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Wednesday, April 26, 2006

I got this article as a forwarded one. usually I avoid reading such messages, but this one was different and so different that I thought, "This surely deserves a place on net." So here it's:

I think we should have job reservations in all the fields. I completely support the PM and all the politicians for promoting this. Let's start the reservation with our cricket team. We should have 10 percent reservation for Muslims. 30 percent for OBC, SC/ST like that. Cricket rules should be modified accordingly. The boundary circle should be reduced for an SC/ST player. The four hit by an OBC player should be considered as a six and a six hit by a OBC player should be counted as 8 runs. An OBC player scoring 60 runs should be declared as a century. We should influence ICC and make rules so that the pace bowlers like Shoaib akhtar should not bowl fast balls to our OBC player. Bowlers should bowl maximum speed of 80 kilometer per hour to an OBC player. Any delivery above this speed should be made illegal. Also we should have reservation in Olympics. In the 100 meters race, an OBC player should be given a gold medal if he runs 80 meters.
There can be reservation in Government jobs also. Let's recruit SC/ST and OBC pilots for aircrafts which are carrying the ministers and politicians (that can really help the country.. ) Ensure that only SC/ST and OBC doctors do the operations for the ministers and other politicians. (Another way of saving the country..) Let's be creative and think of ways and means to guide INDIA forward...Let's show the world that INDIA is a GREAT country.
Let's be proud of being an INDIAN..
May the good breed of politicans like ARJUN SINGH long live...

Tuesday, March 28, 2006

Reservations Unlimited

Our great erudite representaives have yet again come up with an ingenious idea of harnessing the already much exploited strata of society. This time they are holding "reservations in private sector" as their carrot. Devil only knows what next are these great people going to offer them when next elections will be due.
The whole purpose of making certain "reservations" for a segment of society has been defeated countless times. And it's not the defeat, per se, it has also been the shameless manner in which it has been done that aggravates me et. al. Every Indian knows why reservations were made and why caste system was adopted. It was only lack of proper infrastructure to correctly assess a person's wealth (read resources) and possible misuse by wealthier upper caste people, our forefathers thought that categorization on basis of caste will be better.
As of now the system (in whatever state it may be) tries to support people of certain castes. The get free education (during my IIT days, whole of tution fee was refunded to these "deprived" guys and it was very appropriately blown off into dope, alcohol and lukhagiri); they get entered into tough institutes easily and then they enter into Government jobs easily. And now, lo & behold, they'll be in private sector also. Why? Are they mentally handicapped; an analogous form of physically handicapped quota people? No! They are not the reserved caste; they are the protected class, just like "protected industries". Just like our great leaders continue to give protection to some silly and useless industries, they continue to give protection regime to these people.
Three cheers for our Oxford and Harvard educated leaders. If this is the best thing they can think of for our country, then I really cast doubts on their ignited minds. Wonder whether Harvards and Oxfords also protects their students by extending quota system??

Wednesday, December 07, 2005

Drugs

Man’s desire to experiment new modes of pleasures can be traced back to the time when Adam took the forbidden fruit in the Garden of Eden. History says that, every culture, in various parts of the world, has used several methods to derive pleasure. However, drugs that alter mood, thought and feeling have been sought the most.
Any substance or product that is used, or intended to be used to modify or explore physiological systems or pathological states for the benefit of the recipient, is termed as a drug according to the WHO. An ideal drug is one, which has maximum efficacy with least or no toxicity and a large therapeutic index. No drug known today can be proved absolutely safe, because in practice, no drug produces only a single effect but has a spectrum of effects.
Of all the drugs used to derive pleasure, opium and its derivatives, and related synthetic compounds enjoy a unique place and have to their credit a very long history. Reference to opium dates back to 3rd century B.C. and it is believed that the Arabic physicians used it widely and introduced it to the Orientals. The Orientals used it to treat several ailments. Many others found it efficacious to relieve suffering. However, the drug fell into disrepute for a short while due to its toxic effects and inappropriate use.
Inappropriate use of a drug can be inadvertent or intentional. Though inadvertent in the beginning, it can become intentional very quickly, when the experience is pleasurable. Unrestricted availability (until early 20th Century), curiosity and influx of opium smoking immigrants from the Orient, caused accentuation of opium abuse in USA. The situation worsened with the invention of the hypodermic leading to parenteral morphine use, thereby causing a severe variety of compulsive drug use.

How people get hooked to this thing in under-privileged societies?
".....As he puffs deeply on his opium pipe in the evening gloom of histhatched-roof hut, Kya Teh is wreathed in clouds of sweet, heavy smoke.And slowly his pain disappears. The 56-year-old farmer started taking it as a form of medicine. Like most of the impoverished villagers in this remote drug-producing land in northern Myanmar, opium is the only medicine he can afford."

"....His addiction grew. Soon he was smoking three or four pipes of opium every morning, another three or fourpipes in the afternoon, and 10 or more every night. But a few years ago, Kya Teh felt a severe new sickness, a sharp pain in his lungs, and he began coughing up blood. Now his only happiness is the opium pipe. "If I don't smoke it, I feel the pain more and more," he said. "It's easier to sleep when I smoke. But then later I worry about tomorrow. I worry how I will get the opium tomorrow."

What happens when one decides to quit this thing?
".....At 28, Joe has become something of an expert at heroin detox - he's tried it nine times. Between programs, he's attempted to quit on his own. Once, when the cravings got the best of him, he tried to knock himself out by hitting his head against a brick wall. So late last year, when Joe checked himself into a New York outpost of Phoenix House, the country's largest residential rehab program, he knew exactly what to expect: the plastic cups of methadone to wear down his dependence, the sedated days and sleepless nights, the chill of the toilet seat, the sickening sight of food."

What is Methadone?
It's amber syrup that offers similar relief from opiate cravings but is highly habit-forming. First synthesized in the 1940s by German scientists and scooped up after the war by pharmaceutical giant Eli Lilly, methadone attracted attention in the addiction community in the 1960s. That's when a husband and wife team, doctors Marie Nyswander and Vincent Dole of Rockefeller University, found that with a daily dose of methadone and some counseling, opiate addicts had a much better chance of staying clean.

By law, methadone must be dispensed at special clinics and, for most patients, only in single daily doses. Widely prescribed beginning in the 1970s, methadone was medical science's first real attack on addiction, and study after study showed it prevented relapses and deaths by overdose. But public opinion swelled against it. Neighborhood groups battled methadone clinics, where patients congregate daily for their medicines. Politicians charged that junkies were merely swapping one habit for another. Methadone has been controversial among addicts, too. Some rejected it for producing a powerful sedative effect that makes it difficult for a recovering addict to perform job duties. Others took methadone illegally as a cheap tranquilizer.

The discussion
After reading all this I started asking myself, why do we blame people for getting addicted? What can Governments do to stop their citizens getting hooked to this thing? Many Governments still cannot provide basic amenities like water, electricity, and food to their citizens; then how can I believe that they provide medicines to them. And is the situation really different in developed countries? I say, No. Causes of getting addicted may be different but state of addiction is same. And the irony of situation is that policy makers and thinkers keep on discussing on putting end to "causes" while very little attention is given to end the "effect" also. We, the people, believe that due to tremendous growth in research in medicine, these old sufferings must have a medicinal solution. The truth is far from our imagination. People who want to get out of this killing habit have few options of treatment. Another angle is our viewpoint about addicts as weak people. We easily say, how difficult for anyone is to leave a habit if he exercises his willpower? Tell me, how many days one can survive without having water? Can one exercise his willpower and not sleep for 90 hours? One can exercise will-power to avoid things that one does with his will. For addicts it's the case of physiological dependence. Their bodies ache, they feel nausea, they vomit, they struggle to breathe, they bleed. And yes they do become "weak". Their sufferings are limitless.

Tuesday, December 06, 2005

Cult Brands - Zippo

I was introduced to Zippo lighters by one of my friends during my MBA days. Though I was smoking for quite a time, somehow I remained ignorant about this thing. I'd seen this lighter many a times on screen, but never known the histroy it carried. There's nothing much about the Zippo, still there's something in it. And to limit its mystic to its "click" and "thunk" would be like saying Harley Davidson's magic is only due to its patented audio rumble. Below is a compilation of some information on Zippo, that I collected from various sources. Enjoy it and become one of the Zippo Collectors.
A Zippo Lighter is a refillable, metal lighter manufactured by Zippo Manufacturing Company. They are highly collectible and hundreds of different styles and designs have been made in the seven decades since their introduction.
Zippos gained popularity as “windproof” lighters—able to stay lit in harsh weather. They became popular in the United States military, especially during World War II when all Zippo lighters produced went to the Allied war effort. Additionally, Zippos are known for the lifetime guarantee they carry: if a Zippo breaks, no matter how old, the company will replace or fix the lighter for free.
George G. Blaisdell founded Zippo Manufacturing Company (located in Bradford, Pennsylvania) in 1932 and produced the first Zippo in early 1933. It got its name because Blaisdell liked the sound of the word "zipper" (according to John Ratzenberger's television show "Made in America" and Zippo Manufacturing Company's website).
Since 1933, over 400,000,000 Zippos have been produced. After World War II the Zippo became increasingly used in advertising by companies large and small through the 1960's. Many of the early advertising Zippos are works of art painted by hand, and as technology has evolved, so has the design and finish of the Zippo. The basic mechanism of the Zippo has basically remained unchanged.
In 1986, Zippo began including a lot code on all lighters showing the month and year of production. On the left of the underside was stamped a letter A-L, denoting the month. On the right was a Roman Numeral which denoted the year, beginning with II in 1986. Thus a Zippo stamped H XI was made in August, 1995. However in 2000, Zippo altered this system, changing the Roman Numerals to more conventional Arabic Numerals. Thus a Zippo made in August 04 will be stamped H 04.

Trivia on Zippo
The highest amount paid for a Zippo lighter was $18,000. The 1933 model was purchased at the 2002 Tokyo Swap meet.
An average of 800 Zippo lighters are auctioned online every day.
There are over 4 million Zippo lighter collectors from all over the world
Original price of a Zippo lighter was $ 1.95
Basic concept of Zippo windproof lighter has remain unchanged for over 70 years
Zippo ran its first national advertisement in Esquire magazine in 1937
In late 1950s a Zippo was removed from the belly of a fish. The Zippo lit the first time.

Company Names - Part II

Daewoo - the company founder Kim Woo Chong called it Daewoo which means "Great Universe" in Korean.
Danone (Dannon in USA) - Isaac Clarassó in Barcelona made his first yoghourts with the nickname of his son Daniel
DHL - the company was founded by Adrian Dalsey, Larry Hillblom, and Robert Lynn, whose last initials form the company's moniker.
eBay - Pierre Omidyar, who had created the Auction Web trading website, had formed a web consulting concern called Echo Bay Technology Group. "Echo Bay" didn't refer to the town in Nevada, the nature area close to Lake Mead, or any real place. "It just sounded cool," Omidyar reportedly said. When he tried to register EchoBay.com, though, he found that Echo Bay Mines, a gold mining company, had gotten it first. So, Omidyar registered what (at the time) he thought was the second best name: eBay.com.
EMC2 Corporation - The Company was founded by Richard (E)gan and Roger (M)arino the E and M in EMC. There has long been a rumor that there was originally another partner (C) which provided for the third letter. Other reports indicate the C is just there to stand for Company (ie. E + M + Company = EMC). Since the company was to operate in the technology sector they adopted the EMC2 notation to refer to the famous Einstein Equation
Epson - Epson Seiko Corporation, the Japanese printer and peripheral manufacturer, was named from "Son of Electronic Printer"
Exxon - a name contrived by Esso (Standard Oil of New Jersey) in the early 70s to create a neutral but distinctive label for the company. Within days of announcement of the name, Exxon was being called the "double cross company " but this eventually subsided.
Fanta - was originally invented by Max Keith in Germany in 1940 when World War II made it difficult to get the Coca-Cola syrup to Nazi Germany. Fanta was originally made from byproducts of cheese and jam production. The name comes from the German word for imagination (Fantasie or Phantasie), because the inventors thought that imagination was needed to taste oranges from the strange mix.
Fiat - acronym of Fabbrica Italiana Automobili Torino (Italian Factory of Cars of Turin)
Fuji - from the highest Japanese mountain Mount Fuji
GlaxoSmithKline - 2000 merger of Glaxo Wellcome and SmithKline Beecham
Google - the name is a misspelling of the word googol, reflecting the company's mission to organize the immense amount of information available online.
Häagen-Dazs - Contrary to common belief, the name is not European; it is simply two made-up words meant to look European to American eyes.
HP - Bill Hewlett and Dave Packard tossed a coin to decide whether the company they founded would be called Hewlett-Packard or Packard-Hewlett.

Hitachi - old place name, literally "sunrise"
Hoechst - from the name of a district in Frankfurt
Honda - from the name of its founder, Soichiro Honda
Hotmail - Founder Jack Smith got the idea of accessing e-mail via the web from a computer anywhere in the world. When Sabeer Bhatia came up with the business plan for the mail service, he tried all kinds of names ending in 'mail' and finally settled for Hotmail as it included the letters "HTML" - the markup language used to write web pages. It was initially referred to as HoTMaiL with selective upper casing. (If you click on Hotmail's 'mail' tab, you will still find "HoTMaiL" in the URL.)
Hyundai - connotes the sense of "the present age" or "modernity" in Korean.

Thursday, December 01, 2005

Daily Quote

Successful people are very lucky. Just ask any failure.

Trivia - Comany Names (Part I)

ABN AMRO - In the 1960s, the Nederlandse Handelmaatschappij (Dutch Trading Society; 1824) and the Twentsche Bank merged to form the Algemene Bank Nederland (ABN; General Bank of the Netherlands). In 1966, the Amsterdamsche Bank and the Rotterdamsche Bank merged to form the Amro Bank. In 1991, ABN and Amro Bank merged to form ABN AMRO.

Accenture - Accent on the Future. Greater-than 'accent' over the logo's t points forward towards the future. The name Accenture was proposed by a company employee in Norway as part of a internal name finding process

Adidas - from the name of the founder Adolf (Adi) Dassler.

Adobe - came from name of the river Adobe Creek that ran behind the houses of founders John Warnock and Chuck Geschke.
Aston Martin - from the "Aston Hill" races (near Aston Clinton) where the company was founded, and the surname of Lionel Martin, the company's founder.
Audi - Latin translation of the German name 'Horch'. The founder August Horch left the company after 5 years, but still wanted to manufacture cars. Since the original 'Horch' company was still there, he called his new company Audi, the Latin form of his last name. In English it is: "listen!".
BASF - Initials of Badische Anilin und Soda Fabriken. Anilin and Soda were their first products. Badisch refers to the location in the state of Baden, Germany (Black forest region).
BenQ - Bringing ENjoyment and Quality to life
BMW - abbreviation of Bayerische Motoren Werke (Bavarian Motor Factories)
BP - formerly British Petroleum, now "BP" (The slogan "Beyond Petroleum" has incorrectly been taken to refer to the company's new name following its rebranding effort in 2000).
Cadillac - Cadillac was named after the 18th century French explorer Antoine Laumet de La Mothe, sieur de Cadillac, founder of Detroit, Michigan. Cadillac is a small town in the South of France.
Canon - Originally (1933) Precision Optical Instruments Laboratory the new name (1935) derived from the name of the companies first camera, the Kwannon, in turn named after the Japanese name of the Buddhist bodhisattva of mercy.
Cisco - short for San Francisco. It has also been suggested that it was "CIS-co" -- Computer Information Services was the department at Stanford University that the founders worked in.

Coca-Cola - Coca-Cola's name is derived from the coca leaves and kola nuts used as flavoring. Coca-Cola creator John S. Pemberton changed the 'K' of kola to 'C' for the name to look better.

Colgate-Palmolive - formed from a merger of soap manufacturers Colgate & Company and Palmolive-Peet. Peet was dropped in 1953. Colgate was named after William Colgate, an English immigrant, who set up a starch, soap and candle business in New York City in 1806. Palmolive was named for the two oils (Palm and Olive) used in its manufacture.

Bad Predictions in Business History

"I think there is a world market for maybe five computers." --Thomas Watson, Chairman of IBM, 1943

"I have travelled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won't last out the year." --The editor in charge of business books for Prentice Hall, 1957

"This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us." --Western Union internal memo, 1876.

"The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible." --A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)

"Who the hell wants to hear actors talk?" --H.M. Warner, Warner Brothers, 1927

"We don't like their sound, and guitar music is on the way out." --Decca Recording Co. rejecting the Beatles, 1962.

"Heavier-than-air flying machines are impossible." --Lord Kelvin, president, Royal Society, 1895

"Airplanes are interesting toys but of no military value." --Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre.

"Everything that can be invented has been invented." --Charles H. Duell, Commissioner, U.S. Office of Patents, 1899

"Louis Pasteur's theory of germs is ridiculous fiction". --Pierre Pachet, Professor of Physiology at Toulouse, 1872.

"The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon". --Sir John Eric Ericksen, British surgeon, appointed Surgeon- Extraordinary to Queen Victoria 1873.

"640K ought to be enough for anybody." -- Bill Gates, 1981
Link

Wednesday, November 30, 2005

Daily Quote

"Man Is An End In Himself, And Not A Slave To The Ends of Society."

Consultants - An Old Story


A shepherd was herding his flock in a remote pasture when suddenly a brand-new BMW ad vanced out of a dust cloud towards him. The driver, a young man in a Armani suit, Gucci shoes, Ray Ban sunglasses and YSL tie, leans out the window and asks the shepherd, "If I tell you exactly how many sheep you have in your flock, will you give me one?"
The shepherd looks at the man, obviously a yuppie, then looks at his peacefully grazing flock and calmly answers, "Sure. Why not?"
The yuppie parks his car, whips out his Dell notebook computer, connects it to his AT&T cell phone, surfs to a NASA page on the Internet, where he calls up a GPS satellite navigation system to get an exact fix on his location which he then feeds to another NASA satellite that scans the area in an ultra-high-resolution photo. Then young man opens the digital photo in Adobe Photoshop and exports it to an image processing facility in Hamburg, Germany. Within seconds, he receives an email on his Palm Pilot that the image has been processed and the data stored. He then accesses a MS-SQL database through an ODBC connected Excel spreadsheet with hundreds of complex formulas. He uploads all of this data via an email on his Blackberry and, after a few minutes, receives a response. Finally, he prints out a full-colour, 150-page report on his hi-tech, miniaturized HP LaserJet printer and finally turns to the shepherd and says, "You have exactly 1586 sheep."
"That's right. Well, I guess you can take one of my sheep," says the shepherd.
He watches the young man select one of the animals and looks on amused as the young man stuffs it into the trunk of his car.
Then the shepherd says to the young man, "Hey, if I can tell you exactly what your business is, will you give me back my sheep?"
The young man thinks about it for a second and then says, "Okay, why not?"
"You're a consultant," says the shepherd.
"Wow! That's correct," says the yuppie, "but how did you guess that?"
"No guessing required," answered the shepherd. "You showed up here even though nobody called you; you want to get paid for an answer I already knew; to a question I never asked; and you don't know crap about my business...

Wednesday, September 28, 2005

Value Chain Analysis

For a company to survive in today’s highly flooded markets a company must, at least temporarily, achieve a competitive advantage. There are many ways for a firm to achieve this advantage and two generic ones are: price leadership and differentiation. Price leadership is simply when a company keeps prices below those of his competitors. Differentiation occurs when a company creates a distinctive position in the market through product functionality, service, or quality.
If either of these two management strategies are chosen to be implemented by a company, value chain analysis can help the firm focus its plan and thus achieve a competitive advantage. There are two components of value chain analysis: the industry value chain and the company’s internal value chain. The industry value chain includes all of the value-creating activities within the whole industry, beginning with the basic raw material and finishing with the delivery of the product. The internal value chain of a company includes all the value creating activities within that specific firm.
The Company’s Internal Value Chain
A firm’s internal value chain includes all the physical and technological activities within the company that add value to the product. The key to evaluating a company’s internal value chain is to understand the activities that give that company a competitive advantage, and then pin point and exploit those advantages better than other companies in the industry. This evaluation is done in four steps:
1. Identify value chain analysis
Look for discrete activities. These create value in different ways. They will include different costs, different cost drivers, separable assets, and different personnel involved. For example, contrast product design activities with advertising activities.
Identify structural, procedural, and operational activities. Structural activities determine the basic economic nature of the company. Procedural activities include all aspects of the firm's operations and reflect the company's ability to carryout the processes efficiently and effectively.
Focus on structural and procedural activities. Most companies emphasize operational activities, but proponents of value chain analysis say that focus is too narrow and only deals with the short run and will not be able to give the company an overall competitive advantage.
2. Determine which activities are strategic
To determine which activities are strategic a company must identify which product characteristics are valued by existing customers.
A company should then find characteristics that it can exploit, and thereby create value for future customers. Examples of these characteristics are quality, service, or any tangible or intangible product features.
3. Trace costs to activities
The company needs an accounting technique that traces costs to different value chain activities. This is important for a company to focus on these value-added processes, so they will be able to manage them more efficiently.
4. Improve management of value chain activities
To achieve a competitive advantage a company must manage their value chain better than their competitors. This means reducing a company's total cost while enlarging the competitive advantage. This does not however mean that all costs have to be reduced, it means that all costs that do not adversely affect the competitive advantage can and should be reduced.
The Industry Value Chain
The value chain of an industry starts with the raw material manufacturer and finishes with the delivery of the final product to the customer. The key to analyzing the industry value chain is to comprehend and use the advantage of a company’s comparative strength within the industry.
All industries begin with a raw material and end with a sale to a customer. There are many links within this process. There are upstream links and downstream links. Each separate link stands for an independent, economically viable segment of the industry. To establish which links in the industry value chain are separate, assess these two questions:
1. Is there a market for the output of this link in the industry value chain, or can a market price be determined objectively?
2. Are there any companies that produce and sell only within this link of the chain?
If the answer is “yes” to either of these questions, then the industry under consideration may be a separate link in the industry value chain. Then, after the industry value chain is determined, a company should examine the relative strength of its position, in any separate link, in the industry value chain. A company’s position within the industry link can be found by using a myriad of measurements, including industry margins, return on assets, benchmarking, and capital budgeting. When a company then finds where it has deficiencies in relative industry strength, it can go back to the internal value chain activities to improve its standing with its competitors and then gain a competitive advantage.
Conclusion
Value chain analysis comes with a few challenges. First, accounting systems are not designed to assign costs to value-added activities, but when ABC is implemented that problem can be solved. Second, it can be difficult to find accurate return on sales and return on asset data to determine the value chain. But, rough estimates still can be used to give some insight into the value chain. Lastly, not only do estimates make the value chain difficult to determine, but many industries have very complex value chains. Even though there are some challenges to a value chain approach it can be a very effective strategic management tool. When competition is fierce, firms must very precisely manage their activities and costs to continue their competitive advantage.

Reconfiguring the Value Chain - Summary (Authors:Carr, L.P. and Lawler. W.C.)

This article provides an illustration of how strategic cost management can make financial analysis a more powerful decision making tool. This idea is illustrated through the examination of the Levi Strauss Company’s past initiative to “lean thinking.”
The lean initiative was part of an overall strategy of sustaining a competitive advantage. Beginning in the mid-1980s, starting with the automobile industry, companies have studied techniques on how to achieve sustained competitive advantage. Companies strove to create substantial increases in wealth by challenging the ways they implemented their strategies. One such process called value-chain-based analysis was achieved by performing these five steps:
Value: The value chain must be identified from the customer viewpoint at a disaggregated level - a specific product must be developed from the perspective of a specific target customer, at a specific price, at a specific place and time.
Value stream: Three elements of the value chain must be mapped - the physical stream originating with the first entity that supplies any raw input to the system, and ending with a specified customer (regardless of legal boundaries); the information stream that enables the physical stream; and the problem-solving/decision making stream that develops the logic of the physical stream.
Continuous flow: The focus must be on ensuring continuous flow and minimizing disruptions, such as those in a typical push-based batch-and-wait system.
Pull: To ensure continuous flow and to minimize disruptions, companies must create pull where the customer initiates the value stream.
Perfection: Finally, companies must strive for perfection by creating the virtuous circle, in which transparency in the system enables all members of the value chain to continually improve the system.
The remainder of the article examines the success Levi’s Strauss has had by implementing value-chain-based analysis and focuses of their “Levi’s Personal Pair” program which was the product of their analysis.
Levi’s Strauss was the market leader for women’s jeans in 1995. However its position as leader was coming under heavy attack. Focusing on size combination (which they offer 51), Levi’s was losing ground as more styles, more colors, and better fit became more important to its customers. Market research showed that only 24% of women were completely satisfied with their jeans purchase, at $50 a pair they were becoming a tough sell. Levi’s responded by recognizing a need to be in closer touch with their customers. They began to open stores to sell directly to their customers (rather then trough another retailer). They also implemented new technology such as EDI to help their supply chain. Unfortunately the lag time for their products was still 8 months.
Levi’s was a company that needed a way to strengthen their business. Using the value chain analysis Levi’s was a prime textbook case of a company that needed to improve its value chain in order to sustain a competitive advantage. The results of their value chain analysis are as follows:
1. Value: only 24% satisfaction rate.
2. Value stream: ROE average more then 38% lead to little improvement in their cumbersome value chain.
3. Continuous flow: 8 month lag time.
4. Pull: The customer initiated nothing, activity was driven by sales forecasts.
5. Perfection: A good ROE led management to miss opportunities in improvement.
In addition, use a pull driven distribution strategy Levi’s lost big profits when retailers had to markdown their products in order to make them more appealing. Levi’s often made good on these markdowns to their retailers. Although the opening of Original Levi’s stores helped eliminate some of these losses, it was clear Levi’s need a “better fit” with their customer.
In 1994 they were approached by Custom Clothing Technology Corp. (CCTC) with a business proposal. Specializing in client/server applications linking point-of-sale, customer-fitting programs directly with single-ply cutting programs in apparel factories, CCTC suggested a joint venture to introduce woman’s “Personal Pair” kiosks in the Original Levi’s stores. These kiosks, using a customer pull ideal, would begin the process of ordering a custom fit pair of jeans in an eight step process:
1. The Personal Pair kiosk would be a separate booth in the retail store, staffed by trained sales clerks equipped with touch-screen PCs.
2. A sales clerk would take three measurements from each customer (i.e., waist, hips and rise) and record them on the touch screen. Working from these three measurements, 4,224 combinations would be possible.
3. The computer would then flash a code corresponding to one of 400 prototype pairs that are stocked at the kiosk, and the sales clerk would retrieve the prototype pair for the customer to try on.
4. With one or two tries, the customer would be wearing the best available prototype. Then the sales clerk would take the final exact measurements for the customer (out of the 4,224 possible combinations) and note the length required (i.e., inseam).
5. The sales clerk would enter four final measurements on the touch screen and record the order. Initially, the system would be available for only the Levi’s 512 style; however, five color choices would be offered in both tapered and boot-cut legs.
6. The customer would pay for the jeans and choose either Federal Express delivery (addition $5 charge) or store pickup. A maximum three week delivery would be promised.
7. Each customer order would be transmitted by modem from the kiosk to CCTC, where it would be logged in and transmitted daily to Tennessee (Where each pair is cut, hand sewn, inspected, and packed for shipment.) Each pair would include a sewn-in bar code unique to the customer for easy reordering at the kiosk-store that stored the bar code.
8. A money-back, full-satisfaction guarantee would be provide with every order.
Levi’s cautiously accepted CCTC’s proposal, choosing to enter a test phase before proceeding with a full scale project. This was a radical new way to retail apparel and given that this model did not have an established record in retail merchandising Levi’s was cautious. Levi’s initially price each Personal Pair at a rate of $15 more than an off-the-shelf product. The program was still popular almost immediately despite the increased price. As a result of the Personal Pair concept implementation Levi’s experiences the following positive effects:
· For the styles affected unit sales were up 49%.
· Distribution costs and distribution investment per pair were virtually eliminated.
· Nonmaterial manufacturing and distribution costs were cut by 47%.
· The price increase of the Personal Pair coupled with the cost reduction resulted in a 467% increase in pretax profit (i.e., from $6 to $34 per pair).
· Asset investment was remarkably reduced: inventory of $12 per pair of woman’s jeans sold (reflected an 8-month pipeline) was reduced to $1 reflecting only raw materials requirements.
· Accounts receivable were negative since all pairs were prepaid.
· The kiosk yielded a greater than tenfold increase in profitability.
· By 1997 the program was responsible for 25% of the sales of the 30 U.S. company-owned stores.
Levi’s Strauss can attribute all of these gains to CCTC’s approach to improving their value chain. The fundamental ideal in this approach is customer satisfaction. By creating a system driven by customer demand and specific to the exact needs of their customers CCTC sold Levi’s a way of doing business that ultimately made their business leaner and more focused on fulfilling their customer’s needs. Without the help of and outside value-chain-analysis and improvement like CCTC (which was eventually acquired by Levi’s in 1995) Levi’s could have never grasped the scope of the opportunities they were missing.