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TaylorMade &

HON
Industries
Group 3
Anthony Pemberton
Anthony
Case #3 Pemberton
pg. 202
Bryan Gauthreaux
Ryan Platt
Daisaku Okada
Kendra Platt
Jordan Thompson
TaylorMade
 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.
Bryan
TaylorMade
Company Overview
 TaylorMade-adidas Golf, one of the
largest golf club manufacturers in the
world, is a subsidiary of adidas- Mark King:
TaylorMade
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
Bryan
TaylorMade
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.

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

 Cost is a major disadvantage - $10 million


to develop and secure their extranet.

 Must have thorough understanding of all


business processes related to the supply
chain to implement.

Kendra
HON Industries

 HON began after World War II,


when three businessmen used HON Founder:
scrap metal to manufacture C. Maxwell
small, index card file boxes to Stanley

use in the kitchen.


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

Bryan
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 100.
 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.

Anthony
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 Continued
 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.

Anthony
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
Sales Dai
Million
$800.0
$700.0
$600.0
$500.0
$400.0 Sales
$300.0
$200.0
$100.0
$-
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%
Thousand
Sales Dai
$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
1996 1997 1998 1999 2000 2001 2002

HON Industries Inc


Sales
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 Dai
Thousand
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$-
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.
Jordan
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
customers.
 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.
Bryan
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.
Daisaku
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