Chpt6 Taylor Made Hon

TaylorMade & HON Group 3 Industries Anthony Pemberton

Anthony Pemberton Case #3 pg. 202 Bryan Gauthreaux Ryan Platt Daisaku Okada Kendra Platt Jordan Thompson

TaylorMade  Early in 1997, Robert Louis Dreyfus, Chairman and CEO of adidas (a German footwear and apparel manufacturer) decided to initiate a number of acquisitions to grow his $5 billion parent company. He started by acquiring Solomon SA (a French Company) as a major part of his growth strategy. The TaylorMade Golf Company was owned by Solomon SA and automatically became an integral part of his acquisition. Bryan

TaylorMade Company Overview  TaylorMade-adidas Golf, one of the largest golf club manufacturers in the world, is a subsidiary of adidasSalomon A.G. The adidas Group is one of the world's largest producers of sports clothing and shoes with sales topping six billion dollars each year.  Estimated Employee numbers for TaylorMade-adidas-Salomon 14,716.  Mark King, TaylorMade President/CEO

Mark King: TaylorMade President/CEO

Bryan

TaylorMade Mergers and Acquisitions  Adidas became Adidas-Salomon with its US$1.4 billion purchase of Salomon  The merger makes Adidas/Salomon the second largest sport marketer in the world, and number one in Europe.

Anthony

TaylorMade uses an Extranet to enhance SCM

 TaylorMade chose an extranet to link its own business with that of suppliers and distributors.  What is an Extranet? It is a network that links selected resources of a company with its customers, suppliers, and other business partners using the Internet or private networks to link the organizations. Extranets are usually just extensions of Intranets with controlled access.

Ryan

Analysis of TaylorMade’s Extranet  Taylor Made spent two years moving its main business information systems to the web. It contracted with I2 technologies to implement SCM software.  Though the system cost $10 million to install, it may save up to $50 million in production costs alone.  TaylorMade now engages in real-time collaboration with suppliers and other business partners. Ryan

Advantages of TaylorMade’s Extranet  Off-the-shelf clubs were manufactured in 50% less time.  Custom clubs can now be made in less than seven days. Previously it took upwards of six weeks!  TaylorMade’s business has doubled in the past year alone. The supply chain is literally TaylorMade’s competitive advantage.  Administrative tasks such as dealing with suppliers, distributors, and sharing forecasts and inventory levels are more automated. Kendra

Disadvantages of TaylorMade’s Extranet  Time: 2 years to complete  Cost is a major disadvantage - $10 million to develop and secure their extranet.  Must have thorough understanding of all business processes related to the supply chain to implement. Kendra

HON Industries  HON began after World War II, when three businessmen used scrap metal to manufacture small, index card file boxes to use in the kitchen.  Founder: C. Maxwell Stanley, invited his brother-in-law and a industrial designer to join him

HON Founder: C. Maxwell Stanley

Bryan

HON Industries Company Overview  Incorporated in 1944 and began operations in 1947 in Muscatine, Iowa.  Second-largest office furniture manufacturer in North America, and the nation's leading manufacturer and marketer of gas- and wood-burning fireplaces.  Recognized for the third consecutive year as one of the 400 Best Big Companies in America by Forbes magazine in 2003, and as America's Most Admired Company in the furniture industry by Fortune magazine in 2003.  HON employs 8,800  Annual Revenue of 2 billion and IT department of 100.  HON CEO and Chairman: Jack D. Michaels Bryan

HON Industries Mergers and Acquisitions  HON Industries announced the acquisition of Paoli in December, 2003. Paoli is a leading provider of wood case goods and seating.

Anthony

HON’s use of Synquest Software to enhance SCM  Since HON has very few retail outlets of its own,

the company has to depend on a large network of dealers, wholesalers, and retail stores. The “static supply chain” was keeping HON from finding optimal ways of keeping this network supplied.  Enter Atlanta’s Synquest, which offers optimization tools and algorithms for companies like HON that are trying to simplify complex logistics networks.  Hon was already running at near-peak production levels, so it used Synquest Inc.'s supply-chainplanning software to redesign its logistics and supply-chain network and to reschedule production at its 18 factories. Ryan

Hon Industries Advantages of SCM  By replacing aging legacy systems with new technology, HON has a more flexible, efficient, and productive planning and scheduling system.  Distribution costs were lowered, improved timeliness of shipments, and reduced the amount of finished inventory carried.  HON’s system focused mainly on logistics and transportation which is a unique component of SCM. Normally companies look to sourcing and procurement to save money. Anthony

Advantages SCM to HON Continued  Scheduling accuracy has improved 20%  Freight costs have dropped from 6.5 to 5.8 percent  Inventory turns 19 times vs. 16 prior to SCM enhancements.

Anthony

HON Industries Disadvantages of SCM  Time: took from Oct 1999 to March 2001, they went 6 months over their deadline  Cost: $2 million for their advance planning and scheduling system  One major challenge was the constant shifting of business processes at HON, the project had to be completed in short phases. Kendra

Dai

Sales Million $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $-

Sales

1999

2000

2001

2002

TaylorMade Golf Annual Sales (Million) Sales

Rate

1999

$ 329.3

-

2000

$ 415.2

26.09%

2001

$ 482.8

16.28%

2002

$ 741.0

53.48%

Thousand

Dai

Sales

$2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $1996 1997 1998 1999 2000 2001 2002

HON Industries Inc Sales Sales (thousand)

Rate

1996

$

998,135

-

1997

$

1,362,713

36.53%

1998

$

1,696,433

24.49%

1999

$

1,789,281

5.47%

2000

$

2,046,286

14.36%

2001

$

1,792,438

-12.41%

2002

$

1,692,622

-5.57%

Thousand

Dai

Net Income

$120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $1996 1997 1998 1999 2000 2001 2002

HON

Net Income (thousand)

Rate

1996

$

68,094

-

1997

$

86,955

27.70%

1998

$

106,313

22.26%

1999

$

87,360

-17.83%

2000

$

106,217

21.59%

2001

$

74,407

-29.95%

2002

$

91,360

22.78%

TaylorMade Competitors

 Acushnet: Through the usage of SynQuest, it has reduced lead times from 12 to 5 days, been able to offer guaranteed 2-day express service, and improved shop floor visibility. In addition to using SynQuest for order tracking, it plans to add options such as capacity and internal planning tools.  Callaway Golf: A partnership with Trade In, Trade Up! Program allows customers to trade older model Callaway Golf clubs for new or certified pre-owned clubs allowing it to focus on its core competencies while gaining a higher ROI through this alternate use of SCM. Jordan

HON Industries Competitors  Steelcase: After implementing SAP, it discovered SAP to

be weak with the scheduling of plant operations because SAP focuses on make-to-stock whereas SCM focuses on make-to-order. It is now working with SCM vendor i2 Technologies, Inc. whose technology will integrate with the $3 billion SAP R/3 Suite.  Haworth: It has experienced more efficient communication with its suppliers eliminating many misunderstandings and reducing the amount of time spent on projects. It plans to expand allowing its customer base, in addition to its supplier base, access to a fully operational online management system.  Herman Miller: It has designed a SCM infrastructure needed to enable the launch of web initiatives which has allowed it to reach an entirely new market. SCM has cut costs by up to 15% and expanded its customer base by more than 10%. It plans to expand from its national customer base to a global base over the next few years. Jordan

1. How could moving business information systems with suppliers and distributors to the Web result in such dramatic business benefits as experienced by TaylorMade Golf?  TaylorMade spent ten million implementing an extranet website to efficiently handle administration details, suppliers, and distributors. The extranet helps predict sales and inventory information. Some of the key benefits of the new system include: shelf time of golf clubs has been essentially eliminated since clubs are now sent directly to customers.  TaylorMade’s extranet uses supply chain management to achieve more agility and more responsiveness in meeting demand and customer needs of their suppliers. According to an article in MSI suppliers were late 60-70 percent of the time. TaylorMade used its leverage as a big corporation to form key alliances with suppliers. TaylorMade engages in real-time collaboration with suppliers via an internet-based portal purchased from I2 technologies.  The web-based system provided TaylorMade with a dramatic reduction in costs, improved communication between itself and key business partners, and an enhanced inventory tracking and management solution.

Bryan

2. How does HON Industries’ new SCM system improve the efficiency of their supply chain?  HON used SCM to make its logistic, transportation, and storage services more efficient. HON purchased supply chain management software from SynQuest. The software allows HON to take product orders, factor in shipping and scheduling variables and decide which factory can build and ship the product at the lowest cost. Scheduling accuracy has improved 20% and freight costs have dropped from 6.5% to 5.8% of the firm’s overall sales revenue. HON’s inventory now turns 19 times per year up from 16 times last year.  Since HON has very few retail outlets of its own, the company has to depend on a large network of dealers, wholesalers, and retail stores. HON’s “static supply chain” was keeping it from finding optimal (hence, less expensive) ways of keeping this network supplied. Daisaku

3. What other SCM initiatives would you recommend that TaylorMade Golf or HON Industries implement to improve their supply chain performance and business value? Explain the business value of your proposals. 



HON Industries could develop a system allowing web cam usage in order to allow a virtual presentation of one’s home with point-and-click options enabling the customer to place different pieces of furniture in different areas of the room to see what it will look like before purchasing. This would be valuable because it would allow the customer to select colors and other alternatives, sending the information for needed materials directly to supplier who could immediately ship the order to the manufacturing facility. TaylorMade, on the other hand, could develop an automated custom-club measuring display. These could be located at golf shops or golf courses. The customer individual specs. could be measured and stored in the computer. At that point, the customer could swipe his credit/debit card and this custom order is immediately sent to the manufacturer to fulfill the requested order. This would eliminated the “middle-man” thus speeding up the supply-chain management process. Anthony