QuickREAD

January 10, 2007

Apple Is Said to Be Tough on Contract Manufacturers, But They Like the Business
Compared with other U.S. computer makers, Apple is notorious in the Taiwanese electronics industry as a difficult customer. With their near-obsessive concern about secrecy and quality, Steve Jobs & Co. make life especially hard for their suppliers.
It's not uncommon, for instance, to hear stories of finished iPods getting rejected by Apple because they don't meet its standards. "In terms of quality, service, and secrecy," Apple's requirements are "higher and stricter than anyone else's," says Henry King, an analyst in Taipei with Goldman Sachs.
Still, Taiwanese companies like working for Apple. Typically, Apple contracts with only one Taiwanese supplier for each type of iPod. Hon Hai, for instance, makes the Nano while Asustek makes the Shuffle. (An exception is the Video iPod; Apple now has two suppliers, following its decision last year to give some of the business to Quanta Computer in addition to Inventec Appliances.)
Moreover, the iPod's popularity ensures that orders keep coming in. And at a time when Taiwanese computer makers are struggling to cope with ever-shrinking profit margins, the iPod provides some welcome relief. According to Byron Wu, Shenzhen-based head of China research for iSuppli, Taiwanese manufacturers make only 2 percent margins on computers. Margins for iPods are at least double that, says Wu.
Source: Business Week, http://businessweek.com

Your DC is Optimized to the Max, Right, But What About Your Labor Management?
Why are companies looking at labor management? "Many of the companies we're talking to have already optimized their distribution centers with a warehouse management system (WMS) or other automation tools," says Dan Hokanson, product manager of labor management for HighJump Software. "But labor continues to account for over 50 percent of their costs, so they're looking for the next way to take cost out of their supply chain."
Facilities that lend themselves to labor management are those that are still labor-intensive or perform some labor-intensive distribution practices like value-added services. In fact, some facilities have implemented labor management just in areas like a value-added services area.
Facilities that aren't well-suited are those that are highly automated or have already reduced the labor component in their facilities.
Source: Modern Materials Handling, http://www.mmh.com

Gas-Detection System Maker Avoids Needing New Building by Optimizing Storage
Industrial Scientific Corp. (ISC) is a manufacturer of fixed point gas detection systems. The company's products are used in a range of industries, including oil, mining, breweries and space exploration. A rapid growth rate of 20 percent to 30 percent, however, threatened to slow production down if increased storage capacity and organization was not achieved quickly.
ISC was supplying parts to its production area with mobile carts. If its rate of growth continued, a new building was going to be required. The company considered several solutions to its storage woes, including high-bay storage and expanding its existing system of mobile carts, and automated storage. The latter option proved the right fit and the company worked with a systems provider to conduct a pilot study using one vertical carousel.
The results proved better than expected. ISC found that the 200 to 300 square feet. of floor space that had been consumed by mobile carts was reduced to just 67 square feet with the system. Inventory control was also improved and payback was reached within a year.
Pleased with these results, ISC decided to add another vertical carousel to manufacturing and three additional carousels in other areas. In manufacturing, ISC uses one carousel to provide ready access of parts to all workers and supports day-to-day manufacturing. The second vertical carousel is equipped with software to monitor inventory. It counts numbers of parts in and out and supports day-to-day inventory control. The software supports running two different assembly lines at once, and the total volume of parts stored in the two storage units includes over 1,000 different part numbers with a total part count of six to 10 million pieces at all times.
The significant gains of the system, combined with its flexibility, have made the new vertical carousels one of the most valued systems at ISC and made the principles of lean manufacturing a reality.
Source: Industry Week, http://industryweek.com

Auto Industry Needs Tighter Global Supply Chains to Avoid Rise in Bankruptcies
Auto manufacturers face stark choices over the next five to seven years, a period that is likely to see increasing bankruptcies and consolidations, according to KPMG's annual global automotive survey.
Some 87 percent of executives said they think the bankruptcy rate will remain the same or slightly increase over the next few years.
Slightly more than half -- 56 percent -- said that rate would increase as bankruptcy becomes a more strategic option for firms. Only 10 percent expect a decrease in bankruptcy activity.
"Not surprisingly, bankruptcy is on the minds of industry executives," said Gary Silberg, lead automotive partner in KPMG's Transaction Services practice. "With shrinking market share, ongoing cost cutting and other pressures, beleaguered companies are tempted to reorganize by way of bankruptcy, which provides them protection from creditors while they sort out their affairs as they seek to strategically restructure and gain breathing room to meet their obligations."
A tighter realignment of global supply chains is viewed as one of the first lines of defense against falling margins, especially as 47 percent of auto executives see non-competitive cost structure as the driving force of bankruptcy.
For instance, 96 percent of executives expect manufacturing to grow in Asia while 60 percent of executives expect increases in manufacturing in South America and Eastern Europe.
China will continue to play a paramount role in auto manufacturers' sourcing operations -- 75 percent of all executives agree that automakers and suppliers will continue to make significant investments in the country over the next five years.
Executives are split on which country is best situated to take advantage of the growing Chinese automotive industry. Thirty-eight percent say China is best poised to take the upper hand, while 29 percent name Japan.
Source: CRM Buyer, http://crmbuyer.com

Globalization, Outsourcing Drive Growth in SRM Applications
The increased demand for supplier relationship management applications will be predominantly driven by the continued proliferation of globalization and outsourcing. The worldwide market for SRM is expected to grow at a compounded annual growth rate of 8.2 percent over the next five years. The market was $1.56bn in 2006 and is forecasted to be over $2.3bn in 2011, according to a new ARC Advisory Group study. The SRM market has experienced substantial M&A activity and is currently occupied by four major categories of vendors: ERP vendors offering SRM functionality, SRM suite vendors, point-solution providers, and PLM providers offering SRM functionality. "Point-solution vendors have merged resulting in a smaller number of providers offering integrated suites of supplier relationship management, or 'spend management', solutions. In addition, product lifecycle management (PLM) solution providers have recently begun offering SRM solutions integrated with their PLM solutions," according to Clint Reiser, analyst for supply chain management at ARC Advisory Group and the principal author of the study.
Source: ARC Advisory Group, http://arcweb.com

Demands of Today's Global Supply Chains Affect Air Carriers' Strategy in Buying Aircraft
The rush of new orders for widebody freighters aircraft, the uncertainty over fuel prices and the fluctuating world economy have amplified the need for a forward-looking fleet strategy in today's air cargo industry.
In the overall marketplace, there are certain drivers of every carrier's freight fleet strategy. "Noise and emission standards and reliability are of paramount importance today," says Steve Rimmer, executive officer, Guggenheim Aviation Partners.
Beyond that, however, are the more fundamental questions about how the fleet fits into a carrier's business model. That includes an examination of the direct operating and maintenance costs spread out over several years, which means diagramming out the business as it is today and how it will look far in the future both in scope and in direction.
Some air cargo carriers are "revisiting their fleet strategy" because of the increased demands on the operator in today's global supply chain, says Rimmer.
Source: Air Cargo World, http://aircargoworld.com

You're Not Really Innovative Unless You Are Openly Sharing Information with Others
Everyone knows that innovation is a core business necessity: Companies that don't innovate will die. But effective innovation increasingly means to do so openly, using transparent business models.
Implementing an open business model represents a significant cultural break from most corporate traditions. Indeed, it may even seem counterintuitive--especially for CIOs who work diligently to protect the information resources and intellectual property of their organizations.
Until recently, innovation was a function of tapping into internal intellectual resources and nurturing the business while protecting it from outside exposure or interference. Companies have fiercely guarded their patents, trade secrets, and other intellectual property to leverage the most value from their own innovative efforts. Open innovation, by contrast, calls for companies to make much greater use of external ideas and technologies while sharing their unused ideas with others. This requires each company to open up its business model to let more external ideas and technology flow in and more internal knowledge flow out.
By adopting these models, organizations can bring innovations to market more quickly and less expensively, thereby securing a competitive advantage in an increasingly dynamic global economy. It's critical for CIOs to understand these models' disruptive implications and provide the infrastructure necessary for their companies to thrive in the new landscape.
Source: Optimize, http://optimizemag.com

Now, Business Procurement Can Be as Easy as eBay or Amazon
What does a Hummel figurine called "Going to Grandma's" have in common with an R&S Machine--brand scrap metal baler? How about a Detective Comics #38 (which introduced Batman to Robin) and a Buschman belt-driven elevated conveyor with control panel?
They're all for sale to the highest bidder, and all four items are available through eBay, the online sales portal: the figurine and comic book on the familiar ebay.com, and the baler and conveyor through ebaybusiness.com.
If that seems an odd place to find a conveyor, procurement is going the way of eBay and amazon.com (the online book and music giant). The Gartner Group, in its report "Predicts 2007: Web 2.0 and Consumerization Forge Into the Enterprise," observed that corporate IT departments eventually come around to using consumer-driven technologies, for example, the graphical user interface or GUI, and the use of the Internet. Hence, Gartner recommends that technology executives embrace changes from the consumer Web.
"The idea of creating a 'consumerized' user interface that's incredibly familiar and easy to use, requires no user training, and is accessible to all employees is a fundamentally different and better approach to solving this problem," said Gartner Research Director of Procurement Strategies & Systems Deborah Wilson.
Consumers have become inveterate self-trained procurers, between eBay, amazon.com and free cost-comparison tools available on Yahoo, Google, etc. At work, they expect the consumer-like utility in procurement, and smart vendors are conforming.
Source: The Manufacturer, http://www.themanufacturer.com

Business Has a Wide Array of Industrial-Strength, Can-Do Computers to Choose From
From rugged desktops and notebooks for shop-floor use, to embedded systems for industrial control networks, to "wearables" and handhelds for pick, pack, and ship applications, manufacturers have a wide variety of options when evaluating industrial computers.
While today's models come in different sizes, shapes, and configurations, they all share important characteristics beyond the ability to withstand the harsh conditions of the manufacturing enterprise. First, they are all designed to process work at accelerated speeds, thanks to more powerful microprocessors, denser disk drives, and an assortment of memory and graphics processing extensions. Second, today's industrial PCs are no longer islands unto themselves; they support a wide array of wired and wireless networking options for connecting the shop floor to back-office systems that run the enterprise. And, perhaps most important in these cost-sensitive times, industrial computers are now equipped with more energy-efficient componentry to reduce power consumption and cooling requirements.
Source: Managing Automation, http://www.managingautomation.com

Wal-Mart Implements Workforce Scheduling Optimization System, Regardless of What Critics Say
Retail giant Wal-Mart has just rolled out a new workforce scheduling optimization system. The move has been controversial among some of the store's employees and critics, who charge that it will enable Wal-Mart to take hours away from an already lowly-paid segment of workers. However, the fact is that Wal-Mart already schedules its workforce flexibly. Just go into a Wal-Mart store at 11 A.M., return in seven hours, and see the difference for yourself.
The use of e-business software designed for workforce optimization simply gives Wal-Mart better decision support for a practice in which it has already been engaging; moreover, by making precise measurements of hours worked, store demand, and other such factors, the system will actually make it less, not more, likely that an individual worker won't be the victim of a scheduling mix-up.
Finally, the reality is that, if Wal-Mart can't optimize the schedules of its giant workforce, it will fire some segment of it. That's because Wal-Mart can't offer the bulk, discounted goods that it does without saving on labor costs.Source: Line 56, http://www.line56.com

Recyclable Materials Equipment Maker Automates Field Service Operations
If you've ever returned empty beverage or other containers to a supermarket or other store by inserting them into a machine, chances are that machine was manufactured by Tomra North America, a Shelton, Conn.-based provider of equipment and solutions for the recovery of recyclable materials. More than 13,000 of the company's reverse vending machines, which are used to collect soda bottles, beer bottles, cans, and miscellaneous plastic receptacles and return a small deposit to consumers, have been installed throughout New York, Connecticut, Massachusetts, Maine, Vermont, Michigan, and Iowa. A team of more than 65 technicians service the machines and handle all necessary repairs.
Five years ago, Tomra decided it needed to automate its field service operations. "We wanted to know how long it was taking for technicians to service machines and what problems they were encountering," says Jerry Daniel, regional vice president, service. "We also wanted real-time communication with our fleet."
At the time, the company used a rudimentary home-grown system for dispatching technicians, along with paper work orders and manual methods of recording data pertaining to service calls. Communicating with personnel in the field was difficult, if not impossible.
After evaluating about 10 options, Tomra engaged Nexterna, a solution provider headquartered in Burlington, Ontario, to implement a technology suite comprising its Clearview real-time field service management platform and mobile communications software, along with a schedule optimizer tool from Click Software, a data transmission and global positioning system (GPS) from Wireless Matrix, and Q-100 handheld mobile communications devices from Itronix. "One reason we went with Nexterna was that Clearview contains all the platforms we need to run the field service business in real time, including dispatch, service order, logistics, and service contract modules," Daniel asserts. "We also liked the fact that the company could provide all of the solution components in an integrated package; most importantly, the schedule optimizer already interfaced with Clearview."
Source: Integrated Solutions, http://integratedsolutionsmag.com

Sales Are Nice, But What We Really Want Is a Good Return Policy for Merchandise
Return policies are becoming more important to shoppers, particularly as they cross channels more often, says KPMG's John Rittenhouse. "Consumers want to have a choice of returning an item bought online to a bricks and mortar store, or, for that matter, to be able to pick up something ordered online at a nearby store."
Source: E-Commerce Times, http://ecommercetimes.com

Do You Know How Much New CRM System Will Change Your Daily Operations?
When implementing a CRM system, a company needs be aware of how it will change operations all the way from the CEO and CIO, through sales and service, down to the warehouse delivery driver. That type of end-to-end business intelligence is part of what allows for a flexible CRM system to be used properly in an enterprise of any size.
Source: CRM Daily, http://www.crm-daily.com

Click here to subscribe or renew your subscription to Global Logistics & Supply Chain Strategies magazine

Only the 'Best' Will Do

A year-long series on best practices in supply chain management kicks off with a look at transportation, where a series of potential roadblocks has caused companies to take a fresh look at how they move things.

In the February issue of Global Logistics & Supply Chain Strategies magazine.