This Week in SCDigest

WERC and ISM 2013 Conferences

Well, it was a busy but rewarding week, as I managed to attend the annual conferences of both the Warehouse Education and Resources Council (WERC) and the Institute for Supply Management (ISM) this week in Dallas.

Unfortunately, for at least the past several years the two events have overlapped almost completely, which is a shame because they are both very good conferences. In 2011, both happened to be in Florida on Disney properties and I was able to attend the two events rather easily. This year, both were in Dallas, but separated from downtown (WERC) to the massive Gaylord hotel in Grapevine (ISM) by some 25 miles. But your humble reporter managed to get to the ISM event twice, thwarted a bit by schedules that didn't sync between the two the way that I would have preferred.

My report is below. Thousands of you have already viewed our video reviews of WERC Day 1 and Day 2 - thanks as always for the nice notes - and today in my written summary I will add some summaries from the ISM conference.

Coincidentally, both conferences are bolstered by an attendee base that is very loyal to the respective organizations. The WERC conference is an interesting size, with about 1000 attendees, enabling it to have a sufficient scale to provide depth but yet feel "personal" at the same time. The ISM event is more than twice as large, but it is frankly interesting to observe how committed attendees are to the procurement profession.

First, some highlights from WERC:

In the first session on day 1, I saw a very interesting session from Annette Danete-Akey and Alison Martin of book publisher Random House on use of the Theory of Constraints in its distribution centers.

I learned several things I didn't know, including the fact that Random House worked directly with TOC originator and author of the famous book "The Goal" Eli Goldratt on the project, and that their success was the basis for Goldratt's supply chain novel "Isn't it Obvious?"

Greatly summarizing, one key component of the final solution was something Random House calls "dynamic buffer management" for its split case picking locations.

This involved capturing the inventory levels every day for each SKU and active pick location (not many do that), and analyzing that data over some period of time. The objective: determine which SKUs have too much or too little inventory versus demand, and therefore which may need to have changes inwhere they are stocked (there are several different storage modes) and/or have replenishment quantities adjusted.

The result: a one-day decrease in DC lead times to customers, and a reduction in "emergency replenishments" (replen needed for the current wave's volumes) from 38% of total replens to just 1.7%. Very good - and innovative. Hardly anyone is doing this.

Later on Monday, Kathleen Shafer, director of supply chain transformation at CVS Caremark, gave a very interesting presentation of the drug store chain's recent efforts to align its future supply chain with its business strategies. CVS has a number of major on-going business initiatives in place, including "reinventing the pharmacy" and of course multi-channel commerce, among others. Shafer said CVS's supply chain VP Ron Link recognized the company's supply chain would need to change substantially to adequately support those business strategies.

What ensued, with help from the consultants at Kurt Salmon, was an intense approach to understanding what process and technology capabilities would be required to deliver the right supply chain enablement - very impressive. Some six months of effort was involved, including highly-engaged cross functional teams, detailed assessments of current technologies, priortization and sequencing of initiatives, and lots more.

As I said on the video review, there is no question this is the right way to do it - I just wondered how many companies would have the resolve to take it to this level. Current initiatives coming from the effort include a new full time network design team, improved flow path optimization and scenario analysis capabilities, optimal store delivery analytics, and better end to end supply chain cost modeling.

On Tuesday, Chad Autry of the University of Tennessee summarized a recent book he co-authored with colleague John Bell and Thomas Goldsby of Ohio State titled "Global Macrotrends and Their Impact on Supply Chain Management: Strategies for Gaining Competitive Advantage."

I was surprised I wasn't aware of the book, because most of these works show up in my mailbox looking for a review, but Autry sensibly connected big picture changes like demographics and growing resource scarcity to how the supply chain will need to evolve.

A few recommendations from Autry: companies will need to move from supply chain networks to "flexworks," in which decisions around shipment flow paths, modes and carriers are made much later than today; and that there is a growing imperative to be really good at deliveries to urban locations, as urbanization grows rapidly in the US and across the globe.

Dan Basmajian of Optricity had to fill in at the last minute for a presentation on slotting in the DC after the scheduled spokesperson from C&S Wholesale Grocers cancelled at the last minute.

He was very good. Beyond the core ideas on slotting, I liked a lot the approach Basmajian took of organizing the presentation with a sports analogy. He used a model of have a goal, developing a winning strategy, creating a line-up, conducting spring training, developing a playbook, etc. I think this is an approach that can be very effective for presenting concepts or proposals in many business settings - tuck that idea away for future consideration.

Interesting observations from Basmajian on slotting: travel distance often doesn't equal travel time between picks, due to factors such as congestion; too many companies use a simple rule of thumb like keeping five days of inventory in a pick location that can be far from optimal; and ABC slotting approaches can also often have problems, especially when pallets need to be built heavy to light or to be "aisle ready."

At the ISM conference, keynote speaker Dr. Hau Lee of Stanford told the audience that the supply chain world is clearly moving towards "sense and respond" capabilities - but that it needs to be "sensibly sensing" - meaning companies need analytic and other tools to get at true demand and filter out numerous sources of "noise" that can distort the true picture. And that isn't easy.

I liked this quote from Lee: "Even the best supply chain information is only as good as the human being analyzing it."

Just retired GE procurement executive Patrick MacMonagle gave an excellent presentation on GE's journey in "spend analytics," and made a compelling case for the technology. How can a company really optimize procurement and maximize supplier leverage if it can't easily quantify what it spends globally across business units, vendors and product types?

Before it built its own spend analytics tool, it took a long time to get answers to these kinds of questions, and GE often had to ask vendors themselves for the data. GE would also have vendors and product/commodity types coded in numerous different ways in its systems, confounding analysis. "Patent-child" relationships in suppliers were almost invisible in aggregating spend.

GE has fixed all that, with great bottom line results. Interesting point made that by speeding "deals" by using this data, it also has a various positive impact on cash flow. My only question is what company wouldn't want to have this level of visibility and analytics? It's almost free money, in my view.

Finally, I wasn't especially excited going into a presentation on the business case for Green investments in distribution from Richard Murphy, CEO of Murphy's Warehouse Co. Boy was I wrong - this was a simply outstanding presentation on the real math of fluorescent lighting versus LED, turning land around DCs to "prairies" versus cut grass, growing rain water run-off costs and what to do about it, and lots more. The bottom line message: there is a solid (but not always great) ROI from a wide variety of Green investments in the DC.

Truly excellent - more soon. See our graphic of the week nearby.

Wish I had more space - - it was a good week.

Did you attend WERC or ISM 2013? What was your reaction? Any comments on Gilmore's pbservations? Let us know your thoughts at the Feedback button (email) or section (web form) below.

I agree with you that we ought to be pushing full ahead with oil and gas production in this country and we should not let politics put undue curbs on this. Unfortunately, we live in very divisive political times where everything has become subject to extreme political interpretation by both sides. Any hope of compromise is seen as weakness and any Congressman or Senator who even attempts to reach across the aisle is quickly shuffled out of office by his or her own party.

In the case of fracking, the environmentalists do have valid concerns about potential effects which should be further studied. And we must be concerned about greenhouse gas effects from carbon fuels for the sake of our children and grandchildren. But the two sides do not have to be mutually exclusive. We can continue to explore energy independence from both fossil fuel and natural sources concurrently. The dream of a totally fossil fuel free energy environment is a good one we should continue to pursue, but it will not occur in our lifetimes and should not prevent us from exploiting the resources we have at our disposal today. If we realize how unproductive the current divisiveness is and start compromising again, in and out of politics, we can accomplish both.

Jim LeTart
Sr. Manager, Marketing
JDA Software

Great article on energy issues and opportunities. In my opinion, there will not be a showdown between environmentalists and people in favor of using and expanding non-conventional oil and gas. I think you will see environmental forces continue to question individual programs such as the Keystone pipeline as they come up. And we probably need someone keeping industry honest about environmental risks, remember the BP oil spill. Interestingly, a case can be made for more natural gas pipelines vs. Keystone, but I would predict that Keystone will get approval.

It is exciting to think that we can significantly reduce our dependence on imported oil and, as Dan points out, this has great benefit to the long term prospects for the U.S. economy. However, I think that we need to continue to invest in renewables for the future, they represent the best way to reduce the amount of pollutants that even natural gas puts into the atmosphere.

Herb Shields
President
HCS Consulting

Great article! I knew the gas market was low, but the comparison to other markets was excellent.

Trevor Pinto

Thought you would find this interesting. Read it at lunch just before your column.

http://www.startribune.com/business/202630701.html

Apparently we are not the only country with an abundance of natural gas.

Kevin McCarthy
Director Consulting Services
C. H. Robinson Worldwide, Inc.