QuickREAD

January 24, 2007

You've Wrapped Up the Merger, But What About the Overlapping Supply Bases?
Domestic manufacturers are aggressively pursuing mergers and acquisition strategies to grow and better compete. But what happens when the acquisition is complete and the time comes to marry two distinct supply bases?
Given the influential role of the supply chain in a company's ability to bring goods to market, manufacturers have taken major steps to improve its efficiency. Supply chain decisions bear even greater impact when it comes to tapping the synergies from a merger: supplier overlap is often likely along with opportunities to negotiate better cost and service contracts.
Meanwhile, lean manufacturing, globalization and supplier rationalization initiatives have dramatically increased companies' exposure to the risk of supplier instability, shrunk time-to-respond, and decreased visibility.
These forces combine to establish a new imperative for executives to understand overall risk exposure and criticality across their supply base -- and the supply base they're inheriting.
Source: Line 56, http://www.line56.com

Sorry. When You Say Collaboration, I Don't Feel All Warm and Fuzzy Inside
People have a lot to do. If they don't truly understand the importance of collaboration, they won't do it. For example, someone might agree with a vague rationale for collaboration, such as, "It will improve our customer service." But that doesn't give a person the motivation to insist on collaboration and work across boundaries when deadlines loom and the pressure is high. Why take time for some fuzzy concept that may or not be achieved?
A much more compelling rationale is: "The X Department works with our customers every day. If we don't develop close relationships with the department, we'll never know enough to please our customers." This rationale lays it all out on the table: what the partner has that is critical, why it is needed, and what consequences come from failing to collaborate.
Source: CIO, http://cio.com

All the Talk About Business Performance Management--In One Ear and Out the Other?
For all the talk and vendor marketing pieces pushing business performance management (BPM), with its promise of integrated data and dashboards, powerful analytics and ability to connect financial and planning applications, there are still a lot of CFOs and chief information officers who apparently need convincing.
Tom Manley, senior vice president and CFO of Cognos Inc., told an investor conference recently that "market opportunity" penetration appears to be no more than 20 to 25 percent. Despite solid growth in the market, there hasn't been a "tipping point" that has turned mass prospects further down the food chain into mass converts.
Source: BPM Today, http://www.bpm-today.com

Find Out How New Congress Will Affect Your Supply Chain
While many issues the 110th Congress is likely to address will affect business and supply chain management—many of the transportation security and infrastructure-specific issues are sure to introduce more stress to an already strained U.S. and global logistics infrastructure.
In a new report, "New Congress, New Supply Chain: How Power Shifts in Washington May Affect Your Business," AMR Research says it can help companies prepare by looking at the following transportation-specific issues that the new Congress should address:
1. Finding ways to increase funds for infrastructure improvements, including alternatives to stimulate private investment
2. The allocation of homeland security resources across the transportation network based on a common risk-managed framework
3. Federal and private-sector efforts to ensure the security of surface transportation modes, and federal efforts in developing and enforcing related security requirements
4. Sponsoring and promoting the development of new technologies and solutions for increasing the efficient safety and security of the transportation system.
Source: AMR Research, http://amrresearch.com

Recent TJX Data Breach Reflects Poorly on Retail Industry in General
The scope of a security breach disclosed recently by The TJX Companies Inc. is starting to make itself evident, with more than three dozen banks in Massachusetts alone now reporting that cards they issued have been compromised. But the problem is one the retail industry as a whole needs to deal with, observers say.
Framingham, Mass.-based TJX says that an "unauthorized intruder" gained access to its systems in mid-December and may have made off with the card data of an unspecified number of customers in the U.S., Canada and Puerto Rico, and possibly in the U.K. and Ireland as well.
The retailer, which owns chains such as TJ Maxx, Marshalls and Bob's Stores, didn't disclose the number of shoppers that may have been affected by the breach, saying that the full extent of the data theft "is not yet known."
In addition, alerts from Visa U.S.A. Inc. suggest that so-called Track 2 data appears to have been compromised in the breach. Track 2 data includes account numbers, expiration dates and encrypted personal identification numbers, plus other information that card-issuing banks can include at their discretion. Its apparent inclusion in the breach at TJX provides fresh evidence that IT security remains fragile at some large retailers despite efforts by credit card companies to get them to better protect customer data.
Retailers are forbidden from storing such information under the Payment Card Industry (PCI) Data Security Standard being pushed by Visa, MasterCard International Inc. and other credit card companies. But many retailers continue to do so, often because their point-of-sale systems capture and store the data by default.
Source: Computerworld, http://computerworld.com

Lean Is Not Really About Your Company. It's About Your Customer.
Often, Lean practices are implemented with the goal of cutting costs and improving internal operations. However, it is essential to broaden this scope of thinking when undergoing a true lean transformation. First and foremost, we should always keep the customer at the forefront of the planning and implementation process. A key to success is in being able to find the customer in every single metric you choose to measure your Lean transformation progress by.
Source: Industry Week, http://industryweek.com

Retailers Must Introduce New Products Faster to Satisfy 'Spoiled' Customers
More than half of companies surveyed by AMR Research say their lead time for a new product from inception to shelf is greater than six months, says Michael Barrett, retail research director at AMR. For sellers of apparel, footwear and home furnishings, the time to market is often 11 months.
"Current lead times are long," Barrett says.
They can't stay that way, when companies such as Hennes & Mauritz, Topshop and Zara, owned by Spain's Inditex, have significantly shorter lead times -- thereby spoiling customers with the expectation of product innovation.
Zara, for example, introduces new products in a three- to four-week time frame. This flexibility proves especially useful when there is unseasonably warm weather, like retailers' experienced this holiday season, because Zara can keep warmer-weather clothes in stores while competitors are less adaptable.
Source: CRM Buyer, http://crmbuyer.com

RFID Wasn't the Blowout Business in 2006 Many Hoped for, But Investment Remains Strong
Last year was a challenging one for the RFID industry: sales expectations fell short, a high-profile IPO did not materialize, and the market continued to be "commoditized before it is commercialized." Nevertheless, investment in RFID remained strong and the industry made significant strides toward resolving standards-related issues.
According to Venture Development Corporation's recently released 2005-2006 RFID Year-End Overview, the worldwide market for RFID systems exceeded $2.3bn in 2006, with hardware accounting for nearly 59 percent of the total market. VDC anticipates nearly 35 percent growth through 2008, with total global revenues projected to exceed $3bn by the end of this year.
Source: MoreRFID, http://www.morerfid.com

If Your Company Doesn't 'Do' Change Management, It Couldn't Be Losing a Lot of Money
"Change is hard, and it's not free," says Todd Senturia, global head of Bain Consulting's change management practice. "People simply aren't getting any better at it."
Seventy to 80 percent of companies continue to fail at change management, Senturia estimates, a task made all the more difficult by the growing complexity of the global economy.
Yet the price of lackluster change execution or, conversely, the rewards of stellar execution are huge: potentially ten- or twentyfold the gain of half-hearted implementation, Senturia says. Many large companies could invest $10m a year to do change well and add $500m to their bottom lines.
Source: The Manufacturer, http://www.themanufacturer.com

Forget the Mandates—There are Enough Internal Reasons Why RFID Might Be Good for You
The need for manufacturers to comply with supply chain and retailer mandates for tagged finished goods has led to rising interest in RFID for internal applications that promise greater ROI. While numerous pilot activities designed to evaluate the potential for RFID in manufacturing are currently under way, the number of pilots that actually result in full-blown implementations will be a key determinant of the rate and timing of overall market growth.
Continued growth in existing applications, such as WIP tracking, will combine with increasing adoption in growth segments, such as asset tracking, to fuel healthy overall market growth through the end of the decade. "Compared to the challenge of generating ROI from mandate-driven RFID implementations, numerous opportunities exist for internal RFID applications to generate ROI for manufacturers.
Source: ARC Advisory Group, http://arcweb.com

Online Invoice Payment Solutions May Allow You to Capture Those Discounts Again
KeySpan, a Brooklyn, N.Y., energy utility, had trouble paying its bills. The problem, however, was paper, not money: the company's accounts-payable department was wallowing in paperwork, processing up to 300,000 invoices each year. It was mired in a five-day backlog and missing out on vendor discounts. "The process didn't allow us to capture discounts as much as we wanted to or as much as our vendors wanted us to," says Ken Daly, KeySpan's vice president of financial and employee related services.
Under KeySpan's old, paper-based system, workers usually couldn't pay bills fast enough to qualify for discounts. "The vendor didn't like it because they had to wait longer got their money than they wanted to and, as a finance person, I hated it because I lost that 2 percent discount," Daly says.
But KeySpan is hardly the only company with A/P problems, and vendors have found a lucrative niche in trying to solve them. Electronic-payment specialists are promising to reinvent customers' A/P operations by offering payment services that sit between enterprise A/P departments and their suppliers, eliminating paper-based invoices and streamlining the payments process.
Source: CFO, http://www.cfo.com

Love My Mobile Phone Even if Company Data Is at Risk. Can You Hear Me Now?
A mobile mess looms for CIOs who ignore the rising popularity of connected handhelds. New third-generation (3G) cellular networks make handheld computing more convenient for everyone from executive travelers to salespeople and field technicians. This trend poses new challenges to CIOs who need to maintain enterprise network and data security, plus keep end-user support costs down. Yet most enterprises have no policies or mobile management strategy in place to achieve these goals, notes a recent study by the BPM Forum, an industry association.
And without a mobile device management strategy, a trickle of connected devices brought in by individuals can quickly become a nasty, unmanaged torrent.
Source: CIO, http://cio.com

Fluor: It Makes Its Money on How Well Its Procurement Program Works
Throughout the world, cars and trucks drive on highways, oil is produced at refineries, military bases protect regions and power plants keep the lights on at night. But who builds these amazing structures? As one of the leaders in its industry, the Dallas-based Fluor Corporation prides itself on its ability to engineer, procure, construct and maintain these massive projects. What is even more interesting, from an internal perspective, is the degree of responsibility and criticality that procurement plays in the company's success.
In the last four to five years, Jim Scotti, vice president and chief procurement officer at Fluor, says people are realizing that if the company builds a billion-dollar power plant, nearly 50 percent to 70 percent of the total installed cost of the facility is what procurement buys and contracts for. "The actual engineering and construction labor costs are a much smaller piece than what most people realize," says Scotti. "That is why procurement in our organization is really a core competency, because we make or lose money based on how well we buy."
Source: Inside Supply Management, http://www.ism.ws

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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.