TaylorMade HON Industries by gabyion


									TaylorMade &
HON Industries
Case #3 pg. 202

     Group 3
     Anthony Pemberton
     Bryan Gauthreaux
     Ryan Platt
     Daisaku Okada
     Kendra Platt
     Jordan Thompson
 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.
Company Overview
 TaylorMade-adidas Golf, one of the
  largest golf club manufacturers in the
  world, is a subsidiary of adidas-         Mark King:
  Salomon A.G. The adidas Group is          President/CEO
  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
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.

TaylorMade uses an
Extranet to enhance SCM
  TaylorMade chose an extranet to link its
   own business with that of suppliers and
  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.
Analysis of TaylorMade’s
  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.
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.
Disadvantages of
TaylorMade’s Extranet
  Time: 2 years to complete

  Cost is a major disadvantage - $10
   million to develop and secure their

  Must have thorough understanding of all
   business processes related to the supply
   chain to implement.
HON Industries

 HON began after World War II,
  when three businessmen used           HON Founder:
  scrap metal to manufacture small,     C. Maxwell
  index card file boxes to use in the   Stanley

 Founder: C. Maxwell Stanley,
  invited his brother-in-law and a
  industrial designer to join him

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
 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.

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-chain-
  planning 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
  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.

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
              $400.0                                     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%
                                  Sales                                    Dai

                             1996 1997 1998 1999 2000 2001 2002
HON Industries Inc
           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%
                  Net Income
                  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.
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
 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.
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.
    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

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