“Bring the Taxes On!” An early Christmas or Nightmare?

Conline-shopping(1)urrently, online sellers are only required by law to collect tax on the states they have a physical presence in. Online only businesses are not required to charge sales tax and consumers who don’t pay sales tax on purchases they make online are supposed to pay that tax to their state. But, that rarely happens. Only 1% of consumers actually follow that law and the rest get away with it.

Consumers enjoy the concept of buying online to avoid tax and this may be coming to an end soon if the bill for internet sales tax law is passed.  Some say, that the bill passing will be an early Christmas for Retailers that have a physical presence.  In a survey taken by an advisory firm (Alix Partners),  30% of online shoppers said they would stop shopping online and shop more at retail stores that have a physical location if all online business started taxing.  The other half of the people surveyed said the sales tax would not affect their online shopping habits. Management for retailers need to figure out the pros and cons of the sales tax online.  Some will be affected while others will not be.

Companies like Amazon were against the online sales tax bill passing at first. After years of opposition, Amazon also is supporting the bill because they are already collecting sales tax in nine of the states where it has warehouses.  While Amazon is supporting the bill now, many other online retailers are opposing the bill saying that it would hurt their business and it would be an administrative nightmare because they would have to manage to determine tax rates for different states and locations at checkout. EBay another large online retailer like Amazon, has a slightly different opinion on the tax law.  John Donahoe, the CEO of EBay  says that if congress does pass the online sales legislation, small businesses with less than 50 employees or less than $10 million in annual out of state sales should be exempt from the sales tax law nationwide.  EBay is not completely opposing the legislation, but they are saying that it should have some exemptions to it.  Americans for Tax Reform, an anti-tax group also strongly opposed the bill as well as other online retailers.

The law would only apply to online sellers that have at least $1 million in sales and do not have a physical store or warehouse.  If the bill is passes it is estimated that more than $12 billion in additional sales taxes will be collected from online purchases each year. The only concern of the bill passing is its affect on online businesses. This could be a possible nightmare for them and really hurt their business. The bill has the full support of retailers including Best Buy, Target, Wal-Mart, and Barnes and Noble because they already are required to charge tax online because they have physical presence in most states.

What could be possible techniques for online business to keep running despite them charging online tax?  Do you think that retailers with physical presence will benefit from this bill passing?

http://www.cnbc.com/id/100716012

http://money.cnn.com/2013/05/05/news/internet-sales-tax/index.html

Yahoo Or Google, Will Tumblr Change Which Website You Visit?

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For the past few years Yahoo.com has struggled to keep its website and affiliates at par with its competitors, which include Google, Ask, and Bing. Yahoo has relentlessly tried to modify its site to meet the demands of its customers, as well as retain new users to visit the once sensational site. Three years ago Yahoo completely changed its design capacity for the site, going from a search engine with many links, to a website that prioritized news feed. This new integration has helped the site reach new heights, but has still left them in the dust compared to its main competitor, Google. Around the same time as Yahoo’s new design, which helped utilization and efficiency for the website, Google purchased an even bigger venture, known as YouTube. This astounding company has helped Google become a giant in their industry. In addition, Google recently has increased its stock share to over $900 per share, making it one of the highest growing stocks of this year. Yet Yahoo is still at a measly $26 per share, but has been increasing for the better part of six months. Why has Yahoo’s stock been increasing when Google has completely overwhelmed all of its competitors?

Today the answer to that question was given. According to CNN, Yahoo has purchased Tumblr for a record $1.1 billion. Clearly Yahoo is not afraid to spend money, as a famous person once said, “you need to spend money to earn it.” By purchasing Tumblr, Yahoo hopes to compete with Google at a much more even playing field. According to Wikipedia, Tumblr “is a microblogging platform and social networking website,” which “allows users to post multimedia and other content to a short-form blog. Users can follow other users’ blogs, as well as make their blogs private.” Moreover, when Google purchased YouTube, Yahoo’s usage rate fell dramatically, and today they purchased Tumblr in hopes to change that. In addition, according to the CEO of Yahoo, Marissa Mayer, Tumblr “would allow the search engine to tap into a young, active online user base at the social network.” She goes on to say that our goal is to “engage Internet users and get them excited about using Yahoo again.”

I firmly believe that Google will always hold a slight edge over Yahoo, mainly because of its simplistic search engine. However, I do consider that this new business enterprise will dramatically increase user traffic on Yahoo’s website.  Do you think that Yahoo will finally be at par with Google, or will they continue to be an after thought in the search engine industry? Moreover, do you use Tumblr, and if so do you think this will prompt you to use Yahoo more often? These are questions I am very curious about, as I believe Yahoo will become a giant along side Google moving forward.

http://money.cnn.com/2013/05/19/technology/yahoo-tumblr/index.html

Go Ahead, Drink on the Job!

Many companies would frown upon an employee enjoying a drink during the workday but The Life is Good Company would beg to differ. The Life is Good Company is a Boston-based apparel and accessories brand that aims to be unique and fresh. They have focused their efforts on improving employee productivity in a totally new way. No they didn’t try a cash incentive program, prizes, or extra vacation days, they thought having a tavern in the office would increase productivity.

The Life is Good Company is in the process of installing a tavern in the middle of their office. The tavern will include a stage, to host live music, shuffleboard, billiards, and a basketball hoop with enough space to hold at least 260 people.  They want to have a comfortable place where employees can “put their feet up and relax” while doing their work. Hungry? Grab a booth, food, and hold an informal meeting. The boss says it’s okay.

The Life is Good Company isn’t promoting people to be drunk, driving while drunk, or alcoholism. They just want their employees to be comfortable and productive at work. They would even say having a tavern is appropriate to their brand. Most of The Life is Good Company employees often grab a drink after work, so why not let them do it at the office?

An area The Life if Good Company is trying to improve might just the area that disappears. The book states that labor productivity will increase due to “healthier, better-educated, and better nourished labor force” and poor diets are a major downfall to productivity. Having a glass of red wine a few times a week is good for your diet but will these people really be drinking red wine? Beer and hard liquor are not conducive to a healthy diet. Having a tavern in the office will encourage people to drink. Many people are social drinkers. Having a bar will distract people from working and increase socialization. Product organization may suffer because it requires management and attention.

The operations management team is not being socially responsible or ethical. The workplace has the potential to be a harmful environment to co-workers and prospective business partners. The ability to measure productivity will be increasingly hard as more employees spend time in the tavern.

Another area that could see a decline in growth is quality management. The increase in alcohol could lead to a decrease in quality. The product could suffer because a questionable product could be produced. Many people who drink think certain ideas are better than others maybe that is why a tavern is being installed at The Life is Good Company.

Do you think having a tavern in the office will increase productivity? Is having a tavern in the office ethical and socially responsible? What possible management issues will the Life is Good Company run into because of having a tavern in the office? Can a tavern in the office have a positive influence on the company’s brand image?

Sources:

Why I’m Building An Tavern at the Office : http://blogs.wsj.com/atwork/2013/05/10/why-im-building-a-tavern-at-my-company/?mod=WSJ_Management_At_Work

Be GREEN, or be SQUARE!

More and more customers now are looking for companies to be transparent, but it’s kind of hard to be competitive and sustainable at the same time.  Companies are now using value chain processes to get the job done fast.  They are not only focusing on suppliers but also taking into account By-Product-Synergy, which is “taking waste from one part of the production process and using that waste in order to generate a new product.” But how can companies become more sustainable if only “80 percent of management uses just 20% of the available opportunities?!”  The remaining 80 percent is where management needs to focus the rest of their energy.

It’s crucial for management to set goals and assess their risks, thereafter they can easily seek out opportunities for future improvement.  The first step to become a transparent company is to implement a sustainability program, and of course to develop a strategy.  The next step is to identify the companies “main processes and map data throughout the value chain.”  By using life-cycle-assessment software, the companies will have a more clear idea of how to lower their costs.

A similar approach was taken by ThyssenKrupp (FWB: TKA), a German elevator company.  Since ThyssenKrupp uses a considerable amount of steel in the manufacturing process, they thought the operational aspect had the greatest environmental impact. To their surprise,  the “company’s elevators themselves left a greater carbon footprint then their manufacture or any of the company’s other operations.”

As a result, ThyssenKrupp dramatically changed their product line after implementing a sustainability program.  They made the following changes to their products and services:

  • Elevators use LED lights which reduce energy consumption by 80%, and automatic fan and light shutoff which reduces CO2 emissions by 193,000 tons per year.
  • Getting rid of harmful chemicals used to manufacture the elevator.
  • Using petroleum based biodegradable fluid, with a vegetable-based option called “enviromax.”
  • Elevators are equipped with regenerative technology, meaning that the energy generated from the braking system is put back into the building.

In a way the article gives motivation to other companies who are taking their first steps towards becoming a transparent company.  It gives them few ideas and pointers on “unlocking supply-chain opportunities.” It’s important for different industries to decipher various ways to be more environmental friendly.  After all, there is more to being sustainable than just showing off your environmental initiatives.

Do you think ThyssenKrupp can take additional measures to make their company more sustainable?  Or better yet, are there any companies that you want to see become transparent in the near future? How would they need to change there operations?

Links:

http://www.thyssenkruppelevator.com/Sustainability/products-services

http://www.greenbiz.com/blog/2013/04/26/whirlpool-thyssenkrupp-supply-chain-transparency?page=0%2C1

http://opsmgt.edublogs.org/2012/06/28/transforming-waste-into-profit/

 

The Lululemon Management Model

Ever since I discovered Lululemon my first year out of high school, I have been obsessed with their athletic wear.  Because the clothing is way out of my price range, I will admit I only have a few items from the brand. However, the items I do own, I absolutely love. Maybe the Lululemon fit, style, and quality has stolen the hearts of all is customers (as it has mine) and that is why they have such a profitable business. However, I think much of the success is credited to their very strategic business model.

There are three distinct practices that I believe really sets Lululemon apart from its competitors. The first is empowerment. Lululemon stores are not meant to be simply a carbon copy of the some model store. Each manager of the individual Lululemon locations operates their store as if it were their own small business.  The individual stores are not micromanaged by corporate. Instead, the Lululemon is highly decentralized.

Furthermore, managers provide monthly feedback to the design departments. These correspondences between the individual store operators and the design team ensure that ideas and preferences of the managers have an opportunity to influence the next generation of products.

This brings me to my next point: the community-focused approach of Lululemon. Each Lululemon store is expected to not just merely exist in its surrounding but to integrate itself into the community. One way our local Lincoln Park location does this is by offering free yoga classes to on Saturday mornings. Hospitable services, such as the free yoga sessions, build brand loyalty while also facilitating a great service to their community.

The third distinct practice of Lululemon makes them so successful is keeping their inventory extremely scarce. Did you know that Lululemon is able to sell ninety-five percent of their inventory at full price? How many other retail stores do you know that can say that?

Lululemon never has a huge amount of inventory on site because the main distributor does not over produce their products.  But how do they know what is the ideal inventory? Well, the customers tell them. That’s right, some old fashion listening is the secret behind finding the ideal amount of inventory to have in store. The location of the folding tables is thoughtfully places neat the fitting rooms so employees are able to listen in on what their shoppers like and don’t like about the product.  If several people are complaining about an awkward fit of a particular shirt, the employees are trained to notify their manager would can avoid ordering any more of that item.  The company also is able to learn from their mistakes and therefore, if all goes as planned, avoid making such mistakes again.

http://online.wsj.com/article/SB10001424052702303812904577295882632723066.html

http://www.bcbusiness.ca/your-business/lululemon-athletica

 

 

Service Productivity

This week we learned about Service Productivity. It reminded me of one of the Finance Retreats at my last internship with the Chicago Housing Authority (CHA). The CHA provides a service to the residents of public housing and section 8 voucher holders. The retreats were led by the CFO, and designed as a way for finance staff members to leave the office building, meet at a central location for the purpose of doing team building exercises and brainstorming as a group on how to be more productive around the office. This productivity included saving the company money, how to work cross-departmental cohesively, and how to bring extra revenue into the company. One of the reasons it is so important to conserve money at the CHA, is because they are one of the few housing authorities across the country who are given money by The U.S. Department of Housing and Urban Development (HUD) to use where they need it, for things such as resident programs. Other housing authorities are told by HUD where they must spend the money.

 

We came up with the following solutions:

 

Saving the CHA money

  • We had several unused industrial sized printers sitting in the hallway. We decided to sell them and use the money to purchase new ones.
  • Instead of each group within Finance (budget, financial reporting, treasury etc.) ordering their own supplies, one person would be responsible for ordering supplies. This would cut down on extra unused supplies and double ordering.

 

Working cross-departmental cohesively

  • We determined that employees in one area of finance may not be respecting due dates, which would cause another area to be late submitting reports, in turn lowering productivity. For example, financial reporting may depend on certain numbers from Accounts Payable (AP) within a given time frame. If they don’t receive those numbers, they cannot complete their reports.

 

Bringing in additional revenue

  • The CHA is one of the largest housing authorities (HA) in the country. We decided to use our staff as consultants to advise smaller housing authorities on various issues.

 

Productivity is defined as the ratio of outputs (in this case service) divided by the inputs (labor and capital). In these three cases, the CHA is using its employees as input and the output is the savings of money and employee time, as well as revenue generated which translates into money that can be used to further service the residents.

 

What are some ways you have improved service productivity at your company?

Blackberry: A Globally Local Phenomenon?

I use my Blackberry more than I would like to admit (thanks to the curse of BBM); most Blackberry users do! Canadian company Research in Motion (RIM) has been producing the Blackberry since 1999. Today, Blackberry accounts for 3% of the total mobile sales in the world. Though this may seem to account for a small number, the Blackberry has had significant social implications in the region in the past few years. The Blackberry has redefined the way people interact not only with their phones, but also with one another. Thanks to their instant messaging platform Blackberry Messenger (BBM), RIM was able to make messaging, sharing photos and broadcasting information so easy and so accessible. In doing so, RIM was able to penetrate markets, such as ours in the Gulf, to meet market demand for easy exchange of information and media. Keeping in mind objectives and strategy in a global environment, I will explain this blackberry phenomenon in the context of operations management.

Having this in mind, it is important to understand the RIM, while initially aimed for a business customer base in North America and Europe, was able to diversify into Middle East markets, particularly in the Gulf where mobile phone usage is very high. This issue of globalizing the business explains that RIM was not only able to understand the market at hand, but also learned to improve their operations abroad to attract and retain global clients and talent. In seeing this shift in global markets and adapting to this new commercialized leisure customer base, RIM began providing better goods and services that keep in mind the cultural mindset and markets. They introduced the “display pictures”, for example, to their popular BBM application and made photo sharing instantaneous and easy. Both these features show that this interaction between foreign customers and the supplier (RIM) can lead to new opportunities and extension of the life cycle. This clearly coincides with the fact that blackberries have shown an extended growth in life cycle across Middle East markets in particular, and in doing so, they are also able to improve operations by allowing for the free flow of ideas and creation of an improved product fit for both consumer and producer.

With this new market in mind, RIM needs to think of perhaps hiring more local talent based in the Middle East, in a way to further ensure success in the region. In doing so, RIM can make its mission explicit by allowing for an employee base that understands cultural implications and habits. This could help solidify the strategy for the company and make it more concrete and attainable. By doing that, RIM can continue to produce the Blackberry, ensuring a loyal client base in the Middle East and other global markets that are consistent with its reputation, values, and its ability to generate profits by capitalizing on market and cultural trends.

With new market trends on the way, most notably Instagram which only works on the iPhone (and more recently on Android), how do you think RIM needs to respond to ensure growth, profitability and loyalty by its client base in the Gulf?

Tails: The Bahraini Pet Food Brand

“Tails” is the regions first all natural pet food brand that has been officially launched in February 2012.  Their aim was to provide healthy pet food that is free of preservatives, added colors and flavors as well as the use of 100 percent natural human grade ingredients. They club their services with the Highest Quality, the Best Customer Experience and Value for Money.

Being the first of its kind in the region, and with the general lack of data availability, i immediately thought ” How did they know that this was going to be successful?”

Leap of Faith 

i was fortunate to meet with the owners, in class we talked about all the different forecasting techniques and determined when it was best to use each technique. But what do you do if you had no history/data to use?

Well in this particular case there was no entity in Bahrain that actually registers or even keeps track of Dogs in Bahrain. The owners did alot of research and found that the only entity closest to giving them information was the airport customs office, and they only recorded how many dogs came into Bahrain and how many dogs went out. Moreover they started to get samples and estimates from vets. And the final number they came up with somehow met their expectations and they were comfortable with getting even 10% of it.

Capacity Issue

Within a four month span, sales at Tails has doubled . This led to a bottle neck in their production ( remember the paper puppet activity?) , the machines they had were not able to package and seal fast enough to meet the demand of their customers.  They tried to overcome it by cooking more on and storing it  but they did not have enough storage capacity to meet this unanticipated demand. to overcome this Tails had to quickly invest in new machines that will be able to seal and package faster in order to meet the demand of their customers, gives more flexibility on variety and size, and to start distribution to supermarkets.

Tails are slowly keeping up with their demand however it has been stressful for them because they were not able to accurately forecast.

So i leave you with a thought : how do you forecast with no data? and which forecasting method should Tails use today in order to help them predict their future sales?

 

For more information please visit www.tails.co to get your free dog food sample today!

 

 

 

Return to Sender: A Growing Liability

With the innovation in technology and services being offered by banks today it would be logical to think that the volume of physical mail being sent out will shrink substantially seeing a corresponding reduction in the amount of return mail.  However over the past year my Bank has been facing an issue of having to deal with huge amounts of returned bank statements.

There were various reasons as to why the statements were being returned; in this case it mostly attributed to a change in banking regulation-obliging banks to print statements to all deposit accounts where previously were only printed for specific accounts. With the unanticipated amounts of mail pouring in, it deemed essential to start to analyze all the different reasons to why the pieces returned and what is it costing us. What is the total operational cost of postage, printing, handling, research and re-mailing?  What about the value we lost with returned communications? The delayed or missed payments, unawareness of bank charges and the overall customer service expenses?

The bank has already approved a project to centralize, automate and monitor return mail operations. By having all statements to be printed with bar codes and returned back to a central operation that will be able to simply scan the bar codes and capture how many times the statement has returned, and to ultimately stop printing upon the third time.  We will also be able to capture all the problematic accounts and attempt to contact the customer in different methods in order to update their information and encourage them to use e-statements.

I have highlighted one small operation that possibly was not be seen to have a dramatic impact on the banks performance but it is a growing problem and may have a huge impact in the future with our customer base growing everyday. As Head of Customer Resolution I am able to see a lot of the operational and process issues we are facing with at the bank through customer complaints, and by taking this class it has stressed the importance of how reducing operations cost is the best method to optimize in an organization. I am also looking forward to learn the importance of managing quality, and conducting process redesigns and how they ultimately lead to improved efficiency, profitability and operational excellence.

This after all is my view, so do you think our Bank is on the right track with their cost management initiatives?