Supply chains get the spotlight at ISM conventions, of course, but businesswoman Carly Fiorina and former Fed Chair Janet Yellen put them in perspective, giving them credit for driving change, addressing tariffs and uncertain trade policies, as well as keeping inflation at bay.
On Tuesday at ISM 2019 in Houston, Yellen discussed global economic issues, had an upbeat outlook ("I see a decent year this year; I don’t see a recession.”) and said the work of supply chain professionals can drive down inflation, which is key to maintaining growing economies.
“U.S. consumers getting better goods and services is disinflationary,” she said. “Supply chain professionals’ ability to spread out manufacturing and sourcing suppliers all over the world has lessened expectations about inflation.”
Yellen told the crowd at ISM that "there’s a huge upside in efficiency."
Yellen on Labor, Brexit
Her on-stage interview with Tom Derry, CEO of the Institute for Supply Management, also covered a range of topics, like labor trends, the fallout of a hard Brexit and President Donald Trump’s moves to influence the economy.
“We have a president who would like to have growth like a rocket ship, and he thinks his tax cut plan should be enough to spur growth,” Yellen said.
On employment, she said economists are seeing a new trend: labor participation flattening out after a decades-long decline.
“What’s been the surprise in the last four or five years is that the labor participation rate has flattened out around 63%. What’s driving that is that the participation rates of prime-age men and women [are] going up,” Yellen said, noting that economists are still studying the issue. “It’s risen by more than can account for people coming back after the recession.”
She noted that the trend was spurred by globalization as well as the expansion of technology in our lives.
"The prime age participation has trended down for decades and it’s because of technology and globalization, which has had troubling effects in the U.S.," she said. "We’ve seen fractured communities and a rising mortality rate, a rarity in the modern economies." Yellen said more could have been done to address the problems it caused for some Americans.
On tariffs, she extolled the value of trade.
"It leads to efficiency. It helps consumers," Yellen said. "Many countries tried protectionism and it didn’t work. Countries that have done well have relied on openness and growth in trade." She believes the U.S. will reach a deal with China, and thinks that tariffs have affected some industries specifically but aren't a major factor on the overall economy.
Still, Yellen is no fan of tariffs.
"The tariffs we’ve had in place have had all the negative impacts that you’d expect," she said. "But because they cover a small enough fraction of U.S. output, they haven’t harmed overall productivity.
"When you put a tariff on a trade partner like China," she continued, "the data I’ve seen is that the prices rose in the sectors that were affected — and that cost was sent straight through to the U.S. consumer. On a monthly basis, U.S. consumers are paying $3 billion because of tariffs and another $1 billion in inefficiency.”
On Brexit, Yellen said the lack of uncertainty about the UK leaving the European Union is hurting investment and disrupting efficient markets. If there’s a hard exit with no formal trade terms with the EU, she expects a hit on London’s role as a financial capital and sees the pound depreciating.
Derry joked that that would make the U.S. dollar go further for American tourists, and Yellen agreed — with a caveat.
"It’s a good place to go on vacation, but it’s hard to sell there,” she said.
Fiorina on Leadership
Fiorina spoke Monday with a direct message for the supply chain professionals in the audience — saying that their work mattered because, as Chairman and CEO of Hewlett-Packard, she had seen how the procurement department eventually led the change she sought.
It wasn’t easy, said Fiorina, who led HP from 1999 to 2005.
When she arrived at the company, she found that it had 87 business units — each with its own CFO, CIO and turf to protect. She said the sprawling company also had 30 distinct supply chains.
“Do you think we got the best price?” Fiorina said. “No!”
Fiorina knew this was a problem that she had to address. Facing problems and fixing them is what defines a leader, she said.
“Changing the status quo brings criticism,” Fiorina said. “It’s tough when criticism is all around you — like social media…
“But leadership requires the courage to withstand the criticism,” she continued.
She said customers were the key to driving the change inside HP. Many customers were excited to hire the powerhouse company, but were disappointed when they realized they had to work with many distinct groups among the 87 business units.
She knew she was facing quite the challenge but she had experience to help her out.
When she started her career at AT&T, she learned something about herself that she carries to this day.
"Everywhere I went I found loads of problems,” Fiorina said. “People talked about the problems, gossiped about the problems, bitched about the problems. But the problems festered. After a while, I asked, ‘Shouldn’t we solve the problems?’
“I liked solving problems."
Fiorina said she was able to convince HP’s supply chain teams to serve the customers, challenge the status quo and find ways to change.
“One of the first things I did was to go to our customers to get compelling voices for change,” she said.
The customers’ concerns went like this: “We need you to work together better. We hire one company but must work with many.”
People in supply finally realized they needed to change, bought in, role-modeled teamwork and collaboration to serve customers.
HP went from 30 supply chains to five, Fiorina said.
“The change to fewer supply chains forced us to stop thinking vertically — like focusing on people’s titles or the reporting structure — and to think horizontally to focus on customers and clients,” she said.
Fiorina encouraged the supply chain professionals in attendance to become leaders who foster collaboration, using humility to know you can do it alone and relying on empathy so you can see what others can bring to solving problems.
Her direct message about supply chain issues resonated with the crowd, which applauded as she closed out her speech.
“Choose to lead.”