated, humiliated, and otherwise yelled at his underlings, showing a total lack of interpersonal skills. The situation became so bad, that on February 8, 2011, it was the subject of a hearing with the Public Safety Committee of Canada's House of Commons. At the hearing, Elliott was accused of causing the morale of the RCMP to sink to an "all time low" because of his abusive leadership style. Deputy Commissioner Raf Souccar, along with former assistant commissioner Mike McDonell led was was effectively a revolt against Elliott last summer. It shook the RCMP to its core. Elliott has announced that he will resign effective July 2011. Presumably he will be replaced by an RCMP insider. And now I come to the point of this entry. The comments from Raf Souccar were fascinating, and aligned directly with the Ten Toxins of Strategic Planning that I revealed in my blog entry just previous to this one. Souccar testified before the Commons committee that he had spoken to Elliott about his behaviour, and found that he (Elliott) either could not, or would not change." "Members wanted to come forward with complaints," said Souccar, "but they were fearful that they would either lose their jobs, or that they would be moved out of their current positions." "I have to tell you that I had so many people complain to me about Bill Elliott's disrespectful behaviour that my very position required me to act. I was a member of the Senior Executive Committee, and I could no longer point a finger of blame at the senior executives for inaction, because I was one,. Mr. Chairman, I took my position very seriously and could not stand by and watch while two of our very core values, Respect, and Compassion, be nothing more than words hanging on a wall in our buildings across Canada." Bravo, Mr. Souccar. We would all be well served by more senior executives who share your sense of courage and integrity. As for the monster called Bill Elliott? No doubt he will secure a lucrative and meaningless position somewhere in the civil service. The private sector, however, should be ashamed that it breeds and rewards brutality such as his. This is a follow up to my article "High Impact Strategic Planning" also published in the Durham Business Times, February 2011 edition. Ten Toxins emphasizes certain issues that work to impair the development of a high quality Strategic Plan:
Ten Toxins Short-sightedness: Do not confuse short-term tactics with strategic objectives. While less spectacular than tactical victories, a long-term view is necessary to win the war. Hypocrisy: Core values must be lived every day by everyone. A leader who ignores core values will develop employees who view ethics as mere distractions. Truly believe your Mission. The Silver Bullet: Strategy should not be designed around the notion of having, or finding one magical solution that will resolve all the firm’s problems. Solutions are multidimensional. Nostalgia: We live in a world of change, innovation and fleeting fashion. Ensure that your products and services are not designed to meet obsolete demand. Strategy looks forward. Stay current. Remain aware of your products’ life cycles. Ineffective Communication: All jobs must relate to the strategic plan. Keep constrained resources, including the work force, focused on the plan. By tying performance metrics to strategic objectives, management keeps attention directed at the appropriate goals. Fear: A culture of fear in an organization will prohibit the free flow of information. Encourage employees to provide constructive feedback, without the potential for recrimination. Pyrrhic Victories: Beware of exhausting all of your resources fighting tactical battles. Be realistically aware of constraints that face your enterprise. Ensure that you are able to obtain sufficient resources to achieve your strategic goals. If not, modify the objectives. Not Working the Plan: A plan will not inspire while gathering dust on the shelf. Communicate it, live it, revisit it, and revise it. Put your work front and centre in your firm. Complexity: Complex strategies are difficult to communicate and dilute intent. Employees will be reluctant to embrace them. Craft three to five strategic objectives. Elegant simplicity is the key. Ambiguity: Use straightforward, impactful language. Ensure that the intent of each word or phrase is clear. Remember the SMART acronym. The following article, authored by "yours truly" was published in the Durham Business Times, February 2011 edition. I hope that you will enjoy:
As the senior manager or proprietor of a small or medium-sized enterprise (SME), does the prospect of developing a strategic plan frighten the daylights out of you? Do you view strategic planning as the exclusive domain of intellectuals, expensive consultants, or even mystical practitioners in the Dark Arts? Perhaps the overwhelming volume of literature and teaching regarding strategic planning has contributed to its becoming an intimidating activity. It does not have to be so. One thing is certain: those SME’s who effectively utilize a strategic plan enjoy a much greater chance of long-term success, whether measured in key financial performance indicators, longevity, or cultural stability. Professor Sydney Finkelstein of Dartmouth College provides a concise working definition of “Strategy.” It is: “what a company does, or does not do to fulfil its vision in a competitive marketplace”. The high-impact strategic plan can be presented effectively on one page. Its elements can be expressed in a few well-chosen words, clauses or sentences. The strategic plan should not be confused with an operations or business plan: the latter two are subservient to the strategic plan, shorter in timeframe, and far more detailed. A strategic plan well done is the manifestation of elegant simplicity. Yet it is powerful enough to guide the daily activities of dozens, hundreds, and even thousands of employees. Within the strategic plan, senior management sets the dominant logic and the moral compass of the organization. It is an opportunity to unambiguously document ethics for leadership continuity. It forces introspection and situational analysis. And, primarily through articulation of core values, it provides a directional beacon especially in hard times. Fundamentally, the creation of a strategic plan is a five-step process: The Vision The Vision is an inspirational call to action. In a few short words, the CEO or senior manager uses the Vision to point the way to the company’s future. It should engage our emotions. It should be designed to last for many years. For example, Google’s vision statement is world-class: “To develop a perfect search engine.” Core Values With ethical problems causing the downfall of countless corporations each year, preparing a statement of Core Values becomes vitally important. Choose five or six words or short phrases that define the values that must be intrinsic to your culture. Examples of such words might include “integrity”, “transparency”, or “honesty”. Core Values will guide your firm in making hard choices in very difficult times. They must not be compromised. They will state how you will treat others as well as yourself. Hire people who personify your Core Values. The Mission An effective mission statement should be able to tell your company story and ideals in less than 30 seconds. Comprised of three or four short sentences, it is more detailed than the Vision, and is often written in the present tense. It defines your company’s customers, products, and how your company contributes unique value for its customers. Strategic Objectives: Strategic objectives should be specific, measurable, attainable, relevant, and time-framed (SMART). Three to five objectives should suffice, and they should be attainable within one to three years. For reasons of confidentiality, strategic objectives are rarely published outside the company, but they must be effectively communicated to all employees. SWOT Analysis: This acronym stands for Strengths, Weaknesses, Opportunities, and Threats. An honest, fact-based discussion between senior management and key advisors needs to take place. Documenting strengths and weaknesses tends to involve serious introspection, while opportunity and threat analyses tend to require external environmental scanning. Since it establishes the firm’s current position relative to its competitive environment, the SWOT can be very useful in establishing objectives and even the mission. It is therefore frequently performed early in the planning process. The strategic plan is a living document. It must be communicated effectively and constantly to employees. Successful businesses frequently incorporate the plan into the annual employee performance review process, ensuring that individual and departmental goals and objectives are aligned with the strategic plan. The strategic plan should be reviewed at least annually, noting any SWOT changes that might require modifying strategic objectives. A comprehensive renewal of the strategic plan should be undertaken every three years. While helping to prevent tactical conflicts between operational departments, a good plan will also discourage spending on projects that are not aligned with strategic goals. For a wealth of information, simply search key words such as “vision statement” on the internet. On December 15, 2010, www.bloomberg.com reported the following:
"Goldman Sachs Group Inc.’s top executives will get about $111.3 million in stock next month in a delayed payout from last year and their record-setting 2007 awards, even as Wall Street prepares for lower bonuses. Chief Executive Officer Lloyd C. Blankfein, 56, is poised to receive about $24.3 million in January, based on the closing share price on Dec. 14, while President Gary D. Cohn, 50, will get about $24 million, company filings show. The payouts, just a portion of the $67.9 million bonus awarded to Blankfein for 2007 and the $66.9 million paid to Cohn, reflect a 24 percent decline in the stock’s value since it was granted at $218.86. Within a year after the bonuses were approved, Goldman Sachs took $10 billion of U.S. bailout funds, converted to a bank and was borrowing as much as $35.4 billion a day from Federal Reserve emergency programs. This year the New York-based firm paid $550 million to settle U.S. regulators’ fraud charges related to a mortgage security the company sold in 2007. “Clearly we now look back and say, ‘Were things fine? Should they have paid? Maybe not,’” said Jeanne Branthover, a managing director at recruitment firm Boyden Global Executive Search in New York. “There’s nothing you can do about it. The payouts were in stone. But hopefully, in the future, they won’t be.” In the weeks following the report in Bloomberg, it has become clear that Golman Sachs, and other large investment banks are charging full steam ahead, awarding billions in bonuses to their executives and staff. One report put the amount at an average payout of roughly $500,000 per employee. It is clear that the receptioist isn't going to enjoy a $500,000 bonus check. Executives will get the lion's share. So, as the US government (translateion: "taxpayer") bails out the braintrust at Goldman Sachs et. al, the extremely rich get even richer. During Mr. Obama's State of the Union speech tonight, perhaps he ought to bring out his Louisville Slugger, and drag some of these banking mandarins out to the woodshed, giving them the arse-whuppin' of their lives. Simply put, the investment bank eecutives have been big catalysts in one of the greatest financial crises in a century, even while they feather their beds of largesse with taxpayer money. , One has to question the judgement (or motive) of the Obama Administration as well, however. After all, as Bill Waddell of Evolving Excellence pointed out on January 25, 2011, Mr. Obama has just appointed GE's Jeff Immelt to head up the government's commission to create jobs. Immell appears tp have achieved good results during his tenure at GE from 2000 to 2010. The problem is, however, that 96% of the 81,000 new jobs created within GE between 2000 and 2010 were in countries OTHER THAN the USA! On Saturday, January 8, 2011, the Toronto Star published a report which revealed the annual earnings of the highest paid CEO's in Canada. The data were stunning.
The highest-paid CEO in Canada for the year 2009 was Aaron Regent of Barrick Gold. He "earned" $24,217,020 in that year. In second place was Hunter Harrison of the Canadian National Railway, who was paid a stipend of $17,343,160 for his toil. Ranking #100 was Michael Waites of Finning International - his paycheck was $2,967,207 in 2009. The average salary among the 100 was $6.6 million, down slightly from 2008 at $7.3 million. Compare this to the annual wage salary for the average Canadian worker in 2009, which was $42,988 and one can easily calculate that the average CEO in the Top 100 is paid 155 times the wage of the average Canadian worker. The Star interviewed Roger Martin, dean of the U of T's Rotman School of Management, who believes that the way executives are paid was a key ingredient in the economic crash of 2008/2009. Executives like Jack Wash of General Electric can retire when stock prices are at or close to their peak. Wash owned $900 million of GE stock at the time of his retirement at time. Even subperforming CEO's make out like bandits. Bob Nardelli of Home Depot, who Martin argues "did a terrible job", resigned with a severance package worth $240 million. "Calling it quits can be a lucrative business" says The Star. Remember that 2009 was the year in which we were enduring an economic downturn that was generally acknowledged as being the worst since the Great Depression. Billions of dollars in bailout cash were being delivered by the Canadian government to the private sector. Workforces were being slashed left, right, and centre. Employment Insurance payouts soared. Unemployment figures continue to be high ion spite of the modest recovery that we are now enjoying. But the CEO's, and I will wager their senior executives, were doing very well indeed. Would someone please convince me that these CEO's have 155 times the talent that the average Canadian worker? Do they work 155 times as hard as the average Canadian worker? Are they 155 times smarter than the average Canadian worker? Are they 155 times more ethical, more honest, more motivated than the average worker? We are told that big money is needed to attract big talent. Balderdash. There are just too many examples of very bright young people growing concepts into successful enterprizes (ever heard of Facebook or Google?) that fly in the face of the Big Money Theory. Intelligence, talent, and work ethic are not the exclusive domain of the rich. In fact, given some of the collossal disasters seen in recent years in Big American and Canadian Business, one has to wonder whether there is an inverse relationship: is it possible that the more we pay our senior executives, the more stupid they become? Do they become more reckless? Do they become less trustworthy? Do they become less altruistic? Do they become more concerned with their own lot in life than the welfare and happiness of their employees and their customers? Do they become more short-sighted, looking toward tomorrow's stock price rather than the long-term stability of the organization? Do they become egomaniacal at the expense of society as a whole? Demographic data seems to be indicating a growing gap between the very rich and the working poor. The middle class appears to be eroding. Wealth, it seems, is being withdrawn from the middle class into both the public sector (through Big Taxation) and the private sector (into the hands of the very wealthy). This cannot be a sustainable trend. Top Ten Lists are ubiquitous at this time of year, and who am I to buck the trend? Here are ten stories that grabbed my attention over the past 12 months:
1. The Canadian Dollar: Good news in the short term for importers and southbound travellers, but bad news, at least in the short term, for exporters, the Canadian Dollar is closing 2010 at, or close to par with the US Greenback. I was never a proponent of the low-value dollar policy adopted a decade or more ago by successive Liberal Governments at the federal level, since it excuses business process inefficiencies that creep in to many industries. The Canaidan economy appears to be responding well to the economic crises of 2008 and 2009 in spite of a high dollar (or a low greenback), and insofar as the high dollar increases consumers' buying power, I say "bring it on!". 2. The HST is Implemented in Ontario: Many of my colleagues will disagree with me, but I say the HST (Harmonized Sales Tax, which is a combination of the old GST - Goods and Services Tax - and the PST - Provincial Sales Tax) is a bad tax implemented at the wrong time for Ontario. It has its benefits (such as system simplification), but I do not believe for one minute that the HST will be the job-creation machine that our Province's Premiere claims it will be. The middle class is being ripped apart in Ontario, and the gap between the very rich and the poor is widening. This is just another level that the governments can pull to draw more wealth out from the beleaguered middle class. Besides, the manner in which the tax was introduced to Ontarians was underhanded, to say the least. 3. The BP Gulf Oil Disaster: BP's initial estimates of the volume of oil leaking from the Deepwater Horizon site was 1,000 barrels per day. This estimate grew to 5,000, then 12,000, then 25,000 then 40,000 then 60,000 barrels of crude, or 2.5 million gallons per day, pumping into the Gulf. The scars left on planet Earth are immeasurable. It was an abject failure of safety standards. In a move reminiscent of comments made by Snow Brand Milk's President Tetsuro Ishikawa on July 1, 2000 the the wake of a Japanese food poisoning catastrophe, BP President Tony Hayward says, "we made a few little mistakes early on", and his famous, There is no one who wants this thing over more than I do. I want my life back." (For the record, Mr. Ishikawa yelled eerily similar comments to a press gallery who were pursuing him for answers, "I haven't slept!". My heart bleeds for these poor folk. And today 12/30/2010 it is revealed by the Washington Post that the administrator of the $20 billion compensation fund set up for oil spill victims, Ken Feinberg, is paying an ethics professor from New York University to testify that he is independent of influence from BP. The madness never ends. 4. The Price of Gold: As the year closes, the price of gold surpassed $1,400 CDN per ounce. I clearly recall sitting in the parking lot outside the Bank of Nova Scotia in Markham, Ontario with the intent of going inside to purchase $20,000-worth of gold bullion at $800 per ounce about three years ago. I talked myself out of it, as too risky a venture. Stupid, stupid stupid. 5. The Toronto Mayoralty Race: In October, the City of Toronto made a monumental decision in electing conservative candidate Rob Ford. After years of hubris, waste and arrogance at City Council, Ford's message was simple: "I will stop the Gravy Train." Ford promised that City Hall would, subsequent to his election, respect the taxpayer, and that all staff would focus on the needs of the citizens. What a novel idea. There were many interesting sidebars to the election, which included the Toronto Star newspaper's unabashed support of candidate George Smitherman, and their raw hatred of Mr. Ford, Smitherman's attempts to distance himself from the notorious eHealth scandal which occured during his watch as Minister of Health and Deputy Premier with the Ontario Government, Councillor Kyle Rae's inexcusable retirement party, where $12,000 of taxpayers dollars were wasted, and mud-slinging extraordinaire at Mr. Ford. It is my hope that Toronto will become a more business-friendly jurisdiction as a result, with more value being delivered to the community. 6. eco-Fees in Ontario Hot on the heels of 2009 spending scandals from eHealth and the Ontario Lottery and Gaming Corporation, where it was found that crown corporations / agencies were wasting billions of tax dollars with little or no return and certainly no oversight, the governing Ontario Liberal Party found itself stuck in another tarpit. While the Libs were foisting an unpopular HST on the public, a new set of so-called eco-Fees were applied on over 10,000 products effective July 2, 2010 without warning. Here was an example of taxation without representation if we ever saw one. It would be kind to say that the tax was applied arbitrarily and unevenly. Eco-fees were being applied to grass seed, sun block and vitamins among other such toxic materials. The fees provided no incentive whatsoever for vendors to bring products to market in an environmentally friendly manner. Eventually, public pressure forced the government to back down and the eco-Fees ended up in the junk yard. : 7. The Recovery of General Motors: Many of us were digging the grave for GM to fall into - in 2008, it appeared to be just a matter of time. But we must extend credit when credit is due. The Wall Street Journal Reported yesterday 12/29/2010: "In a series of bullish reports from banks involved in GM's initial public stock offering last month, the analysts predicted GM shares would hit anywhere from the low $40s to $50 within the next year. GM stock has been trading in the low- to mid-$30s and closed Tuesday at $35.32 in New York Stock Exchange trading, up 72 cents. But even the most optimistic prediction would have the U.S. government losing money on its $50 billion bailout of the auto maker last year. To break even, the U.S. must sell its remaining GM shares at around $53 each. The reports come as GM and its stock underwriters are increasingly optimistic that the Obama administration will sell most or all of its remaining stake next year, rather than offloading shares gradually over the next few years. The U.S. Treasury reduced its GM stake to about 33% from 61% in the $23.1 billion IPO." Great news for my friends in Oshawa and St. Catharines, and even a confirmed Hyundai owner like myself was impressed with some of the new GM products, including the GMC Terrain and Chevrolet Equinox. Congratulations, and keep up the great work. 8. The Eruption of Icelandic Volcano Eyjafjallajökull Thank goodness that the human cost of this disaster was minimal. However, the volcanic eruption disrupted travel and exposed flaws in supply chains around the world. With JIT and Lean processes in place, it is more important than ever to plan for potential disruptions. Firms must look for vulnerable spots in their supply chains and plan and practice evasive actions. 9. Potash Corporation: A staple of the Saskatchewan landscape for decades, August of 2010 saw Australian mining giant BHP Billiton mount a $40 billion hostile takeover bid of the Canadian PotashCorp. The bid was considered by the Federal Government for some time, amongst considerable drama. Finally, Industry Minister Clement announced in December that the deal was effectively dead. 10. After some deliberation... It was difficult for me to select my tenth story this year. On the short list were rising energy prices in Ontario, the meltdown of economies in Europe including Greece, Ireland, Spain and Portugal, the growing trend of co-opting of the term "green" to justify all sorts of consumer rip-offs, the suicide of Mark Madoff and the tragedy that was his father, and even the continued meltdown of the Tiger Woods Empire. In the end, I decided to go with what has almost been a non-story: the strength of Canadian Banks and the Canadian Banking System. In Canada, we love to hate our banks, and often with good reason. They charge us with userous credit card interest, exhorbatent user fees for account maintenance, and offer measly interest rates on savings of less than 1%. But, their strength, and the strength of the system, carried Canada through the Recession that endured from late 2008 through most of 2009. I am thankful that our economy did not collapse, and that my savings were relatively safe throughout. I was thankful that I was able to proceed through the last two years being able to make normal transactions in my accounts with no interference. And I am thankful that I have made the right deciions regarding my savings for my children's education. So, I somewhat begrudgingly give a thumbs-up to our banks - even if we the public do have to carry the bankers on our backs to the Champagne Bar on Friday afternoons. Cheers!, and Happy 2011. JDS |
AuthorJohn Skelton is the Principal Consultant and founder of Strategic Inventory Management. Archives
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