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August 19, 2016 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet In Supply Chain It Pays to Put it in Writing 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 Winner Announced bullet Trivia      bullet Feedback
bullet Expert Insight Columns bullet On Demand Videocasts
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Supply Chain Graphic of the Week
Gartner's Hype Cycle for Emerging Technologies 2016


Best of Breed Leader JDA Makes its Decision

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Cloud-Based, Self-Service Automated Locker Systems


Innovation in 3PL Capabilities: Perspectives from Shippers and Providers

What Do Shippers Expect from 3PLs in Terms of Innovation? How Are 3PLs Responding?

We would appreciate you taking this brief survey, with separate paths for shippers and 3PLs. In the near future, we will send all respondents a copy of the survey results aggregated across all respondents. We know you will find it valuable.


Week of July 11, 2016 Contest

See Who Took Home the Prize!

Holste's Blog: Is Your DC Order Fulfillment System Out-of-Date?

Weekly On-Target Newsletter:
August 18, 2016 Edition

Last Chance Robot Cartoon, LTL Q2 Results, JDA Saga, Fulfillment Systems and more

Is It Time to Move Your Supply Chain Planning to the Cloud?
by Bill Harrison
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The Expanded World of Supply Chain: Taking on Supplier and Customer Relations

by Dan Reeve
Director of Sales and
Business Development


Supply Chain Software Trends and Opportunities 2016 Benchmark Report

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

Prefer to view the results instead? Watch the on-demand version of the Videocast summarizing the survey results:


The late Gene Gagnon and Eric Baum (separately) are largely credited with bringing what innovation to DC operations in the 1970s?

Answer Found at the
Bottom of the Page

In Supply Chain It Pays to Put it in Writing

Once a year or so, SCDigest editor Dan Gilmore gives up his weekly First Thoughts perch to an outside guest as part of his taking a vacation, usually on a beach somewhere with his family.

Once again this year, David Schneider, president of consulting firm David K. Schneider & Associates and former logistics executive at auto parts retailer Pep Boys, takes over the reigns, with message this time around about the important of putting most everything in writing.


The effort to fix the mess always takes more time than the effort to write the instructions.


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His guest column starts here:


This story is about a small contract on a small project with a huge lesson about why you should always put instructions and expectations in writing.

The client project was small, setting up 1,100 square feet of warehouse to support a small ecommerce company. The walls needed cleaning and painting. I was breaking in a new associate, teaching them how to manage bidding and contract execution. My assistant looked up commercial painting contractors, made the calls, and got bids for the work. She reviewed the bids and made a recommendation in a written memo outlining the reasons behind the recommendation. 

She recommended a specific contract
or because they gave a formal written proposal, and in meetings with the estimator at the site, the estimator clearly understood the project. The bid was the middle bid, and was well within the budget that we established the work. The client approved the recommendation, signed the proposal, and made the deposit.

All was good until the project supervisor came to the job site to look over the project. He met with my assistant and, after reviewing the scope of work, said that the pricing on the project was wrong. They contractor needed to rent scaffolds and an unpainted concrete wall was out of scope; the contractor needed an additional $550 to do the work. When my assistant said that the company estimator had seen the space before quoting, the supervisor dismissed the comment by saying "she is new and still in training."

After, my assistant told me that the contractor was jacking the project by an additional $550 over the written proposal. I asked to see the proposal, and saw the problem right away, the proposal did not contain a scope of work. Yes, we had a written proposal, but nothing in writing that indicated the exact scope of work.

This was a problem. I coached my assistant to call the contractor's office to talk to the estimator, and then the general manager. The supervisor called again and insisted on the additional money. My assistant pressed back in that conversation that the estimator had seen the space and knew the conditions. We had three options; tell the client to vacate the proposal and hire another contractor, get the contractor to eat the additional costs, or we pay to make up the difference in cost. 

I saw the proposal before we sent it to the client, so I knew the scope of work was missing and knew we would face a problem with the project. I also knew that the situation was a great teaching tool for my young assistant, so I was willing to take the risk, willing to cover the additional cost between the proposal and the actual cost, because the priceless value of the on-going lesson. 

In the end, the contractor agreed to the verbally defined scope of work at the proposed cost. The finished work was acceptable. You may think that this was a win-lose deal. I don't. It is a win-win if all of the parties burn the lesson into their memories and put it into practice. In the end, the project worked out for the client, they got a great value for the work. My new assistant learned a valuable lesson and we did not have to shell out the $550. The contractor may have lost money, but they have the opportunity to teach their estimator an internal lesson. 

Repeat after me: All proposals (and staff assignments) must have, in writing, a clear, concise and complete scope of work that describes the process, methods and materials used to complete the work. If the proposal (or assignment) fails to include the written scope of work, it is subject to the whims of interpretation, and is not any better than a handshake deal. 

Going into this project, I knew that my assistant would make mistakes. By design, I did not step in and "teach" her how to avoid these mistakes. Why? Because, in my opinion, the best learning comes from mistakes, you learn the why behind the process and methods. If somebody teaches you a working process and method, and it works when you put it into practice, what do you learn? 

It worked, and you know that the process and method worked, but you don't learn why it worked.

We supply chain managers know to get much of our deals in writing. We work with the legal teams of our organizations to develop contract that define all sorts of legal terms and conditions, venue, liability, indemnification, termination, payments, confidentiality, recourse and remuneration. Sure, all of these items are important, to the legal team, accounting and finance. But, without the scope of work, the contracts are worthless.

Look at the contracts on your desk now or that you executed in the past month. How much paper space does the legal requirements use, and how much the scope of the actual work?

If you are a smart manager working with smart providers, the scope of work is in its own agreement, a Service Level Agreement (SLA). If you are really smart, the SLA is larger than the master contract. However, not all agreements need a SLA.

Depending on the nature of the work, the scope can be simple enough to take only one paragraph. In fact, a well-written scope of work often is a single sentence.

Take the proposal in my story as an example. I could write the scope like this:

"Clean, prime and paint, with roller, two coats all of interior walls and trim of the warehouse space, from floor to deck of roof, protecting the floor and any objects in the space from splatter or damage."

37 words creating a simple, clear and complete scope of work. My assistant could have avoided about two hours of extra work on her part, and time on the contractor's side, with this simple sentence.

Providence of Practice

Winston Churchill learned a serious lesson in the First World War when he did not put instructions in writing. The project was the Dardanelles campaign, followed by the Gallipoli invasion. Strategically this was a high-risk venture. Both proved to be stunning losses because of execution and leadership failures to follow instructions, leading to Churchill losing his position as First Lord of the Admiralty. 

As British Prime Minister in the Second World War, according to Martin Gilbert's excellent book about Churchill's war leadership, Churchill decided that every instruction, suggestion, proposal or criticism from him were to be in writing. Churchill insisted that all answers were to be in writing. Yes, there could be discussion, but decisions, instructions, proposals and criticism in writing.

Driving the Practice Home

As a manager, how often to you give your direct reports instructions verbally and later learn that they did not understand what you told them to do? 

As part of my coaching practice, I coach managers to put instructions in writing. Many complain that it takes too long or too much effort to put instructions in writing. When faced with these objections, I smile, and wait for the FUBAR (do a search) to happen, because the FUBAR always happens. I observe the manager take time to straighten out the mess, and the extra effort the rest of the team goes through. 

Then I ask three simple questions. 

1. How much time did it take to clear up the mess?
2. Would we have avoided the mess if the instructions were in writing?
3. How much time would it have taken to put the instructions in writing?

The effort to fix the mess always takes more time than the effort to write the instructions. The instructions always avoids the mess, because most of the time, the problem was not that the subordinate got something wrong, but the manager missed a critical step.

Any reaction to Schneider's call to "put it in writing?" Have you had any similar experiences with vendors or employees? Let us know your thoughts at the Feedback section below.

View Web/Printable Version of this Column

On Demand Videocast:

Supply Chain Software Trends and Opportunities 2016 Benchmark Report

Results from SCDigest's New Benchmark Study, Including a Special Focus on Cloud-Based Solutions

In this outstanding Videocast, we'll summarize important trends and developments on both the user and technology provider fronts, based in part on results from a new SCDigest survey on trends, opportunities, and practices in supply chain software.

Featuring  Dan GilmoreJohn Murphy, Senior Director, SCM Applications Product Marketing, Oracle and Jim Heatherington, Vice President, AVATA.

Available On Demand

On Demand 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

Now Available On Demand

On-Demand 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

Available On Demand


This week, just a few quick feedbacks from our first column last week on inventory performance 2016. That includes a question asking for more detail about calculating the inventory-to-sales ratio.

Feedback on Inventory Performance 2016


In your next column, can you clarify the calculation of the “Total Business Inventory/Sales Ratio”. I understand the DIO which is fairly intuitive.

I do wonder why the year-end inventory is used which is more capable of being gamed by someone incented to do so. Seems like an annual average would be more representative, especially for businesses which sell down their inventory over the Christmas peak season.

Eric Dagle
Senior Operations Planner
Dematic North America

Editor’s Note:

The inventory-to-sales compiled by the US Commerce Dept. is define as inventory levels being held by US companies in aggregate divided by one month’s worth of sales.

The Commerce Dept. collects this data from a series of surveys sent each month to manufacturers, retailers, and wholesalers.

So, for example, in May 2016, overall sales for the month across all businesses were $1.291 trillion. Inventories across those same companies were $1.810 trillion. So, $1.810 divided by $1.291 results in an inventory-to-sales ratio of 1.39.

I agree it would be better to use quarterly inventory data and take an average for the year, but the REL data we use as a base takes the year end snapshot, so we have to just run with that. I have looked at this before, and found that while the average inventories across quarters does tend to be a bit higher than the year end number, it is not meaningfully so.

Dan Gilmore


Good once again to see you looking beneath the headlines and trying to gain more meaningful information.

As to reasons for the increase in inventories it might just be due to companies deciding to stock more of what they really need, rather than run the risk of stockouts on popular lines, thus ensuring higher levels of service - using availability as a competitive weapon. Perhaps it is also due to an informal acknowledgment of the need for "slack" that I posed a few weeks ago.

If it is not on the shelf then it matters little how responsive your transport system is you cannot get it into the hands of the customer. It is also a reflection that it can take a huge amount of time to reduce redundant/slow-moving inventories and brand creep is still with us.

I look forward to reading about the answers from your side of the Atlantic.

David MacLeod
Learn Logistics Limited


Outstanding analysis as always from SCDigest. No one else out there, including the analysts, does what you do, and you do it week after week.

Great stuff - keep up the good work,

I agree that the rising US inventory levels have not been well covered or explained.


Thomas Detmann
Spokane, OR



Q: The late Gene Gagnon and Eric Baum (separately) are largely credited with bringing what innovation to DC operations in the 1970s?

A: Engineered labor standards, which led to labor management systems.

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