Q. What is your biggest supply-chain challenge in the coming year?

A. Probably the most important is the flexibility issue within the supply chain. We have so many internal and external customer responsibilities that we have to make sure we're as flexible as we can be, without adding costs or flow barriers within our supply-chain network.

Q. Isn't there usually a price tag attached to achieving greater flexibility, or reengineering the supply chain?

A. It has not been as difficult as it may appear. There are things we've done that have been relatively simple, providing huge productivity benefits without adding a lot of costs. To give you one example, we've taken some people who deal in the sales side as well as the logistics side - they basically do customer logistics, for lack of a better term. And we've asked them to redefine their roles to become more effective. The result has been a much better flow of customer information, both internally and externally. They actually control the movement of product from the point of receiving information from the sales administration group, through to the customer's warehouse. That group used to be split between a bunch of different areas.

[The program] has been in existence for a year, and the results have been phenomenal. It's easier, smarter, more productive and has improved service levels. It's one small example of things you can do without incurring major costs.

Q. Everyone talks about tearing down silos. You've actually done it?

A. Yes, and we've done it by not requiring it to happen at just one level of the organization. Senior leadership shouldn't always make those decisions. The people who are doing their jobs day to day - we empower them to come up with ideas. And they have been very creative, very different.

The interesting thing is, we split the management group from what I would call the doers. We told them to come up with separate ideas, then come together and brainstorm. It's been one of the most successful things we've done. We're looking to do that in other core areas as well.

Q. What kind of technological innovations do you see on the horizon, that will help you to create a more efficient supply chain?

A. The future lies in figuring out an easy methodology for flowing information from the consumer to our customer, and ultimately to us. The more information we have about what is occurring at the consumer level, the better we can make decisions on managing our needs throughout the supply chain. We are seeing more and more information that can be pulled down directly from our customers.

Q. Are you talking about Collaborative Planning, Forecasting and Replenishment (CPFR)?

A. I'm keeping it much simpler than that. I'm looking at getting information from the retailers that tells us what is happening at the point of sale - information on how we're performing. And, along with that, information from our providers - our vendors and carriers. We're getting tighter and tighter linkages. We can see things earlier, what's coming from the production side, so that we can allocate sooner, based on what we're seeing at the consumer level. It's not only the front end, but all the way to the back end as well.

Q. So there's no particular aspect of information technology that you're focusing on? Just the whole universe of better information flow?

A. That's correct. There are isolated tools that we're using, but they're linked to our enterprise resource planning system. We are linking that information and getting feeds from different sources that make our information flow that much better. And, of course, it's in real time.

Q. Do you face a challenge in receiving consumer information from multiple channels? For example, in addition to retail stores, those who are selling your products on the internet?

A. It does raise the question of flexibility. We are dealing with multiple channels.

But our arrangements with the dotcom space aren't all that different from the way we've worked with businesses in the past. I don't personally see it as that much different with regard to how I'm sourcing and delivering product.

Q. Let's talk about people. What kind of expertise and training must supply-chain managers of the future possess?

A. I believe that skills related to leadership are the most critical. Supply-chain leaders of today must have all of the qualities of leadership that create the organization, the vision and the strategy to motivate and retain future leaders. They need to be able to lead our customers and company in the direction that is most beneficial to the end consumer.

Q. "All of the qualities of leadership." Considering the huge scope of the supply chain, where do you expect to find such individuals and/or train them?

A. I don't think that leadership skills are completely and outrageously broad. People who are going to be successful in supply-chain management present leadership qualities. They're able to drive to a vision. They can lead people, versus just managing a functional area.

A lot of skill sets in core managers already exist within the supply chain. And some development is always occurring. I believe leadership development should be a continuous process. How you do that is in the example I gave earlier - of providing a methodology whereby people look at how they do their jobs. You give them the chance to say, how would we do this differently? And you show the management team how to be better leaders.

In the past, core managers have said, "This is the direction I'm giving you, this is what your role is, and this is what you do from one to 10." The leaders of tomorrow will look at how they can use the talent not just within themselves, but within the people they're leading as well. I don't think it's that difficult - a lot of people have those qualities. They need to be given freedom and opportunity to run their day-to-day businesses.

Q. How do you handle change management: fighting the instinctive resistance to change, especially if it involves tearing down barriers between departments?

A. You make it safe. You give people the flexibility to do those things. In other words, let them take risks. Let them fail. From what I've learned in life, a lot of failures are also steps to success. A lot of medicines came from failures in the lab. There are a couple of stories that I remember from my Nabisco days, where different spices were put into products, and they came up with new products.

People need an environment where they feel it's OK to take risks, to do something differently. Try it for six months, see how it works. In the program I talked about earlier, people weren't sure it was going to work. A year later, there were all kinds of accolades. You have to let people take risks, and support them. You learn a lot from things that may not go exactly right. And that gives you the tools to do something at an even better level.

Q. What impact did the events of Sept. 11 have on your operations?

A. We have not had any disruptions in our supply chain.

Q. But has it caused you to rethink your approach to the future, in terms of inventory levels, order cycles or other processes?

A. No. Absolutely not. We have formed a supply-chain system that allows us to be flexible enough. Think about the industry we're in - it's what I would call a fashion industry. We've had to design a flexible supply chain to deal with drastic change - what's going to sell tomorrow, what isn't, and how we manage things that are flying off the shelf as well as slower items. That's the nature of this industry.

Q. Has the toy business in general seen a reduction in overall inventories in recent years?

A. We've definitely done things to manage our inventories much better. [Editor's note: In the third quarter of 2001, the value of Hasbro's inventories declined to $346m, down from$540m in the same period of 2000.] Basically, we're shortening lead times, we're making better decisions because of the information flow that I talked about earlier, and we're getting point-of-sale information. We're having much success at that.

Q. How does the internet figure into your supply-chain strategy today?

A. We are specifically using the internet with respect to our production in Asia. We have visibility as to what is consolidated and loaded on vessels very, very early. That gives us the ability to allocate product quickly. We are getting instantaneous information, which allows us to pre-clear and flow product.

As far as the internet is concerned, the linkages to secured sites with our retailers have helped us to get information on our performance and what we need to be doing differently. We can share and fix and amend things as we go along, so that we meet the needs of the end consumer.

Q. In addition to your ties with carriers, does the internet serve as an important link with manufacturers?

A. That's something we're actively pursuing. And when you mention carriers, we're not looking at them in- dividually - we're looking at a shared-space medium that gives us information from multiple carriers in one place. That's where we're seeing the benefit. With regard to manufacturers, we're looking at technology that is similar to that.

Q. Has the economic slowdown altered your plans for supply-chain reengineeringy?

A. We're looking at things on an ongoing basis. We have made some significant investments in technology. We're optimizing our ERP systems, and some of the additional systems that we talked about already.

But even more importantly, there's a change in thinking and scope. We're asking how we can manage the business differently, from an internal perspective. I just came from a meeting where we were talking about how we're flowing goods to the customer. There is a way we can simplify that process, where we're not having to pass information through all of our functional areas. This is one of the biggest issues that I see in the industry today. We've gotten much better at total organization, but we're still struggling with the internal flow of information. Knowledge management, which a lot of companies have not done much with, is going to be important in the future. How can you do things smarter? How can you better share that information with vendors, carriers and customers?

Q. What is the weakest link in the supply chain today?

A. It's the use of deductions and charge-backs to streamline the supply chain. It touches upon all the players within a global partnership. You can easily start to say, we'll push this charge back to the LTL carrier, and this one somewhere else. But I don't know that deductions and charge-backs are the way to create an optimum global supply chain. They create frustrations and costs for everyone. And I'm not convinced that they fix things. What does fix things is sitting down, virtually or face to face and working through the issues.

Ultimately, everybody wants a happy consumer. To get to that, we need to fix everything in the supply chain. And a negative approach doesn't help. It's more about proactive supply-chain management, in partnership with our customers. I've seen people walk out of meetings with to-do lists that make the supply chain more effective.

Q. Shouldn't retailers have vendor compliance programs?

A. All of us need to have requirements in place to help us manage our business well. What I'm saying is that there are better ways of getting us to a point where all of us perform well. I believe there are much healthier ways of getting to those responses - by working collectively and putting out action plans, and saying, what are the issues that are costing you money, time and effort? Pushing dollars from one company to another, to try to fix supply-chain issues, is not a way of getting to solutions that are effective and profitable for anybody.