CIO Digest: The Era of Efficiency

According to BusinessWeek, industry has moved into a new era of efficiency, despite -- or perhaps because of -- the economic downturn.
The CIO Digest is an engaging summary of significant articles on technology management that have appeared over the past week. It is originally published on CIN, the CIO Information Network.

"The Era of Efficiency," BusinessWeek, June 18, 2001.

CIN Spin: Now that the IT spending spree has largely ended, CIOs can shine by putting all that technology to work cutting costs.

There are plenty of negative signs (layoffs, reduced earnings) that indicate the economic slowdown is taking a toll on corporations in all sectors. But as BusinessWeek reports, there is an upside to the current economic malaise: Companies are judging their IT investments in new ways.

Less than a year ago, companies were still sticking to the philosophy of spend, spend, spend on IT products to grow their e-business and stay ahead of the competition. Now, BusinessWeek reports, they've pulled back on spending and are focusing on how to squeeze the most savings by putting all that technology to work.

After years of heavy spending, this is one way CIOs can shine in their organizations.

This new look at IT spending makes a central point often voiced by IT industry players and pundits, the magazine notes: The real technology revolution isn't in the fact that the Internet can support, say, online auctions. The real value rests in the way enterprises can become more efficient in their operations.

This story, part of BusinessWeek's "IT 100" coverage (a ranking of the best technology companies in the world), concludes that this new "era of efficiency" is leading to clear winners in a range of industries, despite the economic downturn.

An example: A few months ago retailer Staples Inc. was spending heavily on IT to grow its online divisions and stay ahead of the competition. Now, BusinessWeek reports, IT execs are under new orders to put all that equipment to use to lower costs. Staples expects to save $10 million after a $2.5 million investment in a better way of storing data.

BusinessWeek' top "IT 100" company is Celestica, a Toronto-based contract manufacturer for the likes of Sun Microsystems and Motorola.

Celestica has produced huge savings and efficiencies with technology. It spent $60 million on new computer systems (including supply-chain and database software) linking its 36 plants around the world and handling the $8 billion worth of parts it bought in 2000. When orders fell by $700 million in the March quarter, the company spotted the slowdown early and was able to keep a relatively lean inventory, saving millions. The system also lets plant managers see what supplies other plants have, so they can "find a home" for excess parts, the magazine reports.

The bottom line according to BusinessWeek: "The cost-cutters may be the real heroes of the Internet Revolution."

Read the article here.

"Start Small, Think Big," Darwin Magazine, June 2001.

CIN Spin: Don't be afraid to start small with supply chain investments.

Just as companies are now taking a new look at getting a return on their overall (and costly) IT investments (see Digest item above) they're also taking a new view of exactly how supply chains can help improve their profits.

Saving money by managing your resources more proactively (sourcing parts for a manufacturer or managing inventory for a retailer) has always been the hook for adopting supply chain technology, notes Darwin Magazine. (Wal-Mart became a retail leader by forcing suppliers to integrate their systems with its own to help manage its lean inventory strategy.)

But businesses are also realizing a positive impact to their bottom lines by giving them the ability to increase profit margins by making customers happier with the same technology.

By way of example, Darwin delves into the way Ford Motor Co. lets buyers of Ford Explorers choose the brand of tires they want the moment they order their vehicle (This is a result of a recall last year of 6.5 million Firestone tires due to safety concerns). Software links the auto dealer's showroom with the factory floor and the tire vendors. The result: An efficient way for Ford to order the right tires, and, just as important, a sense by customers that they're getting individual attention with their order (not to mention soothing their concerns about tire safety).

Darwin pointedly notes all the benefits of supply chain projects: They help enterprises reduce cycles time, increase their flexibility and eliminate inventory stockpiling. It also reduces mistakes and decreases the number of hands that touch goods on their way to the customer.

Supply chain projects (which haven't been embraced by all industries) need not start out big, Darwin says. Small, internal projects such as automating procurement of supplies is a good start for a "quick win." But there's a significant upside to extending the concept outside the enterprise, allowing companies to conduct activities jointly, such as sharing product demand data with suppliers so they can plan their manufacturing around real demand.

The point: Don't be afraid to start small. Darwin quotes an industry expert saying that for a company with $1 billion in revenues, it's reasonable to spend about $3 million on the first supply chain project ($1 million for software and $2 million for labor).

Read the article here.

"Opportunity Buys Loyalty," Computerworld, by Joanie Wexler, June 11.

CIN Spin: Don't just try to buy your employees' loyalty with pay and benefits. Make them stakeholders in the company.

The battle to hire and retain good IT workers is a never-ending problem. What are the most successful companies doing to hold on to their best workers?

According to Computerworld, the best IT employers use a range of tried-and-true techniques but supplement them with innovative strategies. The common result: miniscule employee turnover and workers who are loyal and devoted to making the enterprise succeed (not just collecting a paycheck).

The basic foundations to hire and retain workers remain strong salaries, merit bonuses, stock options and other benefits, Computerworld reports. Successful companies are also focusing on quality-of-life issues, giving workers the flexibility to choose what projects they work on and telling them how their effort impacts the success of the business.

At Caterpillar Inc., a construction-equipment maker, workers cite the trust they get from management along with the responsibilities they're given, helping to bind them to their company. One worker cites the sense that he's treated as "an asset, not as a commodity."

And at Eastman Chemical Co., a newly created retention team conducts employee satisfaction workshops. The team was created as a result of finding that IT workers wanted insight into the business side of the company, to understand how their work relates to business goals and successes. The company has quarterly "town hall" meetings to show IT staffers how their work is helping the company. The steps help workers to remain motivated with their projects and committed to the enterprise.

To read the article, click here.






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