First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  July 12, 2007  

1H 2007 Supply Chain Review

Gilmore Says:
We’re all so caught up in the day-to-day that it is often (always?) hard to see emerging trends, or even remember noteworthy events.

What do you say? Send us your comments here

I find it beneficial for myself to look back each six months on the key news, trends and events that have shaped the supply chain and logistics profession, and most readers seem to enjoy it as well.

We’re all so caught up in the day-to-day that it is often (always?) hard to see emerging trends, or even remember noteworthy events.

Early in the year, we identified the “Green Supply Chain” as the number one supply chain trend of 2007, and that turned out to be a good call. We’ve already seen an increasing number of “green” or “sustainable supply chain” conferences launched in 2007. Dedicated managers and executives are emerging, such as Dell’s Brittain Ladd, who focuses a big chunk of his time looking at more environmentally friendly transportation strategies. We are even seeing a growing number of related executive positions, such as Gene Kahn, Vice President of Sustainable Development at General Mills.

There is pressure to go Green from many quarters; for example, GE was again named American’s most admired company, in part because of CEO’ Jeff Immelt’s Green focus. You know other CEOs are watching closely, and would also like some recognition.

In the first quarter of this year, a large food company told me they were pursuing a transportation improvement program, in part to save money, but also out of a desire to impress Wal-Mart the company was doing its job to support the retail giant’s own Green strategies. That was a key factor in the project rising to the top of many potential cost saving projects the company might consider. In the first half of 2007, Wal-Mart launched a Green supplier scorecard, we saw eco-friendly product identification coming to Wal-Mart and Home Depot, etc. – the list keeps growing. More on this soon.

We enjoyed the RFID brouhaha early in the year, when the Wall Street Journal reported in the Spring that Wal-Mart’s RFID initiatives weren’t being rolled out as expected, and CPG companies couldn’t find value. That was followed by a barrage of Wal-Mart generated PR, in which they rebutted the Journal’s assertions, and got statements from a few CPG CIOs who said “Of course RFID is great.” This was about the same time at which the CIO of Sara Lee was saying there could be no value at current price points, and the stuff didn’t work well enough yet, etc.

That all died down, but it was fun for a few weeks. Both sides were right, in part.

The first half of the year also saw a continued reduction in logistics/transportation capacity related issues. The Bear Stearns quarterly shippers report has shown record perceptions of overcapacity in the truckload market for the last two quarters. Port congestion has for the moment also disappeared as a concern, as slowing import growth, port efficiency gains, and changing import strategies have combined to dramatically relieve pressure for now.

I think we’ll see the pendulum swing back again before too long in both areas, but perhaps not near the “Perfect Storm” (overused term) conditions of 2005. Transportation markets have a strong tendency to clear themselves to the shipper’s advantage. Now if we could just get rid of those pesky fuel surcharges.

Supply Chain icons Dell and Wal-Mart continued to struggle. Perhaps to the surprise of some, when Michael Dell returned as CEO early this year, he stated Dell had lots of room to improve its supply chain, and named Solectron’s Michael R. Cannon to the position of what is in effect the company’s first Chief Supply Chain Officer.

Wal-Mart has struggled with its overall results (some store sales down or flat, not much success with major apparel initiatives, etc.). It’s unclear how much of an impact two of its big 2006 supply chain initiatives (Inventory DeLoad (slow growth of inventory versus sales), and Remix (streamline fast moving products to the shelves)) have had in improving the numbers. We are going to look at Wal-Mart’s supply chain in more detail in a few weeks.

It seems to us, in part as we report nearby in NewsBites, that the first six months of the year have also seen a strong focus on addressing issues of counterfeiting and the product safety for imported goods. These are two separate but at a high level related issues. There is emerging legislation in Washington, China is promising to crack down on companies that don’t address safety concerns, new companies are starting that provide services that provide brand protection, etc.

From a supply chain software perspective:

  • Many providers are doing OK right now – the market is healthy, which means companies are buying.
  • The software mergers have slowed a bit, for now, as the weak or extremely attractive have been winnowed out.
  • The first half of 2007 saw the real hype to begin over Service Oriented Architecture (SOA), as our Mark Fralick has been reporting. SOA is good, but as we’ve noted, it will be hard for companies to separate the real from the baloney.

Finally, the first half of the year has seen continued commodity price inflation, especially in agricultural products (“Agflation”), putting lots of pressure on the production costs of many companies, squeezing margins as price increases are still tough to push through to consumers.

From a Supply Chain Digest perspective, a few notes:

  • Our new “Your Questions Answered” feature is taking off – too much! We need help. Do you have strong expertise in some area of supply chain, logistics, material handling, RFID, procurement, etc? Join our distinguished and growing panel of experts. Send an email to – please!
  • As many have commented, we have too much content for one issue. Starting the first week in September, we’ll be going to two weekly issues. The first – SCDigest On-Target – will feature news stories, tips and other content along seven consistent supply chain and logistics categories. The traditional SCDigest on Thursdays will be slimmed down a bit, and have my column, our guest columnists, and Your Questions Answered. All the News and NewsBites will be moved to Tuesday. You’ll also see further features on our excellent web site!
  • You will also find a new weekly feature nearby: Supply Chain by the Numbers…

Those are my first half thoughts. Would love to hear yours.

What are your comments on Gilmore’s 1H 2007 supply chain review? What would you add, or change? What do you expect might happen in the rest of the year? Let us know your thoughts at the Feedback button below.

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