First Thoughts
  By Dan Gilmore - Editor-in-Chief  
  Sept. 9, 2011  

A Few Smart Ideas for Your Supply Chain


About once a year or so, I take a step back and look at many of the stories we've written or conversations that I have had with supply chain and logistics professionals and try to pick out a good handful of them which have offered some smart and non-obvious ways to manage some part of the supply chain.

I have received good feedback in the past on this - hope you will enjoy it again this time.

That said, in no particular order, here are four pretty smart ideas:

Gilmore Says:

The OC Tanner approach of course is not at all limited to WMS, but can be used for any supply chain technology solution. It may take a little longer, but the improvement in the subsequent process and result I believe would almost always be worth that effort.

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Using a "Casual Observer" to Look at Solving Problems: Doug Baker, vice president of operations for totes Isotoner in Cincinnati and a friend of mine, told me about an approach he uses when trying to solve a thorny problem. The theory is that many times, even very knowledgeable managers and operators in a given functional area or process can be constrained in how they look at a problem by that very experience - they are too close to the process.

So when Baker and his staff are discussing an issue, they often bring in a "casual observer" to listen to the challenge and offer ideas, perspectives which are often "out of the box," or simply reflect looking at the problem in a different way.

As a specific example as to how this has paid off for totes, a couple of years ago the team was grappling with some issues related to product slotting in the split case pick area of totes' large distribution center.

After a “casual observer” listened to the discussion, he asked a few very basic questions trying to understand why the current slotting strategy was designed as it was. It turned out that question led the team to look at the problem in a whole new way, without some of the existing assumptions about how the slotting needed to be approached. That ultimately led to a breakthrough change in slotting strategy.

Of course, use of a casual observer approach should not at all by confined to distribution center issues. The strategy can be used anywhere. Key I believe, and which I think the totes experience supports, is that you want to engage someone who is knowledgeable enough that you don't have to start explaining everything from the beginning, but not so knowledgeable that they are locked in to the same mindset as everyone else looking at the problem.

I would give it a try. It won't always produce results, of course, but there is little or no cost to doing so, and every now and again you will get a real winner, often indirectly (the casual observer doesn't come up with the winning idea, but serves as a catalyst to the process).

Linking Logistics Flows with Product Lifecycles: Christian Verstraete, a frequent (and always very good) CSCMP speaker over the years whom I believe is still at HP, had the smart idea a few years ago of really linking how a product's physical flow to market should often be based on where it is in the product lifecycle. This is clearly very appropriate for high tech companies, but with product lifecycles shrinking in most industries, it could be valuable thinking for almost any discrete manufacturer, especially those for which postponement strategies are an option.

HP uses the concept of logistics "pipes." A pipe is a different physical route, and for HP that includes where the final postponement activities for printers for specific country or customer requirement are performed.

On a quarterly basis, HP looks at the respective costs of those “pipes” and where each product is in terms of its lifecycle and unit forecast. It then plans which pipe will be the most cost effective for each SKU for the next quarter. For example, at the peak of the lifecycle, postponement is actually often performed in Asia near or at manufacturing facilities, because customers frequently order full container loads that make Asian shipping economical (versus a two-touch process of doing postponement in Europe).

Later that will change - it will make more sense to ship mixed containers and do postponement closer to the customer. There are usually three or four pipes that a product goes through from the start of its lifecycle to the end.

Sometimes, the determination of the pipe is actually made on an order-by-order basis. The cost analysis also includes a sophisticated consideration of inventory costs; that’s critical because the pipe with Asian postponement centers and ocean shipping direct to customers almost always has the lowest labor and logistics costs, but must be balanced against the need for HP or its channel partners to hold more inventory as a result of longer order lead times.

This approach saves HP millions of dollars annually. It required building a sophisticated analytic tool, but the benefits have been well worth the investment. I think Verstraete would be willing to explain HP's approach to most companies.

Wave Planning for TMS: Animesh Ukidwe of PepsiCo gave a very interesting presentation last May at the JDA Software users conference on how it had built a front end to its TMS deployment that allowed PepsiCo to significantly streamline and automate its transportation optimization runs.

I likened it at the time to "wave management for TMS," seeing similarities to what PepsiCo had done for transportation to the long standing practice in distribution of selecting groups of available orders to be released to the floor for picking and shipping based on a variety of rules.

PepsiCo, which manages a huge volume of freight across a number of business units and modes, simply found that the traditional approach of more manual selection of shipments for optimization was becoming overwhelming, and actually led to missed opportunities for consolidation and load-linking.

The PepsiCo tool pre-processor allows the company to pre-define a number of rules about how shipments in the available pool of orders should be grouped for optimization runs, and those optimizations are processed automatically on a pre-set schedule. Transportation managers come in to find those runs complete, which they then review, make adjustments as needed, and then promote on to execution.

The system also smartly understands what shipments can be pushed out to be included in a another optimization run if it is part of an inefficient load.

I fully expect this approach will be a standard part of most TMS systems over the next few years. This was true supply chain innovation. It's not for everybody, but for larger shippers would have many, many advantages (more staff efficiency, scalability, better optimization results). If it were me, I was a larger shipper, I would look at creating something similar to this right now.

Preparing the Team for a New Supply Chain Application:
OC Tanner, a provider of motivational type products and services based in Salt Lake City, decided a couple of years ago that it could probably benefit from a new Warehouse Management System (WMS).

Given that scenario, what would most companies do? Perhaps do a first cut ROI. Start looking for potential WMS vendors. Begin thinking about system requirements, and what the capital investment might be.

Not OC Tanner. Under the leadership of the very wise Wayne Carlston, who either has or is soon to retire from the company, OC Tanner first took the step of educating in detail many of the people who would be affected by a new WMS and/or would be part of the decision process before engaging vendors and consultants.

What is a WMS? How is it really different than the kinds of traditional internal systems a company like OC Tanner may be using? How do vendors differ in capabilities and approach? These were the kinds of question Carlston wanted to get answered for the team up front.

That involved some on-sight presentations, visits to other companies, some SCDigest articles (OK, maybe some others as well), and a number of other steps over several months.

The important point: the OC Tanner team in total was in the end very well prepared for the subsequent evaluation and selection process.

I can tell you from years of supply chain software experience, very, very few companies take this kind of approach. Most companies partially attain the knowledge described above during the selection process, not before. That means they are trying to learn and evaluate at the same time.

The OC Tanner approach of course is not at all limited to WMS, but can be used for any supply chain technology solution. It may take a little longer, but the improvement in the subsequent process and result I believe would almost always be worth that effort.

I wholeheartedly recommend it, and cannot support it more strongly.

I have a number of more ideas, but am out of space. If you find this of value - happy to do this more often.

Do you like these quick summaries of some smart supply chain ideas? Which of the above ideas resonated most with you? What would you add to these comments? Let us know your thoughts at the Feedback button below.

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