transportation strategy – introduction –
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Transportation Strategy – Introduction –. PROFILE: 36 years corporate experience 5 years college instruction Employers IBM DuPont Monsanto ITT Industries NASA Contractor / Defense Textiles Chemicals Pharmaceuticals Automotive Electronics. POSITIONS: - PowerPoint PPT PresentationTRANSCRIPT
1Transportation Strategy
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Transportation Strategy Transportation Strategy – Introduction – – Introduction –
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PROFILE:o 36 years corporate experienceo 5 years college instructiono Employers
IBM DuPontMonsantoITT
o IndustriesNASA Contractor / DefenseTextiles Chemicals PharmaceuticalsAutomotiveElectronics
POSITIONS:o Manufacturing Engineero Packaging Engineero Industrial Engineer (Mfg Ops) o Production Plannero MRP-II Project Managero Distribution Manager o Division Manger, Supply Chaino Director, Transportation Procurement o Director, Corporate Transport & Distributiono Director, Corporate Purchasing & Logistics o Managing Director, Supply Chain Services
Company (3PL) o Supply Chain Management Lecturer
PERSONAL: Married, 3 children, 3 grandchildren; lifetime member of Auburn Alumni Association; Ruling Elder in Presbyterian Church in America (PCA)
Instructor: Gary J. PageInstructor: Gary J. Page
GJP world view: “Triple C”, a Christian, conservative, capitalist
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SCMN 4780 Course Syllabus SCMN 4780 Course Syllabus
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Classroom Format / StructureClassroom Format / Structure
• Instructor’s perspective → U. S. corporation in global economy→ Capitalistic economic model basis
• Student reading assignments • Apply concepts to case studies • Individual / team based assignments • Student / classroom interaction • Instructor applications / experiences
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Boardroom
Instructor’s Purpose & Objective Instructor’s Purpose & Objective
Classroom
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Academic World → individual recognition → make the right decision → project approach with
due dates / deadlines→ suggest / propose → primarily subjective→ efficient communication → personal growth
CoB Classroom-to-Boardroom Transition CoB Classroom-to-Boardroom Transition
Business World team reward don’t make the wrong decisionprocess mindset with progress milestones assert / recommend (SME) primarily objective effective communication professional / career growth
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OUTPUT Goods
Services
… to make profit by minimizing the impact of constraints in operating system that prevent it from increased profitability
Enterprise Objectives Enterprise Objectives
… to achieve competitively superior performance from the transformation (operational) process
What is the definition of PRODUCTIVITY?
INPUT Machines
Labor Materials
Transformation Process
CAPITAL
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Who Owns “Big Oil”? Who Owns “Big Oil”?
29%
27%
23%
14%
5% 2%
Mutual Funds Pension Funds
Individual Investors IRAs
Institutional Investors Corporate Management
A mutual fund is a professionally managed collective investment that pools money from many investors to buy stocks, bonds, short-term money markets instruments, and other securities.
Individual retirement arrangement (IRA) is the blanket term for a form of retirement plan that provides tax advantages for retirement savings in the U. S.
Contrast this model with the Occupy Wall Street movement model
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In a capitalistic / free-trade economic system, the overriding (priority) duty of a company (business management) is to:
a. provide jobs for qualified people b. maximize compensation to senior managementc. continuously increase business revenue (grow sales)d. achieve a superior return-on-investment for its owners
The constitutional duty of government (federal, state, local) is to: a. partner with business to improve business performance b. regulate business practices to eliminate risk to citizens c. incentivize companies for complying with government actions d. ensure an open marketplace for innovation and equal opportunity
US Rules of Business (Capitalism) US Rules of Business (Capitalism)
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Productivity ImprovementProductivity ImprovementRegarding Job Growth in the United States
“I don't think it's a matter of me being unable to convince them (US companies) to hire more people. They're making decisions based on what they think will be good for their companies.
(However) … there are some structural issues with our economy where a lot of businesses have learned to become much more efficient with a lot fewer workers. You see it when you go to a bank and you use an ATM; you don't go to a bank teller. Or you go to the airport, and you're using a kiosk instead of checking in at the gate. So all these things have created changes in the economy, and what we have to do now is identify where the jobs for the future are going to be; how do we make sure that there's a match between what people are getting trained for and the jobs that exist; how do we make sure that capital is flowing into those places with the greatest opportunity.”
President Barack Obama on the Today Show (June 14, 2011)
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Today’s Worldwide Economy Today’s Worldwide Economy
Capitalism
Socialism
Fascism
Communism
In the 21st century
global economy, US
companies with
strategic growth goals
choose to do business
with enterprises from
all economic systems
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Current Business Climate Current Business Climate “Today in America there are nearly twice as many people working in the government (22.5 million) than in all of manufacturing (11.5 million). It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved from a nation of makers to a nation of takers.”
Stephen Moore, Wall Street Journal, March 11, 2011
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Supply Chain Described Supply Chain Described
supply chain is likened to a river upstream or downstream
EXTRACTION
CONSUMPTION
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Trading Era prior to 1750 local craftsman, local sales and supply, bartering goods /
services
1st Industrial Revolution 1750 – 1880 steam engine, textile factory,transportation,
telecommunication
2nd Industrial Revolution 1880 – 1980 electricity, mass production,automobile industry /
assembly, World Wars I & II, computer biz
aps, regulatory environment
Consumer Age 1980 – today quality revolution with customer focus, globalization,
product customization, JIT, dot.com
U. S. Business Supply Chain History U. S. Business Supply Chain History
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2121stst Century Supply Chain Characterized Century Supply Chain Characterized
retail
distribution
assembly
conversion
extraction
consumption
the consumer “pulls” material from its origin (the earth), produces, packages and ships products (material) to consumer utilizing an order fulfillment process
manufacture
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2121stst Century Supply Chain Characterized Century Supply Chain Characterized
information flow
material / product flow
retail distribution assembly conversionextraction consumptionmanufacture
Linkages – transport between nodes
Nodes - value added to product
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Supply Chain Business Relationships Supply Chain Business Relationships
STRATEGIC PARTNERSHIP
JOINT VENTURE
VERTICAL INTEGRATION
TRANSACTIONAL RELATIONSHIP
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Transportation (Linkage) Industry Profile Transportation (Linkage) Industry Profile
MODES • Motor Freight (TL) • Motor Freight (LTL) • Motor Freight (bulk) • Rail• Air Freight• Ocean (tanker)• Ocean (container)• Inland Water• Letter / Package• Pipeline• Intermodal
PARTICIPANTS • Shippers• Carriers • 3rd Party Logistics
RELATIONSHIPS • Common• Contract• Private
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Income Statement
Balance Sheet
Distribution Expense
Return on Capital (ROC)
Material Cost
Conversion Cost
Marketing & Admin Cost
Allocations & Taxes
Cost of Sales (COS)
Sales
Net Income
Sales Revenue
Earnings as % of Sales
Turnover
Net Recv, Payables
Net Fixed Assets
Working Capital
Capital Employed
SalesInventory
Investment
minus
divided by
plus
divided by
plus
plus
plus
plus
plus
multiplied by
The “Language” of Business The “Language” of Business
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Business
Legal Engineering OperationsSupply Chain
FinanceInformationTechnology
Marketing & Sales
Sourcing(Purchasing)
P2POperations
TransportCustomerService
Operations Planning
WarehouseTerminals
Enterprise: Functional Alignment Enterprise: Functional Alignment
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Corporation
Division A
Division B
Division C
Business Unit A-1
Business Unit A-2
Business UnitB-1
Business UnitB-2
Business Unit C-1
Business Unit C-2
Plants &Factories
Plants & Factories
Plants & Factories
Plants & Factories
Plants & Factories
Plants & Factories
Organization: Business Alignment Organization: Business Alignment
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Company
Business Unit A Business Unit B Business Unit CCentralized Functions
Finance
Human Resources
Supply Chain
Environmental, Safety & Health
S/C Management ChallengeS/C Management Challenge
Business Competitive Strategy
Functional
Strategy
Point of Conflict
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Transportation Strategic ObjectivesTransportation Strategic Objectives
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Profitability (Margin) Analysis Profitability (Margin) Analysis
BASE CASE
Sales 1,000,000
Expenses:Overhead 200,000Variable
650,000
NIBT 150,000
Margin % 15.0%
10% SALES INCREASE
Sales 1,100,000
Expenses:Overhead 200,000Variable
715,000
NIBT 185,000
Margin % 16.8%
10% COST DECREASE
Sales 1,000,000
Expenses:Overhead 200,000Variable
585,000
NIBT 215,000
Margin % 21.5%
Companies obsessively strive to improve its financial profitability. Management routinely turns its attention to cost containment as a means to improve performance. WHY?
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Profitability (Margin) Analysis Profitability (Margin) Analysis
BASE CASE
Sales 1,000,000
Expenses:Overhead 200,000Variable
650,000
NIBT 150,000
Margin % 15.0%
10% SALES INCREASE
Sales 1,100,000
Expenses:Overhead 200,000Variable
715,000
NIBT 185,000
Margin % 16.8%
~3% COST DECREASE
Sales 1,000,000
Expenses:Overhead 200,000Variable
632,000
NIBT 168,000
Margin % 16.8%Which tactical initiative carries a higher risk?
Companies obsessively strive to improve its financial profitability. Management routinely turns its attention to cost containment as a means to improve performance. WHY?
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ATTRIBUTE 20th CENTURY
Organization Pyramid Focus (Priorities) Internal
Management Style Structured
Structure Self-SufficiencyResources Physical AssetsOperations Vertically IntegratedProducts Mass ProductionReach Domestic
Financial Reporting QuarterlyInventory On-Hand MonthsStrategy Top-DownLeadership DogmaticWorker Expectations SecurityMotivation To CompeteImprovement IncrementalQuality Affordable Best
Source of Strength Stability
The 21The 21stst Century Business Model Century Business Model
21st CENTURY
→ Matrix→ External → Flexible → Interdependencies→ Information → Virtual Integration→ Mass Customization→ Global→ Real-Time→ Hours→ Bottom-Up→ Inspirational → Career Growth → To Excel → Revolutionary → No Compromise
→ Ability to Change
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20101 Wal-Mart
2 Exxon Mobil
3 Chevron
4 General Electric
5 Bank of America
6 Conoco Phillips
7 AT&T
8 Ford Motor
9 JP Morgan Chase
10 Hewlett-Packard
11 Berkshire Hathaway
12 CitiGroup
13 Verizon Communication
14 McKesson
15 General Motors
16 American International
17 Cardinal Health
18 CVS Caremark
19 Wells Fargo
20 IBM
21 United Health Group
22 Proctor & Gamble
23 Kroger
24 AmeriSource Bergen
25 Costco Wholesale
19851 Exxon Mobil
2 General Motors
3 Mobil
4 Ford Motor
5 Texaco
6 IBM
7 DuPont
8 AT&T
9 General Electric
10 Amoco
11 Chevron Texaco
12 Atlantic Richfield
13 Shell Oil
14 Chrysler
15 Marathon Oil
16 United Technologies
17 Conoco Phillips
18 Occidental Petroleum
19 Tenneco Automotive
20 Sunoco
21 ITT
22 Proctor & Gamble
23 Nabisco
24 British Petroleum
25 Dow Chemical
19601 General Motors
2 Exxon Mobil
3 Ford Motor
4 General Electric
5 US Steel
6 Mobil
7 Gulf Oil
8 Texaco
9 Chrysler
10 Esmark
11 AT&T
12 DuPont
13 Bethlehem Steel
14 Amoco
15 CBS
16 Armor
17 General Dynamics
18 Shell Oil
19 Boeing
20 Kraft Foods
21 Goodyear Tire
22 Chevron Texaco
23 Union Carbide
24 RCA
25 Proctor & Gamble
Fortune Magazine’s ranking of the top 25 US companies ranked by annual
sales
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January 4, 2012 (Bloomberg) -- Eastman Kodak, the imaging company that lost 88% of its market value last year, fell again after a report that the company is preparing for a bankruptcy filing should its effort to sell patents fail. Bloomberg News previously reported in September that Kodak was weighing options including a bankruptcy filing, according to people with knowledge of the matter. Its revenue has tumbled because of slowing demand for traditional film and competition in digital cameras and printers from Canon Inc. and Hewlett- Packard. Kodak's cash and equivalents fell to $862 million at the end of its third quarter from $1.4 billion a year earlier.
December 30, 2011 (USA Today) - Sears Holdings continued to struggle Friday in a week that the company will long remember for its announcement of plans to close up to 120 underperforming Sears and Kmart stores. The company's CEO pledged to investors and employees that the plan is to make necessary changes to get the company back on track. It operates about 4,000 Sears and Kmart stores in the U.S. and Canada and has a workforce of 312,000. Annual revenues are $43 billion. "We can do better than this, we will do better than this.“ In addition to the store closings, Sears Holdings has said it will reduce fixed costs, improve inventory management and launch more targeted pricing and promotions. "Change is never easy, but is necessary," said the CEO. "Our industry is going through profound changes and we need to evolve our business and execute with speed and excellence.“ The retail landscape has been tough for Sears Holdings acquired Kmart while Wal-Mart Stores and Target have become stronger competitors. In the last two years alone, Sears Holdings has closed, or announced the pending closure, of 181 stores.
Unsuccessfully Managing ChangeUnsuccessfully Managing Change
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Successfully Managing ChangeSuccessfully Managing ChangeJanuary 6, 2012 (eWEEK) -- On January 29, 2002, IBM announced that Samuel J. Palmisano would become the company's 8th CEO of IBM. Palmisano replaced Louis V. Gerstner, who would retain his position as chairman of IBM through the end of 2002. Gerstner came to IBM in 1993 and helped turn the company around after a few years of losses by focusing on Big Blue's strengths, such as services, and tapping into the Internet during the e-commerce craze. But if Gerstner's tenure was a turnaround phase, Palmisano's was one of value creation.
"Without the work that Gerstner did, Palmisano could not have been successful," analyst Judith Hurwitz told eWEEK. "But with a stable and profitable IBM, Palmisano was able to focus on the future. I think his greatest contribution was to change the focus away from simply creating new tools and products to putting these products in context with business goals and objectives, first with on-demand computing and then with Smarter Planet. He made IBM look visionary and valuable to the customer." Palmisano made several key strategic moves that have paid off handsomely for IBM. He signed off on the deals to buy Pricewaterhouse Coopers Consulting and to sell off IBM's PC business to Lenovo and its hard disk drive business to Hitachi. Basically, he got IBM further out of low-margin commodity businesses and into high-margin activities. Palmisano also realized the value of research and increased upped IBM's R&D budget by 20%, to $6 billion a year. That strategy continues to pay off as IBM has led the world with the most U.S. patents granted for the last 18 years. Palmisano's tenure was also good for the company's shareholders and bottom line. Under Palmisano, IBM's earnings quadrupled. At the same time, he has driven more than $8 billion in annual costs out of the business with his quietly kept internal business transformation plan. On October 25, 2011, IBM announced that Virginia M Rometty would succeed Palmisano as CEO effective January 1, 2012. Palmisano will remain chairman of the board.
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2121stst Century Business Impacts Century Business Impacts • 9/11 attack with radically new security requirements• Enron debacle; Sarbanes-Oxley regulations on US industry • Integrated supply chain with collaborative relationships • Adversarial collaborative company relationships• Corporate matrix organization• e-Business technology advances • Emerging growth of Chinese economy• Lean / Six-sigma performance requirements
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World-Class Supply Chain Performance World-Class Supply Chain Performance
2011 Top 25 Supply Chain Performers
• Rankings
• Key findings
• Themes
• Recommendations
• Operational Excellence
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Implementing a Culture of ChangeImplementing a Culture of Change
Prioritized Initiatives (Strategic / Tactical)
Proven Leadership
Vision / Mission