The triple-A supply chain

Building a strong supply chain is essential for business success. But when it comes to improving their supply chains, few companies take the right approach. Many businesses work to make their chains faster or more cost-effective, assuming that those steps are the keys to competitive advantage. To the contrary: Supply chains that focus on speed and costs tend to deteriorate over time. The author has spent 15 years studying more than 60 companies to gain insight into this and other supply chain dilemmas. His conclusion: Only companies that build supply chains that are agile, adaptable, and aligned get ahead of their rivals. All three components are essential; without any one of them, supply chains break down. Great companies create supply chains that respond to abrupt changes in markets. Agility is critical because in most industries, both demand and supply fluctuate rapidly and widely. Supply chains typically cope by playing speed against costs, but agile ones respond both quickly and cost-efficiently. Great companies also adapt their supply networks when markets or strategies change. The best supply chains allow managers to identify structural shifts early by recording the latest data, filtering out noise, and tracking key patterns. Finally, great companies align the interests of the partners in their supply chains with their own. That's important because every firm is concerned solely with its own interests. If its goals are out of alignment with those of other partners in the supply chain, performance will suffer. When companies hear about the triple-A supply chain, they assume that building one will require increased technology and investment. But most firms already have the infrastructure in place to create one. A fresh attitude alone can go a long way toward making it happen.     

Effects of audit partners on clients’ business risk disclosure

We empirically investigate audit engagement partners’ involvement in business risk disclosure. Specifically, we examine whether the quality of business risk disclosure is influenced by engagement partner tenure and knowledge. We also examine whether the effects of partner tenure and knowledge are similar for Big 4 audit firms and non-Big 4 firms. Since fiscal year 2003, listed companies in Japan have been required to disclose business risk information. Although the business risk information is not audited, auditors concerned about their audit quality may seek to influence clients’ business risk disclosure practices. Giving advice to management on the narrative business risk disclosure can contribute to improving the perceived value of the auditor’s services which can be a competitive advantage. Using a sample of Japanese listed companies from 2003 to 2010, we find that if the engagement partners’ tenure is shorter, a company discloses more business risk information and the disclosure is more detailed. Furthermore, companies with audit partners who have a larger number of client engagements disclose larger amounts of business risk information in more detail. However, the engagement partner effects are mitigated if they belong to a Big 4 firm.     

We're in this together

When managers from Wendy's International and Tyson Foods got together in 2003 to craft a supply chain partnership, each side had misgivings. There were those in the Wendy's camp who remembered past disagreements with Tyson and those on the Tyson side who were wary of Wendy's. But the companies had a tool, called the "partnership model,'to help get things started on the right foot. Drawing on the experiences of member companies of the Global Supply Chain Forum at Ohio State University, the model offers a process for aligning expectations and determining the most productive level of partnering. It rapidly establishes the mutual understanding and commitment required for success and provides a structure for measuring outcomes. This article puts the tool in the reader's hands. Partnerships are justified only if they stand to yield substantially better results than the firms could achieve on their own. And even if they are warranted, they can fail if the partners enter them with mismatched expectations. Over the course of a day and a half, the partnership model elucidates the drivers behind each company's desire for partnership, allows managers to examine the conditions that facilitate or hamper cooperation, and specifies which activities managers must perform to implement the relationship. This tool has proved effective at Wendy's and elsewhere in determining what type of partnership is most appropriate. Colgate-Palmolive, for example, used it to help achieve stretch financial goals with suppliers of innovative products. But the model is just as effective in revealing that some companies' visions of partnership are not justified. In matters of the heart, it may be better to have loved and lost, but in business relationships, it's better to have headed off the resource sink and lingering resentments a failed partnership can cause.     

Match your sales force structure to your business life cycle

Although companies devote considerable time and money to managing their sales forces, few focus much thought on how the structure of the sales force needs to change over the life cycle of a product or a business. However, the organization and goals of a sales operation have to evolve as businesses start up, grow, mature, and decline if a company wants to keep winning the race for customers. Specifically, firms must consider and alter four factors over time: the differing roles that internal salespeople and external selling partners should play, the size of the sales force, its degree of specialization, and how salespeople apportion their efforts among different customers, products, and activities. These variables are critical because they determine how quickly sales forces respond to market opportunities, they influence sales reps' performance, and they affect companies' revenues, costs, and profitability. In this article, the authors use timeseries data and cases to explain how, at each stage, firms can best tackle the relevant issues and get the most out of their sales forces. During start-up, smart companies focus on how big their sales staff should be and on whether they can depend upon selling partners. In the growth phase, they concentrate on getting the sales force's degree of specialization and size right. When businesses hit maturity, companies should better allocate existing resources and hire more general-purpose salespeople. Finally, as organizations go into decline, wise sales leaders reduce sales force size and use partners to keep the business afloat for as long as possible.     

Value acceleration: lessons from private-equity masters

The most successful private-equity firms regularly spearhead dramatic business transformations, creating exceptional returns for their investors. To understand how those firms do it, the authors studied more than 2,000 PE transactions over the past ten years and discovered that the top performers' success stems from the rigor with which they manage their businesses. This article describes the four management disciplines vital to the success of the best PE firms. First, for each business, they define an investment thesis: a brief, clear statement of how to make the business more valuable within three to five years. The thesis, which guides all actions by the company, usually focuses on growth. PE firms know that the demonstration of a path to strong growth produces the big returns on investment. Second, they don't measure too much. They zero in on a few financial indicators that most clearly reveal the business's progress in increasing its value. They watch cash more closely than earnings and tailor performance measures to each business, rather than imposing one set of measures across their entire portfolio. Third, they work their balance sheets, mining undervalued assets, turning fixed assets into sources of financing, and aggressively managing their physical capital. Last, they make the center the shareholder. Corporate staffs in PE firms make unsentimental investment decisions, buying and selling businesses when the price is right and bringing in new management when performance falters. These firms also keep their corporate centers extremely lean. By adopting these four disciplines, executives at public companies should be able to reap significantly greater returns from their own business units.     

Strategy as ecology

Microsoft's and Wal-Mart's preeminence in modern business has been attributed to any number of factors--from the vision and drive of their founders to the companies' aggressive competitive practices. But the authors maintain that the success realized by these two very different companies is due only partly to the organizations themselves; a bigger factor is the success of the networks of companies with which Microsoft and Wal-Mart do business. Most companies today inhabit ecosystems--loose networks of suppliers, distributors, and outsourcers; makers of related products or services; providers of relevant technology; and other organizations that affect, and are affected by, the creation and delivery of a company's own offering. Despite being increasingly central to modern business, ecosystems are still poorly understood and even more poorly managed. The analogy between business networks and biological ecosystems can aid this understanding by vividly highlighting certain pivotal concepts. The moves that a company makes will, to varying degrees, affect the health of its business network, which in turn will ultimately affect the organization's performance--for ill as well as for good. Because a company, like an individual species in a biological ecosystem, ultimately shares its fate with the network as a whole, smart firms pursue strategies that will benefit everyone. So how can you promote the health and the stability of your own ecosystem, determine your place in it, and develop a strategy to match your role, thereby helping to ensure your company's well-being? It depends on your role--current and potential--within the network. Is your company a niche player, a keystone, or a dominator? The answer to this question may be different for different parts of your business. It may also change as your ecosystem changes. Knowing what to do requires understanding the ecosystem and your organization's role in it.     

供应链成本管理理论基础和方法研究

本文通过分析产品成本关系矩阵, 阐明供应链成本是跨企业的成本管理, 提出了供应链成本管理理论基础和两种主要的供应链成本管理方法, 指出以合作战略为基础的供应链目标成本是一种合适的供应链成本管理方法。最后得出结论并对将来的研究方向提出了建议。     

An integrated approach based-structural modeling for risk prioritization in supply network management

Supply networks are complex and suffer always from various risks. An effective supply chain management requires suitable strategies to mitigate them. In previous literature, there has been a range of research into risk in firms but little in supply networks. This can be explained due to the huge number of risk variables and their direct and indirect interrelations that may suffer all supply chain partners (firms). Therefore, for better risk mitigation, a risk prioritization step is vital. To this end, the purpose of this paper is to propose a new integrated approach based on two structural modeling tools. Firstly, interpretive structural modeling has been used to present a hierarchical model showing the interrelationships between the risk sources. Secondly, MICMAC analysis has been used to quantify and classify the risk variables based on their mutual influence and dependence. The objective is to ascertain the key risk variables and theirs relationships. These prioritized risk variables provide a useful tool to supply network managers to focus on those key variables that are most essential for effective risk management strategies. A real case study in food industry is provided in order to illustrate the application of the proposed approach. The findings may be useful to the practitioners in risk management and may also interest academicians, since the method used here can be applied in other areas of industrial management as well.     

Syndication--the emerging model for business in the Internet era

Syndication has long been a fundamental organizing principle in the entertainment world, but it's been rare elsewhere in business. The fixed physical assets and slow-moving information that characterized the industrial economy made it difficult, if not impossible, to create the kind of fluid networks that are essential for syndication. But with the rise of the information economy, flexible business networks are not only becoming possible, they're becoming essential. As a result, syndication is moving from business's periphery to its center. Within a syndication network there are three roles that businesses can play. Originators create original content, which encompasses everything from entertainment programming to products to business processes. Syndicators package that content, often integrating it with content from other originators. Distributors deliver the content to consumers. A company can play a single role, or it can play two or three roles simultaneously. Syndication requires businesses to rethink their strategies and relationships in radical ways. Because a company's success hinges on its connections to other companies, it can no longer view its core capabilities as secrets to protect. Instead, it needs to see them as products to sell. FedEx, for example, is succeeding by distributing its sophisticated package-tracking capability to other companies on the Net. Syndication promises to change the nature of business. As this new way of doing business takes hold, companies may look the same as before to their customers, but behind the scenes they will be in constant flux, melding with one another in ever-changing, self-organizing networks.     

Morgan Stanley Roundtable on Private Equity and Its Import for Public Companies

The role of private equity in global capital markets appears to be expanding at an extraordinary rate. Morgan Stanley estimates that there are now some 2,700 private equity funds that either have raised, or are in the process of raising, a total of $500 billion. With this abundance of available equity capital, the willingness of private equity firms to participate in “club” deals, and the leverage that can be put on top of the equity, private equity buyers now appear able and willing to pay higher prices for assets than ever before. And thanks in part to this new purchasing power, private equity transactions reportedly account for a quarter of all global M&A activity as well as a third of the high yield and IPO markets. The stock of capital now devoted to private equity reflects the demonstrated ability of at least the most reputable buyout firms to produce consistently high rates of returns for their limited partners. Although a talent for identifying and purchasing undervalued assets may be part of the story, the ability to produce such returns on a consistent basis implies an ability to add value, to improve the performance of the operating companies they invest in and control. And in this round‐table, a small group of academics and practitioners address two main questions: How does private equity add value? And are there lessons for public companies in the success of private companies? According to the panelists, the answer to the first question appears to have changed somewhat over time. The consensus was that most of the value added by the LBO firms of the‘80s was created during the initial structuring of the deals, a process described by Steve Kaplan as “financial and governance engineering,” which includes not only aggressive use of leverage and powerful equity incentives for operating managements, but active oversight by a small, intensely interested board of directors. In the past ten years, however, these standard LBO features have been complemented by increased attention to “operational engineering,” to the point where today's buyout firms feel obligated, like classic venture capitalists, to acquire and tout their own operating expertise. In response to the second of the two questions, Michael Jensen argues that much of the approach and benefits of private equity‐particularly the adjustments of financial policies and stronger managerial incentives‐can be replicated by public companies. And although some of these benefits have already been realized, much more remains to be done. Perhaps the biggest challenge, however, is finding a way to transfer to public companies the board‐level expertise, incentives, and degree of engagement that characterize companies run by private equity investors.     

The Future of Private Equity

A distinguished University of Chicago financial economist and longtime observer of private equity markets responds to questions like the following:

• ? With a track record that now stretches in some cases almost 30 years, what have private equity firms accomplished? What effects have they had on the performance of the companies they invest in, and have they been good for the economy?
• ? How will highly leveraged PE portfolio companies fare during the current downturn, especially with over $400 billion of loans coming due in the next three to five years?
• ? With PE firms now sitting on an estimated $500 billion in capital and leveraged loan markets shut down, are the firms now contemplating new kinds of investment that require less debt?
• ? If and when the industry makes a comeback, do you expect any major changes that might allow us to avoid another boom‐and‐bust cycle? Have the PE firms or their investors made any obvious mistakes that contribute to such cycles, and are they now showing any signs of having learned from those mistakes?

Despite the current problems, the operating capabilities of the best PE firms, together with their ability to manage high leverage and the increased receptiveness of public company CEOs and boards to PE investments, have all helped establish private equity as “a permanent asset class.” Although many of the deals done in 2006 and 2007 were probably overpriced, the “cov‐lite” deal structures, deferred repayments of principal, and larger coverage ratios have afforded more room for reworking troubled deals. As a result of that flexibility, and of the kinds of companies that get taken private in leveraged deals in the first place, most troubled PE portfolio companies should end up being restructured efficiently, thereby limiting the damage to the overall economy. Part of the restructuring process involves the use of the PE industry's huge stockpile of capital to purchase distressed debt and inject new equity into troubled deals (in many cases, their own). At the same time the PE firms have been working hard to rescue their own deals, some have been taking significant minority positions in public companies, while gaining some measure of control. Finally, to limit overpriced and overlev‐eraged deals in the future, and so avoid the boom‐and‐bust cycle that appears to have become a predictable part of the industry, the discussion explores the possibility that the limited partners and debt providers that supply most of the capital for PE investments will insist on larger commitments of equity by sponsors to their own funds and individual deals.     

Pseudo resilient supply chains: concept,traits, and practices

Supply chain vulnerability (SCV) and its counterpart supply risk management are increasingly researched in recent years. SCV is often quantifiable and can be effectively monitored if practices are implemented on a systematic basis. It is essentially more important to extend the research in supply chain risk management so as to address certain traits where the companies perform poor or areas where they overlook their performances. Here, we introduce the concept and property, the so-called pseudo resilience in supply chains where supply chains pretend to perform better in its risk management capabilities, but are essentially vulnerable. Pseudo resilience is an incessant nature of many supply chains to overlook concomitant risks. Typical traits of pseudo resilience were identified in this research and a brief analysis of the disruptions and its effects was done. This research is a maiden effort in the direction of addressing the property of pseudo resilience in supply chains. It is imperative for managers to identify the traits of pseudo resilience in their supply chains so as to avoid the ill effects resulting from it. Further quantitative and qualitative researches are recommended for evincing the property of pseudo resilience in supply chains.     

Owning the consumer—Getting to the core of the Apple business model

This paper uses a business model framework to analyze the main limitations of Apple Inc. post-2003, a significant turning point in the company's history. As such, we move beyond an exclusive focus on what makes Apple unique or different by evaluating the mundane and out-dated elements of its business model. To do so, we examine the end-to-end supply chain, from source to store, to present a more holistic evaluation of the Apple business model. Drawing on the existing literature, we argue that the quintessential element of the Apple business model is its ability to ‘own the consumer’. In short, the Apple business model is designed to drive consumers into its ecosystem and then hold them there, which has been hugely successful to date and has allowed Apple to wield enormous power in the end-to-end supply chain. We demonstrate this through a detailed evaluation of Apple's physical and content supply chains and its retailing strategy. Moreover, we find that the very business processes that enable unparalleled corporate control bring with them new problems that Apple has thus far been unable, or unwilling, to adequately address.     

Export incentives,financial constraints,and the (mis)allocation of credit: Micro-level evidence from subsidized export loans

This paper combines an exogenous shock to the supply of subsidized credit with unique loan-level data from the export sector in Pakistan to identify the impact and allocation of such financial incentives. The removal of subsidized credit causes a significant decline in the exports of privately owned firms, while the exports of large, publicly listed, and group network firms are unaffected. Publicly listed firms make no significant adjustments to their balance sheets, and only their profits are reduced, indicating that they are financially unconstrained. Nearly half of all subsidized loans are assigned to such firms, implying a substantial misallocation of credit and an output loss to privately owned firms of 0.75% of GDP. Productivity differences do not explain the heterogeneous effects across firms.     

Agency conflicts in co-regulation: Evidence from IPO application screening in China

We examine agency conflicts in co-regulation using the unique data on audit firms with partners serving on the Stock Issuance Examination and Verification Committee (SIEVC), referred to here as SIEVC-connected audit firms, in China. We find that audit firms' SIEVC connection helps enhance the likelihood of their client companies passing SIEVC's IPO screening. We further demonstrate that to trade off opportunistic gains against reputational and legal costs, SIEVC-connected audit firms tend to work with those IPO applicant companies with overall quality no worse than others. Finally, we show that to seek the greatest possible opportunistic gains and reduce reputational and legal costs, SIEVC-connected audit firms strategically choose to work with the IPO applicant companies with good observable quality and poor unobservable quality. Our findings imply that due to agency conflicts, private entities participating in co-regulation tend to seek their own benefits by helping their connected parties obtain resources. In addition, IPO applicant screening on unobservable quality aggravate agency conflicts and induce more opportunistic behavior on the part of private parties participating in co-regulation. While such opportunistic behavior weakens the fairness of resource allocation, it does not reduce the efficiency of resource allocation.     

Capturing the real value in high-tech acquisitions

Eager to stay ahead of fast-changing markets, more and more high-tech companies are going outside for competitive advantage. Last year in the United States alone, there were 5,000 high-tech acquisitions, but many of them yielded disappointing results. The reason, the authors contend, is that most managers have a shortsighted view of strategic acquisitions--they focus on the specific products or market share. That focus might make sense in some industries, where those assets can confer substantial advantages, but in high tech, full-fledged technological capabilities--tied to skilled people--are the key to long-term success. Instead of simply following the "buzz," successful acquires systematically assess their own capability needs. They create product road maps to identify holes in their product line. While the business group determines if it can do the work in-house, the business development office scouts for opportunities to buy it. Once business development locates a candidate, it conducts an expanded due diligence, which goes beyond strategic, financial, and legal checks. Successful acquires are focused on long-term capabilities, so they make sure that the target's products reflect a real expertise. They also look to see if key people would be comfortable in the new environment and if they have incentives to stay on board. The final stage of a successful acquisition focuses on retaining the new people--making sure their transition goes smoothly and their energies stay focused. Acquisitions can cause great uncertainty, and skilled people can always go elsewhere. In short, the authors argue, high-tech acquisitions need a new orientation around people, not products.     

Overlapping Membership on Audit and Compensation Committees and Financial Reporting Quality

This paper examines whether the audit committee members of a board improve financial reporting quality if they are also on their organisation's compensation committee. Audit committees are responsible for overseeing the financial reporting process of organisations and have been urged to broaden their understanding of business risk and of the incentives provided by their firms’ executive compensation structures. Acknowledging the interrelationships among executive compensation, risk‐taking and financial reporting quality, members of audit and compensation committees have been advocating more information sharing between the two committees. Using archival data from a sample of Australian Stock Exchange listed companies, and discretionary accruals as a proxy for financial reporting quality, this study finds that firms with overlapping committees have better quality financial reporting than those without such an overlap. Our evidence for this is stronger in cases where managers tend to manage earnings upwards in order to meet or beat earnings benchmarks. We also find that the beneficial effect of the existence of overlapping committees is adversely affected by the equity holdings of directors with overlapping memberships.     

Morgan Stanley Roundtable on The State of Global Private Equity

In this discussion led by Alan Jones, Morgan Stanley's head of Global Private Equity, the University of Chicago's Steve Kaplan begins by surveying 25 years of academic research on private equity. Starting with Kaplan's own Ph.D. dissertation on leveraged buyouts during the 1980s, finance academics have provided a large and growing body of studies documenting the ability of private equity firms to make “sustainable” (that is, maintained over a three‐ or four‐year period) improvements in the operating performance of their portfolio companies, whether operating abroad or in the U.S. Even more impressive, the findings of Kaplan's new study (with Tim Jenkinson of Oxford and Bob Harris of the University of Virginia) suggest that these improvements have been large enough to enable PE funds raised between 1990 and 2008 to deliver returns to their limited partners that have averaged 300 to 400 basis points higher per year than the returns to the S&P 500. And given the “persistence” of PE fund returns—the tendency of the funds of the same PE firms to show up in the top quartile of performers year after year—that Kaplan has documented in earlier work, the performance of private equity seems notably different from that of mutual funds and hedge funds, where there has been little if any consistency in the returns provided by the top performers. Following Kaplan's overview of the research, four representatives of today's leading private equity firms explore questions like the following:

• ? How do the best PE firms, after paying premiums to acquire their portfolio companies and collecting large management fees, provide such consistently high returns to their limited partners?
• ? How did PE portfolio companies perform during the last recession, when many popular business publications were predicting the death of private equity—and what, if anything, does that tell us about how private equity adds value?
• ? What can PE firms do to avoid, or at least limit the damage from, the overpricing and overleveraging that tend to occur near the end of the boom‐and‐bust cycle that appears to be a permanent feature of private equity?

As Jones notes in his opening comments, the practitioners' answers to such questions “should help investors distinguish between the alpha that the firms represented at this table have generated through active management from the ‘closet beta’ that critics say results when private equity firms simply create what amounts to a levered bet on the public equity markets.”     

Productive friction: how difficult business partnerships can accelerate innovation

Companies are becoming more dependent on business partners, but coordinating with outsiders takes its toll. Negotiating terms, monitoring performance, and, if needs are not being met, switching from one partner to another require time and money. Such transaction costs, Ronald Coase explained in his 1937 essay "The Nature of the Firm," drove many organizations to bring their activities in-house. But what if Coase placed too much emphasis on these costs? What if friction between companies can be productive? Indeed, as John Hagel and John Seely Brown point out, interactions between organizations can yield benefits beyond the goods or services contracted for. Companies get better at what they do--and improve faster than their competitors--by working with outsiders whose specialized capabilities complement their own. Different enterprises bring different perspectives and competencies. When these enterprises tackle a problem together, they dramatically increase the chances for innovative solutions. Of course, misunderstandings often arise when people with different backgrounds and skill sets try to collaborate. Opposing sides may focus on the distance that separates them rather than the common challenges they face. How can companies harness friction so that it builds capabilities? Start by articulating performance goals that everyone buys into. Then make sure people are using tangible prototypes to wrangle over. Finally, assemble teams with committed people who bring different perspectives to the table. As individual problems are being addressed, take care that the underpinnings of shared meaning and trust are also being woven between the companies. Neither can be dictated--but they can be cultivated. Without them, the performance fabric quickly unravels, and business partnerships disintegrate into rivalrous competition.     

Strategic sourcing: from periphery to the core

As globalization changes the basis of competition, sourcing is moving from the periphery of corporate functions to the core. Always important in terms of costs, sourcing is becoming a strategic opportunity. But few companies are ready for this shift. Outsourcing has grown so sophisticated that even critical functions like engineering, R&D, manufacturing, and marketing can-and often should-be moved outside. And that, in turn, is changing the way companies think about their organizations, their value chains, and their competitive positions. Already, a handful of vanguard companies are transforming what used to be purely internal corporate functions into entirely new industries. Companies like UPS, Solectron, and Hewitt have created new business models by concentrating scale and skill within a single function. As these and other function-based companies grow, so does the potential value of outsourcing to all companies. Migrating from a vertically integrated company to a specialized provider of a single function is not a winning strategy for everyone. But all companies need to rigorously reassess each of their functions as possible outsourcing candidates. Presented in this article is a simple three-step process to identify which functions your company needs to own and protect, which can be best performed by what kinds of partners, and which could be turned into new business opportunities. The result of such an analysis will be a comprehensive capabilities-sourcing strategy. As a detailed examination of 7-Eleven's experience shows, the success of the strategy often hinges on the creativity with which partnerships are organized and managed. But only by first taking a broad, strategic view of capabilities sourcing can your company gain the greatest benefit from all of its sourcing choices.