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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Bear market or bull market, one thing remains certainManhattan Associates Dick Haddrill says that his company is the plumbing of the consumer economy. Founded in 1990 by Alan J. Dabbiere, who is now chairman of the board, Manhattan Associates has evolved from providing technical support to retailers trying to solve twentieth-century supply chain problems to being an indispensable utility, serving the complex supply chains of the twenty-first century. This companys destiny has been shaped by two pivotal innovations. The first was the Electronic Data Interchange (EDI), which a decade ago allowed retailers to network supply chain links together, enabling them to get an update once per day on the status of orders. Then retailers began implementing quick-response initiatives with their suppliers. Manhattan Associates successfully delivered software to assist their supplier-clients in keeping pace with these new demands for efficiency. In this way Manhattan Associates became familiar with the challenges of operating a successful supply chain network. The next evolutionary phase for Manhattan Associates was triggered by the Internet. The company was in a perfect position to understand how this new tool would create efficiencies for its clients. Macys, for example, said that up to 40% of their buyers time was wasted tracking orders. Because the Internet produces information in real time, errors can be spotted immediately. If an order was placed for 100 blue shirts, but 300 pink shirts are being prepared for shipment instead, the buyer can see the error and immediately stop the shipment before it reaches the stores. One of Manhattan Associates clients, Aramark Uniform and Career Apparel, which makes uniforms for companies like McDonalds, reported that 10% of orders shipped by their suppliers were in error. The uniforms are manufactured in Latin America, and because the distance is so great, even a small number of errors can greatly increase shipping costs. Fixing them cost, on average, $50 per carton. The systems created by Manhattan Associates to access the Internet has reduced Aramarks supplier error rate to zero, producing savings that fall directly to the bottom line. Foreign manufacturing facilities have economical Internet connections. This is all that is necessary to operate Manhattan Associates collaboration systems. Because expensive computer networks are not necessary, any country can be connected to the supply chain network. A fashion retailer in the United Kingdom, whose customers are in Japan and the United States, has its clothes made in Italy. Formerly, goods were transported first to a warehouse in Great Britain before being sent to their final destination. With the help of Manhattan Associates, they now ship goods directly from Italy to their Japanese and U.S. customers. The cost savings by eliminating warehouses, labor, shipping costs, and travel time are staggering. A sampling of Manhattan Associates clients include the following: Manhattan Associates corporate culture values the creative, entrepreneurial employee and encourages professional growth through training programs, mentoring programs, and career evaluations. Voluntary employee turnover is less than 6%, well below industry average. As of March 31, 2002, Manhattan Associates enjoyed recurring revenue from 800 customers representing 1,100 facilities worldwide. Not only does it continue to add new customers, but in 2001 30% of new sales came from its existing customer base. Customers pay an installation charge for new services and fees when systems are upgraded. The company was recently selected by Forbes magazine as one of 200 best small companies in America and by Fortune magazine as one of Americas 100 fastest-growing companies as measured by earnings, revenues, and stock price. Putting Quality into Megamerchandising That Americans are the planets most committed consumers is supported by the fact that the company with the highest revenue in the world is Wal-Mart. But the reliability of the American consumer is a mixed blessing. The frequency with which we shop has made us picky customers, looking for bargains while expecting value. As a result, retailing has to be one of the most competitive businesses today. While answering the need for low-cost goods, the merging of general merchandise and food under one roof (megastores) has created a trend so important that a new category will be created under the NAICS to monitor its productivity. I can get it for you wholesale was a concept pioneered in 1976, at the beginning of the incubation interval, by the Price Company in San Diego, California. After the Price Company created the first membership warehouse, the idea of bare-bones stores offering wholesale prices exploded in popularity. By the end of the century most everyone had heard of, if not shopped at, warehouse clubs like Costco or Sams Club, owned by Wal-Mart. After 30 years of growth, warehouse merchandising is entering a new phase. Customers want value as well as low prices. One step in this direction has been to give consumers the convenience of buying a wide variety of merchandise categories. Stores stock electronics, music, books, videos, hardware, tools, clothes, small appliances, kitchenware, grocery store items, furniture, and jewelry. Services include pharmacies, optical shops, and gas stations. The next step is to provide high-quality merchandise. A company that is ready to capitalize on consumers search for value adds a new dimension to the reckoning of how high its stock will go. Consumer Reports ranked Costco Wholesale (see Figure 7.7) the highest for product quality of all the warehouse megastores.11 When someone walks into our stores to buy a TV set, they already have a number in mind that they want to spend. We want to give them the best product they can get with those dollars, says Jim Sinegal, president and CEO of Costco Wholesale. The Consumer Reports sur vey indicates that he is succeeding. Costco Wholesale was founded in 1983 in Seattle, Washington, by Sinegal and Jeff Brotman, who is now chairman. In 1993 Costco merged with Price Club creating a $15 billion company. In 2002 sales exceeded $38 billion. The company attracts new customers strictly by word of mouth. Other than a small ad in a local newspaper announcing the opening of a new store, there is no exposure on TV, radio, or any other media. After probing Sinegal for the unique retailing paradigm that allows him to avoid costly media campaigns, he finally said that he was sorry his answer wasnt very exciting, but all it boils down to is giving the customer the highest quality products at the lowest possible prices. He said Costcos emphasis on value is much like that of Sears in the twentieth century, and it is what sets the company apart. The focus on quality attracts not only the diehard club shoppers but also affluent customers who many may not expect to be typical warehouse-shopping club members. This means that Costco is likely to attract the growing segment of baby boomers who, facing retirement, will at last be interested in pinching pennies especially if it means that they get the same-quality items to which they have become accustomed. Already Costco shoppers spend more, on average, than do shoppers at other discount merchandisers. The average spending for all discount stores (Sears, Target, Sams Club, Wal-Mart, K-Mart) on everything but groceries is $474 per year.12 Costco shoppers spend an average of $2,300 per year. Costco Wholesale Industries is a division of Costco that operates food packaging, optical laboratories, meat processing, and jewelry distribution. It is another avenue by which Costco can save money while monitoring quality. The company is also expanding its gas station operations; over 50% of its stores were expected to have them installed by the end of 2002. Sinegal says that the lifeblood of his company is his employees. He explained the math that proves that good wages and benefits equal higher productivity, but his conviction in this regard went past mere numbers. He said his company would be nothing without its employees, and he puts his money where his mouth is. Costco pays the highest wages in its industry. A cashier with four years of experience will make in excess of $40,000 a year. Costco sees to its employees health care as well: 90% receive full medical, dental, and vision benefits. By the end of Costcos fiscal year ending in August 2002, the company had 394 locations in the United States, Canada, the United Kingdom, Taiwan, Korea, Mexico, and Japan. Another 20 stores were opened by the end of calendar year 2002 in such diverse locations as Indianapolis, Cleveland, Phoenix, Boca Raton, Boston, and a suburb of Tokyo. This expansion plan should continue to advance earnings by enhancing its volume purchase discounts and leveraging Costcos own manufacturing, packaging, and processing operations. Sinegal makes this all sound so simple, as if he does not understand why everyone cannot grow their companies at a double-digit rate each year. Here is Costcos Mission Statement. It has only five lines: 1. Obey the law. 2. Take care of our customers. 3. Take care of our employees. 4. Respect our suppliers. 5. Reward our shareholders. Jim Sinegal says, By accomplishing the first four objectives, we will fulfill the last one, which is to reward our shareholders, a duty Costco takes very seriously. We intend to do our job by meeting our obligations to our customers, employees, and our shareholders. Costco Wholesale understands that the job their customers expect of them is to provide value. As the most successful retailer of its kind, Costco obviously knows how to do all of its jobs very well. Reenergizing Education The apparatus of our culture cannot function without educated people running it. Access to meaningful careers for high school graduates, retraining programs for adults, and advanced degree programs for everyone must converge with the new requirements of companies that arise out of the redesigning of corporate structures. The notion fixed in peoples minds is that the most acute need is for technical training associated with computer skills. That is an area of concern, but the demand is much broader. Health care is just one example of an area desperately in need of training programs and new employees. Every field needs those who have been trained to rethink how the new tools that are available to us can be used more productively. Professions and disciplines of all kinds are bogged down by the inability to employ successfully the innovations available to them. Additionally, who is going to teach all the people who need to teach these necessary new skills? At every level, programs are needed for retraining and advanced degree programs for educators. The momentum of the changes occurring in this decade will only exacerbate the demand. At this point, when the need has never been greater, nearly every institution of higher learning in this country is facing budget cuts. This means that these institutions must become more productive. Studies have shown that the cost of higher education is rising at a much greater rate than the consumer price index. John G. Sperling, chairman of the Apollo Group, says, Institutions of higher education are going to have to be managed more and more as a business to stay in existence. The solution is the incorporation of education by companies who have proved they can efficiently educate, retrain, and provide advanced degrees to a variety of academic disciplines. Additionally, there is a need for these companies to teach their business skills to nonprofit educational institutions so that these schools may become more productive. The growth potential for the incorporation of education is immense. Currently, for-profit educational institutions account for only 4% of higher education. Apollo Group In 1976 (early in the incubation interval) Sperling founded the University of Phoenix. The Apollo Group (see Figure 7.8) was established as the holding company for the university, along with several other educational institutions, including the Institute of Professional Development, the College for Financial Planning, Inc., and Western International University, Inc. The consolidated enrollment in its educational programs makes Apollo the largest private institution of higher education in the United States. It offers educational programs and services at 63 campuses and 109 learning centers in 37 states, Puerto Rico, and Vancouver, British Columbia. Combined degree enrollment was 148,100 students as of May 31, 2002. Sperling created the University of Phoenix to provide working adult students with the opportunity to return to school to fulfill their educational goals. This included developing an academic model that was built around the different learning styles and needs of the working adult student. Additionally, this included creating a service model that was also geared toward this specific student population, focusing on key aspects of customer service, efficiency, quality, and availability. The university remains committed to serving the needs of this growing student population. Bear market or bull market, one thing remains certain: Our nation continues to serve an ever-increasing and evolving global population. This continuous evolution occurs as our needs as a nation and a global provider continue to grow. The result is an increasing and ongoing skills gap, requiring a variety of accessible and timely education alternatives. The gap is further widened by the accelerated rate of changes in todays society. Increasing changes and complexities are slowly decreasing the half-life of an education. Skills learned 5, 10, and 20 years ago need to be updated. The University of Phoenix is positioned to assist in filling that gap. The average age of a University of Phoenix student is 35, and the majority of students work full-time. The university provides students with both an extensive array of program offerings, ranging from associate to doctoral degrees, and a breadth of modalities. University students may attend class in a physical classroom environment, via the Internet, or in a combination of both. A comprehensive-outcomes assessment process is utilized to measure student learning outcomes in both affective and cognitive skills throughout their progression at the university. Over 160,000 students have earned degrees at the University of Phoenix. |
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