Bank of America Merrill Lynch strategists Michael Hartnett and Jared Woodward are sounding an alarm for US equities markets. They’re saying the markets are girding for a fall, coining the amusing phrase, “Humpty Dumpty Watch” referring to the expectation among investors of an imminent “great fall” in the markets. In times of economic peril, it is exceptionally important for businesses to have a plan to adapt to swift and dramatic changes in supply and demand. Is your supply chain logistics program prepared for uncertainty and possible radical disruption?
With price to earnings multiples at or near historic highs and earnings flat, it is indeed possible that the inability (so far) of the Trump Administration to produce the business-friendly environment many expected of this presidency could be a catalyst for a significant market correction. Historically, stock market crashes have been catalyzed by the shock of external events which send the markets into panicked selling. The collapse of Trump’s Corporate Councils this week and the aborted Council of Infrastructure may be early tremors presaging a reverse in market sentiments which have remained stubbornly high since the President’s election, in spite of troubling fundamentals. If markets decide there isn’t a likely path toward achieving the tax reform and other pro-business policies promised by the troubled administration, investors could plausibly decide to head for the exits. And as the nursery rhyme teaches, “all the King’s men, can’t put Humpty Dumpty together again.”
If you have no logistics process automation systems in place, get moving immediately on selecting and implementing a system ASAP, before the spigot of funding for capital expenditures is shut off.
Should the “Humpty Dumpty” market indeed fall off the wall the resulting impact on economic activity could make things very interesting for all shippers, but particularly so for those like retailers and manufacturers whose businesses are sensitive to wide swings in consumer sentiment. A stock market crash always results in steep drops in consumer confidence. Market crashes also have a deep impact on trade balances which effect the price of the dollar and can change the directional flow of imports/exports. Real estate values, another metric highly influenced by the health of credit markets, typically fall in times of market mayhem and that can mean a drop off in new construction which obviously affects transportation logistics.
So, if as a shipper, you’re joining the markets on the Humpty Dumpty Watch, what can you be doing to prepare for the possibility of extreme volatility? The answer in a broad sense is to prepare for leaner operating budgets and an increased emphasis on cost reductions and efficiency improvements. These goals represent different challenges for different operations. But broadly speaking prudent shippers could:
- Begin examining stored transportation data and establish benchmarking capabilities to identify and capture previously overlooked avenues to cost reduction in logistics
- Reexamine network designs to identify potentials for warehouse and inventory consolidation
- Focus on improving carrier performance management, efficient multi-stop shipment routing, opportunities for continuous moves and other performance-enhancing activities
- Begin planning in TMS for more regional supply chain activity should export/import volumes change
If you have no logistics process automation systems in place, get moving immediately on selecting and implementing a system ASAP, before the spigot of funding for capital expenditures is shut off. You may even make use of the increasing potential for Humpty Dumpty event to make your business case to those whose approval is needed to proceed. The visibility, cost control and efficiency improvements delivered by TMS and associated solutions are precisely what any organization must have in order to be able to weather economic upheavals.