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Stanley Black & Decker’s CFO on the value of playbooks and partnerships

July 7, 2021, 9:00 AM UTC

Good morning,

Every CFO should have a scenario planning playbook, Donald Allan Jr., president and CFO at Stanley Black & Decker told me in a conversation about navigating the COVID-19 pandemic and the global semiconductor chip shortage. However, it’s also important to leave room for flexibility. “I can’t say that we perfectly planned out a scenario of what we just went through the last year and a half,” says Allan, who has been CFO since 2008. 

The Fortune 200 American manufacturer of industrial tools, hardware, and security services in existence for more than 150 years, reported annual revenue of $14.5 billion in 2020, up 1% from the prior year. It reported net earnings of $4.2 billion in the first quarter of 2021, up 34% from the same time in 2020. Second quarter earnings will be announced July 27. 

CFO Daily-Stanley Black & Decker CFO-Don Allan
Stanley Black & Decker President and CFO Donald Allan Jr./Courtesy of Stanley Black & Decker

As a result of the Great Recession, for almost 10 years, Stanley Black & Decker has used a scenario planning playbook, Allan says. An example? “We pick 10 different possible scenarios,” he explains. “What if we had so much market demand that we could grow 30, 40, 50% year over year? And how would we manage through that set of circumstances?” Then they run a scenario at the “other end of the spectrum, which is almost the doomsday perspective, kind of what happened about a year ago, and no one knew what was happening in March, April, and May,” he says. 

He continues, “Our revenue was going down 40, 50, 60% … We went through six to seven weeks of just dramatic, year over year volume declines. And then all of a sudden, when everybody was at home and didn’t have anything to do, our business just began to skyrocket. And it’s been that way for the last almost 12 months.”

Experiencing the financial ups and downs of the pandemic along with the current chip shortage resulted in focusing on the question: “How do we build stronger relationships with our top 25 or top 30 vendors to make sure we really weather those cycles better than our competitors?” Allan says. 

The relationship between suppliers and Stanley Black & Decker has evolved from 10 years ago. “Now, it’s more of a partnership,” he says. Allan is working to create supply chain partnerships with chip and battery manufacturing suppliers.

“We have some dedicated production lines within our vendors that are producing specific types of chips and electronic components that go into our power tools,” he says. “The partnerships helped us have a fairly strong performance around the stability of that part of the supply chain.” As an incentive for suppliers, Stanley Black & Decker may invest in the product line or “innovation around the component or part,” Allan says. The company is working on a partnership with a South Korean battery maker, he says.

“Those types of relationships tend to result in a stronger, long-term bond,” Allan says. “And therefore, when you go through difficult periods like this, you don’t lose pieces of your supply chain as a result.”


See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

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