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  January 19, 2006 - SupplyChainDigest Newsletter
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Making the Right Global Sourcing Decisions

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First Thoughts by Dan Gilmore, Editor

Global Supply Chain – You Better Be Good

The importance of the global supply chain continues to manifest itself in powerful and sometimes unexpected ways.

For instance, this story: a billion dollar division of a Fortune 200 industrial company has succeeded for decades making glass-related products for automotive, aerospace and other industries. It success was in large part based on exploitation of its manufacturing advantages – proprietary production processes, significant investment in assets, belief that it was the low cost producer – at least in the North America.

Recently, due to the increased ease of global sourcing, manufacturing quality improvements overseas, and a reduction of tariffs, market dynamics have changed substantially. In just a few short years, the company is moving from being nearly 100% in-house production to being almost entirely reliant on offshore sources.

  • Its huge domestic production asset base – being shuttered
  • Its manufacturing cost advantage – gone
  • Its competitive advantage based on traditional production expertise and engineering – quickly eroding

We covered this ground a bit in our commentary last fall on Thomas Friedman’s best seller “The World is Flat.” That book put into powerful relief the dramatic forces being unleashed by the global economy and global supply chain – but every week there’s a new twist or story.

Yesterday, we had an excellent web seminar on “Making the Right Global Sourcing Decisions,” featuring Chris Callieri of ATKearney, and Ned Blinick of Blinco Systems. The material was great – if you missed it, and would like to hear the presentations on-demand, click here.

That session led to dialog amongst myself and presenters, as well as attendees, both before and after the webinar. One consistent and interesting thread: if you want to prosper or even survive as a company in the next decade, you better get very good at global supply chain.

Let’s take our industrial company cited above. In just a few years, it will go from being a company with significant competitive advantage based on its manufacturing skills, to one which will survive based on sales, marketing and wringing costs out off and service into of the global supply chain better than the next company, which will be using the same or similar global sources.

I don’t believe many CEOs completely get this yet. While not all examples may be as dramatic as the changes occurring at the company cited above, in most the change is happening at some level, and likely to increase.


At the always excellent Georgia Tech Executive Forum for supply chain last spring, a supply chain executive from Payless Shoe took attendees through all his company had done since the early 1990s to build a global, completely offshored (manufacturing) supply chain. It happened early in the shoe industry, and you better believe Payless understands winning is all about getting that global supply chain right.

Companies in many industries have a detailed feel for how they stack up in manufacturing cost and quality, sometimes to incredible detail. But does anyone really know how they stack up in global supply chain performance?

Quick note: based on some dialog with readers, we are slightly changing the format of our News and Views stories nearby. Each story provides a quick summary and “Impact” or “What it Means” segment at the top, to help busy readers quickly assess the content. We’ll also be releasing more of these stories – as well as supply chain blog entries – daily, so look at


Will global supply chain excellence be perhaps the key criteria for company success over the next decade? Do company executives really understand this? How will we know whether we’re better than the competitive in this new world? Let us know your thoughts.

Let us know your thoughts.

Dan Gilmore

New SCDigest Research Report:

High Volume, Multi-Modal Shipping - What Executives Need to Know

An increasing number of companies must ship across multiple modes, including growing parcel volumes.

We provide insight into how to reduce costs and improve performance.

Click here to download the report.

Report made possible in part by:Irista - An HK Systems Company


Barriers to Effective Demand Forecasting

Guest Speaker:
Dr. Mark A. Moon - Director, University of Tennessee College of Business Administration

Play Viewpoint nowPlay Now
Coming soon in SCDigest:
Defining a Demand-Driven Supply Chain
What Happened to the Supply Chain Planning Market?
RealRFID Newsletter
Task Interleaving Report

January 19, 2006
Takeover Battle for P&O Illustrates Continued Growth in World Trade

But experts don’t foresee rapid rise in shipping or handling charges

January 18, 2006
Best Buys Moves to “Customer-Facing” Supply Chain

Changes at stores drive higher sales, but supply chain provides the engine for change

January 18, 2006
Body Shop Hits Supply Chain Snags

Company joins ConAgra, Loblaw, and others recently pointing to SCM problems to explain financial challenges


Q. What percent of U.S gross domestic product (GDP) is spent on R&D, and how does that rank amongst other countries?

A. Click to find the answer below

Interlog 2006   Softeon -

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


We’re publishing still more letters this week from readers commenting on our review of the University of Arkansas study on the impact of RFID on out-of-stocks at Wal-Mart. Interesting reading. Our feedback of the week is a short but to the point letter from Don Mowery of Nestle Purina, but you’ll find anumber of others as well. We still have a few to go.


Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the week - on the Wal-Mart out-of-stock study:

I believe your out-of-stock reduction calculations are right on. The other consideration is the cost.


As far as I can tell the incremental profit to the retailer and the manufacturer is much less than the cost of tagging every case of product, except for very high value products.


Don Mowery

Director eBusiness

Nestlé Purina PetCare Company

More on the Wal-Mart out-of-stock study:

I've been reading your articles for several years and appreciate your brief, informative commentary on current topics.  Wal-Mart profit, though not as high as indicated in your recent editorial, would still result in a significant ($58 MM) increase to the bottom line.

Mark Hamburg
Manager of Industrial Planning
Lockwood Greene

A very sweeping and likely inappropriate answer to why OOS went down: someone was paying attention! RFID may have been the vehicle driving someone to pay attention, but let’s be cautious of assigning cause and effect. In the business community we could learn a lot from the scientific methodology of controlling experiments, isolating ONE variable, and testing.


Jim Lamb

Manager, Global Transportation and Logistics


This is a late response to Walmart OOS article. Walmart's problems start in the backroom where pallet is stacked upon pallet and the Walmart associates cannot access the bottom pallet or the pallet that is in storage rack with stacks of pallets prohibiting fork-lift access to the rack. When the major CPG companies send in merchandisers to stock shelves their hands are tied because they cannot access their products in the backroom.Result is empty shelves and the consumer ends up selecting a substitute product because they just traveled to a big box store and are not about to get in the car to find the merchandise in a competing store. Great for Walmart and the CPG company whose product was selected, but this does not fit my definition of customer service.

Another point. So Walmart does not want to do business with non RFID suppliers. Great news for Walmart but terrible news for the consumer. Again the consumer is pushed to the end of the line as another criteria is introduced to limit the available selection in a Walmart store. If the trend continues, only a very limited number of manufacturers will be selling in Walmarts. Walmart has already discovered that higher income consumers go elsewhere. They do not settle for the limited merchandising offered in a Walmart store.

Jim Volovich


Q.What percent of U.S gross domestic product (GDP) is spent on R&D, and how does that rank amongst other countries?

A. About 2.7%, which now ranks sixth in the world, a drop from previous periods.

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