|Supply Chain vs Supply Chain | Return of Vertical Integration | Wal-Mart Goes Green |

| Quarterly Shippers Report | Feedback | Trivia |

  Aug. 17, 2006 - SupplyChainDigest Newsletter
SupplyChainDigest - Your first stop for supply chain information

Become a Sponsor Click here for information on how to become a Sponsor
Send to a Friend Send this newsletter to a friend. Click here!
Not already subscribed? It's free! Click here.

Archives | Events | Featured Report | Featured Offer | Upcoming VideoCasts | Feedback
Featured Report

SPECIAL RELEASE: 2006 Warehouse Management RFP Template


Created by leading supply chain consultants, this WMS RFP template is the end result of intensive research with hundreds of logistics professionals.  Require all vendors to prove the value of their solutions BEFORE you make a buying decision.

Download this FREE RFP Template at:



First Thoughts by Dan Gilmore, Editor

Is it Supply Chain Versus Supply Chain?

A commonly accepted axiom of supply chain management is that business competition is all about “supply chain versus supply chain.”

Like many axioms, I think we often say phrases like this without  processing, really, what it means. In this case, it’s not just an academic question – in an age of growing outsourcing and offshoring, it gets to the heart of how a company wins, doesn’t it?

As just one of many examples, I found this in Computer World magazine from 2004: “The classic model of company vs. company is starting to give way to a new model: supply chain vs. supply chain. In the 21st century, being the best at producing or selling a superior product is no longer enough. Success now depends on assembling a team of companies that can rise above the win/lose negotiations of conventional trading relationships and work together to deliver the best products at the best price.”

The sense of the concept in most contexts is that everyone in the chain needs to be competing “as one” to win at the end point of sale, wherever that may be.

I am going to agree and mildly disagree, or at least give it a twist. (See related story in News and Views on "The Return of Vertical Integration?")

Certainly, I trust we all concur that a company’s supply chain is a huge determinant in its overall competitiveness and success. In that sense, the concept of “supply chain versus supply chain” is really a given.

Where it breaks down for me a bit is the fact that in most cases, a given company is part of multiple supply chains that compete with each other. So, for example, if it’s really Wal-Mart versus Target’s supply chain, how is Clorox to think about this? In reality, Clorox is part of dozens of competing supply chains, so how can it think like one with any individual retailer? This scenario also means that innovation on either the buyer or supplier side is generally replicated to competing “supply chains” rather quickly. It’s also increasingly common for companies to both compete in some segments and do business together in others, which would seem to put some constraint on the “competing as one” concept. Take a look at our column on Supply Chain 2006 – a Case Study for more support for this perspective.

The other small fly in the ointment is the fact that at the end of the day, each company by definition as a business entity must think primarily of maximizing its own profits and interests. In many cases, this is zero sum game. If an automotive OEM beats up its steering wheel supplier to keep its consumer MSRP low, in most cases that’s simply profit taken right out of the supplier’s pocket.

You could argue that the auto OEMs, to keep this example, have been roundly and rightly  criticized for their unenlightened approach to supplier relationships, but the fact remains  that in more cases than we may want to admit, shifting of costs and responsibilities has a strong element of “win-lose” to it.

So given all that, what’s the takeaway?

  • With the growing complexity and virtualization, a company’s fundamental supply chain design is in fact the primary competitive weapon it has. This doesn’t imply everyone in the value chain has to be really “working as one.” It simply means that fundamental cost and service structures are largely determined by that design, and that for a given period of time in a specific product-market some are stronger than others.
  • Design also strongly impacts the ability of the supply chain to respond quickly to market/strategy and drive/support innovation, which is perhaps the true weapon that delivers competitive advantage today. Innovations and new customer requirements are quickly homogenized. It’s the ability to respond and innovate more rapidly and continuously that keeps you ahead. As the old joke goes, you don’t have to run faster than the bear, you just have to run faster than the other guy.
  • “Working as one” works best when you have a network of smaller suppliers (or customers, I suppose) for whom you represent a substantial or complete share of their business, and a level of trust and “win-win” characterizes the relationship. By most accounts, Toyota’s supplier network is oriented this way – companies for the most part content to have their fortunes tied to the success of Toyota, while Toyota structures pricing and other elements in a way that enables them to maintain acceptable profitability. I’ll note an exec at Kimberly-Clark once told me they liked working with decent sized regional 3PLs, because they were big enough to have the right capabilities, but small enough they could drive more true collaboration.
  • At the value chain relationship level, it’s all about execution. So, yes, even though most participants are part of numerous competing supply chains, and similar or identical strategies at a high level, the ability to execute within that framework will vary significantly, and that in turn can lead to some advantage for both sides. Collaborative Planning, Forecasting and Replenishment (CPFR) is a prime example. Lots of folks doing it, but great differences in the execution between different partner sets.

In sum: Supply chain design is more critical than ever. Buyer-seller relationships haven’t really changed all that much.

Do you think it “supply chain versus supply chain?” How far does this concept reach? Can participants in multiple chains really think like one is any given one? Where does the line cross between “win-win” and “win-lose.”
Let us know your thoughts.

Dan Gilmore



Knowledge You Need Before Purchasing Voice-Directed Applications in Your Warehouse

If you are considering integrating voice directed solutions into your warehouse or are just interested in learning more about the benefits of voice directed logistics solutions, this document is a must read.

Featured Event

Upcoming Webcast from Supply Chain Digest!

"Low Cost Country Sourcing Revisited - The Total Cost Impact" 

Details next week

Sponsored by Ariba



Aug. 17, 2006

The Return of Vertical Integration?

Era of commodity source and supply constraints cause many to rethink recent paradigms

Aug. 17, 2006

As Wal-Mart Goes Green, What’s the Impact on Suppliers?

“Sustainability” gets big push from Bentonville for now. Will it last, or be more like the “Buy American” campaign? Here comes “compressed toilet paper”

Aug. 17, 2006

Quarterly Bear Sterns Survey Finds Shippers Seeing Increasing Balance in Freight Supply and Demand

Truck load capacity increases seen as coming largely from small and mid-sized carriers; DHL seen as “pricing aggressively” to win new business

Aug. 10, 2006

MIT Announces New Project to Help Companies Understand “Demand Management”

Is anyone taking a look at the entire picture?

Aug. 10, 2006

Alien Technology Cancels its IPO

Timing, new TI chip, and tag pricing environment probably all play a part


Aug. 9, 2006

Is Rise in Chinese Costs Causing Slide in Foreign Manufacturing Investment?

Numbers are down after years of rapid growth; Vietnam looking good?


Q. How much have natural rubber costs increased over the past two years

A. Click to find the answer below


Do use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.

You can subscribe to our RSS feeds in two ways:
1. Copy our RSS link into your RSS reader - it's easy!
2. Click on a button below to quickly add it to your favorite reader.
  Add to My Yahoo! Subscribe with BloglinesSubscribe in NewsGator Online

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

We're still behind - be patient if your letter has not yet been published.  We received a fairly largely number of letters on our First Thoughts piece on "Transportation Infrastructure - Should You Care?" This includes our feedback on the week from frequent contributor David Schneider of Pep Boys, plus a number of other good comments. We also have one short comment on our piece on Spectrum Brands Latest to Blame Retailer Inventory Cutbacks on Sales Shortfall, who suggests there is a more simple explanation.

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 Transportation Infrastucture:

Infrastructure is just one transportation resource that is in limited supply and in high demand.  Driver shortage because the last place a Gen X or Gen Y man wants to be is in the cab of a diesel.  Further driver pressure due to hours of service rules.  Rail capacity restricted due to the lack of rolling stock to load freight onto, lack of locomotives to pull trains, and lack of train crews because the last place a Gen X or Gen Y man wants to be is in the cab of a diesel locomotive.


Gosh the answer must be to build more roads, rails, docks, locks, trucks, locomotives, rail cars, trailers, cargo airships containers, barges, ships, cranes, airports, bridges and tunnels.  While we are at it lets remember more truck stops, special truck only lanes (toll of course), pier pass systems, and restrict trucks to the roads in the hours of midnight to 7 AM, and never on Sunday.


What would the physics professor in "The Goal" say to all of this?  We are not managing the bottlenecks.


I have just one small example of a change in business practice that requires little investment and delivers a strong return to the bottom line.

Ship complete, and consolidate orders into single shipments.  Every day at least 5 vendors will ship an order to us incomplete, and then the next day ship the rest, along with some other partial order.  The get it off the dock mentality drives up the frequency of smaller shipments, which then take up more space and capacity in domestic lanes.


David Scheider

Director of Logistics

Pep Boys


More On Transportation Infrastucture:

Here is a portion of a conversation that some of my friends and I have been having.


'Keith, your comment reminds me of the following.

"Success takes a balance of forces, but technology is not always necessary and is almost never sufficient." - Michael Scott-Morton



"Systems aligned with human motivational factors will sometimes work. Systems opposing such vectors will work poorly or not at all." - John Gall


That said, in the case of intermodal freight transportation, my view is that information, processes, and people can be changed all we might wish, but we are laboring at the margins in as much as the fundamentals of the infrastructure and the way that infrastructure is operated need to be rethought. Business transformation and reengineering writ large, if you will.


Now the likelihood of that happening in a way that can be transformed into action is very, very small except in situations where a significant economic power (e.g., Maersk). Even then, it will likely only happen on selected trade lanes or components (e.g., a port) in a trade lane. There is some interesting thinking out there (e.g., Global Movement Management: Securing the Global Economy by Gould and Beckner at IBM; Toward a National Intermodal Transportation System - Final Report - NCIT by the National Commission on Intermodal Transportation), but there are few (no?) forums available for integrating and implementing these ideas. That is, they are nice research, but seem not to be leading to results.


I agree that this is a tough, tough nut to crack. In the inefficiency and ineffectiveness of the current system uncountable, but likely huge amounts of money and time are irretrievably lost. We may be constrained by socio-political-economic forces and sheer size of the problem to nibbling at the edges.


Can we nibble more thoughtfully? Probably so, but our approach to system analysis, particularly in the consideration of collateral effects, likely needs a tune-up. For example, what's the point of deeper dredging of the harbors if the inland transportation system is a dirt path?


And then there is the Doha Round.


There is a silver lining to all this. It makes for a pile of interesting work. “And every once in awhile the blind pig will find an acorn.”


James Drogan

To many times the blame is put on the Federal Government when it is the businesses that require the infrastructure to make profit.  A tax should be put on the companies that need the system or transportation infrastructure.  Natural any applied tax to a company ends back on the consumer.  I think the public needs to change their expection of over night deliver back to days.  We don't need to be in such a hurry, people need to plan ahead.


Jerome Johnson


Your article on Transportation Infrastructure is right on target and it applies to several other aspects of our economy!


I don’t consider myself an “isolationist” by any stretch, but we need to wake up in this country and start taking care of our own problems before we try to ”fix” others.

We are spending and sending way to much overseas and not making the investments domestically that we desperately need.


We have had several wakeup calls, when are we going to wake up?


Aristides P. Smith


Next Generation Logistics, Inc.

On Spectrum Brands and Retail Inventory Policies Changes:

"Inventory cutbacks" are, in this case, synonymous with "de-listing" only softer.  It's a more pallatable word for investors.  "De-listing" or "De-stocking" sounds more ominous.


Dave Wilcox



Q. How much have natural rubber costs increased over the past two years

A. About 72%

Copyright © SupplyChainDigest™ 2003-2005. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 45066