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  Oct. 12 , 2006 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Time for New Supply Chain Icons?

As most of our readers know, I travel quite a bit on the supply chain and logistics conference and seminar circuit.

Almost always, someone cites examples of great supply chains, and about 98% of the time the references are to Wal-Mart and Dell, and occasionally one or two others (e.g., Procter & Gamble).

In April 2005, for example, I participated at a Supply Chain Management conference at Penn State, during which a panel of supply chain pundit types was asked specifically to name some great supply chains besides Dell and Wal-Mart. I recall the panel managed to cite P&G and not a whole lot more.

Dell, Wal-Mart and P&G are great companies all, with excellent supply chains. That said:

  • Dell and Wal-Mart have had their troubles recently. Relative troubles, for sure, meaning they are still growing revenue and profits, just not at the clip they once did. In both cases, I’ll argue supply chain plays some role in the challenges (see below).
  • We just need some “new blood”
  • Many pundits can’t articulate why these companies have great supply chains. I often ask the people citing these leaders that very question. Generally, the answer is “the build-to-order model” for Dell, and hardly any clear response for Wal-Mart, other than that its prices are so low, its supply chain must be great.

I’ll repeat again that Dell and Wal-Mart are great companies with great supply chains (I own the stock of one – you’ll have to guess which). But their supply chains are arguably not delivering the competitive advantages they once did. Innovation is eventually matched, and operating conditions change.

In Dell’s case, competitors have simply caught up from a supply chain effectiveness and cost perspective. That’s in part why we’ve seen both IBM and HP very active and public about their supply chain stories in the past couple of years. They want the market and Wall Street to know Dell isn’t the only computer firm with an impressive supply chain.

The advantages Dell had in terms of make-to-order model are also reduced as the price of finished units and individual components continues its relentless drive south. The cost of inventory and the dynamics of component pricing just have less of an impact. There is also some evidence that the make-to-order model is less attractive in some global markets, and in the growing category of notebooks. Notebooks also require more R&D today than desktops and many servers, and Dell’s generally small level of R&D spend versus sales may be hurting them there.

Wal-Mart has also had some troubles internationally, having major stumbles in Germany and South Korea, and a tough time in the U.K. versus Tesco. Some have stated that the centralized “command and control” model that drove store operations and the supply chain in North America may not be effective in other parts of the globe. Wal-Mart itself is now moving in part to a more decentralized operating model in the U.S. (see In Search of More Growth, Wal-Mart Follows Best Buy in Move to Tailor Stores to Individual Markets). The company had also allowed inventory to grow at a much faster rate than sales growth for a couple of years,  leading to this year’s Inventory DeLoad program (which appears to be having a positive effect in reversing this trend).

I think very highly of P&G’s supply chain, and think the company is especially good at continuous improvement.  It has continued to thrive. Still, I’ve also heard from some people in the know that there have been some things to learn from the Gillette supply chain team post acquisition about sales and operations planning, collaboration and some other supply chain processes.

So while giving these companies their due, I think we need to find some additional icons, and be more explicit about why any of them are “in the club.”  I’d love to hear from our readers about their companies, or other companies our readers would cite. A very imperfect list of new icon candidates is offered below, some of them “likely suspects,” maybe some others that will surprise.

  • IBM: For the massive and impressive job they have done under the leadership of Bob Moffat in building an integrated supply chain organization on a huge global scale.
  • Cisco: Sometimes mentioned as an icon, Cisco impresses with its ability to run a huge, almost totally outsourced supply chain with a relatively small team and heavy infusions real-time information and visibility.
  • Zara: This European retailer is also cited a bit but not nearly enough in North American circles, probably from a lack of familiarity and U.S. store presence. Zara has implemented the demand-driven, “Quick Response” supply chain that many hoped was the future for the industry 15 years ago but which has largely failed to materialize.
  • Tesco: Powerful global retailer coming soon to U.S. shores, it adopted lean principles throughout its supply chain, and seems very savvy in its approach to RFID.
  • The Limited Brands: Seems under-recognized to me, probably in part because (of necessity) its supply chains are tightly aligned with its many individual store brands. But the specialty retailer seems always on the supply chain move, and is known for the quality of its supply chain and logistics development programs.
  • Frito-Lay: A division of PepsiCo, the snack team has leading edge distribution processes, is an advanced user of supply chain technology, and is one of the few companies performing true continuous network optimization. Like The Limited, it is also one of the “farm teams” for the rest of the industry.
  • Canadian Tire: This Canadian retailer does outstanding  work letting demand drive the rest of the supply chain, and has shown strong operating results competing north of the border against Wal-Mart.
  • Ashley Furniture: This rapidly growing furniture manufacturer and retailer does one of the best jobs we’ve seen managing a long global supply chain like a just-in-time one.
  • Wegmans: This smaller profile, privately held grocery chain doesn't get enough credit for seemingly always being in the forefront and driving real value from initiatives like CPFR and data synchronization.

We’ll be providing more detail on many of these stories in the near term – but would love to hear your company’s story or your suggestions for others.

Do we need some “new blood” in terms of our supply chain role models? What companies would you suggest and why – including your company? Let us know your thoughts.

Let us know your thoughts.

Dan Gilmore


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Supply Chain Videocast Series

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How a Comprehensive Approach to Purchasing and Procurement Can Deliver Substantial Operational Improvements and Bottom Line Savings; Success at Johnson & Johnson

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Cutting Transportation Costs With On-Demand TMS

How Snyder's of Hanover is Driving Real Results

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Workforce and Labor Management Success at DSC Logistics

How They Did It, and Real Feedback Straight from the DC Floor

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Integrated Supply Chain Organization Research Project

Help SCDigest and The Logistics Institute at Georgia Tech with the important research.

Fast, easy web survey.

Summary report to all participants. Go to link above


Optimizing Warehouse Facility Design

Make the process data driven, with attaining balance a key operational goal, say

Ciber's Mike Krabbe and Jan Klingberg


Oct. 12 , 2006

Supply Chain Best Practice Tip: Managing Your Career

The market for Supply Chain Execs is strong, but you need to plan your career path with care to maximize your attractiveness, says one prominent recruiter

Oct. 12 , 2006

Global Logistics: Giant Cargo Ships Keep Coming

Like “parallel parking a Greyhound bus in a phone booth”; should ocean rates be dropping faster?

Oct. 10 , 2006

Supply Chain Digest Announces The Supply Chain Digest Letter, a Hardcopy Newsletter Focused on a Single Topic Each Month

Upcoming issues feature deep dives on TMS, network optimization, labor management, S&OP, sortation, warehouse management, and more; free subscriptions for qualified professionals

Oct. 4 , 2006

Inventory Management: Annual Working Capital Report Shows Strong Improvements in Inventory Levels Across Nearly All Industries

Pharmaceutical Manufacturers and Wholesale Distributors show largest improvements; how do you stack up?

Oct. 4 , 2006

Procurement Benchmarks Show Wide Variation between Top and Bottom Performers

APQC benchmark study shows big gaps in performance; how many POs per person does your staff execute?


Q. What is the approximate cruising speed of the new generation of huge cargo ships?

A. Click to find the answer below


A New Age for Transportation Management

Attend this free web seminar to listen as Beth Enslow of Aberdeen Group, Dan Gilmore of Supply Chain Digest, and Razat Gaurav of i2 discuss how competitive advantage can be won or lost within a supply chain, and how today’s challenges demand that companies adopt an entirely new generation of supply chain management strategies, processes, and solutions in order to succeed.

When: October 31, 2006, 11:00 AM EST

More information or to register for this important event:



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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 had a number of nice batch of letters on our First Thoughts piece a few weeks ago on How Do We Get So Much Inventory?, which offered a framework for what supply chain decisions drive inventory levels. We asked people to comment and add to the model, which a number of you did, including our feedback of the week from Bruce Moser of Arrow.

You'll find several other letters on this topic - and we'd love some additional commentary.

Speaking of additional feedback, we also included a letter from Thomas J. Goldsby of the University of Kentucky, commenting on our review of his co-authored article on

How do Lean, Agile, and “Leagile” Supply Chain Strategies Compare? He and his colleagues would also welcome any company inputs on this topic.

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 Why So Much Inventory?

It surprises me to hear that many of these companies' inventories are higher than in the past.  As far as retail goes, in my personal experience, store-level (actually, I should say, shelf-level) inventories have never been lower than in the last two years or so.  I'll refrain from naming names, but there are at least two leading big-boxers I have totally given up on:  I "know" that almost anything I am looking for will not be in stock, and if it is an item on sale, forget it - no chance - I go straight to the website.  Sometimes I wonder if other people have been experiencing this.


Just a thought: maybe the combination of increased off shoring and stocking to support online sales has contributed to the higher inventories, and I am simply not seeing those goods on my local shelves?


Bruce Moser


More on Inventory Model

Great article! Senior. Managers may know a lot of things about a business but they tend to do this by skimming information off the top. When it comes to the supply chain and its integration they really don’t have a clue most of the time!   When these managers don’t get the results they are looking for they go looking for the head of the scheduler or the demand planner (who ever is out of favor that month). The next thing they will do is go back to some action they did in the past that got some result (desired or not).  The real key that you bring out is that the supply chain is an integrated holistic organism full of cause and affects! (Most of these affects cause by out dated or misapplied management policy).


Senior Director

Food & Beverage Company

Name withheld by request


I didn’t see Variability of Lead Time in the list of factors.


Jim Lamb

Manager, Global Transportation and Logistics


I liked your list.  I work with mid-size manufacturers and distributors to help them reduce their inventory or improve turnover.  Here are 3 things I would add:

1. Lack of accuracy - poor accuracy leads to buying the same item again because the original quantity is "lost" or it leads to pressure to increase inventory to cover up the lack of accuracy.

2. SKU proliferation - many companies add an item because sales is sure it will sell forever.  Instead it sells once and the remainder of the first buy sits.  I challenge clients to eliminate 2 old SKU's for every new one that they add.

3. Lack of focus on disposition and prevention of excess and obsolete - No one wants to be reminded about the 10-20% of their inventory that barely turns at all.  Worse yet when there is some attention paid to the "dust covered stuff"  it's all about disposition, not how do we make sure we don't make the same mistake again?

Herb Shields, CMC
HCS Consulting

In my experience the main reason for high inventory is the company's attitude to inventory/


In Japan inventory is considered as 'evil' and used to problem solve (the rocks in the river get exposed by lowering the water or inventory level)/


In the US under the policy that on-time shipment is sacrosanct, we keep large quantities of Inventory. Unfortunately this also covers at lot of problems. Finally, I have found few companies that understand, let alone know the true cost of their inventory


Professor Blair Williams, CFPIM, CSCP

Author Manufacturing for Survival

On Lean Versus Agile Strategies

I would like to thank the editorial staff of SCDigest for featuring our Lean/Agile/Leagile research on your website.  Professors Griffis, Roath and I are continuing our work in this area and would welcome input from and dialogue with your readers.  Your comments reinforce our efforts to produce interesting and meaningful research.  


Thank you again.


Thomas J. Goldsby, Ph.D.

Associate Professor of Supply Chain Management

Gatton College of Business and Economics

University of Kentucky


Q. What is the approximate cruising speed of the new generation of huge cargo ships?

A. About 30 miles per hour

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