Just back from a day at the Council of Supply Chain Management Professionals (CSCMP) St. Louis roundtable meeting, again courtesy of Mark Baxa of Monsanto; it was their annual full day seminar and exposition, and I was joined by a number of excellent speakers throughout the event, the highlights of which I thought were worth sharing with you.
Roger Woody, CSCMP chairman and supply chain exec and university teacher, kicked the day off with a short talk that offered one sobering observation: based on his travels, Woody said that right now, developing economies in Asia, Africa and elsewhere are no longer looking to the US and Europe as the models for their path forward, but rather India and China. To an extent, that is inevitable and not surprising, but it is also reflective of the efforts India and China are making to court those countries and do business there. The US and Europe better understand these dynamics and get back in the game.
He also reported that fellow CSCMP board member Rick Jackson of The Limited Brands noted at a recent meeting that when it came time for the retailer to costs last year, as virtually every company had to do, the executive team recognized this involved strategic decisions that would affect the future of the company for years.
It wound up with a plan that encouraged staff members to take some unpaid personal time off at various periods, rather than resorting to talent-depleting and morale-killing mass layoffs. It has worked out well, Jackson said, and better positions The Limited Brands for the future versus the alternative approach. Woody also noted that in running, bicycling and other sports, the time when the leaders are often overtaken is “on the uphills,” and apt analogy for thinking about SCM strategies in these economic times.
"Ralston has largely eliminated the freight bid process. While it uses a variety of data points to ensure it is getting competitive rates, it hopes to operate in a “one bid and done” mode with its carrier partners."
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Jim Butts, Sr. VP of Transportation at CH Robinson, offered a number of interesting comments, especially with regard to supply chain innovation. First, however, he stated that from his perspective the companies that have survived the recession best generally had four attributes: highly variable cost structures; cultures that focused on being very close to customers; strong, active supply chain leadership; and the ability to embrace change more so than competitors.
Butts stressed that innovation in both products and a company’s supply chain is simply beyond essential for success today. I really liked his point that while continuous improvement programs are all well and good, if you are not a supply chain leader than a focus primarily on continuous improvement will likely keep you mired in that laggard position. Only innovation and transformation can change a company’s place in the pecking order.
However, supply chain innovation is a concept that is often difficult to define or grasp, and Butts said that “many companies struggle to get there” in terms of building an innovation culture. He said he often sees supply chain leaders that preach innovation themselves, only to see the concept wither in practice as mid-level managers strongly discourage innovation for a variety of reasons.
A supply chain organization needs to be willing to accept some risk and understand that there will be some early failures with some innovations – if the innovators are sanctioned/fired over this, the innovation culture will never be built. Companies also need to measure how much time they really spend on innovation and set some specific targets for what that level should be. Failure to innovate will inevitably lead to a loss of competitive supply chain position over time.
Ken Lehman is VP of Logistics at Ralston Foods, a spin-off of Ralston Purina (after it was acquired by Nestle) that was primarily a private label manufacturer of cereals, but saw its world change dramatically with the purchase of the larger Post cereals brand from Kraft. The logistics organization is one of just a few “shared services” between the very independent business units (five in all), which is especially interesting because the private label division and Post are in most respects market competitors. Yet, they are usually delivered on the same trucks from Ralston distribution centers, and the company pursues a strategy that says deliver the lowest total supply chain cost – even if that penalizes one division for the sake of the whole. Lehman said that is often a tough but necessary sell.
Ralston has specifically decided to go a more collaborative route with its carriers. It cut its carrier base by some 50% awhile back, partly under the theory that the company “wanted to know its carriers a lot better,” Lehman said, “and to do that, there can’t be too many of them.”
In this mode, Ralston has largely eliminated the freight bid process. While it uses a variety of data points to ensure it is getting competitive rates, it hopes to operate in a “one bid and done” mode with its carrier partners.
“We are certainly taking a bit of a risk,” Lehman said. “When rates go back up, we’re hoping our carriers remember us, so that when everyone else goes up 20%, our rates only go up 5%. We’ll see.”
Lehman also stressed that the company really focuses on achieving sustainable and consistent supply chain costs, rather than being subject to large swings. So, it eschews reducing short term transportation costs by ruthless bidding to reach levels that cannot be sustained when the environment changes; it hedges against fuel price swings for the same reason.
But, Lehman points out, Ralston is getting very competitive rates with this program that have enabled it to reduce its logistics costs per unit to all time lows.
Boeing’s Tm Mirnan, who works on the Defense side of the aerospace giant, gave a very interesting presentation on a new ‘business process management” tool that the company recently implemented. In short, it is a new piece of software, based on Service Oriented Architecture, that sits above some 16 existing supply chain business applications for procurement, forecasting, etc.
The tool is used to model and then rapidly execute new business processes that cross these functional silos – and to highlight opportunities for improvement.
Mirnan noted that while in manufacturing it is easy to see build-up in work queues, “It’s almost impossible to see a white collar employee’s work queue.” The barriers are both technical and cultural – it is just not normal currently to have one’s work plate visible to management and peers.
But the tool enables that visibility, and can show managers where long or short-term process bottle necks are. More on this soon – it is supply chain innovation.
Finally, Jane Barrett of Gartner/AMR Research covered a lot of interesting ground, and I will note a few of the highlights. First, I confess to have missed it, but AMR has recently changed its “Demand-Driven Supply Chain Networks” framework to a new and expanded term: “Demand-Driven Value Networks.” The summary catalyst for this change: a belief that traditional supply chain thinking is too supply-centric; rather, the value change should be build from the customer perspective back, and be more focused on value rather supply.
She made the point that to have an agile supply chain means not just being able to respond quickly to changes and events, but having the ability to sense those changes faster than the competition. We often don’t think about that part of it. She also noted some examples of companies that have developed detailed models of their sales and operations planning (S&OP) processes, and therefore exactly where what data needs to come in, what the linkages are to execution, etc. Many companies haven’t advanced that far.
There’s more, but we’re out of room. Hope to do some individual stories in On-Target soon.
Finally, many of you have seen our new Distribution Center Complexity Calculator beta version, which you can find on Distribution Digest. We are looking for reader feedback in a kind of "open source" way to lead to a final version 1.0.
We think we did a good job in putting the calculator together, but are seeing from early results that some factors may be leading pretty compex DCs to get what look like low scores on a scale of 1-100, meaning in the mid-40s to mid 60s. Part of that is, we now realize, that no one today would probably reach a score above 85 or so; therefore, everyone is starting, if you will, with a 15 point deficit.
We are going to correct that in some way, but would love some additional input. Please take a look.
Any of the points made by these CSCMP event speakers resonate with you? Do you have any additional points to make on these themes? Is a "trip report" like this of value to you? Let us know your thoughts at the Feedback button below.
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