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June 9, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Trip Report - Gartner Supply Chain Executive Conference Part 2 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 New Expert Insight and Supply Chain by Design bullet June Videocasts and On Demand Videocast

See how one Distributor Saved Over $15,000 the First Year

first thought


Supply Chain Graphic of the Week
US Truck Driver Pay Easily Explains Driver Shortage

Walmart Looks to Inventory Drones
Spot Market Rates Open Big Gap Versus Contract Pricing
Cost for Weighing Ocean Containers is Steep
Volvo Says New Truck Design Improves Mileage Big Time


See how one Distributor Saved Over $15,000 the First Year


Week of May 30, 2016 Contest

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

Holste's Blog: When Is The "Best" Time To Upgrade DC Operations?

Weekly On-Target Newsletter:
June 8, 2016 Edition

New Cartoon, Walmart Drones, Customs Clearance Tech, TL Rates Plunging and more

Supply Chain Software Trends and Opportunities Benchmark Report 2016

From the Search for Greater Agility to the Coming Era of Cloud Software, Where are Companies Headed?

Moving Past the '90s: Why ERP Just Doesn't Cut it When it Comes to Supply Network Visibility

by Jeremy Coote
Acsis Inc.

Using Profit Maximization to Minimize Cost

by Dr. Michael Watson


What is generally believed to be the first centralized transportation load control center developed at 3M in what year?

Answer Found at the
Bottom of the Page

Trip Report - Gartner Supply Chain Executive Conference Part 2

OK, I am back here after a two week gap while attending to other supply chain matters with part 2 of my trip report on the Gartner Supply Chain Executive conference in early May, as usual in Scottsdale, AZ. As such, Gartner is continuing the tradition of AMR Research, which began the event in the late 1990s before being acquired by Gartner in 2009, a move which took the event to whole new levels based on Gartner's superior marketing might.

You can find part 1 here, which focused on highlights from two days of keynote presentations. As promised then, here in part 2 I will summarize key breakout sessions. As noted in part 1, in my opinion the keynotes were down a bit in quality versus the past few years, while the breakouts were superior to what I saw in 2014 and 2015.


With increasingly connected executives, it is highly likely that without such a system, the first time a supply chain executive hears of an issue say in Thailand could be in a call from the CEO, asking "What do we know?" and "How impacted are we?"


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Not necessarily the best but for sure the most interesting breakout session was from Gartner analysts Kamala Raman and Paul Lord. The session was titled "Taking a Comprehensive Approach to Supply Chain Cost Reduction," but what it really was about was defining a nascent model for organizing supply chain costs.

The proposed model has three main buckets:

1. Structural costs: Those costs largely "baked in" to a supply chain based on the current network design and product portfolio (e.g., the more SKUs, all things being equal, will drive more cost than fewer SKUs, plus how complex is the product design).

2. Operating efficiency: Basically, how a company is at the blocking and tackling of supply chain planning and execution.

3. What Gartner call "pricing waste," but which would be better called "input costs," and which has to do with how effectively a company procures materials and services.

I am not sure if this is good or not yet, but it got me thinking. For one, a sort of supply chain urban legend is that 85% of supply chain costs are locked in by  a company's supply chain design (part of structural costs). I am pretty sure I know where this came from, which was a written piece by a consultant at what was then PRTM in Boston, and which was submitted with zero support to back it up. Nevertheless the idea has stayed a supply chain axiom of sorts even if that percentage was actually made up.

Gartner's operating efficiency bucket also recalls the writing I did last year on the "efficiency frontier," a fancier sounding name I first heard from Logility's Sean Willems to describe supply chain tradeoff curves. This is relevant because in terms of operating efficiency, the first question to ask is if a company is actually on its best tradeoff curve (say service versus cost), or is it far away from it due to inefficiencies. The next question, if you are operating your true curve, is can the entire curve be moved through innovation in process or technology (that is, maintaining or improving service while simultaneously reducing cost).

So, a lot to think about here, both at Gartner and at SCDigest, and more from us at least soon on this. On the product portfolio side, Gartner said computer maker Lenovo has developed a "rigorous" analytic model to calculate the costs of product portfolio decisions, which I would assume would include estimating cost changes for adding/reducing SKUs, using or not common parts, etc. Such a model would indeed be very useful.

The next most interesting session was actually a lunch discussion sponsored by innovative risk management solution provider Resilinc, moderated by ex-GM supply chain executive Bill Hurles, with panelists Lou Ferretti of IBM and Lee Young of Thermo Fisher Scientific.

In a pretty crowded room, I learned one important thing: near real-time "event detection" - notification of events from the realms of politics, natural disasters, weather, supplier failures and more - is at the top of the supply chain risk management priority list right now for many companies. And the reasons why are interesting.

First, with increasingly connected executives, it is highly likely that without such a system, the first time a supply chain executive hears of an issue say in Thailand could be in a call from the CEO, asking "What do we know?" and "How impacted are we?" It is good to have answers to those CEO questions, and I believe it was Young who relayed a story of that happening when he did not know the answers, nor could he offer any new information in a short period of time. Talk about supply chain risk.

Second, there is growing understanding that the company which responds fastest to an important disruption, such as by securing additional inventory/capacity from an alternative source, may escape relatively unscathed by a major event, whereas slow movers take a big hit. (There was also a side discussion on suppliers increasingly realizing this scenario, and therefore being slow to commit while await how demand plays out, often hiking prices dramatically.) But in general, there is a supply chain risk management arms race to be the first to know and respond to each event.

Young said Thermo Fisher typically tracks 40-50 events per week that have to be considered in some way. Everyone is struggling with mapping tier 2-4 suppliers to know how a disruption at some company you didn't even know was part of your supply chain may have an important impact. Young said Thermo Fisher can only really actively track about a fifth of even its direct vendors, and suggested that for suppliers with which a company spends a small amount of money but which could impact production if supply was constrained, it makes a lot of sense to simply bulk up on reserve inventory.

My next favorite was a session from Gartner's Greg Aimi and Rob Coyle of GlaxoSmithKline on "elevating the role" of outsourced logistics. 

Aimi noted companies continue to maintain or increase their level of outsourcing, but are looking to do so with fewer 3PL partners. As more is outsourced, a company's skill in "orchestrating" a portfolio of 3PL providers becomes a key determinant of overall supply chain success. So the question is: how good is your company at this?

And portfolio is really the right way to think about it. Some 3PLs can be true strategic partners, with which so-called "vested" relationships might even be appropriate. Some 3PL relationships on the other hand will be purely transactional, and others somewhere in between. 

Supplier segmentation in terms of appropriate effort, investment and relationship building is a popular concept overall in procurement, and it seems should also be applied to logistics outsourcing.

GSK's Coyle described the healthcare giant's move to creating a "lead logistics provider" arrangement, the path to which involved realizing that logistics was not a core competency at Glaxo - understandably a tough pill to swallow for many GSK logistics managers and something that had to be managed.

One important message from Coyle is that once a decision is made to really go whole hog into outsourcing logistics, there can be a lot of pressure from senior management to get it done quickly. Coyle said one of his biggest value-adds at GSK was to resist that pressure, taking the time to find a 4PL with the right strategic and cultural fit, as he believes that is absolutely the key to major outsourcing success.

GSK is moving down the path to complete transparency, where 3PLs contracted by the lead provider (a unit of Germany's Kuehne + Nagel) will simply have a fixed mark-up to GSK above those 3PL prices. Coyle also said it is a mistake to develop almost exactly parallel org structures between shipper and lead provider, as some companies have done - that just leads to extra cost and redundancy. Better to map out complementary roles and ensure the real value of each spot.

I also saw a decent presentation from Gartner's Matthew Spooner on improving accountability in S&P, which was distinguished by his list of the three reasons why demand planning should never be managed by the sales organization. 

Those are: (1) significant upward bias to the final sales forecast, as much as 25% - it's more like 10% or less bias when supply chain owns demand planning; (2) the end demand plan also tends to be biased towards high levels of customer service, at the risk of excess inventory; and (3) sales is clearly lousy at dealing with product lifecycle management and new product introduction issues, and will fight to keep almost any SKU from being killed off.

Again, all told pretty good breakout this year. I am off to the LLamasoft user conference in New Orleans next week. Will produce a similar trip report from that event, and if you see me there please say hel

Any reaction to our summary of Gartner 2016 breakout sessions? How would you define a supply chain cost structure? Let us know your thoughts at the Feedback section below.

View Web/Printable Version of this Column

June Videocast:

Supply Chain Design as a Continuous Business Process - The Whirlpool Story

From Project to Process: Here's How to Get It Done

In this outstanding Videocast, we’ll explore the changes needed to make supply chain design a continuous process, emerging new best practices in supply chain design, and how consumer products leader Whirlpool has successfully embraced this 360-degree approach.

Featuring Dan Gilmore, Editor, SCDigest, and Toby Brzoznowski, Executive Vice President, LLamasoft and Brian Streu, Manager, Supply Chain Design, Whirlpool

Thursday, June 23, 2016

June Videocast:

A Benchmark Study on Supplier Integration in an Outsourced World

Featuring Real World Experiences from DuPont, Honeywell and Acsis, Inc.

A new benchmark study of practitioners reveals the priorities, expectations and challenges of achieving real-time visibility into goods as they move through third-party production cycles.

Featuring Dan Gilmore, Editor, SCDigest, and John Dipalo,Chief Strategy Officer, ACSIS, Peter Musser, IT Services Delivery Specialist, DUPONT and Bruce Stubbs, Director, Industry Marketing Honeywell Scanning & Mobility

Tuesday, June 21, 2016

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

Available On Demand


Ok, our last set of some of the many emails we received on our coverage of Lessons from Finish Line's Distribution Disaster. Many great responses.

Feedback on Lessons from Finish Line's Distribution Disaster:


Nothing said yet in all the feedback about Change Management? Everyone has to be on board as to why the new systems are being implemented, and benefits it will provide.

Mock go lives? Also a best practice.

Finally, accountability. Everyone, not just project members and business leaders. Annual Performance reviews should have individual metrics and goals tied to metrics and goals of the project. A great way to get everyone on-board, or maybe looked at another way, "Get on the bus, or get out of the way!"

Very interested to see "the rest of the story".

Mark Shuda


I noted the consultant, you first referenced, called out the issue of "buy-in" from the company personnel who would be responsible to implement and operate the new facility and systems. To put it simply - BINGO!

As a retired supply chain executive and consultant, I can tell you our most significant challenge every single time we were standing up a new facility and system for a client was the full buy-in of the company personnel (from CEO to Order Picker in the warehouse) to the new program.

Supporting that buy-in had to be adequate funding, a detailed implementation plan with a reasonable schedule and accountability assigned plus the development of a comprehensive training plan for all (throughout the company) with close monitoring and mentoring before, during and after startup. These were essential elements of a successful project. If we could not get that understanding with a client, we walked away.

James Nelson


Wow, lots of painful and happy memories from earlier in my career when I did hundreds of these systems implementations.

Regarding the comment of Tompkin’s Kevin Hume on WMS/DOM implementation. The fact that Finish Line was implementing DOM suggests that they have multiple DC’s. DOM is a overlay concept to manage customer order distribution across multiple distribution points, and in my opinion should not be implemented until the DCs are running correctly. Plan and lay the groundwork for DOM as part of the WMS, but do the WMS first.

Sound like FL went "big bang" across the full business. I would have chosen 1-2 pilot locations to prove the WMS before going big. Pilots should have been first in a smaller DC which could easily be controlled and less impactful if there were failures, then a larger DC to prove scale – both would provide valuable learning experience and tools, and the opportunity to work out the kinks before bringing the business to its knees. Having a sound WMS running in one-two facilities will help "sell" the value of the system to others (convincing folks to change is always a bugger).

Steven R. Murray

Supply Chain Visions

comma I was lucky enough to not be part of FinishLine project (yes, I can say that again! I have not heard horror stories from those who were on the project, but none of them wanted to stay on it for long).

I have been on several projects that do it all wrong to start with.

At times, it is a company's own employees (on functional side) or sometimes it is IT team , and in many instances, it is the System Integrator or the Software Vendor at fault - and in the ones where distastes are biggest, it is a typically a joint effort.

Since I am typically on the Software Vendor side, here is what I have seen in close quarters:

1. Consulting Managers typically are afraid to give bad news to client.

2. They keep harping on their own team of consultants to get it right (no matter who may be wrong and how hard the consultants try, they can't get it right because of other variables on the project).

3. After a certain point (go live is pushed 4 times, and if the Software Vendor is not making any money - typically fixed fee projects in today's world) - every one starts cutting corners - take knowledgeable resources to profit making projects, put newbies in.

4. Vendors stop proposing changes to the project - which may bring right functionality, because they know that client is not ready to pay for it and if they propose it, it may have to do it for free.

Chirag Sanghavi



Q: What is generally believed to be the first centralized transportation load control center developed at 3M in what year?

A: 1982.

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