3 V's of SCM | Global Sourcing Middlemen Out | BAX Global to be Sold | Smart Offshoring Decisions | Trivia | Feedback
  June 16, 2005 - SupplyChainDigest Newsletter
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First Thoughts by Dan Gilmore, Editor
The 3V's (Part 2)

Two weeks ago (www.scdigest.com/assets/News/05-06-02.htm), we ran some retrospective commentary on former Gartner analyst Art Mesher’s influential piece on "the 3 V’s" of supply chain: visibility, velocity, and variability.

The original piece, as we noted, was written in about 1998, and was the basis for much derivative supply chain thinking and writing from that time to this very day. Our retrospective and commentary generated a lot of reader feedback, including a letter from the original author himself, Mr. Mesher, now the CEO of Descartes Systems.

Mesher notes that at the time, the piece was written in large measure to focus the efforts of more companies beyond the cost reduction focus that characterized most supply chain initiatives at the time, towards those that used supply chain improvements to fuel profitable growth.

"My belief was that companies would view the 3 V’s differently as they moved from a focus of saving money by cutting costs to increasing profit by growing revenues and market share,” Mesher wrote us. “For example, saving money focused on the improving the velocity of the order-to-cash cycle, while improving profits focused on the improving the velocity of which new products and channel configurations could be created or recreated."

The original piece, it should be noted, predicted this shift from cost focus to market gains were expected to occur over the next 4-5 years from its publication in 1998. What happened, however, was a nasty, technology-led recession in 2001-2003 that caused virtually all companies to maintain a highly tactical, cost-cutting focus on supply chain improvements. But lately, there’s a growing sense that supply chains should be offensive as well as defensive weapons, driven in part by the CEO’s focus on profitable growth, which stands at the top of virtually every executive survey we see. SCDigest contributing editor Gene Tyndall has noted much the same in a few of his columns for us, such as his two-part series on "Using Supply Chains as Growth Levers." (www.scdigest.com/assets/Reps/Executive-View_05-02-24.cfm)

Mesher also notes that the 3 V’s will have different importance for different companies. "The three V’s are somewhat like an equalizer in music - different songs are best heard with different settings of mid versus treble or bass," he continued. "All supply chains are not created equal; some are long (global) and very focused on coordinating and controlling material flows, working capital optimization, and channel management. Short supply chains (regional or local) tend to be more focused on service policy optimization and asset utilization. I would suspect that managers of these different types of supply chains would have different views of the priority rank of each of the three V’s."

I agree. As we noted two weeks ago, obviously many companies have decided that the benefits of inventory velocity are outweighed in favor off offshore cost savings, as for many their supply chains are getting increasingly long. But then again, those supply chains require improved visibility to manage those long product flows.

You’ll find Mesher’s letter along with a few others in this week’s feedback section nearby. We can’t publish all we received this week – we’ll try to catch up next week.

That are your thoughts on visibility, variability and velocity? How does a company’s supply chain design and strategy impact which of the three are most important? Are there trade-offs that must be balanced?

Let us know your thoughts.

Dan Gilmore

SC TECHNOLOGIST
Service Oriented Architectures Part III Ė Differences Between Vendors Will Be Substantial

By Mark Fralick, Contributing Editor
Mark FralickThe first two parts of this series have explored the basics of Service Oriented Architectures (SOA), and how this approach to building supply chain applications offers significant benefits to companies by reducing many of the boundaries and barriers to application development and systems integration. ...

Click here for the full column.

NEWS AND VIEWS

June 16, 2005
Cutting Out the Middleman in Global Sourcing
More and more companies are setting up direct relationships with offshore manufacturers, but the benefits come with added complexity, and the need for new global commerce and logistics software.

June 16, 2005
BAX Global to Be Sold, Wall Street Journal Reports
A fresh report in todayís Wall Street Journal says Brinkís Company is putting BAX Global on the block.

June 16, 2005
Offshoring Right Means Think About Functions, Not Factories
Consultants from Bain & Co. argue that smart companies donít move just move whole factories offshore, but take a more modular approach to selectively decide what to move offshore and what to keep where it is.

INDUSTRY NEWS

Industry News - Click here for this week's performance details
Click here for performance details for this past week.

SUPPLY CHAIN TRIVIA

Q. Where does BAX Global, which the Wall Street Journal is reporting will be sold by its parent Brink’s Company, rank in terms of size for North American logistics providers?

A. Click here for the answer

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YOUR FEEDBACK

Feedback is coming in at a rate greater than we can publish it – thanks for your response.

We received a number of responses to our First Thoughts piece last week a retrospective look at the 3 Vís of supply chain; visibility, velocity, and variability. We publish a few of them this week, including our feedback of the week from the author of that original Gartner work, Art Mesher, now CEO of Descartes Systems. Weíve included a few others as well, including readers who suggests some other Vís Ė weíll try to include many of the others next week.

Keep the dialog going! Give us your thoughts on this week’s Supply Chain topics.

FEEDBACK OF THE WEEK On "Visability, Velocity, Variability":

Great to see your views on the three Vís frameworks. At the time of this original work, the key issue that I was considering was ďHow will supply chain initiatives impact corporate performance?Ē

My belief was that companies would view the 3 Vís differently as they moved from a focus of saving money by cutting costs to increasing profit by growing revenues and market share. For example, saving money focused on the improving the velocity of the order-to-cash cycle, while improving profits focused on the improving the velocity of which new products and channel configurations could be created or recreated.

Today, the three Vís are somewhat like an equalizer in music - different songs are best heard with different settings of mid versus treble or bass. All supply chains are not created equal; some are long (global) and very focused on coordinating and controlling material flows, working capital optimization, and channel management. Short supply chains (regional or local) tend to be more focused on service policy optimization and asset utilization. I would suspect that managers of these different types of supply chains would have different views of the priority rank of each of the three Vís.

All supply chains are not created equal, and thus enterprises may have varying views on the 3 Vís and priorities. One certainty is that there will always be trade-offs, just like there are across inventory, transportation, and distribution. The three Vís will most likely always involve trading of something for something else. Hopefully, the three Vís and other concepts Iíve introduced like the ďlong and short supply chainĒ framework can continue to serve as a way to define and educate such tradeoffs in the decision-making of supply chain professionals - and thatís the ďlong and the shortĒ of it (pun intended!).

Art Mesher
CEO
Descartes Systems

More On "Visability, Velocity, Variability":

Over the past 4 years we have been reengineering our supply chain under the concept of V3 or "V" cubed which stands for:

Visibility - we now have visibility across our supply chain both internally and externally with our subcontractors ( in China) and our suppliers around the world through an E Procurement portal that allows us to see their inventories and how quickly they view our requirements through our web based E-Procurement system. We are also able to see the inventory that subcontractors have ordered for us but have not yet received ( but we will be liable for) This helps very much when you have a bevy of engineers who are using the ECO card.

Velocity - We have reduced our planning cycle times on the impact of a new substantial order form our customers from 21 days to 2. No more do we run weekly MRP's, we run them nightly and simulate them during the day when necessary to have immediate impact and notify suppliers almost instantaneously.

Value Add - this is the concept of removing all NON value added processes from our systems by Process Improvement Teams ( we had 26 teams running at one point in our reengineering start ) We always work Process improvement teams before implementing any new system or application. " There is nothing so useless as automating that which should not be done at all."

Those are our 3 V's. We have made significant progress on all three.

Variability in our industry - telecommunications - is by far the most frustrating of any word beginning with V. The forecasting accuracy is abominable even though we have made great strides in maturing our S&OP processes.

With the foundation of the 3 V's we are now putting up the frame of the house with the 3 A's - Agility, Adaptability and Alignment as mentioned in a recent HBR article. The saga continues as we head to the goal of World Class Supply Chain Excellence.

Thomas L. Dadmun
VP, Supply Chain Operations
ADTRAN

I would add a fourth V - Vocalization. The supply chain partners must communicate with each other and the lack of this leads to phenomena like the Bull Whip effect.

Blair Williams

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SUPPLY CHAIN TRIVIA

Q. Where does BAX Global, which the Wall Street Journal is reporting will be sold by its parent Brinkís Company, rank in terms of size for North American logistics providers?

A. Where does BAX Global, which the Wall Street Journal is reporting will be sold by its parent Brinkís company, rank in terms of size for North American logistics providers?

BAX Global is number 24 in the Transport Topics list of the 50 largest North American logistics providers.

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