August 2001 | Commentary | Checking In

On the Economy: Good Thing Johnny Can't Read

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It's back to school time, when some folks' thoughts turn to the lack of educational excellence in America: "Why Johnny can't read." But there could be a side benefit: "Johnny" is not reading the bad press about the economy. He and Mrs. Johnny keep right on going to the mall.

While it's true certain segments of our economy are suffering, and the dot.com meltdown was real, the media seems caught in a broadcast loop about how bad the economy is doing. Newspapers and business magazines say we're in a recession, some say edging toward depression. Economists and talking heads say next year will be worse. People who visit malls and buy retail goods don't seem to be getting this dire message. Every time I venture forth to the mall, I can't even get near the place. Retail stats remain fairly strong, too. Either shoppers can't read or don't believe the media. For them and their disposable income the recession is not as bad as the press makes it out to be. What's your take on it?

Retail spending is the saving grace of this economy because it is based on consumer perception of how the economy is doing and is going to be doing next year. Most consumers don't get, or are ignoring, the sky-is-falling message in the media.

While it's true some retailers are suffering, many are benefitting from recent investments in supply chain systems. Take A&P, for example (see story page 32). The 150-year-old retailer, one of the nation's first supermarkets, weathered an economic downturn of its own the past decade. That downturn was due to the advent of superstores and supermarket warehouses such as Cosco and Sam's Club.

These enterprises were tough competitors to A&P for two reasons: 1) bulk buying enabled them to get lower prices from their vendors and 2) supply chain systems are state of the art. Sam's Club, for example, uses Wal-Mart's supply chain approach. It's tough for any retailer, let alone a 150-year-old one, to compete with Wal-Mart in supply chain excellence. A&P is on the comeback trail, crediting its new supply chain excellence as a major reason for renewed competitive spirit.

Consider A&P's travails as a metaphor for running a retail company in an economy that's slowing. The lesson is real and should be obvious to all. Good or bad economy, it pays to have excellent supply chain practices. Margins are fatter when you turn inventory into cash quickly. In times of feast you can scale up quickly without disruptions. In times of famine, you can scale back and not increase the cost of holding excess inventory as much. Good SCM practice is keeping our economy moving.

Let's do more to keep the economy moving; encourage illiteracy in mall-goers? OK, maybe that's a bit much. Just keep turning off the TV and don't let them anywhere near a business magazine or newspaper. In this case, ignorance may make business bliss.

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