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  Aug. 24, 2006 - SupplyChainDigest Newsletter
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First Thoughts by Dan Gilmore, Editor

Aligning Supply Chain and the Business

Clearly, one of the increasingly common themes in supply chain in the last 2-3 years has been better alignment between the supply chain function and the corporation.

As just one example, we summarized earlier a presentation by The Limited’s Paul Mathews on this topic, which turned out to be one of the most popular News and Views pieces we’ve run this year (see Time to Align the Supply Chain to the Boardroom). But this is a theme that I’ve heard with increasing frequency from many quarters, including new CSCMP President and former practitioner Rick Blasgen, SCDigest Contributing Editor Gene Tyndall, and many others.

It’s also an area I have spent some time thinking about for many years, and have developed a simple model that may be of interest to SCDigest readers.

It came about frankly in the course of my career at various times looking to sell supply chain related solutions to corporations. Looking for any angle I could get, I would often review a company’s annual report, hunting for strategies, goals and initiatives I thought were related to whatever product or program we were trying to peddle.

I was surprised at how often, even at a VP level, the supply chain managers had little idea of what I was referring too.

At the supply chain/logistics executive office, my perception is that this type of significant disconnect between the company strategy and the supply chain focus has closed in most companies, though not completely. In his presentation, The Limited’s Mathews goes through an entertaining story of how long it has taken him in his career across a number of companies to get this supply chain alignment thing right.

The important point is that in addition to the benefits both organizationally and personally from better alignment, it’s a process that’s almost sure to deliver more company support for supply chain efforts.

So, my model is pretty simple (see the graphic Aligning Supply Chain Initiatives with Company Strategies).

  • Ensure you clearly understand what the corporate or brand/business unit objectives and strategies are, both qualitatively and quantitatively.
  • Develop a set of supply chain strategies and initiatives that support the overall strategies and objectives – a direct linkage.
  • Define the metrics that would be used to measure the success of that initiative. Clearly, it is important to make sure this metric or metrics are well aligned with the broader company/brand metrics.
  • Identify the capabilities and changes that are needed achieve the metric goals.

It’s really in steps 3 and 4 that sometimes the alignment and linkages get lost. Number 4 is critical to really understanding what needs to happen to truly create the alignment: Is new technology support required? Process change? Better visibility? Integration with customers? Without taking it down to this level, it’s easy to take the first steps towards alignment, but then not have the horsepower to deliver.

This model is of course also undertaken with an eye towards getting resources and financial support. Clearly, if you pursuing initiatives that are directly linked to the strategies and goals of the company, the likelihood of funding and executive support for those supply chain projects will increase. The metrics and the capabilities required to get there also provide the basis for developing the business case, which will probably be required even if the initiative is perfectly aligned with company/brand strategy.

In 2002, I spent some time with a VP of Supply Chain for a very large consumer packaged goods company that used a process like this in part. Twice a year, he and his team take a fresh look at company strategies, and formally identify the programs they have in process or could pursue to support those corporate plans. In some cases, this resulted simply in effectively communicating that alignment to the appropriate executives – the CEO and functional peers. In other cases, it led to new initiatives, which generally would require some level of other executive support, and in some cases funding. Key again was aligning the metrics between the supply chain and the corporate goals.

I am paraphrasing, but I remember him telling me something like, “This process has been very successful in getting resources made available to the supply chain.

This executive also shared with me privately the corporate strategies for that year. Four of the six listed had significant supply chain implications. But those linkages need to be specifically spelled out.

The bottom line: alignment doesn’t just happen. The more comprehensively this alignment is developed, the better for all – the supply chain organization, and the corporation.

Our model may seem obvious, but think a lot of companies have room for improvement in this area.

Do you like SCDigest’s Supply Chain Alignment model? What would you add or subtract or otherwise improve? What do you think the keys are to better alignment? We’d love to hear your stories and perspective.

Let us know your thoughts.

Dan Gilmore



Driving Operational and Bottom Line Benefits in Beverage Distribution

Beverage distributors across multiple segments (beer, wine, sprits, soft drinks) are facing multiple challenges and competitive pressures. The approach to operational strategy and suppy chain and distribution technology that were enough in the past are giving way to new models that help beverage distributors increase sales, reduce costs, and become more integrated in the total supply chain.

Read this excellent report to learn how these improvements are possible, and what it takes to get there.

How Beverage Distribution Companies Can Use Technology to Increase Efficiency and Profits

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Aug. 24, 2006

Is Accounting a Barrier to Supply Chain Excellence?

As supply chain rapidly evolve, accounting for the costs uses decades-old models

Aug. 24, 2006

Dell Cites Supply Chain Hiccups in Disappointing Financial Results

Latest financial miss blamed in part on overestimating demand, procurement problems; can even robust S&OP processes overcome the pressure to forecast to goal? Supply-demand matching is tough even for Dell

Aug. 24, 2006

Does Enhanced Supply Chain Security Pay?

New report says risk reduction can be accompanied by real operational benefits

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”



Q. What supply chain executive recently left Office Depot to become Senior Vice President of Supply Chain for Home Depot?

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'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 RFID: Slower, Better, which suggested there is some sign the Wal-Mart driven RFID market was slowing, in part as Wal-Mart seems to be more focused now on other initiatives, while RFID is gaining growing traction in other applications, and more in tune with ROI realities.

Many were of the "you were right on" variety, without a lot of comment. We received two letters from consumer goods companies, who for internal and Wal-Mart reasons requested anonymity, but we publish their letters below. Our feedback of the week is a strong letter on this topic from Bruce Welty of Scenic Technology.

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 – RFID Slower, Better

As usual, another great article on a relevant topic.


Your restraint and balance continue to amaze me, especially in your sidebar about Alien.  To date, the RFID craze has been academically-driven, vendor-driven and compliance-driven, hardly compelling business trends.  It was started by some great academics/technologists that were even greater marketers.  For the past 5-6 years I have been reading articles that look to me to be written by some staff (or contract) journalist who was asked by the editor to “go and write an article about RFID”.  Lo and behold, they found the original works published by the PhD’s and regurgitated their own original script.


The real answer as to why RFID has not gotten very much traction (and Alien’s IPO was cancelled) was simply that the financial characteristics of RFID for the Supply Chain are very poor.  There is negative ROI for the customer, the price of the chips is too high and needs to drop significantly (who wants to invest in a company where the underlying price has to drop to pennies to be viable?), the competitive product (barcodes) is actually quite inexpensive and very effective (we’ve all gotten pretty good at what we do after 20 years!), and the industry has been over-invested allowing companies that have no real business to continue to bid down the projects, thereby killing the market.


Given your comments “we are about where we should be”, I agree with that.  My guess is this technology will ultimately find a place and will afford many vendors the opportunity to improve their solutions.  It is probably not the “next big thing”, but it is one piece we all need to consider in our strategy, but only when the customers say they need to have it.


Bruce Welty

CEO, Scenic Technology

EIR, Great Hill Partners

More On RFID Pace:

I agree that there does appear to be a slowdown, but I think that is all it is--an appearance.  It is mid-year, Wal-Mart's mandate is 6 months off and there isn't a lot of press about who is now engaging in enabling their products because they are smaller companies that don't show a whole lot of value unless they tag everything.  It doesn't help the RFID vendors and technology providers to announce those.  It will seem as if it does suddenly pick up towards the end of the year once that mandate draws closer.


With regards to your comments on the conference sessions, I agree whole heartedly.  Every session starts out with a speech on RFID 101, then tries to dance around giving an audience any meat or telling them "how" to make successful implementations.  Most people have that 101 knowledge at this point and are trying to learn beyond that.  Another problem is that the conferences can sometimes be so expensive, the end users aren't attending, but rather only the vendors are. 

Well, keep up the good editorials!


Supply Chain Director

Consumer Goods Company

As a second wave Wal-Mart supplier, I think your perspective is exactly right. We are simply in no hurry, and it seems to attention from Wal-Mart is wavering.

Maybe that is just temporary - we'll see.

I think there is great promise from RFID eventually, but it will take a long, long time.

Director of Distribution

Consumer Hard Goods Company

From what I can see it looks like something call RFID-Radar is going to change the map.


Direction and distance information from a passive tag at good distances.

We investigated RFID but the metal bins=transponder, multiple reader requirements made it cost prohibitive.


This new wave of technology appears to leave traditional RFID in the dust.


Michael Watton

On Pressure on Inventory Levels

As a provider of an inventory optimization solution, I am in constant contact with supply chain and finance executives throughout the country. What I find is that while publicly held companies are being pressed about inventory levels, I’m not as confident that the same pressure is being applied in the private sector. You would be surprised at the number of companies I speak with who are “happy” with their current inventory turn rate and reducing inventory levels is not a concern, despite the averages for their industry vertical. When I receive this type of response, I normally place my next call to their competition.

Rich Murphy

TC Logic


Q. What supply chain executive recently left Office Depot to become Senior Vice President of Supply Chain for Home Depot?

A. Mark Holifield, who took the new post in July

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