It has been said that we live in interesting times. This is true and it has been the case for some time now, predominantly because of the rate of change that we have all had to cope with as well as a consistently growing market that has become avarice in its consumption of effort and people’s time.
Amidst all this ‘new territory’ that we are apparently now in, there is growing and increasing disparity between the various things that are being reported and very little genuine consensus between many of those saying it. One thing though is that we appear to be consistently using traditional formulas, fixes and remedies that once applied to endeavour to have some impact on what is a new environment. One example being the continual reducing of interest rates to retrigger a failing system that is not reacting to same.
Interest rates come down, property prices go up, lenders become increasingly nervous about lending and curtail same, whilst those with cash on deposit confront lower returns and pull in spending as they begin contemplating the reduction of their investment base.
The system we have, which has been predominantly underwritten by large corporations in the drive for market share and profit, has been one that is driven by continual and increasing growth. This growth has seen turnover increase with production to match but many have ignored the visibility of waste within the process. I’m not talking here of the packaging and other surplus expenses but the hidden waste that is not being seen readily by consumers.
In an AFR article “Donate your surplus stock, former CEO urges retailers”, there is a reference to $2 billion of stock that can end up as landfill when new lines or upgrades are introduced. Whilst the article talks of organisations that have been trying to remedy this to some degree, the real system that has driven us for decades has been built to waste. My most vivid recollection of this was reading of the dumping of huge war stocks at the end of the Second World War into the oceans in accordance with the lend-lease provisions, only to have new items purchased, often essentially identical, to then be modified for civilian post war use.
Couple this with an article in the NEWDAILY entitled “US-China trade war and Brexit drag global manufacturing into recession, analysts say”, which is essentially stating that global manufacturing has already slipped into an official recession. But as Queensland Investment Corporation Director Beverly Morris says: –
“That’s been happening over the course of this year, and that is continuing as we speak… What hasn’t happened yet is a sign of that significant slowing happening elsewhere in the economy. But that is obviously the risk, and that is risk that we’re now starting to increase in our probability of recession.”
Many small and medium businesses can be pawns in this process of the pursuit of profit and control by larger corporations. Just ask anyone at the bottom end of the construction tree or standing in the way of development! One mess that we, in our industry, regularly clean up.
This is best exemplified by the levels of risk that large corporates have managed to pass over to smaller players, e.g. the creation of labour providers who are on monthly or quarterly terms, whilst employing individuals with long term award liabilities; the establishment of regional suppliers who have given security, who buy in bulk on thirty day terms, and then supply to the end user often who often needs 60 to 90 day terms; component suppliers that must gear up for a significant supply schedule only to have it terminated early, or in the alternate, suspended with no income whilst the larger organisation deals with some other problem; just to identify some examples.
With these additional risks that have been inherited, and the economy moving further into unchartered waters, small and medium businesses need to be even more vigilant. Now is an excellent time to review the agreements and contracts that the business has in place and where necessary make adjustments. It may well even be an appropriate time to finalise some arrangements if the carry forward risk outweighs the future benefit. Care, though, must be taken in such cases to ensure that no instantaneous costs are incurred accidently and all efforts to mitigate same are taken.
Uncharted territory means exactly that. You cannot rely on the basic factors; you cannot simply rely on everything around you. The solution is continual and increased vigilance, travelling at a speed or size that you can adequately control if things get tough and ensuring that you have really good experts around you if things begin to go wrong so that you can move quickly when you need to.
Small and medium businesses offer so much, with many options, alternatives, and returns… in so many ways, that’s what drives most of us to be a part of it; but in reality, the only easy part of it is saying it!