sc digest
September 20, 2012 - Supply Chain Newsletter

This Week in SCDigest

bullet The New Era of Perfect Logistics
bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic of the Week and Supply Chain by the Numbers bullet This Week In "Distribution Digest"
bullet New Cartoon Caption Contest Begins This Week! bullet Trivia
bullet New Expert Contributor bullet Feedback


New Information Video From PTC
Schneider Electric goes Beyond Product Compliance

first thought


Supply Chain Graphic of the Week
Understanding Inventory Optimization
This Week's Supply Chain by the Numbers for September 7, 2012:
  • Now Samsung Under Gun for Labor Practices
  • On-Line Pricing Madness
  • Proposal for Dramatically Increasing Carbon Taxes
  • "Old Man River" Mighty Low


September 5, 2012 Contest

See The Full-Sized Cartoon and

Send In Your Entry Today!


Weekly On-Target Newsletter:
September 5, 2012 Edition
Gilmore, Holste on Distribution, VICS and GS1 Merge, Transportation Trends and more


Holste's Blog: Determining Actual CPM Rate Is First Step Toward Improving System Capacity


Seven E-Commerce Order Fulfillment Strategies for Growth
By Chris Arnold
Vice President,
Operations & Solutions Development


Which of the following supply chain planning companies was not ultimately acquired by JDA Software? I2, Evant, Manugistics, E3?
Answer Found at the Bottom of the Page

The New Era of Perfect Logistics

Several months ago, I did a two part series summarizing my new set of Supply Chain Megatrends. You can find the links to those columns here: Supply Chain Megatrends Part 1 and Part 2.

I said at the time I would be providing more detail on my thinking on each Megatrend over the following months, and finally got that going a few weeks ago with a piece on the first Megatrend, "Turbo Supply Chain Visibility."


"The issue will become not can a company deliver Perfect Logistics, but how much it costs them to get there."


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I am coming right back with Megatrend number 2, because it is tied at the hip with turbo visibility.

A perhaps obviously but nevertheless important corollary to the substantial improvement in supply chain visibility that is occurring right now is this: with rising visibility comes rising control. And with rising control comes the ability to wring errors and delays out of the process.

This is especially true at the execution layers of the supply chain. While volatility in everything from demand to commodity prices will always play some on havoc planning and forecasting processes, when it comes to supply chain execution, visibility will enable companies to get very close to zero errors: in fact, Perfect Logistics.

As I noted in the Turbo Visibility trend, with GPS and mobile systems, we may be the last generation that was really capable of being lost. And here is the really important point: if we can't get lost, than neither can our inventory or our assets. And that doesn't just mean lost along the way, it means lost because it wasn't put in the box or on the pallet or most other ways.

As I wrote last time, the technology is largely in place today - auto ID, wireless, mobile, GPS, video, advanced ship notices (ASNs), the "Cloud", and software that takes advantage of this – to give us this near complete visibility and control.

To fully get there will probably require more widespread implementation of RFID, which will indeed someday soon dominate the auto ID playing field. Bar codes can help get us close to Perfect Logistics, but it usually requires a manual scan effort that can be missed, and doesn't work so well in more unstructured processes and environments, whether it is the backroom of a retail store or field operations in the orchard or the battlefield.

The ability of RFID to support automatic reads, in combination with the other technologies and systems, will push the potential from near perfection to actual perfection - with big implications for our supply chain.

Examples of Perfect Logistics are Starting to Emerge

The industry is in fact seeing a growing number of examples of partial logistics perfection:

Perdue Pharma, maker of the drug OxyContin, uses a Las Vegas style camera system to video record every step of the packing process as the drug (which is literally worth more than its weight in gold) is placed into shipping containers, pack by pack. If there is any receiving quantity discrepancy on the other end, Perdue simply goes back to the tape.

With the coming of "video analytics," Perdue could actually use the same system to catch any packing errors as they occur.

A division of South Africa's Imperial Logistics manages direct store delivery for a major food company in the country. The delivery operation is controlled by a sophisticated routing and scheduling system connected to GPS units on the vehicles. Large screen displays throughout the master control room show precise, second by second movement of dozens of trucks as they execute their routes.

Dispatchers know instantly if a delivery is going to be off from the scheduled appointment time even by a few minutes, such as from a traffic delay or extra time required at a stop. When this occurs, the customer is often contacted and updated with the new expected arrival time. More seriously delays can cause a dynamic re-optimization that changes routes or dispatches new deliveries.

This is getting very close to perfection indeed, all based on visibility and software that takes advantage of it.

A retail customer of Descartes Systems uses its Logistics Flow Control software to precisely manage inbound vendor shipments to its DCs and remove much of the variance it had previously experienced. The tool is a cloud-based, collaborative system that ties together vendor, carrier, and retailer.

In addition to full visibility of the purchase order through receipt, the software provides visibility and control to the retailer of the carriers as well. This is especially true for the LTL service providers, which analysis showed were the source of much of the delivery variance the retailer had been experiencing.

Now, rather than being somewhat subject to the delivery whims of the LTL carriers, the retailer can see what is happening in the network and terminals relative to inbound goods, and then pull or delay those orders into its own DCs depending on its inventory needs and the DC schedule.

"Logistics Flow Control" - just the same sounds cool, and actually well captures an aspect of what Perfect Logistics will mean.

Monarch Beverage, a major beer distributor located near Indianapolis, recently installed an automated case picking system, using a series of technologies and robotics to select cases and pallets (from Hartness International). In addition to being an impressive display of automation on its own, every case running through the system is also captured on video.

First, the system guarantees just about perfect case selection and pallet building - a challenge in most manual beer operations.

Second, If there are any order discrepancies at the customer, Monarch can go back and show every case that was picked, placed on the pallet, and shrink wrapped for delivery for that customer. It has reduced both incidents and claims dramatically - due to video visibility.

A major department store retailer which I can't reveal at this time is building towards a vision in which cases and items within the case are RFID tagged and read automatically as part of the truck loading process at the vendor's DC, which will be used to create the ASN. It then wants to see the inbound load also read somewhere along the transportation process by the carrier, and then again read automatically as it receives the goods into its own distribution centers, closing the loop.

Not only will this provide truly perfect visibility into the inbound flow of goods, that visibility will highlight where any errors tend to be occurring, leading to their eventual elimination. Perfect.

There are other examples. Perfect Logistics will be about both accuracy and continuous product flow. Another retail executive recently commented, for example, that ""It's all about speed to market, so there's a great focus on how we eliminate dwell time."

Today's visibility tools will provide supply chain participants the ability to find and root out those dwell times with increasing precision not just for retailers but every supply chain sector.

It's hard to talk about Perfect Logistics without mentioning the "perfect order" metric. Clearly, such elements of the perfect order as on-time and undamaged will be by impacted by these new capabilities. But what about "in full?"

Even here, technology such as "demand sensing" software that is greatly improving short term forecasting for companies such as P&G and Unilever, greatly reducing issues with inventory needed for orders not being available.

I believe firmly this new era of Perfect Logistics is coming. And what will happen is that as supply chain leaders begin to deliver different aspects of it, Perfect Logistics will increasingly become a customer expectation that vendors and 3PLs/carriers can provide it.

This in turn will lead to something of a "visibility arms race," as companies and service providers find the need to rapidly deploy such capabilities. And the issue will become not can a company deliver Perfect Logistics, but how much it costs them to get there.

And when we eliminate nearly all logistics execution errors, just how does this change our supply chain world? That is a really intriguing question.

Do you agree or not that a new era of Perfect Logistics coming? What are the barriers - and opportunities? Let us know your thoughts at the Feedback button below.

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Videocast Series:

Supply Chain Advanced Analytical Tools That Facilitate Cross-Functional Strategic Planning

Part 1:
How to use Advanced Analytics to develop the Optimal Strategic Supply Chain Design across all Operations

Featuring Dr. Jeff Karrenbauer, President of INSIGHT, Inc.

Tuesday, September 25, 2012


Introduction to Automated Procurement

Changing the TMS Game with Advanced Carrier Sourcing

Featuring Aditya Desai, Product Management, B2B Commerce Supply Chain Applications, IBM and Jeff Robbins, Product Management, Sourcing, IBM (Q&A Session only)

Wednesday, September 26, 2012

New Videocast:

Life Sciences - Transforming Performance by Challenging the Operations Strategy

Insights from New Analytical Models Reveal Key Drivers of Operational Performance

Featuring David Simchi-Levi, a Professor of Engineering Systems at MIT and OPS Rules Chairman and Robert Bissett, Associate at OPS Rules Management Consultants specializing in Pharma/Life Sciences

Tuesday, October 9, 2012


We are catching up on some recent feedback, starting with some letters on Gilmore's columnm on the Seven Habits of Highly Effective Supply Chains, written a few weeks ago, upon the passing of Stephen Covey. We add a letter on a new Supply-Demand Chain Model from the analysts at IDC, and one on JC Penney's aggressive new RFID program, which one reader thinks is oing to be hard to pull off.

Feedback of the Week: On Seven Habits of Effectice Supply Chains


A useful and thought provoking essay.

In recent years I have spent a great deal of time with defense related supply chains - those in the USA and UK are surely the most complex in the world. In doing so I have read up on military history and whilst not claiming in any way to be a proper historian my take is that two things wins wars. You need better trained forces and better logistics than the other guy. Having better technology does help but it is not the final determinant in conventional warfare. Surely there are lessons here for commercial organizations. In any campaign you need the best trained people on your side and the best supply chain - then you'll beat the opposition..

David MacLeod


Covey stressed the need to address the circle of influence where an individual (company) can make a difference, in contrast to dissipating one's energy in the circle of concern, where one can have little or no effect

Perhaps "Focus on your circle of influence and not on your circle of concern" should be a Supply Chain rule

Blair Williams


On New Supply-Demand Model

One more circle needs to be added: "Supply Volatility."

Many supply/geographical markets are changing, and changing dramatically.

More manufacturers/producers are relocating from high cost environments (California for example) to areas of higher quality labor/management, lower costs of raw materials and energy and overall living conditions (Idaho, Texas, etc).

This has taken an already volatile market(s) where the foundation of freight volume is dictated by "seasonality," both import and domestic.

Thanks for the informatio - good stuff.

Bob Farrell
Vice President, Sales & Business Development
Henderson Trucking/Logistics


On JC Penney RFID Program:

I have been involved with the tech side of the retail supply/demand chain for many years.

In previous pilots, the issue wasn't the tag cost, it was the cost and reliability of the scans and scanning equipment.

I am at a loss about how JCP will practically manage it's suppliers (or virtually any DC) to get the right tags on the right items. But maybe they have figured something out.

If they want to use NFC and the consumer's mobile phone, that seems to be a good vector for attacks into the mobile since the process is not transparent.

Steve Kohler



Q:Which of the following supply chain planning companies was not ultimately acquired by JDA Software? I2, Evant, Manugistics, E3?

A: Evant, which was acquired by Manhattan Associates in 2005.

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