Bill Stankiewicz Copy Voice Of Vics April 2010 V3

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Think like Peter Senge:
o Tough economic conditions require tough
decisions. That may be so, but uncertain times
can also force us to act hastily, and make game-
changing decisions without the appropriate level
of consideration for all of the possible outcomes.
Thus, tough times can lead to bad decisions.
Applying Peter Senge’s principles of systems
thinking to the problems we face in the business
world is one way to validate the decision and all
of the potential outcomes that can result.

Peter Michael Senge (born 1947) is an American
scientist and director of the Center for
Organizational Learning at the MIT Sloan School
of Management. He is best known as the author
of the book, The Fifth Discipline: The art and
practice of the learning organization. He
describes systems thinking as the process of
understanding how things influence one another
within a whole. Systems thinking has been
defined as an approach to problem solving, by
viewing "problems" as parts of an overall system.
We owe the concept of the business ecosystem,
in large part, to Peter Senge and his systems
thinking principles.

We all know the metaphor of being able to "step
back" far enough from the details to "see the
forest for the trees." But, unfortunately, many
times we may step back and just see "lots of
trees." We pick our favorite one or two ―trees‖
and focus our attention and efforts for change on
those. This is even more likely in uncertain
times.

This concept is evidenced in the latest economic
downturn. Some companies immediately began
reducing the size of their organizations, stopped
investing in their business, pulled back on
advertising and basically hunkered down in every
way imaginable. On the other hand, there were
those companies that continued to drive ahead,
http://www.ups.com/bussol?loc=en_US&viewID=metaCategoryView&contentI having faith in their products and their marketing
D=ct1_solg_met_industry&WT.svl=PNRO_L1 and sales programs. While all had to experience
a deterioration in sales, when the turn around
began to take place, those with the ability to
apply systems thinking were good to go and
came out swinging.

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Joe’s Corner (Continued)

So those who applied a Systems Thinking approach It’s interesting to note that most companies
and had faith in their abilities to understand their don’t last much longer than 40 years. The
overall strengths, focused on them rather than primary reason being they become comfortable
getting caught up in the hysteria of the economic with their success and revel in their financials.
downturn. Unfortunately, they don’t understand that
today’s solutions may be tomorrows problems.
Senge on Change Management: An individual, a team, an organization can
* The easy way out usually leads back in. never stop learning and when that happens the
(Saving your way to prosperity) end is in sight.
Senge points out that change cannot be
accomplished without the organization applying * Dividing an elephant in half does not
individual and organizational learning, which produce two small elephants.
comes about by an encouraging management Systems are alive, and their character depends
that takes a holistic view of the challenges of the upon the whole. To understand difficult problems
situation against the strength of the or plot strategy, you will have to see the whole
organization. system that creates the issues. For instance,
when a company decides to divest itself of what it
* The cure can be worse than the disease. believes to be ―non-strategic‖ operations, the
The familiar solution is sometimes not just problem may be seen as a financial one, while the
ineffective but also dangerous. The long-term, operations people may view the problem in terms
most insidious consequence of applying non- of the additional cuts that will have to be made if
systemic solutions is increased need for more the synergy of the ―non-strategic‖ product line is
and more of the solution. While I don’t want removed from the ―growth‖ businesses.
to interject my personal views, one would have
to question whether the problems with our As Nabisco attempted to reinvent itself during the
healthcare system, the financial and credit 80’s and 90’s, one of the many steps it took was
markets, and consumer product safety (to name to sell off a very profitable – but comparatively
a few) are likely to be resolved by increasing the small cereal business. Consequently, the entire
level of government intervention. product portfolio was impacted as many customers
were no longer able to buy in truckload quantities.
Senge on Business Growth: Nabisco’s logistics costs increased as the reduced
* Faster is slower. volume increased overall logistics costs. This
All natural systems, whether new products or ultimately raised unit costs and made us less
entire organizations, have an optimal rate of competitive on the shelf, as product is priced on
growth that may be far slower than the fast the shelf based on how it is purchased from the
pace managers desire. For instance, the supplier. This is just one example of the ―plug
current drive to ―perform for the quarter‖ can and play‖ acquisition and divestiture strategy that
disrupt or break long term trends. plagued the company at the time. Brands were
bought and sold, and relocated seemingly at a
One of our member companies, UPS, was founded moment’s notice and with little rationale. Had
96 years ago in a little office under a saloon in the management of the day taken a systems
Seattle. They survived two World Wars, a thinking approach and stepped back to look for the
depression, changing business models, and real underlying business problems, perhaps
countless economic cycles. Their time horizon for Nabisco would still exist today.
determining success is probably a little longer than
those companies that have bent to the pressure of All the very best, Joe
quarterly earnings reports.

U.S. Firms See Strong Profits
Sara Murray of the Wall Street Journal recently Pretax profits rose 8% to a seasonally adjusted $1.5
reported on the upswing in profits related to trillion annual rate in the fourth quarter from the third
increased consumer purchasing across the United quarter, the Commerce Department said Friday, as it
States. released a slight downward revision to its estimate of
fourth-quarter economic growth.
The government, in the broadest tally of corporate
earnings, said profits grew smartly in the fourth Gross domestic product, the value of all the goods
quarter as the economy rebounded from a deep and services produced by the U.S., grew at a 5.6%
recession. inflation-adjusted annual rate. The change reflected
weaker than previously estimated business and

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residential investment, as construction spending In the fourth quarter, companies' profits from
declined. Economists are expecting more modest domestic operations climbed $124.7 billion, while
growth for the first quarter, with most estimates profits from the rest of the world dropped $16.1
around 2.8%. billion.

While conditions are clearly improving for companies, Rising profits are a boon for stock market investors,
consumers still aren't yet confident in the economic but not a guarantee companies will use improved
recovery. An index of consumer sentiment remained earnings for big capital spending projects and hiring.
flat at 73.6 in March from the prior month, the "Are we going to see hiring pick up and the money
University of Michigan and Reuters said Friday. start to flow through the economy?" said Joshua
Consumers' gauge of current conditions improved Shapiro, a MFR Inc. economist. "That's obviously the
slightly but their optimism about where the economy great hope." Still, he said, "I think they're going to
is headed declined. "It is unlikely that sentiment will be a bit cautious."
improve to truly optimistic levels until robust job
creation returns and home prices stabilize," said Government stimulus has been responsible for
Steven Wood, an Insight Economics LLC analyst. propping up much of recent demand. But recent data
suggest strength in business purchases of
The 8% quarterly increase in profits, which isn't equipment, computers and software.
adjusted for inflation, followed a 10.8% increase in
the third quarter. Profits were fueled by an increase After-tax profits increased 6.5% in the fourth quarter
in output, as companies replenished inventories, and and were up 22.8% from a year ago. Taxes on
little change in compensation costs, as companies corporate income rose 12.7% in the fourth quarter
got more productivity from workers. and were 62.1% higher than a year ago.

The combination pushed pretax profits 30.6% higher The increase in fourth-quarter profits was split nearly
than a year earlier—the biggest increase in 25 evenly between both domestic financial and
years—but from the low $1.1 trillion annual rate in nonfinancial companies. For all of 2009, however,
late 2008, when the financial crisis mushroomed. For profits at financial companies were up $45.2 billion,
the full-year 2009, profits were down 3.8% from compared with a $31.3 billion decline among
2008. nonfinancial businesses.

VICS Member News:

In this next series of articles, we’ve focused on recently published financial results and other newsworthy events related
to several VICS member companies. We intend to periodically provide these updates and welcome input from our
members.

Best Buy Offers Rosy Outlook for the Year

At the beginning of April, Best Buy reported The consumer-electronics company had a strong
increase in expected profits, Mary Ellen Lloy and holiday season, with same-store sales in December
Nathan Becker reported in the Wall Street rising above analysts' forecasts at the time, amid
Journal. particular strength in sales of home-office products
and consumer electronics.
On a conference call Thursday morning,
Chief Financial Officer Jim Muehlbauer said For the quarter ended Feb. 27, Best
the strength in Best Buy's computing Buy reported a profit of $779 million,
business was key to the fourth-quarter or $1.82 a share, up from $570
results and is important to the future. million, or $1.35 a share, a year
While the lower-margin nature of the earlier, which included 26 cents of
category pressures gross margin, the high restructuring charges. Revenue
velocity of sales and efficient use of jumped a stronger-than-expected
overhead means "at the operating margin line, it is 12.4% to $16.55 billion, and same-store sales rose
much closer to the domestic company average," he 7% after a 4.9% drop the prior-year period.
said.
Same-store sales of TVs and other consumer-
Mr. Muehlbauer acknowledged Best Buy's services electronics products at Best Buy rose 4.2% in the
category, which includes installation, tech support quarter, while home-office sales jumped 22% and
and warranties, hasn't grown as fast over the past appliances rose 6.5%. Entertainment-software
several quarters as hardware categories. "The same-store sales dropped 4.9% and revenue from
opportunity is to find new ways to improve these services, including Best Buy's Geek Squad tech
value propositions and make them more relevant to support unit, fell 2.3%.
our customers," he said. Best Buy in fiscal 2011 will
test new services, content and connection Best Buy said it will open 50 to 55 Best Buy
offerings, he said. branded large-format stores, mostly in the U.S.,
and up to 15 Five Star stores in China. It also plans
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up to 100 new smaller stores, primarily under the Best Buy Mobile brand in the U.S.

Polo profits up 5.5% in Q4
The New York Times reported Ralph Lauren’s Polo Retail sales were up 8 percent, to $592 million. Sales
brand has had a substantial increase in profits, in stores open at least a year, which includes
revealing the economic turn around and RalphLauren.com, were up 6 percent year-over-year.
improvement amongst luxury purchases. RalphLauren.com sales were up 13 percent.
For the first nine months of the fiscal year, earnings
Polo Ralph Lauren reported Wednesday that its fiscal were up 1 percent, to $365 million, compared with
fourth-quarter 2010 profits increased 5.5 percent the same period a year earlier. Sales declined about
and raised its full-year outlook. 4 percent, to $3.6 billion.

The New York-based company reported that The company reported better-than-expected
its earnings increased to $111 million, or sales so far this year, but anticipates sales to
$1.10 per diluted share, compared with decline at a low single-digit rate for the full fiscal
earnings of $105 million, or $1.05 per diluted year, an improvement over previous
share, for fiscal fourth quarter 2009. expectations of mid-single-digit declines.

Polo Ralph Lauren’s (NYSE: RL) sales were Polo operates a 330,000-square-foot
down slightly, about 1 percent, to $1.2 billion, RalphLauren.com distribution and fulfillment
which the company attributed to lower center in High Point, which has more than 200
wholesale sales, which dropped about 8 employees and handles orders for Ralph Lauren
percent year-over-year, domestically and in products via the Internet or by phone.
Japanese markets.

Jones Apparel profit rises more than expected
Jones Apparel Group Inc., maker of Nine West shoes
and Jones New York clothing, reported on its website "On a macroeconomic level, we are encouraged by
April 29, 2010 that its first-quarter profit surged to rising consumer confidence and positive retail
$37.5 million, or 45 cents a share, from trends," said Chief Executive Wesley
$300,000, or break even, a year earlier. Card. "While we believe these trends
should continue, the economic
Total revenue fell to $887.3 million from environment remains unclear and
$891.1 million. Excluding store closing and consumer spending is unpredictable.
other charges, the company said it would have We will continue to position our core brands for
earned 47 cents a share. Analysts, on average, growth and fill the white space in our portfolio with
estimated Jones to earn 34 cents a share on sales of selected acquisitions and growth initiatives.
$866.01 million.

JCPenney Receives 2010 ENERGY STAR® Award for Sustained Excellence
The U.S. Environmental Protection Agency (EPA) has objectives," said Gina McCarthy, EPA assistant
awarded J. C. Penney Company, Inc. (NYSE: JCP) administrator. "That is why EPA is proud to recognize
with a 2010 ENERGY STAR Sustained Excellence JCPenney with our highest ENERGY STAR distinction
Award in recognition of its continued leadership – the 2010 Sustained Excellence Award."
in protecting environmental resources through
energy efficiency. This is the Company's second JCPenney is credited with being the first
time to win the prestigious Sustained national retailer to achieve Sustained
Excellence Award since receiving the ENERGY Excellence for its comprehensive "hands-
STAR Partner of the Year awards in 2007 and on" approach to energy management.
2008. JCPenney's accomplishments will be Last year, the Company invested more
recognized at an awards ceremony in than $10 million to install advanced
Washington, D.C. on March 18. meter technology, lighting retrofits and
high-efficiency heating, ventilation and
"JCPenney is honored for its inclusive approach to air-conditioning (HVAC) systems in Stores across the
reducing energy usage throughout its entire country with nine locations utilizing solar power. In
operation by incorporating superior energy addition, JCPenney has adopted an enterprise-wide
management into its overall organizational

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culture of energy stewardship that encourages every day how their individual actions and habits can have
Associate to seek innovative ways to save energy. a profound effect in achieving energy conservation."
Currently, 96 JCPenney stores and the JCPenney
"We believe everyone has a responsibility to Home Office in Plano, Texas have qualified for the
minimize their impact on the environment," said ENERGY STAR Building Label. The Company expects
Myron E. (Mike) Ullman, III, chairman and chief to expand the number of ENERGY STAR certifications
executive officer of JCPenney. "This award is a to 200 Stores by the end of 2010.
testament to our Associates who demonstrate each

Kimberly Clark’s Global Supply Chain Transformation

Ben Cook, Director of Global Transportation & B2B process and provide advantaged capabilities to
for Kimberly Clark (KCC), recently presented a case increase on time deliveries, reduce expedited freight
study at the University of Tennessee costs and increase productivity.
Supply Chain Forum. The presentation Ben defined the implementation
addressed Kimberly-Clark’s challenges faced along the way:
implementation of the Global Logistics Internal: Customer service buy-in
Management (GLM) guidelines defined to process change. Kimberly-Clark
by the VICS Logistics Committee. Information Technology resources to
support the Global Logistics Model setup and ongoing
Ben identified KCC’s business issues: maintenance.
Prior to the summer of 2008, Kimberly-Clark was External: Carrier commitment to consistently send
experiencing double digit growth in North American over EDI tracking status messages (EDI 315).
import and export demand. The company lacked Customer buy-in to freight forwarder changes.
international shipping automation (air and ocean),
was experiencing a very low on time service (51% In spite of the challenges, benefits realized following
on time delivery to customer) and a high occurrence the 18-month implementation period have been
of expedited shipments via air (>10% of total significant both in dollar savings and service level
import-export freight spend). Additionally, all ocean gains.
and air invoicing was paper based and sent via mail, Cost savings: $3.8 million (reduced expedited
resulting in increased delays of payment to freight cost, courier fees, increased low cost carrier
Kimberly-Clark’s carriers and service providers. utilization). Air freight cost reduced from 13% of
total freight spend to 8% (38% year over year
The solution: reduction). Primary carrier utilization increased from
Kimberly-Clark partnered with a 3PL (Expeditors 82% - 97%.
International) and implemented the VICS Global Service improvement: On time delivery to customer
Logistics Model (EDI 850 & EDI 315) to automate increased from 51% (2008 average) to 86% (2009
purchase order transmission, carrier booking average). 67% increase in on time service.
process, ocean and air shipment tracking, shipment
document imaging, and automated invoicing. The Congratulations to Ben and his team and a special
VICS Global Logistics Model provided the framework thanks to KCC making the presentation available on
for the international transformation initiative to the VICS website. Please visit www.vics.org and
automate our end to end process. The VICS look for our ―VICS Committee Updates‖ section.
guidelines helped them to automate a very manual

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The Focus on Sustainability at U Connect 2010

U Connect 2010 will provide insight into the state of these topics as well as answer questions from the
sustainability as it pertains to packaging, fuel audience.
consumption, carbon emissions, and other areas
where waste and inefficiency impact your business The End of Cheap Oil – Are You Awake?
and our world. U Connect will provide the With oil prices moderating, some question the
opportunity to hear from industry leaders who are at premise of a peak in conventional world oil
the forefront of the sustainability movement. production. The session explains why lower prices
are a short term gift and why the end of cheap oil is
VICS Empty Miles -A Retailer’s Commitment to one of those inevitable "surprises" that will change
the Environment and the Bottom Line the world as we know it.
This session will explore how Macy’s made a
significant leap towards achieving their sustainability The State of Sustainability – An Introduction to
objectives without the huge up-front investment the Sustainability Consortium
many ―green‖ initiatives require. Attendees will learn Leading consumer products companies and retailers
how the VICS Empty Miles portal works and how such as P&G, Cargill, Walmart, Disney, and Unilever
Macy’s and Schneider National used this simple, low- have partnered to work collaboratively on innovative
cost solution to significantly reduce environmental approaches to improve consumer product
impact and transportation expense. sustainability. The goal of the consortium is to
develop measurements of sustainability across the
Case Study: Driving Savings, Curbing entire life cycle of the product including
Emissions with VICS Empty Miles Service™ manufacture, distribution, consumer use, and post-
Find out how your company can save money and be use
good to the environment at the same time. Major
department stores are saving costs and reducing GDSN 2012: Upcoming Major GDSN
emissions by filling their return trucks by matching Functionality
loads using a new service from VICS. Companies In an ongoing effort to drive global change in
that typically ship truckloads with empty return miles packaging, leaders from many of the world’s largest
can learn more as we explore a case history during consumer goods companies and major retailers have
this session approved a suggested set of common definitions and
principles for packaging in the framework of
Packaging and Sustainability Attributes sustainability. This common language will support a
This session provides an opportunity to understand global discourse on packaging in the context of
what GS1 Standards are already in place or pending environmental, economic and social impacts.
to support the exchange of packaging information. Attendees will learn progress to date and what’s to
This background will be used to describe how come in the next phase of validating this work within
businesses may effectively exchange product and real business situations.
packaging characteristics across the supply chain.
The implications to data synchronization, the Global Supply Chain Visibility to Chemical Ingredients
Data Synchronization Network® (GDSN®) and - A Confidential Solution
Global Product Classification system will be If your company makes, uses, or sells products
considered. This detailed session is tailored to those which contain regulated chemical ingredients
who must understand and communicate product and requiring special handling, storage or disposal, this
packaging characteristics, together with those session is for you. J&J and Walmart will present on
responsible for product design decisions. how this information can be shared using the GDSN
within companies and between trading partners.
Sustainability Panel Attendees will learn the latest on development
The establishment of a green economy will have a efforts of GS1 Standards in this area and learn the
profound impact on the way we do business. positive impact on sustainability efforts,
Legislation such as the American Clean Energy supplementing supplier regulatory expertise, and
Security Act (ACES) is placing a substantial focus on minimizing recalls due to prohibited chemical
climate change. How can companies be proactive content.
while maintaining their bottom lines? What strategies
should companies enact today to remain competitive To register now and learn more about U Connect
in light of impending changes to the business 2010, visit www.uconnnectevent.org
landscape? This panel will be a forum to discuss Follow U Connect on Twitter

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VICS Meetings & Events
Date 2010 Meetings/Events Location

PSU: Supply Chain Collaboration Program
May 10-13 State College, PA
Details & Registrations

Processes and Tools for Supply Chain Success
May 17-21 University Park, PA
Details

RFID: A Retailer’s Story today
May 19 Presented by CSCMP Webcast

Item-Level RFID Meeting
Jun 7 San Antonio, TX

U Connect 2010
Jun 7-10 San Antonio, TX
Annual Conference

Applying Lean Principles Across the Supply Chain
Jun 7-11 University Park, PA
Details

Jun 8 VICS Board of Directors' Meeting San Antonio, TX

VICS Annual Achievement Awards Ceremony & Dinner
Jun 8 San Antonio, TX
Sponsored by Hewlett-Packard

VICS Logistics Sub-Committee Meetings
July 12-13 Lombard, IL
Hosted by CSCMP

PSU: Supply Chain Collaboration Program
Aug 23-25 State College, PA

Sept 26-29 CSCMP Annual Global Conference 2010 San Diego, CA

VICS Board of Directors’ Meeting
Oct 20-21 Chicago, IL
Hosted by Accenture

VICS CPFR® Certification Program
Nov 9-11 Lawrenceville,NJ
Details

www.cpgmatters.com/vics.html

http://www.bernardsands.com/rpm.asp.

www.vics.org
VICS
Princeton Pike Corporate Tel: 609-620-4590 Websites Joe Andraski Jo Ann Fiordland
Center Fax : 609-620-1201 www.vics.org President & CEO, VICS jfiordland@vics.org
1009 Lenox Dr., Suite 202 Email: admin@lists.vics.org www.emptymil jandraski@vics.org
Lawrenceville, NJ 08648 es.org

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Bill Stankiewicz Copy Voice Of Vics April 2010 V3

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