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Table: Lessons from the Bust


1. Good Info Requires Good Judgment

Information systems can put the numbers in front of you in real time. But you need experienced managers with skepticism and judgment to figure out what it all means.

2. Stay Flexible

Using the Internet to forge closer links with suppliers and customers, outsourcing nonessential work, and contract manufacturing are ways to lower inventories and fixed overhead costs. Those management ideas are more important than ever in a downturn.

3. Know Your Customers' Customers

The further you are from the final customer, the harder it is to see a swing in the economic cycle. The trick is to monitor consumption by the end users and produce to their needs.

4. Look Beyond a Backlog in Orders

Basing a forecast just on order backlogs is a fool's game. In boom times, your customers may double- or triple-order to avoid shortages. You need to track your customers' revenues.

5. Planning Goes Only So Far

Predicting the future with precision is nearly impossible. Forecasts based on consumer confidence and economic output are important, but avoid tying yourself to one economic world view. Instead, consider a range of possibilities and prepare for all of them.

6. Don't Just Sell Them, Serve Them

Building a service business can bring long-term contracts that produce more predictable streams of revenue and income. Product service can be a life-saving fallback when times get tough.


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