The Cycle of Industry Through a Recession

[Lifeisagame]

I am old enough to have been through several periods of recession, albeit none as big as this, the Cycle is interesting to watch.
When we start to move into a recession a series of events begin and continue until we come out again.
There are many reasons for a recession but the result seems to be the same.
First, the Companies cut back on spending and reduce Inventory, this triggers cancellations or reschedule of orders to the suppliers. The Supplier now has over Capacity and must downsize to survive. This effect goes right down the Chain.
Now, because everyone has cut back then the Lead Time of Supply increases all the way back up the Chain.
This in turn makes the final Company in the Chain place more orders, but these are speculative orders where the Company is trying to Forecast the Future. Obviously this is necessary but also dangerous if you Forecast too high then the Chain strains and sometimes breaks with a few casualities, companies folding.
However, if you get it low then all hell breaks loose. I am seeing this in our business at the moment, the Global market is stabilising and even growing in areas. The Companies back down the Chain rush to increase Capacity and increase infrastructure. But they cannot reduce Lead Time yet, hence a massive backlog of orders builds up. The Final Company now gets confident enough to begin to raise Buffer Stock which means more orders and bigger backlogs. So the Companies down the Chain build more Capacity space to cope.
Then we hit the final stage, the Final Company reaches stability and sufficient Buffer stock and so stabilises their orders, naturally the Companies down the Chain now have over Capacity so they reduce Lead Time which reduces orders further and they have to cut resources again, so they actually get a double whammy before normality returns.

This would not interest most people, but for those of us in the Chain it is almost a Game.

[C. Flower]

My guess would be that this would be a stage at which there would be winners and losers between competitor companies, depending on who made the right call or just got lucky ? I would guess that you wouldn't want a "double dip" to hit in the middle of this.

Would a planned economy take too much of the fun out of it for you?

[Lifeisagame]

It depends on what type of Market you are in. When your end product goes to the consumer Globally there are many factors to go into the equation, right down to Nationality. Don't see it possible to help us with a Planned Economy.
But it can be very tough on Companies who get hit twice.
Another Dip and the unstable Euro and you can just wait at home for everything to come from China because we are out of it.