NAFTA WORKS: FOR COMPANIES WITH A STRATEGY, THAT IS; Andersen Consulting Gives Best Practices and Highlights Company Successes in New Book

Business Wire, Dec 27, 1995

CHICAGO--(BUSINESS WIRE)--Dec. 27, 1995--Although the North American Free Trade Agreement will be two years old on January 1, 1996, most companies still are overlooking the vast opportunities it offers to improve their global supply chain costs and operations.

NAFTA represents a mandate for dramatic, strategic change rather than incremental, tactical shifts, according to a new book by Andersen Consulting's Strategic Services practice, in conjunction with the University of North Florida and the Council of Logistics Management. Based on nearly 600 indepth surveys and 35 interviews with companies around the world, "Supply Chain Directions for a New North America" compiles a list of best practices and profiles pioneering companies, including Braun, Chrysler, Eastman Kodak, Hewlett-Packard, Mattel, Phillips and Pioneer, that are optimizing NAFTA's potential.

"Many companies think of NAFTA as just a bland mix of lower tariffs and continuing border-crossing headaches," says David G. Waller, a partner in Andersen Consulting's Strategic Services practice and one of the book's authors. "But the reality is that NAFTA changes the very basis of global trade. North America is now a genuine 340 million-member trading bloc. Company economics can be transformed because NAFTA can change how they buy, make, move and sell products in the new North America."

NAFTA allows companies to reap significant benefits in three major supply-chain areas: sourcing, manufacturing, and logistics. Companies can lower raw material and component costs by leveraging new sourcing opportunities made possible by NAFTA's duty reductions. Before the trade agreement, Mexican truck manufacturer Vilpac made most of its components. Now, it is buying many parts from U.S. track manufacturer Kenworth--and paying less than it would cost to make them.

With dramatic tariff cuts and relaxed foreign investment rules, companies also can rationalize production facilities worldwide. Kodak, which has long manufactured products in both countries, has shifted some labor-intensive operations to Mexico while transferring some high-tech process operations back to the U.S.--giving it a definite cost advantage in film production over Fuji. Similarly, Toshiba has relocated a parts manufacturing plant from Asia to Mexico to supply components to its television assembly plant in Nashville, thus saving on tariffs charged for parts made outside of North America.

NAFTA opens new options for logistics operations such as transportation, distribution and material management. Roadway, Yellow Freight and other U.S.-based transportation providers, for instance, have formed partnerships with distributors in Mexico.

Despite these success stories, "the full impact of NAFTA still lies ahead," asserts Waller. "While industry leaders, including Braun, Kodak, Hewlett-Packard and Mattel, have gleaned significant advantage by reformulating their sourcing, manufacturing and logistical strategies, major players in all industries must now follow suit or lose competitive ground."

In addition to the compelling case studies, "Supply Chain Directions for a New North America" traces the global forces that led up to NAFTA and provides a blueprint that companies can use to define and develop a post-NAFTA, Pan-North American supply chain strategy. Copies of "Supply Chain Directions for a New North American" can be ordered from the Council of Logistics Management at (708) 574-0985.

Andersen Consulting's Strategic Services practice takes a pragmatic approach to developing corporate and operational strategies. This approach--combining a depth of global industry and management knowledge with expertise in how organizations execute and respond to change--creates implementable strategies that result in sustained, measurable value to clients. With more than 1,100 people worldwide, Strategic Services is among the five leading strategic consulting practices in the world and has enjoyed an average growth rate of 46% for the past six years.

Andersen Consulting is a $3.45 billion global management and technology consulting organization whose mission is to help its clients change to be more successful. The organization works with clients from a wide range of industries to link their people, processes and technologies to their strategies. Andersen Consulting has more than 32,000 people in 152 offices and 47 countries.

CONTACT: Lois Therrien

Andersen Consulting

312/507-9530