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Feb. 8, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Modeling "Logistics Flows:

Have you modeled your “logistics flows” lately?


I received a call recently from an industrial company that attended our 2006 version of “How to Select a WMS” (2007 version to be announced shortly). The issue initially had to do with whether the same WMS/logistics software suite would work for each of several different businesses.


You hope, of course, the answer is yes. But what’s a quick way to get a handle of that? The conversation turned to a discussion of how many “fulfillment chains” they really had – and did they understand what the specific physical flows and capability requirements that were associated with each?


In the past, I’ve used an approach that is useful for this as well as a number of other scenarios – modeling “logistics flows.” While it’s quite common for companies to map physical product flow in some way when something forces the need to do that, this approach adds a couple of other useful elements.


Most companie operate two or more distinct physical supply chains- and sometimes a number of them. At a high level, some of the typical flows would include inbound raw material and finished goods shipments from suppliers; internal company shipments from plants to distribution centers, or plants to plants (one plant supplying another); shipments to customers from distribution centers or direct from plants; customer service related flows (such as spare parts); and reverse logistics flows (product returns, recyclable containers, etc.). They often involve handling by third party logistics providers somewhere in the flow.


I’d argue that many organizations don’t really well understand these multiple physical goods flows, don’t have an accurate model of the multiple information flows that support these physical processes, and have not documented the current and future capabilities needed to support these supply chains.


So what’s the approach? First, you start with modeling the physical flows – what are the distinct paths by which material/product come into your company, move within the company, or move to customers? As we said, this is fairly common.

But to that, you also add the “information dialogs” that accompany these physical flows. Each physical flow will have associated information flows (inputs and outputs to steps of the process) that accompany the movement of goods. This may sound a bit “academic,” but it is useful to characterize the nature of these information flows.

In general, information flows are either electronic or paper-based, and can generally be characterized as being: (1) system-to-system (e.g., EDI); (2) system-to-person (forecast information is provider over a web application) ; (3) person-to-system (a carrier uses a web application to enter delivery status) ; or (4) person-to-person (manual).  Clearly, there may be a mix of these communication methods by trading partner, and that also needs to be understood.


These information “dialogs” can be within the enterprise itself, or external to trading partners or service providers. In other words, if you pick up the phone and call carriers to secure a freight move for inbound raw materials, this is a “person-to-person” dialog between your company and an outside service provider that is part of this logistics flow.


The final piece – document the key supply chain “competencies” required at each stage of the logistic flow. In other words, what important capabilities are required at each step? It can also then be useful to identify what additional capabilities could/should be added to the mix?


A simple version of a logistics flow map, constrained by the limits of space, is available here. A real version would identify the nature of the dialogs, and be a bit more granular about current and future capability requirements.

So, you are probably asking, would I use such an approach? I’d argue there are a number of opportunities.


It's a good way to really get a handle on how product really moves within your company, and opportunities for standardization, integration, and automation. Where there is “person to person” information flow predominant, for example, there is probably an opportunity to provide some automation to the process.


It can also be useful in a number of other ways:


• Provide an increased understanding of the supply chain requirements for each distinct physical flow, identifying the holes in current capabilities and “dialogs” and assisting in the prioritization of IT-related projects. Companies employing this exercise often find some of the biggest gaps involve internal information dialogs (e.g., lack of advance ship notices between plants and distribution enters).

• Identify opportunities for use of postponement strategies (the delay of value-added processing and/or product customization until late in the delivery cycle).

• Help provide clarity to potential outsourcing decisions for logistics services, and the IT requirements needed to support outsourcing strategies.

• Use as the key guide for decisions about whether to deploy common or differentiated supply chain applications across different logistics flows (for example, warehouse management software). This can be particularly useful for system decisions following mergers and acquisitions.


I once worked with a leading consumer durable goods manufacturer that used a similar logistics flow modeling process to construct the physical and information technology requirements for three separate market segments:


  • Large mass merchandisers that were shipped in full truck load quantities directly from manufacturing plants – this was a new strategy/logistics flow that required a series of new “competencies”
  • Smaller retailers supply from third party distribution centers supplied by multiple company plants and outside suppliers
  • Parts and aftermarket logistics flows supporting both internal and external repair organizations).

I suggest modeling an enterprise’s unique logistics flows along all three dimensions (physical, information dialogs, and supply chain competencies) can be a powerful mechanism when the need arises for understanding internal and external system requirements, especially when used in conjunction with market segmentation by supply chain service requirements.


But I welcome your thoughts.

What is your approach to modeling logistics flows? Is adding "dialogs" and "capabilities" to traditional physical flow modeling useful? How would you improve or use this approach?

Let us know your thoughts.


Dan Gilmore


Supply Chain 

Videocast Series

Building an ROI

for Reverse Logistics

The focus on "reverse logistics" has been building for several years.

In this excellent Videocast presentation, you'll learn how improving reverse logistics process can provide a high ROI, while enabling your company to meet regulations and contribute to sustainability strategies.

It's an outstanding, highly educational presentation.

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On-Demand Videocast

Optimizing Transportation and Distribution Performance: You Really Can Get More Product on Each Truck

View this excellent broadcast on your schedule

SCM Stock Report


The big story last week was supply chain software provider i2, which continues its remarkable financial and stock price resurgence. After announcing strong Q4 results, i2's stock price surged almost 17% for the week, and it is now up 61% for the past 12 months.

USP was the only transportation-logistics stock down for the month of January.

See stock report.

News and Views

Feb. 8 , 2007

This Week’s Supply Chain News Bites – Only from SCDigest

Michael Dell returns as CEO of Company He Founded, says Dell has lots of opportunity to further improve it's Suppy Chain

Advanced Micro Devices snags ex-IBM exec Douglas Grose to head supply chain

Boeing takes proactive steps to address potential Supply Chain bottlenecks in new aircraft

Airbus workers and suppliers in Germany stage protests over expected factory reductions

Target Stores to partner with SuperValu in first company-owned food distribution center for temperature and time sensitive items

Feb. 7, 2007

Consumer Goods Companies in Europe Could Reduce Logistics Costs through Menu-Based Pricing

McKinsey study says disconnect between sales and logistics, lack of collaboration with retailers, is to blame; it is better in North America?

Feb. 5, 2007

Supply Chain Software News: i2 Continues its Strong Financial Turnaround

Stock pops on NASDAQ after Q4 results handily top expectations

Feb. 1, 2007

Experts Discuss the Use and Value of Supply Chain Management and Logistics Best Practices

Full comments from Ralph Drayer, Gene Tyndall, Ed Marien and Jim Tompkins on Supply chain Management best practice



Q. If a shipment originates in Canada and occurs damage in the United States, which country’s law applies?

A. Click to find the answer below


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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

More letters this week on our "top 10 supply chain trends of 2006" column This includes both feedback  we  received directly, as well as responses our piece generated from a posting on our content partnership with RetailWire. That includes our feedback of the week on this topic from Bill Bishop of Willard Bishop.

There are a number of other goods letters as well - take a look.

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 Top 10 SCM Trends of 2006

This is an excellent list. I would applaud the identification of going green as the number one trend. While of the visibility still focuses around Wal-Mart, many other players are moving in this direction, and the good news is that it all appears to be market-driven.

One topic I'd like to add to the list is trading partner collaboration, i.e., the processes and practices that glue the modern supply chain together. We're seeing a significant uptick in what could be called customer-driven collaboration by a number of the larger players, and it is adding clarity and effectiveness to the process of aligning key elements in the supply chain. We will hear more about this in 2007 and beyond.

The other trend we would add relates to the growing appreciation for end-to-end visibility in the supply chain. This may not feel like a new thought, but there's a lot of energy being focused today on making it happen and when it does, there are real strategic benefits.


Bill Bishop
Willard Bishop

More on 2006 Trends

Excellent insight as always with your top 10 trends for 2006. I would also suggest the following:

1. The year of the integration. DHL/Exel and Bax/Schenkers move forward with integrating two of the largest global logistics entities.

2. China continues it's world dominance of outsourced manufacturing and creates logistics problems globally.

I thouroughly enjoy reading SCDigest on a regular basis and think that your site is on the cutting edge of supply chain related topics. Keep up the great work!




I think one big thing that is missing from the list is the effort to improve forecasting results. I think 2006 and future efforts to improve forecasts will have a huge impact on supply chain and store operations. Historically, we have managed by monitoring sales and orders. In the future, it will manage forecasts and inventory. By monitoring actual results against forecasts and using demand management to bring sales closer in line with preparations, we will make the whole supply chain operation much more efficient as we reduce inventory imbalances that require operational and discounting action to correct.

Bill Bittner
BWH Consulting

Dan has all the big trends for the year, bit I would put them in a slightly different order –

1. Global Supply Chain Gets Serious
2. RFID Slows - but Grows
3. Continued Supply Chain Vendor Consolidation
4. Focus on Risk Management
5. The Greening of the Supply Chain
6. Supply Chain Icons Stub Their Toes
7. Concern Over Commodities
8. Voice Technology in Distribution Goes Mainstream
9. The Perfect Storm Blew Over
10. Labor Unions at an Inflection Point

It's a fact of business that sustainability will only be a top trend when it makes clear commercial sense, and we’re not there yet.

Ron Margulis
Managing Director
RAM Communicatio

Thank you for your report. #5 Risk mitigation interests me most. We have done work in supply chain for CVS, J&J, to name a couple, and the trend there has been to consider supply chain (especially WMS and TMS) as mission critical areas for IT. I can’t yet figure out is why more companies are not buying into these areas of supply chain being mission critical. Do companies just not understand what it costs them if the chain is stopped?  I would love to hear your thoughts on this subject.


Jim Harris

Segment Director, Government and Transportation & Logistics

S T R A T U S   T E C H N O L O G I E S


Q.  If a shipment originates in Canada and occurs damage in the United States, which country’s law applies?

A.  According to the 2nd Edition of Transportation, Logistics and the Law, “It is the law of the country in which a bill of lading is issued that applies. Canadian law will govern the parties, even if a loss occurs in the United States.”

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