QuickREAD

— August 2, 2006

Retailers May Be Driven by Demand, But They Are Slow to Respond
Demand-driven retailers must use agile supply networks to sense and profitably respond to demand. Having agility throughout a network of suppliers lets retailers slash overall lead time for product and new product introductions in an effort to capitalize on demand.
AMR Research and the National Retail Federation (NRF) recently surveyed retailers and vertically integrated manufacturers to assess their performances, abilities, and initiatives for cycle times within their supply networks. The findings show that although much work has been done, there is still more to do. For example, while increasingly faced with the need to be more responsive to changing consumer demands, half of respondents indicated a total lead-time in excess of six months. Retailers and branded suppliers must improve supply chain collaboration, visibility, and flexibility to continue to shrink lead times.
Source: AMR Research, http://amrresearch.com/

Aw, C'mon, Get Over It. Sarbanes-Oxley Isn't That Big a Deal, Is It?
When the Sarbanes-Oxley Act came squalling into existence on July 30, 2002, it was widely viewed as an unruly baby, spawning humongous costs and heavy compliance burdens for Corporate America. Now, on its fourth birthday, the law is being viewed in some circles as an amiable child — still difficult in some respects, it's true, but certainly manageable.
John Hagerty, a vice president and analyst at AMR Research Inc. in Boston who has done a good deal of numbers-crunching on Sarbanes-related compliance costs, prefers a different metaphor. The evolution in many companies' responses to Sarbanes, he says, resembles the stages in the way people react to a death: first shock and anger, then acceptance, and finally a sense of moving on.
Source: CFO, http://www.cfo.com/

Retail Industry Is Very Positive About Use of Business Intelligence Tools
Eighty-nine percent of retailers are using business intelligence (BI) processes, including advanced analytics, on an enterprisewide basis, according to an Aberdeen Group report. And more than two thirds of retailers have said that senior executives all the way up to the CEO are actively using BI software. Yet the need for faster response to consumer demand is driving retailers to budget new BI investments or upgrade existing data management processes, according to "Business Intelligence in Retail: Bringing Cohesion to a Fragmented Enterprise." While the retailers already see the benefits of enterprisewide BI, they readily admit they have more work to do to improve data quality and step up their use of advanced analytics.
"More than half the retailers surveyed believe their data is not reliable enough for analysis," says Greg Belkin, retail research analyst. "The big challenge for retailers is to get their internal data management processes in order."
Source: Intelligent Enterprise,
http://www.intelligententerprise.com/

Manufacturers Must Integrate Their Information Systems More than Ever Before
How should manufacturers organize their companies to compete in the global marketplace of the 21st Century? Should there be tight, centralized control of all major processes or should the model be decentralized, with local control by divisions and business units over how they do things and what systems they run?
The questions are timely and relevant because many manufacturers these days are trying to establish common business processes and practices in their companies. This transformation comes in response to the globalization of manufacturing. Now, more than ever before, manufacturers are realizing that to grow profitability in their hyper-competitive markets they need to be more innovative in what they make and in how they manufacture. They must fully leverage every physical and human asset, and they must integrate their information systems, in the back room and on the factory floor, to a greater degree than ever before.
Source: Managing Automation, http://www.managingautomation.com/

Measuring IT Investment, No. 1: Just What is a Meaningful Metric?
IT leaders at companies such as DHL Express, Cendant Hotel Group and Kaiser Permanente say they continually wrestle with what they're measuring to gauge the effectiveness of their IT organizations. But by focusing on what business leaders are looking for, they're getting a lot more sophisticated at what to measure — and what not to.
Best-in-class IT organizations have gone beyond rote metrics such as system uptime and help desk problem resolution. Some IT shops on Wall Street, for example, are studying things like how many stock trades or customers they're able to support for each IT dollar they spend, says Howard Rubin, an analyst at Gartner Inc.
But these kinds of metrics are much more difficult to use than the traditional IT time and transaction measures. One of the big challenges that many IT leaders face in developing effective metrics, says Rubin, is determining which activities are under the auspices of the IT department. For instance, some user departments at financial services companies have their own LAN administrators who are outside the purview of the IT organization, says Rubin.
"There's IT everywhere, not just in the IT department but in bank branches and on the plant floor," he says. The business activity supported by IT "drifts back and forth like the eye on the head of a flounder," he adds.
Metrics get even more complicated as IT organizations move to service-oriented architectures, explains Tim Stanley, head of IT at Harrah's Entertainment Inc., in Las Vegas. "In a classical IT world, you measure a particular application," he says. "But when these systems are all highly integrated, what do you actually track? The platform? The services?"
Source: Computerworld, http://www.computerworld.com/

Measuring IT Investment, No. 2: Most Companies Don't Know How to Do It
If most companies really know how to measure the business value of IT, we'd see a clear consensus on which metrics to use, and IT executives would feel those metrics accurately capture business value. But our data indicates just the opposite: Companies use many different metrics, and the most popular metrics are used more often by companies that aren't very good at measuring value. Companies that have developed their own metrics fare somewhat better, but many of those are also dissatisfied. It appears companies aren't picking the right metrics, don't know how to go about measuring, or both.
Source: Baseline, http://www.baselinemag.com/

Now India Wants to Drive Off with Another Piece of U.S. Business—Auto Parts Supply
As if U.S. auto parts suppliers don't have enough to worry about, there's an emerging player in the global auto-components industry. The new competitor is India, and if current growth trends there continue, U.S. suppliers will have plenty to contend with.
The Indian auto-component industry has grown at a cumulative average growth rate of 21% annually in the past five years, according to the Automotive Component Manufacturers Association (ACMA) of India. An ACMA/McKinsey & Co. study shows India has the potential to grow from US$8.7 billion in 2005 to US$45 billion by 2015.
Despite the projections, some U.S. auto industry experts don't seem overly concerned. They say that, if anything, India presents more of an opportunity than a threat. Additionally, infrastructure problems and a slow-growing middle class continue to be major barriers for India's auto-parts business, says Neil DeKoker, president of the Original Equipment Suppliers Association, Troy, Mich. "It's a pretty small industry — the automotive industry — even though there's a lot of people there," he explains. "There is significant potential for growth, but it's from a very small base."
Source: Industry Week, http://www.industryweek.com/

Home Depot Sells Streaming Video Ads on Its Much-Visited Web site
Walk into a Home Depot and chances are you will be confronted by large displays showcasing new products from manufacturers such as Moen, Maytag, or Kohler. Vendors pay Home Depot and similar retailers for such prime promotional space, and it usually doesn't come cheap.
Now the Atlanta home-improvement retailer is trying to replicate that in-store experience, selling streaming video advertising on its Web site to manufacturers, promoting the fact that Home Depot's online store is visited by 4 million shoppers each week.
"Our vendors can definitely do much more online than with their in-store displays," says Greg Foglesong, director of Web marketing and sales at Home Depot in Atlanta. "Vendors can communicate their stories of innovation, and new product selection via video."
Home Depot is certainly breaking some new ground — at least as far as major retailers are concerned.
Source: CRM Daily, http://www.crm-daily.com/

Process Innovation Must Come First or Outsourcing's Value Will Be Short-Lived
Outsourcing is one of many tactics that companies deploy to achieve operational excellence—defined as making a company's processes better, more efficient and more effective. These improvements lead to competitive advantage, lower costs, and increased customer satisfaction. However, outsourcing is a viable tactic only if it meets two objectives: It improves customer service, and it increases employee engagement. Ask yourself if those goals are being achieved by your outsourcing arrangements. If the answer is no, you may not realize that the key to achieving these objectives is process innovation prior to outsourcing. If you don't create process innovation up front, the cost savings generated through outsourcing, by its very nature will dead-end. It won't create long-term financial savings or a sustainable competitive advantage.
Source: Optimize, http://www.optimizemagazine.com/

Private World Has a Thing or Two to Show Government About Saving Money
Governments are turning to private sector techniques — namely benchmarking — to ensure that their back-office processes meet industry performance standards, according to a new study by Accenture. The resulting savings are, at least in theory, being applied to constituent-facing processes.
"We know of a few organizations that realized savings in the first year or two since they began benchmarking," says Mark Howard, global program director for the finance and performance management service line within Accenture's government practice.
Source: CRM Buyer, http://www.crmbuyer.com/

Your Best Practice May Not Be My Best Practice
It may seem self-evident that organizations should study and adopt best practices. But in fact, this isn't always the case. There certainly are situations where others have figured out how to solve a problem and there's no need to reinvent your own solution. It's wise to avoid the “not invented here syndrome” and remain open to learning from others.
But there are also situations where others (sometimes many others) have adopted practices that are ineffective, or even harmful. For example, I've heard a number of people say that decentralizing applications developers is a “best practice” when, in fact, it inevitably leads to replication of efforts, fragmented data and lost business synergies.
Source: CIO, http://www.cio.com/

GM, Renault, Nissan Consider Joint Purchasing Programs
The alliance being considered by General Motors and Nissan and Renault may focus on a shared purchasing program, similar to the one currently in place between Nissan and Renault. Carlos Ghosn, head of Nissan and Renault, said teams at the companies are studying the benefits of such an alliance in areas such as joint purchasing and will come up with number for potential savings. Nissan is 44 percent owned by Renault and the two have a joint procurement project under which 70 percent of their purchases are made jointly. The project has already cut about $868m annually by combining $59bn of purchasing, according to an estimate by Credit Suisse. Ghosn said expanding the project to include GM would not be a necessity, but it is worth studying. The deadline for considering the alliance is Oct. 15, according to industry sources.
Source: Purchasing, http://www.purchasing.com/

Electronics OEMs' Expectations of Contract Manufacturers Not Being Met
OEMs' expectations of their electronics manufacturing services (EMS) partners—and their partners' success in meeting those expectations—appear to be out of sync, according to a recent study.
For example, OEMs rank an EMS provider's or ODM's (original design manufacturers) ability to reduce the total cost of ownership as the most important factor in an outsourcing relationship, according to a recent report by supply chain consultancy Technology Forecasters Inc. (TFI). Yet in aggregate, OEMs gave their suppliers relatively low marks in this area, according to Matt Chanoff, author of the study and an analyst with TFI.
In addition to reducing the cost of ownership, OEMs cited four other criteria as key. The second most important factor was their manufacturing suppliers' global supply chain management coordination and execution. Third was their flexibility and responsiveness to a variety of factors, including engineering change orders and shifts in market and supply conditions. Ranked fourth by OEMs was the EMS/ODMs' ability to leverage technology; fifth was environmental compliance.
Interestingly, Chanoff says, the study found an inverse relationship between the relative
value OEMs place on the five performance categories and how well their EMS/ODM suppliers perform. For example, reducing the total cost of ownership was of highest importance, yet in aggregate OEMs gave their suppliers relatively low marks in this area. Conversely, OEMs rated their EMS providers and ODMs relatively highly for environmental compliance yet this category was of least importance to them.
Source: Electronic Business, http://www.reed-electronics.com/

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