We thought we’d take advantage of the short holiday week to review some of the interesting developments in supply chain management and logistics over the first half of 2006, as well as review some of the most popular columns and articles from SCDigest in that time.
The big story so far this year is probably the continue rise of oil, gas and diesel prices, which continues to play havoc with many raw materials costs, transportation budgets, fuel surcharge levels, you name it.
We covered this from several angles this year, and generated quite a bit of reader feedback in the process.
For example, in Supply Chain Management and the End of Oil, we discussed the theory of peak oil – basically, that worldwide petroleum production is likely to max out in the next few years, leading to incredible price increases that will make today’s $70 per barrel look like a bargain. We quoted, for example, a peak oil expert in Forbes magazine as saying, “In 1988 there were 15 million barrels a day of shut in production [meaning surplus that could be tapped] and the world was using about 55 million barrels of oil. Today, the world is using 80 million, and there is no shut in-production.”
That led to good advice from some supply chain experts who offered their thoughts to me on Supply Chain Network Design in an Era of Dynamic Costs. Advice included hedging fuel costs, doing network planning and optimization more frequently, really understanding what customers drive profitability given higher transport expense, and building in network flexibility, to name just a few of the good ideas offered.
Our most popular articles of the year were our two-part “unplugged” interview with Dr. Eli Goldratt, father of the Theory of Constraints. (See part 1 and part 2.). It’s hard to describe unless you’ve talk to Goldratt just how powerful a thinker he really is. If you missed these columns, please take a look at the links above.
“If [a customer] is ordering the same product once a month, that means the total order lead time – from when the sell a unit to when they order a unit – is one month. This is enough to kill them,” Goldratt told me. It will typically create big problems with excess inventory, along with frequent problems with unavailability. So now, the standard solution shows them how to do this with less than half the inventory, with almost no unavailability. Do you understand once you are doing that you are taking the market?”
Supply chain software industry merger mania continued. Perhaps the most noteworthy in 2006 was Manugistics, one of the pioneers in supply chain planning and optimization solutions, ending its recent struggles by being acquired by retail software provider JDA (the deal actually just closed this week). There were a slew of smaller deals, and the trend is likely to continue. What’s it all mean? Since literally anyone can be acquired these days, the key is protecting yourself when selecting a solution and negotiating with a vendor – more on that later in these pages.
We also generated a lot of feedback on our Supply Chain 2006 – a Case Study piece. In that column, I took a composite story of several real conversations I had recently with consumer goods companies, relative to their business and supply chain challenges. These pain points rang a bell with many readers and their companies. They included: the need to offshore production but difficulty really generating the savings yet; the challenge of “being great” at global supply chain generally; falling prices and margins, as big box retailers put the squeeze on both; and by the way, tremendous competition from the private label brands of those retail customers, just to cite a few of the issues that seem to define many of our supply chains right now.
Finally, a lot of readers liked our perspective on The Intelligent Supply Chain, where I compared an articles I had written on the subject in 1999 to my thoughts today. The basic question: your supply chain may be efficient, but is it smart? Supply chain visibility and the ability to respond better and faster than the competition are certainly key elements of that intelligence.
In News and Views nearby, we republish some of our most popular of those articles from the first half year, including stories on the impact of Wal-Mart’s inventory strategy changes on suppliers, GM’s struggle to compete with Toyota supply chain and manufacturing systems, The Limited Brands’ Paul Mathews on aligning the supply chain and the boardroom, Procter & Gamble’s analytics framework for evaluating RFID by product category, and the trend of some large city retailers starting to offer same day delivery in those metro markets for on-line orders.
We covered a lot more, but those were some of the highlights both of the industry and Supply Chain Digest. A lot more in store shortly.
What do you think the key trends or developments were in the first half of 2006? Any additional comments on our most popular pieces of the first half of the year?