The aftermarket has become the new frontier for manufacturers - providing significant opportunity for increasing revenue, strengthening customer relationships and building more dynamic product lifecycles. Industry giants and small companies alike that transform their businesses into service-centric organizations will realize multi-million dollar savings and increased customer satisfaction-a winning combination.

Aftermarket spare parts and services account for 8 percent of the annual gross domestic product in the United States, with U.S. consumers and businesses spending more than $700 billion annually on spare parts and services for previously purchased assets such as automobiles, aircraft, and industrial machinery, according to Aberdeen Group.

While a critical component of the economy, the service sector remains underinvested. A recent study by AMR found that while after-sales service on average represents 24 percent of revenue and an astonishing 45 percent of profit for manufacturing companies, only 20 percent of IT spend is allocated to service.

Corporate executives are increasingly recognizing that paying attention to aftermarket service results in immediate profit as well as longer-term customer satisfaction and new product revenue. To capitalize on the service opportunity, there are several important trends that smart executives should be aware of:

1. Growing demand for performance-based service metrics

2. Linking product innovation and service

3. Continued value in outsourcing

All of these are based on a fundamental service concept: the objective of the product manufacturer is not in selling the product but rather in maximizing the value that the customer receives from the product throughout its lifetime. Leveraging these three trends can greatly increase the value of a service offering.

Companies that are quick to recognize and jump on the untapped potential in the service supply chain have a huge opportunity to gain market share through competitive advantage. With the right investments in service, increased profit, streamlined efficiency, and improved customer satisfaction are inevitable. Understanding and embracing the three service trends is the first step toward this next level of success.

In the latest breach of consumer computer security, United Parcel Service Inc. confirmed Monday that it has lost the financial data of nearly 4 million Citigroup Inc. customers. Citigroup said UPS cannot account for computer tapes containing the names, Social Security numbers, account numbers and payment history of 3.9 million of its CitiFinancial customers. The courier service was transporting the financial firm’s tapes to a credit bureau when they disappeared.

The USA has seen a rash of consumer data thefts and losses in recent months. The disappearance is the latest in a series of data breaches involving U.S. banks, including No. 2 Bank of America Corp. Consumers’ names and other personal information have been stolen or lost from computers at banks, credit bureaus, universities and other institutions.

Citigroup says now that it will encrypt financial data and transmit it to credit bureaus electronically. Modern computer encryption is virtually impossible to decipher. But there is no question that there has been an outbreak of hacking and records losses for many thousands of people. There is no sign that the records have been misused.

Clearly, the bad news did not disturb investors. Shares of Citigroup rose 13 cents, to $47.69, in a generally flat market. Shares of UPS added 4 cents, to $72.86. Both trade on the New York Stock Exchange.

The toll surcharge on the German motorways has made the goods transport considerably more expensive. The cost of a trip by a lorry using the German motorway, did increase in the first trimester of 2005 by -on average- with 6 percent. In comparrison the price increase of national transport in the same period did increase with something more than 0.5 percent. The influence of the toll on the total increase of the cost of a trip seems therefore considerable. What exactly the impact of the toll surcharge is on the total cost is, can hardly be stipulated in detail. This because other factors (like diesel allowance) do influence the price too. Furthermore, contracts and pricelevels are ussual renewed at January 1st.

Not all professional transport using the German motorways has become more expensive. An exception are the international household removals. This type of transport has become even cheaper. A possible cause is that this type of transport more often uses toll free modes of transport like small weight type of lorry (less than 12 tons).

Within the international transport and haulage market there are big differences in price levels between the several sub-markets. Thus the price of the international chicken transport in the first trimester 2005 increases by more than 9 per cent with respect to the first trimester 2003. On the other hand the price of the international container transport (by road) did increase only something more than 2 percent.

Here are the seven new topics that will likely appear on the agenda of future AMR Research events.

[u]

1. Disruptive innovation and ?appropriate technology?[/u]

What does the car of the future for India look like? As more of that country’s population moves toward purchasing their first car, buyers will have a choice of options from manufacturers around the world. The most intriguing announcement to date is Tata?s plans to build the People’’s Car. This four- to five-seat vehicle is scheduled to appear in 2008 at around $2,000 to $2,200. This is about one-fifth (or less) than the price of most low-end cars sold there today. Tata is targeting the five million people currently riding motorbikes.

The idea of ‘appropriate technology’ came from Small is Beautiful, a book written by E.F. Schumacher. The point is that we can’t take product from other markets and assume that they are appropriate for developing countries or markets. Other examples include MIT’s Nicholas Negroponte?s plans for building $100 laptops for India, China, and other Asian markets. Given the challenges of accessing reliable electrical power, the laptop will be powered by a hand-crank or bicycle. Honest.

[u]2. Labor supply chains[/u]

Earlier this year, IBM received some press coverage on its plans for labor-based supply chain management. Through its Workplace Management Initiative, which aligned labor strategy to business strategy, IBM saved $500M last year and is looking to save $2.0B to $2.5B annually. While part of the savings came from better utilization of its consultants, the long-term plan is to develop a global demand plan for skills needed far out into the future.

Believe it or not, more than 25% of current U.S. workers will reach retirement age by 2010. This has the potential for a major brain drain, especially in the federal government. A recent Accenture study noted that 45% of the respondents worked at companies without workforce planning processes or tools for knowledge transfer. We suspect that most companies have neither a long-term labor demand plan nor have thought about the impact of the retirement of baby boomers.

[u]3. Financial supply chains[/u]

A recent e-mail from TradeBeam noted that the average global trade cycle for order-through-to-settlement runs about 120 days. The companys goal is to cut that cycle by at least 10%, leading to an immediate improvement in all cash-related metrics. Likewise, Bolero.net has developed software for automating the process for generating letters of credits and other financial instruments. Its goal is to help companies achieve shorter procure-to-pay and order-to-cash cycles. Look for ongoing research from Guy Dunkerley on the impact that global tax policies will have on future supply chains, too.

[u]4. Eco-Tech: Doing well by doing good[/u]

Much of our coverage on the environment and technology has focused on global regulations aimed at reducing/eliminating hazardous substances or increasing recycling or reuse. While most has been about the costs and benefits of compliance, we think there is great marketing opportunity in going green (see the AMR Research Alert article ‘Green Compliance: It’s a Marketing Opportunity, Not a Burden’ for more on that).

A few weeks ago GE made a splashy announcement of its ‘ecomagination’ initiative. The company is developing 17 new products and technologies aimed at improving the environment. Executives expect the new offerings to generate $20B in revenue by 2010. Its plan is to double its R&D budget to $1.5B over the same period. Any bets on which big company will be next?

[u]5. Sensor networks[/u]

If you enjoy reading about ’smart dust’ and sensor networks, you may know that there are more than a $1B worth of projects underway involving wireless networks of motes, robots, cameras, and computers. Imagine a low-power network that can measure light, precipitation, wind speed, humidity, barometric pressure, soil temperature, humans, and weapons, and you can sense new applications for the environment, facilities management, traffic management, and all facets of security, from homes to the battlefield. Where does this fit in the supply chain? How about lights-out manufacturing or distribution?

[u]6. Nanotechnology: a quiet $10B market[/u]

In 15 years of attending AMR Research’s and other industry events, I?ve only heard one speaker mention nanotechnology, the science of using sub-microscopic materials or particles. Believe it or not, nanotech is a $10B market, with much of the growth coming from Japan and the United States. Last week, Motorola demonstrated its first nano-emissive display. It measures one-eighth of an inch. This could be part of the next 42-inch, sub-$1,000 televisions by 2007. Hitachi and a German university are teaming to use nanoscale latex spheres to build next-generation storage devices. Meanwhile, Bell Labs is reported to be developing fingerprint-sized phones and ‘nanograss’ for longer lasting batteries.

It’s not just technology companies. A recent article in USA Today (June 1) talked about the role that nanotech is playing in paints, sunscreens, apparel, and even creating gem-quality diamonds. What effect will nanomaterials have on your next new product launch?

[u]7. Human area networks[/u]

Earlier this year Japan?s NTT unveiled RedTacton, a plan to turn the human body into a 10 MB local network. Instead of using sensors or electric current, the network would use the natural electric field on the body’s surface. One news article talked about being able to exchange data by shaking hands or transfer music files by a kiss on the cheek. While it remains to be seen if anything comes of this, one could imagine new applications for security or medical diagnostics. There seems to be a logical link to sensor networks, too.

What do you think? Will any of these make next year’s agenda, or is 2010 a better bet? As always, AMR welcomes your ideas? brichardson@amrresearch.com.

Swiss voters approve a measure to ease travel requirements between surrounding E.U. member states and their land-locked neutral country. Though not a union member, the decision to join a European Union “passport-free” zone, sharing border security and police information with neighbor nations, is a boost for the confederation.

The acceptance of the Schengen treaty by the Swiss will create a another fundemental pillar on the (economic) relations between Switzerland and the EU. In 1972 the Swiss accepted the Free Trade Agreement between Switzerland and the European Economic Community (EEC), and this agreement is still one of the fundamental pillars of economic relations between Bern and Brussels. Free trade with Switzerland?s largest trading partner by far has brought significant gains in prosperity for Switzerland. With a trade volume of eur 120 billion Switzerland is the EU’s no. 2 trading partner after the USA (eur 382 billion), ahead of China (eur 105 billion) and Japan (eur 120 billion).

Schengen will allow Swiss police to share information with their EU colleagues about all sorts of crimes, from money-laundering to suspected terrorist organisations. The Dublin accord, which has also been backed in the referendum, will give Switzerland access to Eurodac, the database which is supposed to prevent asylum-seekers making applications to more than one European country. The Swiss “yes” vote on Schengen and Dublin comes in the wake of “no” votes in France and the Netherlands on approving the EU constitution.

Africa’s biggest trade bloc, COMESA (common Market for Eastern and Southern Africa), should establish a customs union by 2008 to boost trade by 25 percent and spur greater investment in the region, trade ministers recommended on May 31st.

Government officials and business representatives from the 19-member Common Market for Eastern and Southern Africa (COMESA) are meeting in Rwanda’s capital to push for the customs union which has been delayed due to concerns over loss of revenues by governments and business groups.

The 16 Heads of State are expected to discuss and agree on the revised road map on how best COMESA can have a Customs Union in place by December 2008. Initially, COMESA was scheduled to have a Customs Union in place by December 2004 but this was postponed to give adequate time to all Member States to prepare adequately.Once launched, Member States will collectively regulate trade relationships with countries outside the COMESA Customs Union. This will enable theses states to negotiate under the WTO and with bodies such as the EU and the USA, as a single entity and with one voice.

A Customs Union is a merger of two or more customs territories, which agree to a common external tariff (CET) and common policies and procedures for managing the importation of goods from countries outside the Customs Union. This happens after individual countries with different rates of duty on imported goods, agree to charge the same duties on goods from countries other than these countries, and thus become a single customs territory in international trade terminology. A Customs Union is the third stage of integration after a Preferential Trade Area (PTA) and a Free Trade Area (FTA). It is succeeded by a Common Market, then an Economic Community and lastly an Economic Union.

The COMESA Customs Union, will represent 19 countries with a vast area of 12.8 million square kilometers and a population of 380 million people with a combined GDP of US$ 200 billion.”

China is to scrap export tariffs on 78 categories of clothing and textiles in an apparent escalation of a trade dispute with the US and European Union. Beijing introduced the tariffs to try to control burgeoning Chinese clothing exports, but the EU and US still say too many such goods are being exported.

With the EU now threatening to limit imports of such Chinese items, it appears that China is now retaliating. The US has already brought in limits on Chinese textile and clothing imports.

Washington made the move on 14 May against Chinese cotton trousers, cotton shirts and underwear. The EU on Friday asked for formal talks with Beijing over two types of Chinese clothing and textiles - flax yarn and T-shirts. On Monday, the EU’s executive commission insisted that it had grounds to act to stem the flood of Chinese imports and rejected China’s claims that there was no evidence to justify the complaints.

InkSure Technologies Inc., a leading provider of covert machine-readable security solutions for the prevention of counterfeiting, fraud and diversion, today announced that its wholly-owned InkSure RF

subsidiary has been awarded two key U.S. patents related to the Company’s ongoing development of “chipless” RF tags. The two patents are entitled “Chipless RF Tags” and “Radio Frequency Data Carrier and System for Reading Data Stored Therein.”

“While RFID (Radio Frequency Identification) technology enables automatic non-contact and non-line-of-sight conveyance of product and logistic information, current RFID applications require that relatively expensive chips be imbedded in the ID tags, making item-level tagging impractical for most products,” stated Elie Housman, Chief Executive Officer of InkSure Technologies Inc. “Our goal is to develop multi-bit ‘chipless’ RFID tags that can be manufactured and applied to product labels at a cost of well below one cent each. Such tags offer far more speed, functionality and ease-of-use than traditional barcodes and have the potential to revolutionize brand protection and supply chain management on a global scale.”

According to IDTechEx Ltd., a leading consultancy in smart labels and smart packaging, global revenues from RFID systems should exceed $10 billion by 2010, with “Chipless RFID” accounting for at least 30% of the total.

“The issuance of these patents confirms InkSure’s ownership of these important chipless RFID innovations and will allow us to accelerate our development of an ultra-low-cost printable RFID tag,” continued Housman. “We have established a separate subsidiary, InkSure RF, Inc., to pursue and

commercialize our RFID technology, and we have applied for additional U.S. and European patents.”

TransCore announces new trailer tracking sensors, including a first-of-its-kind infrared cargo sensor and a temperature sensor, for use on TransCore?s GlobalWave satellite communications products. Infrared beam technology, used extensively in household remotes and appliances along with military defense applications, has long been proven and reliable. The widespread use of this technology lowers the cost of components, allowing TransCore?s breakthrough infrared cargo sensor to be priced affordably for fleets. Prices are less than $100 for purchases in volume.

Trailers are a costly resource and the availability of trailers for new loads can determine whether a fleet operator is selected by a shipper. As fleets face a tight economy, escalating gas prices and narrow margins, demand is increasing for technologies that increase asset visibility, usage and ultimately profitability. The value proposition for satellite trailer tracking is improved trailer utilization and enhanced security as demanded by shippers and increasingly becoming a concern of regulators. These requirements are quickly making TransCore?s trailer tracking service and suite of sensors integral to today?s modern trucking companies? operations.

TransCore, the largest global manufacturer of transportation-based RFID wireless communication products, acquired the GlobalWave satellite tracking and global positioning system (GPS) technology in March of last year, making TransCore the only manufacturer to offer both major wireless monitoring technologies. The GlobalWave system allows users to monitor, manage, track and communicate with remote and mobile assets from a Web interface. With six ground control stations providing service to five continents, the GlobalWave network supports more than 40,000 installed mobile terminals worldwide. In addition to commercial trucking, GlobalWave products are used for many other transportation applications such as refrigerated goods management, railroad, marine, heavy equipment, and government requirements for defense and homeland security.

Cargo Sensor: Detects the presence or absence of cargo. An event trigger is used to notify fleet managers when trailers are loaded and ready for pick-up or unloaded and ready for assignment. The cargo sensor transmits infrared (IR) light pulses down the length of the trailer, approximately 2 feet above the floor from the front of the trailer toward the rear door. Specific features include:

+ Selectively enable or disable scans;

+ Programmable scan interval from minutes to hours;

+ Polled, pre-scheduled, and event triggered reporting;

+ Reports include load status, position, and event timestamp;

+ Fully compatible with the GlobalWave MT2000 system;

+ Configurable ?over the air? or independently via the RS?232 port.

Temperature Sensor: Allows a refrigerated truck temperature or even the inner skin of a tanker?s temperature to be monitored. High or low temperature settings can be alarmed when settings are exceeded. These alarms are automatically sent by satellite to the fleet operations center.

Ultimately, all sensor data is fed into a GlobalWave data communications terminal mounted on the asset. The MT2000 can accept input from multiple sensors installed on a single asset. The data is relayed via satellite to a convenient Web-based interface for immediate use by the customer?s fleet operations center. Using this interface, the customer can access data reports tailored to operational needs. Such reports can be requested on demand, triggered by an event such as a change in load status, or sent to the operator on a pre-scheduled basis. Email alerts can be generated as well.

Capgemini, in cooperation with the Economist Intelligence Unit, created and conducted a survey of 105 North American retail executives on the industry-wide implications of the value retailer phenomenon. This report provides insight around the greatest market challenges in 5 - 10 years, company changes to be implemented in the next 5 years, predictions around the internet channels and more.