SCDigest editorial staff

SCDigest attended a number of valuable presentation sessions at CSCMP 2006. In the coming weeks, we will provide more details on several of these case studies, but in this show review issue highlight key takeaways from several sessions.

Defining Business Alignment with Service Level Agreements at The Limited Brands

Limited Logistics Services (LLS), which supports the business’ major retail brands, develops detailed service level agreements with each chain to define what functions the group will perform, the level of that performance, and the roles of the supply chain and the business in meeting those goals.

Presented by executive vice president (and soon to retire) Nick LaHowchic, an agreement that runs for more than 30 pages is developed between LLS and the chains. That’s critical, because LLS then charges the business back for their services. Businesses choose from the portfolio of services LLS offers, and performance requirements for identical services can vary depending on business needs.

Key Takeaway: LLS does a better job internally of defining performance expectations than most companies do with external 3PLs. While requiring significant discipline and certainly some overhead to develop and monitor these agreements, many companies would benefit from developing a program like this that drives business and supply chain alignment, gives the supply chain clear goals needed to support the business, and provides an on-going framework for performance and alignment review.

Caterpillar Uses Activity-Based Costing and Value-Analysis to Drive Global Decision Making

Want to make the best global sourcing decisions? It would help to start with the activity-based costing database that Caterpillar has constructed over many years that details for every component, assembly and finished good its total cost structure, from variable to “periodic” (fixed) to other overhead elements, by specific sourcing or manufacturing location. But to get really good, especially for making decisions about where to source supply chain processes, it would help to layer on value stream mapping and relentlessly analyze what steps add value and how the value relates to those costs.

That’s exactly what “Cat” has done, developing a vigorous process to identify both cost and value for each element of a process, streamlining those processes as a result, and then moving processes to locations most appropriate based on their value profile.

The Key Takeaway: We hear a lot about “fact-based” decision-making, but here is a company that really lives it. We’re not sure how hard it is to build and maintain this activity-based costing database, but the advantages to a complex, global manufacturer are huge. Do you clearly know “Why you do what you do where you do it?”  Cat does.

Toyota Uses Logistics Kaizen and LSP Partnerships to Achieve Superior Results

Toyota invented “Lean,” and continues to operate that way both in logistics staff and IT development resources. So how does the company keep the improvement going? Often by low tech ways that focus on team work, detailed analysis, and partnership with service providers.

A team of logistics managers from Toyota shared some of their practices. The effort has been especially important as the company has moved most logistics responsibilities to a centralized function, versus the plant-centric approach that had historically been taken.

“Kaizen” (continuous improvement) teams meet regularly to identify and execute against key opportunities. Recently, team have been focused in three areas: logistics development (e.g., improved transportation and routing, better logistics flexibility); packaging (lower costs, increase reusability); and operations (productivity, quality of service). Team member typically include a representative from each North American plant, 1-2 members of the supply chain/logistics team, and a representative from each of Toyota’s four key logistics service providers, who function truly as if they were members of the company. That’s especially important as improvements could often in the short term actually reduce LSP business.

The efforts started out focused on cost reduction, but have evolved into support for new model introduction and team member development. We’ll cover some of the efforts in more detail soon, but one is struck by the focus on fact-based decisions, rigorous analysis, developing a culture where continuous improvement is in the “DNA” and the resulting discipline, even with a small staff, to make this happen. Tens of millions have been saved.

Key Takeaway: Yes, supplier relationships can be collaborative. Consistent and disciplined analysis – and lean principles – can drive huge benefits for those companies able to make the commitment.

Ingram Book Uses Wave Management Simulation to Get DC Fulfillment Back Under Control

Like many companies, book distributor Ingram Book found its distribution center processes were becoming increasingly complex and difficult to manage. The company had developed multiple “pick wave” types to handle different types of customers or fulfillment requirements, which added to the complexity, and found productivity and the ability to efficient run waves, especially as the day progressed, were challenged.

So how do you improve with the pressures of daily fulfillment, a complex situation, no clear answers from existing data, and the need to not make changes that might actually further reduce performance?

Ingram partnered with consultants TranSystems to build a simulation tool that model different wave types, volumes, pick type, cost and throughput, and a variety of other factors to better understand what was really happening and to better predict the effect of order release and wave planning changes. The tool is used to both analyze overall operations, as well as to help wave planners understand on a wave by wave basis the expected throughput and cost of waves they are considering.

Key Takeaway: As we’ve discussed in SCDigest, increasingly complex, multi-channel order fulfillment can lead to uncertainty above whether to use wave planning, and more commonly how to use it most efficiently. Most WMS’ provide limited tools to really optimize those decisions. Complex operations may require a more sophisticated set of modeling tools to really drive efficiency.

Chevron Develops Real-Time Executive Dashboards – The Right Way

In an outstanding presentation, Chevron’s Mike Brooks took the audience through his efforts to lead a project that would provide visual, near real-time dashboards for its refinery operations.

The industry doesn’t matter. Brooks point (and challenge) was that to provide information that really can improve decision-making, focuses on what’s important, can be quickly understood by decision-makers, and has credibility and acceptance is a very hard task – but one with a big payoff if done right. It took a number of iterations, but Chevron got there.

Key Takeaway: Forget what you think you know about “dashboards” and presenting information. If you are thinking “pie charts,” you’ve got it mostly wrong. Most of our ideas (and existing vendor dashboards) don’t really meet the goals above. Take the clutter and “overhead” off the screens. Use simple but highly effective technique (“black” indicates “over plan,” “red indicates “under plan”). Most importantly, work very hard to really understand the link between information and decisions (increasingly real-time) that can drive improvement and goal attainment.

Hershey Optimizes Global Sourcing Decisions

As Hershey pursues a strategy to go more global, there were some assumptions about how the supply chain worked and what the right decision would be that needed to go through the filter of objective analysis, said VP of Global Logistics Greg Kaiser.

Hershey used a network and optimization tool to help it better understand its supply chain dynamics, understand trade-offs among cost capacity, and service, and make fact-based sourcing decision.

The upshot: a few strongly held assumptions about where the best sourcing options would be turned out not to be the case, and the company found it had significant untapped potential by just re-juggling its existing manufacturing capacity (production and packaging lines) before it built new capabilities.

Key Takeaway: In anything but pretty simple supply chains, making these kinds of global sourcing decisions optimally without use of a network planning tool is almost impossible. Done right, the analysis can provide a clear framework for decision-making that cuts through assumptions and pre-conceived ideas about the best plan. Look at how existing resources can be optimized before running offshore.

Why Waste Time Collaborating with Those Who Don’t Want to Collaborate?

Dr. John Gattorna, of the Sydney (Australia) Business School and Cranfield School in the U.K., gave a fascinating presentation on collaboration, based on his book “Living Supply Chains.” We’ll have a lot more later as well on this, but Gattorna made a powerful case that too many companies spend far too much time and resource trying to “collaborate” with customers and suppliers that don’t really want to do so. This in part explains the mediocre results from efforts like Efficient Consumer Response (ECR) and CPFR for many companies.

Key Takeaway: Nearly all companies over serve some customers and under serve others – and don’t really know which is which. Customers can generally be segmented in three or four simply types, and the appropriate services and supply chain teams aligned with those markets. Among other benefits, this enables a company to get closer to those customers that really do want to collaborate – relationships which provide many benefits.

We’ll have more detail on each of these as well as other presentations in upcoming issues of Supply Chain Digest.

What CSCMP sessions did you find extremely valuable, and why?  Do you have any comments on these stories and the key takeaways? Let us know your thoughts.