“I should have seen the crisis coming earlier.” – Jean-Paul Agon
I was reading a recent interview in the Wall Street Journal with L’Oreal CEO Jean-Paul Agon. The article’s beginning states “First-half net profit at the world’s largest cosmetics company fell 14% after decades of at least 10% annual increases…Chief Executive Jean-Paul Agon is scrambling to fix L’Oréal.”
I was not surprised to see later in the article that Algon said “This year I’m very cautious. I learned my lesson.” L’Oreal management, like most companies, was surprised by the severity of the recession and vast impact on the world’s economies and on their product sales.
The question I ask now is: Will “being cautious” slow the recovery of his company and to a greater extent the economies of the rest of the world? Possibly. Not because I am overly optimistic (being a “finance guy” that isn’t actually possible), but because this isn’t a time for executives to over-react.
My position is to get the right data and let the data provide the guidance. The best data is going to come from our sales and marketing teams—not those historical models based on shipments that have been used by operations to build inventory. I think this was the key data input that was missing to L’Oreal and its executives. With good bottoms-up sales forecasting, they may have picked up the early signals leading to a significant downturn with enough time not to be caught by surprise. Picking up the signals leading to an upturn will also ensure they fully take advantage of the inevitable upturn when it occurs.
If you connect your real-time sales forecast to your production operations, you will reduce inventory, obsolescence, stock outs and improve on time delivery, customer satisfaction and financial efficiency. I think an automated sales forecast could help Mr. Agon scramble less in times of great volatility.