I have been traveling non-stop for the past many weeks for basically every spring event out there (for the record, that includes the Logility, Manhattan Associates, i2 and RedPrairie user conferences, RFID Live, the Warehouse Education and Research Council conference, DC Expo, the Georgia Tech Supply Chain Executive forum, a visit to Doskosil manufacturing, maker of the Petmate brand and other products for our upcoming video on enterprise compliance label management, and two other private days acting as a modest consultant with companies looking for some supply chain insight).
After this flurry, I asked myself this week if there were any themes that emerged from these various events, travels and conversations. I think there are, and I’ll share a few, some of which I may expand upon in future columns.
The first is the simply unbelievable pressure that nearly every public company I talk to is under from the top to reduce operating costs to please Wall Street. I have had a number of conversations that included comments like this, from an exec at a large food company: “The expectation for continuous cost reduction is just relentless right now, driven by our CEO’s own focus about earnings and the stock price.” I guess it’s good at one level that the CEO cares about supply chain, but I sometimes wonder if this relentless cost reduction pressure can be taken too far. Not that continuous cost reduction isn’t good and necessary, just that in this environment it can sacrifice the longer term for short term results.
For example, I recently heard of a very prominent company that actually brought a distribution facility that had been outsourced back in house for very short term reasons. I didn’t fully understand the math, but somehow over the next few quarters, this would save a few bucks, even though they still believed the original decision to outsource was the right one and that in the longer term in-house would actually be more expensive. But the pressure on earnings was right now.
So, if the approach is a drive for continuous improvement, that’s good. If you get there by just cutting something, or otherwise sacrificing the future for the now, that’s something else, and I’ve seen some of both.
Relatedly, I am also struck by how lean organizationally it seems most supply chain and logistics are these days. I’ve had conversations with a number of both managers and execs that tell me they are operating at an incredibly thin level of staffing, and that getting additional headcount is very difficult even when the need can be well demonstrated. Good news for the consultants, I guess.
“Lean” as a operating discipline, however, is a large wave that is turning into a tsunami. It’s amazing the number of companies, from every type of industry, that are aggressively pursuing Lean strategies of some kind, and the hunger for Lean training and information is very high. It’s sometimes hard for me to differentiate Lean from plane old process re-engineering, and I think part of it is just the tools that you use. Our Lean expert Mike Loughrin knows the details, however, and he is looking for your input on how we can help your Lean efforts with education and information (See Lean Supply Chains: Let's Get Lean in 2007 .)
As our Mark Fralick noted last week (See SOA It Isn't So. . .), expect to be overwhelmed by technology vendors of every sort with messaging around “Service Oriented Architecture,” or SOA. Certainly, that was perhaps the dominant theme I heard from vendors during my travels to software user conferences and trade shows. SOA is a good thing, done right, but I suspect before too long most end users will have had their fill of SOA hype. As Fralick noted, figuring out what real from what’s baloney isn’t easy.
Lastly, as we’ve noted before, at every event I attend someone comes up and asks me about the global supply chain. The comments are around a set of themes: we’re really new at this, not getting the savings we expected, our people are really new at this, do you know any vendor that does X? (visibility, trade compliance, transportation management, etc.).
Among my responses is, “You are not alone. Most companies I talk to are in a similar spot.” There are certainly a number of companies (Payless Shoes comes to mind) that have been at this global game for some time, and built up a deep reservoir of expertise, infrastructure and process way that are many years ahead of most of us. Then there are companies like Ashley Furniture, that almost in stealth mode are doing some really amazing things to make a long supply chain operate much like a short one. But the mass in the middle is looking for insight and answers.
There’s more, but I think we’ll wrap it up here. For those in the US, have a very happy Memorial Day weekend.
What is your reaction to Gilmore’s Thoughts from the Road? Are any of these themes consistent with what you are seeing with your companies or clients? What’s your reaction to Gilmore thoughts about stock priced-based cost pressure, lean staffing and the growing “Lean” focus, SOA hype or global SCM challenges? Let us know your thoughts.