Joe’s Corner Blog

You don’t need any more advice as to how to grow sales and improve the bottom line. Challenges abound and it always seems the answers center around reducing operating costs and cutting out any discretionary spending.

“Federal polices have hobbled America’s entrepreneurial strength by needlessly driving up the cost and complexity of doing business, especially for smaller companies. Cumbersome regulation of employment, the environment, and product liability needs to give way to better approaches involving less cost and litigation; yet special interests block reform and the U.S has become a high-tax country not only in terms of rates but also administrative hassle. Infrastructure bottlenecks, due to neglect and poorly directed spending are driving up costs in an economy increasingly dependent upon logistics”.

“Collectively, these unnecessary costs of doing business, couples with skill gaps, are becoming significant enough to drive investments out of the country, including investments by American companies. Instead of addressing the real reasons for offshore investment, the parties spar over closing tax “loopholes,” even though U.S. corporate rates are among the highest in the world. Where is the strategic thinking?”

These two paragraphs were written by Professor Michael Porter, the Bishop William Lawrence University Professor at Harvard Business School, and a leading authority on competitive strategy, for Business Week, November 10, 2008.

This article deals with the lack of a strategic plan to keep America competitive. It is a well written and enlightening article.

Professor Porter’s argument is analogous to the challenges that the retail industry is struggling with, particularly in avoiding unnecessary costs and disruptions in their supply chains while at the same time desperately trying to grow sales. It is apparent that the burdens placed on industry by our government, and foreign governments if companies are involved in global supply chains, are overwhelming.

But not all of them are so taxing as what we are doing to ourselves. At a recent meeting a retailer said that a major problem resulting from supplier non-compliance is out-of-stock products at retail. For the supplier, compliance penalties amount to nearly 2% of gross sales. For the retailer out-of-stocks at the store continue in the range of 8 to 15 percent, depending upon what is on promotion and the time of the week. Both the retailer and the supplier lose in a compliance game that has been played for years where short payments are counted in billions of dollars. And lost sales from stock outs reduce revenues for both parties and leave customers unhappy.

Short payments aside for a moment, it is the cost of quality that goes unnoticed in most discussions. The voluminous, granular and unique requirements that retailers have placed on suppliers result in numerous one off technology and process demands that make meeting most retail requirements both a costly and an unreliable challenge. The magic that VICS created when it first brought retailers, suppliers, service providers and consultants together 25 years ago was the adoption of common business guidelines. By agreeing on guidelines, retailers enabled suppliers to be more productive and products moved to retail effectively and efficiently. Logistics costs as a percent of sales for the department stores and mass merchants fell to their lowest levels and service improved dramatically.

Over time as they tried to find ways to differentiate their companies, retailers drifted away from some of the common guidelines and consequently the suppliers had to begin to accommodate many different compliance requirements. And the problem has grown worse by the year.

The Retail Compliance Council analysis from their 2006 Deduction Policy Review of 34 retailers indicated only 22 of almost 500 compliance requirements were shared by 50 percent of the retailers. Over 300 of the 500 were shared by 3 or fewer retailers. This means that suppliers have to build out unique capabilities for each retailer, sometimes with the requirements of different retailers contradicting one another. Worse, sometimes the requirements from the same retailer are conflicting, causing not only higher costs for the supplier but also for the retailer.

Senior leadership in the retail industry is not engaged and has little understanding of what is taking place in their organizations. Strategic goals have been replaced by granular, tactical and silos of requirements that confuse suppliers and reduce their ability to help retailers meet their real goals. Senior leadership sees compliance problems and charge backs as a cost of doing business. Changes and requirements are made by retailers with no regard for the impact on the supplier. Initiatives are conceived in silos without consideration of their impacts to the retailer, supplier base, or industry standards. This has become more complicated given the amount of product that is off-shored.

I recommend that senior leaders bring together each of their key players and have them create a strategic plan that will clearly identify how to adopt standard business processes with a focus on meeting strategic goals and not departmental interests. The next step is to meet with their key trading partners, who have gone through a similar process, to understand the challenges and solutions that can benefit each company and trading relationship. Simply stated, share as much information as you can about predicting and adjusting demand (S&OP, CPFR processes), then clean up your supply chain communications to allow your suppliers to execute as best as possible. Doing these well are competitive advantages that folks like Walmart, Lowes, and Best Buy continue to demonstrate. The companies that do it well are best positioned to respond quickly to rapidly changing economic conditions.

As part of any initiative, training and education must be embraced as key enablers! On the job training is very important, but in many ways contributes to doing business as usual. Getting back to common standards and a focus on overall execution rather than unique process compliance requires retailers and their suppliers to gain an understanding of new technologies and services that can have a dramatic impact on establishing and meeting business requirements. Gaining this knowledge and seeing its impact within the business takes time, but will be worth it in the long run. It is hard to change, but doing things the way we’ve been doing it – and continuing to have the same problems – doesn’t make sense. Retailers need to have an open mind in embracing both standards and education both internally and with their partners. Collaboration will add greater value than confrontation.

Goal setting and scorecards that each partner agrees to will play a major role in success but only if senior leadership remains actively involved. This age old problem will stay with retail until senior leadership becomes engaged and is made aware of any variation from business guidelines that place their company in a unique position. Competitive advantage does not come from differentiating at the process level, but through excellence in supply chain execution.

Thanks to Al Sambar KSA; Norm Katz, Katzscan; Steve Rosenberg, GS1 US; and Bryan Larkin, GXS for their help in writing this article.

Don’t wait to be great…Collaborate! ®

Over the last couple of weeks I have had the opportunity to attend two conferences, share some thoughts as a panelist, attempted to answer questions dealing with transformation, collaboration and supply chain management. I also delivered several presentations on leadership and the power of effective negotiation. It took time to get my thoughts organized and to work up the PowerPoints, aligning the material with the message that was to be delivered in the track and basically getting ready. No small task.

There’s a personal side to all of this, which was trying hard to stay focused on getting prepared, given the turmoil in the stock market and trying to understand the impact on my personal portfolio. Nevertheless, it was a great time to network, meet and greet old friends and make some new friends as well.

Collaboration was without a doubt the one term that was ubiquitous. It seemed like collaboration was constantly mentioned, in keynote presentations, workshops, forecasting discussions, etc. Practically every presentation that I sat in on mentioned the value that collaboration brought to supply chain management. In a sense it reminded me of how strategic relationships, partnerships, etc. were the buzz words of days gone by.

What I found to be universally true is that the definition of collaboration is in the eyes of the beholder. Those that are proponents and those who are detractors have arrived at their opinions, for various reasons.

When getting into the fundamentals of collaboration, this recent experience revealed that many didn’t really understand what makes collaboration successful. For example, when asked if they understood the diamond or butterfly organizational structure, only about 5 percent understood that we weren’t talking biology.

The butterfly has one wing as the buyer and the other as the seller. The body of the butterfly is the connection between the buyer and seller, which is typically the sales manager and the buyer. All communication flows through the sales manager, the body of the butterfly, who takes great pains to ensure control is not relegated to any other company silo.

Generally speaking, the sales person isn’t the subject matter expert when it comes to logistics, marketing, finance or manufacturing. To get the most out of the buyer seller relationship the diamond structure is much more effective. In this organization, each function communicates directly with the other side of the buyer seller relationship. Not hard to understand, but oh so difficult to put into practice.

This is but one aspect of building collaborative relationships between the buyer and seller. It continues with other building blocks, e.g. self and trading partner assessments, accurate data, up front arrangements, etc.

I’d really appreciate your comments about what needs to be done to help you and your company realize the benefits of collaboration. What can I do to help??

All the best, Joe

Joe’s blog

Hi, I’m humbled to have received so many positive comments about my last posting. I must admit, the pride in the accomplishments of our daughter came through loud and clear!

Can’t imagine where the summer went and all of the events that have taken place. We are in tumultuous times with the debacle we are seeing with the financial community, the run up in oil prices, global outsourcing of manufacturing and other processes, decline in the value of the dollar, substantial increase in unemployment, growing economies around the world demanding oil and the beat goes on

I’ve experienced the oil problems of the 70’s and the long lines of cars at gas stations. I seem to remember some stations that had rationing programs so that regular customers wouldn’t be left without gas. I remember a presentation at a Council of Logistics Management conference. The message was, don’t worry, there is plenty of oil to be found around the world. He was right, and while the price of gas stabilized in the USA, European citizens were paying 4 to 5 times per gallon of gas than Americans. Bottom line we got comfortable and spoiled.

Those of us who travel internationally could readily see the difference between what was taking place at home versus other countries. For example, Hummers, SUVS, pick em up trucks, and other gas gobblers here and very small cars, trucks, bikes, motor bikes in other countries.

I was recently in Japan with my grandson George, rush hour in major cities like Kyoto and Tokyo had people using mass transit. The streets were relatively empty (cars) and train stations teeming with commuters. Trains and subways arrived and departed on time. The bullet train which runs between Kyoto and Tokyo, travels at 180mph, is so very smooth and comfortable. Not at all the experience that one finds when traveling on Amtrak. ( I don’t use Acela Express, to expensive and not much difference in time). Clean, fast, on time, (say reliable) trains, and the same can be said for the terminals. In fact everything that we saw in Japan was neat and clean.

Getting back to energy, tour buses can only idle for a specific amount of time and then shut down automatically! Hi rise apartment houses, in what appeared to be up scaled neighborhoods, had wash on clothes lines. Some of the younger generation here in the states don’t know what a clothes line is, having grown up with clothes dryers. Obvious that the Japanese are conserving! Consider that the population of Japan is half that of the USA, about 130 million, living in a country the size of California. They can’t afford to be extravagant in the use of energy or natural resources.

The trip with my grandson George was a lifetime experience. No business, just one on one time with a great young man. I am more than proud of him!!

He just couldn’t absorb enough of the culture, the food, the total experience. We took every tour we could fit into our time and saw as much of Japan as possible. The Japanese were most kind and courteous, regardless of where we were or the circumstances. We marveled at the temples and other structures that were centuries old and built with massive boulders. How they were moved is unimaginable. Huge doors, 20 feet high, on steel hinges forged hundreds of years ago guarded the entrances of marvelous gardens and beautiful temples.

One of the most enjoyable trips I have ever taken! If I snored, George never complained… As we sat on the plane in Narita, waiting to depart for home the pilot came on the intercom and said,” as usual here in Narita, we are ready to depart earlier than our planned departure time” This spoke volumes about the efficiency of the Japanese and their concern for customers!

Finally, (whew) get ready for a pay as you go economy. We have seen a increase in the cost of newspaper home delivery; insurance companies are considering basing a portion of car insurance on miles driven; in some cities the cost of garbage collection will be based on the quantity, seems like every utility company has announced an increase in rates for gas, electricity, etc.

We aren’t going to get out of this situation for some time, which means that conservation is the first step we all can take. Americans have reduced by billions the number of miles driven since last year. This fact, combined with other factors, e.g. a slowing of the global economy, countries that have stopped subsidizing the cost of gas( resulting in reduced demand) OPEC deciding to hold the line ( at least temporarily) brought oil
down to $100 per barrel. But don’t get too comfortable with $3.50 per gallon (more or less). Put in the posts and build a clothes line.

Joe’s Corner Blog
August 9, 2008

It’s been a long time since I posted my last article and I do apologize to the almost 6,000 Joe’s Corner monthly. I am most gratified and thankful to all those that do find some value in what I’ve been able to deliver, and that it may be somewhat useful from professional and personal perspective.

Our daughter Laure is an RN and has worked in the spinal care injury department of Shriners Hospital, Philadelphia, for over 20 years. She will graduate, summa cum laude, with her BS in Nursing, later this summer. Laure is a very special person, one has to be, to care for paraplegics and quadriplegics, who need exceptional and specialized treatment. She began working on her BS after her children were in junior high and she attended night and weekend classes. We are so proud of her and hold her up as a model of what can be accomplished through perseverance and the willingness to sacrifice to achieve a goal. Laure is now in the Shriners spinal cord research department and planning on starting her Masters program.

A requirement of her last class was to write a spiritual legacy, i.e. what did she want to leave behind for her children and special people in her life that had nothing to do with anything material. Laure said that it was one of the most difficult assignments that she was ever asked to complete, in a class that had nothing to do with nursing! She thought long and hard about what was important to her and what of herself she wanted to leave behind that could make a difference in the life of someone she loved.

When Laure shared this with me, it was the inspiration I was looking to write this article. I’ve been contemplating what to share with you that was unique and what you all could use to shape your individual strategies, both personally and professionally. I put myself in Laure’s place and asked “what’s my professional legacy?” What do I want to be remembered for that might make some small difference? I remembered the story of
a couple walking in the sand and the man reached down and picked up a sea urchin that was stranded on the beach, throwing it back into the sea. His friend asked what was the point as there were hundreds that were in the same situation with only the tide to hope for, but that death was ultimately their fate. He responded that throwing one back made a difference, to that one in particular, and for that it was worth the effort.

So in our individual professional legacy, we don’t have to try to identify the problems and solutions that will have dramatic effects. We can leave behind a story of one relatively small solution that contributed to the success of a team that had been hit with a particularly difficult challenge. We can think about the kindness of contacting an old friend who had hit hard times and was without a job and helping that person network.

Our professional legacy could be that we listened and remained non judgmental. That we cared for others rather than having others care for us. That we negotiated fairly, looking for each side to come away with a win and could find satisfaction in knowing that fair play ruled the day.

There is no final summation of what your professional legacy should include as it is profoundly personal. It’s really about what example you will leave behind with those who love you, personally and professionally. Yep, love is a powerful expression and be sure to let those you love know your feelings as part of your contemporary legacy.

Till next time, and I promise it won’t take a month, joe

“Thinking about tomorrow” is an article that appeard in the WSJ on July 7th, 2008. It was written by Professor Chaman Jain of St. John’s U and Mark Covas, global innovations diamond manager at P&G.

They first make the case for improved forecasting by speaking to the current business challenges; “customers are less loyal, and global competition more fierce, making it difficult to predict where sales are going: Products, sales and distribution channels all have proliferated, and the life spans of products have gotten shorter.”

Let me try to summarize, however they can be reached at reports@wsj.com for the complete article.

The core message is that it takes a village, ( who said that?) or how about collaboration to be successful. Collaboration between buyers, sellers, suppliers, i.e. all the players in a business relationship. It also means collaboration among company functions/departments, to include sales, marketing, supply chain management, finance, manufacturing, etc. I would also add that the how a company is organized can contribute to or work against collaboration.

The authors also speak to the need for senior management support to provide the necessary resources and that mutual benefits have to be understood, with clearly defined goals and agreements. Of course, improved forecasting can’t be accomplished with out the best technology, and the great strides can be made by sharing benefits with trading partners.

Linking incentives to company wide goals is an experience I had with a company that tied annual increases bonuses to company EPS, Sales, etc. This certainly ensured that we all worked at making the company successful as it meant that we would be financially rewarded.

Well written and certainly the article makes cogent points and recommendations. What I would add is the importance of making collaborative business practices part of the company culture. Changes in managment result in a penchant for revamping business strategies. I have seen companies that embraced CPFR, realized success, then take their eye off the ball by hooking up with the hottest new business practice, consequently reorganizing, changing successful processes, etc.

I’d also add that training is critical to success. Developing a training program that includes the importance key crossfunctional practicses, e.g. sales and operations planning is essential to sustained success. Making training a management objective is absolutely essential if companies expect to sustain a collaborative, cross organizational program that delivers ongoing results. When times get tough, personnel changes are made and new incumbents are expected to hit the ground running. It just doesn’t work that way.

This is a well written article by Dr. Jain and Mr. Covas, which should be taken seriously by every business person and academic. Congratulations and thanks for your contribution to helping companies increase sales through an effective and efficient supply chain.

“China’s Export Machine Threatened by Rising Costs”

My how rapidly changes are taking place in China, especially with inexpensive goods, such as toys, household goods, shoes and clothes. The cost of oil certainly has had an impact on the cost of transportation and warehousing. The Chinese government has taken steps to protect workers and the environment. “This year the government implemented a labor law that capped factory overtime, limited temporary employment and raised the minimum working age two years, to 18. China has tightened its environmental oversight, which means dyeing companies must now pay to dispose of the chemicals they use, instead of dumping them into the creeks.

The exchange rate with the US dollar has contributed to the plunge in profits, e.g. items like wool cardigans where profit margins for Chinese manufacturers have collapsed to about $.30 from $2.00 a few years ago.

According to my sources, very similar conditions and consequences are playing out in other parts, to include India. It’s no longer about having the lowest labor costs, but in order to be competitive the entire value chain must be effective, i.e. from source to final destination.

While there are those companies that focus on supply chain efficiency and effectiveness by utilizing proven tools such as Electronic Data Interchange and solid communication and business practices, there are a myriad of those that do not. There are numerous opportunities for trading partners to work toward lowest landed costs, providing management with speed to market and visibility, but are mired in old ways of doing business.

Here are examples of just a couple of VICS initiatives that will contribute to improvements, keeping in mind that there are many more. The redesign of finished goods packaging and dunnage is underway with great opportunities to reduce the cost of logistics on one hand, while being more environmentally friendly on the other. Another is Distribution Center Bypass! One must question why products destined for retail must follow conventional distribution patterns and move from the port of entry to the supplier’s distribution center and then be ultimately shipped to the retailer’s distribution center. The potential to reduce miles traveled, fuel, wear and tear on a deteriorating national highway network, handling, etc, etc. is enormous.

Reasonable labor rates are but one part of the lowest landed cost equation. Putting together all of the pieces that place the product: right time, right place, right price, is doable, but first there must be a case for action. My friends, the time is ripe, the case for action is strong and the solutions are available. Let’s have at it as every dollar (or whatever domination) that is spent for inefficiency results in higher prices, which result in lower consumer spend, which impacts the economy. We can do it!!

Good morning;

This article was in the Wall Street Journal, June 27th, 2008.

Previously we have written about companies who are not cutting back during this difficult economic period, but who are moving forward with plans to take advantage of the rebound when it happens.

“Valentino, Gucci and Burberry have spent millions of euros to overhaul their supply chains in the last few years. Now they are banking on the unglamourous side of their business–logistics–to shore them up as the global economic slump threatens the luxury-goods industry”

They had relied on outdated technology systems, which caused them to regularly miss delivery deadlines, even to key customers.

Now these companies are investing in the technology that allows them to track sales at retail and respond accordingly. Valentino spent some 2.5% of the $805 million in sales of its Valentino and smaller brands last year on its new technologies; Burberry Group PLC has spent more that $100 million to over haul the back end of its business over the last three years. It saved $40m in costs last year.

Bulgari SpA says recent revamping of its point of sale data collection help it figure out faster how to restock jewelry cases as shoppers spend more cautiously.

The power is in the hands of the consumer! The VICS CPFR(R) model has had the customer as the center of focus for years and while these companies are successful at their efforts to coordinate their supply chain activities with retail sales, there are many opportunities to become much more efficient and effective by collaborating internally and externally. Sourcing of fabrics from around the globe and coordinating the manufacturing of products to meet seasonal demand is no small task.

Short term gains can be and are made, but are they sustainable? Will companies commit to on going system upgrades, training and collaborative practices that ensure the development and continuation of a culture of successsful business practices.

It’s about speed to market, visibility, effectiveness and efficiency, while at the same time being aware of corporate responsibility to protect the environment.

With the price of a barrel of oil at $140 today, with predictions of $200 in the not too distant future, there must be, and will be, dramatic changes in existing business practices that will offset some of these costs. VICS is addressing several, e.g Distribution Center By Pass, which will have a major impact on how products are sourced and imported into the the USA and other countries, taking out millions of unnecessary miles of transportation. The VICS Empty Miles program will also have a major influence on private and contracted fleet efficiency and effectiveness.

Now is not the time to get into line item budgeting and hunkering down! Now is the time to take action to overcome the obstacles being foisted upon all of industry and demonstrate the creativity that will make a difference. VICS is leading the way!!

Have a VICS Day!!

Joe’s comments

Just in case you missed this column, I thought I’d share some of the information that I found pertinent, especially since oil is now at $137 per barrel.

“The US remains one of the only countries in the world that chooses as a matter of policy to lock up it’s natural resources. The Chinese think that we are insane and self destructive, while the Saudis laugh all the way to the bank”

“The US has vast undeveloped fossil-fuel deposits. A tiny corner of the Arctic National Wildlife Refuge contains an estimated 10.4 billion barrels of oil and would be the largest producing oil field in the Northern Hemisphere. The outer Continental Shelf is estimated to contain some 86 billion barrels of oil, plus 420 trillion cubic feet of natural gas. Yet of the shelf’s 1;76 billion acres, 85% is off limits and 97 % underdeveloped.”

“Engineers recently perfected refining solid shale rock into diesel or gas, which may amount ot the largest oil supply in the world,-perhaps as much as 1.8 trillion barrels in the American West. That’s enough to meet the current US oil demand for more that 2 centuries”

“Many areas haven’t been examined since the 1960’s, when exploration technology was far more primitive.”

“Yes, we know, increased drilling is no energy cure-all; new projects take about a decade to come on line. Then again, more that a few experts say that new production could affect price as the market perceives a new US seriousness to increase supplies. Part of today’s futures speculation is based on the assumption that supplies will remain tight for years to come”.

What’s a country to do? Short term versus long term? Keep these resources in reserve for generations to come while we learn to be more conservative and less wasteful? Not a bad idea and maybe that is the strategy.

Let’ not mess up our environment with wells, wind mills, etc. But keep in mind that while Hurricanes Katrina and Rita flattened terminals across the Gulf of Mexico, there was not a single oil spill.

“As far as the anticarbon theology, oil will be indispensable over the next half century and probably longer”.

Finally, China will begin drilling for oil off the coast of Cuba. That’s just 90 miles from Florida. Hmmmm, what do they know that we don’t?

So in summary, I am comforted to know that the USA has vast natural energy resources and that oil rigs don’t necessarily mean oil spills. I also know that the Alaskan pipeline was poorly maintained and almost caused a disaster, which means that there has to be controls and oversight.

There are a lot of smart people in this wonderful country of ours. Let’s put them to work to come up with an energy policy that makes sense, for this generation and those to come.

Fill up before the price of oil goes to $150. 

I found a couple of May 3-4, 2008, Wall Street Journal articles that dealt with countries on opposite sides of the world.

The first article is “China Sweeps Factories for Underage Laborers.”

According to the article, Chinese authorities exposed a network that brought predominantly ethnic-minority children from western China to work in east-coast factories. The Chinese have been cracking down on unsafe labor practices and those that force employees to work long hours. It has been reported that the Chinese government is considering a social security program, which will add to the cost of labor.

It was cheap labor and the willingness of China to allow foreign companies to outsource manufacturing. At the time it began, the cost of a barrel of oil was as low as $20. Today with oil reaching $126.00 a barrel and labor costs increasing, the business case for manufacturing in China may come under scrutiny. Obviously change, if it takes place, will be in the distant future.

In contrast, The Weekend Review with Alan Garcia/ By Mary Anastasia O’Grady, “Peru’s Born-Again Free Marketer”, addressed the advent of an economic opening of trade without borders.I was fascinated by the interview, and I’d like to share excerpts with you.

Peru’s average growth rate over the past six years has been better that 6.2%. Peru has become competitive, going beyond mining.

Mr. Garcia led Peru from 1985-1990 and his presidency ended in disaster. Price controls resulted in long lines for food, the government had a fiscal deficit of 7.5% of GDP. The economy contracted by 8.8% in 1988 and 12% in `1989. Shining Path terrorists dominated the countryside, making life miserable for the peasants and impossible for tourism. He left office in shame and lived in Colombia in exile.

He returned in 2006 and was returned to the office of the President. He now speaks the language of a born-again capitalist and defends market forces as a way to reduce poverty. He says “the country has decided to insert itself in the global economy, open its borders to investment, lower tariffs (and) guarantee fiscal and monetary stability”.

Peruvians are discovering their comparative advantages in a host of other industries, including manufacturing, apparel and agriculture. A visitor to Lima immediately appreciates improvements in services compared to even a half –decade ago.

The country has had an important rate of growth in the past three years, from 6% annually to almost 8% and then 9%. It is expect to maintain the highest growth rate and the lowest level of inflation in South America.

President Garcia said “Twenty-five years ago the world was divided in two. What did not exist was the extraordinary revolution in communication and information, which is the basis of all the change in the world economy now and for the change in our ideas. The Internet, electronic money, the economic opening of trade with out borders are what ‘s driven the shift in thinking. This new reality demanded that we not oppose the wave of globalization , but take advantage of it in favor of society”.

“We are beginning a totally different chapter in economics. The world is linked and there is a growing democratization through participation by consumers and producers”.

“Government’s role is to be open to all the possibilities of…investment and, with this to decentralize economic activity and thereby create more employment”.

“We no longer live in a closed economy with protection. It is an economy of competition and speed. And therefore, businesses are destined to be born, live and die because any company can enter a market and displace others. In this sense, businesses are condemned to instability. As a consequence, we cannot continue with concepts that come from another time and another situation.”

President Garcia wants the world to know that is a born–again believer in the connection between liberty, education and human progress.

What’s the take away? I thought of Tom Friedman’s The World if Flat. Peru is entering the world market place. A recent article in Business Week identified Colombia as an emerging global player. Ireland has an amazingly low corporate tax, which is leading to growth in their economy and standard of living.

There’s a clear message. The global market place will demand that companies, individuals and universities develop the skills and processes to prepare for an ever-expanding, global business community. Among the most important developments will be improved opportunities and quality of life for people in less-developed countries that have leadership committed to capitalism-oriented economic principals.

The dire and ongoing negative news about the economy is creating a burden for so many Americans. Have you caught up with the fact that the United Kingdom, France and other countries are also suffering? Of course the cost of oil is a major factor impacting not only logistics, but the vast amount of products made from oil and the bio fuels that are raising the cost of basic foods.

My friends, a recent article in USA Today, scared the heck out of me. “Bill for Taxpayer swells by trillions, Deficit far bigger than government estimate”

Last year the long term federal government financial obligation grew by $2.5 trillion due to the mushrooming cost of Medicare and Social Security. That’s double the red ink of a year earlier. “Taxpayers are on the hook for $57 trillion in federal liabilities to cover the lifetime benefits of everyone eligible for Medicare Social Security and other government programs” that’s $500,000 per household!!

Add state and local obligations and the total is $62 Trillion. Big new liabilities taken on in 2007.

Medicare $1.2 trillion

Social Security $900 billion

Civil servant retirement $106 billion

Veteran benefits $34 billion

Add to this the underfunding of the USA Highway infrastructure of some $50 billion and we are talking about some real money!

This has got to have an impact on the retail industry as money that is needed to service this debt, to pay social security benefits for the baby boomers, has to ultimately come from individuals and corporations. Oh, by the way, the USA 35% corporate tax rate is the second highest corporate tax rate in the world. So we get less competitive, etc.

What does this have to do with supply chain management? The pressure is on now and it will become more and more intense. I was just with a number of dot com retailers, whose major concern is the cost of logistics. Imagine what it will be in a couple of years from now.

Sorry for the gloom and doom. joe