QuickREAD

December 6, 2006

Sorry, Our E-Store Is Closed. Come Back Later. Or Not.
What if, in the days leading up to Christmas, a crush of shoppers forced a retailer to lock its doors during peak business hours? Unimaginable--but that's exactly what happened to varying degrees at the Web stores for Wal-Mart, Macy's, and other retailers as the holiday e-commerce season got off to a blazing start. Here's what's more shocking: There's no guarantee it won't happen again during the all-important shopping days ahead, when even bigger throngs are expected at e-retail sites.
You'd think retailers would have licked the problems of site downtime and slow response times by now, even during the holiday rush. Yet while everything else associated with online shopping keeps rising--the number of visitors, sales volume, site sophistication, and consumer expectations--site performance is still a wild card. As companies load up on Ajax- and Flash-powered interactive features that can stress sites, simple uptime and performance could be the differentiators this season.
Wal-Mart's failure on Black Friday, the day after Thanksgiving, was the most stunning. Walmart.com was down for a total of about 10 hours that day, according to Internet monitoring firm Keynote Systems, forcing it to greet shoppers at times with a "come back later" notice. "I'm afraid it was too much of a good thing on Friday," a Wal-Mart spokesman says. Wal-Mart expected order activity to be double the level on last year's Black Friday, but it came in at seven times the previous year's volume. Wal-Mart set big online goals for this holiday season, having spent 13 months adding faster checkouts and an interactive toy section, the kind of features it hopes will lure about 300 million visitors this holiday season. Not if the door's closed it won't.
Macy's site performed poorly for about nine hours on Black Friday, according to Keynote, and was down for about an hour that day and then again part of the following Tuesday. Zappos' and Foot Locker's sites also had some performance problems. Keynote says most sites, including Wal-Mart's, recovered Monday and didn't have major problems that day.
Source: Information Week, http://www.informationweek.com

Eco-What? Hey, The Only Green I Want to Know About Is the Spending Kind.
surprising number of business people, including an unacceptably large contingent of corporate-tech pooh-bahs, are still sitting on the environmental sidelines. High fuel prices, heavy regulation around environmental issues, and public concern about sustainability and global warming make clear the bottom-line value of eco-friendly strategies. But some folks still aren't paying attention. The problem goes to the top of the corporate ladder: A recent report from the Conference Board, "Stopping the Profit Drain from Higher Energy Costs," says: "[E]xperts and plant managers say that it is extremely difficult, if not impossible, to get CEOs interested in cost-saving energy programs." And this particular breed of ignorance appears to be widespread.
Source: CIO Insight, http://www.cioinsight.com

Maybe, Just Maybe, Airfreight Industry to See Continued Growth in 2007
Although not out of the woods entirely, the air cargo industry had a far better year in 2006 than it did the year before, and 2007 is expected to continue that upward trend. Revenue and traffic growth is expected to be moderate overall but potentially industry-crippling fuel prices have stabilized, giving the aircraft operators a bit of breathing room, and the larger world economy more room to grow.
Source: Air Cargo World, http://aircargoworld.com

Biotech--It's the Next Big Thing--and You Need a Piece of It
At last count, some 41 states had programs in place targeting the industry, while many more countries, counties, and municipalities offer their own incentives. Attendance at the Biotechnology Industry Organization's annual trade show has boomed, with exhibitors from Minnesota to Malaysia hoping to attract biotech business. "Everybody's working on it, frankly," says Bruce Johnson, lieutenant governor of Ohio and director of the Buckeye State's economic-development activities.
"States and local governments are looking for the industry of the future," says Gautam Jaggi, a senior manager with Ernst & Young's Global Biotechnology Center. "There is more and more of a feeling among economic-development people that [biotech] has the potential to be the next big thing, and they're all looking to figure out how to attract a piece of it."
From its roots in the 1970s, the global biotech industry has grown to more than $60bn in revenues and is expanding at a 16 percent annual rate. The industry comprises a range of applications, including new drugs, disease-resistant crops, waste remediation, biofuels, and more.
Source: CFO, http://www.cfo.com

Lenovo Chairman Emblematic of New Type of Chinese Business Leader
Yang Yuanqing, the young chairman of Lenovo, is not only building a new breed of multinational company; he is very much a new kind of leader, at least in China. From the moment he was tapped at age 29 to shake up the struggling PC unit of Legend, Lenovo's predecessor company, Yang has defied the stereotype of a Chinese manager. He marries the drive and creativity of Western management with the vast efficiencies of China's manufacturing operations.
If your idea of a Chinese boss is a cautious bureaucrat propped up by the state, Yang is not that guy. He presides over a merit-based culture built on the Silicon Valley blueprint: In an elder-worshipping country, he fearlessly promotes young people and fires employees who aren't up to snuff. He demands that people learn from their mistakes, and he's relentless about self-improvement. When it became clear 18 months ago that he was being hindered by his scant knowledge of English, he hired a tutor, watched CNN obsessively, and went from halting to conversant within a year.
Source: Business Week, http://www.businessweek.com

Pa. Counties Struggle to Entice Wall Street Firms to Use Them as Business Continuity Sites
An attempt to entice New York-based financial services firms to set up business continuity facilities in nine counties in northeastern Pennsylvania has yet to attract any clients to what is optimistically being dubbed "Wall Street West."
The initiative is aimed at making the areas in and around the Pocono Mountains competitive with neighboring New Jersey as a location for disaster recovery sites and secondary data centers. Pennsylvania officials also hope companies will hire residents to be on-site IT workers, creating new job opportunities in an area that is in need of economic revitalization.
Last February, the U.S. Department of Labor gave the Bethlehem, Pa.-based nonprofit organization that is coordinating the Wall Street West efforts a three-year, $15m grant to fund IT training programs. The group also expects more than $10m from the state government to help it develop a fiber-optic infrastructure over the next 15 to 18 months, says Jim Ryan, director of outreach and network development for Wall Street West.
Source: Computerworld, http://computerworld.com

Invest in Continuous Improvement Teams to Make Your Lean Strategy a Success
With so much volatility occurring in the industry, it's easy for automotive manufacturers to find themselves in perpetual firefighting mode. In the midst of that volatility, strategic management concerns like Lean often slide down the slope of priorities. Ironically, though, it is during those times where Lean principles can pay the greatest dividends.
To address this issue, many manufacturers have put dedicated continuous improvement (CI) teams in place--separate from operations. This is a solid sign of investment in the process; however, it's critical that CI teams remain connected to the day-to-day workings of the plant and work collaboratively with the plant manager to ensure that any improvement efforts are linked with compelling operations challenges.
Transforming value stream mapping from a one-time, static activity to an ongoing and dynamic process modeling of production and the extended supply chain is one very effective way to advance from merely doing Lean to truly running Lean--day in, day out. By building a "living, breathing" representation of the value steam, manufacturers gain visibility into key metrics within processes and sub-processes that enable them to pinpoint opportunities for improvement while also managing more effectively right at that moment.
Source: Industry Week, http://industryweek.com

Electronics Manufacturers Discover Anew Mexico's Lower Landed Costs Compared to China's
In the past three years, Jabil Circuit has doubled the revenue from its plants in Mexico while increasing revenue by one fourth from its plants in China. Why is that?
"What is driving the Mexico revenue is that customers are taking a lot closer look at the lowest landed cost," says Bill Peters, president of the Americas for Jabil. "It was in vogue a few years ago to ship everything to China."
Jabil recently opened a new assembly plant in Reynosa, Mexico, bolstering existing operations in Reynosa, Chihuahua and Guadalajara. And it is not the only EMS company expanding in Mexico.
Elcoteq, which has plants in Juarez and Monterrey, is preparing to expand in Juarez, says Mitch Schoch, vice president of sales and marketing for Elcoteq Americas. The Monterrey facilities assemble cell phones, which account for 80 percent of the company's revenue worldwide; Juarez builds set-top boxes, a growing market for Elcoteq.
After a relatively static period in the first part of the decade, electronics manufacturing has grown by leaps and bounds in Mexico in recent years. OEMs are wising up to the hidden costs of doing business in China, contrasted with the lower landed costs--also known as total cost of ownership--often achievable in Mexico.
Source: Electronic Business, http://www.edn.com

Just How Big Was RFID in North America in 2005? Is $75m Big?
The total North American RFID market for manufacturing and logistics generated $74.8m in 2005, according to Research and Markets. The market is expected to grow at a compound annual growth rate of 19.6 percent over the forecast period to reach revenues of $261.8m in 2012. The automotive and industrial vertical segment markets account for the highest percent of market revenues with 39.0 percent and 37.0 percent during 2005 which was the base year of the research. The split of revenues by geographic regions for the total market revenues indicates concentration of the present market potential within the U.S. The region accounted for 57.3 percent of the market revenues during the base year.
Source: MoreRFID, http://www.morerfid.com

Can U.S. Manufacturers 'Innovate Around' Structural Barriers Put Up by Foreign Producers?
Data from the National Association of Manufacturers' recent report, "The Escalating Cost Crisis," points to costs from five structural, non-production factors that are hampering U.S. manufacturing's ability to compete against foreign producers for consumer spending. The five factors? Corporate taxation, employee benefits, regulatory compliance, litigation and tort costs, and natural gas prices.
These same factors, which were studied back in 2003, were found to constitute a 22.4 percent overall cost disadvantage for U.S. manufacturers, beyond all raw cost components including wages, corrected for capital intensity and raw material expenses. The 2006 update found that the disadvantage has widened to 31.7 percent.
Is innovation enough to help U.S. manufacturers overcome these structural barriers?
Source: AMR Research, http://amrresearch.com

No Wait, This Is One SOA Story You Have to Read. Really.
If the average CIO had a dime for every column inch penned about the virtues of service-oriented architecture over the past three years, he or she could be relaxing on a tropical beach right now. But nothing would be done toward convincing the boss that SOA matters.
Although SOA is the IT story of the year--of the decade, for that matter--it's one that falls on deaf ears in the executive suite. The CEO, CFO, and COO have heard all about IT's transformative powers, and they've understandably developed chronic technology fatigue. No matter how many compelling testimonials there are about successful SOA-enabled software integration or faster upgrades to the corporate Web site, SOA still seems irrelevant to their pressing business challenges. Instead, it presents further evidence of the parallel universe inhabited by IT managers and many of their business colleagues.
Top execs are also under nonstop pressure for improved financial performance, and they're experiencing the associated frustration caused by years of cost cutting. Despite their best efforts, many see few ways in which their company's operations and offerings stand apart from those of competitors.
So where does SOA fit into this picture, if at all?
Source: Intelligent Enterprise, http://www.intelligententerprise.com

Can U.S. Manufacturers Keep on Pushing Productivity Up and Up and Up?
Over the past 25 years, even while coping with an unprecedented pace of change, U.S. manufacturers have managed to maintain at least one constant: a solid, unbroken track record of productivity improvement. Vertically integrated enterprises have given way to virtual networks capable of taking advantage of trends such as cheap offshore production. Long, steady production runs have changed to short, demand-driven production bursts. Manageable bills of materials and product catalogues have exploded as the number of products and features has skyrocketed. Yet, through it all, U.S. manufacturers have remained at or near the top in driving productivity, at least as measured in the traditional terms of output per worker hour.
And it's a good thing, too. Without the breakthrough productivity gains that they have achieved in recent years, many U.S. manufacturers would not have been able to overcome an avalanche of rising costs for everything from raw materials to energy. Nor would U.S. consumers have enjoyed the steady supply of low-cost manufactured goods that has played a major role in stimulating economic growth.
"While it tends to be cyclical, the long-term rise in manufacturing productivity has resulted in a competitive advantage for U.S. manufacturers and an important boost for the economy, driving down inflation," says Dan Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a manufacturing industry trade group. "It's really quite a success story."
But how much further can U.S. manufacturers push productivity gains?
Source: Managing Automation, http://www.managingautomation.com

You Want Me to Be Nice to IT Vendors? There's Money in Being Nice?
In the past, the goal of vendor management programs was to get the best prices from hardware, software and services companies. Although competitive pricing remains an objective of vendor management, it's no longer the primary one. In today's growth-obsessed business climate, constructive relationships with technology providers often prove to be a source of innovation. Dennis Gaughan, a research director with AMR Research, says maintaining healthy relationships with technology providers helps CIOs improve the service they provide to their end-users and the services their companies provide to their customers.
"It gives them an opportunity to leverage their vendors' skills and capabilities," he says. Companies now spend so much on technology, which is such a significant source of competitive advantage, that managing vendor relationships ought to be treated as a strategic activity and not a tactical or administrative one.
Mike Hmel, FedEx Ground's senior vice president of IT and CIO, certainly views vendor management as a strategic activity, given the $280m his company spends on technology each year. "It's a way to make FedEx Ground more successful," he says.
Indeed, the care and feeding of 30 technology providers has made his company more agile and his IT group more innovative.
Vendor management is so important to Hmel that he uses the phrase "strategic business partnerships" to elevate the concept. "We call the people that we've invited into this inner circle our trusted business partners. They were a vendor when we first started dancing with them. Now that we're in bed with them, they're our partners."
Source: CIO, http://cio.com

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

2007 Supply Chain Management Resource Guide & Executive Yearbook
The annual complete source of industry suppliers of solutions, systems and services, industry conferences, exhibitions, seminars and executive education programs.
And some of the most respected SCM research organizations and analysts take a look at the past year's developments and suggest what to look for in 2007.

In the January 2007 issue of Global Logistics & Supply Chain Strategies magazine.