This week in SCDigest:
P&G's New Service as Measured by Customer - Supply Chain Industry Inflection Point?
Supply Chain Graphic of the Week and Supply Chain by the Numbers
Cartoon Caption Contest Continues For Another Week!
SC Digest On-Target e-Magazine
This Week In "Distribution Digest"
New Expert Contributor: Supply Chain CSR Under the Spotlight
New Expert Contributor: What's the Goal of Your Voice Project?
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  Newsletter Archives                Can't View In E-mail? November 3 , 2011 - Supply Chain Newsletter

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Free Download :
Six Keys to Inventory Optimization Success


Supply Chains in Motion: Driving Adaptability, Flexibility and Visibility

Part 3: Building an Actionable Visibility Platform in the Food and Consumer Goods Industries

Featuring Greg Goluska, VP & CIO, DSC Logistics and Tom Kozenski, Vice President of Product Strategy, RedPrairie

Wednesday, November 9, 2011


The What, Why and How of Vendor Scorecards

Part 2: Effectively Executing the Scorecarding Methodology

Featuring a Simulated Retailer-Vendor Scorecard Meeting - with SCDigest editor Dan Gilmore Playing the
Role of the Vendor!

Tuesday, November 15, 2011


Multi-Objective Optimization Technology To Address Options for Flexible, Customer Centric Supply Chains

How to Leverage Network Design and Sourcing to Create the Ideal Value Chain for Your Customers, Partners, and Organization

Featuring Dr. Michael S. Watson, Ph.D., Optimization & Supply Chain Team Lead, IBM

Wednesday, November 16, 2011

This Week's Supply Chain News Bites
Supply Chain Graphic of the Week: Who Makes the Profit in the Consumer Goods to Retail Value Chain?

This Week's Supply Chain by the Numbers for Nov. 3, 2011:

  • Major Distributor Makes Bold Bet on SCM Planning - and Hits Jackpot
  • Continued Rail Carrier Pricing Power
  • Import Toy Story Hurting
  • Risk being Experienced Far Down the Supply Chain


Free Download : Six Keys to Inventory Optimization Success




October 18, 2011 Contest

See The Full-Sized Cartoon and

Send In Your Entry Today !


Weekly On-Target Newsletter
November 2, 2011 Edition

Next Gen Planning, App Station Update, Capacity Crisis Looming and more

Holste's Blog: Sortation Is Key To A Comprehensive Material Flow Solution
Top Story: Innovative App Store Concept for WMS Gaining Early Traction
Top Story: Automation In The Workplace Is Inevitable -- The Question Is: Are We Smart Enough To Plan For It?
Top Story: Annual Third Party Logistics Study Review and Comment Part 2


By Steven Wilding
Conference Director
Ethical Corporation

Supply Chain CSR Under the Spotlight

Q: What major financial shock occurred to a supply chain software company in late 1998 that had a big impact on its future and supply chain technology?
A: Found at the Bottom of the Page

P&G's New Service as Measured by Customer - Supply Chain Industry Inflection Point?

As I noted in my conference review, something very noteworthy may just have occurred at the CSCMP conference in Philadelphia, courtesy of Procter & Gamble.

P&G has been directly connected to almost every major overall supply chain innovation in the consumer packaged goods to retail sector, roughly in this order:

  • Efficient Consumer Response
  • Continuous Replenishment
  • The Bullwhip Effect
  • The Perfect Order
  • The Two "Moments of Truth"
  • Demand/Consumer-Driven Supply Chains
  • RFID


"I mean, it can't really work any other way in the end, can it? And this would now change the whole dialog between suppliers and customers over supply chain performance and joint strategies."


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        They share the RFID role with many others of course, and it frankly is the one on the list that has yet to produce any real benefits for the company or other CPG firms. Maybe some day.

The only major innovation in the sector that I don't believe has strong P&G roots is Collaborative Planning, Forecasting and Replenishment (CPFR), which was concept first envisioned as best I can tell by consultants at then research firm Benchmarking Partners, who were then involved in a pilot between Warner-Lambert (later acquired by Pfizer) and Walmart (that pilot was actually just called CFAR). P&G was certainly an early participant, and you could argue CPFR has some real roots in P&G's continuous replenishment innovation, but think that one we'll credit to others.

Why this trip down consumer goods to retail memory lane?

Because in Philadelphia, Deirdre Wilson, associate director, customer service operations for P&G, did a presentation on "Beyond the Perfect Order," which rather amazingly presented the news that Procter & Gamble has now firmly established inside its supply chain operations a new metric framework: Service as Measured by Customer (SAMBC). I say amazing because this wasn't really hinted at in the session description, and could be a major inflection point again in supply chain history.

Like nearly all companies, while P&G certainly discussed its supply chain performance with its customers, internally it was really driven by its own metrics spread across all customers around cost, fill rate, on-time deliveries, etc. (As an aside, I was told by an insider that a powerful metric within P&G is something like "Cases not shipped because of warehouse" - if cases are shorted on a shipment that were actually in the DC, lots of alarm bells start going off and the warehouse manager gets real nervous. If it happens more than a few times, he or she can expect a visit from Cincinnati.)

With SAMBC, Procter & Gamble is now today measuring itself primarily based on how well it is performing against the individual performance metrics of all of the customers it has on the program. In fact, SAMBC is defined as:

The Percent of Customers for which P&G is meeting or exceeding all of those customers' unique expectations.

I believe that is a binary measure at the customer level, meaning missing just one performance expectation would lead to a miss on the measure for that customer.

So just to be clear, let's walk through this. Say P&G has 20 retail customers on the program. Each one of those has 3-5 core metrics. For each of these customers, P&G must hit or exceed each of those 3-5 measures. If they don't, it's a fail on a pass-fail measure. P&G could hit 4 out of 5, but score a zero for that customer. If they hit each of the metrics for 9 of the 20 retailers, the SAMBC score would be 45%.

Impact of the SAMBC Approach

There are several pretty important aspects to this, beyond that a company is really and meaningfully orienting their performance measurement systems this way.

First, SAMBC not only recognizes that customers vary in what metrics are most important to them, how those measures on defined, and what the levels of expectations are for each measure, it embraces that diversity. That is really the core of the concept - service as measured by [each individual] customer.

Wilson showed a real chart, with customer names removed, of about 10 retailers and what those core metrics were. I won't say they were all over the map (on-time delivery I think was on every list), but there was also a lot of variation in what metrics were included across the group. Even nearly universally embraced metrics such as on-time and fill rates were calculated differently by various retailers, and there were a variety of expectations. Some wanted 98% on time delivery, others 94%, or whatever.

Second , this obviously requires a very collaborative approach with customers. Many retailers did not immediately have answers as to what metrics, what levels, etc. During the discussion process, P&G of course discovered that how they and the retailers defined many metrics weren't the same.

Importantly, in the end this will/should force the retailer to think about this at a supplier and maybe even product category level. Maybe metrics and expectations for P&G will be different than for say fresh produce suppliers - I would think so.

And just for P&G, is it possible that toothpaste would have some differences in metrics/targets versus diapers? Maybe so. Vendors themselves of course set different service levels for A versus C items - but usually, that is often done without any real dialog with the retailer.

Most critically, these customer-specific metrics are not meaningful just at sort of the account management/customer logistics team level, but driven back through the supply chain from demand planning all the way to individual manufacturing sites. This is really the amazing thing. Plant managers will need to be aware of how they are performing not at an aggregate level, but at a customer-specific level, perhaps across dozens of customers. (I got the sense the program now was active at between 10-15 customers). This takes the concept of "order pegging" in manufacturing to whole new levels.

Now, let's just say this takes off, first in consumer goods to retail, but maybe then in other industries too. If P&G can make it really work (meaning retailers see value), it will obviously put pressure on others to do the same, both P&G competitors and vendors in other categories which see an opportunity for first-mover advantage. This will have a huge impact on supply chain performance management and supply chain planning and execution. It may truly represent a milestone change in supply chain practice.

Second - and this is simply my opinion - I think P&G may be setting the for service-level agreements with customers. Right now, Wilson said, there is really no cost to the retailer for wanting 98% on-time versus a 95% target with another customer. But we know that difference has a real cost to P&G. While the metrics and measures are developed collaboratively, in the end wouldn't customers push for 99% on everything?

Not if there are more explicit trade-offs to the differences, just the way there are in the "menu-based pricing" approaches many CPG manufactures use that make price adjustments based on order details (e.g., full truckload versus less than truckload, full tirs versus loose cases, etc.).

That mindset will be taken to service levels around fill rates, on-time, inventory on-hand, etc. So, if you want a 95% case fill rates, the price is X. How about 98%? Well, that's X + something.

I mean, it can't really work any other way in the end, can it? And this would now change the whole dialog between suppliers and customers over supply chain performance and joint strategies.

I will note a couple of other interesting aspects. (1) P&G can't really yet measure this from its main ERP/scorecarding systems (understandably). It is working on that, but has to calculate many of the individual measures more manually today; (2) Often, the retailer will use P&G's number because they can't calculate it either; (3) P&G has already made changes/investments to support SAMBC, such as better GPS/tracking systems relative to on-time performance; (4) This could cause some actions many might not yet have thought through. For example: going to be late on a shipment for a customer? If I am behind on this metric, maybe I call the "hotshot" carrier and absorb the high transport cost. If I am ahead on that metric, maybe I will just be late and save the cash.

I think SAMBC is an extremely innovative, bold but risky move for P&G. It could dramatically impact our supply chains the way other P&G innovations have. We will be watching closely here to see how this one plays out. More soon.

What is your reaction to P&G's SAMBC? Pros/Cons? Do you think it will stick, and if so, how will it change supply chain practice? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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By Stephen Gerrard
Vice President of Marketing & Strategic Planning
Voxware, Inc.

What’s the Goal of Your Voice Project?


Just a few quikck letters, courtesy from our partners at RetailWire, on our recent piece on accusations of poor working conditons at an DC.

Feedback of the Week - on Amazon.con DC Conditions:


After many dealings with Amazon, this is a difficult article to believe...although it may indeed be true; the actual question is how much of the "hearsay" is valid and how much is subjective? Many of the quotes are very dubious about the true importance here; Amazon is already reacting and putting A/C in their warehouse. Whether these efforts are sufficient is another story.

As a manufacturing president, who has installed A/C to keep the entire warehouse cool, determining effectiveness and employee comfort are often 2 different sides of the same coin. DCs are often in poor condition regarding temperature, but this is not unexpected when working in a DC compared to an office or another environment. Perhaps the true measure of this would have been to include interviews with the A/C companies who installed the units to get their perception on the units installed in these warehouses compared to other warehouses they have done over the years. Hmmmm....

Kai Clarke


Miraclebeam Products, Inc.

More on Amazon.con DC Conditions:


DCs are a rough work environment. Anyone who thinks that it's easy in a DC isn't working in a busy and efficient DC. As for the heat, etc, it looks like Amazon is taking the steps necessary to fix the problem but I don't agree with the hiring of temps. While they may save money in the short term, Amazon has go to know that it is costing them to hire, train, fire and rehire, and retrain temps. Plus I question the overall quality of work and commitment by temps.

Doron Levy

Working in a DC is not an easy job to begin with. In this case, I am led to wonder what took so long for it to surface if paramedics had previously had to bring people out in wheelchairs. It appears Amazon got caught with their best face reddened. I also think this will pass quickly. Amazon has too good a name to allow it to linger. They will make the needed changes.


Ed Rosenbaum


The Customer Service Rainmaker


Without a thorough, impartial investigation, it's hard to know what really went on there. If this was a union shop, it's hard to believe this was as bad as it says, unless the union steward was being paid off by management. But it's hard work, as Doron said. When I was a kid I worked in a retailer DC that was roughly as described here. If the union steward didn't like you, you got a "mule job" that was so hard it was designed to break you. Never can forget the day a guy dropped dead and a boss came over, covered the guy with a big cardboard box, and told us to stop looking and get back to work. Not making that one up, folks.

Warren Thayer


I an not defending Amazon, but are the work conditions any different than the factories across the country? (Or maybe I should say those that remain.) I commend Amazon for adding the AC units.
To me the bigger issue is the use of temporary employees. I can understand that in December, but in the summer? Come on Amazon, I know you don't want to charge state sales tax, but you can at least do a better a job of contributing to the state and local economy!

Doug Fleener

Q: What major financial shock occurred to a supply chain software company in late 1998 that had a big impact on its future and supply chain technology?
A: Supply chain planning vendor Manugistics announced  a much steeper than expected loss, sending the once high-flying stock price tumbling, and causing it to say it was looking for a buyer. The next month, it changed its mind, but sent many employees and executives packing, with founder and CEO Bill Gibson remaining only as chairman. The company never recovered financially, and was acquired by JDA Software in 2006.