THE CHANGE MASTER

Logistics Insight Asia, 1/7/2009

PATRICK BYRNE is steering Intermec through a period of internal changes and external challenges. He talks to Bob Gill.

As a developer and manufacturer of products that identify, track and manage supply chain assets, Intermec’s core technologies include mobile computers, bar code scanners, RFID systems, printers and label media. Headquartered in Washington State, USA, the company employs some 1,900 people worldwide. Fiscal year 2008 revenues (year ending December 31) hit a record US$891 million.

In line with a new strategic focus encompassing markets, products, channels, growth, and supply chain, Intermec has undergone a number of organizational and executive changes since Patrick Byrne took the helm as president and chief executive officer in July 2007.

Q: How have the last 12 months been for Intermec?
A: We have been through a number of initiatives aimed at streamlining and simplifying the company. These have included transfer of all product manufacturing to Venture Corp’s plant in Johor, Malaysia, which we managed to complete in just six months; and a major reconfi guration and expansion of our channel model, particularly in the US.

The reduction of cost and complexity helped our earnings to grow by 40 percent in 2008 (to $35.5 million), and the company is financially strong – being debt free and sitting on over $200 million in cash. There is plenty of work to do still, such as focusing efforts on attractive markets and in globalizing the company – two-thirds of revenues come from North America and we want to get to 50-50 (North America/Rest of World).

Q: The recession has not been too much of a concern?
A: Of course we are going through tough times and you would be foolish not to acknowledge that fact. But it’s also easy for executives to get distracted – they read the Wall Street Journal or Financial Times and believe that’s their forecast, whereas in fact, there is money being spent, you just have to find out where it is.

The important thing during a recession is to ensure that you’re growing faster than the market; for example, if it’s down 25 percent and we’re only down 10 percent then that’s good. And the cuts that we have made have not been done purely to reduce costs or out of a sense of panic, but to build a stronger company.

And at a time when many customers are struggling and looking to free up cash from their supply chains, the products that we offer can payback, typically, in six to nine months, which makes our value proposition as a trusted advisor that can help them make operational improvements very strong.

Q: So where are the opportunities for Intermec?
A: Field service applications are becoming an increasingly important part of the business. Intermec technology has the power to radically improve the productivity of the mobile workers in areas such as customer service, distribution, and maintenance and repair.

In fact, our biggest win of 2008 was the contract to supply 25,000 CN3 mobile computers to the UK’s Royal Mail. The CN3 has enabled the Royal Mail to improve on its previous paper-based system for collecting signatures for tracked products. The signature is now collected on the device and sent via the cellular network to the sender for delivery confi rmation.

The use of the cellular network as an IT platform is truly a transformational thing for the industry, and leveraging that network can effectively solve the “last mile” problem, which is where much of the cost is. Cellular enables the enterprise application to cost-efficiently go out to the guys in the field, and this is why the CN3 and the CK3 launches have been so successful for Intermec.

Q: Is RFID still high on the agenda?
A: We did grow the business in 2008, and faster than the company average. Most of the applications have been closed-loop, mid to small size projects with clear objectives, rather than the grand end-to-end supply chain ones that were perhaps first envisaged by RFID proponents. Our clients are reporting quick payback (less than nine months) and tell us they are proud of the results they have achieved.

With new technology, there is always a tendency to over estimate what is likely to be achieved in two years and under estimate the benefits over 10 years, and that seems to be the case with RFID. So it’s better to be persistently engaged rather than to try and do too much in the beginning and then get discouraged. RFID does have a compelling role to play in asset management and inventory tracking but, right now, we’re not counting on it to transform the growth rate of the company.

Q: In these times of change and uncertainty, how do you keep Intermec employees motivated?
A: Besides a fair income, there are three things that people generally look for in their work: confidence in the direction of the company, i.e., where it’s headed; a good team environment; and to be able to make a contribution and learn new things. As a leader, if you can provide all these them the external environment does not loom so large.

Q: And finally, your thoughts on the outlook for Intermec?
A: I am very optimistic about the future. We are externally focused on the opportunities, internally strong with great people and great technology, and a great platform for customers to improve their business. The core of Intermec is very strong, which is not always the case with companies.

For the next 12 months I have three main goals: a leaner, stronger Intermec that’s simpler and runs better; market momentum in each region, achieved by new products, marketing campaigns, and customer engagements; and a multi-year growth strategy that we can execute.