QuickREAD

December 13, 2006

I Want My Company to Be a Starfish, Not a Spider. What Do You Want Yours to Be?
A spider will die if you cut off its head, but chop off the arm of a starfish and the creature will grow a new one. Not only that, the severed arm will generate a new body. Starfish can achieve this feat because unlike spiders, they lack a central control mechanism. Instead of a brain, they have a neural network with vital organs replicated across each arm.
In business and society, organizations are also structured like either spiders or starfish. While some are traditional and top-down, others are decentralized. Take Alcoholics Anonymous. Want to start an AA circle? Go ahead--anyone can contribute. Conversely, eliminate half its circles and AA will still survive. Social activists have used starfish principles to abolish slavery, win voting rights for women, and fight for animal rights. But until recently, starfish organizations were rare in the business sector.
The internet changed everything. By going online, people no longer had to convene in the same physical location to form a starfish. It used to be that the bigger you were, the more power you had. But being small and nimble like starfish gives you flexibility and resilience.
Source: Optimize, http://optimizemag.com

Big Pharma Seems Intent on Buying Innovation, But Is That a Viable Long-Term Strategy?
Pfizer wants to add more medicines to its pipeline. But its strength isn't research, even though Pfizer spends some $7.5bn a year developing new drugs. It's using the company's enormous cash pile to acquire promising medicines from smaller, more innovative drugmakers. The question is: Is relying on outside innovation a viable long-term strategy?
The core argument for this strategy? Big Pharma can jettison the incredibly high risk of early clinical research out of their operations. Pfizer has been effectively doing this for a number of years. Smaller companies are discovering more and more of Pfizer's new medicines. Moreover, all the industry's top companies are doing the same. According to market research firm Datamonitor, in-licensed products represent nearly 20 percent of Big Pharma sales today, and will grow to 26 percent over the next four years.
Some experts argue that companies would be wise to cut most early-stage research projects and transfer that money to outside deal-making. "Today, drug companies are double-spending in R&D. They're spending internally, but because of their productivity problems--caused by their size--they need to purchase outside projects. Why pay for both?" asks Roger Longman, a partner with Windhover Information Inc., a Connecticut-based healthcare market research firm.
Of course there are downsides. Some experts argue that while small acquisitions and in-licensing deals might temporarily fill gaps in Pfizer's planned medicinal offerings, as a long-term strategy, it would be more costly--both financially and politically--than fixing its own research operations.
Source: Fortune, http://money.cnn.com

Sarbanes-Oxley Is Costly for Small Businesses, Merrill Lynch Report Finds
Costs related to the Sarbanes-Oxley Act seem to be increasing for small businesses, according to a Merrill Lynch report. In fact, 35 percent of small-business CFOs and CEOs predict Sarbox expenses to rise over the next year.
The executives are hoping a new Congress will bring them some Sarbox relief next year when the two legislators who created the 2002 law will no longer be in office. The recent release of the Committee on Capital Markets Regulation's report from 22 professionals garnered plenty of headlines, and likely the attention of legislators when it blamed Sarbox for the debatable threat of increased American capital going overseas. Having no authority, but the support of Treasury secretary Henry Paulson, the committee claims that the cost burden of Sarbox's Section 404, which requires management's assurance of internal controls, can have a "significant" impact on a small business's decision on whether to enter the U.S. market.
Source: CFO, http://www.cfo.com

To Reduce or Eliminate Risk in Demand Variability, You Need Production Scheduling Tool
Production schedulers walk a fine line every day. They must consistently achieve a delicate balance between demand and supply to ensure the right products are delivered to the right place at the right time. To maintain that equilibrium--and keep customers happy--production schedulers need devices and applications that provide real-time visibility and quick access to detailed information. Without such tools, they have to sort through a multitude of reports and inquiries to create a production schedule, relying on intricate spreadsheet arrangements to consolidate many pieces of information.
Source: APICS, http://www.apics.org

Should You Pull Up Stakes in India Solely Because Outsourcing Costs Are Cheaper Elsewhere?
Make no mistake: India remains an IT outsourcing powerhouse, with $17.7bn in software and IT services exports in 2005, compared with $3.6bn for China and $1bn for Russia, according to trade organizations in each country. And India's outsourcing industry is still growing at a faster pace than that of Russia and other wannabe Bangalores.
Yet many companies can't resist the lure of cheaper labor. "Ninety percent of all outsourcing deals in the market today have been structured around cost improvement only," says Linda Cohen, vice-president of sourcing research at consulting firm Gartner. By the third year of an outsourcing deal, after all the costs have been squeezed out, companies get antsy to find a new locale with an even lower overhead.
But moving IT operations into developing countries like Vietnam or China can also pose big risks, such as insurmountable language and cultural differences, geopolitical instability, and the risk of stolen intellectual property. "You keep following the money, but how often are you going to move people around?" asks Cohen. Even the routine day-to-day management of an offshore team can require significant project management expertise. "If you don't have experience and don't do it well, it can negate savings," says Barry Rubenstein, program manager of application outsourcing and offshore services at IDC.
Source: Business Week, http://www.businessweek.com

Chances Are Good that Your Company Is Insufficiently Globalized
Globalization is definitely not new, but it is different. Thanks to the new levels of speed, intensity and aggressiveness, no one can hide from the global forces at work. And the view of China and India as low-cost labor sources is dangerously naive. These countries are now also critical sources of new innovation.
Chances are your company is behind the curve. That's what many executives report in a recent survey. Only 16 percent of companies say they are truly global now. Another 33 percent describe themselves as only cross-regional or multiregional.
Yet successful globalization is an imperative for high performance. Data correlated from 65 different companies to show high performance and globalization indicate that the best performers were 83 percent globalized; average performers were 18 percent globalized. Ironically, the worst performers were 33 percent globalized, proving that ineffective globalization is worse than none at all.
Source: Chief Executive, http://chiefexecutive.net

Manchester, England Plans to Have Largest, Free Wi-Fi Zone Anywhere in Europe
Manchester, England's City Council is planning the largest Wi-Fi zone in Europe to enable more citizens and local businesses to access the internet. The proposed wireless area would cover 400 square miles of the city, allowing its business and residents to access the Internet for free.
While many cities have central Wi-Fi access zones about a mile wide, they are often not where most people and businesses are, says Manchester City Council's Digital Development Agency head Dave Carter.
"Most of them, especially the small businesses and low income citizens are based outside, in the five mile zone around the town center, in the suburbs," he says.
"What we want is something that gives all of that area a basic level of free access to the internet and this is the best way to do it."
The planned service, which will be installed by a commercial partner, will provide residents with access to a 256 Kbps connection and reserve higher bandwidth services for a premium service.
One of the aims of the project is to give businesses in Greater Manchester the ability to get on the internet very cheaply, says Carter.
"There is a great opportunity here for businesses to use this service to do a lot more of their work and trading over the Internet," he says.
Source: Mobile Tech Today, http://www.mobile-tech-today.com

Chemical Companies Find Financial Benefit in Complying with Governmental Regulations
Two trends are driving the chemicals industry toward investment in advanced systems that ensure regulatory compliance in emissions tracking and reduction. First, there are ongoing clean air and water initiatives designed to reduce pollution, including the European Union's Registration, Evaluation, and Authorization of Chemicals (REACH) requirements, which call for chemicals manufacturers to gather information on the properties of their substances and to register the information in a central database. Second, treaties such as the Kyoto Protocol have set up emissions trading systems that create an economic incentive for chemicals companies to manage their emissions.
As a result, companies in chemicals manufacturing, ranging from oil and gas to commercial fluids and solvents, to consumer products that run from lawn fertilizer to laundry detergent, have begun to explore new ways to track pollutants and emissions in real time.
"The emissions area is unique. There's an opportunity for a company to have a financial benefit from compliance," says Simon Jacobson, research analyst for manufacturing operations at AMR Research. That benefit can come via cap-and-trade programs, whereby companies that cut their emissions to below their allotted amount can sell the remainder of that allotment to companies that need cushion. That, Jacobson says, can create "a million-dollar business without a lot of extra cost." But, he adds, "you do need tight control of the processes to predict and analyze where the [compliance] risks are."
Source: Managing Automation, http://www.managingautomation.com

Multichannel Retailing Is Placed to Win Big Over Online-Only Sales This Year
It's important to look at the underlying dynamic that is changing selling online. It's that trust is turning into speed of purchasing this holiday season, and while any e-commerce manager could pile up their weight in metrics and key performance indicators, it's irrelevant unless the last twelve months have been spent attuning all channel strategies to the unmet needs and wants of customers. Coordinating multiple channels to have the same pricing, availability, product selection and messaging is very difficult, yet this holiday season will be the first one in which companies with these multichannel strategies in place win big relative to online-only counterparts.
Source: CRM Buyer, http://crmbuyer.com

All Too Often Manufacturers Just React to Problems Rather Than Act to Prevent Them
Sikorsky, one of a few firms to have contracts with all branches of the U.S. military, is encountering some serious quality control problems. Defective parts have found their way from suppliers through manufacturing, and were installed on helicopters the firm is building for the U.S. Military's war fighters. The end result of these escaping defects: field failures.
Of course, this is not the first public incident of a high-profile manufacturer experiencing quality management issues.
Thinking long term, the lack of an organization-wide systemic corrective action management process prevents any firm from successfully auditing its processes and taking effective preventive actions. This is especially true when multiple manufacturing sites (both in house and outsourced) are involved.
Too often, firms place emphasis on tracking and managing the reaction to a nonconformance (corrective action) and not placing an equal, if not greater, amount of weight toward risk mitigation and assessment (preventive action).
Source: AMR Research, http://amrresearch.com

Begin Your Process Improvement by Reading the U.S. Army Survival Manual First. Really.
There are significant risks to any process improvement (PI) effort that vary according to the environment. So it makes sense to provide some general comments on how you can react to and overcome risks that turn into problems.
Perhaps surprisingly, we turn to the U.S. Army's survival handbook to help us with a framework for our discussion. As shown below, the handbook uses the word survival as an acronym for a set of principles.
Size up the situation
Undue haste makes waste
Remember where you are
Vanquish fear and panic
Improvise
Value living
Act like the natives
Live by your wits, learn basic skills
You should keep these principles in mind no matter where you are in your improvement journey.
Source: CIO, http://www2.cio.com

No Shortage of SKUs, No Shortage of Tech to Manage Them For You
It wasn't so long ago that store shelves held a handful of soft drink choices. Regular and diet colas were always standard. And, of course, there were the requisite alternatives such as orange, root beer, lemon lime, and ginger ale. The whole scene was pretty orderly and predictable.
This certainly isn't the case in today's retail stores. From Pepsi ONE to Pepsi Vanilla, route workers must account for more than a dozen varieties of Pepsi. More than a dozen varieties ... of Pepsi. This doesn't even begin to address the other brands of soft drinks and their myriad variations. And this is just one segment of the soft drink market. The retail shelves are also stuffed with energy drinks and juices and coffees and teas. Well, you get the picture.
"Managing the proliferation of SKUs [stock keeping units] is a major challenge. There's no question about it," says Ted Hastings, general manager, Delivery Division, HighJump Software. If only this issue was unique to the soft drink industry, it might be more manageable. However, the proliferation of SKUs seems to exist across all consumer goods. There are now dozens of varieties of breads and shelves upon shelves of alcohol and beer choices. Adds Hastings, "This situation creates unique pressures where you must have the right SKUs in the warehouse in the right quantities. All of a sudden, forecasting and inventory planning become significantly more important."
In addition to consumer demands and market pressures, your mobile workforce is also impacted by significant advancements in mobile technology. Business processes that once required little more than a clipboard are now being ported to handheld mobile computing devices and leveraging real-time voice and data communications. "Most companies are moving past paper-based systems to some level of real-time management," says Tyler Buskard, sales manager at BelTek Systems Design. "This means that the software and hardware need to be pretty bulletproof from a user perspective. Handhelds can't be complicated, and the interface needs to be intuitive."
Managing the flow of products from warehouses to store shelves is more complicated than ever. And, there is no shortage of technology solutions that aim to make your people and processes more efficient. The key, of course, is to deploy the technology you need now and that can be expanded in the future.
Source: Integrated Solutions, http://www.integratedsolutionsmag.com

Workforce Optimization Solution Saves Briggs & Stratton Million Dollars
Profitable supply chain execution must count upon effective warehouse management, that critical link that often today encompasses a manufacturer's distribution, logistics, and certain customer service functions.
Especially important, warehouse distribution executives report, is optimizing workforce resources, since labor represents up to 50 percent to 70 percent of the cost of distribution operations for many companies. Simply more automation isn't the answer when flexibility is the key to meeting today's more volatile product and marketing mix in responding to customer demands.
"We were able to reduce our workforce by 20 percent but actually increase throughput. We estimate that has saved us about a million dollars [annual rate]." That's from John Guy, vice president for supply chain and distribution, regarding Briggs & Stratton's recent history with workforce optimization in warehouse management--and related light manufacturing in its distribution center.
Source: The Manufacturer, http://www.themanufacturer.com

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