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  Sept. 28 , 2006 - Supply Chain Digest Newsletter
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Featured Report

This valuable report focuses on several industry-specific examples of lean distribution.  It provides an overview operational situation, solution, and resulting benefits of actual lean environments in multi-channel retail, consumer product goods, grocery, mail-order pharmacy, and automotive aftermarket industries. These benefits impact areas, such as increased throughput, reduced labor, improved order cycle time, and reduction in capital investment.

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First Thoughts by Dan Gilmore, Editor

Synchronizing versus Simplifying Your Supply Chain

Is synchronizing your supply chain a good thing?


Well, it certainly sounds pretty good. UPS says they can do it for you. Put “synchronize supply chain” in Google or Yahoo and a lot of stuff shows up. Certainly we want to “synchronize supply and demand” – hard to argue with that.


I’m asking the question because awhile back at a recent conference I attended, a software vendor made a presentation about “synchronizing supply chains” to a group of supply chain execs – and to my surprise the speaker received a lot of pushback.


Summarizing the basic position: “Synchronizing is too hard. We don’t want to synchronize – we want to simplify.”


In fact, one former exec from Home Depot said they had tried to “synchronize” at one point in logistics, building smaller footprint DCs that relied on fairly complex timing of inbound receipts, but found it proved just too difficult. He said the retailer return to a more traditional design, which cost more money, but which could be operated with less dependency on precision.


There is no question that across many if not most supply chains, there is a focus on “simplification” – whatever that means. More on that in a future column. Certainly it involves reducing suppliers and the number of “moving parts,” standardization of process, and other tactics.


In other cases, maybe we simplify by just outsourcing the thing to UPS or Exel or whomever and letting them worry about the synchronization part.


I’ll note that in my interview earlier this year with Theory of Constraints founder and general supply chain guru Dr. Eli Goldratt , I suggested to him that “as I talk with lots of supply chain executives, right now for many of them there is a strong focus on simplifying their supply chains…”


His reaction: “Good grief!” The context is more than I can relate here – take a look at the full interview to get the details, but the basic notion – you must find the keys to simplicity in the complexity.


So it seems to me this is actually a pretty fundamental question. Do you want to simplify your supply chain, or synchronize it? Yes, a company can say they want to do both, and I suppose they can, but aren’t those two concepts somewhat opposed from a strategy and tactical direction? Or do you synchronize by simplifying? Certainly to a degree – that’s part of what lean is all about, it seems to me.


For most companies, supply chains are complex, and by many measures increasingly so. There was a great Wall Street Journal article a couple of years ago that detailed HP server computer supply chain – and to call it “complex” would be to put it mildly, with design, engineering, production and logistics happening all around the globe – and yes, needing to be “synchronized” to effectively get the product to the customer when needed at a price they were willing to pay.


Part of the pushback, I think, is that in the specific context I first referenced, and more generally, there is some connotation of a magic software “black box” that does all the synchronization for you. Users are justifiably cynical about that ever being the case, many having been burned on over-promises in the past.


On the other hand, I don’t know how you possibly coordinate, let alone synchronize, supply chains today without a lot of technology. The big focus on “visibility” right now is certainly some manifestation of the need to synchronize. Let’s call it “poor man’s synchronization,” meaning we look at information and do the synchronization ourselves, rather than hoping an optimizer can do it for us.


I actually think over time we will build on what we have and know works to have optimizers that do more and more synchronization for us. But right now, for a high percentage of companies, there just seems to be so many moving pieces that the natural reaction is to place hope in simplification.


But I wonder, if you can successfully synchronize while the other guy simplifies, do you gain competitive advantage?


I know I’ve raised more questions than I’ve answered, but I think this is a worthwhile intellectual pursuit. I’d be interested in your thoughts, and would love to talk about it if you can spare a few minutes. Drop me your thoughts at the Feedback button below.


Is “synchronization” a good supply chain objective or not? Is it too hard, or too reliant on software? Are simplification and synchronization compatible, or somewhat opposite strategies to pursue? If you can synchronize, do you gain advantage?

Let us know your thoughts.

Dan Gilmore


Supply Chain Videocast Series

Spend Management Success at One of the World's Greatest Companies

How a Comprehensive Approach to Purchasing and Procurement Can Deliver Substantial Operational Improvements and Bottom Line Savings; Success at Johnson & Johnson

More information or to register

Cutting Transportation Costs With On-Demand TMS

How Snyder's of Hanover is Driving Real Results

More information or to register


Integrated Supply Chain Organization Research Project

Help SCDigest and The Logistics Institute at Georgia Tech with the important research.

Fast, easy web survey.

Summary report to all participants. Go to link above


Optimizing Warehouse Facility Design

Make the process data driven, with attaining balance a key operational goal, say

Ciber's Mike Krabbe and Jan Klingberg


Sept. 28, 2006

Supply Chain Best Practice Tip of the Week: Using Two-Step Reverse Auction Processes in Procurement

Single stage on-line “reverse auctions” are fast and effective, but may not be best when the buyer has less information or control

Sept. 28, 2006

Have An Opinion On The Rail Fuel Surcharge Issue? There’s Still Time

Surface Transportation Board extends deadline for public commentary on proposed new rules to Oct. 2, as rail group requests more time

Sept. 28, 2006

Motorola’s Acquisition of Symbol Technologies Highlights that Consolidation Hitting AIDC Supplier Market Too

A decade ago, dozens of vendors; now just a handful. as consolidation continues; remembering the Scan Tech and ID Systems trade shows


Q. What are the 5 elements in the Council of Supply Chain Management Profesionals' definition of total supply chain costs?

A. Click to find the answer below


New Report on Value-Added Warehousing: Differentiation in a Dynamic Logistics Marketplace

Why adding new, information-driven capabilities in your warehouse is an essential component to acquire new business and keep existing customers

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

We're still behind - be patient if your letter has not yet been published. 

Letters this week from our piece on Aligning Supply Chain and the Business, which included not only some perspective but a model companies can use to improve this aliignment. We received a number of letters, most very positive on the model, and some suggesting some modest improvements. This includes SCDigest Contributing Editor Gene Tyndall, and former P&G supply chain exec Lamar Johnson.

But our feedback of the week on this topic is from Colin Snow of Ventanna research, who sent a very thoughtful letter we know you'll enjoy.


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 Aligning Supply Chains with Corporate Strategy

Better alignment between the supply chain function and the corporation is a hot topic.  Your assessment that ‘alignment doesn’t just happen’ is well stated.


I would add that most supply chain initiatives promise to improve the speed of supply chain transactions, streamline processes, optimize throughput and minimize risk. But few companies evaluate initiatives on how they contribute to overall corporate performance goals. Typically, those companies that have not yet embraced performance management still evaluate projects on cost-effectiveness.  As a result, managers and executive sponsors are hard-pressed to demonstrate the contributions of the new initiatives to overall cost reduction and increased operational efficiency. We've also noticed that many of these initiatives have been implemented neither sequentially nor in concert with each other.


All of which underscores the key question: How do you choose which supply chain performance initiatives to do, and which to do first?  Ventana Research’s answer is to start at the top with a clear performance management methodology and software tools to support it.


Performance scorecards and reference models work well. A performance scorecard is a software application that tracks progress towards goals and objectives using key performance indicators (KPIs). Balanced scorecards are the most popular way to measure top-level organizational performance. As you know, balanced scorecards contain the perspectives of finance, customers, business process, learning and growth. Within each perspective the scorecard tracks objectives, targets, measures and initiatives. These metrics in turn provide the basis for an ongoing cycle of measurement, evaluation and improvement. They also provide guidelines for corporate initiatives to improve decision-making.


Reference models, which are frameworks for benchmarking cross-functional business processes, are another way to manage performance.  Reference models integrate the well-known concepts of business process reengineering, benchmarking and process measurement.  The best-known reference model for managing supply chain performance is the Supply Chain Operations Reference model (SCOR), created by the Supply Chain Council. This model contains standard descriptions of management processes it calls plan, source, make, deliver and return. It also characterizes the management practices and standard metrics that benchmark “best-in-class” performance.


Many companies use SCOR to identify and prioritize improvement opportunities because it recognizes the linkages between supply chain process elements, metrics and best practices and so helps companies better understand and measure the flow of information and physical goods.  SCOR by itself has helped hundreds of companies define their supply chains, measure them and drive performance improvement. SCOR is effective in the way it lays out the core supply chain processes, but it falls short of providing the broader performance management framework that is necessary to link supply chain improvements to a company’s strategic plan KPIs and strategic improvement goals. SCOR is limited because it does not address the many extrinsic activities that affect the supply chain, such as product development, demand generation or customer relationship management.


We assert that a more integrated strategic approach is needed to propel supply chain operations to greater effectiveness and to provide the basis for consistent financial results. We recommend that all supply chain improvement initiatives start with a Balanced Scorecard strategy map. Use the Balance Scorecard methodology to guide your priorities and track progress. We also recommend that SCOR results be displayed in the Balanced Scorecard business process perspective. By doing this, executives will be able to evaluate supply chain initiatives within the company’s performance management framework and manage within a proven reference model that provides linkages to strategic goals.


Colin Snow
VP & Research Director
Ventana Research

More on Aligning Supply Chains with Corporate Strategy

I would only add one thing to your model (I like it by the way). The very first step would be for the corporation to make sure the top supply chain executive is an integral part of business strategy development. Involvement from the beginning ensures the supply chain officer completely understands the evolution of the business needs driving the strategy, as well as ensuring supply chain constraints and capabilities can be cooked into the strategies from the very beginning. This step makes all the steps that follow flow smoothly up and down the organization, and across the boundaries of the supply chain (suppliers through customers).

Build this first step in, and your model is complete.  

Lamar Johnson

P&G Retired

Your comments on aligning supply chain with corporate strategies are right on. Without aligning an organization's strategic planning - business and internal ops - excellence is never possible. It is also impossible to position supply chain as a strategic asset of the corporation without such strategic planning alignment.   I am linking this article in my blog and will refer it to my clients who hear this message from me - sometimes with skepticism on their part.

Stephen Tambolas

American Healthcare Solutions LLC Managing Director, Supply Chain Management Solutions

As always, good article on alignment -- and you are right, I am passionate on this subject.   The only suggestions I would have on your alignment process are:  

  • we have to get people to view Supply Chain as an "enabler", and less of a "support". So, I would change your term on point 2.  
  • even better, we need to get people to view Supply Chain as a business goal in the first place.  So, I would include that in point 1. 

In other words, the best companies have Supply Chain improvement or innovation on their executive agenda, which are the business goals. where goals are less enabled by Supply Chain excellence -- for example, HR, R&D, product innovation (as opposed to service innovation) then, yes, Supply Chain has to help enable or support these.  

But, just viewing it as a function that needs to align with the business is too limiting, and makes it sound like IT.  As you know, I have been warning people for some time that SCM or Logistics is in danger of becoming another IT, due to the complexities, terminologies, jargon, and other mysteries that SC people like to promulgate, and thus build communication barriers with C-levels.

Gene Tyndall

Supply Chain Executive Advisors

SCDigest Contributing Editor


Q. What are the 5 elements in the Council of Supply Chain Management Profesionals' definition of total supply chain costs?

A. Order Management Costs + Material Acquisition Costs + Inventory Carrying Costs + Supply-Chain-Related Finance and Planning Costs + Total Supply-Chain-Related IT Costs

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