The Art of Business Intelligence and What It Is Telling Me Today

For many CEOs, the most difficult part of the job is making tough decisions. Even the most difficult choices are made easier when the data and other relevant decision-making variables are all pointing in the same direction. A useful instrument to planning and decision making is effectively utilizing business intelligence, which I will loosely define as gathering and analyzing the most up-to-date information to understand, for transformative purposes, the ever-changing dynamics within a company’s ecosystem of employees, customers, markets, competitors, suppliers, and macroeconomic variables.?

Developing actionable business intelligence is as much an art as it is a science.

Developing actionable business intelligence is as much an art as it is a science. Sometimes, the information is obvious and easy to gather and understand. At other times, developing an accurate picture is like putting a 5000-piece jigsaw puzzle together.

For American companies, consider the forward-looking implications for your business of the current state of the economy and trade between the US and its primary trading partners:

·????????In 2022, the U.S. has imported more goods from Europe than China – a big shift from the 2010s, according to Project 44.?

·????????During this same period, U.S. manufacturing orders in China are down 40% (“an unrelenting demand collapse”).

·????????Normally, you’d assume that a reduction in U.S. purchasing from China would result in an increase in volume at its low-cost manufacturing neighbors. But since early 2022 in Vietnam (“which had been booming as a manufacturing hub”), a slowdown in manufacturing orders and the almost doubling of interest rates from 6.5% to 13.2% has forced the closure of 12,500 companies were per month (a 24.8% year over year increase).

These facts would lead you to believe that manufacturing is rising in either the US, Europe, or both, right? Think again.

·????????The most recent S&P Global surveys indicate that manufacturing is contracting in both the U.S. and Europe. The November S&P Global US Manufacturing PMI came in at 47.7, while the Eurozone’s PMI came in at 47.1.?(A reading above 50 indicates expansion in the sector; below 50 indicates contraction.)

·????????In the U.S., the official jobless rate remains at 3.7%, a level that indicates labor market strength. However, this data is questionable at best, since “[a] more comprehensive data set known as the quarterly census of employment and wages shows jobs have grown by 500,000 less in the year through June than payrolls indicate, according to UBS. Because monthly payrolls are eventually adjusted using those more comprehensive figures—which are based on employer tax records—they will likely be revised down.????

·????????We are already seeing a rise in layoffs and downsizing across the U.S., as many large companies have announced layoffs, including major employers in tech, banking, and retail, and “economists expect that higher interest rates will trigger more widespread layoffs and some forecast a recession in the next year, as has typically occurred during prior episodes of fast rate increases.”

·????????These assumptions can probably be similarly applied to Europe, where the official unemployment rate dropped to a record-low 6.5% in October, but which is subject to the same macroeconomic impacts of higher interest rates and reduced demand.

What impact is all of this having?

·????????“[E]ven with the latest production cuts, the downturn in demand has still led to one of the largest increases in unsold stock recorded since survey data were first available 15 years ago, which suggests that companies will continue to reduce production in the coming months to bring these inventories down to more manageable levels.” (Chris Williamson, Chief Business Economist at S&P Global Market Intelligence)

·????????While supply chain worries persist, notably in relation to China's lockdowns, companies' concerns are increasingly moving away from the supply side to focusing on the darkening outlook for demand, meaning the business mood remains among the gloomiest seen over the past decade."?(Chris Williamson, Chief Business Economist at S&P Global Market Intelligence)

·????????8% inflation has reduced the buying power of savings, including retirement savings, which, along with the major stock market drop, will force many back into the workforce.

So putting all of this together, my business intelligence tells me that:

·????????We are in a recessionary environment, with reduced demand and high interest rates motivating companies to reduce investment and costs. Like pornography, you know a recession when you see it, regardless of what the government may prefer to call it.

Like pornography, you know a recession when you see it, regardless of what the government may prefer to call it.

·????????With the legislative power split in Washington, any substantial legislation that will result in dramatic economic shifts is highly unlikely.

·????????The long-term redrawing of the supply chains in the U.S. and Europe will parallel the balancing out of trade with China and other Asian countries, whose manufacturers are dealing with higher interest rates, rising labor costs, and the downside of their remoteness to their customers.

·????????An increase in the labor supply combined with rising unemployment will result in a fairly rapid and dramatic rebalancing of the labor market (and labor attitudes towards jobs).

So what are my actionable takeaways from all of this business intelligence?

·????????As an American manufacturer, the importance of efficiency (labor, automation, focus, ROI, and ROC) is more essential than ever.

·????????Equipment manufacturers will face major slowdowns, so be on the lookout for amazing offers on even the latest automated production technology.

·????????The labor market is loosening up, so be alert for opportunities to hire skilled and experienced talent who have not been available recently.

Every economic downturn ultimately reverses, and when it does, some will have weathered it better than others and be in position to accelerate.

Every economic downturn ultimately reverses, and when it does, some will have weathered it better than others and be in position to accelerate. Our team will be taking the necessary steps to adjust to the current reality while laying the groundwork to emerge stronger than ever when the economy returns to a growth mode.

Sources:

https://www.cnbc.com/2022/12/04/manufacturing-orders-from-china-down-40percent-in-demand-collapse.html

https://seekingalpha.com/article/4561784-october-sp-global-us-manufacturing-pmi-first-decline-since-june-2020

https://themalaysianreserve.com/2022/12/06/cooling-demand-squeezes-factory-activity-in-europe-and-asia/

https://www.wsj.com/articles/november-jobs-report-unemployment-rate-economy-growth-2022-11669944597