Manufacturers of all types seek the same holy grail: the strategy that delivers products at the lowest possible total landed cost. In search of that goal, over the past few years companies all over the world have relocated facilities, outsourced production to low-cost countries, invested in automation, consolidated plants, or fundamentally redefined relationships with suppliers. The range of possible futures confronting business is great. Companies that nurture flexibility, awareness, and resiliency are more likely to survive the crisis, and even to prosper. In our experience, the missing ingredient in many manufacturing-strategy decisions is a careful consideration of the value of flexibility to manage risk. Companies that build flexibility into their manufacturing presence can respond more nimbly to changing conditions and outperform competitors with less flexible footprints.

As consumers batten down the hatches and the global economy slows, senior executives confront a more profoundly uncertain business environment than most of them have ever faced. Uncertainty surrounds not only the downturn’s depth and duration—though these are decidedly big unknowns—but also the very future of a global economic order until recently characterized by free-flowing capital and trade and by ever-deepening economic ties. A few months ago, the only challenges to this global system seemed to be external ones like climate change, terrorism, and war. Now, every day brings news that makes all of us wonder how the system itself will survive.

Regulatory concerns top the catalog of supply chain risks confronting executives in Latin America—unlike executives in other regions, where labor issues are the paramount supply chain risks. Further, executives in Latin America are more likely than their counterparts elsewhere to worry about foreign-exchange rates and fluctuations in commodity prices—fears that probably reflect the prominence of cyclical, export-driven industries in the region’s economic growth. Few executives in Latin America or other parts of the world express confidence in the ability of their companies to manage these and other supply chain risks successfully. These are among the findings of a survey examining the risks that make it more difficult for companies to supply their customers with goods and services cost effectively, as well as the way companies manage these risks. The executives in Latin America who were polled (out of a global panel of 3,172 executives) represent a mix of privately and publicly he ld businesses across a range of industries in Brazil (82 respondents) and the rest of the region (119 respondents).

One beverage company, for example, conducted surveys that identified staggering differences in the potential gains from customers within markets and micro markets. The respondents' price sensitivity varied by up to a factor of 13 across regional markets, of 5 across cities within them, and of 3 across zip codes in cities. In previous recessions, many marketers doubled down on large, historically profitable customers, geographies, and market segments—an approach that may now be ineffective because economic woes are affecting consumers and markets in unexpected and very specific ways. Marketers should therefore toss out their historical expectations and look for emerging pockets of profitability.

While the downturn has certainly changed the economic landscape, it may also have fundamentally altered the behavior of numerous US consumers, who are now learning to live without expensive products. Many companies with strong premium brands are anticipating a rapid rebound in consumer behavior—a return to normality, as after previous recessions. They are likely to be disappointed.

Changing consumer purchase patterns is another supply chain trend. New research found that, in any given category, an average of 18 percent of consumer-packaged-goods consumers bought lower-priced brands in the past two years. Of the consumers who switched to cheaper products, 46 percent said they performed better than expected, and the large majority of these consumers said the performance of such products was much better than expected. As a result, 34 percent of the switchers said they no longer preferred higher-priced products, and an additional 41 percent said that while they preferred the premium brand, it “was not worth the money.”

As a result, a growing number of consumers are now in play. The percentage up for grabs varies by category and depends on how many consumers switch from higher-priced brands, their experience with cheaper ones, and the way they revise their buying intentions. We found, for instance, that only 12 percent of beer buyers switched to cheaper brands. Of those, 31 percent said that their experience was more positive than they had expected, which means that only about 4 percent of customers are in play. Among buyers of cold and allergy medicines, however, we found that more than 20 percent tried a lower-priced option, and 48 percent of those consumers said the experience was better than expected. That means 10 percent of the people who buy cold and allergy medicines are now in play, resulting in new supply chain trends.

We developed this approach by examining the purchase decisions of almost 20,000 consumers across five industries and three continents. The proliferation of media and products requires marketers to find new ways to get their brands included in the initial-consideration set that consumers develop as they begin their decision journey. We also found that because of the shift away from one-way communication (from marketers to consumers) toward a two-way conversation, marketers need a more systematic way to satisfy customer demands and manage word-of-mouth. In addition, the research identified two different types of customer loyalty, challenging companies to reinvigorate their loyalty programs and the way they manage the customer experience.

Finally, the research reinforced the importance not only of aligning all elements of marketing—strategy, spending, channel management, and message—with the journey that consumers undertake when they make purchasing decisions but also of integrating those elements across the organization. When marketers understand this journey and direct their spending and messaging to the moments of maximum influence, they stand a much greater chance of reaching consumers in the right place at the right time with the right message.