2nd Annual Global Operations Conference: Strategies for a Volatile World

Conference packed with globalization, localization and nimble strategies for rapid change

ANN ARBOR, Mich. -- When organizers of the 2nd Annual Global Operations Conference at the University of Michigan named the event “Fast Forwarding Operations: Preparing for the Future,” they had no idea how profound and relevant that title would be.

“To say that things have fast forwarded recently is an understatement,” said Joel Tauber, benefactor of the Tauber Institute for Global Operations, during the Nov. 7 conference. The Tauber Institute hosted the event with the student-run Operations Management Club at the Ross School of Business. Topics included lean and green initiatives, management strategies and balancing globalization with localization for real stability.

“The events of the last 60 days have been cataclysmic and have changed the rules of the game forever,” Tauber told the audience of operations experts, scholars and students. “What once was a given is no longer.”

But such upheaval and rapid change bring about opportunities for creativity in the business world, he noted. “Now is the time to catch the wave and act on what is occurring. Have internal discussions about how you can take advantage of it. Those who understand and act on the current world situations will be the ones who succeed.”  

Top-Level Executive Insight

Tim Manganello, CEO and chairman of BorgWarner, emphasized the need for companies to have a global presence for business survival. Fifty percent of BorgWarner’s powertrain-solutions business is conducted with European companies, 30 percent is with North American automakers and 20 percent is with Asian firms. “It is scary to think what we would be today if we were not a global company,” Manganello said.

Being a technology leader has helped define BorgWarner as a market leader. “Customers come to us to solve their problems after others have tried and failed,” he said. He encouraged emerging business leaders to be pioneers and create groundbreaking technology.

Matthew Thornton III, senior vice president of U.S. operations at FedEx Express urged students and managers to transform adversity into opportunity.

“Strengthen your company culture. A valued employee attracts other high-quality workers who are engaged and can help you succeed. At FedEx, we strive to create an outstanding experience for all,” said Thornton.

Investing in technology, reinvigorating quality and focusing on its role as a global citizen are other ways the shipping giant is maintaining its market share in difficult times. Green initiatives include developing the first commercial hybrid vehicles with the Eaton Corporation, and switching to biodegradable packaging in distribution facilities around the world. Three facilities have implemented solar energy, with more to come, and FedEx is constantly looking at ways to reduce carbon emissions, he said. “Our research has found that by having our airplanes level out at higher altitudes, we can save a considerable amount of fuel and money.”

Tom Jones, senior vice president and general manager of supply chain solutions at Ryder Systems, knows well the impact of rising fuel costs on business. It is Ryder’s number one cost, ahead of manufacturing and labor. As the price of diesel fuel rose 75 percent in one year, Jones said Ryder implemented changes to ease the pain. For example, his company has slowed its trucks down by one mile per hour for a tremendous savings of fuel. They also train drivers to conserve fuel and have installed auto-shutoffs on trucks that idle more than 10 minutes. “The spike in fuel costs differentiated those who were prepared to deal with it and those who were not,” he said.

“Future leaders need a broad sense of business,” he continued. “Supply chain spans industry more than any other area and is more than just trucks and planes. It requires vision, leadership skills and people skills.”

How Flexibility Translates to Survival

Providing an academic perspective at the conference was Dr. David Simchi-Levi. A professor at the Massachusetts Institute of Technology and leading researcher on supply chain management, he gave an interactive lecture that detailed the impact of oil prices, the benefits of flexibility and the importance of sustainability.

“Flexibility means the ability to respond to changes in demand and volume as well as changes in commodity prices,” he said, adding that companies should invest time and resources in becoming flexible.

David Clark, director of worldwide customer excellence systems at Amazon.com, took conference attendees on Amazon’s recent journey through lean and how this company has evolved in its relatively short existence.

As America’s largest online retailer, Amazon has grown exponentially since its founding by Jeff Bezos in 1995. In 2000, the management team adopted the Six Sigma strategy to improve its performance and deliver on its promises. “We found that though we thought we were engaging our people, we weren’t. We were engaging our suppliers and our customers, but not our own people,” said Clark.

After implementing Six Sigma, Amazon then implemented Kaizen and held more than 5,000 events impacting 9,000 employees. It empowered customer service representatives to “stop the line” when quality issues arose, thus removing defective merchandise and avoiding thousands of potential negative customer contacts. “It was tremendously powerful for us. We were engaging our people and encouraging ownership in our company,” Clark said. Since the implementation of lean manufacturing strategies, Clark said Amazon has seen $30 million in savings.

“Glocalization” is New Buzzword

Jim Varilek, VP of supply chain at Dow Chemical Company, believes in being global while thinking local. He said that in order for Dow to achieve its vision of being the largest, most profitable and most respected chemical company in the world, this “glocalization” mindset is key. “The current financial crisis demonstrates how global the world has become. Today, the free flow of money and the faltering of our economic system have given nearly every company in the world a dire outlook,” he said.

Dow is seizing the opportunity to invest in its human element -- employees around the globe. In the supply chain area, Dow has embedded employees, or those in site manufacturing locations, and non-embedded people who look at strategy, direction and capability. The two sides are working to align and deliver acknowledged value to the overall business strategy, according to Varilek. “We are developing resiliency as a supply chain organization that will help us survive and thrive even at the bottom of economic cycles,” he said.

Balancing Globalization and Localization
 
As more and more managers wonder whether it is time to reexamine their offshoring and outsourcing decisions, high transportation costs, international regulations, fluctuating exchange rates and security issues demand careful consideration. The question becomes how to smartly divide tasks between what should be done globally and what should be done locally. Ray Koopman, director of GMS/IE future programs for General Motors, and Steve Williams, director of strategic planning for Cisco, examined the key factors in this decision and what solutions are being used.

Williams said that global strategy is a mindset about the future that requires firms to be open, collaborative and curious. The four drivers of Cisco’s global mindset are 1) the global economy, 2) diverse countries, 3) diverse customs and 4) diverse network supporters. “We have customer moments of truth where we face socioeconomic challenges of language barriers and culture clashes, but we have to focus on becoming a local company with a global mindset,” said Williams.

Koopman, who spent eight years in Shanghai, illustrated the extreme cultural differences between American and Chinese business methodology. “In China, you never simply launch into a business discussion upon meeting someone. You develop a relationship in not one or even five visits. It is a long-term process,” he said, adding that a person’s dignity is of the highest priority and must be preserved at all costs.

This creates an environment that leads to potentially messy discussions and drawn out processes, but the business rewards can be substantial.

“If you decide to do business abroad, you have to put someone on the ground, and plan on being there for several years. The relationship-building phase requires face time. And if your people adapt to the culture, it lends credibility to your efforts,” said Koopman.

Changing Trends in Consumer Behavior

As trends in consumer behavior change over time, operational activities have to adjust to meet these differences. Current consumer preferences, consumer awareness and changing consumer bases are demanding significant alterations in the way corporations approach their operations. A panel made up Hans-Werner Kass, director of McKinsey and Company; Alex Kormushoff, senior VP of worldwide field operations for SPSS;
and John Antone, corporate VP of Applied Materials, addressed these changes and what trends might emerge in the future.

Innovation, focus and a holistic approach to the global marketplace are three ideas that resurfaced throughout the panel discussion. While fuel and energy costs emerge as the new consumer limiters, companies have to find new ways to respond, according to Antone. “There is no lack of brainpower, but there has been a lack of focus on renewable energy, for example,” he said. “It has not been our focus because fossil fuel has been so available.” He added that developing alliances, working within eco-systems and remaining on the leading edge of technology is something single enterprises can do. “Industry does not have to be the victim.”

Networking and Case Competition Awards

In addition to showcasing top-level speakers from industry and academia, the conference allowed industry decision makers to meet MBA and graduate engineering students at a career networking reception. Also, the winners of an International Case Competition, which was open to MBAs and graduate engineers from top business schools in the US and abroad, were announced by Kevin Harrington of Cisco. Taking top honors was the University of Michigan Team I: Innovation at Heart, made up of MBA students Shomit Manapure, Raghu Valipireddy and Sunil Tahilramani.

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Written by Nancy Davis

Tauber Media Contact: bakerpa@umich.edu