Intangible Asset Finance Society Conference Explores Ways to Create Enterprise Value Through Improved Supply Chains

PITTSBURGH--(BUSINESS WIRE)--"Supply chains are the sinews that connect myriad suppliers in a business network to an importer, retailer, or assembler. They carry $750 billion per month," noted Robert Rittereiser, CEO of Zhi Verden, former CFO of Merrill Lynch (NYSE:MER) and a speaker at the Intangible Asset Finance Society's (IAFS's) Annual Meeting, Reputational Perils: The Intangible Value of Safe, Secure and Ethical Supply Chains, held at the Savannah Dhu Conference Center near Syracuse, NY.

"It takes years and millions of dollars to build a reputation that customers trust and investors reward," said Nir Kossovsky, MD, executive secretary, IAFS, "but a 30-second lead story on the evening news can destroy everything a company has done to develop and protect its vital non-balance sheet assets."

Non-balance sheet intangible assets include innovation, ethics, resilience, quality, integrity, safety, security and sustainability. Their contribution to enterprise value – on average, 70% of a company's market capitalization -- can be significantly reduced by supply chain glitches like those that recently plagued Mattel (NYSE:MAT), Baxter (NYSE:BAX) and RC2 Corporation (NASDAQ:RCRC).

David DeLong, a knowledge transfer consultant and author of Lost Knowledge, offered a reason for those breakdowns. "Too many times, critical operations knowledge is lost due to retirements, and to corporate management not knowing the right questions to ask."

Dennis Dalton, who heads Northrop Grumman Corporation's (NYSE:NOC) supply chain integration programs shocked many attendees by saying, "Almost every company has a ‘data king' or ‘data queen' who understands how the various supply chain databases and information systems integrate with each other. Unfortunately, they don't have back-ups or understudies who can fill in for them temporarily or take over permanently. This situation creates risk."

Scott Childers, senior manager of customs compliance and international finance at The Walt Disney Company (NYSE:DIS), observed that "companies have a fragmented view of risks to their supply chains." He added that many companies' supply chain-related programs have not changed much, if at all, since globalized outsourcing evolved in the 1990s.

To protect and increase the value of supply chains Beth Enslow, senior vice president of supply chain management solutions, Marsh USA Inc. (NYSE:MMC), proposed that supply chain managers, risk managers and chief financial officers or treasurers collaborate to develop and implement organization-wide strategies that minimize disruptions. Craig England, president, England & Company, an investment banking company, agreed, noting the problem of compartmentalized information. "There is consistency within silos, but not across, and it's a significant problem for many organizations that will only get worse."

Making supply chains more visible within companies is a challenge that requires organization-wide trust. "Corporate executives and managers who value transparency over gamesmanship will help their companies take the ‘unknowns' out of supply chains and improve performance," said Chris Hatzi, senior director of Crisis Simulations, Inc.

Added Robert Liscouski, senior vice president, advisory and forecasting, Steel City Re, "There is a big disconnect between top management and operations people. Even when there is bottom-line justification to improve supply chain management, companies delay or forego making the necessary investment."

The quality of information on which companies base their supplier relationship management efforts is becoming increasingly important. According to Vivek Chakrabortty of PricewaterhouseCoopers, "The new way of looking at suppliers is to ask pertinent questions such as, ‘How critical are they to our business?,' ‘For how long could we live without them, and at what cost?,' and ‘How lean is too lean? Only cross-functional risk assessment teams can answer those questions accurately."

The conference concluded with a discussion provocatively titled "Culture and Management: Selling American Cheap," led by Jon Baskin, author of Branding Only Works on Cattle and president of Baskinbrand, and Jon Low, partner and co-founder, Predictiv.

Conference sponsors included Athena Alliance, Carpenter Moore (NASDAQ: NDAQ), Center of Capital Market Competitiveness (U.S. Chamber of Commerce), Destiny USA, Steel City Re, Deutsche Bank (NYSE:DB), Milken Institute and Pittsburgh Technology Council.

About the Intangible Asset Finance Society

The IAFS engages in education, standards development and advocacy to promote the use of intangible asset financial management best practices. The Society publishes scholarly articles in Intellectual Asset Management magazine. The IAFS is based in Pittsburgh, PA.

For more information, contact Nir Kossovsky at 412.661.7086, e-mail nkossovsky@steelcityre.com or visit www.iafinance.org.