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April 15, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Trip Report: University of Tennessee Supply Chain Forum bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet Expert Insight and Gilmore's Supply Chain Jab bullet On Demand Videocasts

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Creating a Win-Win Scenario through Supplier Scheduling

A Powerful Argument for Developing a Valid Supply Plan, While Demonstrating the Symptoms of Invalid Plans


first thought


Supply Chain Graphic of the Week
Signs of Economic Trouble Here?

Amazon's Assault on Apparel Sector
Diesel Prices Expected to Remain Low Despite Recent Rise in Oil
Successful Test of Truck Platooning in Europe
Idle Container Ship Pool Keeps Growing




Week of March 22, 2016 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Receiving Automation - Key to Order Fulfillment Accuracy & Greater Customer Service


Weekly On-Target Newsletter:
April 14, 2016 Edition

Cartoon, Best of MODEX, Truck Platooning, 3D Printing and more


The Compliance Networks Corner: Five Critical Supply Chain Steps to Ensure Merchandise Plan Execution

by Richard Wilhjelm,
Compliance Networks


Will Amazon Really Build Parcel Shipping Network?

by SCDigest Editor Dan Gilmore


The drum-buffer-rope system developed by Eli Goldratt as a core element of the Theory of Constraints was articulated in what book?

Answer Found at the
Bottom of the Page

Trip Report: University of Tennessee Supply Chain Forum

This week I am fresh back from Knoxville and the University of Tennessee's Spring Supply Chain Forum.

I have presented at many university supply chain forums in the past, including Penn State (several times), Georgia Tech (several times), MIT, Harvard, University of Wisconsin and maybe one or two others. The basic structures are the same: a group of companies (generally in the 20-40 range) pay a decent size fee to belong to the forum, in return for which they usually receive in part two events per year featuring presentations from practitioners and others.

Largely but not totally, the sponsoring companies tend to be either in the general geographic region or have supply chain execs that graduated from a given university. 


Most interesting, Negrescu said Mondelez has managed to take most product development responsibilities away from brand managers. A new best practice?


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So earlier in the year, Dr. Paul Dittmann (ex of Whirlpool) who runs Tennessee's Global Supply Chain Institute and assists Dr. Ted Stank with the Forum inquired if I would come down and present on supply chain trends. After the demand for my standard speaking fee was quickly rebuffed, I said Yes anyway, as I was planning on issuing a new set of supply chain megatrends sometime this year as it was.

I managed to get the new trends finalized a good 24 hours before my presentation on Wednesday morning, to what was a very large crowd for these type of Forum events (Tennessee does as good a job as anyone at marketing their Forum and especially their research). My presentation seemed to go over very well, with dozens of people complimenting the work afterwards. The new megatrends for 2016 will be released here in this column in coming weeks.

It was a quality event, with a number of excellent speakers. I have seen Frank Crespo, VP and chief procurement officer at Caterpillar, speak before, but he keeps updating the presentation, so I am always happy to hear him again.

Let me first say that what Cat is doing in many areas is simply incredible, "engineering" the supply chain (vendor, sourcing point, flow path, inventory levels and more) for literally every one of the hundreds of thousands of parts Caterpillar sources or makes. How this is even possible I am not quite sure, but it is saving the company I am guessing many tens of millions of dollars annually if not more.

Caterpillar is also on the leading edge of the Internet of Things, with nearly all of its some 3 million machines in the field equipped with sensors and wireless data connections. Caterpillar can now see in detail how each is actually being used, both in terms of efficiency and optimal performance. Crespo told an anecdote of a technician in Peoria who saw an operator of a piece of mining equipment in Virginia was shifting the motor in neutral when coming back down the rock pile, and who then called the driver to make sure he understood that practice can lead to premature transmission wear.

"Every decision impact time and money," Crespo noted.

Caterpillar has built a slew of analytics and visibility tools to support its managers. He observed that many companies sort of assume the information on a manager's screen is accurate and timely. Often not the case, Crespo said, and the reason why Cat has been so focused on improving the flow of supply chain information to optimize the flow of materials. "You have to attack problems with the information flow with the same rigor you do with issues with the material flow," Crespo said, but noting that is harder because you can't see it in the same way.

Wendy Herrick, VP of supply chain in North America for consumer products giant Unilever, spoke on "Leading with Purpose," which detailed the company's aggressive efforts at sustainability and making the world a better place.

I did not know that much of this mindset comes from the company's founding days, when in the 1880s William Leverstarted what would ultimately become half of Unilever by marketing a new kind of soap that he hoped would "'make cleanliness commonplace," and " lessen work for women."

Now, Unilever aims to "make sustainability" commonplace, and is aggressive as any company towards that end.

For example, when Unilever measures its carbon footprint, it not only counts the CO2 emissions of its own operations and that of its supply chains, but also the CO2 that might be released in its customers' use of the product. That contributes to the fact that its total Unilever greenhouse gas emissions rose 4% from 2010 to 2015 - but that is as compared to a 21% growth in sales.

Unilever has achieved zero waste to landfill I believe at all its operations worldwide, well ahead of schedule, and goes so far as "dumpster diving" with some of its some of its suppliers to help them down the same path.

It's a fine story, though I was less enamored with the notion that each of the company's many brands needs to also have a purpose. I must not be alone, because when Herrick asked the crowd if anyone knew the "purpose" of Dove soap, Hellman's mayonnaise and one other brand, no one raised a hand. Must my mayonnaise have purpose beyond making a turkey sandwich taste better? Maybe I am simply behind the times.


But Herrick said Unilever's results prove that sustainability wins in the market. Only 8% of publicly traded companies have increase both revenues and profits every year over the last 10 years. Unilever has a strong eight-year streak going, and expects many more.

Procter and Gamble's Joe Shields and Jason Merrick and Lance Sauders of Virginia Commonwealth University presented on a model and simulation of P&G's lipstick supply chain that Dr. Mary Holcomb of Tennessee was also somehow involved in.

The 36-44 lipstick shades P&G markets have to be turned over every six months, and only 5-6 of those shades are likely to be big sellers - but it is very hard to forecast which ones those will be the winners, at least until very close to launch pr past. That's a problem, because some of the SKU-specific components of the lipstick and packaging come from Asia with long lead times. P&G traditionally compensated by acquiring too much inventory of everything, with large supplies even for the majority of the SKUs that turn out to be dogs.

Greatly simplifying, if P&G went to local/nearsource supply versus Asia, it could substantially reduce lead times. That in turn would allow it use a later stage forecast that historically was much more accurate. But the VCU model showed that the faster lead times, allowing smaller product runs, had the bigger impact in terms of reducing safety stocks while maintaining very high service levels than did use of the more near term forecast (as I guessed when the question was asked).

What I don't understand is why a combination of the network planning and inventory optimization tools I know P&G uses couldn't have answered these questions, rather than needing a separate, outside modeling effort. The answer I received in part was that the VCU model allowed the "isolation of variables" better than such packaged tools. So custom modeling apparently is still required to get the job done in some (many?) cases.

There was an interesting session on "platform thinking" in the consumer packaged goods world by Cristian Negrescu of Mondelez and Mike Burnette of Tennessee, ex of P&G. "Platforms" of course make obvious sense in areas like automobiles or construction equipment, but in consumer packaged goods too?

The answer is Yes, and it is currently a pretty hot topic, though Burnette says very few companies are doing it well. What does it really mean though? Well, it has in large part has to do with supply chain simplification, achieved through SKU rationalization and standardization of formulas, processes and equipment across the globe.

Negrescu, for example, said he was too embarrassed to tell us how many different dimensions of its Oreo cookies the company was producing globally. Just standardizing that diameter has led to some $100 million in savings from lower material cost and being able to move production to a much smaller number of total lines.

Still not sure what a CPG platform is? Burnette said "Think of liquid in a bottle." So that could be a platform that defines equipment, processes, many materials and more that cross different product categories for a CPG company.

Most interesting, Negrescu said Mondelez has managed to take most product development responsibilities away from brand managers. The marketers still define product requirements, but a combination of supply chain and R&D take it from there for new product introductions to get maximum leverage and maintain SKU/platform discipline. It wasn't easy. An emerging best practice?

There is more, but I am out of space. Good job by the Forum. As a final note, there is an air show this weekend in Knoxville, and while awaiting my flight at the airport, we were treated to several practice sessions by the Navy's Blue Angels. I have seen them before, but they are very cool as always. Nice way to end a good couple of days in the Volunteer state.

Any reaction this trip report on the University of Tennessee Supply Chain Forum? Should supply chain and R&D wrest more control of NPI from marketers in the CPG world? Is custom modeling still the answer to many supply chain problems? Let us know your thoughts at the Feedback button below.

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On Demand Videocast:

Now is Finally the Time for WMS in the Cloud

As Supply Chain Software Moves to the Cloud, Barriers to Warehouse Management Joining the Party have All Fallen Away

What has changed, and what WMS technology developments are fueling this transition. We'll cover all that and more in this detailed, fast-paced broadcast.

Featuring SCDigest editor Dan Gilmore and Dinesh Dongre, VP Product Strategy, Softeon

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Results from SCDigest's New Benchmark Study on Practices and Technology in Global Trade

You'll learn the results of the survey, unveiled in a new report launched with this Videocast. Not to be missed by anyone interested in global sourcing, global trade management and supply chain visibility.

Featuring SCDigest editor Dan Gilmore, Gary Barraco, Senior Director of Supply Chain Solutions at Amber Road, and Dan Gardner, President of Trade Facilitators Inc.

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On-Demand Videocast:

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Featuring Frank Diaz, senior vice president, distribution and logistics at PriceSmart, and Toby Brzoznowski executive vice president at LLamasoft and SCDigest's Dan Gilmore

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We received several excellent letters on our article on Target's decision to rewrite much of its  supply chain software, and do it in house rather than outsource and use packages. All the result of the impact of Omnichannel, which, CEO Mike McNamara said, is killing the traditional DRP/DC supply chain model in retail.

See a selection of this Feedback below.

Feedback on Target's Change in Software Direction:


In an omni-channel retail world the entire supply chain needs to be in the system because vendors can ship to the stores, DCs, depots, fulfillment centers, and so on.

So, a DC-level DRP system will not do the job.

I suspect we agree on that.

If so, then the logical solution would be a store-level DRP system which also includes the DCs, depots, fulfillment centers and so on. This way, everything is in the system and a model of the business exists from the final point of sale all the way back to the vendors, and possibly further back to raw material suppliers if the vendors have DRP/MRP systems. Forecasts, planned shipments, financial plans, transportation plans, and capacity plans exist for this fully integrated supply chain, everyone has up-to-date, clear and undistorted visibility, and everyone is working to a common set of plans.

Do we agree on this?

If so, then the next question is does it make sense for Target to create their own store-level system?

The success of these systems is mostly a function of the people side of the business - changing the process and behaviors and we have lots to share in this regard. But you also need to have software which can do the job.

There is nothing preventing a company like Target from changing their processes, and the process changes are tested and proven.

So, could a retailer as large as Target create store-level DRP software? If so, what would it cost? Would it be less than what many retailers are spending to implement a package?

Mike Doherty
Vice President
Demand Clarity


Yes, the DC/DRP model is dead.

The store-level DRP model where the extended supply chain including stores, DCs. vendors, and other locations is very much alive and is both tested and proven in retail.

All trading partners are linked together with clear visibility upstream and downstream. Changes are communicated daily or more frequently. The planning horizon extends a year into the future.

Darryl Landvater
Product Director


No question here: If an application is central to the business mission of a company, that company must own it own code. 

Did Amazon buy packaged applications?  I think NOT.


Steve Kohler



Q: The drum-buffer-rope system developed by Eli Goldratt as a core element of the Theory of Constraints was articulated in what book?

A: No, not "The Goal," but rather its sequel titled "The Race."

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