Manufacturers have not yet truly embraced what LEAN Six Sigma tells us

Good article at Industry Week. Lean Manufacturing produce to order which is a huge advantage in agility and responding to customers. The US has not fully embraced an advantage we have over suppliers across an ocean. Read "Viewpoint - Industry's New Look" below:

http://www.industryweek.com/articles/viewpoint_--_industrys_new_look_18708.aspx?ShowAll=1

There are also good webinars available on http://www.industryweek.com/
Steve

Businesses Need to Plan for the Recovery

It is about the opportunities, not the problems. We are in a good sized recession, and the uncertainty is making life difficult for business owners and managers. Orders are down as customers order smaller quantities, or no longer have demand for some products. Credit is in short supply, and cash is king.

Even worse is the drumbeat of bad news shouted from the TV, and on front pages of magazines and newspapers. They are trying to scare you to look or listen for better ratings. Hello, this is about the size of the 1982 or 1975 recession. Not the Great Depression 2 or even the end of the world.

Today is not about the fear. Business is about the relationships, especially with the customers. Business is about being better than the competition. Business is about finding our niches, and serving the customer. Business is about making a profit through service.

So what can you do differently to improve profits?

Can you offer 2 for 1? Make twice as much and lower your prices? Develop a low cost version? Add more products to sell to your customers? Redesign dated products? Bundle more services together?

What about when the recession ends? What products or services would you like to develop now to be ready for the next couple years? Who do you need or want on your team? What skills do you need to train your staff to have? Don’t you think this is the best time to prepare?

We have to be careful, but business will go on during and after the recession. Will you be ready?
Steve

Scroll down to Anticipating the Credit Crunch for more ideas to increase profits.

About the Market
Personally I am not ready to declare the bottom of the market, and it may be further off than we would like. However there are reasons to think we are closer to the end than at the beginning. Housing has already corrected about 40% from the peak of the bubble. The Dow has dropped from the $14,000’s to the low $7,000’s. For other hints see Irwin Keller’s article below.


Signs of life
Commentary: The economy's worst may be past
By Irwin Kellner, MarketWatch
Feb. 24, 2009

http://www.marketwatch.com/news/story/evidence-mounts-recessions-worst-past/story.aspx?guid=%7B71467556%2D3683%2D4018%2D906C%2D7FFC8A3F9E8C%7D&dist=TNMostRead

Note Marketwatch Links are soon broken. If the link does not work, go to
http://www.marketwatch.com/
Search for Irwin Kellner

Some businesses think big during the downturn

A great article about the companies that will succeed during and after the recession.

http://www.latimes.com/news/la-fi-expand13-2009jan13,0,4036581.story?track=ntothtml

We all need to think like this,
Steve Amos

Happy 2009!

Everyone is finally over 2008, but the economy is still a concern for most of us. Lets face it, few investors made money last year, and most of us took a substantial loss. At least my 401K has been crunched :( Thank God I am 50% cash right now, and the rest is losing money in stocks. However I focus on long term investments and good companies, so I will survive and recover.

However my predictions for 2009 are not as pessimistic as most of what you read in the media. Most of the worst effects of the recession already occurred in 2008. No one knows what will really happen, but I will make a few economic predictions like I did last year with oil prices. Warning your mileage may vary as I am limited in experience and make lots of mistakes. But it is good to present views for you to think about and analyze.

Recession: We are still going forward with the recession, and businesses are hanging on to money carefully since borrowing is so difficult. I do not expect the recession to grow into a worldwide depression. The news reports comparing us to a depression are vastly exaggerated. Most people have not experienced a serious recession since the early 1980's. We have lived through recessions before, and will survive.

Jobs: If you personally have a good job you may not feel the recession. People who are job hunting or looking for a better position will have to take more time to find a great job, and may have to take a step backward right now. It is just a delay for the good times to come. My prediction is job loses will peak early in 2009, and by the end of the year jobs will start recovering. So if you are job hunting keep persisting.

Stock Market: I suspect we are getting closer to the market bottom. I suspect we are within six months of the bottom. It may take a year, but I am looking for evidence it is time to fully invest again.

Housing: I see no bottom to the real estate market until around 2010. The over supply of home will have to be worked off the market. I expect prices to fall another 5% - 15% in 2009.

Oil prices: This was my best prediction of 2008. On January 17, 2008 I predicted oil prices would peak and fall during 2008. I thought the bubble prices were way out of line at $105 per barrel, and thought oil would fall into the $60 - $80 per barrel by the end of the year and to $40 - $60 per barrel early in 2009. My prediction was based on the long term cost of alternatives to oil were in the $40 to $60 per barrel range. In spite of the gyrations of politics, wars and speculation, I expect prices to stay in the $40 to $60 per barrel range. We might see another over correction with prices falling into the $30's per barrel with the slow economy. There is an oversupply which will be corrected over the long term.

The best advice summary: The best thing you could do is maintain a very positive attitude. This one action will help no matter the crisis's you face, and will help you reach your goals. Heck you may even succeed with your resolutions. Spend some time every morning meditating on what is good in your life, and thank God for everything. Even the challenges and problems you face.

Have a great 2009! I will no matter what.
Steve

Anticipating the Credit Crunch

Business has to adapt to the changing conditions and change your plans. Business conditions right now are transitioning into a more severe recession than expected. The shutdown and forced sales of US financial companies and banks. This is the reason for the bailout which really should be called a credit stabilization bill.

Inflation was the story at the beginning of 2008. Currently inflation is being reduced by the improving value of the US Dollar. It is not how much the US economy has improved, but the global economy has gotten worse faster than expected in Europe and Asia. Only the oil producer’s economies are doing well. The rest of the world is slowing down quicker than the US economy is.

Helping with inflation is the bursting of the bubble in commodity prices. Oil rose to a high of $145 per barrel, and now has returned to around $95 per barrel. This happened in only a few months. Oil price will be volatile depending on political and weather related interruptions, but is gradually dropping towards the $60 – 80 range in 2009. Demand for all commodities except food has dropped.

The real problem now is the credit crunch. Banks are trying to raise capital to survive, and are not giving loans they gave last year. Credit card companies are tightening their limits because of losses. This not only affects consumers, but lots of small companies use credit cards instead of a line of credit. Lines of credit are harder to get for larger businesses. Taking a second mortgage on your house is more difficult due to lower values and tightened lender requirement. These all will accelerate the credit crunch.

Keep your perspective. No recession lasts forever. There are a few steps to take right now to prepare.

Hang on to all your cash
1. Sell down inventory as low as you can. Sell excess and obsolete products by reducing prices.
2. Cancel all unnecessary expenses, subscriptions, software, and leases.
3. Sell and scrap unnecessary equipment.
4. Lease out or sell unused space. A sublet tenant can improve profits.
5. Pay credit on time and make sure your bank knows you are profitable. You need a good relationship for future credit needs.

Review your products and prices
1. Do you know which products create profit for you? What do they actually cost without overhead?
2. Increase prices or discontinue unprofitable products. Do you need all the finishes or colors? Increase prices on money losers to reduce demand, or…
3. Replace dated and noncompetitive products with new designs to improve margins. Design simpler products or combine two products to reduce cost and improve margins.

Improve your business

This is a major opportunity to improve. Focus your business on a mission. We need to serve our customers better and better. Measure your most important attributes for customer satisfaction and make sure you improve.

1. Advertise more. Stay in contact with existing customers more. Find new customers.
2. Expand by adding more products to sell existing customers. Partner with other suppliers to your customers.
3. Keep your key people and performers. It is too expensive to replace your best talent.
4. Hire better talent. Lose your weakest performers who slow down or move them to positions where they have ability. This is the best time to find the people you need to grow and be ready for the recovery.
5. Plan to grow more profitable over five years. Find new products, services, or profitable niches. Others are cutting costs only. The great companies grow more competitive.

Recessions are opportunities. Take full advantage of them for your benefit.

A Geeky Remedy For Recession Blues

Forbes has a wonderful article by Christian Lindholm about the power of design in results, and what sells in a recession. Highly recommend reading it

http://www.forbes.com/technology/2008/09/16/iphone-nokia-design-techsolutions08-enter-cx_cl_0917design.html?partner=technology_newsletter

It has been too long since I have written, so expect some new postings soon. Basically would like to comment on the economy.

Enjoy,
Steve

When Will Oil Prices Fall?

The main cause of high oil prices is political. Environment nimby’s have stopped construction of power plants with lawsuits, and punitive taxation stopped investment domestically.

No government has successfully managed an economy like a business. We have been successful letting the market determine winners. The government can sponsor research, but business has to invest. Its simple – higher taxes equal no profits and no oil.

What should we do is promote every energy source. Drill offshore, coal, natural gas, solar, hydrogen, conservation, and nuclear. Government should not pick the winners, but goal has to be energy independence.

When will oil prices fall? When the US has the will to build nuclear power plants.

Energy Independence

President Bush’s energy proposals to Congress include the right solutions to free the US from energy dependence. We need more domestic oil production, natural gas, pipelines, nuclear power, solar, grass based ethanol and to better technology to clean coal for our independence. There will be few jobs in the future without energy infrastructure, and the political risk from oil producing countries cutting our supply is substantial.

Our dollar is falling in value for because of oil imports. Oil imports were 4.9 billion barrels in 2007. Estimate $75 per barrel is $367.5 billion, or 50% of the $711.6 billion US trade deficit. We need to expand drilling off all coasts and domestic refining.

Corn based ethanol is not efficient and is causing food shortages. We need to develop cellulous (grass) base ethanol.

France generates 90% of their electricity with nuclear power. Our nuclear plants are decades old and need to be replaced for safety. Solar power will contribute in the next decade, but we need electricity at night for non polluting electric cars.

We need to balance fiscal, political and environmental responsibility in our energy policies. The US can not surrender our children’s future to imports. We need to meet our own needs domestically.

Invest in Productivity and Innovation

The economy is in a mild recession. The housing bubble has burst and is reverting to mean (normal) values. The super leverage of the 2000’s is being unwound as the investors who took the risk are paying the price of risk. There is a lot of speculation about how bad the economy will be.

We will not have a great depression. This is just a normal business cycle, unless political protectionism makes the situation worse. This cycle is predictable and expected by mature investors. There are challenges coming, but nothing to panic over.

Consumers will not be able to use their homes to use like an ATM to keep spending. Increased energy and food costs further will reduce consumer spending power. Consumers will change their spending towards different priorities for the next few years until incomes increase again. Job outsourcing globally will keep salaries low.

Consumer spending is the driver of two thirds of spending. Fortunately the world is now more successful everywhere, and increased demand is now coming from Eastern Europe, Asia, India and the Middle East. So consumer spending will recover internationally first.

So how will the economy recover? Productivity and innovation has always driven economic growth.

Invest in businesses, products or services that increase productivity. Can you lower shipping costs, use energy more efficiently, use less material in products, service clients quicker at less cost, or reduce overheads? These are the drivers of productivity. And the companies that do this are the ones to own.

Innovation and market changers are the companies that will thrive in the future. Look at Apple’s success in changing the music market. There are kids who have never bought a CDs nor albums. They buy music through iTunes. Television and movies are the next to be changed. Low cost hardware and better software has made an explosion of producing content available. With so many choices for customers, how can major studios or networks hold on to viewers? Look for distribution over the web to grow.

Computer grow exponentially more powerful, and programs now do the leg work of thousands of technicians or clerks. CAD changed how we design products, test ideas, and do research. Better quality and lower prices have come with these innovations. In fact, as the price gets lower more people have access to the power of software. Look at the success of new medical products that are improving medical care. CAD has speed up development tremendously. Furthermore the web will be replaced by cloud computing which will increase the amount of data available faster.

Invest in energy businesses that increase productivity of creating energy or conserving energy. One caveat, they must be profitable at a much lower oil prices. Energy will be the next bubble to break. $100 to 120 per barrel is not sustainable.

Oil was stuck in the $15 to $20 per barrel range for two decades. A price of $30 dollars per barrel would be reasonable today with normal inflation. The value of the dollar fell about 30% over the last two years, so $20 to $30 per barrel is now $30 to $45 per barrel. Demand will fall at the current high prices, and alternative production methods are cost effective above $30 per barrel. Both will reduce future demand for oil and lower prices. Invest only in energy processes that are cost effective at $30 - $45 per barrel. I expect oil to fall to $60 – $70 per barrel in 2009.

In summary, the future economic growth will be from productivity and innovation. Productivity and Innovation will overcome a few years of low growth or recession. This is where we need to invest for future profits.

Redefining Success

In High School success was passing your courses and graduating. Having friends, a date on Friday, and a date for the Prom are good.

In college success was still passing your courses, but more important was figuring out your major. Most of us had no experience whether we would like our career afterwards, but we choose them anyway.

After college success was getting your first job and an apartment. Friends and good times may be a priority. The adventurous take breaks and travel, while most of us tried to figure out what we are doing at work.

Next success was finding love and marriage. Success is finding a partner to love and who will love us.

Family comes after marriage. Success was buying a house or condo. As the family grows, success was getting a bigger house.

Getting promoted, or getting a better job was our next definition of success. Some will choose to be self employed instead.

At some point, the economy or business cycle changed and success was keeping our job as other were laid off.

Maybe your next success will be retiring, or maybe it was a recent success. Perhaps you will consider it a success to find part time work to keep you busy, or success is more games of golf.

While these are all fine goals, I think most are not a good definition of success with the exceptions of love and family. Let’s propose a better definition of success.

Success is when we take care of customers. Success is earning a living. Raising good children is a success. Success is when we make the world a better place.

Success is when we do for others selflessly. Success is not about us, not what we own, but about serving others. We succeed when we help. Help any way we can by either our time or money. Volunteer at charities or church. Volunteer in you schools or neighborhood. Just take action for others.

Isn’t that a better definition of success for you to live by? Change your definition of success and you can leave a better world. Then you are succeeding!