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  January 5, 2005 - SupplyChainDigest Newsletter
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SCDIGEST E-LEARNING SERIES
Making the Right Global Sourcing Decisions
January. 18, 2006 - 11:30 am. EST
At this informative web seminar, you will learn:
The Global Sourcing Opportunity
Understanding the Total Cost Elements
Keys to Making the Right Business Decision
How Technology Enables Buyers to Make Better Decisions, Scale Sourcing Operations, and Reduce Overhead Costs
Much more...
Featured speakers: Event Moderator:
Chris Callieri - ATKearney
Dan Gilmore - Editor of SupplyChainDigest
Ned Blinick - Blinco Systems
It's an event that anyone involved in or considering offshore/global sourcing strategies will not want to miss.
Click here to register and for more information.
First Thoughts by Dan Gilmore, Editor
Supply Chain Christmas 2005

Thought we’d start off the year on a light note, with some observations on the Christmas shopping season and the supply chain.

The most significant trend has to be what many observers are calling the "Google-ization" of the economy. Put simply, it is now incredibly easy for almost anyone with basic computer skills to search the web for the products – and more importantly, prices.

Looking for an Excalibur “New York Times Quiz Master,” as I was? Put the term in Google or Yahoo and find instantly not only individual e-tailers that carry the product, but sites like Tech Bargains, Price Grabber, MySimon and numerous other that compare prices across multiple vendors and merchants.

The E-Loan commercials have it right. What in effect is happening with the web is that on-line merchants are conducting a reverse auction for your business – and consumers are happy to go with the low price choice, moderated just a bit perhaps by how many stars the merchants have received from on-line consumer ratings.

Is it not possible - even likely - that soon even for individual consumer purchases, we’ll have web sites where a consumer puts in the product and obtains real-time bids from vendors for this specific purchase, right now? Why wouldn’t eBay eventually offer a consumer rather than seller-oriented model as well? We’re not far from this model right now, but in the end it may truly turn into an on-line reverse auction for that digital camera.

So what’s this have to do with supply chain?

First, we should see a growth in e-merchants who would like the manufacturer to drop ship the product on their behalf – manufacturers must decide whether they want to play that game. For those that don’t, we may see renewed action at the wholesale distributor level – but these will be part wholesalers, part 3PLs who hold inventory and perform direct consumer fulfillment, often for competing e-tailers.

The continued pressure on brick and mortar stores will be intense. For decades we’ve had the issue of more upscale retailers providing consumers with knowledgeable product information and broad selection, only for the consumer to then go buy the item at the low price discounter across town. Manufacturers have often done some things to try to protect the upscale merchant, and the issue has in a sense been limited by the dollars to be saved (which has shrunk over the years) and the hassle factor of driving around from store to store.

The web has changed a lot of that. The discounts can be substantial, and are simply a click away while sipping on a glass of wine after dinner.

So for supply chain managers, this means the aggressive, relentless focus on cost reduction in the Google economy will have to continue, as the web makes price more transparent and critical than ever before. Second, companies need to think very hard about what their channels of distribution – and service levels – are really likely to be over the next five years as they plan distribution networks and capabilities. New channels and requirements are sure to emerge – and even the most well-thought plans will turn out to be at least partly wrong. This means designing in supply chain flexibility will be more important than ever.

My second general observation on the season was that retailers were in fact playing tighter inventory games than ever before. Both in shopping and research I noticed many stores with out-of-stock items. By the end at one Best Buy, it seemed like half the digital cameras were OOS. Now maybe this was constrained supply or forecasting error or “lack of RFID,” but I suspect for many it was simply a decision to pare back inventories generally and hope to sell the consumer something else if one item is gone.

I was therefore really surprised when two local stores were out of stock on December 23 rd of $25.00 Apple iTunes gift cards. My first thought was, “How could you be out of these cards, they cost next to nothing to produce!” In investigative mode, I asked an associate at a Circuit City about that, and he told me that even though the cards are worthless unless activated at point-of-sale, Circuit City still pays for them upon receipt from Apple; hence, ordering is constrained. While I supposed this is good for Apple, it just seemed silly to me for a store to lose a $25 sale because they were out-of-stock on a small piece of plastic.

We’re out of space. Happy New Year from the SCDigest team – we’ll have a great year of information, tools and events for you in 2006.

What impact do you think the Google economy will have on companies and the supply chain? Did retailers play inventory conservatively in the 2005 holiday season?

Let us know your thoughts.

Dan Gilmore

EXPERT INSIGHT

Lean, Agile and Adaptable Global Organizations –
An Information Technology Perspective – Part 2

By Ned Blinick -
Blinco Systems

In our last column we reviewed some facts about the continued growth of global sourcing and the competitive advantage companies that develop “lean” global supply chains achieve.

Today, we’ll look at how information and technology are critical to establishing lean operations and global supply chain excellence.

Lean, agile and adaptable global organizations are dependent on information that provides absolute visibility into all aspects of the global supply chain. As a company moves further away from its basic manufacturing paradigm – both physically and geographically – visibility into and monitoring of remote its facilities, suppliers and service providers become overriding critical capabilities. ...

Click here for the full column.

SCDIGEST VIEWPOINT

Barriers to Effective Demand Forecasting

Guest Speaker:
Dr. Mark A. Moon - Director, University of Tennessee College of Business Administration

Play Viewpoint nowPlay Now
EDITORIAL PREVIEW
Coming soon in SCDigest:
Defining a Demand-Driven Supply Chain
What Happened to the Supply Chain Planning Market?
RealRFID Newsletter
Task Interleaving Report
NEWS AND VIEWS

January 5, 2006
Same Day Delivery Coming from a Store Near You?
Though in its early stages, more and more retailers are piloting the concept; will it work this time?

January 5, 2006
Gartner Predicts Solid Growth in RFID Spending, but Focused on True Value-Added Applications
Not likely for the warehouse soon, Gartner analyst says; what’s behind the Gartner market estimate?

January 5, 2006
Wal-Mart in Trouble for Hazardous Waste Handling
Reverse logistics, environmental concerns sure to be issues of increasing importance to logisticians

SUPPLY CHAIN TRIVIA

Q. Who is Alex Rogo?

A. Click to find the answer below

Interlog 2006   Softeon - www.softeon.com
YOUR FEEDBACK

Feedback is coming in at a rate greater than we can publish it – thanks for your response.

We’re just catching up on a few good letters from the end of last year, before starting to publish next the many letters we received on our review of Wal-Mart’s RFID/out-of-stock study.

Our feedback of the week is from Jon Kirkegaard of DCRA Inc., commenting on our First Thoughts piece calling for a goal of ”powerful simplicity” in supply chain software. However, on the same topic, Jerry Johnson of Siemens says we’re ”talking out of both sides of our mouth” in our suggestions . We like the debate. There’s also a good letter on outsourcing supply chain competencies.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we'll keep your name anonymous if required.

Feedback of the week – on "powerful simplicity" for supply chain software

Another great topic!  It is all about simplicity of the man vs. machine relationship! The computer machine or in the case of supply chain software “machine” has not been designed to drive simplicity and understanding but to often targeted at some proprietary blackbox that fixes all, sadly and to often by design of some “investor” who thinks this is the way to make a killing as a software play.   As you state clearly this does not apply to supply chain software or at least it should not.  Instead what the market needs are great enabling demand and supply netting capabilities that hide complexity and are non-intrusive and instinctive for key users to deploy.    

I believe most supply chain software can work more like “Google” because of service oriented architectures (SOA), distributed computing, web services and good non-intrusive complimentary design.  

Keep challenging the status quo as it desperately needs to be challenged.

Jon Kirkegaard
President
DCRA Inc.

More on "powerful simplicity"

I think you are talking out of both side of your mouth.  Simplicity is in the mind of the user.  I've been in the software business for 40 years supporting both the factory automation and logistics industries.  Familiarization and understanding are the key to simplicity; one can have a complex solution and if the user has the mind of the computer and software it is a simplistic process.  Each customer has a unique process that gives them a market advantage, and yet they believe all this custom functionality should be in an off the shelf product.  Simplicity can only come if every logistics business have an identical process for managing and moving product.

Jerry Johnson
Concept & Estimating
Siemens L&A

On "Outsourcing supply chain competencies"

I continue to be a fan of your newsletter, and enjoy it above all others I see regularly.  You make some good points/concerns about outsourcing, such as the example of making headcount reduction targets...possibly at the expense of the bottom line.  My gut tells me that your concern about future supply chain talent is a stretch.  Seems to me that as supply chain operations have moved from internal functions of a manufacturing or retailing company to a core competency of a 3PL, the career opportunities for raw talent have become more obvious with a higher profile.  My guess is that more universities have logistics/supply chain curriculums now than in the past.  Years ago, "talent" was drawn to production or marketing, not "distribution".  Who the employer is is not necessarily relevant.  I wouldn't loose sleep over the talent issue...I'd be much more concerned about the total impact of outsourcing decisions on the overall business. 

Keep up the good work!

Dave Sandoval
B.U.S. Systems, Inc.

SUPPLY CHAIN TRIVIA

Q. Who is Alex Rogo?

A. The main character (plant manager) in Eli Goldratt’s seminal book “The Goal,” which uses a novel to explain the theory of constraints as it applies to manufacturing and supply chain. Yes, careful readers may recognize we used this one a long time ago, but it’s repeated for a reason – look for our exclusive interview with Dr. Goldratt soon.

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