The Voice of VICS – 1 of 7 Don’t wait to be great… Collaborate! TM

-The VICS Monthly Newsletter

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Think like Peter Senge: Tough economic conditions require tough decisions. That may be so, but uncertain times can also force us to act hastily, and make game-changing decisions without the appropriate level of consideration for all of the possible outcomes. Thus, tough times can lead to bad decisions. Applying Peter Senge’s principles of systems thinking to the problems we face in the business world is one way to validate the decision and all of the potential outcomes that can result. Peter Michael Senge (born 1947) is an American scientist and director of the Center for Organizational Learning at the MIT Sloan School of Management. He is best known as the author of the book, The Fifth Discipline: The art and practice of the learning organization. He describes systems thinking as the process of understanding how things influence one another within a whole. Systems thinking has been defined as an approach to problem solving, by viewing "problems" as parts of an overall system. We owe the concept of the business ecosystem, in large part, to Peter Senge and his systems thinking principles. We all know the metaphor of being able to "step back" far enough from the details to "see the forest for the trees." But, unfortunately, many times we may step back and just see "lots of trees." We pick our favorite one or two ―trees‖ and focus our attention and efforts for change on those. This is even more likely in uncertain times. This concept is evidenced in the latest economic downturn. Some companies immediately began

reducing the size of their organizations, stopped investing in their business, pulled back on advertising and basically hunkered down in every way imaginable. On the other hand, there were those companies that continued to drive ahead, having faith in their products and their marketing and sales programs. While all had to experience a deterioration in sales, when the turn around began to take place, those with the ability to apply systems thinking were good to go and came out swinging.

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Joe’s Corner (Continued)

So those who applied a Systems Thinking approach and had faith in their abilities to understand their overall strengths, focused on them rather than getting caught up in the hysteria of the economic downturn.

Senge on Change Management: * The easy way out usually leads back in. (Saving your way to prosperity) Senge points out that change cannot be accomplished without the organization applying individual and organizational learning, which comes about by an encouraging management that takes a holistic view of the challenges of the situation against the strength of the organization. * The cure can be worse than the disease. The familiar solution is sometimes not just ineffective but also dangerous. The long-term, most insidious consequence of applying non-systemic solutions is increased need for more and more of the solution. While I don’t want to interject my personal views, one would have to question whether the problems with our healthcare system, the financial and credit markets, and consumer product safety (to name a few) are likely to be resolved by increasing the level of government intervention.

Senge on Business Growth: * Faster is slower. All natural systems, whether new products or entire organizations, have an optimal rate of growth that may be far slower than the fast pace managers desire. For instance, the current drive to ―perform for the quarter‖ can disrupt or break long term trends.

One of our member companies, UPS, was founded 96 years ago in a little office under a saloon in Seattle. They survived two World Wars, a depression, changing business models, and countless economic cycles. Their time horizon for determining success is probably a little longer than those companies that have bent to the pressure of quarterly earnings reports.

It’s interesting to note that most companies don’t last much longer than 40 years. The primary reason being they become comfortable with their success and revel in their financials. Unfortunately, they don’t understand that today’s solutions may be tomorrows problems. An individual, a team, an organization can never stop learning and when that happens the end is in sight.

* Dividing an elephant in half does not produce two small elephants. Systems are alive, and their character depends upon the whole. To understand difficult problems or plot strategy, you will have to see the whole system that creates the issues. For instance, when a company decides to divest itself of what it believes to be ―non-strategic‖ operations, the problem may be seen as a financial one, while the operations people may view the problem in terms of the additional cuts that will have to be made if the synergy of the ―non-strategic‖ product line is removed from the ―growth‖ businesses.

As Nabisco attempted to reinvent itself during the 80’s and 90’s, one of the many steps it took was to sell off a very profitable – but comparatively small cereal business. Consequently, the entire product portfolio was impacted as many customers were no longer able to buy in truckload quantities.

Nabisco’s logistics costs increased as the reduced volume increased overall logistics costs. This ultimately raised unit costs and made us less competitive on the shelf, as product is priced on the shelf based on how it is purchased from the supplier. This is just one example of the ―plug and play‖ acquisition and divestiture strategy that plagued the company at the time. Brands were bought and sold, and relocated seemingly at a moment’s notice and with little rationale. Had the management of the day taken a systems thinking approach and stepped back to look for the real underlying business problems, perhaps Nabisco would still exist today.

All the very best, Joe

U.S. Firms See Strong Profits

Sara Murray of the Wall Street Journal recently reported on the upswing in profits related to increased consumer purchasing across the United States.

The government, in the broadest tally of corporate earnings, said profits grew smartly in the fourth quarter as the economy rebounded from a deep recession.

Pretax profits rose 8% to a seasonally adjusted $1.5 trillion annual rate in the fourth quarter from the third quarter, the Commerce Department said Friday, as it released a slight downward revision to its estimate of fourth-quarter economic growth.

Gross domestic product, the value of all the goods and services produced by the U.S., grew at a 5.6% inflation-adjusted annual rate. The change reflected weaker than previously estimated business and

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residential investment, as construction spending declined. Economists are expecting more modest growth for the first quarter, with most estimates around 2.8%.

While conditions are clearly improving for companies, consumers still aren't yet confident in the economic recovery. An index of consumer sentiment remained flat at 73.6 in March from the prior month, the University of Michigan and Reuters said Friday. Consumers' gauge of current conditions improved slightly but their optimism about where the economy is headed declined. "It is unlikely that sentiment will improve to truly optimistic levels until robust job creation returns and home prices stabilize," said Steven Wood, an Insight Economics LLC analyst.

The 8% quarterly increase in profits, which isn't adjusted for inflation, followed a 10.8% increase in the third quarter. Profits were fueled by an increase in output, as companies replenished inventories, and little change in compensation costs, as companies got more productivity from workers.

The combination pushed pretax profits 30.6% higher than a year earlier—the biggest increase in 25

years—but from the low $1.1 trillion annual rate in late 2008, when the financial crisis mushroomed. For the full-year 2009, profits were down 3.8% from 2008.

In the fourth quarter, companies' profits from domestic operations climbed $124.7 billion, while profits from the rest of the world dropped $16.1 billion.

Rising profits are a boon for stock market investors, but not a guarantee companies will use improved earnings for big capital spending projects and hiring. "Are we going to see hiring pick up and the money start to flow through the economy?" said Joshua Shapiro, a MFR Inc. economist. "That's obviously the great hope." Still, he said, "I think they're going to be a bit cautious."

Government stimulus has been responsible for propping up much of recent demand. But recent data suggest strength in business purchases of equipment, computers and software.

After-tax profits increased 6.5% in the fourth quarter and were up 22.8% from a year ago. Taxes on corporate income rose 12.7% in the fourth quarter and were 62.1% higher than a year ago.

The increase in fourth-quarter profits was split nearly evenly between both domestic financial and nonfinancial companies. For all of 2009, however,

profits at financial companies were up $45.2 billion, compared with a $31.3 billion decline among nonfinancial businesses.

VICS Member News:

In this next series of articles, we’ve focused on recently published financial results and other newsworthy events related to several VICS member companies. We intend to periodically provide these updates and welcome input from our members.

Best Buy Offers Rosy Outlook for the Year At the beginning of April, Best Buy reported increase in expected profits, Mary Ellen Lloy and

Nathan Becker reported in the Wall Street Journal.

On a conference call Thursday morning, Chief Financial Officer Jim Muehlbauer said the strength in Best Buy's computing business was key to the fourth-quarter results and is important to the future. While the lower-margin nature of the category pressures gross margin, the high velocity of sales and efficient use of overhead means "at the operating margin line, it is much closer to the domestic company average," he said.

Mr. Muehlbauer acknowledged Best Buy's services category, which includes installation, tech support and warranties, hasn't grown as fast over the past several quarters as hardware categories. "The opportunity is to find new ways to improve these value propositions and make them more relevant to our customers," he said. Best Buy in fiscal 2011 will test new services, content and connection offerings, he said.

The consumer-electronics company had a strong holiday season, with same-store sales in December

rising above analysts' forecasts at the time, amid particular strength in sales of home-office products

and consumer electronics.

For the quarter ended Feb. 27, Best Buy reported a profit of $779 million, or $1.82 a share, up from $570 million, or $1.35 a share, a year earlier, which included 26 cents of restructuring charges. Revenue jumped a stronger-than-expected

12.4% to $16.55 billion, and same-store sales rose 7% after a 4.9% drop the prior-year period.

Same-store sales of TVs and other consumer-electronics products at Best Buy rose 4.2% in the quarter, while home-office sales jumped 22% and appliances rose 6.5%. Entertainment-software same-store sales dropped 4.9% and revenue from services, including Best Buy's Geek Squad tech support unit, fell 2.3%.

Best Buy said it will open 50 to 55 Best Buy branded large-format stores, mostly in the U.S., and up to 15 Five Star stores in China. It also plans

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up to 100 new smaller stores, primarily under the Best Buy Mobile brand in the U.S.

Polo profits up 5.5% in Q4 The New York Times reported Ralph Lauren’s Polo brand has had a substantial increase in profits, revealing the economic turn around and improvement amongst luxury purchases. Polo Ralph Lauren reported Wednesday that its fiscal fourth-quarter 2010 profits increased 5.5 percent and raised its full-year outlook. The New York-based company reported that its earnings increased to $111 million, or $1.10 per diluted share, compared with earnings of $105 million, or $1.05 per diluted share, for fiscal fourth quarter 2009. Polo Ralph Lauren’s (NYSE: RL) sales were down slightly, about 1 percent, to $1.2 billion, which the company attributed to lower wholesale sales, which dropped about 8 percent year-over-year, domestically and in Japanese markets.

Retail sales were up 8 percent, to $592 million. Sales in stores open at least a year, which includes RalphLauren.com, were up 6 percent year-over-year. RalphLauren.com sales were up 13 percent. For the first nine months of the fiscal year, earnings were up 1 percent, to $365 million, compared with the same period a year earlier. Sales declined about

4 percent, to $3.6 billion. The company reported better-than-expected sales so far this year, but anticipates sales to decline at a low single-digit rate for the full fiscal year, an improvement over previous expectations of mid-single-digit declines. Polo operates a 330,000-square-foot RalphLauren.com distribution and fulfillment center in High Point, which has more than 200 employees and handles orders for Ralph Lauren products via the Internet or by phone.

Jones Apparel profit rises more than expected Jones Apparel Group Inc., maker of Nine West shoes and Jones New York clothing, reported on its website April 29, 2010 that its first-quarter profit surged to $37.5 million, or 45 cents a share, from $300,000, or break even, a year earlier. Total revenue fell to $887.3 million from $891.1 million. Excluding store closing and other charges, the company said it would have earned 47 cents a share. Analysts, on average, estimated Jones to earn 34 cents a share on sales of $866.01 million.

"On a macroeconomic level, we are encouraged by rising consumer confidence and positive retail

trends," said Chief Executive Wesley Card. "While we believe these trends should continue, the economic environment remains unclear and consumer spending is unpredictable.

We will continue to position our core brands for growth and fill the white space in our portfolio with selected acquisitions and growth initiatives.

JCPenney Receives 2010 ENERGY STAR® Award for Sustained Excellence

The U.S. Environmental Protection Agency (EPA) has awarded J. C. Penney Company, Inc. (NYSE: JCP) with a 2010 ENERGY STAR Sustained Excellence Award in recognition of its continued leadership in protecting environmental resources through energy efficiency. This is the Company's second time to win the prestigious Sustained Excellence Award since receiving the ENERGY STAR Partner of the Year awards in 2007 and 2008. JCPenney's accomplishments will be recognized at an awards ceremony in Washington, D.C. on March 18. "JCPenney is honored for its inclusive approach to reducing energy usage throughout its entire operation by incorporating superior energy management into its overall organizational

objectives," said Gina McCarthy, EPA assistant administrator. "That is why EPA is proud to recognize JCPenney with our highest ENERGY STAR distinction

– the 2010 Sustained Excellence Award." JCPenney is credited with being the first national retailer to achieve Sustained Excellence for its comprehensive "hands-on" approach to energy management. Last year, the Company invested more than $10 million to install advanced meter technology, lighting retrofits and high-efficiency heating, ventilation and

air-conditioning (HVAC) systems in Stores across the country with nine locations utilizing solar power. In addition, JCPenney has adopted an enterprise-wide

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culture of energy stewardship that encourages every Associate to seek innovative ways to save energy. "We believe everyone has a responsibility to minimize their impact on the environment," said Myron E. (Mike) Ullman, III, chairman and chief executive officer of JCPenney. "This award is a testament to our Associates who demonstrate each

day how their individual actions and habits can have a profound effect in achieving energy conservation." Currently, 96 JCPenney stores and the JCPenney Home Office in Plano, Texas have qualified for the ENERGY STAR Building Label. The Company expects to expand the number of ENERGY STAR certifications to 200 Stores by the end of 2010.

Kimberly Clark’s Global Supply Chain Transformation

Ben Cook, Director of Global Transportation & B2B for Kimberly Clark (KCC), recently presented a case study at the University of Tennessee Supply Chain Forum. The presentation addressed Kimberly-Clark’s implementation of the Global Logistics Management (GLM) guidelines defined by the VICS Logistics Committee. Ben identified KCC’s business issues: Prior to the summer of 2008, Kimberly-Clark was experiencing double digit growth in North American import and export demand. The company lacked international shipping automation (air and ocean), was experiencing a very low on time service (51% on time delivery to customer) and a high occurrence of expedited shipments via air (>10% of total import-export freight spend). Additionally, all ocean and air invoicing was paper based and sent via mail, resulting in increased delays of payment to Kimberly-Clark’s carriers and service providers. The solution: Kimberly-Clark partnered with a 3PL (Expeditors International) and implemented the VICS Global Logistics Model (EDI 850 & EDI 315) to automate purchase order transmission, carrier booking process, ocean and air shipment tracking, shipment document imaging, and automated invoicing. The VICS Global Logistics Model provided the framework for the international transformation initiative to automate our end to end process. The VICS guidelines helped them to automate a very manual

process and provide advantaged capabilities to increase on time deliveries, reduce expedited freight

costs and increase productivity. Ben defined the implementation challenges faced along the way: Internal: Customer service buy-in to process change. Kimberly-Clark Information Technology resources to

support the Global Logistics Model setup and ongoing maintenance. External: Carrier commitment to consistently send over EDI tracking status messages (EDI 315). Customer buy-in to freight forwarder changes. In spite of the challenges, benefits realized following the 18-month implementation period have been significant both in dollar savings and service level gains. Cost savings: $3.8 million (reduced expedited freight cost, courier fees, increased low cost carrier utilization). Air freight cost reduced from 13% of total freight spend to 8% (38% year over year reduction). Primary carrier utilization increased from 82% - 97%. Service improvement: On time delivery to customer increased from 51% (2008 average) to 86% (2009 average). 67% increase in on time service. Congratulations to Ben and his team and a special thanks to KCC making the presentation available on the VICS website. Please visit www.vics.org and look for our ―VICS Committee Updates‖ section.

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The Focus on Sustainability at U Connect 2010

U Connect 2010 will provide insight into the state of sustainability as it pertains to packaging, fuel consumption, carbon emissions, and other areas where waste and inefficiency impact your business and our world. U Connect will provide the opportunity to hear from industry leaders who are at the forefront of the sustainability movement. VICS Empty Miles -A Retailer’s Commitment to the Environment and the Bottom Line This session will explore how Macy’s made a significant leap towards achieving their sustainability objectives without the huge up-front investment many ―green‖ initiatives require. Attendees will learn how the VICS Empty Miles portal works and how Macy’s and Schneider National used this simple, low-cost solution to significantly reduce environmental impact and transportation expense. Case Study: Driving Savings, Curbing Emissions with VICS Empty Miles Service™ Find out how your company can save money and be good to the environment at the same time. Major department stores are saving costs and reducing emissions by filling their return trucks by matching loads using a new service from VICS. Companies that typically ship truckloads with empty return miles can learn more as we explore a case history during this session Packaging and Sustainability Attributes This session provides an opportunity to understand what GS1 Standards are already in place or pending to support the exchange of packaging information. This background will be used to describe how businesses may effectively exchange product and packaging characteristics across the supply chain. The implications to data synchronization, the Global

Data Synchronization Network® (GDSN®) and Global Product Classification system will be considered. This detailed session is tailored to those who must understand and communicate product and packaging characteristics, together with those responsible for product design decisions. Sustainability Panel The establishment of a green economy will have a profound impact on the way we do business. Legislation such as the American Clean Energy Security Act (ACES) is placing a substantial focus on climate change. How can companies be proactive while maintaining their bottom lines? What strategies should companies enact today to remain competitive in light of impending changes to the business landscape? This panel will be a forum to discuss

these topics as well as answer questions from the audience. The End of Cheap Oil – Are You Awake? With oil prices moderating, some question the premise of a peak in conventional world oil production. The session explains why lower prices are a short term gift and why the end of cheap oil is one of those inevitable "surprises" that will change the world as we know it. The State of Sustainability – An Introduction to the Sustainability Consortium Leading consumer products companies and retailers such as P&G, Cargill, Walmart, Disney, and Unilever have partnered to work collaboratively on innovative approaches to improve consumer product sustainability. The goal of the consortium is to develop measurements of sustainability across the entire life cycle of the product including manufacture, distribution, consumer use, and post-use GDSN 2012: Upcoming Major GDSN Functionality In an ongoing effort to drive global change in packaging, leaders from many of the world’s largest consumer goods companies and major retailers have approved a suggested set of common definitions and principles for packaging in the framework of sustainability. This common language will support a global discourse on packaging in the context of environmental, economic and social impacts. Attendees will learn progress to date and what’s to come in the next phase of validating this work within real business situations. Supply Chain Visibility to Chemical Ingredients

- A Confidential Solution If your company makes, uses, or sells products which contain regulated chemical ingredients requiring special handling, storage or disposal, this session is for you. J&J and Walmart will present on how this information can be shared using the GDSN within companies and between trading partners. Attendees will learn the latest on development efforts of GS1 Standards in this area and learn the positive impact on sustainability efforts, supplementing supplier regulatory expertise, and minimizing recalls due to prohibited chemical content. To register now and learn more about U Connect 2010, visit www.uconnnectevent.org Follow U Connect on Twitter

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VICS Meetings & Events

Date 2010 Meetings/Events Location

May 10-13 PSU: Supply Chain Collaboration Program Details & Registrations

State College, PA

May 17-21 Processes and Tools for Supply Chain Success Details

University Park, PA

May 19 RFID: A Retailer’s Story today Presented by CSCMP Details & Registrations

Webcast

Jun 7 Item-Level RFID Meeting Details & Registrations

San Antonio, TX

Jun 7-10 U Connect 2010 Annual Conference

San Antonio, TX

Jun 7-11 Applying Lean Principles Across the Supply Chain Details

University Park, PA

Jun 8 VICS Board of Directors' Meeting San Antonio, TX

Jun 8 VICS Annual Achievement Awards Ceremony & Dinner Sponsored by Hewlett-Packard

San Antonio, TX

July 12-13 VICS Logistics Sub-Committee Meetings Hosted by CSCMP

Lombard, IL

Aug 23-25 PSU: Supply Chain Collaboration Program Details & Registrations

State College, PA

Sept 26-29 CSCMP Annual Global Conference 2010 San Diego, CA

Oct 20-21 VICS Board of Directors’ Meeting Hosted by Accenture

Chicago, IL

Nov 9-11 VICS CPFR® Certification Program Details

Lawrenceville,NJ

www.cpgmatters.com/vics.html

http://www.bernardsands.com/rpm.asp.

www.vics.org VICS Princeton Pike Corporate Center 1009 Lenox Dr., Suite 202 Lawrenceville, NJ 08648

Tel: 609-620-4590 Fax : 609-620-1201 Email: admin@lists.vics.org

Websites www.vics.org www.emptymiles.org

Joe Andraski President & CEO, VICS jandraski@vics.org

Jo Ann Fiordland jfiordland@vics.org