MLCP: The Business of Tomorrow MODULE 3: RESILIENCE IN CHAOTIC TIMES Disruptions were considered unpredictable - and when they did occur, the operation.

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

Disruptions were considered unpredictable - and when they did occur, the operation would go into crisis mode, and costs would soar!

Back in the ’90s…

. . . all we heard was “Short Supply Lines!”, “JIT!”, and “Zero Inventories!”

Today the logic is to also have plans that allow the operation to be flexible and resilient to economic and other shocks.

TODAY’S LOGIC

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

Looking Back to the Early 1970s….

Typical N.A. car:Lots of M

etal;

LARGE;

V8 Engine;

Lots of Power!

but FUEL EFFICIENCY? - Not even considered!!

THEN IN 1973, OPEC DOUBLED THE PRICE OF OIL!- The Japanese imports were suddenly in vogue- In terms of market share, the ‘BIG 3’ have never recovered!

Comfort;

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

In the 35 years since OPEC, the ‘Caught Unprepared’ pattern has been repeated in many sectors - We should have learned the lesson!

While many aspects of management have undergone change, the unexpected still trips up companies that are not ready for shifts in customer taste, thinking, government regulation, etc.

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

Re sil ience (noun)

Resilience is the ability to avoid, minimize, withstand, and/or recover from the effects of adversity, whether natural or man-made, under all circumstances of use.

As the global footprint of firms expands, so also do the risks they face on a daily basis: - Extended supply chains; technological interdependencies; IT vulnerabilities; mutating viruses; turbulent geo-politics; flat-world economics; and even weather phenomena all combine to increase business risk. As such, resilience isa matter of ever-increasing importance.

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

Desired Outcomes for this Module:

Gain a clearer understanding of the kinds of emergencies that may have to be faced at work;

Work with the other participants to identify how these contingencies directly affect your businesses;

Explore opportunities to plan for contingencies and minimize the damage to your businesses.

MLCP: The Business of Tomorrow

MODULE 3: RESILIENCE IN CHAOTIC TIMES

Scope of this Module:

The Speed of Change

The Role of Government

The Matter of Money

Trade Treaties

The Environment

Contingency Planning

Paradigm Shifts

Natural, Man-Made, and Business Contingencies

CH

AN

GE

TIME

Quality and quantity of information has been increasing exponentially. With so much data now instantly available, we can easily become lost in analysis at the expense of decision!

2008 19581958

CAD / CAM

CNC / more

Skill requirements have changed

Automation yields productivity gains and allows semi-skilled operators to replace skilled trades personnel, lowering labour cost.

Food & beverage systems have made quantum leaps in capacity and automation.

Windows-type touchscreens are now more the norm than the exception.

Maintenance has become module replacement.

Today’s only constant is change itself, and even then the rate of change is changing!

Today’s paper machines produce a sheet twice as fast; twice as wide; and with half the crew size than just a few years ago.

To monitor automated printed circuit assembly, cameras have replaced human inspectors whose reaction times are slower than the machines.

Quality Control

Process Control

Statistical

Process Control

Root Cause Analysis

Risk Analysis

Governments have changed the way they control their economies over the years. Change factors include:

- Shifts in internal economic thinking;

- International pressures;

- Treaties and agreements;

- Influence of global corporate giants.

Today no one government alone is able to substantially change many of the circumstances that businesses now face.

Some changes, e.g., Globalization and Off-Shoring, are irreversible.

THE ROLE OF GOVERNMENTTHE ROLE OF GOVERNMENT

THE ROLE OF GOVERNMENTTHE ROLE OF GOVERNMENT

Governments do have some influence over exchange rates:

EXCHANGE RATES:

By using central banks to adjust interest rates, they can slow or speed up the rate of investment and the price of debt

If the economy is growing too fast, they worry about inflation, so they raise the interest rate to slow growth

To counteract recessions, rates are lowered to spur spending

Releasing money into the economy helps improve it

THE ROLE OF GOVERNMENTTHE ROLE OF GOVERNMENT

TRADE TREATIES:Trade treaties, such as NAFTA, do good things for the economy, but there are compromises, too.

Trade treaties help create a faster, more lucrative global arena, but also a more exacting place in the event of bad planning.

- Tariffs and subsidies cannot be arbitrarily applied

- There are mechanisms for redress when disputes arise

- With trade treaties, policy change is restricted by external agencies

How does white Writing Stand Out?How does white Writing Stand Out?Prior to WWII the World ran on a Gold Standard:Prior to WWII the World ran on a Gold Standard:

- The US backed its currency with gold held in Fort Knox- The US backed its currency with gold held in Fort Knox

- Britain backed the Pound with sterling silver & gold.- Britain backed the Pound with sterling silver & gold.

Today, exchange rates between currencies depend on the extent of confidence the money markets have in each country’s economy.

Today, exchange rates between currencies depend on the extent of confidence the money markets have in each country’s economy.

When confidence in the US economy falters, the comparative value of the Canadian dollar increases

When confidence in the US economy falters, the comparative value of the Canadian dollar increases

How does white Writing Stand Out?How does white Writing Stand Out?

Financial institutions, banks and investors worldwide trade in currencies & debt daily.Financial institutions, banks and investors worldwide trade in currencies & debt daily.

With the speed of IT today, a change in conditions in one part of the globe can almost instantly affect confidence in a currency elsewhere.

With the speed of IT today, a change in conditions in one part of the globe can almost instantly affect confidence in a currency elsewhere.

This causes exchangerate changes that canhave lasting adverseeffects far beyond thecontrol of the affectedbusinesses.

This causes exchangerate changes that canhave lasting adverseeffects far beyond thecontrol of the affectedbusinesses.

CRUDE OIL PRICING:CRUDE OIL PRICING:

The World crude oil price is central to the value of the Cdn$, as we havevast Tar-Sand reserves in Alberta, as well as offshore oil.

The World crude oil price is central to the value of the Cdn$, as we havevast Tar-Sand reserves in Alberta, as well as offshore oil.

Above US$55 / Bbl, the Tar-Sands are profitable to exploitAbove US$55 / Bbl, the Tar-Sands are profitable to exploit

At US$60 / Bbl World commodity price, the Cdn$ is viewed as a stronger currency.At US$60 / Bbl World commodity price, the Cdn$ is viewed as a stronger currency.

Strong currencies with stable government systems are safe havens for capital investment: Money flows in; the economy grows stronger; and the spiral continues….

Strong currencies with stable government systems are safe havens for capital investment: Money flows in; the economy grows stronger; and the spiral continues….

Exchange Rate Impact:Exchange Rate Impact:

Around the turn of the century, the Cdn$ had a value of 60-70 cents US:Around the turn of the century, the Cdn$ had a value of 60-70 cents US:

Cdn firms received Cdn $1.50 for every US $ sold.Cdn firms received Cdn $1.50 for every US $ sold.

Many US firms manufactured here cost-attractively.Many US firms manufactured here cost-attractively.

Auto manufacturers increased output in Canada, as wages, productivity rates, and health costs were also cost-attractive compared to in-US costs.

Auto manufacturers increased output in Canada, as wages, productivity rates, and health costs were also cost-attractive compared to in-US costs.

Canadian firms providing parts and services to US did well.Canadian firms providing parts and services to US did well.

Then in 2001, this happened:Then in 2001, this happened:

- The World changed rapidly:- The World changed rapidly:

- The price of oil skyrocketed;- The price of oil skyrocketed;

- The US went into huge debt to fund its wars against terrorism;- The US went into huge debt to fund its wars against terrorism;

- Eventually the Cdn $ reached US par. (For exporters to the US, this cut their revenues from $1.50 to $1.00!)

- Eventually the Cdn $ reached US par. (For exporters to the US, this cut their revenues from $1.50 to $1.00!)

The Canadian government could not offset so huge a hit: The causes were bigger, faster than economic measures could handle, so profits fell rapidly.

The Canadian government could not offset so huge a hit: The causes were bigger, faster than economic measures could handle, so profits fell rapidly.Continuous Improvement is no longer just ‘fashionable’: It has become an essential element for business survival and recovery.Continuous Improvement is no longer just ‘fashionable’: It has become an essential element for business survival and recovery.

PARADIGM A paradigm is a generally-accepted rule or belief that affects the way we view things

PARADIGMSHIFT

A fundamental CHANGE in belief that forces us to revise our thinking

Example:

He helped create a SHIFT inbelief, to “The world is ROUND!”

Before Columbus, the paradigm was that “The world is FLAT!”

Another Example:

Old Paradigm: “Carry large buffer stocks!”

Paradigm Shift:

Better Business Practice!

Paradigm shifts don’t occur overnight:

Wal-Mart was a paradigm-shifter in retail thinking - but others were slow to catch on

- and many still fight the ‘New Reality’

In Manufacturing, shifts are clearly evident:

Magna personifies the ‘New Paradigm’:

- Fewer processes per plant

- Less and less vertical integration;

- More and more specialization

- More and more outsourcing

- Smaller unit plant size

- More and more automation, with ever-lower skill

requirements.

Joel Barker, Futurist

“The Business of Paradigms- Discovering the Future”

Publisher: William Morrow & CoNew York, New York

ISBN 0-688-10936-5

The environment is an area where government can have major impact.The environment is an area where government can have major impact.

Growing public awareness of global warming provides politicians with the chance to convince electorates that they are worthy of your vote.Growing public awareness of global warming provides politicians with the chance to convince electorates that they are worthy of your vote.

For business, resulting government regulatory change will represent opportunities for some, and considerable risk for others.For business, resulting government regulatory change will represent opportunities for some, and considerable risk for others.

- What if you produce only incandescent light bulbs, and a switch to fluorescents is mandated?- What if you produce only incandescent light bulbs, and a switch to fluorescents is mandated?

- What if you produce only plastic grocery bags, and their use is discontinued or heavily taxed?- What if you produce only plastic grocery bags, and their use is discontinued or heavily taxed?

Pollution of the air we breathe is a recognized major problem.Pollution of the air we breathe is a recognized major problem.

Governments retain the right to regulate accordingly, and are under increasing global pressure to sign treaties, such as Kyoto.Governments retain the right to regulate accordingly, and are under increasing global pressure to sign treaties, such as Kyoto.

Internal pressures in most Western countries are intensifying, with coal-fired generation facilities and ‘smokestack’ industries becoming prime targets.

Internal pressures in most Western countries are intensifying, with coal-fired generation facilities and ‘smokestack’ industries becoming prime targets.

If your business has high carbon emissions because of process, you’ll soon be under fire.If your business has high carbon emissions because of process, you’ll soon be under fire.

GLOBAL WARMING IS AN ABSOLUTE REALITY

THERE IS AN ALARMING CORRELATION WITH THE INCIDENCE AND SEVERITY OF NATURAL DISASTERS

‘RESILIENCE’ includes risk recognition and contingency planning / preparedness:

THIS DVD ISA ‘MUST-SEE’

- How comprehensive are your organization’s contingency and preparedness plans?

GLOBAL WARMING IS AN ABSOLUTE REALITY

THERE IS AN ALARMING CORRELATION WITH THE INCIDENCE AND SEVERITY OF NATURAL DISASTERS

THIS DVD ISA ‘MUST-SEE’

- How comprehensive are your organization’s contingency and preparedness plans?

‘RESILIENCE’ includes risk recognition and contingency planning / preparedness:

Contingency Planning aims to best assure that a company can sustain the impact of a interruption, recover promptly, and resume ops without long-term ill effect.

Most organizations have plans in place for eventualities like these:

But what about something like this: A major IT wipe-out?

A recent study found that malicious damage, major IT system faults, and hacking account for more ‘disaster scenario incidents’ than fires & floods!

Further, that 60% of firms sustaining an IT outage for a period of 10 days, go out of business within a year!

A good Contingency Plan and IT system backup process can limit the damage and in some cases, provide recovery up to the moment of destruction.

How well does your company score on this assessment?

- Might follow-up action be warranted?

What other Contingency Plans does / should / could your company have in place for such occurrences as:

Further adverse trend in Cdn/USexchange rate?

Unfavourable regulatory Changes by Government?

A serious oil crisis?

Terrorist (or resulting) activity?

Severe supply chain disruption?

“There must be others, too!”

The Flexible SupervisorThe Flexible Supervisor

Supervisors may have only limited impact on a company’s overall policies, and lack the power to decree what contingency plans the company should have.

Supervisors may have only limited impact on a company’s overall policies, and lack the power to decree what contingency plans the company should have.

Most supervisors are, however, at liberty to make their own. Also, supervisors have a responsibility to be able to react in the company’s best interests when disasters, emergencies, or other disruptions occur.

Most supervisors are, however, at liberty to make their own. Also, supervisors have a responsibility to be able to react in the company’s best interests when disasters, emergencies, or other disruptions occur.

How about the plans that ARE in place: Are you up-to-date on them? How about for bomb threats? How about your data integrity, and what your best practice should be in that respect?

How about the plans that ARE in place: Are you up-to-date on them? How about for bomb threats? How about your data integrity, and what your best practice should be in that respect?

Confucius

#1: Reefs in the Lagoon – Who Remembers the ’70s?

#2: The Best-Laid Contingency Plans . . . .

#3: The Saga of the Incandescent Light Bulb

#4: The Plastic Bag and the Joy of Shopping

#5: The Natural Disaster

#6: The Man-Made Disaster

Take Care, Folks!

See You Next Week.