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Companies can easily underestimate the complexity and competence built into their operational processes or misread the ease with which these capabilities can be transferred to supply chain partners Maintaining strong links between newly outsourced operations and those kept in-house also can be a challenge Very often the decision to outsource one or more of your core supply chain processes will require that you develop a new core competency the ability to manage partners effectively How do you know what your core competencies are or should be Remember that all essential supply chain processes must exist somewhere within your supply chain whether inside your company or beyond your borders in the extended supply chain (the chain of chains) Review your company s basis of competition and understand the process elements that must be in place to support it Ask yourself, Is this activ-.

Over the past three fiscal years, NOPMs have been relatively steady at 1923 percent, 1891 percent, and 1955 percent, for an average of 1923 percent It the nine months ending September 30th, Citigroup s NOPM jumped to 2419 percent For our baseline valuation, we used the 1923-percent three-year average NOPM, and hope that Citigroup can continue to improve their operations as they have through the third quarter of 2002 Income Tax Rates Provision for income taxes for Citigroup averaged 353 percent over the three-year period from 1999 to 2001 We used that 353-percent rate in our baseline valuation..

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the public Internet, to load balance media servers, to allow streams to bypass faulty connections, to redistribute the load automatically when a server fails, to protect the rights of content owners using XMCL (eXtensible Media Commerce Language) technology and to provide media player software that integrates extremely well with established Web content and content-authoring tools, via JavaScript. RealNetworks has always provided software development kits (SDKs) to encourage third-party independent software vendors to incorporate RealNetworks streaming media technology into their own products. The company s attitude is that the more users of their technology that exist, the stronger the company s position in the market. So far, this strategy has served the company well. At the time of writing, RealNetworks had recently announced its commitment to adopting the MPEG-4 standard in an effort to create a single, global, streaming media format. Although the company s player supported the format, through a plug-in developed in conjunction with Envivio, when the announcement was made, encoding software and media server products did not. It will be a measure of RealNetworks commitment to see how long it will take before the MPEG-4 format is supported across all the company s products.

ity critical to competitive advantage, business growth, customer service, or superior offerings (See Figure 3-10.) If the answer to any of these questions is yes, the activity is likely a core competency and one you should keep within your organization and grow. In general, functions such as demand planning, supply-demand balancing, and supplier development need to be nurtured as core competencies because they are so dependent on current customer requirements. Product complexity and supply-base stability also play a role in determining which core competencies should be tightly held; a complex product or an unstable supply base make the transition to a third party more difficult and risky. While outsourcing providers may offer design-for-manufacturability (DFM) services, be careful what product-development activities you outsource. DFM is a critical link between the product-development function and supply chain operations. The same is true for activities associated with new product introduction (NPI). An NPI coordinator within the supply chain organization is essential. And once these skills are lost, they are extremely hard to rebuild. In the consumer products market, product development is a critical core competency. The need for a steady steam of new products in response to fast-changing consumer tastes also places tremendous pressure on the supply chain especially the purchasing function, which must keep the company aligned with the supply base at all times. Dial, the maker of soaps and other consumer products, restructured itself to better focus on its ability to develop and deploy new products rapidly. The company s management team acknowledged that an agile procurement process was a critical piece of the restructuring. Dial redesigned its overall approach to sourcing and procurement, transforming the purchasing function from a

New Investment and Depreciation A typical manufacturing company, in order to grow its business, invests a significant portion of its revenues in plant, property, and equipment Earlier in this chapter, we noted that financial companies invest very little in the way of PPE and have small depreciation charges Financial companies do invest in software to develop proprietary trading and risk management systems, and often grow by acquiring businesses in similar fields Citigroup has made significant investments over the past three years in business acquisitions $63 billion in 1999, $88 billion in 2000, and $71 billion in 2001 On average, Citigroup spent $717 billion per year or an average of 676 percent of revenues to acquire other businesses Citigroup also had capital expenditures over that period that averaged about $1.

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