World Trade Magazine Manufacturer of the Year FOR GLOBAL SUPPLY CHAIN EXCELLENCE

'On Demand' is for IBM not merely a punchy advertising campaign for its solutions offerings but also the essence of a massive, on-going internal corporate transformation on which the company is staking much of its future. Few companies can match IBM's boldness in putting the supply chain at the dead center of the enterprise. Indeed, supply chain officers at the top tiers of the corporation are responsible not only for manufacturing and distribution processes, but also such areas as customer satisfaction, order-to-cash cycles and even a newly launched cross-departmental 'deal hub' that manages IBM's highly complex end-to-end sales process that will free up time for sales teams to spend more with clients.

In recognition of such bold managerial initiatives, Boston-based AMR Research, a recognized leader in supply chain research and management consulting, has chosen IBM as World Trade's 2006 Manufacturer of the Year for Global Supply Chain Excellence, joining previous winners Procter & Gamble (2004) and Ford Motor Company (2005).

In selecting IBM as the 'best in class' from among an eminent list of 2006 honorees (see the profiles of the other top nominees included in this issue), AMR Research underscored the company's success in unifying the vast, dispersed procurement and logistics activities of this international giant ($90 billion annual sales, 330,000 employees).

Tellingly, IBM now regards the supply chain expertise it has gained over a dozen years of internal transformation to be itself an intellectual asset to be brought to market and monetized as a solutions offering (including software, hardware and consulting). Top management has high hopes for the potential of such outsourcing services-typically beginning with procurement, ideally expanding to full spectrum supply chain management generically marketed as Business Performance Transformation Services (BPTS).

To better understand the nature of the transformations underway at IBM, I recently visited one of the company's facilities on the IM Pei-designed pastoral corporate campus in Somers, New York, where I spoke several hours with the top management team responsible for the $40 billion integrated supply chain: Tim Carroll (Vice President of Supply Chain Operations), John M. Paterson (Chief Procurement Officer), Gary Smith (Vice President, Global Logistics), and Barbara Martin (Vice President, Customer Fulfillment).

WT: What's the over-arching structure that supply chain operates under at IBM?

Tim Carroll: It's a three-legged approach. I run overall operations, strategy and innovation work, business transformation and all in-house manufacturing, consolidated demand and inventory management.

John has responsibility for procuring all the goods and services IBM needs to run the business and serve clients, which totals $40 billion annual spend across 35,000 suppliers. He also provides guidance and thought leadership to IBM's procurement services offering, where customers outsource all or some of their indirect procurement spending, which has the potential to add another several billion spend this year.

Gary is the global logistics piece. The movement of roughly 2 billion pounds of hardware and parts to more than 160 countries around the globe and global assets recovery services, which totals a $2.5 billion piece of procurement spend.

Barbara is in charge of customer fulfillment, including the deal hubs and the whole 'quote-to-cash' cycle. Her organization fills out the front end of our face to the customer so we truly have an end-to-end supplier to customer supply chain.

WT: Three or four years ago, a corporate organizational chart like this didn't exist at IBM. What was the initiative to so dramatically alter the traditional ways of doing business?

Tim Carroll: It started when IBM went through its struggles in the '90s. At the time, procurement was fragmented all over. We were optimizing different lines of business instead of the whole corporation, and management recognized that IBM as a whole wasn't getting the value of its total leverage in costs and efficiencies. So the bottom line was, 'Why not put procurement together as a global entity?'

After going through those trials and tribulations, we saw an incredible pop in efficiency mainly from a cost leverage standpoint. So the next step was to look at global logistics, which is now 93 percent outsourced, which has netted millions in savings that has contributed to the bottom line at IBM. From there, we built momentum towards what we now see as an integrated supply chain.

In 2002, when Sam Pamisano was coming in and saw what was going on, the thought process was 'can we put more under this umbrella?' We brought in pieces of what we thought constituted the integrated supply chain (which was the new terminology). We brought in manufacturing, supply demand, business transformation. But, we really didn't have it organized or centralized yet where we were getting the power and influence that we got out of transforming logistics or procurement or fulfillment.

So the next step that we took was to figure out where those pockets of functional excellence were, what we call 'pillars of strength,' and consolidate them. Over the past couple of years we've taken all of engineering and put that together, all supply demand and put it together. For the first time ever, all of IBM's internal manufacturing facilities are now under the same operational executive and it goes down the list.

The next stage that we have just started last June is now 'How do you take all this and make it seamless globally from an end-to-end standpoint?' How do we run and optimize our lines of business and also optimize IBM? How do you get an organization that is at a functional strength to work as an extended matrix team that works for both the betterment of the lines of business they support and for IBM?

Gary Smith: We started on this road early, not necessarily because we had great vision or insight but because we had a great need. It has proven to be the right path because it forced us to take an end-to-end focus and it allowed us to leverage a really talented global organization.

Tim Carroll: The companies that have not been through a 'near death' experience or some real turmoil, may see the light of where to go but they're not going at it with the same kind of speed and sense of urgency as we did. And one of the other things that drives this urgency and you can't over-emphasize it, is a sponsor from the top.

Barbara Martin: In addition to getting the benefits of acting as a shared service, IBM is moving towards the centralization of business solutions that allow us to work across the businesses. So from my standpoint, the leveraging of having consolidation is that I can work on behalf of the sales and the clients across all the businesses. That's a huge step towards supporting IBM's growth in the solutions space and in making IBM an easier company to do business with.

WT: Managing this kind of system, with both supply chain centricity and also parallel lines of business groups responsible for their own agenda, must pose real challenges.

John Paterson: On the one hand, we want to be able to leverage as much as we can that is appropriate for our scale, but at the same time, we have to be able to support multiple internal lines of business in a way that makes them understand that we are aligned with them and can deliver value requirements, which vary from internal client to internal client.

WT: How do you keep everybody facing the same way? Is that an art or a science?

Gary Smith: I think the science comes in the alignment of the metrics we use to make decisions and are judged by. The art comes in terms of the relationship, the focus, the dependency and the trust that exists between ourselves and the various brands to understand their specific requirements and to optimize the supply chain in a way that provides them with clear value.

In my case, where I was once measured by 'my cost per pound of moving something from A to Z,' today it is more strategic and I am measured on my cycle time, on the reliability of the network and the responsiveness of the network to various changes, which defines an 'on demand' supply chain.

John Paterson: Supply Chain metrics always derive from IBM's strategic objectives. There's no disconnect as you go across the organization. It's very structured in terms of identifying the business goals and properly cascading throughout the organization.

Gary Smith: One of the unique aspects of this supply chain is the end-to-end view and we, as functional leaders, always go back to 'what is the best IBM decision?' For example, with logistics, I will sub-optimize a particular aspect for the greater good of IBM.

Barbara Martin: And we can do this because we're all measured to the same metrics. For instance, one of our scorecard metrics is 'On Time Delivery' and we all contribute. There are several shared metrics that we're all jointly measured by, such as Cash, Inventory. Essentially, anything that's bottom line shareholder or customer value.

Tim Carroll: Once you put common guidelines in place you eliminate a lot of frustration. If you looked at us in pre-2002, we had so many different areas that had so many different acronyms for the same thing that the teams could not communicate. Forget about the English/Japanese/Spanish languages, it was the 'supply chain' language we couldn't communicate in.

WT: What is the next stage in the supply chain strategy?

Barbara Martin: We see the supply chain as one of our key business initiatives supporting the growth of IBM. We don't see it as just a cost. We don't even see it as just a competitive advantage. We see supply chain as a key enabler of IBM's growth, which is a huge difference from how most companies see it.

For instance, when we took customer fulfillment out of sales, the discussion with the senior sales executives at the time was 'why should we let go of this critical fulfillment?' And the answer was 'by putting it in supply chain, we can actually make your sales team more productive and making your sales team more productive is better for IBM.'

So, one of our metrics is Sales Productivity. We started out in 2003 where 20% of a sales person's time was spent on 'non-sales' supply chain-type activities-checking up on orders and billing questions. We took that down by 25% in 2004, to 15% of their time. That's like getting 20% more sales effort for the same investment.

WT: Is there any downside to the centralization of the supply chain?

Gary Smith: The downside would be if you started down that road but then you weren't committed to it and you lost the trust factor internally and of your suppliers. Then I think you would have significant issues. But we decided this was the road we wanted to be on because it generated the greatest value for IBM and we have stood the course and that counts for a lot in the view of the suppliers and our clients.

Tim Carroll: One of the challenges we have as we get more end-to-end, particularly for those like us who have been with IBM more than 25 years, is that when we were taught how to manage and lead we were taught how to do this in a hierarchical organization. That was standard business practice. Through the transformation of the supply chain, the four of us have figured out how to 'flip ourselves over,' how to lead into a matrix, but it will always be a challenge because it's not natural to think about how to lead and understand that you're still accountable for the success even when the relevant reporting structures don't necessarily report to you. The exciting challenge is, how can we get all of our supply chain leaders and extended team, to also work in such a seamless end-to-end thought process. The potential value that will bring to our clients and our shareholders is incredible.

Picking World Trade's 'Manufacturer of the Year' By Bill Swanton

“Build a better mousetrap and the world will beat a path to your door.” If it were it just that simple. Companies once competed primarily on the attributes of their products, but with shorter product life cycles, continuous innovation, and more global competitors, supply chains have become the deciding factor in product success. Take that better mousetrap design, get the parts from the lowest cost, highest quality suppliers any where in the world, and beat a path around the world to deliver it before your competitors do!

Each year, AMR Research rates top manufacturing and retail companies to establish the Supply Chain Top 25. AMR Research looks at public information on the companies, including trailing 12-month growth, inventory turns, and return on assets. We poll our analysts across industries and functional specialties to develop a proxy measure for demand driven leadership based on a combination of known operational activities, public business results, and direct field research. (“The AMR Research Supply Chain Top 25 and the New Trillion-Dollar Opportunity,” The Top 25 Supply Chains for 2005).

For World Trade's Manufacturer of the Year, we started with the Top 25 and further narrowed it according to criteria of interest to the readership. This included:

• Alignment between the company's business and supply chain strategies
  
• The degree of inter-enterprise supply and logistics collaboration
  
• Use of the supply chain to enhance customer service and agility
  
• Strategic use of global sourcing

These companies are not happy with small incremental improvements. They have overhauled their business strategy and supply chain to compete locally and globally and more important, continue to overhaul it as competitors start to catch up. Accomplishing this is more than implementing a new technology; it also required a well thought out business transformation and a willingness to continue to adjust the strategy. For example, while many other companies have improved inventory and demand planning across their supply chain, these companies are now closely coordinating those processes with their logistics providers to reach a new level of performance.

Top companies
Previous “World Trade Manufacturers of the Year for Global Supply Chain Excellence” are taking the lead in making a Demand Driven Supply Chain (DDSC) a reality. Procter & Gamble, the winner in 2004, has been implementing its Consumer Driven Supply Network strategy for several years, significantly reducing out of stock situations at retail stores. Ford Motor Company is consolidating vast procurement and logistics operations into centrally managed supply chains.

In choosing this year's winners and top two honorable mentions, we sought similar credentials:

IBM completely restructured its supply chain over the past few years to enable is OnDemand strategy with the goal of responding with speed to any customer demand, market opportunity or external threat.

Johnson Controls uses rapid propagation of demand data to its factories and suppliers to build complex seat assemblies to order in sequence with only hours of advanced notice from automobile assembly plants.

Cisco Systems was a pioneer in the use of global contract manufacturing, but more importantly in making the complexity of their supply network transparent to their customers. The company continues to implement innovative IT systems to make this possible.

Demand Driven Supply Networks
AMR Research is the No. 1 advisory firm focused on supply chain, enterprise applications, and infrastructure. Over the past twenty years, we have advised Fortune 1000 companies in the manufacturing and retail sectors on using technology to improve the supply chain and business processes. Today, these companies are coping with two divergent needs: 1) Building products at low cost and distributing them to markets around the world. Companies are now dependent on global suppliers, with over 80% of manufacturers sourcing both in their home markets and another region, such as Asia Pacific; and 2) Responding within days to significant swings in end customer demand by adjusting inventory, model mix, and volume.

The answer is an emerging approach to supply chain called the Demand Driven Supply Network (DDSN), which breaks down silos between organizations and companies and rapidly shares demand information across multiple tiers to improve responsiveness.

Why is DDSN important? Because companies implementing it show better perfect customer order performance, meaning they deliver what the customer wanted, on time, at the right quantity, and in perfect condition. Improving perfect order performance has measurable financial benefits. AMR Research's Benchmark Analytix service measures the value of better perfect order performance as:

• 10% better perfect order performance = 50 cents better earnings per share.
  
• 5% better perfect order performance = 2.5% better return on assets
  
• 3% better perfect order performance = 1% of additional profit margin

Leaders are now focused on the major DDSN goal of connecting up to the minute demand information from the ultimate customer down through many levels of the supply chain. Every company has global customers and global suppliers, which complicates the supply network, but creates options for matching supply and demand and more options for postponement. For example, the current trend is to source common components from low cost countries, but to do final assembly close to the market to be more responsive to shifts in demand. This is driving movement of some manufacturing back from Asia to Mexico and Eastern Europe, while retaining the Asian final assembly capacity for the growing market in China.

Regardless of the strategy, companies are realizing they need multiple supply chain strategies, tuned to meet the specific needs of a product and its markets. Recent research shows that many large companies are moving from a single supply chain to twenty or more that are under annual or even quarterly reevaluation. The companies that have the business resolve and technological support to implement supply network change quickly will be the top companies on our list over the next few years.

The Making of a Flagship Machine

It is the flagship machine of the 'new' IBM, a key piece in the company's determination to regain the unchallenged primacy it long occupied as a global icon. Announced in the summer of 2005, the System z9 (officially IBM System z9™ 109) is one of the most sophisticated mainframes manufactured by IBM's Integrated Supply Chain, a supply chain that has been so successful in contributing to IBM's overall transformation, that the company is now leveraging it in a new outsourcing service.

Selling at upwards of one million dollars apiece (even more, depending on customer configuration), the System z9 is designed as the foundation for integrated infrastructures, the extended end-to-end management implementation systems driving the next generation of 'best practices' organizations-both public and private. These mainframe platforms constitute the heart beat of the emerging model of the globally integrated enterprise, storing and organizing and delivering the data and processes linking up-stream suppliers through procurement, manufacture and distribution to down-stream customers.

Running mission critical applications with no margin for break down, the System z9 has been engineered to insure unprecedented reliability, with internal back-ups and redundancies and scaleable expansion capacity so flexible that it can be activated and removed with the simplicity of entering a code.

Appropriately enough, the supply chain and global procurement responsible for producing the System z9 machines is itself a model of precisely the kinds of integrated processes the machine has been built to empower. As described in its marketing brochure, “The z9-109 has been designed using a holistic systems approach that includes the latest operating system, middleware, storage and networking technologies. The synergies gained through this collaborative design and development enables the elements to support each other while helping to deliver additional value.”

Even a brief overview of those holistic synergies, gathered during a recent visit with the management team at the Poughkeepsie, New York manufacturing site where the System z9 are made, underscores the immense power leveraged by a state-of-the-art integrated global supply chain.

Take something as seemingly mundane as the handle on a memory card (each machine can handle as many as 32 memory cards). Made of aluminum in an earlier mainframe iteration, the next generation plastic handle (at less than half the price) used in System z9 took a mere five weeks to go from starting conversations to final mold-an unprecedented short period. Why? Because all members of the design and production teams, outside vendor as well as internal IBM, were linked from the outset through the same integrated processes right down to accessible 3D CAD screens.

The power of this robust network becomes even more compelling throughout the on-going manufacturing processes. The primary source of technology of this state-of-the-art machine resides in Poughkeepsie, but personnel in the four different manufacturing sites (by being closer to their end customers fulfillment is faster and cheaper than if all machines were made at a single site) have shared real-time access to it. Such integration facilitates continuous improvement. An example cited to me was of how assembly workers are able to recommend improvements, get fast feed-back and watch new approaches based on their ideas get quickly ramped into the system. The net result: workmanship defects, which typically ran between 15-20% a dozen years ago, today are less than 1%.

Supply chain order entry takes place from a multitude of worldwide sources with data management looped into a single network and integrated such that the entire entourage of the System z9's 1500 suppliers (that number reflects significant consolidation) is updated on replenishment requirements every two weeks (the goal this year is to take a day out of those two weeks). The system is already sufficiently responsive, however, that suppliers can tweak their own respective transactions on a daily basis (in total, the IBM Server Group processes an estimated 5 million transactions a year).

Aligned and looped into this ERP realm is an order process realm, running from customer order through production to fulfillment.

One measure of the effectiveness of this integrated supply chain is that last year inventories were at historic 30 year lows. Another metric is speed: from customer order to ship is just 4 days. This process becomes all the more extraordinary given the fact that every System z9 is built to unique customer specs chosen from huge numbers of options (“there are as many different configurations to a System z9 as a Boeing 737, which if you don't know is in the hundreds of thousands”).

IBM Poughkeepsie plant manager Jim King, who has been with the company for more than 20 years, concluded the day by saying, “In the time that I have been with IBM, I've seen it all from our struggles to survive in the early 1990s to our incredible transformation to an on-demand business. To think that we can build these incredibly complex and sophisticated machines in hours rather than months was incomprehensible 10 to 15 years ago. And, we are only going to get faster, while the mainframes become even more advanced. Our new tagline is innovation that matters and every time a System z9 leaves Poughkeepsie under my watch, I know I am delivering on that mantra and making a difference. It's a great time to be an IBMer.” -Neil Shister

Honor Roll of Excellence
AMR Research identifies nine other superior integrated global supply chains.

By Jeremy Smith

Johnson Controls

Fiscal 2005 was the 59th consecutive year of sales increases for Milwaukee-based Johnson Controls-a global market leader in vehicle interior systems, lead acid automotive batteries, mechanical equipment, and heating, ventilating, and air conditioning systems. Worldwide, 136,000 employees man more than five hundred sales, service, and manufacturing sites. Of approximately $27 billion in annual sales, close to $15 billion come from clients outside the United States.

At home and abroad, Johnson Controls boasts “just-in-time” assembly of each component from car seating to skyscrapers' cooling systems. Outfitting the cockpit alone of a single car requires eleven major components from thirty-five suppliers-all on a delivery timeline of fewer than four hours. And, says John Waraniak, director of e-business speed for the company's Automotive Systems Group, for a single popular model, “We do this nine hundred times a day.”

Last year, the firm deployed new management software modeled on the Toyota Production System across North America, encompassing some thirty manufacturing facilities in all. This investment, though only a beginning, makes Johnson Controls the largest lean operations software user in the world, according to a spokesperson at supplier Factory Logic. “We place a significant emphasis on lean manufacturing as a means of continuous improvement throughout our organization,” says Steve Valentine, director of supply chain management for Johnson Controls, North American operations. “Integrated leveling, sequencing, [and] scheduling enable us to respond to changes in demand, production, and inventory levels, and ensure that all production and supply resources remain in sync with the production plan. Exception-based monitoring and alerting help us to manage our production closely and consistently across multiple locations.”

Adding to that math are close to 750 direct suppliers and 5,000 more secondary suppliers worldwide. Little wonder Johnson Controls led suppliers to original equipment manufacturers in launching a private Web site to communicate directly with key partners

Cisco Systems

Manufactured products compose more than 75 percent of some $30 billion in annual revenues at networking giant Cisco. “Cisco products range from a Linksys box that you might buy for $29 at Circuit City all the way to million-dollar routers that are extremely complex,” says Angel Mendez, the company's senior vice president, worldwide manufacturing. “The lion's share of what we sell is a configure-to-order product. One of the challenges of our supply chain is the variety that we need to tackle every day.”

A world-class virtual supply chain manages a nimble global footprint. Core manufacturing like circuit card assembly takes place, for the most part, in Asia, but configuration happens closer to customers in Europe and North America-and beyond. “We manufacture products for all regions of the world,” Mendez says. Now that developing countries are spending significant money on infrastructure, for example, he cites India and Central Europe as “exciting” new potential profit centers. “It's our job to bring those products to those markets at a price they can afford.”

Worldwide, Cisco contracts with more than three hundred component makers, eighteen major logistics firms, four main electronics supply and manufacturing partners, and a small but increasing number of original equipment manufacturers. Despite that diversity, Mendez says, his has a “very concentrated, leveraged partner base.” In dollar terms, ninety percent of Cisco contracts go to just ninety core partners.

Mendez sees considerable momentum for further growth at Cisco.

How will Cisco do it? First, by designing modularly for configurability. Next, by converting manufacturing plants worldwide to the low-inventory, rapid-response 'pull' model of lean manufacturing. “Shifting our factories and logistic centers around the world is a major event for us,” Mendez says. “It will take six to eight quarters.”

Home Depot

With nearly 1,900 stores ringing up more than 1.2 billion annual consumer transactions, Atlanta-based Home Depot is the world's largest home improvement retailer, the second-largest retailer in the United States and the third-largest retailer on the planet. Annual sales exceed $75 billion-and growth numbers remain in the double digits. For Wayne Gibson, Sr., Home Depot vice president of global logistics, priority one is making sure a single security disruption does not disrupt the supply chain that powers that growth.

“We have over 40,000 Stock Keeping Units (SKUs) per store [and] source merchandise from over 40 countries,” Gibson told a U.S. Congress convened to discuss port security. “We directly import from 268 vendors, with 555 factories.”

Can one company, however large, keep track of it all? Gibson says Home Depot can. How: “Repeat buying from known suppliers and factories,” said Gibson. “Over eighty percent of our products are sourced from five countries and forty vendors.”

Merchandise can expect equal or greater attention when it reaches stores newly equipped with a $250 million investment in advanced IT infrastructure. A global data synchronization network tracks order codes, price, and handling info, as well as connects point-of-sale systems to inventory management applications.

“We were so under automated as a major corporation that getting support for these major initiatives wasn't the challenge,” Robert DeRodes, corporate executive vice president and chief information officer, told Optimize Magazine. “In the end, we installed 90,000 devices and put 5,000 miles of cables in our stores at a cost of a quarter-billion dollars. Everyone believed it would take eighteen to twenty-four months, and we finished in twelve months. I would even venture to guess this may be the largest [IT investment] ever in retail history.”

Anheuser-Busch

Ten years ago, $15 billion brewing leader Anheuser-Busch debuted what remains by far the most public promotion of just-in-time inventory in supply chain history. Better known as “born on” freshness dating and backed by an initial $40 million ad campaign, the system tells consumers exactly where and when each of Anheuser-Busch's thirty different beers-among them Budweiser, Bud Light, Michelob, and Busch-was manufactured. Backing the flashy ads were extensive instructions on better stock rotation to distributors. Net result: in a single quarter, wholesale inventories sunk by a third, an annual savings of over $10 million.

Abroad, Anheuser-Busch expects equal success from supply chain consolidation. The company owns nearly half of Grupo Modelo, Mexico's largest brewer, whose Corona brand has overtaken Heineken as America's top imported beer. Meanwhile, exports reach over 150 countries, nine of whom boast their own Anheuser-Busch breweries.

Intel

Santa Clara, California-based computer chip giant Intel boasts total revenues of approximately $40 billion. Gross profits? Nearly half that number-or $200,000 for each of its 100,000 full-time employees. Such success long let Intel to be “somewhat lax about its supply chain,” described one CIO cover story. The company was “like a monopoly,” said Roger L. Kay, senior research analyst at International Data Corp. “If it had told its suppliers to show up at the loading dock with orders written on toilet paper with crayon, they would have done it.”

No more. Now with a slowing personal computer market and sinking market share to rival Advanced Micro Devices, Intel has staked its future on status as an internal and external supply chain expert.

Technological change, the legendary former Intel C.E.O. Andy Grove preaches, makes every person or company in the world either a co-worker or a competitor. Before any logistics outsourcing decision then, Intel makes certain it won't sacrifice future technical self-sufficiency.

Intel's supply chain strategy, thus, is to begin logistics outsourcing with an exit strategy already in mind.

Such strategies start with its core contract manufacturers. “There are no official design responsibilities in the supply chain,” Eric Ross, an analyst at Thomas Weisel Partners, explained to Electronics Supply & Manufacturing. Keeping control at Intel means signing contracts with Celestica, Jabil Circuit, SCI Systems, and Solectron guaranteeing company engineers direct access to outsourced design work.

Intel has joined its networking expertise with the logistics and system integration experience of DHL and IBM. Their goal is to use high technology to make international supply chains an order of magnitude more efficient.

Lowe's

Venerable home improvement North Carolina-based retailer Lowe's long had a profitable southeastern regional market to itself. Then along came The Home Depot. In light of this, Lowe's had to assess and form its strategy.

Indeed, it did. Rather than pit its 125,000 employees directly against Home Depot's, Lowe's realized greater revenue-more than $40 billion a year-and profits-over $12 billion-in careful product and service differentiation. Lowe's was first to target the female shoppers responsible for most home improvement purchases, increasing the quantity, quality, and color range of once-marginal furniture and appliance offerings. Today, the company spends upwards of $200 million a year updating the look and feel of its 1,100-plus stores, nearly three-quarters of which operate within ten miles of a Home Depot.

Such investments are backed by a flexible supply chain managed by both man and machine. Inventory specialists keep Lowe's stores in stock while an inventory manager at each assigned store is responsible for maximizing inventory turnover while satisfying pre-set in-store percentages and service levels requirements.

Ten highly automated regional distribution centers feature facilities tailored to merchandise that requires special handling due to size or type of packaging, such as lumber or ladders. So stocked, a single RDC may serve up to 140 individual retail stores. Half of purchased merchandise is shipped through such facilities, “while the remaining portion,” says a Lowe's spokesperson, “is shipped directly to stores from vendors.”

Motorola

Schaumburg, Illinois-based Motorola employs 69,000 in its mission to lead the world in wireless and broadband communications and embedded electronic solutions. Annual sales approach $37 billion. Though semiconductors alone make up more than $5 billion of that total, the public best knows Motorola by what a spokesperson calls “the device formerly known as the cell phone,” which Motorola now intends, according to its worldwide mission statement, to transform into “a universal remote control for life.”

Last fall, World Trade toured the Singapore facility where, besides turning out 10,000 phones daily, Motorola is consolidating its worldwide procurement operations into a single administrative entity (the goal is to centralize eighty percent of Motorola's total procurement purchases from here by 2006).

According to E.L. Tay, corporate vice president, integrated supply chain, mastering high technology is easy compared with coordinating global suppliers. “Before they might have been shipping to ten different sites and dealing with ten different people.” In this new world, Motorola has a single face. Such single source ordering enables the company to command a single price per item regardless of where it's manufactured or how costly it is to ship to the ultimate destination.

Publix Super Markets

Privately-held Publix Super Markets, a $20 billion, Lakeland, Florida-based chain of 850 stores across the American South, is usually loathe to share specifics of its supply chain, but Allen F. Wysocki, a professor at the University of Florida Institute of Food and Agricultural Sciences was able to share findings from a private interview with one of the company's business development directors, Jim Cunningham. As supermarkets evolve, Cunningham told Wysocki, “supply chains will compete rather than firms competing. Retailers have a large role to play in any supply chain because of their closeness to the consumer, and their access to buying data.”

“At Publix, supply chain management is coordinated through category managers,” Cunningham continued. “These people are responsible for knowing everything they can about products in their category, including sourcing, promotion, pricing, and profit potential.”

Publix stretches the retail food sector's notorious low margins and demanding customers with a long tradition of technological innovation. Last year, the company announced its newest supply chain management initiative, led by Manugistics, to optimize store-level replenishment.

Current IT projects include a trial investment in RFID tags designed by researchers at RedTail Solutions, VeriSign, and the University of Florida's Center for Food Distribution and Retailing. Based on their findings, Publix may roll out RFID tags across all eight of its Florida distribution centers organized by high and low velocity dry goods, meat and diary foods, and produce. Though Publix processes its own dairy, bakery, and deli goods and acts as a distributor for all of its stores, it relies on the same global cold chain as its competitors. “The project will provide an example for all companies worldwide on how to link the capabilities of RFID with a national or global network so all participants in the supply chain have the latest available information,” predicts Ahmed El Amin of Food Production Daily.

Nike

No firm has endured such supply chain scrutiny as Beaverton, Oregon-based footwear, apparel, and sports equipment maker Nike, whose once-little-monitored Asian garment factories made it an early target of labor rights advocates and whose $100 million demand-planning software snafus saw stock prices plummet 20 percent in a single week a while ago.

Nike got the message and nimbly shifted central planning functions for its 120,000 products to a well-tested SAP system and hit the ground hard to increase efficiency in its Asian factories. Inventory levels dropped, led by a push to cut “pre-building” from 30 to 3 percent of shoes. At the same time, global product lead time shrunk from nine months to nearly six. The results: record revenues of $12 and $14 billion in fiscal 2004 and 2005, with sales outside the United States for the first time supplying more than half of Nike's profits.

Nike now knows better. Though his company “experienced complications arising from the impact of implementing our new demand and supply planning systems and processes,” Philip Knight, chairman and CEO said, “we believe that we have addressed the issues around this implementation and that over the long term, we will achieve significant financial and organizational benefit from our global supply-chain initiative.” One example: a newly implemented global trade management application, which automates strategies to slash international inventory and reduce country-to-country global supplies duties.