blog

Planning the Downside

by Anu

Recently, I read an interesting article on oil price's impact on the global distribution of packaged goods. The head of P&G global supply detailed how the company plans for different oil price scenarios. He commented that his company's distribution system was built on decades-old assumptions of cheap oil, ad infinitum.

Decades old-assumptions are no longer relevant for P&G and the packaged-goods industry, which brings to mind the question: are executives in our industry making similar mistakes?

Specifically, is our industry assuming intermediaries will exist, ad infinitum? In recent conversations with Sales executives, we heard the push to place product at all distributor platforms, at any and all costs. During the 1980s S&L debacle, 10% of US banks failed. Is it inconceivable that distributors may fail? These are interesting times we live in. Two weeks ago, a major retail bank had trading halted on the New York Stock Exchange. Last week, securities regulators coordinated a six-state probe into sales practices on auction-rate securities. And this week, the Treasury announced that government-sponsored entities may require the US taxpayer to provide a $25B bailout (note: double the MSFT annual net income).

With the brainpower in the industry, the C-suite could plan for "extreme" scenarios. It seems that in the case of distribution disruptions, a bit of business contingency planning would enable quick decision-making. In these interesting times, is this money well spent?