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September 6 , 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Supply Chain Megatrends, Part 2

What are the “Megatrends” driving supply chains today?

Last week, I offered five of my ten Supply Chain and Logistics Megatrends (See Part 1). For those that missed it, those first five (in summary form) were:

  • Focus on Alignment: Between supply chain and the business, between supply and demand, etc.
  • Push-to-pull: Getting more “demand-driven”
  • Visibility: It’s on the top of most supply chain agendas these days
  • Virtualization: Not just offshoring/outsourcing, but also, in part, a long-term risky move in which the company adds less and less of the total product value
  • China: Worthy of a trend all by itself, China is changing the global supply chain and competitive landscape
I will now suggest the next five.
Gilmore Says:

Everywhere I go, companies are moving Lean thinking and Lean initiatives from the factory floor to the broader supply chain.

What do you say?

Send us your comments here

6. Centralization: Everywhere, companies are centralizing supply chain operations and functions. In fact, one could argue that the “integrated supply chain” practically requires a level of centralization to best manage the entire process and the inevitable trade-offs that must be navigated. As a subset, companies continue to centralize transportation, procurement, etc. – in part because the technology now makes it much easier to do so. Can you ever go back?

7. Performance Management: More than ever, companies are really using metrics to drive supply chain performance, and an increasingly sophisticated set of electronic scorecards and “dashboards” to monitor and report on performance. Obviously related to the Alignment trend, leading companies are trying to develop clear “line-of-site” between corporate and high level supply chain goals and individual metrics. The “people” part of the equation.

8. Lean Supply Chains: Everywhere I go, companies are moving Lean thinking and Lean initiatives from the factory floor to the broader supply chain. Sometimes, they are combined with Six Sigma to become Lean Six Sigma programs – 3M is a good example of the latter strategy. In part, this trend is being driven by the relentless cost reduction focus that finds so many companies in its grip, rightly or wrongly.  But if your company isn’t looking to Lean now, it will be soon.

9. Risk Management: In the face of many infamous supply chain disruptions (e.g., Milliken’s only factory capable of producing a proprietary carpet fiber burning to the ground in 1995), and widely read research from Georgia Tech’s Vinod Singhal showing the long-term impact of supply chain disruptions on shareholder value, a growing number of companies are more formally focusing on managing and reducing supply chain risk. Supply chain risk has become a boardroom level concern (ask Mattel), and supply chain leaders are doing sophisticated scenario analysis to better understand their risk potential. As Nokia just decided, single sourcing of key components is rapidly vanishing as a strategy.

10. Sensory Networks: From RFID to “motes,” companies are building out infrastructure to track goods and assets in near real-time. This “internet of things” will involve auto id (e.g., RFID), Global Positioning Systems, wireless and other technologies, but the end game is knowing where everything you have is all the time. We have not fully considered all the implications, challenges and benefits of this. Gartner has called it “instrumenting the supply chain.”

So there you have it. What else almost made the list?

  • The Green Supply Chain: Clearly it’s a big deal right now, but is it a Megatrend? It’s too early to say so yet – there may be some faddish components here. But we’re watching closely.
  • Cost Reduction Imperative: As mentioned above, everywhere I go supply chain execs are under relentless pressure to decrease costs to stay competitive and, maybe more importantly, to meet Wall Street expectations. Maybe this is beyond a Megatrend – a “Permatrend?” But it seems worse to me than ever before.
  • Distribution Automation: We’re early here, but I believe you will see a huge move in the U.S. to automate additional parts of the distribution process. Why? Labor costs and headaches simply continue to rise. Combined with new technology developments, and this will be a very hot area for the next decade.

So there you have the complete list. I would really welcome your comments and feedback as always.

What do you think are the key Megatrends driving the supply chain? What is your opinion of Dan’s picks? What would you add, subtract, or add more color to? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

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Dan Gilmore


New Certified Lean Masters Lean Supply Chain Training and Certification Schedule Released


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

September 6, 2007 Global Logistics: Importers Again Dodge Fee, as California Bill to Levy $30 Surcharge on Each Shipping Container is Scrapped for Now

September 6, 2007 Global Sourcing and The Green Supply Chain: Will Environmental Groups Target Western Companies over Pollution Issues in Chinese Manufacturing?

September 6, 2007 Supply Chain Graphic of the Week: Impact of Supply Chain Disruptions on Stock Price

September 5 , 2007
Supply Chain by the Numbers: September 5, 2007


The continuing credit crisis prompted both the Federal Reserve Chairman and the President to issue statements last week that were meant to calm investors.

Despite these statements, our Supply Chain and Logistics stock index finished the week with overall downward movement.  In the software group, Descartes Systems plunged 7.9%.  Intermec, in the hardware group, was down 4.2%. In the transport and logistics group, CSX tumbled 4.8%; however, on the positive side, Prologis was up 4.2%.

See stock report.


RFID News From Retail Wire: Metro Goes to Full-Scale RFID Deployment

Will Mandated Compliance Motivate Others to Follow Suit?

This Month's Supply Chain Marketing News Exclusively for Supply Chain and Logistics Solution Providers

Expert Insight:
Living Supply Chains

Dr. John Gattorna

John Gattorna It's People That Power Enterprise Supply Chains; But Where are the HRM Professionals?

Supply Chain Executives Need to Reassess their Approach to People and Culture to Achieve their Goals; We're not Getting Much Help from Human Resource Departments; How would you Respond to Gattorna's Six Questions?


Q. What important supply chain event is associated with a pack of Wrigley's gum?

A. Click to find the answer below


Reader Question: Why Isn't Port Congestion at U.S.Ports an Issue Any More?

Reader Question: What Kind of Savings Do Companies See When They Implement EDI Transactions With Their Suppliers and CMs?

If you have supply chain or logistics related questions you need answered, ask our panel of experts

Share your insight.



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

We're really behind again - bear with us. But keep the letters coming!

We have more letters this week stemming from our First Thoughts piece on the just released inventory statistics for 2006 (See Inventory Management Challenges Continue). This includes our Feedback of the Week, courtesy of the RetailWire, from Nikki Baird of RSR Research, who says we need to look at “marginal return on inventory” to really understand what is smart practice.

You’ll find several other good letters on this topic as well below.

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 Inventory Levels

Globalization is definitely partly responsible for increasing (or at least flat) inventory levels. But, before you know it, localized assortments are going to put pressure on inventory levels too. The more specialized the assortment by retail store, for example, the more inventory you're going to have to carry to support that assortment.

Which says to me that inventory cannot be judged by inventory-specific measurements alone. It has to be taken in combination with what the additional inventory enables--sort of the "marginal return on inventory." Carrying more inventory to support localized assortments is worth it if you get a boost in sales as a result. Carrying more inventory because of a longer supply chain is worth it if you get margin improvement from lower costs of supply.

But I also want to second that better planning and forecasting is not the answer. Longer supply chains and broader assortments increase risk from disruption, so the answer to that comes in flexibility in execution, not unachievable accuracies in forecasting.

Nikki Baird
Managing Partner
RSR Research

More On Inventory Levels:

One comment I would make is that CEOs and CFOs rarely, in my experience of training supply chain managers for the past 10 years, understand the way inventory drives supply chain performance and the impact it subsequently has on corporate performance. They do not link it in to customer service and the cost to serve and rely on snapshot KPIs which hide/disguise the underlying performance of the supply chain.

If you think that I am exaggerating, then ask the next CEO/CFO you meet, let alone a SCM senior manager, what the Forester effect is and why 40+ years on it still comes as a revelation!

David Macleod
Learn Logistics Limited

I completely agree that improvement in DIO is a good indicator of inventory performance, especially if it was measured for several years. However, I would want to see how the companies which improved their inventory relative to that metric did on customer service performance.

Jovy Jader

Anytime you increase the length of the supply chain, you increase the inventory required. Safety stock is driven by variability in demand and lead time. Increasing the supply chain length always increases the lead time variability.

Putting that aside, the current approach and methodology has little room for improvement. There is continued belief that accurate forecasting will solve the problem. Consumer products sales are extremely unpredictable. Competition, promotions, weather, economy, etc. all contribute to changes. It is time for the industry to first move to daily data from weekly data. Additionally, there should be a change from relying on a forecast to planned reaction to demand utilizing the slack in the supply chain to buffer extremes.

W. Frank Dell II
Dellmart & Company


Q. What important supply chain event is associated with a pack of Wrigley's gum?

A. At a supermarket in Ohio, a 10-pack of Wrigley's gum was the first item ever scanned using a UPC bar code?

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