This Week in SCDigest:
Recession and Supply Chain Transformation
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
New Blog - Gilmore's Daily Jabs
SCDigest Introduces "Distribution Digest"
Your Supply Chain Questions Answered! This Week's Question - Task Interleaving in WMS
Trivia, Supply Chain Stock Index
 
 
Can't View this E-mail?  
Become a sponsor
Subscribe
November 13, 2008 - Supply Chain Digest Newsletter
 

FEATURED SPONSOR: i2 - The Supply Chain Results Company

 


Check out the on-line edition of Supply Chain Leader, where you can listen on-line, access additional content, post an opinion, or share ideas with other supply chain thought leaders.

       
     
Recession and Supply Chain Transformation

OK, so what does the current economic turmoil mean for all of us in the supply chain?

It’s amazing how fast things can change in our world now.

It was just a few weeks ago when I wrote a column on Supply Chain, AIG and What’s Next that offered some thoughts on the current mess and what it means to supply chain management. The world has turned even more since then.

I am an optimist, and actually believe the governments will turn enough knobs that before long one of them actually starts to work. To have all this happening economically amidst a change in US presidential administration is wild too. Just for example, it appears the auto company bail out simply can’t wait until January. The request for loans/bailouts will be coming from all quarters, and who can blame the supplicants. If GM and American Express are getting billions, why not us?

Here are some additional thoughts about the current environment:

  • We have “bubbles” bursting all over the place. As we’ve been reporting, some are calling the “ocean shipping bubble” the biggest of them all, and it is by some measures, in terms of price drops from peak to trough. Oil prices and commodity prices have collapsed with stunning speed. Now, the China “manufacturing bubble” is also popping – factories (and future capacity) are disappearing rapidly – as many as 100,000 plants now expected to close this year. (See Will there Turn out to be a “China Import Bubble” Too?)
  • I think, given the overall climate right now, that it will be politically very difficult for companies to announce they are shutting down Western factories and moving to Asia. If Lou Dobbs on CNN was railing about “traitor CEOs” and “exporting jobs” when times were good, the heat on companies doing so now will be even greater. Passage of the “card check” unionization rule could change that thinking, however.
Gilmore Says:  
"Many of you will have to pull out that list of potential supply chain and logistics cost saving moves that you haven’t implemented yet. If you don’t have such a list, I would start building one immediately."

What do you say?
 
Send us your Feedback here

 
  • Will that mean more investment in US and European factories? Maybe, if you can get the capital. But for most, that investment may be in automation to take out more costs. Fred Smith of FedEx is calling on Congress to allow US companies to expense rather than depreciate such capital investments, and says, in the end, it is the only way to raise blue collar wages by increasing productivity. (See FedEx’s Fred Smith Agrees US Needs to Return to a “Product Economy.”)
  • Where are oil prices headed? If I really had to bet, I would agree with those who say we will see $100 oil again in 2009. The pain on the oil producers is so great right now, and the gap between supply and demand still relatively small in historical terms, that I think supply reductions by OPEC, et al, combined with some increase in demand spurred by the low prices (we are driving the Suburban a lot more again) will cause a move back up to occur. I do think, however, that the precipitous plummet also showed that the impact of “speculators” in driving oil and other commodities to the moon was real, despite many saying that wasn’t true.
  • The pressure to reduce supply chain costs has been escalating each year, and that pressure will now increase some more as CEOs and CFOs look to the supply chain to help sagging top lines. The good news is falling transport and input prices should be delivering big savings for most already, and certainly prices at the store haven’t yet reflected those cost changes, so margins should improve just as they shrunk on the way up for many. But many of you will have to pull out that list of potential supply chain and logistics cost saving moves that you haven’t implemented yet. If you don’t have such a list, I would start building one immediately.
  • I have to think that many Green initiatives will be put on hold for awhile. Transportation expense reduction provided the ROI behind many off these programs, and those numbers won’t be there at the same level today. I can’t believe there will be many companies that would take higher costs right now to do the right Green thing. However, many packaging improvements are just smart moves in and of themselves, and likely will continue, though with perhaps less urgency for a time. But would you risk a packaging change (e.g., Tide moving to a more concentrated form and package) right now if there was any concern it might impact sales? You could take that risk when times were good, when the reduction in transport costs on all units sold would mitigate any marginal sales loss from the change, and you thought the consumer would buy Green. But those dynamics are different today. However, will the new administration try to impose a carbon tax system in this climate? Would think that would wait, but you can’t be sure.

But what I really wanted to say is that, perhaps somewhat paradoxically, this actually could be the time for supply chain transformation. Over the past few years, we have seen supply chain and network transformations driven by three main things: rising input costs; the drive towards virtualization; and some companies simply getting SCM religion. Now, I think there will be different drivers.

Differences in supply chain performance between companies will actually be brought into greater relief in tougher times than in better ones. Barriers to make changes, such as uniting the supply chain under a single organization/leader, should fall. Improvement initiatives take on a higher priority. What was “important but not urgent” in the past better times becomes “important and urgent” in the present, to use Stephen Covey’s great framework.

So, take a step back from your daily activities at whatever level you are at and use this time to look at how can we make what you do better. Ask how we can rethink major areas and processes of how we do things today. Start thinking hard about what your supply chain should really be. While funding may be tougher to get, I think receptivity to ideas may actually open up.

The companies that do that now will have real advantage when things pick back up.

Beats following the stock market.

 

Let us know your thoughts.

 

Web Page/Printable Version of Column




 
FEATURED EVENTS
*** Upcoming Videocasts ***

Increase Effectiveness
in the Supply Chain
using RFID Technologies:
A Case Study with
Lowry Computer Products

Improving Data Quality
and Productivity with Mobile
Data Collection Systems

November 18, 2008

REGISTER NOW!


Voice-Based
Warehouse Distribution

Learn How to Optimize Your
Warehouse Workforce with
Voice-Based Material Handling

November 19, 2008

REGISTER NOW!

***On Demand***

Optimize Your
Warehouse with WMS


VIEW IT NOW!

NEWS BITES
This Week's Supply Chain News Bites Only from SCDigest


Supply Chain Graphic of the Week - Sectors with the Greatest Inventory Changes

Supply Chain by the Numbers: November 13, 2008

SCM STOCK REPORT

Despite the welcomed end of the interminably long presidential election campaign, the U.S. stock market continued on its downward trend.  Consequently, there wasn’t a lot to smile about when reviewing the end-of-week results of our Supply Chain and Logistics stock index.

In the software group, i2 fell a gut wrenching 37.6%, making JDA’s loss of 14.1% pale in comparison.  On a positive note and in the same group, Descartes gained another 7.4% for the week.  In the hardware group, both Zebra and Intermec were down (3.7% and 5.7%, respectively).  In the transportation and logistics group, Prologis nose-dived 28.9% (now down 85.4% on the year), while Yellow Roadway continued its plummet (down another 12% for the week). 

See stock report.

ON-TARGET e-MAGAZINE
Each Week:
-RFID/AIDC
-Transportation
-Procurement/Sourcing
-Manufacturing
-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Weekly On-Target Newsletter
November 11, 2008 Edition


NEW!
Gilmore's Daily Jabs

Is There Anything More Pathetic than the GM Situation? And that's a Shame

Supply Chain Cost Structure Simply Unsustainable

THIS WEEK ON Distribution Digest

>>

Holste
Holste's Blog: Continuous Improvement Ideas for Increasing Picking Performance and Storage Space

>> Top Story: Will Warehouse Management System (WMS) Vendors Increase Support for Material Handling Integration?
>> Fralick: Some Companies Short Sighted in Looking at Consulting Rates, Part 2
>> Tedford Blog on Warehouse Control Systems
SUPPLY CHAIN TRIVIA

Q. What was noteworthy about the introduction by Intermec in 1974 of the Code 39 bar code symbology?

A. Click to find the answer below

YOUR SUPPLY CHAIN QUESTIONS ANSWERED!
Have supply chain or logistics-related questions you need answered?
Ask our panel of experts. Share your insight!

Featured Question and Answer:

Task Interleaving in WMS

Your article on task interleaving in a distribution center was excellent, but I have a follow up question. Which is mathematic algorithm that a WMS uses to do this optimization?

SCDIGEST RSS FEEDS
Do use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.
You can subscribe to our RSS feeds in two ways:
  1. Copy our RSS link into your RSS reader - it's easy!
    www.scdigest.com/rssfeeds.xml
  2. Click on a button below to quickly add it to your favorite readers.
 
   
YOUR FEEDBACK

Feedback continues to pour in each week – but we want more and, with this in mind, are pleased to announce our new “Fuel for Thought” program. If your response is selected as our Feedback of the Week, we’ll send you a $20 gas card. Must have complete name and company, and you can only win once every three months. Send in your Feedback regularly! Make it thoughtful if you would like to win.

More great letters as usual this week.

Our Feedback of the Week is from Angela Curtis, a Supply Chain Analyst who asked that we don’t mention her company, who sent in a very excellent and thoughtful letter on our piece on The Eight Steps of the Forecasting Process, suggesting the addition of a few more steps. Good stuff. William L. Kincaid Jr. of CB Richard Ellis and Danny Halim of JDA Software responded favorably to our piece on National Association of Manufacturers president John Engler’s rebutting the claim by one research firm that China would soon overtake the US in production.

Finally, Brian Etzler of Do-It-Best responds to a number of pieces we have done lately on order picking technologies by saying Voice has worked very well for them.


Feedback of the Week – On the Forecasting Process:

A wise business consultant once told me a third of my project time should be spent planning. Some may argue that planning is an individual process that everyone innately engages in, but from working with small to mid-sized businesses I've learned that planning is usually discarded as an unnecessary expense. So although it is not specific to a forecasting software implementation, these important steps bear repeating for any project of this nature. In that spirit, I recommend adding a step in the beginning and two steps at the end.

At the beginning:

Make the paragraph after item #1 ("These models and hierarchies are often hard to change later...") its own item and even consider breaking this into a few steps.

Obtaining input from -- or even identifying -- key stakeholders is no trivial matter. As stated in the article, it is a mistake to assume that the data in the system contains meaningful or complete information, so give this step its due. A brief data quality assessment (for instance, polling your records to find out what, if anything, is in the fields you intend to use) can reveal nasty data inconsistencies that can kill a project later on.

At the end:

A.  Make a plan for System Update and Maintenance. Ask questions such as:

How will the forecasting system be updated going forward? Who will be in charge of ongoing data cleansing or transformation? Could your original data source be generating additional, more useful data? Forecasting is an ongoing process, so there always needs to be a plan for the future.

Document key processes and decisions in case revisions need to be made in the future ... which brings us to ....

B.  Determine a means of evaluating the effectiveness of your forecasting tool, track its predictions and re-evaluate as necessary. If there's no means to refine a system or even decide if its working as expected, support can quickly dwindle.

Sharing a unified vision to support company strategy is imperative to success. Cover all your bases by planning and gathering input, maintain and update your system once it is completed and finally, have a plan for evaluating and tweaking the system if it doesn't perform as expected.

Angela Curtis
Supply Chain Analyst
Park Ridge, IL


On Position of U.S. Manufacturing:

It is nice to see that John Engler is engaged in a significant and important role here for the US. I was born and raised in Michigan and when Mr. Engler served his terms as Governor, he changed the face of the State and its economic performance. I cannot say enough of what he did for business and the economy.

Nevertheless, I agree that the US still has a strong manufacturing capability and with recent gains in exports proves that we can compete in this global economy.Recent transportation cost increases, the weak dollar and the increase in China wages is the right recipe for US manufacturing to prosper.

I believe that NAM should focus in efforts on large high cost transportation commodities such as; furniture, HVAC equipment, Appliances, etc, as these will be the first to move back to the US as Transportation and other factors continue to be the issue.

William L. Kincaid Jr.
Vice President
CB Richard Ellis


I agree with this article.

I think this probably needs to be broken down by industry. I see Food & Beverage are probably industry segments that cannot be moved to offshore, and given the complex diversification, network complexity, perishability, and channel masters’ demand; the capacity pressures are even higher.

Many of our manufacturing customers have personally expressed this to me in the past few months.

Danny Halim
Vice President, Supply & Manufacturing Solutions
JDA Software Group


On Voice Picking:

We just recently finished a voice pick installation at all of our centers. Our high achievers had concern that there productivity would go down with voice because they would not be able to look ahead. Their interest in looking ahead was not so much for pallet building as finding shortcuts for their pick path to minimize their travel. In the end they all saw productivity improvements with Voice.

 Sometimes I'm not sure that the Order Filler doesn't out-think him or herself as they try to strategize savings. Voice seems to help the Filler with their organization, simplifying the process and freeing them to focus on just picking and putting.

Brian Etzler
Do-It-Best

SUPPLY CHAIN TRIVIA

Q. What was noteworthy about the introduction by Intermec in 1974 of the Code 39 bar code symbology?

A. It was the first alpha-numeric bar code symbology.

Copyrights © SupplyChainDigestTM 2003-2008. All Rights Reserved.
To Unsubscribe: Click Here
SupplyChainDigest
PO Box 714
Springboro, Ohio 4566