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CFO's Economic Outlook — Exporters Optimistic, Others Not
“I do not believe we can repair the basic fabric of society until people who are willing to work have work. Work organizes life. It gives structure and discipline to life.”
— Bill Clinton source: www.quotegarden.com The perceptions of chief financial officers on the economy and business prospects heavily influence corporate decision making and direction. CFO magazine's January 1, 2008, article "Business Outlook Survey" says, "...72 percent of them [CFOs] say they are less optimistic about the economy than they were last quarter, while just 9 percent are more optimistic, according to the latest Duke University/CFO magazine Global Business Outlook Survey." Surprisingly, however, CFO respondents from U.S. exporters report the fall in the dollar's value has improved overseas sales and future prospects. The article says, "The declining dollar has had some positive effects, particularly for companies with significant revenues coming from overseas. For those with foreign sales, 34 percent say the weaker dollar has helped their exports, and 35 percent say it has bolstered their competitive position abroad. Profits from foreign operations have helped support U.S. parent companies more than in past domestic slowdowns, according to 80 percent of respondents." 
Source: www.cfo.com
Corporate Real Estate Management
“The conventional definition of management is getting work done through people, but real management is developing people through work.” — Agha Hasan Abedi, President, Bank of Credit and Commerce International, Luxembourg
source: www.bartleby.com 
Source: www.vfa.com
A Template for Strategic Facilities Management
The acquisition and disposition of corporate real estate has been viewed strategically for years. Now, within the facility management function there's a move to apply the Facility Condition Index concept to methodically allocate more facility maintenance and investment dollars to the more strategically important facilities. An article in the January/February 2008 Facility Management Journal entitled "Transforming Corporate Real Estate into a Strategic Function" says, "Corporate real estate is big business. American corporations alone have more than U.S. $4 trillion in property, plant and equipment on the balance sheet, and 30 to 40 percent of that total is real estate. A single corporate real estate department may be responsible for managing strategic investments in hundreds of real estate assets-representing millions of dollars each year. To optimally manage building assets and allocate those investments appropriately, the organization needs to understand how these assets support strategic business objectives as well as their implications for financial and operational risk." "In many corporations, the capital planning cycle only looks ahead 12 to 18 months, which may result in unpleasant surprises such as spikes in required investments in building systems when renewals and replacements are needed," the piece goes on to say. The article recommends a 3-5 year planning horizon for these investments and proposes a process for planning, monitoring and budgeting for them. For instance, it says, "A pre-defined target facility condition index (FCI) was established for each facility, based on its region and the class of the building. ... a primary data center-a Class I facility-would have a target FCI of less than 2 percent-meaning the cost of all building requirements, from repairs to system renewals, should not exceed 2 percent of its replacement value."
Chuck Manula
Source: Future Pharmaceuticals
Unique Aspects of Site Selection for the Pharmaceutical Industry
In the article "Site for Sore Eyes," authored by IAMC Active member Chuck Manula and published in Future Pharmaceuticals, Manula surveys the site selection process for this industry. Focusing on the R&D function, he says, "The most important item that we look for is access to skilled labor. When people think of site selection, they immediately think of availability of land, utilities, tax issues and transportation. R&D is very different from selection of a manufacturing or distribution facility. We focus on recruitment, retention and maintenance of high-level professionals and workers [with] specialized scientific skill sets. We also look at quality of life issues. We want to roll out R&D facilities in communities that offer access to universities, because many researchers like to further their education. Another concept that is important to keep in mind is the affiliations that can be developed between R&D facilities and hospital networks for research collaborations." The author sees plenty of domestic opportunities for pharmaceutical investment. "Domestically, the real growth in R&D will be in smaller research centers. For a very long time in the pharmaceutical industry we were focused on large consolidated R&D centers. We could discover compounds and develop them at the same location, which provided efficiencies and control and drove the growth of many large sites across the country. However, due to the cost competitive nature of the business and technology advances, the large R&D centers are not as efficient and are becoming smaller, more focused and somewhat competitive with one another," he writes.
Supply Chain
“Does calling a supply chain a demand chain really change anything? I'm pretty confident that most people working in supply chain management realize the purpose of the supply chain is to meet demand.” —
No attribution
source: www.inventoryops.com 
Supply Chain: Manufacturers on the left, consumers on the far right
Source: www2.sims.berkley.edu
Industrial Company Site Selection Must Focus on the Supply Chain
Although Jean Murphy's article, "Supply-Chain Issues Move Up on Site-Selection Agenda" was written several years ago, it pounds home a point that's still important today: industrial facilities must integrate with the supply chain. To start, Murphy says, "Global supply chains are exponentially more complex and difficult than purely domestic ones. First, there are large distance and time gaps to bridge, which tend to magnify forecast inaccuracy. Then companies must deal with a variety of infrastructure, regulations, languages and cultures, all while meeting increasingly stringent demands for lowering inventory and reducing cycle times." The article's supply recommendations turn on classifying products as either functional or innovative. The author quotes Marshall Fisher as saying the supply-chain objectives for these product types are as follows: "Functional, low-profit, stable-demand products should concentrate on minimizing physical costs, while innovative, higher-profit, demand-variable products should concentrate on market availability." In conclusion, Murphy writes, "The root cause of the problems plaguing many supply chains is a mismatch between the type of product and the type of supply chain."
To view this Gantt chart, which goes with the above-described article, go to http://www.logisticsmgmt.com/contents/pdf/SampleMovePlan.pdf.
Building a New Distribution Center — The Greenfield Approach
In his article "Warehouse and Distribution Center: How to Go Greenfield," Maida Napolitano gives six detailed steps and 21 tips for laying the groundwork and overseeing this work. Here's a look at step one, which may be the toughest: "secure top-management commitment and a project budget." On this, Napolitano writes, "To maintain objectivity and reduce pressure on the project team, present your plan before any major crisis needs to be averted. [He] suggests not waiting until you are literally out of space." Step two is "Determine the best geographic area for your new project." The author says, "With multiple suppliers, coast-to-coast customers, and other DCs, this one step can get extremely complicated." To deal with the complexity, he suggests, "using software to model the network not only simplifies matters, but also allows managers to test different what-if scenarios for locating in one state versus another." The 21 tips follow the more rigorously organized and stated steps, but they're valuable just the same. Here are the first three: "[1] Show your CEO that you've explored all options. [2] Don't hesitate to hire consultants as a project partner. [3] Challenge forecasts."
Solar panels on a Staples warehouse roof
Source: www.treehugger.com
Building Sustainability into your New Distribution Center — Think Green
In his article "Beyond Green," Peter Bradley argues that integrating sustainability features into a new distribution center may be good for public relations, but it can also be a very good business decision. He covers a wide swath of green-related measures from roof-top solar panels to acquiring the highly reputed and technically rigorous LEED certification for a facility. And he gives case examples. Here's his first example: "PepsiCo and several of its subsidiaries, including Frito-Lay, have earned LEED certifications. In 2005, a newly opened Frito-Lay distribution center in Rochester, N.Y., earned a Gold certification, the second-highest award. What does it take to earn that distinction? According to Frito-Lay, the award-winning DC featured responsible site development, environmentally responsible construction management and materials, renewable energy sources, recycling programs, water efficiency, atmosphere and air-quality measures, alternative transportation for employees, and a reduction of the building's `heat island' effect." Along the same lines as LEED, other companies are participating in the Global Reporting Initiative (GRI). Bradley writes that this is "an Amsterdam-based program that is sponsored by the United Nations Environmental Program. GRI is a network of business, labor, and other groups that encourages organizations to report their economic, environmental, and social performance. Although GRI's sustainability reporting framework encompasses many types of business scenarios, companies can apply that standard to their distribution centers." ProLogis participates in GRI. The article says, "the company, which is one of the world's largest developers of distribution and logistics properties, set targets for the next four years that include use of 20 percent recycled construction materials at all new DCs; diversion of 75 percent of construction debris from disposal in landfills or incinerators; a 50-percent reduction in the use of potable water in landscape irrigation at all new developments...."
Sample GIS-generate map of a city's transportation service areas
Source: www.gis.com
GIS Value Extends to Logistics Facility Site Selection
In "Predicting the Where with Spatial Intelligence," William Holland recommends companies collect more information on where events happen and bring this to play in more of their decisions, much like financial information is commonly used. He writes, "outcome-based measures such as the revenue generated by a retail store are strongly influenced by location because location typically dictates trade area demographics, proximity to competition, transportation facilities, associated customer travel times, and other cultural and physical landscape feature relationships." Distribution center location can make a major difference in supply-chain performance, including cost and speed. As one way of integrating spatial intelligence with corporate decision making, Holland looks at the SAS Enterprise Intelligence Platform. He says, "This system takes a variety of factors into consideration, including customer location and preferences and the presence and effect of competitors. It also provides predictions of revenue and other success metrics based on location alternatives."
Schematic of time horizon for various supply-chain tasks
Achieving "Speed to Market" Is Changing DC Location Strategies
In "Distribution Center Site Selection: Where, why, and How Many?," Karen E. Thuermer writes, "shippers are under pressure to optimize their networks of distribution centers [DCs], and to do it quickly. The process usually begins by asking where, why, and how many DCs are needed. And for more and more companies, speed to market is a consideration in the answer to every one of those questions." Speed is directly related to DCs' distance from the factory and the final market. Thuermer writes, "The rule of thumb for regional DCs is that they should be within a 100-mile radius of a market's logistical center. Beyond that, the cost picture can change significantly." The key factor for DCs serving all, or major parts, of the country is different. According to the author, "Transportation accessibility plays a big role in determining whether a new DC will help a shipper meet customers' delivery requirements. For example, rail service was an important consideration when siting Nike's 2.7-million-square-foot DC in Memphis, Tenn. Much of Nike's footwear and apparel arrives from Asia via the Port of Los Angeles; from there, many shipments move by rail to Memphis, a centrally located city served by three major railroads. From Memphis, outbound shipments can reach 45 of the 48 continental United States, as well as several cities in Mexico and Canada, within two days."
Employee Relocation Issues
“The point to remember is that what the government gives it must first take away.” —
John S. Coleman
source: www.quotegarden.com 
Corporate "Temporary Assignments" — U.S. Tax Traps for Employees
Corporations are tending to use more temporary assignment job postings than in the past because the employees of today sometimes are reluctant to take the same job as a permanent posting. The issue is mostly relevant to overseas postings to less-than-desirable locations. The report "How to Avoid `Stealth Relocations' and the Potential Tax Consequences" says, "In fact, the IRS draws a distinction between "temporary assignments vs. indefinite assignments." Companies that place employees on temporary assignments that last for more than 12 months should be aware of IRS Publication 463, which states: `If an assignment is indefinite, the location of the assignment becomes the new tax home to the employee, and the employee may not deduct travel expenses while there. An assignment in a single job location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year. ... If the assignment is indefinite, the employee must include in his income any amounts he receives from his employer for living expenses, even if they are called travel allowances.'" Then, the employee could face a large and unexpected tax bill.
Russia Becoming Tough Place,
First, recent changes to Russia's visa laws make doing a corporate temporary assignment there more complicated and difficult than previously. Now, the maximum temporary stay is 180 days, but the visa holder must leave the country by 90 days and return to comply with the new regulations.
Second, Moscow apartments are very expensive. According to Global Property Guide, "Moscow is the world's third-most-expensive city in which to buy residential property; ... an apartment in central Moscow costs between $10,000 and $20,000 per square meter."
to Do Business -- Joel Parker
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