CarrierWorld by Elizabeth Jowaisas

Carrier World Customers have made it clear they want to do business on the Internet, and itâ&#x20AC;&#x2122;s changing the way we work.

No.1, 2000

Jon Ayers: carri r.com E-business? Hangon, it’sgoingtobeawild,exhilaratingride ! IndescribingtheInternetand Carrier’sef fortsto move manyaspectsofourbusi nesstothiselectronic medium, revolutionistheonlyappropri ate word. Revolutionsareabout movingfrom a pointinthenowtoapointinthefuturewithoutgoingthroughtheinterveningspaceortim e.Thewords“continuity”and“evolution” istinthe“e-business”vocabulary. donotex W hen weaskaboutCarrierand e-business,theonlyquestion mustbehowfast,not if.Asyouread moreaboute-businessinthisissueofCarrierW orld,keeponethingin m ind.Thecom panythatisableto movefirstintothee-business model—the model in whichdealingswithcustom ersareW eb-enabled,notpaperenabled — will take market sharefrom thecom petition. Thesecondinline willtakealotless.Thefollowerslose. E-business,aboveallelse,isabout makingiteasierforcustom erstodobusiness with Carrier.Follow methroughthisexam ple : W hen a CarrierdealerlogsontoaspecialCarrierInternetsite,thedealerim m ediately hasaccesstoourentireproduct line,includingspei cic f ationsanddrawings,salesliterature, prii cngandproductavailability.Thedealercanconf igureaproductforacustom er,downloadacustom salesproposalandim m ediatelydeterm inehowlongitwill taketobuildthat particularproduct.Thedealercanthenplacetheorder,res ervetheinventoryandconf irm thedeliverydate. Thedealercanalsolookataccountsthattellcreditbalances,out standinginvoices, evenhow many moreunitsmustbesoldtoearnthatincentivetriptotheCaribbean. It won’tstopthere.W arrantyandservicetransactionsalsocanbecom pletedatthespeedof lightontheW eb. Theresultisacustom i zedandpersonalonlinerelationshipbetween Carrierand itsdistributor/dealercustom ers.Thise-business modelallowsourdealerstospend m oretim eprospectingforcustom ers.Theirvolum eincreasesandtheyswingeven m oreoftheirbusinessto Carrierbecause we makeitsoeasyforthem tosucceed.In theexchange,wealsogainunf ilteredinformationaboutwhat motivatesand moves thebuyersofourproductsandservices.

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HAL SILVERMAN STUDIO

Everyonebenei ftswhen wedobusiness electronically.O ursalesforcearoundthe world won’tbeburdenedbychasinganswerstoroutine questionsorhandlingordinarytransactionsthat stealtim e.Instead,theycanusethattim e developingnew accountsortrainingdealershow tosellmoreef fectively. D on’tforgettheef fectonsuppliers.The speedandsim plic ityadvantagesofweb-based orderingandconf irmationreducecycletim es andcostso wecanrespond morequicklyto custom ers’schedules,build marketshareand im prove marginsatthesam etim e. Thisisnotsciencefiction. Theseelectronic relationshipsex isttoday withinpocketsof Carrier President Jonathan Ayers Carrier.(Seethearticleonp.9aboutCarrier M ex ico.)Butourperformanceintheverynearfuturewillbe measuredbyhow quickly andhowflawlessly wecanrevolutioni zetherestofCarrier. Usingthetoolsofe-businessandelectroniccom m unicationandcollaboration willalsosupportouroperational initi ativesof : quality,PDS,acquisitions,purchasing, workingcapital im provem ent s,safety,and workforcediversity.Certainly,Idon’tthink anyone’severclaim editwouldbeeasy. PDS,asyou’llreadlater,hasbeenidentii fedasthe mostim portantstrategytohelp usreachourperformancetarget s.Q ualityisalsoofparam ountim portance.In 1999, wereducedourwarrantycostsasapercentageofsalesbythree-tenthsofapoint.That’s m orethan US$21 million. Everythingisim portant,and,asI’vesaidbefore,wedon’thavethechoiceofan “either/or”approachtobusiness.W e mustbelieveinthegeniusofthe“and. ”AsPDS has proven, wecanshortenourcycletim es,andincreaseproductavailability,andim prove qualityandreducecostsatthesam etim e. Thisiswhere e-businessfitsinso wel.lAswebecom eprof ic ientatusingthe Internetforall itsworth, itbecom esanenablerforalm osteverythingelse we’retrying todo.The morefam ili arweallare withthe web,thefasterwe willbepreparedand inspiredtoim proveourcustom ers’andem ployees’easeofdoingbusinesswith Carrier. Fastenyourseatbelt s,andsurfthenet...theridehasjustbegun!

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Fueling the e-business engine

AndrePapaleoishappytotellyouaboutCarrier’sfuture,butyour dinner maygrow coldlongbeforetheconversationisover. H eapologi zes. “Sorry,I’m likethat, ”Carrier’sdirectorofe-businessadm it s overcold salm on. “I’m passionateabout e-businessbecauseI’ve seenthepotenti a.l It’shuge.W ecannotseetheend.Itcan make Carrieranew com pany. ” Strong words,butPapaleohasseenthefuturefirsthandand understandstheInternet’spowertotransform. H ealso understandstheInternet’spowerto makehistoricallystrongbusinesses obsolete.Thetrainisleavingthestationthis minuteandisfilled withtheInternetsavvy.Businessesthatdon’twantto kisstheir opportunitygoodbyehadbet terhopaboard. E-businessisthrustingcom paniesintoanelectronic market placein whichinformationflowinginstantlyto andfrom cus tom ers,distributionpartnersandsuppliersisthekeyresource.The informationistheraw materi a,l sim ilartothecopper,alum inum andsteel in Carrierproduct s,butmuch morevaluable. AsPapaleo says : “Informationisthefuelthatdrivestheebusinessengine.W ithoutit,itstops. ” Papaleo,wholedasim ilaref fortin Carrier’sBrazili an operations,hasacceptedthetask of coordinating and accelerating Carrier’se-businessef fortson a worldwidebasis.Partofhisjobis tofocusresourceson e-businessef fortsthatwilldothe mostgood, thatis,contributethe mostto Carrier’ssalesandearnings.Buthe m ustalso be,ashesays with a grin, an “e-vangelist”—a cheerleaderhelpingothersseethepotenti al inbusinessbased moreon electronsthanbrickand mortar. H isim m edi atetaskistonarrowthepossibilities. “Thereisnolim it, ”Papaleocontinues,“soifyou don’tfocus, youcanbeoverwhelm edbythenum berofopportunitiesyouhave topursue.Alreadythereareabout80such e-businessprojects—

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Going Global Anyone who doesn’t believe the internet has gone global? An estimated US$5.6 billion was spent on-line last year in western Europe. The projection for 2003 is US$430 billion.

Real Money Selling jet engines to airlines; centrifugal chillers to consulting engineers; elevators to building contractors . . . businesses are expected to spend about US$1.3 trillion online with each

other by 2003. That’s roughly double the economic output of Canada today.

Supplies & Demand Paper clips, staplers, pens, those overhead projectors that make meetings hellish. . . office supplies worth about US$3 billion will be sold over the Web this year. In five years, that number should reach US$65 billion.

E-Productivity The Internet generated about $300 billion in revenue in the U.S. alone last year. The 1.2

million Americans who owe their jobs to the Internet were also 65 percent more productive than non-Internet workers.

Surfing for Dollars Cisco Systems, a maker and marketer of computer networking devices, makes 80 percent of its annual sales online (that’s almost US$10 billion, or $640,000 per employee).

hom epages,extranet s,intranet s,e-com m ercesites—underwaythroughout Carrier. ” “W e’realreadytalkingaboutasubstanti alam ountofresources,that,if focusedonhighim pact,prioriti zedef fort s,wouldputusinadiferentposition todayintheW eb world. ” W hatexactlyis Carrier’s dei fnition of e-business? There’s no sim ple answer.Papaleolikesto saythat e-business will“substanti allyshapeevery encounterwithourcustom ers,channelpartners,suppliersandem ployees. ” H e sees a Carrier universe in which the com pany hasim m edi ate electronicaccessviatheInternettotonsofinformationaboutthose whoare buyingorshoppingforourproductsandservices.Carrierwouldknow nam es, addresses,phonenum bers,whatindividualconsum erslike,whattheydislike, whatthey wanttheproductorservicetodoforthem, whentheyplantobuya product,how much they wantto pay,the physicaldim ensions of their dwelling,whatkindofheatingandcoolingsystem stheyhavenow,whenthey wereinstalled—thelistsgoonandonandon. Transferredto Carrier’schannelpartners,electronicinformationlikethis wouldallowthem tofocustheirsalesef fort s,toreducetheircostofsalesand im prove prof it margins.It would also mean helpingthechannelpartners extendthecustom errelationshipintoaftermarketandservicesalesbeyondthe originalequipm entpurchase. “W e wantourchannelpartnersto be marketdevelopers, ”saysPapaleo. “W ecan givethem theguidancethrough prec isecustom erinformation we gainfrom the web.And wecan givethem thetim eto dothatby using ebusinessinternallyto makeiteasierandso muchfastertodealwithus. ” Itwillbeaworldin whichthehundredsofpapertransactionsenduredby em ployees,dealersand contractors who sellourproducts willbe handled electronically,m ostofthem viatheInternet.Thetim eoncespentshuf f ling papercould bespentbroadeningex isting marketsordeveloping new ones. Costsonbothsidesofthefencearereduced. Suppliers would also do business with us viatheInternet.Bet ter informationfrom dealers,contractorsandretailoutletsaboutwhatisbeing sold providesthosesuppliers withfaster,m oreaccurateinformation about whatCarrierfactorieswillneedtoreplacetheairconditionersorfurnacesthat havebeensold. Ifthissoundslikethedecades-oldprom iseofapaperlessworldthanksto thecom puter,it’snot.M uchofitisreality,withsom eexam pleswithin Carrier. Already,about 90 percentofSpringerCarrier’ssuppliersareconnectedtothe com panyviatheInternet.CarrierFranceistakingsim ilarsteps,althoughit isn’tasfaralong,yet. “Business-to-businesstransactions overtheInternetlastyeartotaled alm ost 43 billion dollars, ” Papaleo says.“That’sthetotaloutputof two zeofUnited Technologies.W ithinacoupleofyearsit com paniesalm ostthesi isprojectedtobe morethanatrilliondollars—aboutthesi zeof35 orso U TC s.

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“Information is the fuel that drives the e-business engine. Without it, it stops.”

—Andre Papaleo

Kevin Madigan

Weaving a WRAC Web The 3,335 window and room air conditioners (WRACs) Carrier sold online last year in the U.S. proved a point well beyond their number, asserts Chris FitzGerald, director, WRAC-North America. “They showed customers liked and will use this distribution channel to buy WRACs.” And, that may be the salvation of Carrier’s WRAC business in North America—the world’s largest WRAC market, with some 4.5 million units sold in a typical year. Carrier has not held more than a 6.1 percent share of this market throughout the 1990s, and lost money in 1997 and 1998. Even last year, despite regaining profitability, the company captured little more than a two percent share. “We really missed the retail boat in North America, which now is a very mature and even a consolidating WRAC market,” said FitzGerald. “Large retailers wield considerable purchasing power and four manufacturers—Frigidaire, Fedders, Goldstar and Whirlpool—command almost a 70 percent share. “But, with the Internet,” he continued,“we have a tremendous opportunity to leapfrog our competitors into this new and rapidly growing channel, and build a business with great growth and profitability potential.” Launched last May with advertising support limited to Philadelphia, PA, the WRAC web site is accessible to virtually anyone in the continental U.S. from Carrier’s Internet home page. This year, advertising support will be extended to the

Boston, Chicago and New York City market areas, covering a significant portion of U.S. WRAC sales. Dehumidifiers and air cleaners will be added to the product mix, and installation and same-day delivery will be options in some areas. Carrier WRAC sales in all North American channels should climb to around 210,000 this year, with the Web accounting for almost onethird of those units, FitzGerald said. He expects Web sales to more than double to over 150,000 in 2001, and long-term plans call for achieving a 15 percent market share by 2005, with 50 percent or more of those sales coming from the web. Not everyone is thrilled with Carrier’s Internet venture, acknowledged Chip Simplicio, manager, direct sales and e-commerce, WRACNorth America. Some Carrier retail customers see it undermining their sales. However, he noted last year’s Philadelphia test suggested the Web Site helped generate sales for retailers, too, by raising brand awareness and connecting some Web customers to more traditional Carrier outlets. Indeed, despite the retailers’ wariness with Carrier’s Web activities, the company’s largest retail customer, Nobody Beats the Wiz, increased its order for this year’s cooling season. While Carrier is the first and only HVAC manufacturer to go on line with sales of new products to consumers, it’s not completely alone in the WRACs-on-the-web market. Fedders offers remanufactured units and Sears sells its Kenmore brand WRACs via Web sites. Circuit City, WalMart and others are expected to join the fray this year. Still, Simplicio noted, being first, aggressive and the only WRAC manufacture on line means Carrier can shape the technology, the process and the market. “The home run, here, is translating the realtime demand of the Internet into dramatically decreased inventory levels,” FitzGerald added.“Once we’re able to build-to-order for at least a significant portion of that demand, then we’ll go from being just a tiny blip in the market to being a robust business that’s extremely attractive to shareholders.”

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“That’stheonlyproofIneedthate-businessisreal . Anditis a worldin which 50- or 100-year-old brand nam es mean nothing without a well positioned virtualcom panyto back up the brand nam es.Som e of our com petitorsinafew yearscould becollegestudentsnow whoare workingin theirgaragesto develop a new e-business modelto befunded byventure capitalist s.Ifthatseem sradical , it’sbecauseit’saradicalworld. ” Partofthee-businessspectrum doesinvolvewhathascom etobeknown as“e-com m erce”—selling,in Carrier’scase,whatPapaleocallscom fortcomm odities(likeroom airconditioners) directlytothe consum erviathe Internet.This Carrierto-consum erelem entofe-businessisim portant(see p.10), butrightnow he wouldconcentrateresourcestowardthebusiness-tobusinessaspects of theInternet—shaping Carrier’sencounters withit s channelpartners,contractors,engineers,architectsandsuppliers. “Thebusiness-to-businessarenaiswhere mostofourrevenuestodayare generated, ” Papaleo says.“O ur business model wasestablishedthrough a business-to-businesschanne,lwithlinkstoourdistributorsanddealersthatsell ourresidenti alandcom m ercialproductsandservicesineverypartoftheworld. ” It’sim portanttostrengthenthoserelationships,Papaleo says,butatthe sam etim eit’salso necessaryforcom paniesto build bridgestoconsum ersto preventwhathecallsslippingtoofarbackinthesupplychain. Using hisknife,forks,spoonand saucertoillustratehispoint,Papaleo constructs models of Carrierand Dell Com puter,the online com puter marketer,onthetablecloth. O n therightside of the Dellcom puter modelis a singlespoon representingtheconsum ers who buy Dellcom puters.Nexttothespoonisa saucerrepresenting Del.lTotheleftofthesaucerisall therestofthesilverware representingthe businessesthatsupply Dell with microprocessors,hard drives,m onitors,cabinet s,keyboards—all thecom ponentsthatareassem bled intoacom putersystem. Becausethereisnothingbetween Dellanditscustom ersthereisdirect accesstoinformationaboutcustom ersneeds,preferencesanddemands.W hat ateandunf iltered. Papaleocalls“perfect”informationbecauseit’sim m edi Totherightsideofthe Carriersaucer,however,isnotonlythespoon representingtheend-user,butalsoaknifeandforkrepresentingthe Carrier’s traditionaltwostepdistribution mode.l “Theconsum ersareseeingus,and weareseeingtheconsum ers,through ” Papaleostresses.“In our e-business mode,l we have ourchannelpartners, directaccesstothatinformation. “W e need to use theInternetto get perfectinformation from our consum ers.And when we havetorturedthatinformation untilittells us som ething,itflowsim m edi atelyto ourchannelpartnersto help them strengthentheirbusinesses. ” Papaleois nottalking abouterasingthe business-to-business model Carrierhasdepended onforgrowth. H eistalkingabout makingit more

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Case Dismissed Even California judges are recognizing the power of the Internet and e-commerce. At least two websites allow traffic violators to complete online “speeders’ schools” that erase traffic tickets from their driving records. The cost is $19.95. . . plus you don’t have to waste a sunny Saturday.

Dell Dollars Every day, online retailer Dell sells computers worth US$30 million.

The Web is turning things around “Down Under.” Carrier Australia is opening new and enhanced channels of communication, to both its dealers and its service customers, via the Internet. In the case of the Carrier dealers, the new web-based facility will allow them to search for products, check inventory levels, place orders and arrange delivery merely by entering a secure, password-controlled Web site. There is also a channel forum —a kind of chat room—where dealers can discuss products, services or views on any other topic. The site already is being tested via pilot programs in New South Wales and Victoria, prior to its nation-wide launch. For service customers, Carrier Australia has developed Service Direct, which offers priority treatment similar to that provided under the “frequent flyer” programs operated by major airlines. Service Direct customers will, for example, be able to book service calls and program maintenance visits, accept quotations for repair work and check the history of the equipment they are working on, all via the Carrier Web site. The customer can log on and describe the problem in detail—which piece of equipment, what the problem is and whether it is an emergency, as well as giving site information for access. Back at the Rozelle headquarters in Sydney, the service call is given a ticket number and passed immediately to the service technician. The Carrier Australia Web site is. www.carrierairconditioning.co.au

Down Under

Andre Papaleo shows a Brazilian customer how to save time and money with Carrier On Line.

relevanttothedevelopingprospectsofe-business.H isexperiencesin Brazil givehim conf idencein whate-businesscandofordistributorsanddealers. “W ithim m edi atefeedbackfrom the marketplace and more accurate forecasting mechanism s,thereislessneedtocarrycostlyinventory, ” Papaleo reiterates.“Butspeedingtheflow ofinternalinformationcreatesaneven more im portant im m edi atevaluesforourpartners—operationalef f ic iencyandtim e. ” W hen Springer Carrierin Brazilconvertedsom eofitspaperprocesses like ordering and creditchecks to electronicexchanges,transactiontim es plum m etedfrom six daysto around 10 minutes.Papaleo didsom e quick i fguringonhisnapkinanddeterm inedthateachdealershipsavedanextra 960 hours a year—tim ethatcould bespentbuilding business with new and ex istingcustom ers. The meal isover,butPapaleokeepstalking.H efeelsconsiderablepressure to spread his message quickly because he sees how rapidly e-businessis developing.Notonlyhasthetim escaleshifted(anInternetyear,hesays,equals threecalendar months)butcustom erexpectationsalsohaveshifted. “The powerinthe marketplace hasshiftedfrom thecom panytothe custom er, ”Papaleostates.“O urcustom ers,and I meanallofourcustom ers,are sendingusamessage.Theyaretellingus,‘Look,IhavetheseInternettoolstoview the marketandthisisthewayIwanttodo muchofm ybusinessfrom now on.’ “Ifwedonotprovidewaystousethesetools,andquickly,then wewillbe behind. ” So whatare Carrier’sprospects? “Isaid earlierthatcom panies with 50- or 100-year-oldlegac iesdon’t m ean muchinthe world ofe-business withoutagood virtualcom panyto backthem up, ”Papaleoconcludes.“IfBarnes & Noble,withallitsexperience andpublishingcontactshadcom eup withtheideaofsellingbooksonline,do youthinkAmazon.com. wouldhavehadachance? No way! “Astheindustryleader,thesam eopportunityex istsforCarrierifwe move quicklyanddoitright. ”

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H ¡Hola Sam’s Club! Cesar Abarca credits the Internet with helping Carrier Mexico retain one of its largest customers this year. “The Internet helped us preserve our ‘exclusive supplier’ position with SAM’S Clubs in 2000, despite fierce challenges,” said Abarca, residential and light commercial business director.“It facilitates your ability to manage your product line and minimize working capital exposure for your customer, and that’s a true competitive advantage.” Indeed, similar success stories related to Carrier Mexico’s Internet and other online customer connections are becoming commonplace, says company president, Jeff Williard. But, he stresses that these electronic links serve largely as enablers. It is the access to information, combined with the company’s ability to gear production and other market responses to demand, that enables this new approach to serving customers. Carrier Mexico calls it the Customer Management Process (CMP). SAM’S Clubs—Wal-Mart’s chain of membership warehouse clubs—is a good example. Carrier Mexico keeps abreast of sales and other point-of-purchase (POP) information at each of SAM’S 33 Mexican stores via the Internet and SAM’S proprietary “Retail Link” software. Retail Link collects a broad range of product and market information, from what’s in or on its way to various warehouses and stores, to what product just passed through a checkout counter’s barcode scanner. The passwordprotected system lets Carrier monitor sales and inventory, customize its own sales reports by store, region or product, and gather the real-time market information it needs to signal internal Kanban and supplier replenishment systems. It is Carrier Mexico’s ability to leverage this technology and information that underscores the power of the Internet, Abarca said. For instance, if sales dip or inventory builds up at a given store or group of stores, Carrier Mexico can dispatch

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its demonstration van, re-design POP displays and materials, or beef up marketing campaigns to stimulate consumer interest. If inventories are depleted, the company can restock in under three days. “The most important part for us is that we get to see the movement of our products at the end point, to the consumer,” said Williard.“Faster fill rates, improved cycle times, and minimized working capital exposure for both us and our customers are the logistical benefits of knowing precisely what the market wants and is buying. “We can meet with customers, say quarterly, and give them highly detailed reports on product performance,” Williard continued.“We can tell them which products are selling and how sales are being affected by a range of factors, from consumer preferences to competitors’ pricing to weather. We can do it by store and by region. And, we can produce to meet that demand, whatever it is, without either our customer or us having to hold inventory.” If this all sounds a bit like a Product Delivery System (PDS) success story, there’s good reason for it. The timely —often, real-time—market information available through these electronic links to customers fulfills much of the demand management component of PDS. It is this information that “pulls” production through factories for justin-time delivery to customers. Leveraging the Internet and CMP helped Carrier Mexico boost sales to SAM’S 93 percent in 1999, while doubling SAM’S-related inventory turns from four a year to eight, and getting 28 working capital turns in 1998-99. Carrier Mexico has extended this expertise to other retailers and its traditional dealer base. The company works with dealers through its “Extranet,” a kind of private Internet link, and its own software. And, at least a dozen large retail customers use an Electronic Data Interface (EDI) system to place and track orders, as well as to check inventories, pricing, credit status and current promotions. Although less robust than the Internet and SAM’S Retail Link, the Extranet and EDI systems still let Carrier Mexico help customers manage key business issues like supply and cash flow, Abarca noted. “Eventually, all of this will transfer over to the Internet,” Abarca said.“But, still, we are the only air conditioning company in Mexico to engage in this electronic connection with its customers. It has improved Carrier’s image tremendously with customers because we are on the cutting edge of this technology and management process, and that has given us a unique competitive advantage.”

Going Up! e*Direct Carrierisnottheonly United Technologies businessunitto developelectronic businessstrategies. Otiselevatorhas alreadyannounced thedetailsofe*Direct —a Web-based systemthatallows Otiscustom erstowork withthecom pany24 hoursaday,seven daysaweek . Here’sa recentintranetarticle describingsom e aspectsofe*Direct.

Our first purchase may have been a $20 book or a CD. Then we spent more. The computer on which this was written was a late-night electronic purchase. It was on the doorstep before noon the following day—no driving, no crowds, no hassles, promises kept. You can buy a Carrier air conditioner on the Internet now, or a car, even an airplane. With introduction of e*Direct, the electronic sale of the first elevator (Otis, we assume) isn’t far away. With e*Direct comes a basic shift in the way traditional Otis customers deal with the company. “We aren’t pushing this at our customers,” says Scott Gaskill, manager of electronic commerce. “They are pulling. With 52,000 people a day going ‘on line,’ consumers are driving behavior changes in all industries. Our customers are going to expect to be able to do business with us electronically. We need to be the first so we can establish the standards.” e*Direct, Gaskill says, will soon allow architects to determine how many elevators they need and then figure out how they will fit within the building. They’ll be guided through the process by expert software that matches Otis products to the number of floors, the distance traveled, number of occupants per floor, the number of doors and their widths—any variable that contributes to the efficient, safe movement of building occupants and visitors. Once the elevator package has been designed, an estimating function allows the architect or general contractor to determine the system’s approximate cost. And from there it’s just a few clicks to download a complete, customized set of construction drawings. The difference between now and then? The information will be available when and where they want it. “The Internet is open 24 hours a day, seven days a week,” says Gaskill. “Within 15 minutes the architect or general contractor will be able to accomplish alone what used to take hours or days.” When the order has been placed over the Internet and a job

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number assigned, the general contractor can learn where each elevator is in the manufacturing process, its delivery and installation dates. If you were a contractor trying to juggle construction site schedules, imagine the benefit of being able to turn to a laptop computer in a construction trailer to track an elevator’s arrival as easily as you could an air express package. So where are the Otis field sales reps that have traditionally handled these chores? They are, Gaskill says, exactly where they should be—helping answer customers’ questions face to face, suggesting solutions to unique problems, and calling on potential customers they didn’t have enough time to contact before. Gaskill, a 15-year Otis veteran, is a former field sales rep and knows the tedious paper trails they must follow to complete a sale and successful installation. “Field sales reps have to do a lot of things, but only a small part of their time is spent doing the things they’re really good at—consulting with customers face to face and negotiating sales. So, early in the process the Internet can serve as an electronic assistant that can complete the repetitive, routine details of any transaction.” Besides giving the Otis sales force more time to generate revenue, e*Direct will also speed the process for Otis customers. Anyone who’s ever played phone tag knows the frustration of waiting for information that was needed immediately, three hours ago. “Let’s face it. We’re not always able to make contact with our customers. So having an electronic consultant on duty 24 hours a day is a real benefit,” says Gaskill. “It’s one more way of making it easier for our customers to do business with us. But they understand there will never be a substitute for a human sales force.” e*Direct services will be introduced in stages beginning in Europe, Gaskill says, but he expects the process to build global momentum as customers continue to experience the ease of electronic commerce in other business segments. “We won’t be selling elevators on our website immediately, but it will happen, probably sooner than we think,” Gaskill says. “Look at the way the telephone changed the way we live and do business, but it took years to spread. But an Internet ‘year’ takes no more than a week in real time.” Hang on.

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The dust devils whirling over the desert outside Palm Springs, California during the year-end global management meeting couldnâ&#x20AC;&#x2122;t have been any more turbulent than what was happening within Carrier. . . . A new company president, three new regional presidents, record sales, acquisition of a major competitor, an alliance with Toshiba, dynamic shifts in distribution channels, the e-business flood . . . It was time to take a deep breath of dry air, reassess and focus on the priorities that would drive each business unitâ&#x20AC;&#x2122;s performance in 2000 and beyond. There were few surprises. PDS, quality, e-business, acquisitions, purchasing, and working capital management were near the top of everyoneâ&#x20AC;&#x2122;s lists. Here are brief assessments by the three new presidents of how these priorities will affect business in their regions.

Ted Amyuni Innovation was not an available option at the Global Management Meeting in Palm Springs,“but since it cuts across everything we do, I’d put it right at the top of the pile,” says ETO President, Ted Amyuni. Continuing change is a fact of business life, and the need to meet increasingly demanding performance targets means the pace of change has to get faster and faster. Amyuni accepts that sometimes this means decisions will have to be changed and mistakes will be made, but to ensure the program of change stays on track, Amyuni and his team have identified five guiding principles. Each new idea is measured to make sure it aligns with ETO’s “High Five”—innovation, quality and reliability, ease of doing business, cost reduction and asset optimization, and leadership and spirit. “ETO is excited by change rather than wary,” according to Amyuni, a strength he attributes, in part, to the many dramatic changes ETO has undergone over the last decade.“As a result we have a unique ability to think the unthinkable. We have a challenge to anticipate our customers’ needs and fulfill them. No one knows what they need until it has been invented, tested and marketed, and that applies to comfort just as much as personal stereos or mobile phones.” However, the first priority has to insure that questionable quality (and by quality Amyuni means the quality of the offer in terms of features and ease of installation as well as the more accepted definition) is a thing of the past. Quality, reliability and ease of doing business are the dominant influences on customer satisfaction, and falling short of customers’ expectations is no longer an option. E-business fits right into Amyuni’s plans. “The impact of e-business on product quality and PDS will be dramatic,” Amyuni predicts.“By the year end, 80 percent of our major suppliers will be linked electronically with the factories. A trial with one supplier has increased the associated inventory turns from 20 to 40 and slashed daily administration time by a total of 6 hours.”

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Amyuni

President, European Transcontinental Operations. “The impact of e-business on product quality and PDS will be dramatic. By the year end, 80 percent of our major suppliers will be linked electronically with the factories. A trial with one supplier has increased the associated inventory turns from 20 to 40 and slashed daily administration time by a total of 6 hours.”

In addition to shortening the product delivery process, he points out that suppliers have a crucial role in improving product quality. Products such as the highly successful Aquasnap and Alpine cassette have confirmed that quality can be designed into products by involving the suppliers early in the development process. And working with suppliers to help them meet quality standards and giving them access to quality tools is critical to success. Amyuni recently received what he sees as the highest accolade from a major supplier when Carrier was described as its most demanding client. “However, until our customers rate us more highly than competition we have failed” he says. “At the other end of the value chain, developing our e-business capability is fundamental to making it easier for customers to work with us. Uwe Schulz, as ETO director of interactive marketing, will devote 100 percent of his time for as long as it takes to ensure that ETO leverages as much benefit as possible from the opportunities the Internet offers.” Research has demonstrated that giving customers fast and easy access to product information—availability, lead times, scheduling and prices, parts lists for current and obsolete machines and training material—releases valuable human and financial resources to invest in increasing sales, training, and developing innovative products It is on record that strategy U-turns are a possibility and the first has already by made. “In the past we have neglected the service and parts business.” Amyuni acknowledges.“That was a mistake. We have to give our customers the world class parts and service support they need. We will learn from the success that has been achieved by our Spanish operation and, wherever appropriate, will open Totaline stores. And we’ll develop new ideas such as rental, and make alliances with bigger players.” To help customers struggling to get parts information, Amyuni recognized teams in Montluel (France) and Villasanta (Italy) that have created electronic files on parts, not only for machines built in the last two years, but also for the thousands of units installed over the past 20 years. “It is really exciting to witness the gradual awakening throughout ETO as people realize that everything is possible, that it’s OK to make mistakes and that change is fun!” Amyuni says.“The ‘can do’ spirit is almost tangible as people develop new ideas to get better, faster, to innovate and of course to increase return on investment” Among the ideas, Amyuni says, is a plan to market ‘comfort’ as a utility. Work also is well advanced with Microsoft to develop software to allocate the components of a complete system to the appropriate factory at the appropriate price—automatically! “We must focus on where we can really add value, and doing that we should be able to treble our capacity within the same areas with no additional headcount,” Amyuni concludes.“No idea is too far fetched—and it has taken no time at all to encourage people to bring their ‘crazy’ ideas to the Executive Committee. The genie is out of the bottle. We are going to become the best in our industry, and then just fasten our seatbelts and wait for the numbers to fly!”

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Geraud Darnis In moving to a new region—APO—President Geraud Darnis knows he has a steep learning curve ahead of him. “This territory is so large and so diverse that I cannot pretend to understand it yet,” Darnis says.“But I do know about the benefits that focusing on selected initiatives can bring to any organization. My role will be to harness the wealth of energy and experience that exists within APO and focus it on ensuring that those benefits are reflected on our bottom line as fast as possible.” As the ‘new boy on the block’, Darnis is gratified that his new team’s priorities were totally in line with those identified at the recent Carrier Global Managers’ Meeting in Palm Springs, California. It is also a good sign that his personal ‘top five’ differed in only one particular. “After a short acquaintance, my feeling is that PDS within Asia is an unstoppable force, and so, in my view, acquisitions should move to the top of our hit list,” Darnis explains. Geographically, every square inch of APO has a climate that cries out for air conditioning and in 20 years’ time, half the world’s city dwellers will be in Asia. In the same time span, China will become one of the world’s top three economies. The opportunities are obvious. “There are tremendous immediate opportunities for us to take advantage of the crisis in Asia to grow our business and we must move quickly before our competition does,” the former president of European and Transcontinental Operations says. “Even today, China with its population of 1.2 billion has an enormous split-system market that Carrier does not participate in. We have to change that fast, but how—with joint-ventures, with an OEM agreement? I don’t have the answers yet, but we don’t have much time. “I remember when we transferred 06 compressor and 30-series chiller technology from Montluel to our factories in China. Those factories now produce top quality products at very low cost. The same is now happening with appliances and with cars. There is no doubt that China will follow the same path as Japan and Korea by producing a large surplus of top quality products to grow its export market. “We cannot afford to ignore the possibility that this success could threaten some of our own factories in other regions. Let’s prepare for it now.” Quality is another subject close to Darnis’s heart and he is delighted that it features high in his new team’s list of priorities. He is puzzled that Carrier can still ship inferior products with a degree of equanimity. The attitude is, he says, unacceptable and he is determined that the quality standards achieved by Toshiba will never be compromised on the altar of lower costs. “I have spoken with Toshiba customers who told me they were happy to pay a hefty premium for the peace of mind that comes from knowing that once the plant was commissioned they would never have to return to site” he explained.“That is how it

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President, Asia Pacific Operations. “Geographically, every square inch of APO has a climate that cries out for air conditioning and in 20 years’ time, half the world’s city dwellers will be in Asia. In the same time span, China will become one of the world’s top three economies. The opportunities are obvious.

Darnis

should be, and although Carrier has improved in recent years, there is still a long way to go. Satisfaction surveys demonstrate the importance customers attach to quality—if we do not raise our standards we are playing right into our competitors’ hands.” But it is on the subject of e-business that Darnis’ enthusiasm is unbounded because it presents what he calls “unimaginable” opportunities for transforming Carrier’s business. It will, Darnis thinks, play the lead role in speeding the implementation of every single program his APO colleagues have identified as a priority. Carrier’s global scope only adds to the benefits offered by e-business, Darnis says. “I see no reason why, with e-business and information systems technology, we cannot work ‘virtually’ 24 hours a day. “Asia has its own ‘Silicon Valley’ in Bangalore, India with world-class computer engineers where companies such as Intel and Microsoft have large operations. Just imagine how it would accelerate our product development program if the design team in Syracuse could, at the end of its day, transfer work to their colleagues in India who would then pass the ball to the development engineers in Montluel—the ultimate in job sharing.” Obviously, such practices would be impossible without the adoption of standard processes globally. “The added bonus of this would be the ability to use our most valuable resource—our people—more effectively, no matter in which time zone they wake up,” Darnis elaborated. “The increased application of e-business will also eliminate paper transactions that add no value, releasing resources that can be redirected to really improving our efficiency. It will impact positively on our supplier management program and PDS initiatives. Giving suppliers access to our production schedules and allowing them to work with us on line would benefit our supply management and PDS efforts. Our salesmen will be able to concentrate on nurturing those all important personal relationships with their customers, while the everyday paperwork is dealt with electronically—no more time-consuming and frustrating phone calls asking for quotations or literature. Our dealers, often very small operations, will e-mail their queries out of normal office hours when many, me included, log on for a few minutes right at the end of the day.” APO’s service business helped sustain the region when the financial crisis hit, so it is not surprising that it featured high on the list of priorities. “Growing that business will, I am sure, present us with the traditional Carrier dilemma of how to proceed without competing with our customers!” Darnis concludes. “Service is clearly an opportunity to differentiate ourselves, to grow revenue and to add value—I’m just not quite sure how yet, but I am sure our Internet capability will play a major role. I have discovered that there is vast experience within APO to find innovative ways to serve our customers in a world that is becoming increasingly ‘virtual’ and I am anxious to listen and learn all I can.”

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Carlos Renck With a fair amount of economic turmoil, 1999 was a difficult year for Carrier’s Latin American Operations, says LAO’s new president, Carlos Renck. But in a number of ways —aside from it being even tougher on Carrier’s competitors—1999 was still a very good year. First, the down side. With the exception of Mexico, which benefited from its participation in the North American Free Trade Agreement, the gross domestic product (GDP) declined in virtually every Latin American economy in 1999. Moreover, in a number of countries—especially Venezuela, Equador and Colombia—economic travails were compounded by political disruptions. In Argentina, there was the distraction of last October’s elections. And currencies were devalued in Brazil and some of its neighbors. Now, the up side. Despite these trying conditions, Carrier LAO held 1999 sales at 1998 levels, and increased EBIT (earnings not including interest and taxes) by 25 percent. “Carrier did well given the circumstances in 1999 for a number of reasons,” Renck asserts.“We have a local presence in most of the countries we serve, with manufacturing facilities, sales offices or both. Thus, we’re better able to manage economic issues. But just as important, all of the continuous improvement and efficiency programs that employees implemented so successfully in the 1990s, particularly PDS, proved decisive. They allowed our operations to react quickly to the peaks and valleys of this difficult economic environment.” In the light of that success, it’s no surprise that Renck and his senior managers put PDS at the head of LAO’s top five business priorities for 2000. “The importance of PDS and related purchasing initiatives to operating with low working capital and to meeting fast-changing market demands cannot be over stated,” says Renck. Together with PDS, the next four priorities—e-business/Internet development, service, quality, and leadership development—go to the heart of what Renck characterizes as the “soft side” of Carrier’s business. “We have to make doing business with Carrier a pleasurable experience for our customers,” he adds.“When everyone can offer basically the same equipment at competitive prices, our ability to serve our customers and help them solve the challenges they face is what will differentiate us in the market.” E-business and the Internet provide “opportunities we would not even have dreamed of just a couple of years ago” to enhance Carrier’s “user friendliness” for customers, Renck says. Already, 80 percent of purchases are done on-line through LAO supplier integration system. In fact, with some of LAO’s largest retail customers, point of sales information is relayed back to Carrier and its suppliers virtually at the moment a product—a window room air conditioner, for instance—is scanned at the checkout desk. That information sets in motion all the steps necessary to restock that product.

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Renck

President, Latin American Operations. “We have to make doing business with Carrier a pleasurable experience for our customers. When everyone can offer basically the same equipment at competitive prices, our ability to serve our customers and help them solve the challenges they face is what will differentiate us in the market.”

Service, Renck says, is a key item to tackle in LAO because “it provides a stream of very stable revenues, can command some decent margins and requires relatively few assets.” The challenge, he says, is to develop a single, region-wide service strategy that also recognizes local issues, such as potential competition with established dealer networks. “Quality is a priority that goes without saying,” Renck notes.“LAO in the past was a bit complacent on quality because we had relatively closed markets. Customers had few choices. Now our markets are very open and customers have lots of choices. We have to have best-in-class quality in both the hard and soft sides of our business.” Leadership Development is a high priority in LAO because “at the end of the day, your people are what make the difference between you and your competition,” Renck explains.“Everyone can buy the same manufacturing machines. Everyone can buy the same computers. The technology is fairly easy to emulate. It is the soft side, your people and how they execute your systems and processes, that matters.” The strategic focus of these business priorities underscores the changing nature of LAO’s markets, Renck says. Despite its challenges, 1999 was an attractive year for business when viewed from the vantage point of five or six years ago. “Today, there is relatively low inflation—not above 10 percent in any country, with most well below that,” he says.“Despite some bumpiness, governments generally are stable, markets are fairly open, and frequent game or rule changes for doing business are a thing of the past. Moreover, infrastructure for doing business, in terms of airports, flight availability and communications, is sophisticated and reliable.” As LAO looks ahead into 2000 and the next few years, the picture continues to be promising. Latin American economies should do well, Renck predicted, with GDPs growing at three to six percent, and the devaluation issues faced by Brazil and Mexico largely over. This comparatively rosy business environment, together with Carrier’s own success, has attracted much more competition, Renck noted. Where competitors once were limited in number—and none spanned the region as Carrier does—today they are far more plentiful and many, including large Korean and Chinese companies, are investing in factories and sales offices across Latin America. While Renck believes this growing competition will drive pricing toward international levels, he is pleased with LAO’s prospects in the market. “We have 40 percent market share, the best dealer network, the best brand image, the most complete product lines and local production for most products,” he concludes. “The integration of Argentina’s and Brazil’s operations into one company will provide significant efficiencies and facilitate business in countries belonging to the MERCOSUR trade pact. And, Carrier’s joint venture with Toshiba provides product lines that were unavailable to LAO before, as well as the valuable asset of Toshiba’s brand image. “LAO also is making tremendous investments, particularly in information systems and employee development that will better integrate our businesses and make Carrier much more user friendly. We are becoming a company that truly is a pleasure to deal with, and that is the best competitive position to be in.”

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Assembly lines can now build every model Carrier offers every day of the week.

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M-1 shines its dull image by keeping customer promises Elem entsofPDS areevident, buttheycredithard work, hom e-growncom m onsense. on’t blink when you’re visiting Carrier’s McMinnville, Tennessee factory, you might not recognize it when you open your eyes. While the change may not happen that quickly, if your visits over the last several years had been six months apart the transformation for its 16 assembly lines would still have been dramatic. n What was once a storage area for purchased parts and components covering nearly 20 percent of the factory is now manufacturing area. Now there are 450 people building products to sell rather than 10 people driving forklifts. n A whole crew of material expediters, that spent part of their days shuffling and storing parts, components and sub-assemblies on towering metal

Variety is the spice of life and the 40-ton air-cooled chiller that Stephen Fearing (left) and Bradley Layne are brazing now may be followed by its 80-ton cousin. Customers no longer wait three months for a specific model. ©2000 Dan Loftin / Black Star

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M-1 has reduced its Process Cycle times so much and become so flexible that others are coming to learn from them.

shelves and the rest of their days trying to find the parts again, now are building the commercial products that M-1’s customers are buying. n The number of fan coils that used to fill the finished goods warehouse has been reduced by 60 percent. n Assembly lines that used to manufacture the same model air conditioner for months at a time before changing over to another model, can now build every model Carrier offers every day of the week. As Plant Manager Mike Stigall says with a

smile born of past unpleasant memories:“Now we don’t have to tell customers wanting a particular model that they just missed the deadline and will have to wait another three months.” The physical changes are reflected in the numbers that chart the factory’s performance: Inventory turns are up 222 percent from the early 1990s; lead times are down 55 percent from 11 to 5 weeks; Process Cycle Times have been reduced by 41 percent in the last two years. Yet, as far-reaching as the changes are, the

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people of M-1 are reluctant to say there was any single reason for them. When you give things a name, some say, it becomes a “program,” and the long-term effectiveness of “programs” within Carrier hasn’t always been the best. M-1’s Rick McCarty, operations manager says it’s really a combination of tools gleaned from a variety of acronyms. “PDS, CPS, DFT, MMS, JIT, Kaizen, 16-16 . . . we’ve used parts of each to keep getting a little closer to what we want this factory to be,” says

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It really is a team effort, but Materials Manager Tom Clarke often finds himself at the heart of regular production meetings that focus on one thing: delivering products to customer on schedule.

McCarty.“Whatever you call it, we’re all trying to do the same things.” The factory’s goals have changed, as well. “We were always proud of delivering the product to our customers when we said we would,” says Stigall.“But that was still a problem, because it usually wasn’t as soon as the customer

wanted it. We’re changing our focus from the ‘customer promised shipping date’ to the ‘customer requested ship date’—without giving up quality or pretax profits. “To achieve that, almost everything we do now is directed toward reducing our overall Process Cycle Time.” The real push came when M-1 started building the 30-series reciprocating and screw chillers that used to be built in Syracuse, and air handlers once made in Little Rock,Arkansas. Manufacturing space had to be found without adding brick and mortar. Tom Clarke, materials manager, says the only choice was to take the purchased stores area and convert it to manufacturing. Supply chain management suddenly took on a new meaning and urgency as M-1 was faced with the necessity of eliminating stockpiled purchased parts and sub-assemblies built within the factory. “Our first thought was we’d never survive,” Clarke says.“We always bought extra everything. We never ran out of anything, but we didn’t always know where it was, either.” M-1 began sponsoring two-day PDS workshops for suppliers to explain what Carrier customers needed, clarify the suppliers’ role in the process and then train them on how they would be expected to work in the future. Included was the gentle but firm implication that continuing to do business with M-1 meant adopting these new ways of working together. Before the PDS workshops, about 300 distinct deliveries were logged in each day at the loading docks. Unfortunately, some of those deliveries included a month’s supply of some parts —parts that took up storage space and the valuable labor needed to shuffle them back and forth within the plant. Those same loading docks now receive 1,500 distinct deliveries a day, but nearly all of the factory’s 190 suppliers deliver on a daily basis and in lots small enough to not require storage. Some of them with factories more than a day’s drive away have rented warehouse space in Warren County to insure compliance with 26

Former storage area is now a profitable Design Enhancement Center that customizes standard products. Carrier’s delivery requirements. Brenda Locke, M-1 scheduling and distribution manager, says she has recognized a vast change within the plant. “We no longer have to think about doing things that will help us reduce overall cycle time,” Locke says.“It’s second nature. It really has become part of the culture. Our associates understand what role they play in these improvements and our suppliers do, too. They know we aren’t buying anything more than we need.” Carrier World, No. 1, 2000

The line producing TJ/HJ small rooftop air conditioners, like those that might be used on a community bank, is a good example. Each night, four pallets of scroll compressors are delivered to the line for use by the morning shift—no more, no fewer than needed. The supplier also has arranged them on the pallets in the order they’ll be used and on the correct side of the line. (The larger semi-hermetic reciprocating compressors from Carlyle Compressor’s TR-3 factory in Syracuse used to be stocked at least a Carrier World, No. 1, 2000

With 113 years of combined experience, James Cagle, Jerry Fish, Jerry Wiser and J.W. Cantrell add a heat reclaim option to a unit bound for a supermarket rooftop.

month ahead. Now there is no “safety stock,” in part because TR-3 has lowered its lead time from 42 to 17 days.) On the large chiller line that builds a mix of chiller models each day, a week’s worth of wiring in black, snake-like conduit used to be unloaded from cardboard boxes, dumped into bins, taken 27

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Rick McCarty and Brenda Locke move freely in floor area that was once stacked to the ceiling with parts and subcomponents waiting to be used. By the end of the shift, the compressors beside them will be in air conditioners on their way to customers.

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Each night, four pallets of scroll compressors are delivered to the line for use by the morning shift—no more, no fewer than needed.

to the line and stored until it was used. Today, up to two days’ supply of conduit is delivered to the line and placed in a neat row of what look like gym lockers—again, arranged by the supplier in the order each wiring assembly will be used and clearly marked. McCarty says it saves several hours of material handling time and also reduces the possibility for using the wrong wiring assembly on a chiller. The ability to make daily mixed models is not new to M-1. That began a few years ago when changeover times between models were whittled down to minutes instead of Just In Time hours. But those Elaine Sliger checks the label on an mixed models were electrical conduit she pulled from a handy still being built to locker. More than a week’s supply of stock for distributors conduits used to be stored in gaping wire to draw from. Today, bins that held a hundred or more. Today’s conduits are delivered a day in advance with no changeover in the order they’ll be used. times at all between models, the chillers are being built to order. M-1 has reduced its Process Cycle Times so much and become so flexible that others are coming to learn from them. A large contingent of factory specialists from various Carrier Refrigeration Operations visited M-1 last year. This is quite a change from the early 1990s when M-1 stood a good chance of being closed. “But our success raises a question,” says McCarty.“How do we continue to demonstrate

the flexibility of our factory to our customers?” Stigall, Locke and Clarke have ready answers. One of the goals this year, Locke says, is to take more time out of the “front end”—to reduce supplier lead times even further since that is the longest segment of the total order-to-ship process. At the beginning of last year, supplier lead times stood at 20 days. That was reduced to 15 days by the end of 1999. The goal this year is seven days. “Hey,” says Clarke,“we’ve been setting stretch goals for ourselves every year that we really don’t think we’ll be able to meet, but we’ve been meeting most of them. I think we can do it.” M-1’s suppliers now understand the need for speed and flexibility, so what would happen if the factory could get orders to its suppliers more quickly than is being done now? At the start of 1999, the MRP report (Material Resource Planning) was generated once a week. It told suppliers what parts or materials would be needed from them if M-1 were to build all the products scheduled for manufacturing the following week. If a customer ordered an air conditioner just after the MRP had been generated, that meant it would be another six days before the parts for that air conditioner could even be ordered. “We didn’t think we could do it,” Clarke said, “but we successfully began generating two MRPs a week instead of one. That one element reduced supplier lead times by three days. Our goal this year is to generate a new MRP every night and transmit it electronically or make it available on the Internet to our suppliers. If we get an order for a chiller on a Monday, we’ll order the parts for it on Tuesday.” There was general agreement that achieving even this one goal would be difficult. But they also agreed it had to be attempted. “You never learn unless you try,” Stigall says. “We learned a lot in 1999 that will help us this year. We’ve also learned how satisfying it is to do things that only a couple of years ago would have seemed impossible.”

CSS Breaks Old Habits Could any of us stay on a strict diet if we were paid extra to eat cheesecake, Linzer tortes, chocolate mousse or rich Italian gelato? Probably not. Yet Carrier has been sending that message to its commercial product distribution partners for years. They have been urged, through sizable discounts, to order products 40 50, 60 days in advance. Like a steady diet of delicious sweets, it was an easy habit to start and a tough one to break, no matter how harmful it was to the waistline or coronary arteries. The effects on Carrier were bloated inventories that cost more money the longer they sat in finished goods warehouses. Distributors paid, too, as money that could have been used to expand the business sat around tied up in a warehouse full of unsold green or gray air conditioners, heat pumps and air handlers. And if they had ordered early, but guessed wrong about what specific product models their customers would want, they lost money, too, because customers went to competitors that had what they needed. But on January 1, the date that new ordering policies took effect, the message suddenly changed. Yes, you can still order products far in advance of when you really need them, but we’ll no longer pay you to do it. “We’ve done a good job of moving factories like M-1 from a “build-to-stock” mentality with big, costly inventories, to a “build-to-order” mentality that concentrates on reducing work-inprocess and finished goods inventories while still getting the right product to the customer when it’s really needed,” says Dan Williams, CSS marketing director. “Yet we still promoted behaviors with our distribution partners that worked in direct opposition to what we were trying accomplish with PDS. “We offered our distribution partners discounts from three to five percent if they ordered products way before there was any real need for them. This way the factory could see the demand coming way ahead of time and leisurely order the supplies it needed to build the equipment. And distributors

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always had full warehouses. Everyone was happy,

one percent for orders with lead times between 20

even though it was costing us money.”

and 29 days.

Carrier also allowed distributors to say they needed a product “right now” when the real need

M-1 also used to offer special “jobsite coordination” that guaranteed delivery of the product

“Like a steady diet of delicious sweets, it was an easy habit to start and a tough one to break, no matter how harmful it was to the waistline or coronary arteries.”

was still 30 days away. That satisfied some

to the jobsite within a very narrow four-hour time

distributors, but others who really did need certain

window. It required M-1 to assign a person to

products immediately were out of luck because

literally accompany the order through the final

the products were “mortgaged” to someone else.

stages of production, shipping consolidation and

Neither of the ordering scenarios reflected the true

over the road delivery staying in constant contact

demand, Williams says.

with the jobsite. Because it added value, a minimal

Williams says his team worked closely with

fee was charged, but it became a money-losing

the Distributor Advisory Council to come up with

proposition when it became very popular, often in

ordering policies, incentives and some penalties

cases when it wasn’t really needed.

that encourage the kind of behavior needed to

As a result, the minimum fee for jobsite

make PDS work throughout the system, not just in

coordination has been more than doubled to dis-

the factories.”

courage its use except by those who really do

For example, last year Carrier offered a three

need to have delivery guaranteed at a specific time.

percent discount for orders with a 40-day lead

The small change is expected to free up as much

time to the customer’s requested shipping date—

as $2 million worth of inven-tory for people who

primarily for condensing units up to 20 tons of

really need the service.

cooling capacity, the “bread and butter” of most

“Our factories have become very good at

distributors’ sales. But because the M-1 and Tyler

responding reliably to shortened lead times,”

factories have so effectively reduced their lead

Williams concludes. “If we are going to reap the

times, neither factory needs the long “visibility”

full benefits of PDS, it becomes our responsibility

into future demand that Williams talks about. It

to provide better information at the front end of

became less valuable, so the discounts have been

the process—information that more accurately

reduced to two percent for orders 30 days out and

reflects the reality of the situation.”

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Bits&Pieces

The Villasanta facility is also supplying a number of cassette units for use in relatively new schools whose ceiling arrangements can accommodate them. A key element in the selection of Carrier equipment was the ability to supply, as standard, blue fin coils that are specially coated to resist salt corrosion—a problem frequently encountered throughout Queensland. The school air conditioning contract comes at a time when the negative effects of high humidity and poor air quality on the learning process are being increasingly highlighted by scientists. This concern has already prompted the American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) to publish detailed guidance on classroom comfort. Meanwhile, the Queensland Government’s commitment to its comfort cooling programme has resulted in plans to extend it southwards to Brisbane, and to replace with conventional air conditioning the evaporative coolers currently being used in many schools around the region.

Cool Schools, Aussie Style Carrier air conditioning units are ensuring muchimproved comfort in small rural schools located in the north of the Australian state of Queensland. Temperatures in these schools can climb as high as 40˚C (104˚F). This, along with relative humidity of up to 80 percent, means pretty uncomfortable working and learning conditions for teachers and pupils alike. Having become convinced that the installation of air conditioning represented the only practical solution to the problem, the Government of Queensland opted for Carrier under-ceiling units—1,000 of which have already been fitted, with another 1,000 scheduled for installation over the next three to four years. The units are going into every state school from Australia’s northern most point down to the Tropic of Capricorn at 20 degrees south latitude. Phase one of the initiative has involved the conditioning of the schools’ libraries and other resource centres. However, by the time the contract has been completed, over 2,500 classrooms will also be benefiting from Carrier technology. The under-ceiling units are being shipped directly to the Queensland Department of Education, or to its nominated contractors, from Carrier factories in Malaysia and Villasanta, Italy.

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bills considerably. Multiple compressors provide Carrier Cures Ham Problems inherent standby and allow less installed total Carrier chillers are playing a capacity. It also meets environmental critical role in the production regulations related to refrigerants. For the owner, of many of Spain’s most popular the easy-to-read controls are a huge bonus, as delicacies. The country’s internationally he can see at a glance what is going on in the famous Jamon Serrano is a case in point. drying chambers. As much as 30% of this delicacy is produced At the other end of the scale, a mile or so up in the Torrijos region, close to Toledo where the the road, around 500,000 hams are produced local pork and the climate combine to provide every year, with around $6 million in process at the best conditions. That is until local contractor any one time by Eulogio Ramos S.A.. Here a Jurado e Hijos and Carrier teamed up to improve newly installed 30GH120 chiller regulates on nature for two local ham producers. temperature and humidity to deliver perfect hams The traditional method of drying the ham destined for the most discerning palates around which involved its unhygienic exposure to the the world. Around 600 hams are gently cured cold winds of the Sierra mountain range, not in a single chamber for 90 days and so crucial is only took a whole year to complete but was it to maintain these conditions precisely, that the frequently bedeviled by adverse weather condisystem is linked by modem to Carrier Service in tions. Indeed a mild winter could result in the Madrid for remote monitoring. loss of entire legs of pork, as could the inadverMeanwhile Navidul, one of Spain’s leading tent use of excess salt in the curing process. processors, has installed a Carrier 16JB absorpNowadays, however, the curing of the pork tion chiller which allows them to use excess legs takes just 180 days in hygienic, purposeheat and steam to power very cost-effective air designed dryers which conditioning to its ensure a constant adjacent office complex. temperature of –3ºC and Elsewhere in Spain, the opportunity to readily Carrier equipment is in use and effectively to control by several tuna processing the brine levels. co-operatives in Galicia, by A Carrier 30-series the Cervezas Damm brewbrine chiller has replaced ery in Barcelona and by a artificial dryers which have number of olive oil procesbeen used for 15 years by sors based in Tarancon and Carnicas La Villa S.A., a Daimiel. And of course small family business where wine producers have been around 15,000 hams are using Carrier machines processed each year. The for years to control the new chiller not only fermentation process. provides perfect control of So relax, and enjoy the whole process, transa feast of Spanish delicaforming each 12kg haunch cies in the interests of into 8kg of delicious ham, researching the effects of its heat recovery capability Jamon Serrano hangs from the ceiling in this food Carrier chillers on the has reduced overall energy shop in Palma de Mallorca, Spain. Pictured above tables of the world. is a Navidul boneless ham.

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Carrier World

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CarrierWorld is published by Corporate Communications for Carrier employees worldwide. Editorial offices are located at Carrier Parkway, P.O. Box 4808, Syracuse, New York 13221. Telephone: 315-432-6177, Facsimile: 315-432-3213 Managing Editor: Creative Editor: Contributors: Design: Cover Photo:

Matthew Chadderdon Rick Fedrizzi Eric Johnson, Nicky Ashley, Kevin Madigan, Phil Rieth Jowaisas Design Masterfile

Printed in USA on Recycled Paper ÂŠ 2000 Carrier Corporation

BULK RATE U.S. POSTAGE PAID PERMIT No. 1583 SYRACUSE, NY