IBM Institute for Advanced Commerce Symposium The Impact of Globalization, Transcripts: Supply Chain Implications (Panel)

Good morning everyone,

I am delighted to see so many of you back even here at an early hour. I hope that we will have an informative and enjoyable session for the morning. It will also be less gruelling as there will be a tea and coffee break in the middle not going through for almost 4 hours straight. Please do remember to fill in an iration form at the end of the morning. You should have one at your place.

It is my pleasure to start the opening panel, discussing the issues of the supply chain. Globalisation directions involve reaching out to customers in one direction; reaching out to suppliers in another; reaching out to partners in between and we will try to address today both some of the customer issues and some of the supply shipments.

Let me hand over the session to Keith Martin to get it going he will be moderating and the panel will work its way up to Thank you very much.

Morning everyone. Hope you enjoyed your meal last night and did not have too much wine. My name is Keith Martin I work for IBM Global Services in the U.K. and I am very pleased to be able to come to this help. In my real job I actually run an IT Global service for IBM so many of the challenges I have heard about are still going on

The subject this morning is managing a world wide supply chain which I thinks is obviously a vital part of the globalisation issues and I was thinking about this last night. Going back through history and you look at civilisation, training and commerce back through the centuries I suppose the infrastructure that it really attracts like rivers

Horses and ships and boats and as technology has moved on to where we are today and we heard yesterday where terra bytes of data can be moved around at frightening speeds and really it is just a totally different game.

The format that we should be using will be the same as yesterday's panel basically in that each of the distinguished panellist I have with me, and I will introduce in a minute, will have between five and ten minutes where they will discuss some of their experiences on this subject and then we will just throw it open to you to ask questions

Or raise your open issues and points and hopefully a discussion will develop if you fail to actually to ask the questions it could be quite interesting and you might end up with me doing ten or fifteen minutes of Broadway hits on the middle of the stage. Now I seriously recommend that we do not go down that route and I wouldn't like to explore it particularly .So my panellists - on my immediate right here is Bob Dee, Bob works in IBM Global Services and the Global Offering Executive for Supply Chain management. Bob has a lot of practical experience in this area and he has worked on many client engagements, both in the U.S. and Internationally. Next to him we have John Potter he is just distinguishing within the Company I believe, and he is the Director of Logistics for S C Johnson Wax. He has worked for them for nineteen years and the reason John was invited on the panel is because he has spent the last 18 months developing and implementing a supply chain process across the major markets within Europe in which S C Johnson work. Finally on the end we have Barbara; Barbara is the Vice President for Integrated Supply Chain Development and Deployment so whereas Bob is helping IBM customers with their Supply Chain Management Barbara is responsible for the development and deployment of the necessary processes within IBM. She is primarily focused on hard ware and soft ware so we have a panel here of three practitioners three doers who have actually been doing this so they wont be talking from theory they will be talking from real experience. So without further ado I will hand over to Bob.

Good Morning - One of the most interesting quotes I have seen and this has been tossed around in many different forms for quite some time - its from a Professor out of the U.K. named Mark Christopher, who we have a chance to work with for quite some time and basically the thought is that the future of competition will be between supply chains or net works of companies and trading partners together and not specifically between individual companies and we are finding this to become more and more true in a globalised society. Don't worry you are not meant to look at all of the words here but we have been working with many different industry forms around the world and what this graphic shows in its complexity, its meant to be shown for its complexity sake, is the supply chain from the harvesting of cotton all the way through to actually buying a pair of trousers. This was probably the simplest form of supply chain that we could show you with any amount of detail. It was really fascinating working on this project, just to show how many people and how many different processes get involved from beginning to end. We have also had a chance to work with many different companies and many different industries and trust me when I say this is one of the more simple ones when it comes to supply chains. But the idea is the supply chain means very different things to many different people and there are many different ways to look at supply chains but one of the things that we have done within IBM is to take a look at and trying to define some of the major components of the supply chains. When we go out we work with many different clients we council our consultants and we council the people that we work with and if someone comes up and says, excuse me I have a supply chain problem, we always teach them to ask one very important question, and that question is tell me what do you mean by that because if you are talking someone who deals with sourcing Sherman they will be able to still say well I have Sherman problem where I talk with someone that works on the manufacturing side or I have this production problem. The term supply chain means many different things to many different people. The other fascinating thing is to look at the many different graphics to describe supply chain. From everything from silver threads and golden threads and platinum threads and pipelines and pyramids and different types of network graphics and the one we just saw earlier was quite complex as well. We found that these six, actually seven processes pretty much cover the different types of supply chain complexities that we have. But we have also found that on the greater order of things we were dealing between companies, trading between companies and that's clearly what supply chain is - is to look outside the four walls of your firm. That these fairly well cover those types of processes. The one that we are finding interesting though is the integrated supply and demand management because whereas a lot of companies focus on process, organisation and technology improvements and one of the first six, like customer order for and customer service that the greater benefits are to be found in actually integrating that particular process with some of the other ones as well. It goes back to the story of the gentleman who walked into the doctor and said doctor, doctor I'm dying, I'm dying and the doctor says well tell me, what do you mean and he says well, if I take my finger and I touch myself anywhere on my body, it just really hurts, so I must be dying I touch my arm, I touch my leg, I touch my head and the doctor says well excuse me, but you are not dying you have a broken finger.

Well that's true with supply chain as well. If you perceive that you have a problem or symptom in sourcing procurement, the answer may not always be in sourcing procurement because in forecasting and planning, it could be in the production side, it could be in your inventory or warehouses or other things. So its important to have an integrated overhaul view of supplying the man management, which it comes to looking at supply chains. So it is really much more broad than a lot of people think and everyone has their own separate definition in terms of what supply chain really means to them. Those types of things also are allowing through the use of technology for a different type of supply chain. If you compare the complexity of the first chart with this interesting graphic that we have been able to get on this system here. The whole idea of the e-business is really driving some massive changes in supply chains. Lets face it ,those 6 or 7 processes that we just saw earlier, procurement, taking orders, production - those types of things have been around since day one - OK everyone been doing them, everyone going to continue to be doing them but there are some fundamental things that are driving some major changes in the world today. Quiet frankly, technology specifically E business for the use of the Internet is driving tremendous vast change in this particular area of supply change, not only within a company but especially, between trading partners and getting the products to the right place, the right price at the right time for those customer. There are 5 drivers that we have found in the market place, which we were specifically taking about one today that are really driving change throughout the world, throughout globalisation in supply chain. The first one is globalisation basically, how do I get into new markets, once I'm there, how do I grow. And do I have the appropriate process, organisation and technology infra structure to allow me to operate on a global scale. The creation of value was talked about yesterday, and that's how do I get and retain customers. How do I create intimacy - now people do not always think of supply chain as relating to this, but we strongly feel that if you take the focus of taking those same investments and supply chain that you would within the four walls of your firm, but driving those to actually deliver more value to your customers, who actually make it harder for those customers to go to your competition therefore improving your competitive damage to the market place. The extended enterprise issues are very important because believe it or not a lot of companies today still only focus within the four walls of their firm. And if they do manage to take that step outside the working and looking just within process organisation and technology improvements in their firm, then they have a tendency to go back to their suppliers and they say - If you want to do business with me - your going to do it my way. We call that - Help I'm being held hostage by my customers. And then there are others firms that turn around forwards and go up to their customers and say, take the customer value approach to driving more value to their customers as well. Operational excellence has been around for ever, some people call it cost production or cost efficiency or process efficiency. Its still going to be very important and the 5th market driver is technology. We really see the technology driving major changes in all of these processes and in the network environment today.

In summary basically what we are going to see in the market places is that people are going to start dealing with customers more and more directly. Instead of just focusing within their firm they are actually going to become more aggressive and going out after those customers to deliver more value to the customer. They are going to aggressively pursue new and unfamiliar market places, because technology will allow them to do that on a global scale. They are going to continually work to simplify and optimise their supply chains and that is not only the processes within your firm but also outside with suppliers, wholesalers, distributors, customers and transportation firms too. We are going to see or we are already starting to see a relentless use of technology, towards integrating and implementing these different business processes together and also to increase the speed of the transactions.

I would like to caution everyone here the supply chain is only important if you are slow, some people say that speed with supply chain is a paramount interest we have found that synchronisation of the supply chain partners is far more efficient, far more effective, far more important than being able to do it fast, because if you do it fast and your trading partner cant reciprocate and they are only fairly slow at being able to respond to your business processes for the information which you are transacting, then the supply chain has a tendency to slow down and sometimes buying can stop there as well.

The last point I would like to make is two of the key fundamental attributes that we are seeing in supply chain is flexibility and agility in a supply chain. Not only in technology but also in business processes and organisation. We have found through of our prior engagements in all of Europe, in all of the world, in all industries, that the companies that are able to recognise change in the market place today take advantage of it - move quickly to take advantage of it OK with technology, with business processes, with new trading partners OK with organisational contracts, are the ones that will be competitive in the future

Thank you very much.

Good Morning

Two IBM speakers and me I'm not too sure I'm the meat on the sandwich but after this meeting yesterday's presentation on the excising opportunity that technology makes available. I feel as though I have just emerged from a cave, having worked very hard and very proud of the fuel I've just used, only to emerge to find the Maclaranet FI sports car parked outside. Anyway having had a good dinner and some wine I feel a little bit better this morning and I am emerging from the dark ages. What I hope to do today in the next 5 to 10 minutes is to present a user perspective of technology and I want to share my experiences that I have had over the last 18 months to 2 years at S P Johnson. S P Johnson is in the fast moving consumer goods business. Our customer base is the retailers and wholesalers in the world. My focus is in Europe, and Europe for us extends beyond the European Union, and we are expanding rapidly into the Eastern market so far as the east I think so far ??????stand. So its quite broad and it is quite diverse but, from background like most companies within regions, trying to improve our operation, look at it more from a reasonable perspective. Historically we are country based. The idea was to develop in the supply change a set of common business practices. We saw this as key before we moved anywhere and we spent about a year doing this, developing these in our downstream logistics operation and for us every company will have a different definition of that - that is from the time we take an order from our retail customer through the order fulfilment process. So distribution, shipping, invoicing and hopefully the collection of cash. The vision that we had from that was that whole process from the order being received, right the way through to the invoice being delivered was fully automatic. The way we try to communicate that within our organisation was to try and create the image was that this would happen overnight when someone was around working, that took some persuading because at this point in time, it was a very human activity, lots of human input into this process. So a major part of our exercise is to try and communicate this understanding. We did this by trying to explain what the key enablers were to make this happen. We called this by the way, common business solution. To try and portray the image that this was going to be, the same operation, the same practices whether you were in the UK, France, Italy or even . So the enablers, well it relied extensively on the use of the electronic data interchange, that's between our customers to and from and perhaps more importantly, are logistic service providers. Perhaps have common transactional software and a hardware platform. We actually out source that and that our data centre is managed and run by IBM. That was a major change as well, having run our own over the years. Outside warehousing and distribution was out sourced to our logistic service providers. Now for us, there hasn't be a strategy since about the late 80s and so today, we only have one warehouse that we actually own and run. All the rest have been managed by third party suppliers. But these suppliers are per country. We have yet to rationalise across the region, although I think that will come.

Perhaps the most significant change for us rated, intra process between our regional focused factories and our Company based commercial organisations. In the early 90s we have moved to rationalise our factories. Significantly reducing the number. So say, if it's an aerosol, its made in Mygra, wherever its sold, it's made in Mygra in Holland. This integration was keen and one of the biggest changes that we have made in our organisation, is that it affects people roles in responsibilities and the way they behave. But the factory, life was very safe behind the factory gates. Suddenly now they are exposed to the retail customers. So it's not so comfortable. Anyway, just to go on to some of the issues that we face during the implementation. Well whether we made the wrong choice, well I don't know. But whoever I speak to, I think has this problem. That the reliability and robust transactional distance weren't up to our expectations so that could mean our expectations were wrong or that we had been sold and our expectations had been allowed to be wrong. I happen to think it's the latter but I am probably a bit biased. The other key difficulty was EDI. Now in theory there are standards in Europe for EDI. But in practice, basically every relationship is unique, because none of the standards are actually implemented in a common way, so the complexity, the resource, the time, the effort that went involved to do this in a common way across Europe was a major exercise. The easiest for us was with our logistics service providers. One, it was just one organisation on a country by country basis. Two, it was new. So we were able to develop a common approach with . The UK was the exception but even hope Cable moved to Edifacts with our logistics service provider. Buts it slow, well get there.

Yesterday people were talking about the culture differences. I am not too sure I would subscribe to those. Probably more fundamental that, as human beings we strive or look for stability, or maybe at least certainty. Maybe that's something to do with the fact that since time, there has never been a stable period. As human beings we always want what we can't have. But to me to overcome this, as this is a lesson we learned in some cases the hard way, in the change management. And by that I mean, communication, education and it has to be done in that order. There is an essential ingredients for enabling the organisation to go through the change process and never under estimate how difficult it is, or certainly in our organisation to get communication through, from the top of the organisation to the bottom of the organisation. On communication, my definition of that by the way is the conveyance of understanding and I think there is a very big difference between conveying understanding to just hearing a message.

So the conclusion that I have drawn. Well I agree with the context yesterday that was described as , don't wait. Nowadays, there is so much on offer, unless you do start I think in a small way, you may never get started. We are trying to develop electronic links with our manufacturing supplier. Now for me, to start with something simple like EDI but no with everything that is available to do, we have to put the . Well we started 9 months ago, very ground project, nice expensive Consultants. Nine months later we are still in the paper shuffling stage and still thinking about how we can do it and what we might have to do. The project is too grand, it's too long, its too expensive with no short-term game. In my experience of management, is impatient for results, so I strongly support the idea of get started and then let it row.

Technology will create closer strategic relationships with LSPs or any supplier but I think that eventually means, there will be fewer because relationships take time, it costs money to develop these things and I think the pay back is through economy of scale of trying to work with fewer but in a much closer and deeper relationship. You do need to provide a ROI and as everything I heard yesterday, I didn't see that and I think as businessman responsible for a business, you have to look at a return for your shareholders. My final conclusion is that historically for a business, technology has been a limiting factor. Often management has had ideas way beyond what the technology could actually report. In a summary why I think that made life easier, is that it created a boundary of order from which we couldn't go beyond. It seems to be now there is nothing that's not possible from technology. The question is that I think the suppliers of technology therefore have a responsibility to create that understanding for what is feasible for a business, to generate a return within a defined hyper . there's a need to create a balance between technology and customer and supplier capability to implement and achieve the benefits from it. Anyway, in conclusion I was encouraged yesterday, having come out of my cave, to listen to the time horizons of years and years and decades for this revolution to take place, as I believe it gives business and the human race, time to prepare and adjust for the future.

Thank you for listening.

Good morning

As Kit said, I am probably one of the only IBMers here who couldn't take a purchase order from you. I'm not in sales or services, I am in fact in the internal organisation in IBM. Like many of you a practitioner in trying to implement the tools and processes to support our global business. Now I can't share a great deal of what I have done in IBM or what we've done in IBM over the last three years and 10 minutes. But what I wanted to do today was to give you a little bit of a feeling of how we have approached changing, transforming our supply chain business and then just finish with a couple of examples of places where we have used the latest technology, processes in our global business to help our business growth. First, I wanted to give you a feeling of the complexity of IBM, because while there are many areas that we in fact can undo across IBM with common tools and processes. You probably know and it's probably true in your businesses too. IBM is really made up of a series of complex supply chains. It crosses all geography and so critical to our success is being able to optimise across a very multi dimensional matrix of business units, functions and geographic capabilities. You can see from this chart, we have an idea of 3 geographic sales units, multiple routes to market, including direct and indirect channels and those channels all have differing levels of maturity and capability. We have a product division, three groups. Our internal vertical supply chain is made up of three groups responsible for global manufacturing across 26 manufacturing sites and 14 countries, so we in fact are global in terms of our manufacturing organisation also. Just as an example, I wanted to give you a little bit of a example of just one of our internal supply chains. This is in fact our hard disk drive business. Starting with technology, our disks wafers which come from San Hosui in California. Going into sub assemblies in multiple locations like Mexico and China and then finally, being assembled into hard drives in Hungry to be delivered to our customers. This is clearly an example of where all aspects of supply chain capability globally needs to be assessed when making sourcing decision. Here sourcing decisions made for low cost and low tax reasons have to understand the unique infrastructure challenges that this kind of supply chain gives us, so that the advantage is not taken away in reliability issues from our customer perspective or physical distribution costs and so on. So its very important for us to understand all of our supply chains.

Certainly this becomes more complex as we will get our external supplies. Here are re-engineering yielded a global, central organisation to assure that we are leveraging this large procurement stand at the IBM level through contrast managed by commodity councils. However, to assure that we have the rapid execution that this matrix would be local execution organisations in the business unit. One of the elements that I will talk about next in our first phase of re-engineering, its critical to managing this kind of matrix, common central leverage but fast execution within business units. Was our implementation of the ERP of SAP. In this case SAP allows us to manage centrally, globally, hundred of contracts to get the leverage purchase price leverage for IBM, and that is linked to each of our business unit implementations of production SAP, through SAP's LAE dynamic linking. So that we can take advantage of it every day as we are making by.

OK, this goes back to what Baldine was talking about earlier. Like many organisations, we started our supply chains, re-engineering, focused on our internal capability. Trying to make it become more reliable, more responsive and optimise our assets across our supply chain. I think this is very typical. Many Companies start by getting their internal house in order and it's the right way to begin because, as you begin in the next phase that I will talk about, to extend your supply chain beyond your boundaries, its important that you be a credible supply chain partner, and to be credible you have to have your own house in order. So this is where we begin our first phase of re-engineering. The concept was with premier response to rapidly filled customer requirements from our Regional Fulfilment Centres which perform fast 48 hour assembly and test of building blocks from our internal and external supplies and then that capability which is the customer facing capability is supported by the supply chain execution, which is really the engine room. And these are the processes, the poor processes that Bob talked about, the processes of supply demand planning, replenishment, materials of acquisition that assure that you have the right assets, positioned in the supply chain at the right point in the supply chain, in the right amount to support that rapid fulfilment engine. And so this was our phase I objective and as you can see, it says 1998-2000. We are still working on this. As a matter of fact, I think we will always be working on improving this process, so we will continue. But just to give you a little bit of an idea of where we are in this. Since we began this re-engineering, we've finished 1998 with about 50% of our cost of costs going through an SAP production instance, so we are about half way there with our implementation of the ERP. We've increased inventory turns across the preparation in our vertical supply chain by 40%. Our reliability has significantly improved into the mid 90's and finally, our order cycle time, order entry to delivery cycle time has decreased by more than half. So this is really a good base for us to build on and we begin phase 2 of re-engineering, what Bob talks about as extending the supply chain, moving beyond the boundaries. This looks at optimising the supply chain from the suppliers supplier to the customers customer and builds on the base that we established in phase 1 but here the focus is not on efficiency and effectiveness, its really on building the opportunity to grow profitable revenue. And to grow profitable revenue, not just in IBM but across our supply chain, with our supply chain partners. Because in this phase of supply chain, its really important to recognise, as Bob said earlier, that we are competing as a supply chain. We are not competing as an enterprise. Here the information and the use of information for decision support processes and optimisation of our processes is key. However, I want to bring up a point here. Irvine made the point yesterday and we are finding that its absolutely critical that the IT that you implement, so that we are implementing to optimise these processes and support end to end supply chain. Typically systems called advanced planning systems that are used across supply chains, across ERPs to optimise have to implemented in an open and flexible environment. That is not the case today. Most of them are implemented in very proprietary architectures. But if we are to see the benefits that we are looking for here of growing revenue by being able to rapidly react and market opportunities when we see them, we have to be able to change our business model to be able to change the optimisation logic and that is only going to be possible in an open architecture for that software.

Let me go over to the right hand side. The three areas of focus in phase 2 that will allow us to get these benefits of growing profitable revenue, we think are first the visibility and exploitation of key information across the supply chain and I am going to give an example of that in a few minutes.

Secondly, collaborative planning across the supply chain to assure that the entire supply chain is synchronised and prepared to react to a market opportunity at the same level.

And finally, rapid synchronisation and execution across the nose in the supply chain once an opportunity is set. So those are three areas. I want to talk about the first two or give an example of the first two.

The first example I want to give is one of exploiting data visibility with our supplier in this case. Because again, we are looking end to end, but this is a supply example. As we've looked at our value added leverage points in our supply chain in IBM, we have decided like many of you, I am sure to out source some of our manufacturing assemble operations, specifically one of them are electronic card assembly capability. However, we wanted to out source the manufacturing. We did not want to loose the leverage that we have today in those purchasing contracts of buying electronic components. Through the web, we are now able to share with our suppliers, electronic bill of materials. This is with our assembly suppliers, so that our card suppliers can now buy sub products and components under our corporate contract. So we are getting the leverage. Now its interesting because many of us have talked about the fact there has to be trust among supply chain partners. Here's a case where were getting the advantage of the purchase leverage for these electronic companies and we are sharing it with our supply chain partners. So our suppliers are buying from there suppliers, and our contracts were sharing the benefit. The benefits are not just costs by the way, they are quality, they are reliability and other benefits that we are seeing. Since our contracts, as I showed you are our procurement organisation is a global organisation, so that our card contracts as well as our electronic card contracts are global, we get this advantage around the world. So we have now optimised globally in that area. The second example I want to use is one on the other end of the supply chain in a process we use with our channel management partners called advanced fulfilment initiative. Now this initiative allows us with our business partners to service our broad customer based with high reliability and the service that having a channel partner allows you, while minimising the physical access in the supply chain, the inventory in the supply chain, making it possible for us to compete with our direct competitors. The process is again implemented using the web and the way we do it is through frequent collaborative demand planning, supply remix and rapid supply commitment to our partners. Partners can then take that information and commit to customer orders directly off the information. This is the case where information is replacing physical assets, so partners don't need to keep the inventory, they can commit to customers right off the information. One of the other things this allows then, is for us to directly shift that asset from the point of manufacture to the end customer, so the information flow are separate. This project really began in our personal systems group and it's a very interesting example because, as was mentioned before, you typically have a lot of leverage with your suppliers. You can almost dictate with suppliers what you can do. With business partners and the upstream, there has to be some common objective. You have to be after some common goal. In this case, in our personal systems business as some of you might recognise, we had a really common enemy and that was the direct business model. Our channels were not competitive, our channel partners recognised they were not competitive and so, if we did not do something together, we would both fail. Very powerful. So at the end of our personal systems group in North America where we implemented this, and actually got the timing down from when we could access a new demand from a business partner on a Monday, give them a re-commit of supply on Friday, they would then be able to commit to their customer base without any accents flowing. We are now in the process of trying to shrink this even further. But the better news is that now that we have this working in one small place, we are able to leverage it in other places in our organisation and so right now as we speak, in Europe for our mid range, we are implementing the same processes and the same tools. So those are just a couple of examples of places that we are implementing e-business and in this case, some might be an example we saw yesterday, this is business to business, e-business in order to allow supply chains to compete.

Just a quick question - what does ERP - Enterprise Research Planning

So, I would like to thank my panellists for their exploration of some of the issues here. Bob talked about the battle of the supply chains and defining it, how the technology is changing it, what the market drivers are and some of the strategies. John gave us his user perspective and the frustration he has with the technology and key messages about get started now. And then Barbara gave us some real examples from inside IBM of the manufacturing supply chain and how that's changing and some of the dynamics and issues related to the suppliers and the relationships.

Q. A question related to one of the topics yesterday. Do you think there will be numerous trucks down every high street, trying to deliver within 12 hours or within 24 hours, and if that is the case, how do you think that will be handled from a supply chain point of view.

A. Well, I think very much like the example we talked about yesterday. I think this is an area that is evolving. We also like John have begun to do some out sourcing that are physical delivery to third party logistic providers. We are finding it gives us a capability to leverage our business with other businesses which says that in fact you can reduce the number of trucks coming to multiple businesses. We are also leveraging the inbound with the outbound transportation. So when a truck comes in, it picks something up an takes it out and also leveraging it with reverse logistics which is becoming a bigger and bigger business for us. The bringing back of our product for environmental and refurbishing and that kind of assistance. So I think over time while the speed of delivery to the assets flowing, will increase I think our capabilities to exploit these other options of combining processes will tend to dampen that a little bit.

From our point of view, that's one of the reasons we out source to the logistics centre to . If helps them to put together a clients portfolio, the balance is all the demands from their customers, supplier like ourselves and our customers to retail trade. I also think there's a national balance that has to occur. If you take the extreme, you are literally going down to individual units and there will be a balance and the cost will balance and I think in some items, yes, you will have very frequent delivered measured in hours. But infantry still has a role to play and I know its not very fashionable, but you have to look at infantry from the point of view of what it means to your organisation. Your selling newspapers or perishables, the costs to your infantry is much greater than if you are in our business when our products have a much longer shelf life and is not subject to the same rapid .

I couldn't agree more, and when I think of transportation, I think of inventory. One of my family had a reasonable truck and air brake company in the States for over 28 years, so I am very familiar with the business. But, when I see a certain Vice President of logistics of a major European electronics company getting measured on the fact that when an order gets released to his logistics warehouse, he is measured on having it picked, packed and shipped in 24 hours. But when that truck pulls away from his dock, it sits on the road for 2-3 weeks, because his customer can't take delivery of all those goods. So good question about will we see a lot of trucks running around out there. I think that is an issue but I also think that this in transit inventories are so important in the market place are also an issue out there. Plus the for the trailer, plus the fact of the improper usage of the driver and all those other things so, there's a lot of issues around that particular thing.

I think there are a lot of opportunities for the industry in that area because, I saw some statistics recently in Holland, I think, they reckon that 40% of trucks run empty. So there is huge opportunity I think to use the existing capacities.

There is a European retailer that I have worked with that actually had a problem in that they had 100 trailers sitting out by their distribution centre and they didn't know which one had green dresses, white refrigerators and things like that and so there is another thing, you talk about transportation issues, the fact is in inventory and attracting issues as well and the effective use of the inventories. There was a study done in the States that I liked, because the conclusion was just so simplistic. They said that there has been no real reduction in inventory in the market place today while certain companies quote 30%, 40% and 50% reduction in inventory...............................

Or somewhere between the electronic companies warehouse and the customer that can't take it. So there are lots of issues so that's a very good question that may sound simplistic but it certainly doesn't when you get into the heart of some of the issues.

There is a lot of opportunity also as we integrate processes across the supply chain, a lot of improvement of parts occurs or sub assemblies occurs between supply chain partners today for no good reason. So as we replace inventory with that information that I was talking about, you can eliminate a lot of that movement. But that's going to take co-ordination across the whole supply chain.

Because the content of confinement stock always amusing me. We have this with one of our suppliers and we have a warehouse full of this stuff. But its not on our books, so its great and its very convenient for us as we can use it when we want it. But someone's paying for it and I expect we are but we just don't know and we don't see it. So, I think you'll right. There are certain physical constraints. The idea that there can be no inventory is, I think a little bit of a miss. It takes physical time to move from one chemical into through the process to create something else when you move it. So inevitably, it's a question of how you best utilise that industry and that's where I think individual supply chains are unique in that one and there is no one common solution for every supply chain, despite what you hear.

Q. When you talked about EDI, what is the factor of internet and EDI we need to increase the user of EDI or will it replace it by

A. Our belief is, and we are not fully winding down on all our customers. We saw the internet as a way for some of the smaller customers about coming into our common process but again, it's a question of persuading them to do it. Which goes back to my point about getting started. There does seem to be a reluctance but we certainly see it as a huge opportunity. From what I heard yesterday, it would seem that some of the complications of the current EDI technology could be solved through the use of the internet, so there's hope for us yet maybe. The main message is, the expectations that are raised by the IT industry to non ITT language to simply what actually has to go on to support that technology and I suspect to even use the internet, it is not as simple as you would like to make out.

I think one of the places we begun to use the internet is with those 80% of suppliers that it wasn't cost justified to do EDI. We have been able to create a web EDI, so you can have the same benefit of EDI but the problems still remains that EDI is not the standard that need. It helps, it goes a long way but its not where we need it to truly be able to optimise the question of supply chain. We have to have standard of information flow that we don't have today.

Information flow is one thing and I agree with you completely. But EDI standards work like they were supposed to. Everyone would be using EDI. The whole idea was that we created these standards and the creative standard transaction and we created the standard segments for transaction and standard data elements in this segment, but until I sit down with you, and you and I both discuss, with does the PO mean to you. What does purchase order mean to you and what does it mean to me and we rationalise at the data element level within the segment, within the transaction, within the standard, between our firm. Then it starts becoming a useful transaction and that's been one of the complexities of it all, so costs and ease of use of the internet and the lower end people as you suggest to be able to use it is excellent and we are also seeing those in the internet, people are putting up this information saying, this is what I am giving you, this is what I mean. If you want it, then you come get it. So its almost taking away half of the problem because they are not actually rationalising that information on a data element basis so, it does again get a little bit more complex in that respect. That's one of the reasons why EDI 10 years ago, just didn't take off if everybody used it like they thought it would be.

Q. I would like to know what volume you use ........

A> Today we use it in both of the examples that I gave, in order to allow us to integrate our workflow with our web technology for collaborative planning and also for the buying off our purchases for our electronic card assemble providers. So, it is not today directly linked with SNASP instance, although we are working in our collaborative planning process to make that automatic link. It is used for more than just mail though. I think we are beginning to really test its capabilities in terms of this whole idea collaborative planning. And you know when people think about e-business today, they most often think of e-commerce. From business to business stand point, the real value is not moving transactions to the west, its really in going that next level and adding value, adding these new capabilities that you never had before and this whole area of collaboration, which we are using from a planning stand point in the west, but will be used in our product development to intra collaborative design work with our customer based and in every one of our processes, I think its where the real opportunity is and that's where helps us, both on the collaboration and the integration of the work flow with the west and we are using it there.

Q. Hearing you talk before about the difficulty of keeping track of physical goods like, which stroke has one. It points to some interesting changes coming as we get better and better pervasive computing technologies then when a package of white dresses leaves the factory, you put a little arrow seen, that now identifies that package to the system and now all of a sudden you get ...................... possible now you really can keep tract of where everything is, so down the line, there is a whole new processes to minimise the time of transit of the difficult packages. Would any of you care to comment whether we are ready for that world.

A. Well, I have worked in the RF field for over 5 years, prior to doing the IBM and, our efforts of splendid technology, they are low ends, high end tags and passive tags and active tags and all kind of things. We are even coming into from these that came here. There is an audio tag used to go through tolls, which I have had a chance to work on. The issue is that RF technology works very well, in what we call a close loop environment. If you can control where it starts and where it stops and every information in between, it works very well but when you start dealing in an open loop environment, where not everyone has adopted that same technology, that same type of tag, the same information which breaks down quite simply. There was some studies done in Europe to where they put a tag on a truck and they actually loaded the inventory into the tag what was in the truck and took it out and then made multiple stops. Well where they made multiple stops and drops in the inventory, there was not the technology to update what was in the tag therefore, after they made the first drop and they made the pick up there, then the information on the tag is not good. So, I agree the technology is wonderful but whether we take a wide spread adoption of a specific standard of information and a collection point like the internet to be able to collect it and distribute it as well. So what we are seeing is that the information about the shipment is usually collected at the point of departure like white dresses here in this trailer, that information is then sent via the internet to the people that are receiving the goods. And they know to expects trucks 1, 2, 3 arriving at this particular day and time and then they can match it up that way, as opposed to using a RF tag, as a in transit tracking mechanism. That's the way things solve today because of the openness versus close loop information of not so standard technology. I do think in the future though that RF will play a much major role when certain cost barriers are reached. The high-end RF tags are still way too expensive for trailer and rail card tracking. The low-end tags are still very expensive. There was once said that RF tags were at least $1 per tag. It was felt that everyone would use it, well then it went to, no they must be $25, so that price point keeps on dropping until everyone says, I will use it once it reaches that point. So there is still a lot of churning going on in that market place technology.

Q. I would like to pull off some of the points made by the panel, advanced planning systems being proprietary and not being open up. We talked about data and the difficulties of getting data definitions but I didn't hear any solutions for this. I heard the problem being raised but I did not hear any solutions. I think one of the things that businesses really get upset about is the fact that we push more and more about technology but we don't push the data. And I think if data seems boring and we don't solve that problem, I just wondered if the panel have any ideas on that.

A. We're trying to push from a couple of different perspectives. We are participating in a number of the standard committees, because everything we talked about here, EDI whether you talk about RF, everything requires standards and if we are going to use information to manage and optimise the supply chain, we have to all know what we are talking about and everything you have to translate information, it slows down the chain. So we are working through standard committees, like Rossett and that. There are in fact global kind of standard committees. I don't personally think that going to get us there, I think what's its going to take is, us as customers demanding the application providers to implement in an open way with common data standards and until we as a customer set, really require that, really insist on that from the suppliers. I don't think that will happen. For instance, if there is competition between SAPs, advanced planning systems and I too were , advanced planning systems, they all have different data models. Until somebody like me who says, look in my supply chain, I might SAP, but my business partners don't. And so I need something that can talk SAP and and a number of other systems and insists that my application, the advanced planning system provider be able to deal with all of those, I don't think it will happen. So I think we have to drive it from both perspectives. And we are actively doing that with our suppliers, base and our channel partner base.

Q. I think I would tend to agree, I think the is the ideal solution but, life and business moves so quickly, it takes a long time for the standard institutions to actually develop standards. And there's not a lot of product collaboration that goes between manufacturing, normally business compared to business etc. Let alone the other parts of the supply chain, the retailers as well. So, I think that's going to be a very difficult one. Hopefully over time, economics will sort of drive for some sort of harmonisation. Certainly perhaps in Europe and hopefully that can extend beyond. In the meantime, I think it is. We have to develop translation at all. Basically is what we do today. And that's what I think from all the added complexity and that's where I think certainly, the resource and time it takes to develop these things is grossly underestimated and the support from an ongoing basis. As soon as you make a change in some way, you have to re-think all those interfaces. But then I have a personal view as well that the large all incumbent and resource planning systems probably over time will be replaced, certainly for a smaller organisation into more high breed type of systems that specialise in certain things. And then you interface effectively. I know that again is not but having just implemented B-pix and trying to interface all of those elements of that and then having to compromise in certain areas, I'm not too sure that it would be the strategy that were going to get, if we were doing it again.

So we have a standard, you could do that, you could implement in modules that were the most functionally effective from what you were trying to do. But I think the reason that ERPs have been so popular is that they do the integration for you across your internal piece of supply chain so you can operate very quickly at the transaction level because you are not doing the data translation, it's an integrated information base. That's was fuming about it. You cant do that across companies though, because your ERP is what keeps you booked. So, when we do have data standards, not only will we will be able to operate across companies more efficiently but we will also create much more flexibility in the internal functionality capabilities, little modules of capabilities that will dynamically link together as the time of execution to be the most effective. There is a lot of opportunity there.

One of the things that we have seen in IBM global services is that there are 3 basic ways to link different applications together. There is very tightly integrated, there's loosely integrated and then there's separates that are linked together on a transactional basis. What we've seen is, we would like to get more and more companies working together, to actually have that tightly integrated data module, but that's going to take some time. We have just completed a study around the company that shows that we have anywhere from 12 to 15 different types of technology methods for integrating in these loosely coupled or even separate, but transactional based types of applications. So, it's a services organisations, that's one of the things that we are specialising in now. Looking for the best way, the right way in a given business situation to link the different applications together because as Barbara said ERP systems are great within the four walls of your company. But you always have a complexity of a business issue when you go outside. These suppliers, wholesales, distributors, transit companies and customers as well. There is always going to have to be that linkage between, whether its separate transitionally based or in loosely couple, so there will also be a technology or an interface of some kind in between this. So we have some significant work going on there. Excellent question, its very complex and its not going to be solved anytime soon, but that's the way it seems to be, a current solution for the problem today.

I would like to thank the panellists for sharing their experiences with us today. Thank both John and Barbara and I would like to thank you all for asking some questions as well, saving me from a fate worse than death. I would like to hand back to Stewart now.

If I may now change the topic............................................... But also one of the earliest users of the internet to move out into a global market place. And he will talk about the importance of customer relationship management in the global market.

You can see the left columns that our department stores raise more than 170 stores and in these stores were have our internet caf�, we have kiosk systems with internet access and we have also different other kiosk systems for customers and you will see the Nickerman mail order company, we are using our Nickerman company for doing all the logistics in our e-commerce business and address check, I will tell you a little bit later about that and from Nickerman, were in our shopping mall, up to 180,000 last minute trips that's available for the customers for booking.

May I start on what we are talking about. In the last 100 years, we are producers and suppliers and we are retailers and we are also have mail order companies but there is a big danger for companies like . If you look at the virtual code of electronic commerce. In the middle of all this, there's the customers but soon new technology, its possible that the supply can delivery directly to consumer, through the virtual code and that's a bit dangerous for cash. Who delivery a very lot of PCs directly to the consumer. While our ideal the revenue in our own company ...................................

If you look at this chart, see it's the biggest part of electronic commerce in the next few years, followed by the UK and at the moment CAS is only in Germany but we are thinking to re internationalise my word, to go to the European market in the next future. We are in Austria for a few months and are thinking of expanding to Scandinavia and other countries in Europe. You will see from more than 100% of increasing electronic commerce in the next few years, so its very important to our business.

This chart you can see, there are different kinds of goods that will be delivered or will be repaired on the commerce business and so there's nearly 14% of that and that's important to our business is the consumer goods. But our idea to co-operate with partners and to have bigger business in our e-commerce strategies than in our department. We are brokering partners with special goods of IT and also we have with the travel agency from our Group. That's very important, our strategy can combine in a very good grade so to satisfy the customer. But nevertheless, the main part of the electronic commerce market is business to business but in our business, a retailer, we are looking for the business consumer market and of course, its 25% that left a lot, monies that will be reserved onto the internet in the next year.

That's an interesting chart, because it shows that a lot of people want to use the internet for electronic commerce in the next 6 months and if you look at the number, it was increasing from 28% in 1979 up to 45% in 1998 and I am sure, it will increase in the next few months and year up to 100%, because nobody can say I have nothing to do with the internet. May be you will have to see what they will have to do with the internet. But on the other hand, its very interesting why people are not buying on the internet. There was a reason why shoppers didn't buy on the internet and if you look on this, you will see they are afraid to use the internet for retailing or for ordering goods by the internet. So a lot of people know who was making the offer and they are afraid to give their credit card number to the internet and on the other hand, they find it too difficult to use the internet to order goods via the internet. That's the main topic for us to make it as easy as possible for customers to use the internet and order goods via internet. From the other end, they don't know how to find their goods they want to buy. So the internet is very hard to use for a lot of people. And if you look to our normal customer in our department store or mail order business, there's not a typical internet user, there just a man and a technician. It's the housewives, up to 60% of our customers so we are looking for ideas to make it as easy as possible to use the internet in my world and and may be via the TV in the household.

So, combine all these ideas, we try to find new ways to our customers. We look for interesting content to and look entertainment to combine our offerings with interesting things like test rooms or may be in the future other things from the multi media industry and we try to build strategic alliances like with C2000 in Europe as the wholesalers for IT products. So we have my word, more than one point million items at the moment but we don't have a lot of them in our old stock. We have corporation departments, corporation departments who are handling all of these items for . But the customers gets only one invoice and that my word for cash back and not Year 2000 or all the other partners of my world. So we try to build a real virtual shopping mall with a lot of partners to satisfy the customers. And we try to find new things for customer binding. We look for special events from the music industry or we are building plugs, we call it member and we always try to find a simple way, an easy way so that the customer can handle our website very easily but that goes for everything I guess. Its not useful to use the internet for most of the people at the moment. So if we look to the customer on this side, we see that we have a lot of ways to think about the services in the new future and we have to think because not so many people have internet access in Germany or I think in Europe, how we can bring the internet to the customer. So, we have the idea that we have care systems in our department store that people can use for free in my world and we build over 40 cyber bars at our internet cafes and department store and for that we have made the way that more than 60% of the people in the cyber bar are coming to Caster, only because of the Cyber bar. And that's a specific point for us, for customer buying, to get the people in our department store combine with new technology to introduce the people in the new technologies and to have new customers, especially young people to put them to the recess store and .

We think to expand this strategy to have care systems with internet access which had been altered or gestations or may be in special companies like we do with IBM in ,they can order via my world. All the goods of my world directly to the headquarter of IBM in England. And we are always looking for special new services we can use, such as satellite services in Europe. We talk to them of how we can bring the internet via Astra with multi media content into the household. At the moment that's not possible because of the , once we are convinced that in the next future, it will be possible and we will have a lot of household with satellite, with cyber cards , maybe combined with the issues, so that people can serve in the living room to order and buy goods in my world.

But of course, of all the idea, the main topic in our sense is the service. There are a lot of fresh codes of topic to service but the main topic in my opinion, it must be simple to handle for all the customers, for all housewives or children, older people. To get a lot of new customer in the future. We are in the past 3 years we have , but that is not the way to build power . They must be easy to handle so that everybody can use it. It all appears because of the telephone costs. So, its not interesting for them to have all this powerful website with medials and to one. It must be easy, it must be a new so they can find the products to have and good way to find their product.

You have to organise in your company flexible delivery. At the moment we can only deliver within 48 hours but we are thinking about ways to say, when will you have the product, maybe next day at 5 p.m. and that will be the boy or guy the product. Some cities and you can say, I want to have my goods from 2pm to 4pm or from 4pm to 6pm and it was better to send nobody is at home.

The other factor I will tell you. You need to have simple and secure payments. So we decided to use very early, as the first company in Germany to implement SEP technology. We worked together with IBM for this project and we have been the first company, which mentions SEP in the virtual mall in Germany. So of course, look at the other thing. I don't want to explain everything in this chart but we are to look at a new enterprising to reach more customers and to order.

Let me speak a little bit about business process in e-commerce. There are a lot of interesting ideas of all the people that are totally different on . Our opinion is there is no big difference between normal mail order business and the electronic commerce business on the internet. Look at the left side, the typical mail order business, you have a supplier and you have a customer and you will send out the distribution. You hope that the customer will read it and last but not least, you will receive an order. And its nearly the same in the electronic commerce process. You have also suppliers and customers who have different medium like CD-ROM, you have the internet, you have customer terminals but you have to distribute all of these things. That's the difference if only on-line or off-line and it can be inter active. But I told you it must be , and you also want to get an order. In the office, they are the same processes you have to organise. If for example, if credit worthiness, billing or commissioning, delivery and you want to get your payment. If its not organised very well you will loose a lot of money. I can tell you that a receipt, up to 60% of the revenue in My World is junk orders. So if you don't have the processes and tools of technology, so you are able to take or find out what is a junk order. If it does have words, you will loose a lot of money. For instance 60% of the revenue, not 60% of the numbers of order. But a lot of people want to prod us and we have to check out. So in the business process, when we build it, we build it in 6 months when we have had the decision to build electronic commerce more. We though how can we build it very fast in our normal IT infrastructure and what should we have to do. If you look at the blue rectangles, that's a business process chain cash exercise within more than 100 years. So we decided to build my world and on to the normal IT infrastructure. So we decided to My World an on to the normal IT infra structure. So we have built a new environment internet compliant with .................. that was new. But we decided to use all our IT software from Nickerman mail order companies to make the and invoices and credit worthiness check an to use all the merchandising since the and not to build all new applications for the new business.

So I give you an example what we have done. We are using the normal Edwards cheque from mail order company Nickerman and from the 1st day beginning our internet mall, we are able to look at the address, looking for spelling and so on and then for credit worthiness and we can say that in this city, in this street and this side of the street, after this number of problems we can deliver but maybe not to the next number, because they wont get our money probably. So this technology, software and organisation to organise that you don't have too much junk orders.

I told you a little bit about our services in this business process and we are thinking about new services, so we have one the right side my words and our corporation partners. And on the other hand, we have our customer profile of our customers, if they want to get and we have statistics about and so on and what people want to buy. But now we want to build in the next future, lists like databases of preference of the special customers with the interest and so on. Combined with statistics of gender or age and what will be pressing for the age for example and as a result, we want to give every customer, but only if the customer wants that, an individual customised home page in my world. So I told you we have more than 1 million items in my world but not all items are interesting for everybody so, we want to make it easier for the customer, saying I'm not only impressed in computers and books and not in the travelling and not in . And if the customer wants to use it, it will be much more easier to find the items of interest for them. The other idea is that we have also on the left side of my world with the items, and we have a lot of customers who do not know what they want to buy. Maybe they want to buy a present for the grandmother but what should they give the grandmother and the idea is to build a personal adviser with new agent technologies and all the possibilities of softer technology to offer a limited choice of products, especially for grandmother birthday in this case and so to offer items for the individual need of the customer when it comes to my world. That's the idea of new services, it takes a lot of money and time to use this service, but we are convinced that we have to have it because it makes it easier/simpler for the customers to buy in my world.

With this idea we will terminals, we will bring it to a gas station in our department store, so that it will be easy for the customer to use these PC's. May be we are starting our department store that can help people. The customer to serve in my world and in the website of all partners so that they are getting familiar with the internet and ordering via internet and we will use new technologies coming up into the future like satellite services for multi media stream or for our delivering of goods like e-books.