What are ERP and CRM?

ERP is a process that helps you put any and all resources involved with an organization to the best possible use. ERP has had other names in its past iterations: Materials Resource Planning and Manufacturing Resource Planning. Manufacturing Resource Planning shows that, at its roots, it was used as a tool most often in a manufacturing environment. Typically, it was used in reference to a process with several discrete operations or discrete objects, many of which can be broken down further into atomic level objects or processes. An example would be a simple wooden bar stool. A bar stool with three legs, three dowels connecting those legs at a predefined space interval, and a round wooden seat. A process might be to drill the hole for leg one into the bottom of the seat piece. There would be three similar processes like that one, one for each leg into the seat. Each leg might have a process assigned to it of drilling two holes, each hole has a depth and a diameter and an angle in reference to the leg and an angle in reference to the other legs. The finished product (bar stool) as a whole has a demand for each component (e.g., legs, screws, seat) and you have a predefined amount that is allocated to waste. Tracking all of this information, as well as tracking those times when the projected numbers fall outside of the expected ranges are all things that historically were tracked by a MRP system either in a spreadsheet, in a notebook, or in early databases (usually with homegrown applications built as a front end).

ERP methodology has grown significantly from its manufacturing roots, although many times MRP is still the basis from which the implementation of an ERP system grows. Today the concept of ERP often refers to a broad set of activities that a company or an enterprise performs, both internally and externally. The computerized system that is often referred to when discussing the management of planning of an enterprise's resources (all resources, including money, physical, and people) is an integrated solution. Such a software system is typically made up of multiple modules that interact together, share information amongst themselves and each other, and provide management with a broad, all-encompassing picture of the entire enterprise. These systems can now be used to meet needs in any industry.

Within the software is stored the information that management needs to operate its business day to day. ERP software systems break down the departmental barriers that sometimes still exist in organizations and allow the information that may have been in silos before to be shared across the enterprise. Further, it takes a process-oriented view of the organization and uses that view to allow the organization to meet its goals by tightly integrating all aspects of the organization. With ERP software, a company can better integrate its entire supply chain, automate many of its processes, and reduce its lead times and exceptions to the process along the way.

CRM is the process of finding, getting, and retaining customers. It encompasses the methodologies, strategies, and other capabilities that help a company or enterprise organize and manage its customer relationships, as well as the software tools to help achieve those ends. Today, many companies focus on the wants and needs of the customer, so the ability to track information about the customer, learn from that information, and use that information to better serve the customer is crucial. CRM helps a company learn what works and what does not. It helps the company identify the profile of the most profitable customers, gain a deeper understanding of the most and least profitable customers, and will allow the company to target the most profitable customer profile when it is searching for new business. For companies that are forming alliances with business partners, CRM is centralizing information on the customer base in a way that can be shared between partners to help to create products to better serve the end user. Before, customer-centric information was likely already stored within the company. It was unlikely, however, that this information was stored in a central location or that it was easily accessible by multiple departments therefore reporting on customer information in an enterprisewide manner was nearly impossible. If it is difficult to report on, it is likely nearly impossible to perform analysis on.

CRM will help your customer base, and your reputation within that base, by allowing faster response to customer's inquiries because the information is centrally stored and accessible by the people who are interfacing with the customer

source : Oracle E-Business Suite

Enterprise Resource Planning (ERP)

Sistem ERP adalah sebuah terminologi yang secara de facto adalah aplikasi
yang dapat mendukung transaksi atau operasi sehari-hari yang berhubungan
dengan pengelolaan sumber daya sebuah perusahaan, seperti dana, manusia,
mesin, suku cadang, waktu, material dan kapasitas.

Sistem ERP dibagi atas beberapa sub-sistem yaitu sistem Financial, sistem
Distribusi, sistem Manufaktur, sistem Maintenance dan sistem Human Resource.

Untuk mengetahui bagaimana sistem ERP dapat membantu sistem operasi bisnis
kita, mari kita perhatikan suatu kasus kecil seperti di bawah ini:

Katakanlah kita menerima order untuk 100 unit Produk A. Sistem ERP akan
membantu kita menghitung berapa yang dapat diproduksi berdasarkan segala
keterbatasan sumber daya yang ada pada kita saat ini. Apabila sumber daya
tersebut tidak mencukupi, sistem ERP dapat menghitung berapa lagi sumberdaya
yang diperlukan, sekaligus membantu kita dalam proses pengadaannya. Ketika
hendak mendistribusikan hasil produksi, sistem ERP juga dapat menentukan
cara pemuatan dan pengangkutan yang optimal kepada tujuan yang ditentukan
pelanggan. Dalam proses ini, tentunya segala aspek yang berhubungan dengan
keuangan akan tercatat dalam sistem ERP tersebut termasuk menghitung berapa
biaya produksi dari 100 unit tersebut.

Dapat kita lihat bahwa data atau transaksi yang dicatat pada satu
fungsi/bagian sering digunakan oleh fungsi/bagian yang lain. Misalnya daftar
produk bisa dipakai oleh bagian pembelian, bagian perbekalan, bagian
produksi, bagian gudang, bagian pengangkutan, bagian keuangan dan
sebagainya. Oleh karena itu, unsur 'integrasi' itu sangat penting dan
merupakan tantangan besar bagi vendor vendor sistem ERP.

Pada prinsipnya, dengan sistem ERP sebuah industri dapat dijalankan secara
optimal dan dapat mengurangi biaya-biaya operasional yang tidak efisien
seperti biaya inventory (slow moving part, dll.), biaya kerugian akibat
'machine fault' dll. Dinegara-negara maju yang sudah didukung oleh
infrastruktur yang memadaipun, mereka sudah dapat menerapkan konsep JIT
(Just-In-Time). Di sini, segala sumberdaya untuk produksi benar-benar
disediakan hanya pada saat diperlukan (fast moving).
Termasuk juga penyedian suku cadang untuk maintenance, jadwal perbaikan
(service) untuk mencegah terjadinya machine fault, inventory, dsb.

Bagi industri yang memerlukan efisiensi dan komputerisasi dari segi
penjualan, maka ada tambahan bagi konsep ERP yang bernama Sales Force
Automation (SFA). Sistem ini merupakan suatu bagian
penting dari suatu rantai pengadaan (Supply Chain) ERP. Pada dasarnya, Sales
yang dilengkapi dengan SFA dapat bekerja lebih efisien karena semua
informasi mengenai suatu pelanggan atau
produk yang dipasarkan ada di databasenya.

Khusus untuk industri yang bersifat assemble-to-order atau make-to-order
seperti industri pesawat, perkapalan, automobil, truk dan industri berat
lainnya, sistem ERP dapat juga dilengkapi dengan Sales Configuration System
(SCS). Dengan SCS, Sales dapat memberikan penawaran serta proposal yang
dilengkapi dengan gambar, spesifikasi, harga berdasarkan keinginan/pesanan
pelanggan. Misalnya saja seorang calon pelanggan menelpon untuk mendapatkan
tawaran sebuah mobil dengan berbagai kombinasi yang mencakup warna biru,
roda racing, mesin V6 dengan spoiler sport dan lain-lain. Dengan SCS, Sales
dapat menberikan harga mobil dengan kombinasi tersebut pada saat itu juga.

Sistem ERP dirancang berdasarkan proses bisnis yang dianggap 'best practice'
proses umum yang paling layak di tiru. Misalnya, bagaimana proses umum
yang sebenarnya berlaku untuk pembelian (purchasing), penyusunan stok di
gudang dan sebagainya.

Untuk mendapatkan manfaat yang sebesar-besarnya dari sistem ERP, maka
industri kita juga haurs mengikuti 'best practice process' (proses umum
terbaik) yang berlaku. Disini banyak timbul masalah dan tantangan bagi
industri kita di Indonesia. Tantangannya misalnya, bagaimana merubah proses
kerja kita menjadi sesuai dengan proses kerja yang dihendaki oleh sistem
ERP, atau, merubah sistem ERP untuk menyesuaikan proses kerja kita.

Proses penyesuaian itu sering disebut sebagai proses Implementasi. Jika
dalam kegiatan implementasi diperlukan perubahan proses kerja yang cukup
mendasar, maka perusahaan ini harus melakukan Business Process Reengineering
(BPR) yang dapat memakan waktu berbulan bulan.

Sebagai kesimpulan, sistem ERP adalah paket software yang sangat dibutuhkan
untuk mengelola sebuah industri secara efisien dan produktif. Secara de
facto, sistem ERP harus menyentuh segala aspek sumber daya perusahaan yaitu
dana, manusia, waktu, material dan kapasitas. Untuk lebih meningkatkan kemapuan
Sistem ERP perlu ditambah modul CRM, SRM, PLM dan juga Project Management.
Karena sistem ERP dirancang dengan suatu proses kerja 'best practice',
maka hal ini merupakan tantangan implementor ERP untuk melakukan implementasi
sistem ERP di suatu perusahaan.

Modul-modul Enterprise Resource Planning (ERP) Systems :

1. Item Master Management (IMM)
2. Bill Of Material (BOM)
3. Demand Management (DM)
4. Sales and Order Management (SOM)
5. Master Production Scheduling (MPS)
6. Material Requirements Planning (MRP)
7. Capacity Requirement Planning
8. Inventory Mangement (INV)
9. Shop Floor Control (SFC)
10. Purchasing Management (PUR)
11. General Ledger (GL)
12. Account Payable (AP)
13. Account Receivable (AR)
14. Cost Control (CO)
15. Financial Reporting (FIR)

sumber : http://www.erpweaver.com/

Developing a Knowledge Management Platform for Automotive Build-To-Order Production Network

Modern global companies have to build a supply chain network strategy that provides maximum flexibility and can optimally respond to changes in their environment. The emergence of automotive build-to-order production networks is one of the consequences of these changes in the automotive industry. Production networks can be seen as a step beyond the linear supply chain topography. However, when dealing with multiple organizations and multiple processes within a complicated production network, identifying and locating a member that has responsibility and/or competence in a particular part of the network can be a laborious, time-consuming process. Developing and maintaining a competence directory of all the relevant parties associated with troubleshooting and potential problem solving can significantly reduce the production lead time. Moreover, linking this directory to key decision points and frequent problems can further enhance its effectiveness. Consequently, the problem of semantic interoperability between members of such organizations is of major importance. Developing a knowledge management platform for automotive build-to-order production network proposes an approach to developing a knowledge management platform for a build-to-order production network to solve the above problem. The approach is based on application of such technologies as ontology management, context management and profiling.

Sourece

Knowledge creation in a supply chain

Knowledge creation in a supply chain aims to analyze how organizational conditions, technology adoption, supplier relationship management and customer relationship management affect knowledge creation through socialization-externalization combination, internalization (SECI) modes, and various ba, as proposed by Nonaka and Konno, in a supply chain. A qualitative inquiry with thematic analysis, which focuses on a thin film transistor-liquid crystal display (TFT-LCD) panel manufacturer and an integrated circuits (IC) packaging and testing manufacturer, is presented in order to identify how these key factors affect knowledge creation in a supply chain environment through the SECI modes and ba. The results show that these critical factors facilitate different types of knowledge conversion process in order to achieve successful knowledge creation in a supply chain. Knowledge of the significant factors that were found in this study may be applicable to countries or areas such as Hong Kong, Korea, Singapore or other developing countries, whose dominant businesses are similar to the original equipment manufacturers)/original design manufacturers in Taiwan. This paper considers the case study only as one empirical illustration of many other possible implementation processes. The study does not assume that these companies are a paradigm or that the specific situation is applicable to all other business enterprises. Future researchers interested in this field are therefore encouraged to triangulate its findings by examining variables generated from this study.

Source : Chuni Wu

How do Suppliers Benefit From Information Technology Use in Supply Chain Relationship?

Supply chain management systems (SCMS) championed by network leaders in their supplier networks are now ubiquitous. While prior studies have examined the benefits to network leaders from these systems, little attention has been paid to the benefits to supplier firms. It proposes that two patterns of SCMS use by suppliers-exploitation and exploration-create contexts for suppliers to make relationship-specific investments in business processes and domain knowledge. These, in turn, enable suppliers to both create value and retain a portion of the value created by the use of these systems in interfirm relationships. Data from 131 suppliers using an SCMS implemented by one large retailer support hypotheses that relationship-specific intangible investments play a mediating role linking SCMS use to benefits. Evidence that patterns of information technology use are significant determinants of relationship-specific investments in business processes and domain expertise provides a finer-grained explanation of the logic of IT-enabled electronic integration. The results support the vendors-to-partners thesis that IT deployments in supply chains lead to closer buyer-supplier relationships (Bakos and Brynjyolfsson 1993). The results also suggest the complementarity of the transaction-cost and resource-based views, elaborating the logic by which specialized assets can also be strategic assets.

Source : Mani Subramani

Sharing Global Supply Chain Knowledge

There are two categories of supply chain partners: those that buy and those that sell. Depending on which group they identify with, managers have different perspectives on the value of sharing critical knowledge resources with their supply chain partners. Both groups agree that sharing knowledge makes for more efficient supply chains (with lower costs and quicker speeds) and more effective organizations (with higher quality outputs and enhanced customer service). But the benefits of knowledge sharing don't always accrue equally or simultaneously to all participants. What type of information or knowledge should suppliers and buyers share with each other? How does knowledge sharing provide value to buyers and suppliers, and under what circumstances can it help both? How do cross-cultural differences between global buyers and suppliers influence the value of sharing information? To answer these questions, we studied more than 100 cross-national supply chain partnerships in the industrial chemicals, consumer durables, industrial packaging, toy and apparel industries in 19 country locations. We examined how different types of knowledge sharing can benefit buyers or sellers individually. But more importantly, we studied how knowledge sharing can enhance the performance of partnerships and build stronger supply chains in the global marketplace

Source : Matthew B Myers, Mee-Shew Cheung

Support Leaders in a Modern Workplace

Strengthening the internal communication function is a timely subject when increasingly, in my view at least, it faces some serious challenges. The two most obvious ones are the current workplace revolution we're all experiencing as we move from an industrial society to an information society, and the impact of ever-changing technology.

These two mega trends are affecting our work and the role of both senior business leaders and communication leaders in unprecedented ways.

These trends mean that senior leaders can no longer presume that "communication merely happens" by virtue of people working together to achieve agreed-on results. They also mean that senior leaders must take a much more active communication role than ever before to help explain the change and to put communication technology in its proper place, as a tool rather than a panacea.

I've been so struck by these trends that I've written a new book called The Credible Company: Communicating with Today's Skeptical Workforce.1

How to break the barrier of skepticism

My primary thesis is twofold. First, that senior leaders must acknowledge that today's turbulent change has turned their relationship with their employees upside down. Those employees, who are the means of doing business in the information age, are increasingly skeptical, if not cynical about the communication they receive at work.

That means that for company leaders not only to be credible but also to focus on improved company performance in today's global marketplace, they need to understand the changed relationship and design communication strategies that break through the skepticism that gets in the way of performance.

What they, and we as communicators, need is a robust strategic prescription that's addressed to these new issues.

Technology won't solve all problems

Second, I'm increasingly persuaded that our current love affair with technology as a seductive end rather than as a remarkable means has placed our profession at a significant crossroads.

Will we be mere purveyors of information without regard to outcomes? Will we focus on craft at the expense of balanced communication strategy? Craft is a tempting and easier alternative to the more difficult role of advocacy, education and the greater humanizing of organizational practices and values.

If they truly want to strengthen the communication process, senior leaders need to insist on a robust strategy that sees information as the raw material for today's intellectual assembly line and that recognizes the needs of the audience as the starting point and the first cause in creating that strategy. They need to recognize that face-to-face communication is the antidote to impersonal digital delivery of information and that openness is the antidote to skepticism.

They also need to insist on careful research and data gathering to identify the specific, changing needs of their own workforces and to use the marketplace as the means of rationalizing company strategy in response to the marketplace.

Finally, they must combine all of this into a communication strategy that drives the goals and objectives of the organization.

Help leaders change their view

This may be a tall order. But if we continue on our current path of using technology primarily to deliver mountains of raw information, we run the risk of "dumbing down" the workforce further and increasing the skepticism that already exists.

We need institutional leaders with the courage to tell the truth as it happens, to admit their own confusion in a complex world, and to listen intently to the needs and anxieties of their followers. We also need local interpretation by people on the ground-managers, supervisors and team leaders who understand local needs and who can translate how larger forces and events affect their teams and what they must do to adjust.

What leaders must change is their view that communication just happens in a well-run organization. Instead, they must recognize the need to make it a deliberate and accountable system, like all of the other systems and processes in the organization. The credible company and the credible leader alike will understand that if they wish to strengthen the communication process, they will demand communication strategies that efficiently move human energy in pursuit of worthy goals.

Source : Roger D'Aprix

Productivity

Industrial Engineering has traditionally concentrated on reducing direct labor costs. When industrial engineering came into existence, direct labor was typically a major cost of doing business in manufacturing, and indirect and overhead cost were often minimal. Today it is just the opposite;it is uncommon today for direct labor costs to represent 5 precent of manufactured cost and for indirect and for overhead costs to represent 50 to 80 percent of manufactured cost. Industrial Engineering emphasis and approaches have been slow in adjusting to this change in cost ratios.
Lehrer, ahead of this time, foresaw the need for a concentration of effort in productivity improvement, a concept called "continuous improvement" today. Much of the attention given today to productivity and quality improvement is consistent with his message of a quarter-century ago.
One of few recent industrial engineering text that address the important issue of successful implementation. The client change process they proposes identifies an important requirement of successful practise in industrial engineering-that a practitioner must approach a client in a way that will successfully change the client's behavior (industrial engineering is in the behavior modification business). Industrial engineering to date has been remiss in generally ignoring this requirement of successful pratice. More attention needs to be given to such aspects if our goal is to enable future industrial engineers to maximizes their acomplishments.
In the future industrial engineering becomes increasingly practiced in work team and management consensus environments. Industrial Engineers will need to be trained to both lead and function within team efforts of the future.
Block makes an excellent case for the need for all practicing industrial engineers tipe acquire three sets of required skill: technical, interpersonal, and consulting. All practicing industrial engineers are consultants. They are almost always trying to convince someone to do something; they basically make recommendations for a living. They need to learn how to do so effectively.

Transportation Scheduling of Palm Fresh Fruit Bunches (FFB) Using Linear Programming

Bin System is a system to get fresh fruit bunches transported. TBS transportation at time of low crops by using one Prime Mover to one division will make idle time of Prime Mover of very high. Lessened Prime Movers become three;it's expected idle time of Prime Mover decrease. Decreased Prime Mover will raise a delay of bin to be transported, so it is require a scheduling where idle time of Prime Mover and delay time of bin to be transported minimum.

This scheduling which is finished by using Linear Programming principle use assignation model. The reason for using that method is it can develop scheduling which idle time of Prime Mover and time delay of bin to be transported are minimum. Before conducting of scheduling, it is important to know the optimal amount of bin as well as queue analyses to know do queue in weighing-bridge influence fluency of transportation process.
The result of scheduling shows that mean idle of total time for each Prime Mover each day equal to 111 minute, mean time delay of TBS to be transported is equal to 41,8 minute and total of time required to finish the transportation for each division is 327,5 minute up to 566,3 minute.
Transportation used by Libo Transport need amount of trip PM as according to requirement of trip at selected division. While this scheduling, amount of trip conducted for each PM do not depend on requirement of trip at one particular selected division, but the amount of required trip from entire divisions. So that conducted trip each PM tend to will be the same (8trip per day).
Comparison result between transportation systems used by Libo Transport with this transportation scheduling can be concluded that at the time of low crop amount of bin and required Prime Mover can be lessen. Reduction of one Prime Mover will cause arise of delays of bin to be transported. If delay of TBS counted since TBS reside in TPH up to unloading in loading ramp hence delay of TBS the biggest becouse of existence of delay of bin to be transported is equal to 148 minute added again with trip time, queuing up and unloading in loading ramp equal to 26 minute, is so that got total of time equal to 228 minute. the delay admit able to tolerate because the delay less then 8 hour.

Total Quality Management

Total Quality Management is a management philosophy concerned with broad-based, continuous quality management throughout an organization. TQM is also difficult to define, which is typical of an emerging subdiscipline. Quality has been increasingly popular stated objective of organizations during the past half-century.
Inspection came first and then quality control (QC), quality assurance (QA), product assurance (PA), total quality control (TQC), and finally total quality management (TQM).

Statistical Process Control (SPC)-the application of statistics to quality control.

Quality Assurance-quality control, but including sufficient process analysis and administrations are met.

Product Assurance-quality assurance that recognizes the need for and extends the search for quality solution is production the product design, which is the primary source of most quality problems.

Total Quality Control-product assurance, including a commitment to continuous improvement employing participative management, and making the line organization and supplier primaliry responsible for quality performance.

Total Quality Management-total quality control, including continuous review ad assessment of all operational and management policies, procedures, and practices, to perfect quality performance in meeting customer needs.

In each progression, the role of quality control was broadened to take on a greater responsibility. TQM includes any aspect of the product, process, product design, and the management and control systems that has any potential effect on product quality. TQM in fact has only modestly extended the technology of quality control. what it has done is stressed the need to examine how we do business and how we manage our operations. TQM is more revolution in management than a revolution in quality control.
Most of the original QC statistical techniques still apply, but they are employed in a more rational management context. Quality control is now a management practice of inclusion, whereas in years past it was a plant activity of restricted inclusion-only quality control personnel were permitted to do quality control. A few f the TQM concept are summarized below :

1. Adoption of kaizen (improvement) within our industrial culture.
2. Do it right the first time
3. Recognition that management is the problem and needs to be addressed.
4. Quality control is a production responsibility.
5. Discipline
6. Recognition that for the last decade in particular, while American management has been chasing "quality" as an end in itself, the Japanese industrial culture has been addressing quality and productivity improvement, and more recently, responsiveness.

There reason to believe that TQM is not just a passing "silver bullet" and will, in fact, become a continuous improvement element of our future industrial and government culture.

Markov decision models for the optimal maintenance of a production unit with an upstream buffer

We consider a manufacturing system in which a buffer has been placed between the input generator and the production unit. The input generator supplies at a constant rate the buffer with the raw material, which is pulled by the production unit. The pull-rate is greater than the input rate when the buffer is not empty. The two rates become equal as soon as the buffer is evacuated. The production unit deteriorates stochastically over time and the problem of its optimal preventive maintenance is considered. Under a suitable cost structure it is proved that the optimal average-cost policy for fixed buffer size is of control-limit type, if the repair times are geometrically distributed. Efficient Markov decision process solution algorithms that operate on the class of control-limit policies are developed, when the repair times are geometrical or follow a continuous distribution. The optimality of a control-limit policy is also proved when the production unit after the end of a maintenance remains idle until the buffer is filled up. Furthermore, numerical results are given for the optimal policy if it is permissible to leave the production unit idle whenever it is in operative condition

Source: A Pavitsos, EG Kyriakidis. Computers & Operations Research 2009

A Call for an "Asian Plaza"

From 1995 to early 2002. the dollar rose by a trade-weighted average of about 40 percent. Largely as a result, the U.S. current account deficit grew by an average of about $70 billion annually for ten years. It exceeded $800 billion and 6 percent of GDP in 2006. This posed, and continues to pose, two major consequences for the world economy.

The first was the risk of international financial instability and economic turndown. To finance both its current account deficit and its own large foreign investments, the United States had to attract about $7 billion of foreign capital every working day. Any significant shortfall from that level of foreign demand for dollars would drive the exchange rate down, and U.S. inflation and interest rates up. With the U.S. economy near full employment but already having slowed, the result would be stagflation at best and perhaps a nasty recession.

The current travails of the U.S. economy are clearly related to these imbalances. The huge inflow of foreign capital to fund the external deficits held interest rates down and contributed significantly to the housing bubble that triggered the financial crisis and economic turndown. The sizeable slide of the dollar has indeed added to price increases, notably of oil as the producing countries seek to counter the losses it causes for their purchasing power, and thus greatly complicates the management of monetary policy as it tries to prevent a recession. The world economy is also adversely affected through the impact on other countries, as their currencies rise and they experience significant reductions in the trade surpluses on which their growth had come to depend.

Second is the domestic political risk of trade restrictions in the United States and thus disruption of the global trading system. Dollar overvaluation and the resulting external deficits are historically the most accurate leading indicators of U.S. protectionism because they drastically alter the domestic politics of the issue, adding to the pressures to enact new distortions and weakening pro-trade forces. These traditional factors are particularly toxic in the current context of strong anti-globalization sentiments and economic weakness. The spate of administrative actions against China over the past several years, and the numerous anti-China bills now under active consideration by the Congress, demonstrate the point graphically since China is by far the largest surplus country and its currency is so dramatically undervalued.

The U.S. current account deficit does not have to be eliminated. It needed to be cut roughly in half, however, to stabilize the ratio of U.S. foreign debt to GDP. That ratio was on an explosive path, which would have exceeded 50 percent within the next few years and an unprecedented 80 percent or so in ten. Avoiding such outcomes required improvement of about $400 billion from the levels reached by 2006.

I and colleagues at our Peterson Institute for International Economics have been pointing to these dangers since the end of the 1990s, and calling for corrective action that would include a very large decline in the exchange rate of the dollar. We were confident that such a decline would, as in the past, produce a substantial turnaround in the U.S. external position and it is now doing so. The current account deficit has fallen by more than $100 billion and is likely to drop by another $100 billion or so over the next couple of years. The fall of the dollar by 25-35 percent over the past six years, depending on which index is used, has sharply increased the international competitiveness of the U.S. economy. Exports have been growing at more than 8 percent annually for the past four years and by about 1 2 percent for the last two. Especially with the recent slowdown in U.S. growth, they are now expanding four times as fast as imports.

The internal corollary is of course that U.S. domestic demand, initially residential investment but now also con- sumption, is rising more slowly than output. This inevitable reversal, after a decade in which internal demand climbed more sharply than production, means that the improving trade balance is cushioning the aggregate U.S. slowdown to an important extent. We are in fact experiencing the first episode of "reverse coupling," through which the rest of the world continues to expand and pulls up the United States rather than being devastated by its turndown. This is an early indication of the shift in global economic weights, with the rapidly growing emerging markets now accounting for almost half of world output, as well as a timely unwinding of the chief global imbalance of the early twenty-first century.

THE CURRENT AGENDA

Even on this modestly optimistic prognosis, however, the U.S. deficit will remain too large. The dollar needs to fall by another 5-10 percent to cut the imbalance to a sustainable 3 percent of GDP. This is one of the three key factors that underlie the current set of imbalances that should now be addressed by global economic policy.

The second factor is the continuing surge of China's global current account surplus. That imbalance reached about $400 billion in 2007 and, while growing more slowly in the future, is likely to reach $500 billion by next year. It will thus be almost as large as America's global current account deficit in absolute terms in an economy about one-third the size of the United States. The surplus exceeds 10 percent of China's GDP, an unprecedented level for the world's largest exporting nation. The Chinese authorities have let their currency rise more rapidly against the dollar over the past few months, and continued appreciation at that pace for another two or three years could cut their surplus to a manageable level, but the renminbi has still not climbed at all against a trade- weighted average of the currencies of its main trading partners since the dollar peaked in early 2002 and its own surpluses started to climb.

The third factor is the creation of the euro, which provides a real international monetary rival for the dollar for the first time in almost a century. The dollar has been the world's dominant currency since the abdication of sterling, around the time of the First World War, primarily because it had no competition. No other currency was based on an economy and financial system that even approached the size of the U.S. economy or its capital markets, and thus none could even begin to challenge the dollar in international finance. Former German Chancellor Helmut Schmidt used to assert correctly that the deutschemark, the world's second leading currency for most of the postwar period, could never rival the dollar because "West Germany was the size of Oregon."

The creation of the euro changes all that. The European Union as a whole, and even the slightly smaller Euroland, has an economy about as large as the United States and exceeds U.S. levels of both external trade and monetary reserves. The euro has already outstripped the dollar in terms of currency holdings around the world and denomination of private bond flotations.

The dollar will obviously remain a major international currency and it may be some time before the euro overtakes it, if it ever does so. But we should expect a steady and sizable portfolio diversification from dollars into euros as private investors, central banks, and sovereign wealth funds seek to align the currency composition of their assets with the new structure of the world economy and global finance. One result will be steady upward pressure on the euro, and downward pressure on the dollar, in the exchange markets over the longer run. A somewhat similar portfolio adjustment took place from yen into dollars during the early 1980s, after Japan finally lifted its controls on capital outflows, adding substantially to the upward pressure on the dollar during that period.

A PROPOSED RESPONSE

The result of these developments is a series of imbalances, some old and some potentially new, that create major risks for the world economy, international financial stability, and the trading system (due to the protectionist impact of large currency overvaluations). They call for urgent new policy initiatives by the G7, the International Monetary Fund, and probably new groupings of key countries that reflect the rapidly evolving power structure of the global economy.

First, there is now a substantial risk of a free fall of the dollar. Its sizable depreciation over the past six years has been gradual and orderly, and it is approaching an equilibrium level. As often happens in the last stages of a major currency swing, however, like the dollar's upward overshoot in 1 984-85 and downward overshoot in 1995, that decline could now accelerate.

Both growth differentials and interest rate differentials have moved sharply against the dollar and are likely to continue doing so for a while. As noted, the current account imbalances remain too large and the maturation of the euro creates an additional incentive for shifts out of the dollar. Perhaps even more importantly, the acute slowdown in U.S. productivity growth undercuts the chief rationale for the strong dollar of the second half of the 1990s, and the advent of stagflation conjures up images of the 1970s, which witnessed three sharp dollar declines - including in 1978-79 its closest approximation to date of a "hard landing."

The G7, in conjunction with the major Asian economies, thus needs to be ready with a contingency intervention plan to limit the pace (and perhaps extent) of dollar decline if a free fall begins to eventuate. They should not seek to block the further realignment of exchange rates that is needed to complete the adjustment process, especially against the Asian currencies as elaborated below. However, dollar depreciation of excessive speed and magnitude could exacerbate the present economic weaknesses in both deficit and surplus countries: raising inflation and interest rates in the United States, perhaps sharply, and weakening export and overall growth in Europe, Canada. Australia, and others. In the present fragile environment, it could also ignite another round of global financial turmoil. The results could be sufficiently severe to tip the current global slowdown into a world recession.

It should in fact be simple for the G7 along with the key Asians, most of whom are already intervening substantially, to agree to moderate the pace and amplitude of the dollar's final decline. One would indeed assume that the needed contingency plans have already been prepared. However, the failure of these same countries to anticipate and respond cooperatively to the current financial crisis generates little confidence in their ability to work together even when the benefits of doing so are blindingly obvious. A new initiative on this front, orchestrated particularly by the United States and Euroland as the issuers of the world's two key currencies, is likely to be necessary.

Second, the remaining decline of the dollar needs to be steered in geographically appropriate directions. It should take place, wholly or very largely, against the renminbi and the currencies of other Asian countries along with a number of oil exporters. These countries are running most of the counterpart surpluses to the U.S. deficit, and piling up massive foreign exchange reserves, and the International Monetary Fund has recently certified that most of them enjoy the option of expanding domestic demand to offset the adverse growth impact of declining trade surpluses.

If these surplus countries continue to resist significant appreciation of their exchange rates, the counterparties to the dollar decline will be the currencies (mainly of Euroland, the United Kingdom, Canada, and Australia) that have already risen substantially and whose countries are not running substantial (if any) surpluses. The result would be the creation of sizable new imbalances that would produce new problems for the world economy and, due to the protectionist impact of large currency overvaluations, for the already-beleaguered global trading system. In the meantime, further increases in the Chinese (and other Asian and oil producer) surpluses, coupled with the declining U.S. deficit, will place considerable pressure on the trade positions and growth prospects of the rest of the world.

There is no effective monetary coordination, or even cooperation, among the Asian economies despite their Chiang Mai Initiative and the swap agreements that they have arranged over the past few years. Hence any individual Asian country understandably fears that permitting its own currency to appreciate unilaterally could undercut its position against its neighbors and chief competitors, as has in fact happened to Korea since it let the won rise sharply. This collective action problem can be solved only by an Asian Plaza Agreement, or some informal equivalent, through which the main countries in the region agree to let all their currencies rise more or less in tandem with the renminbi once it is permitted to strengthen substantially. Such an agreement would make an important difference: if all the major East Asian currencies (including the yen) moved together, they would climb by trade-weighted averages of a very manageable 12-15 percent each even if they all appreciated by 30 percent against the dollar.

The International Monetary Fund should take the lead in forging such an "Asian Plaza." Now that Euroland has joined the United States in sharply criticizing China's huge surpluses and massive intervention to limit the rise of the renminbi, and especially as Asian and developing countries such as India and Mexico have expressed similar alarms, the International Monetary Fund should be able to forge a sufficient consensus to do the Asians the great favor of enabling them to act together on this issue. A dividend for the International Monetary Fund should be enhanced status in Asia and thus a major deterrent to any future consideration of a rival Asian Monetary Fund.

The third needed initiative would reinforce the first two but address as well the secular impact of the advent of the euro as a global key currency: creation of a Substitution Account at the International Monetary Fund to avoid some of the exchange-rate impact of dollar diversification by providing an off-market alternative for its realization. Such an account, which was actively negotiated and almost came into being during an earlier bout of dollar diversification in the late 1970s, would accept unwanted dollars from official holders in return for Special Drawing Rights at the Fund. The investors in the account would receive a widely diversified and highly liquid asset with a market interest rate while protecting the value of their (very large) remaining dollar assets. The Euroland countries would avoid additional appreciation of their currency. The United States would avoid excessive weakness of the dollar. The International Monetary Fund would gain a new lease on life.

Such an initiative should thus have widespread appeal and all parties should be willing to use part of the International Monetary Fund's large gold holdings to protect the account against valuation losses if the dollar were to fall further in the future, which was the chief sticking point during the previous negotiation. Since the dollar is probably near its lows, at least for a considerable time, a rebound that would instead generate sizable profits for the Substitution Account over the next decade or so is in fact more likely - as would have occurred had it been agreed in 1980.

CONCLUSION

The partial and continuing correction of the world's previously dominant imbalance, the U.S. current account deficit, highlights and indeed exposes several other actual or potential imbalances that pose major risks and must now join it at the forefront of the global policy agenda: avoidance of a free fall of the dollar, correction of the huge Chinese surplus (and other Asian and oil surpluses), the related prevention of a building of new deficits in Europe and other areas where currency appreciation may go too far, and the exchange rate impact of the advent of the euro as a global rival to the dollar.

Different groups should take the lead in addressing each of these problems. The United States and Euroland should devise the contingency plans to counter a free fall of the dollar against the euro, and spur the initial negotiations to create a Substitution Account to limit the market impact of diversification from dollars to euros. The Asians should work out a coordinated realignment of their currencies against the dollar. The International Monetary Fund is the chief institution to implement most of these plans.

This would also be an ideal agenda for the "new G5" recently created by the International Monetary Fund to conduct its revived multilateral surveillance program. The new group includes China and Saudi Arabia, for the oil exporters, as well as the United States, Euroland, and Japan. It could seize the moment to replace the G7 as the key steering committee for the world economy, greatly strengthening the position of the convening International Monetary Fund in the process. A failure to pursue all three components of the strategy will leave the world at substantial risk in the period ahead and deepen the threats to the world economy that are posed by the current financial crisis.

Source: C Fred Bergsten, The International Economy 2008

5 Steps to Creating a Forecast

A sea captain would not try to sail the Atlantic on a cloudy day without a navigational system. Likewise, a healthcare financial manager should always use a reliable forecasting system when evaluating his or her organization's performance. Simple average calculations or untested business targets that provide general direction aren't enough; financial managers need to be able to identify potential challenges, just as a navigation system would identify open-sea hazards. Yet forecasting is not an idea that should be dismissed out of fear of complex spreadsheets and mystical practices of statisticians and PhDs.

Just as ship captains today use powerful navigational systems to plot, monitor, and adjust their voyage, healthcare financial managers can leverage advanced forecasting techniques to better plan, manage, and adjust the decisions that will help them achieve their performance goals. Although an introduction to forecasting warrants a much larger discussion, this article outlines the major steps and considerations that a healthcare manager should address when embarking upon forecasting.

Step 1. Establish the Business Need

Healthcare financial managers need to clearly understand how their forecast will influence business planning and decisions within their organization. Without this important understanding, the resulting effort will very likely produce adverse results. For example, many business managers rely on monthly cash forecasts. These are used by collections managers for setting monthly cash collection goals, by finance to schedule capital expenditures for clinical equipment, and by staffing managers for their budgets.

Those are just a few examples; actually every employee walking through the halls of a hospital is a knowing or unknowing stakeholder in a forecast. Imagine if the cash forecast wasn't in synch with business expenses-the results on reserves could be disastrous. To establish the business need, these key questions should be answered:

* What decisions will the forecast influence?

* Who are the key stakeholders?

* What metrics are needed and at what level of detail?

* How far forward should the forecast project in terms of years, months, weeks, or days?

* How will accuracy be measured, and what is the acceptable level?

* What is the impact of under- and overcasting?

The results of forecasting a metric, whether they include revenue, patient visits, or uninsured bad debt, are always needed to support many organizational decisions. To best answer the above questions, the healthcare financial manager needs to ensure that the forecasting efforts meet organizational needs.

Once these questions have been answered, it is important to identify the potential drivers of a forecast. For example, gross revenue is driven by a number of factors throughout the organization from clinical to financial to strategic. Furthermore, each driver can be grouped into internal factors and external (exogenous) factors.

Healthcare organizations can find internal factors like those shown for key hospital revenue drivers in the sidebar above quantified within their own data. As healthcare organizations adopt more sophisticated techniques for forecasting, they should advance their models to consider key market and strategic business influences like those shown in the sidebar below.

Step 2. Acquire Data

For each business driver and influencing factor, the typical forecasting effort should use at least two years, and ideally up to five years, of historical data. When forecasting efforts have short time horizons in small time periods, fewer data can be used. To collect the most accurate and robust data sets, all available data sources, such as multiple healthcare information systems (HIS), spreadsheets, small departmental databases, and/or an enterprise data warehouse, should be used. By sourcing from multiple areas, differences in organizational behavior can be balanced out to yield the best data set.

All data should be drawn incrementally in their pure form from available data sources to build up the needed accuracy and completeness. To ensure the richest representation of historical events, the data should not be altered and quality issues should be addressed sooner in the process rather than later. A common challenge a hospital may face in forecasting is the practice of purging of aging trial balance data from an HIS after one or two years. This common practice makes accurate forecasting very difficult. Hospital financial managers need to review purging policies or acquire tools to ensure historical data are available for budgeting and planning.

Collecting exogenous data often requires involving third-party data sources. Several potential sources for external data exist in free public sources, such as census data, the Centers for Disease Control and Prevention, and the Centers for Medicare and Medicaid Services (CMS), as well as private information firms. Financial managers need to find the optimal source that can provide reliable, high-quality data that can be incorporated into their data structures. In fact, incorporating third-party data can provide valuable benchmarks later in the analysis.

Once the data are collected, it is important to ensure they are clean. Cleaning data often requires more effort than developing the forecast. One of the most efficient ways to perform this process is to visualize the data in trend, distribution, and scatter graphs to find anomalies. This review should be conducted for each toplevel metric and major subgrouping as well as all driving factors to help identify:

* Missing values and gaps: Missing values can be caused by HIS purging policies, changes to business processes and practices, and switching patient access or billing systems. Gaps in valuable historical data can limit forecasting accuracy.

* Outliers: These are business events that may skew a forecast, such as how Hurricane Katrina affected healthcare facilities in Louisiana and Mississippi. Rather than manually looking through all possible slices of data for outliers, it is best to identify and look for specific events that may be unique to an organization, coupled with tools that automatically search data to find outliers.

Examples of these potential issues are shown in the graph, below. Once found, there are many well-known methods for addressing missing data and outlying data points, including statistical methods such as nearest neighbor or forecasted value, or by adjusting the data manually to a known true outcome.

Step 3. Build the Model

Once the business needs, drivers, and influencing factors have been established with the associated historical data, a decision needs to be made on the type of forecasting model to use. The forecasting model is the technique or algorithm that determines the projections based on identified business drivers, influencing factors, and business constraints. There are three major categories of forecasting models: cause-and-effect, time series, and judgment.

Many more forecasting models are also available, and there is no overall best choice. In fact, forecasting models are often combined to produce the most accurate results for a given business need, and it may be necessary to consult with business and technical experts for advice when selecting the best model for a given situation.

As an example, let's explore creating a hospital revenue forecast that has seasonal considerations. The graph at the top of page 104 depicts hospital revenue trending up and peaking at each year end. There are 4,8 months of historical data available, and the most recent five months of data have been selected to test and evaluate the model once it is built. This technique is referred to as training and testing the model.

An application of a cause-and-effect model that incorporates a seasonably and judgment factor is shown in the graph at the bottom of page 104. Seasonal variations can be attributable to a number of reasons, such as a hospital's being located near a ski resort during the ski season, or the "snowbird" effect, when a large population migrates south during the winter months. Clinical factors often have seasonal factors, with the most obvious being flu season. Because the healthcare financial manager in this example knew there were seasonal trends, and ample historical data were available, the model was constructed to include these influences.

Judgment variables can also be used to account for infrequent events such as employee strikes, acquisition or construction of a new acute care center, construction of a new wing, or construction of a new hospital in the area. For example, a healthcare financial manager can use the opening of a physical therapy center at an acute care hospital in 2006 to predict the effect of opening a physical therapy center at a different facility in 2008.

Step 4. Evaluate the Results

Once the model has been built and executed, the resulting forecast accuracy should be evaluated using the most recent time period. Overall model accuracy should be measured using tatistical functions such as F statistic, standard error of the estimate, or R^sup 2^. R^sup 2^ is a statistical measure used for regression models describing what percentage of the changes from month to month can be explained by the forecast. By visualizing the results as shown in the graph below, a healthcare manager can easily understand a model's accuracy.

Model accuracy should be tracked and monitored by calculating the difference from month to month. The accuracy rate may vary from month to month, but in any month, a forecast accuracy of more than 85 percent is considered to be very good. To compare forecast accuracy over time, the simple yet powerful mean absolute percentage error (MAPE) test should be used. If the MAPE increases over time, then not all influencing factors have been included in the model. By constantly keeping an eye on this test, a healthcare financial manager can easily understand whether the forecast model needs to be tuned.

Another powerful tool to test how a model will handle future conditions is scenario analysis. By running different scenarios, especially with known outcomes, healthcare managers can gain a comfort level of model behavior and accuracy. For example, a forecast for inpatient volume could test a base, a conservative, and an aggressive scenario for population growth rates, additions of new managed care populations and employer groups, and clinical initiatives to convert inpatients to outpatients. Under each scenario, the forecast should provide reasonable results.

Step 5. Apply the Forecast

Once all the work has been done to create a highquality forecast, it should be deployed to the stakeholders and end users in a manner tailored to their use. The forecast should ideally be made accessible to all appropriate business areas in reports and analyses packaged to unique enduser perspectives. For example, a contract manager is most interested in revenue forecasts by payer contracts. Each healthcare financial manager should have access to a "sandbox" area to perform "what-ifs" to better understand the impact of business decisions.

An often overlooked value of a forecast model is that it allows financial managers to better evaluate how the hospital is performing when controlled for external factors. When the forecast is for an increase in revenues for a particular month, and the actual performance is below both the forecast and the previous month's actuals, there may be a problem that needs to be resolved. For example, in the case of gross revenue, a hospital could control for the fact that it's the holiday season and no one wants to be in the hospital, or perhaps local employment is down, or people are moving out of the county. By letting the forecast adjust for factors beyond their control, financial managers can objectively judge how items they can control (such as quality of care, prices, and payer relationships) are performing.

A consistent challenge healthcare organizations face is identifying a problem after it has already damaged organization performance. To mitigate this problem, healthcare financial managers should put into place tools to check their forecasts on an ongoing basis so they will be aware of downward trends months before those trends affect the performance of the organization.

"Those WKo Fail to Plan, Plan to Fail"

Today's advanced forecasting techniques allow healthcare managers to plan, manage, and continually monitor where their organization is headed in the future. It is often said that "Those who fail to plan, plan to fail." Through advanced forecasting, healthcare financial managers can ensure that their organizations have a successful voyage to better performance.

Source: Doug Stark, David Mould, Alec Schweikert. Healthcare Financial Management, apr 2008

Inventory control with product returns: The impact of imperfect information

Product returns are characterized by considerable uncertainty on time and quantity. In the literature on inventory management for product return environments best forecasts of future returns are associated with methods that use the most information regarding product return history. In practice, however, data is often scarce and unreliable, while forecasts based on historical data, reliable or not, are never perfect. In this paper we therefore investigate the impact of imperfect information with respect to the return process on inventory management performance. We show that in the case of imperfect information the most informed method does not necessarily lead to best performance. The results have relevant implications regarding investments in product return information systems.

Source: Marisa P de Brito, European Journal of Operational Research 2009

FUZZY PRESENT VALUE ANALYSIS MODEL FOR EVALUATING INFORMATION SYSTEM PROJECTS

In this article, the economic evaluation of information system projects using present value is analyzed based on triangular fuzzy numbers. Information system projects usually have numerous uncertainties and several conditions of risk that make their economic evaluation a challenging task. Each year, several information system projects are cancelled before completion as a result of budget overruns at a cost of several billions of dollars to industry. Although engineering economic analysis offers tools and techniques for evaluating risky projects, the tools are not enough to place information system projects on a safe budget / selection track. There is a need for an integrative economic analysis model that will account for the uncertainties in estimating project costs, benefits, and useful lives of uncertain and risky projects. In this study, we propose an approximate method of computing project present value using the concept of fuzzy modeling with special reference to information system projects. This proposed model has the potential of enhancing the project selection process by capturing a better economic picture of the project alternatives. The proposed methodology can also be used for other real-life projects with high degree of uncertainty and risk.

Source: Olufemi A Omitaomu, The Engineering Economist 2007

IT Management Models

Models as I like to call it took three years to develop. It is a unique book containing 72 models to help managers learn about, discuss, and remember management concepts and issues easily.

Models is a truly unique book. The approach taken in this book is unlike any other you have read. It is 200 pages long but the reading will be quick and enjoyable. The models themselves make the book different and interesting to learn. They will also be extremely easy to remember and to use in your day to day activities. In fact, one of my reviewers of the book said he, "used three models in one day while reviewing the book."

Using models in your IT management or project management activities is a natural thing to do. "A picture says a thousand words," they say. I've used models my entire career and now there is an entire set designed specifically for the technology manager or project manager to use in helping you achieve more success.

Models is a fun book. Managing technology is hard work and full of stress. We all need to view our problems from a "lighter side" at times. Some of the models like Bite the head of a frog provide a meaningful management principle and insight while taking a more fun approach to the situation.

Believe me, when you read about this model, you won't forget it for a long time and you will be amazed at how easy it will be to use the model in daily situations.

Models is a practical book. All of my work approaches IT management and project management from a very practical perspective. The job of managing technology resources is complex to be sure but managing doesn't have to be hard and complex when you know what to do, how to go about it, and have the tools to be successful. Models is the fourteenth book of my IT Manager Series publications and an excellent tool to help simplify managing technology resources to allow you to achieve more success.

Who is Models intended for

Models is primarily intended for IT managers of all levels, project managers, team leaders, and supervisors. However, it is a tool that can be understood and used by virtually anyone.

What is a model Good question. A model starts with a picture or simple graphic used to depict a specific management principle or issue. There are 72 models in the book. Each model has a unique graphic, a brief description, and bullet points that highlight key points of the model. In addition, there is a full page discussion of the model and each of the key points.

Models are grouped into six management discipline categories. The book is organized so you may learn the models one by one or focus in on a specific management discipline to learn about that area of management. The management discipline categories are:

- IT Assessment

- Strategy and Planning

- Project Management and Process

- Organization and Staff

- Financial Management

- Measurements and Communication

The models cover a complete overview of the requirements of an IT manager, delve into specifics of project management, and focus specifically on issues pertinent to information technology.

Source : Business Wire. New York: Nov 3, 2008

Multi-modal visual experience of brand-specific automobile design

This article presents a questionnaire study of brand-specific perceptions of automotive design using subjective rating methods. The purpose of the paper is to explore the multiple modalities of the visual product experience of automobile design as perceived by the general public. Furthermore, the experiences were analysed using a framework for visual product experience (VPE). Design/methodology/approach - Respondents were asked to assess the design of two car models at an international car show in relation to brand perceptions and visually perceived attributes using, among other tools, visual analogue scales. Analysis was done using a qualitative technique. Findings - Results from the study indicate that there is a correlation/relation between experiential modes, in that respondents tended to rate attributes consistently high or low across modes. This implies that if the aesthetics are not perceived as favourable, neither is the expression of the car. Furthermore, respondents' assessments of aesthetic appeal and expression are on an average strikingly similar, suggesting that the level of aesthetic appeal correlates with the level of semantic understanding of the design. The general rating of emotional response follows a similar consistent pattern for the two studied cars. Originality/value - Study approach as a way to gain insights into subjective perceptions of products based on appreciation and interpretation of visual product form. VPE framework recognising, mapping and clarifying the multiple modes of the visual experience.

Source : TQM Journal, Author :Anders Warell