Wisdom of the Troops | Is DoD Losing RFID Tags? | CEO SCM Perceptions | Suit Against Coke Over the PowerAde Supply Chain | Trivia | Reader Feedback

  March 24 , 2006 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

The Wisdom of the Troops

I’ve worked for a number of companies, and like most, at most times they each had their share of issues. While the executives (including at times myself) were running around trying to determine how to fix the problems, in the vast majority of cases I believe if you polled the rank and file, the consensus on what was wrong and what needed to be done would usually have been pretty spot-on (but not always – some exceptions below).

This leads me to two mostly related supply chain anecdotes. The first consulting project I did was for a warehouse management system at personal products maker Carter-Wallace in New Jersey about 1991. As we presented our findings on the “as is” state to the logistics management team, we outlined something to do with inbound flow. “That’s not how we do it,” came the response back. After some back and forth, it ended with us requesting that a very nervous woman from the Receiving area come in and tell the VP that despite what he thought and what might be on a flow chart somewhere, the process did in fact work as we had indicated.

Example two: In about 1999, I spoke as an analyst with the CIO of a multibillion division of a Fortune 50 type company that had a supply chain planning project that was not going as intended. There were so many issues raised and so much complexity that one despaired that there was any real path to success, save pretty much starting over from scratch and calling in a new set of consultants. That is, until a week later I spoke with a much lower level IT manager, who explained in very clear terms what was going wrong, and had what appeared to be a very logical and attractive plan for fixing it. This involved a much more incremental plan and solving a few key problems in sequence to get a working product, and then worrying about some of the galactic possibilities once they got there. The CIO was bogged down by both a lack of detailed knowledge and the swirl of all the politics and CYA – the manager was not.

My point is that as managers, we do not use the individual and collective wisdom of our teams as effectively or often as we could – to our own and our company’s detriments. If you are more on the “team” than the executive side right now, I suspect you probably agree with that view.

Why is this? Pride, not wanting to look weak, thinking we’re a lot smarter than the people who work for us, and maybe most often being afraid they’ll tell us we’re a big part of the problem –those are a few that come to mind. Some times, we take a sort half effort (I seen it many times from all sides of the table) – the group meeting/off-site where the manager/exec is going through the motions of collecting everyone’s opinion, but in reality is mostly using the meeting to push the group in the direction he or she wants.

So, I’ll just suggest this:  If performance is any area of your supply chain or function or facility is not what you’d like, there is a darn good chance if you collected the wisdom of all those involved, there would be a strong and accurate consensus on what the problems are and what needs to be done.

The exception – groups are not likely to suggest major transformations.

I doubt Paul Gaffney, EVP of Supply Chain at Staples, would have culled from his team the power of the using the unifying metric of return on assets to focus supply chain decisions and performance, as he has ultimately done with success in aligning the supply chain with corporate goals and shareholder value creation. I think it unlikely that employees would have been thinking what needed to be done at IBM a few years back was a massive supply chain restructuring. This ultimately involved outsourcing a number of plants and logistics operations, putting a number of functional silos under one integrated supply chain executive, and making a series of other transformational changes.

The bottom line, whatever your level in the organization: (1) do a lot of management by walking around, so you have a better feel for what’s really happening; (2) recognize if you have performance issues or simply want to improve, the collective wisdom of the team probably has a pretty good idea of what needs to be fixed or could be done, if you just ask and listen.

Do you agree there is a lot of accuracy and unused collective wisdom in our supply chain teams, or is this not often the case. If yes, why don’t we use it more? When does it make sense to use it, and when not? Any keys to success? Let us know your thoughts.

Let us know your thoughts.

Dan Gilmore


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Quote of the Week

"In order for all of the industry to be ready, we've decided to make broad availability in January."

Microsft executive Jim Allchin, on the delay in shipping the new Vista version of Windows, which apparently could have shipped in November, but which would then not allow make-to-stock PC makers to have Vista machines in time for Christmas.

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March 24 , 2006

Should the DoD Tag its RFID Tags?

GAO report says government could save millions by re-using active tags; Is there a battlefield issue?

March 24 , 2006

Another Survey on the CEO’s Perceptions of Supply Chain Management


No surprise, cost cutting is number one focus, but mismatch with the CEO’s primary agenda stands out

March 24 , 2006

Suit over PowerAde Distribution Highlights Changes Dynamics in Beverage Distribution


Wal-Mart wants to have product delivered to its warehouses, not stores; is beverage industry supply chain soon to have major changes in the flow of goods?

March 17 , 2006
Full Transcript of Eli Goldratt Interview Part 2

Agree or disagree, he is a provocative thinker.


March 16 , 2006
Supply Chain Digest Logistics Costs Survey - Full Details and Charts

Supply Chain Digest survey and report finds companies measure costs in many different ways, strong upward cost preSsure in 2005



Q.  How many bottlers does Coke have in the U.S. today?

A. Click to find the answer below


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

We received a number of letters on our First Thoughts column on "Network Design in an Era of Dynamic Costs," several of whioch we'll publish this week, more next week. They are all good - please take a look.

Our feedback of the week is a letter from Jeff Gantt of Manhattan Associates, who offers some insightful comments on SCDigest's recent study on logistics costs.


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 Logistics Costs:

Regarding the following statement:


“How can anyone say logistics costs are going down when the cost of diesel has risen almost $1 a gallon in the past year. The cost of rail has increased 7-10% across the board and the major air carriers have implemented fuel surcharges. There is no way!”


I guess there’s a few ways you could look at this: 1) Companies with private fleets may have hedged fuel costs…or structure their fuel contracts with a annual cost decrease over X period of time; 2) customers could have been locked into certain carrier contracts that were recently renegotiated for more cost effective rates leading to an overall reduction in transportation…which includes fuel surcharges.


It was interesting to see that only 8% said they tracked costs using ABC, which I believe is the most practical method for tracking costs (all costs) not just logistics costs.  Once these are derived (both direct and indirect) this information can then be used to make better management decisions at the operational and strategic level…after all, costs aren’t tracked to pay the bills.  Just my 2 cents.


Thanks for the article.  Keep them coming…they’ve all be great reads


Jeff Gantt

Product Management

Manhattan Associates

On Supply Chain Network Design:

Really, the effect of transportation costs on logistics network design started to have an effect in 2002 when the hours of service changes started to take effect.  The rising cost of fuel is adding sharpness to what has been a dull pain in cost and fleet management.


One thing to remember in network design is the "cost density" of the product being distributed.  Too many times I have seen analysis that assumes that $1 of merchandise is the same as another $1 of merchandise.

Case in point is the change in our merchandise mix over the past 2 years.

Our $value per cubic foot has dropped over 40% in the past two years, making our distribution model much more cost sensitive to changes in cubic foot demand.  My point is that if you are distributing small items that have a high value per cubic foot (like drugs), your network will be much lest sensitive to transportation and storage space costs than a enterprise moving a lower cost per cubic food commodity (like tires).


There is one other point, and that is who pays the freight from the distribution points.  If the customer is paying the freight, such as in "to consumer" internet retail or apparel, then your model is insensitive to what is the most expensive transportation costs, outbound to the customer.


David Schneider

Director - Logistics

Pep Boys Auto

A very insightful article. It mirrors some of the initiatives and direction changes that are happening across the automotive industry.


Sameer Savant
Lead Engineer
Vector SCM

SCDigest has done it again.  Love the way you change gears and "smack us up-side the head" with a great "new" topic!  Just when the audience is getting bogged down in the endless debate about the "value" of RFID, you nail us with a left hook...makes my day. The breadth, depth and value of SCM can be overwhelming, exciting and immensely motivating all at the same time. 


OK, to the topic at hand...network design needs to be a dynamic process, just like inventory management.  We update forecasts on a regular, cyclical model, and adjust supply planning accordingly.  Capacity planning and network design need to be no different.  Timelines, and change/revision parameters need to be evaluated and defined creatively and oriented to support an organization's strategic objectives.  Your scenario is driven by the current high profile issue of fuel costs.  The bigger question is "what will the next crisis be?"  Which leads to the real strategic question..."how do we design a supply chain capable of responding to an unpredictable future?"  This may all sound a bit philosophical (it's late and the wine is good) but bear with me.  You suggest that the price of oil will rise dramatically thus the cost of transportation will also, driving the network design process.  Well, what if e-85 and/or coal-derived diesel gains momentum, creating an economic alternative to fossil fuel?  I for one am not inclined to "fix" an assumption constant either way, then make a major investment that proves to be a mistake.  I want flexible alternatives, capable of responding to changing environments.  Variable capacity, quickly and easily revised to meet changing demand and cost variations. Contract manufacturing, 3PL's, and a dynamic planning process and I'm ready for whatever the future brings.


Dave Sandoval

B.U.S. Systems, Inc


Q. How many bottlers does Coke have in the U.S. today?

A. About 76, though just a few control 80-90% of the total volume.

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