We’re just a week into 2016 and the outlook for economic growth is arguably more pessimistic today than it was just a few weeks ago.
- The Dow Jones Index is down more than 6 percent since January 1
- The Federal Reserve Bank of Atlanta and J.P. Morgan Chase both cut their fourth-quarter GDP growth estimates in half to 0.7 percent and 1.0 percent, respectively.
- The December PMI® registered 48.2 percent, “a decrease of 0.4 percentage point from the November reading of 48.6 percent, indicating contraction in manufacturing for the second consecutive month, and is the lowest reading since June 2009 when the PMI® registered 45.8 percent.”
- Heavy-duty truck orders declined 37 percent in December 2015 compared to December 2014, according to industry research firm FTR.
In light of this economic outlook, will cost management trump innovation investments this year or will companies aim to find a happy balance?
I asked Jason Luedtke, Vice President of Corporate Sales Services at C.H. Robinson, that question in a recent episode of Talking Logistics (“On Your Radar: Important Logistics Trends and Outlook for 2016”). Here are some excerpts of what he said:
Even when the economy is growing, cost management is always part of the discussion. Public companies, in particular, have the responsibility to grow shareholder value, which means they’re still trying to grow their companies, but if growth is going to be slow, they will need to find ways to reduce costs.
The interesting thing is that many companies, when faced with an economy like this, look for opportunistic savings instead of consistent, sustained savings.
When you think about what leading companies do, it’s more around taking actions to produce sustained savings…you can’t just cut and cut and cut; you also have to find ways to grow.
Leading companies find ways to balance cost management and innovation. It may not be 50/50, but you can’t forget about the innovation portion of it.
Jason’s comments echoed one of my New Year’s resolutions for supply chain and logistics executives: Be more than a cost-cutter — be a sales hero too. As I wrote:
For a long time, C-level executives viewed supply chain management, especially the logistics function, as a cost center. As a result, cutting and controlling costs became the top priority for supply chain executives. Today, however, cost management is a given — it’s what every supply chain executive is expected to do. Therefore, how do you differentiate and make a larger impact on the organization? Be a sales hero — that is, look for ways to leverage supply chain management to drive top-line growth and increase market share.
Watch the short video clips below where Jason shares some ways companies are investing in innovation and uncovering opportunities to achieve sustained savings, including engaging in qualitative benchmarking to improve their processes, and for his outlook on the transportation market in 2016 and steps companies can take to better manage transportation costs and capacity.
Is cost cutting pushing aside innovation investments at your company? How do you find the right balance between cost management and innovation? Post a comment and share your perspective!
Opportunistic vs. Sustained Cost Savings
Finding a Balance Between Cost Reduction and Innovation
Transportation Market Outlook for 2016
Creative Ways to Manage Transportation Costs and Capacity