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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:

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slide2
PROFILE:

36 years corporate experience

5 years college instruction

Employers

IBM

DuPont

Monsanto

ITT

Industries

NASA Contractor / Defense

Textiles

Chemicals

Pharmaceuticals

Automotive

Electronics

POSITIONS:

Manufacturing Engineer

Packaging Engineer

Industrial Engineer (Mfg Ops)

Production Planner

MRP-II Project Manager

Distribution Manager

Division Manger, Supply Chain

Director, Transportation Procurement

Director, Corporate Transport & Distribution

Director, Corporate Purchasing & Logistics

Managing Director, Supply Chain Services Company (3PL)

Supply Chain Management Lecturer

Instructor: Gary J. Page

PERSONAL: Married, 3 children, 3 grandchildren; lifetime member of Auburn Alumni Association; Ruling Elder in Presbyterian Church in America (PCA)

GJP world view: “Triple C”, a Christian, conservative, capitalist

classroom format structure
Classroom 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

slide5
Boardroom

Instructor’s Purpose & Objective

Classroom

slide6
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

Business World

team reward

don’t make the wrong decision

process mindset with

progress milestones

assert / recommend (SME)

primarily objective

effective communication

professional / career growth

slide7
… to make profit by minimizing the impact of constraints in operating system that prevent it from increased profitability

Enterprise Objectives

INPUTMachines Labor Materials

OUTPUTGoods Services

Transformation Process

CAPITAL

… to achieve competitively superior performance from the transformation (operational) process

What is the definition of PRODUCTIVITY?

slide8

Who Owns “Big Oil”?

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

slide9

US Rules of Business (Capitalism)

  • In a capitalistic / free-trade economic system, the overriding (priority) duty of a company (business management) is to:
    • provide jobs for qualified people
    • maximize compensation to senior management
    • continuously increase business revenue (grow sales)
    • achieve a superior return-on-investment for its owners
  • The constitutional duty of government (federal, state, local) is to:
    • partner with business to improve business performance
    • regulate business practices to eliminate risk to citizens
    • incentivize companies for complying with government actions
    • ensure an open marketplace for innovation and equal opportunity
slide10

Productivity Improvement

Regarding 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)

today s worldwide economy
Today’s Worldwide Economy

In the 21st century global economy, US companies with strategic growth goals choose to do business with enterprises from all economic systems

Capitalism

Socialism

Fascism

Communism

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

supply chain described
Supply Chain Described

CONSUMPTION

EXTRACTION

supply chain is likened to a river  upstream or downstream

slide14

U. S. Business Supply Chain History

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

21 st century supply chain characterized
21st Century Supply Chain Characterized

extraction

conversion

manufacture

assembly

the consumer “pulls” material from its origin (the earth), produces, packages and ships products (material) to consumer utilizing an order fulfillment process

distribution

retail

consumption

21 st century supply chain characterized1
21st Century Supply Chain Characterized

Nodes - value added to product

information flow

extraction

conversion

manufacture

distribution

retail

consumption

assembly

material / product flow

Linkages – transport between nodes

supply chain business relationships
Supply Chain Business Relationships

VERTICAL INTEGRATION

JOINT VENTURE

STRATEGIC PARTNERSHIP

TRANSACTIONAL RELATIONSHIP

transportation linkage industry profile
Transportation (Linkage) Industry Profile
  • PARTICIPANTS
  • Shippers
  • Carriers
  • 3rd Party Logistics
  • RELATIONSHIPS
  • Common
  • Contract
  • Private
  • MODES
  • Motor Freight (TL)
  • Motor Freight (LTL)
  • Motor Freight (bulk)
  • Rail
  • Air Freight
  • Ocean (tanker)
  • Ocean (container)
  • Inland Water
  • Letter / Package
  • Pipeline
  • Intermodal
slide19

The “Language” of Business

Income Statement

Sales Revenue

Material Cost

plus

Conversion Cost

Net Income

minus

plus

Earnings as % of Sales

Cost of Sales (COS)

Distribution Expense

divided by

plus

Marketing & Admin Cost

Sales

plus

Allocations & Taxes

Return on Capital (ROC)

multiplied by

Inventory Investment

Sales

Working Capital

Turnover

plus

divided by

CapitalEmployed

Net Recv, Payables

plus

Net Fixed Assets

Balance Sheet

s c management challenge
S/C Management Challenge

Functional

Strategy

Point of Conflict

Business Competitive Strategy

profitability margin analysis
Profitability (Margin) Analysis

Companies obsessively strive to improve its financial profitability. Management routinely turns its attention to cost containment as a means to improve performance. WHY?

BASE CASE

Sales 1,000,000

Expenses:

Overhead 200,000

Variable 650,000

NIBT 150,000

Margin % 15.0%

10% SALES INCREASE

Sales 1,100,000

Expenses:

Overhead 200,000

Variable 715,000

NIBT 185,000

Margin % 16.8%

10% COST DECREASE

Sales 1,000,000

Expenses:

Overhead 200,000

Variable 585,000

NIBT 215,000

Margin % 21.5%

profitability margin analysis1
Profitability (Margin) Analysis

Companies obsessively strive to improve its financial profitability. Management routinely turns its attention to cost containment as a means to improve performance. WHY?

BASE CASE

Sales 1,000,000

Expenses:

Overhead 200,000

Variable 650,000

NIBT 150,000

Margin % 15.0%

10% SALES INCREASE

Sales 1,100,000

Expenses:

Overhead 200,000

Variable 715,000

NIBT 185,000

Margin % 16.8%

~3% COST DECREASE

Sales 1,000,000

Expenses:

Overhead 200,000

Variable 632,000

NIBT 168,000

Margin % 16.8%

Which tactical initiative carries a higher risk?

slide26
ATTRIBUTE 20th CENTURY

Organization Pyramid

Focus (Priorities) Internal

Management Style Structured

Structure Self-Sufficiency

Resources Physical Assets

Operations Vertically Integrated

Products Mass Production

Reach Domestic

Financial Reporting Quarterly

Inventory On-Hand Months

Strategy Top-Down

Leadership Dogmatic

Worker Expectations Security

Motivation To Compete

Improvement Incremental

Quality Affordable Best

Source of Strength Stability

The 21st 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

slide28

Unsuccessfully Managing Change

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.

slide29

Successfully Managing Change

January 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.

21 st century business impacts
21st 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
world class supply chain performance
World-Class Supply Chain Performance
  • 2011 Top 25 Supply Chain Performers
  • Rankings
  • Key findings
  • Themes
  • Recommendations
  • Operational Excellence
slide32

Implementing a Culture of Change

Vision / Mission

Prioritized Initiatives (Strategic / Tactical)

Proven Leadership