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

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

Lots of feedback continues to roll in. Our favorite this week, and hence Feedback of the week, is a leeter from John White on a piece we did a number of weeks ago about the concept of Logistics Flow Modeling. He agrees more companies could benefit from similar techniques, but offers reasons why they often don't.

We also print an excellent letter arguing against the changes underway that will finally let Mexican truckers operate in the U.S., and one who has some thoughts to add about one of our reader questions about how to best guide and incent managers in Lean Initiatives, based on our Lean Expert Mike Loughrin's answer.

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 – Logistics Flow Modeling

My experience is that few firms understand physical flows and an even lesser number conduct modeling.

If one maps out flows for a organization using a multi-tier DC network, the flows among DC’s are complex.  Within a given large automated DC, there can be multiple flows:  conveyable flow ( receiving dock to outbound dock), conveyable short-term stock (e.g. 24 hours), conveyable stock, non-con flow, non-con stock and repack.  The constraints are many, such as the sortation capacity (cartons/hour) and storage capacity (pallets/rack opening capacity).  The overall mix of flow types plus service requirements and constraints determines the overall DC capacity utilization—answering a potential question of is there enough DC capacity as well as where it is placed (aka strategic network modeling).

In a similar manner, there are transportation constraints—which are complex, but easier to manage by contracting capacity as needed.

If one understands the physical requirements and constraints, knowing the associated variable costs is the logical next step.  Using activity-based costing (ABC) remains a foundational element.  One can then make informed tactical decisions, changing flows from one type to another to improve service, reduce inventory, lower variable costs or a combination of these three.

But before one can make these tactical flow decisions, there are external factors to consider.  For example, what is the impact of package quantity or buying in full truckload for stock in terms of supplier costs or discounts?

 I suggest that contribution to overhead and income with consideration for inventory carrying costs is the correct metric.  The contribution metric is essentially using cash—what profit remains after relevant costs are considered.

To your question, adding "dialogs" and "capabilities" to traditional physical flow modeling is very useful for assessing alternative flows as well as  managing the quantities moving in different flow paths. Many firms would gain significant income benefit from an improved understanding of current flows, constraints and costs—often without capital investment.

Again, I enjoy your insights.

John White
White Supply Chain and Operations

On Mexican Truckers in U.S.:

I have many problems with this whole thing, and have had for a long time. I have investigated this story since the inception of NAFTA and have gathered volumes of information based on my own research.  

The Teamsters are using the wrong argument. Safety is a huge concern and will become a larger argument the first time a Mexican truck has an accident in our country. (There have been many accidents already involving Mexican trucks in the United States, but the American press has chosen not to give much coverage of them.) Overall though, the argument is overblown.  

Those taking the air quality standards as a basis for their arguments have a point. While our government has spent billions to make our trucks for environmentally friendly, allowing thousands of Mexican trucks into the country defeats all of that. Consider that these trucks were not manufactured to meet the stringent standards required here. Add in the fact that they will all top off with much cheaper high sulfur diesel before crossing the border and all standards are gone.  

Mexico has never wanted American carriers in their country. A little research proves this point. I have no confidence in their claims that American trucks will be headed into Mexico in six months,or six years for that matter. But consider this. Now that American trucks will not be allowed into Mexico even for the first six months, the market for American carriers is significantly diminished. As the Mexican carriers will not have to stop at the border, and American trucks can't cross it, American shippers will have no choice but to use Mexican trucks to ship their products into Mexico.

With freight already quite slow, we will see many small carriers and independent owner operators go out of business as a result.   And what of the border warehouses? How many will have to shut down? How many jobs, both Mexican and American, will be lost? What about the local economies of the border towns who host those warehouses?

Not one study has been done as far as I can discover, but my own research shows there will be several business closures, and thousands of lost jobs. This will result in a serious problem for the border towns who rely on the income from those businesses.   What about produce and other food stuffs that are currently inspected at the border during the cross docking process?

Considering the many salmonella outbreaks we have had, will this cause an increase when inspections are reduced as the USDA claims?   I believe this is a serious mistake.

Richard Murray

On Lean Strategies:

I agree with Mike Loughrin's points.  I’d would add:

• There’s an implicit statement about senior management leadership and support for creating a lean supply chain in your article.  I would explicitly state it.  Those senior managers need to walk the talk with allocated resources and be actively involved in progress and break down barriers.
• In effectiveness, it’s implied (as near as I can tell) that the measurements are internal to the company to gauge the degree of improvements made form lean.  I would explicitly state that the measurements can and should include some benchmarking against specific competitors and best-in-class, whether competitors or not.

Alan Campbell
Envirofit

Q.  What is the JI Case company's claim to supply chain fame?

A. The tractor and farm machine manufacturer, which merged in 1999 with New Holland to form CNH Global, is said to have installed the first MRP system, in the late 1950's.