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Indirect purchases represent a large part of a company’s costs, yet many companies have neglected such expenditures, sheltering them from rigorous competitive scrutiny in favor of supplier partnerships. The authors suggest that companies should examine their indirect purchases more closely. First they delineate indirect purchases & #8212; those not directly associated with end products or services & #8212; into five major expense clusters: advertising and marketing, technology, overhead, human resources, and those specific to the business such as store fixtures or collection agencies. Three problems prevent most companies from managing these purchases effectively: (1) inadequate information & #8212; companies have confusing, inaccurate data about indirect purchases; (2) insufficient resources & #8212; the people negotiating purchases lack skill or have other incentives in making purchasing decisions; (3) improper techniques & #8212; few companies gather sufficient information or solicit competitive proposals. Kapoor and Gupta propose five approaches for improving purchasing programs that are rooted in a competitive, free-market view: 1. Measure pragmatically. Managers should be extremely selective and focused when defining pricing data for purchasing. 2. Assign resources selectively. Companies should increase the resources assigned to indirect purchasing and clearly define the roles of people assigned to administer supplier relationships. 3. Demystify business requirements. Companies must establish precise quality requirements for indirect purchases. 4. Clarify the pricing basis. Lax pricing practices work to the buyer’s disadvantage. In order to compare prices, the buyer must establish discipline in pricing by creating and enforcing a standard vocabulary. 5. Leverage the free market. Buyers must be willing to use free-market competition to reduce costs and must take business away from suppliers if necessary. The five approaches run counter to the prevailing “partnership” purchasing model, according to the authors. In a supplier partnership, they suggest, companies give up their right to investigate alternative sources by making a commitment to work with a partner through good and bad. Such partnerships may be appropriate when there are few viable alternatives or when changing suppliers would be difficult. Otherwise, they say, companies should establish free-market competition as their standard operating procedure and form partnerships only on an exception basis.

Electric utility companies will have to reinvent themselves to change from vertical to & #x201C;virtual” integration based on value networks segmented into six areas: generation, transmission, distribution, energy services, power markets, and IT products and services.

After nearly ten years of IT outsourcing, managers are beginning to look for other ways to manage IT investments. Three factors make rethinking the logic of managing IT resources important: (1) there is increasing use of a hybrid multimedia platform to link business processes with suppliers and buyers; (2) managers expect more business value from IT investments; (3) there are fundamental changes in the external market for IT products and services. Venkatraman introduces a framework, the value center, for managing IT resources. The center consists of four building blocks of value from IT resources to allow companies to balance the role of IT in today's operation with tomorrow's requirements. The cost center is the traditional way that companies have managed most IS activities. They allocate resources based on quantitative payback criteria, operate the infrastructure independent of business strategy, design the IS organization as a support unit reporting to finance, and assess it with cost-based indices. The second building block, the service center, is distinguished from a cost center in several ways. There is no presumed classification of activities into cost or service centers. A help desk may be a cost center activity or a service center activity, depending on whether the expected benefit relates to business strategy. A company can assess a help desk in terms of the degree of perceived contribution to specific business processes, rather than in terms of operating costs. The degree of service orientation further distinguishes the service center. The investment center, the third building block, has a strategic focus and tries to maximize business opportunity from IT resources. It focuses on scanning, selecting, evaluating, and transferring emerging technologies to the business. IT also licenses technology and does beta testing to create new future-oriented business capabilities. The final building block, the profit center, focuses on delivering IT products and services to the external marketplace. When a company intends to leverage its best-of-industry IT proficiency, it can go beyond licensing to create a new unit to market the expertise commercially and create new products and services. Not only a source of incremental revenue, the profit center provides valuable experience and market knowledge to IT managers. Venkatraman provides questions that business and IT managers can ask in reorienting their IT operations and managing from a value center perspective. Is the IT organization's purpose to repair current weaknesses or create new business capabilities? How much should we spend on IT to support the value center and how should we measure that allocation of resources? What should we outsource? How can we assess the value from IT resource deployment? Who has overall responsibility for the value center? The author proposes designing the IT organization as a solutions integrator to join the various components in delivering business solutions. Overall, companies need to find ways to approach managing IT resources that go well beyond outsourcing.

How can a corporate executive balance social and economic pressures when social activists and corporate investors are the same people? This is the quandary Amoco Corporation faced when investors repeatedly filed proxy resolutions requesting adoption of the Valdez Principles, ten environmental principles developed by the Coalition for Environmentally Responsible Economies (CERES). The author describes the evolution of the relationship between CERES and Amoco. He shows how Amoco responded strategically to investor activism with corporate activism. He also discusses the three factors determining a company's response to investor activism: the firm's culture, the power and influence of the group filing the resolution, and the political climate in which the resolution is filed. Ultimately, responding to investor activism becomes an important aspect of integrating political strategy into competitive strategy.

Despite the popularity of flexible manufacturing systems, managers suffer from inadequate frameworks to help incorporate flexibility into their strategic planning. Through a study of thirty-one plants in the printed circuit board industry, the authors progress toward such a framework, define types of flexibility, and examine the relationships among them. Their findings have implications for technology, production management, human resource management, supplier relationships, and product development.

A hybrid of Japanese and American parents, NUMMI provides a case study of the successful introduction of a new production system. By working on the assembly line in the NUMMI plant and interviewing hundreds of people, the authors observed the transformation of an out-of-date General Motors auto plant into the world-class assembly operation it is today. Their study has implications for other organizations that are trying to learn from each other, particularly across national borders. Their findings also show how organizational culture plays a central role in companies that are adapting to a constantly changing environment.

Some of the results of continuous improvement in just-in-time manufacturing and rapid product development have not always been favorable. As the author points out, Japan is suffering from increased traffic due to JIT deliveries, a shortage of blue-collar workers, too many product variations, overly stressed suppliers, and a lack of money for new product development. This situation offers an opportunity to companies in the rest of the world to catch up to the Japanese, modify lean production and product development to create a more balanced approach, and seek competitive advantage in new areas, for example, in more flexible automation, new materials and technologies, innovative product features, and expansion into developing markets.

The role of IT in shaping tomorrow's business operations is a distinctive one. IT has become a fundamental enabler in creating and maintaining a flexible business network. Using a framework that break IT-enabled business transformation into five levels, the author describes each level's characteristics and offers guidelines for delivering maximal benefits. He suggests that each organization first determine the level at which benefits are in line with the costs or efforts of the needed changes and then proceed to higher levels as the demands of competition and the need to deliver greater value to the customer increases.

Vertical integration is a risky strategy -- complex, expensive, and hard to reverse. Yet some companies jump into it without an adequate analysis of the risks. The authors have developed a framework to help managers decide when it's useful to vertically integrate and when it's not. They examine four common reasons to integrate and warn managers against a number of other, spurious reasons. Their primary advice: don't vertically integrate unless it is absolutely necessary to create or protect value.

Japanese success with some management practices may depend on cultural factors that are not present in the West. But that is not true as far as continuous improvement programs are concerned; CIPs were developed in the United States long before they were introduced into Japan by U.S. trainers working for the post-WWII occupation authorities. Schroeder and Robinson synthesize the fascinating history of improvement programs, from the early "awards scheme" of a Scottish shipbuilder to the present day. They propose four fundamental principles that can help managers build the competitive advantage no one can steal -- a constantly improving, highly productive, committed workforce.