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  Oct. 26 , 2006 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Readers Respond: Synchronizing Versus Simplifying Supply Chains

We received a large number of interesting letters over my column a few weeks ago on “Simplifying versus synchronizing your supply chain.” We are really busy at SCDigest right now (thanks!), and so as I do a few times a year I am going to take the easy way out and let our readers write most of this column.

But first, in my review and comment last week on the 2006 CSCMP conference, I suggested all of us, myself most included, should stop spending lots of time in presentations describing the current transportation challenges of fuel surcharges, tight capacity, driver shortages, etc. It’s starting to become “blah, blah, blah.” So, henceforth, a few things I have “in the can” excepted, I am going to swear off that recitation. I have even come up with a (not so good) short hand way to do it, that I make freely available to all: RISCED.

  • Rates (rising)
  • Infrastructure (lousy in the U.S.)
  • Service demands (customers keep raising the requirements)
  • Capacity (who’s got a truck?)
  • Energy (ok, I needed a vowel, and used this instead of fuel)
  • Driver shortages

So, now we can just put “RISCED” on our slides, and summarize the whole set of challenges in one word. I am open to improvements in the acronym.  An SCDigest polo shirt to the one with the best idea.

Also, to see our all new video review of CSCMP, which I promise you'll enjoy, you'll find it here: CSCMP Video Review. Did you attend? You might even see yourself!

To briefly summarize the earlier column, I wrote that at a high level there seemed to be two somewhat opposite supply chain strategies: simplification or synchronization. Right now, simplification seems to be really “in,” and we noted some examples of supply chain execs suggesting “synchronization” was too hard. The questions: Is that right? Can you/should you do both? If you focus on simplification, do you commoditize the supply chain?

Consultant Henry Camp stated: “It is obvious to me that you are onto something.  We see so many companies spending thousands of dollars per seat for computer systems which promise to track, integrate and manage the complexity in their supply chains.  There is no pretense of simplification, rather just more and more artificial intelligence to out think the complexities.”

John Griese from Frito-Lay observed that: “There is no magic bullet in technology that will simplify and synchronize a supply chain. If you are lucky the system will automate some of the activities allowing less manual effort which will reduce the people required or allow them to focus on optimization. Any organization needs to focus on identifying the objectives of their supply chain strategy then prioritize implementation based on benefit. Develop the tools, processes and behaviors in support of these priorities in house. The benefits of supply chain synchronization are often achieved through trial and error until you determine where the most and simplest return is coming from.”

But this supply chain manager from a consumer durables companies, who as you can understand wished to remain anonymous, noted the downside of simplification: “Like the companies you mentioned, we are on a supply chain “simplification” mission. There is always room to simplify processes, but I think you hit the nail on the head when you discussed that this may lead to a loss of competitive advantage. I’m afraid we are going to simplify ourselves right into mediocrity.”

The always interesting Jon Kirkegaard of DCRA says you can and should do both, and notes an interesting parallel from the airline industry. “The classic complexity theory example of American Airlines vs. Southwest Airlines is a decent metaphor for your readers.   AA through the use of over zealous optimization technology and a wide variety of assets and hub and spoke networks has built inherent complexity into their model.   Southwest with single airplane asset type (737s) and simple point-to-point routes is a quite simple operation and much less problematic to plan and operate. However, both need to synchronize plans for routes, capacity, pricing, freight etc. or their whole service model (customer experience) breaks down.  The conclusion is to simplify the interface to the internal and external operation.”

That last point is especially interesting.

Scott Brown, a supply chain manager at Plexus, said we had really hit on “tender spot” for his company, which is focused on better synchronization right now, and he offered these excellent thoughts: “Our approach is to "simplify through synchronizing" not the other way around.  Both are important.  I am amazed at the over-thinking that goes on with regard to this topic.  People try and swallow the whole elephant rather than break it down into one bite at a time.  The fundamental premise of lean and specifically pull-based supply chains is one of synchronization to achieve a simpler process.  Is it prohibitively software intensive? No. That is unless you try and shoe horn it into traditional ERP/MRP and some APS systems that are based on an entirely different and incompatible model and set of assumptions.”

We’ll print these and other letters in full over the next few weeks.

We had a lot more, but these are some of the excellent highlights. We’d love still more feedback, especially around whether simplification can lead to commoditization.

Is “synchronization” a good supply chain objective or not? Is it too hard, or too reliant on software? Are simplification and synchronization compatible, or somewhat opposite strategies to pursue? If you can synchronize, do you gain advantage? Do you have a better acronym that RISCED?
Let us know your thoughts.

Dan Gilmore


Webcast: A New Age for Transportation Management

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Oct. 26 , 2006

Supply Chain Best Practice Tip: Building Real-Time Supply Chain Dashboards that Provide Value is Harder than You Think, says Chevron’s Mike Brooks

Forget pie charts and gauges; get rid of the clutter; find out what info really drives decision; the “business of now”

Oct. 26 , 2006

Will “TWIC” Thwack the Global Supply Chain?

Program to verify drivers’ status may be good for security at the ports, but lead to delays moving the goods; infrastructure bottlenecks may just keep moving

Oct. 26 , 2006

Dutch Book Seller Finds Good Reason for Item-Level Tracking

Here’s an idea – actually give customers a tool to look up if you have the book; RFID enables the solution, but isn’t its focus, which is key


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.


Q. Which forecasting technique uses a variable's past behavior to select the best forecasting model from a general class of models, such as autoregression, moving average, and autoregressive-moving average?

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. 

Catching up on a variety of letters on a variety of topics this week. Our feedback of the week is on our best practice tip on the use of two-hased auctions for e-procurement from Akshaya Rath, who offers an related approach. We have additional letters on that topic, Mexico as a sourcing location, accounting barrier to supply chain excellence, ASNs, and best practices for vendor site visits. Links are to the original stories.

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 Two-Phased Reverse Auctions

As an auction manager in public procurement, I have tried out on-line sealed bid from all participating vendors and take the lowest rate as a start bid for a dynamic reverse auction. Unlike a reverse auction, during an on-line sealed bid event , the bidders cannot see last bid or the number of bids.


This effort has resulted in effective use of auction tool and invariably ends with a price discovery.


In the event the number of vendors is high, the bidders can be cautioned that few of the highest bidders of on-line sealed bid will not be allowed to participate in second phase. This helps of preventing unrealistic bids coming in during first phase.


Akshaya Rath
Sr. Manager - e Marketplace

More on two-phased auctions:

Very interesting, I presume the bidders are informed upfront on the two-step auction process.


However as bidders know that their prices are subject to negotiations, don’t you think that they will hold on further reductions on-line, and try to be Mr. nice during the negotiations and give that further price reduction that would have been given (or even more) during the single-step auction.


Why not save on the cost of on-Line bidding and do it the traditional way, and negotiate with the lowest bidder?


Saif Izki

On Sourcing from Mexico:

Excellent article on the renewed interest in Mexico as a sourcing location. We did a post on our logistics blog linking to it.


This is something that we have been talking about for some time , linking and commenting on a number of articles over the past year or so that have questioned the wisdom of rushing headlong into China and wondering if perhaps people wouldn't be smarter to first look closer to home.


Looks like those of us advocating this view have been right, although we have always maintained that one shouldn't NOT go into China, just that you should weigh the decision very carefully before jumping in.

Aaron Hoag


On ASNs:

The ASN is a great tool to reduce receiving cost for the customer.  However, that cost does not go away.  It is simply added to the shipping department cost of the supplier, which will eventually be added to the product price as additional overhead.  Pay now or pay later, someone has to do the work.

Staci Frantz

Supply Chain Manager

W.R. Case & Sons Cutlery Company

On Vendor Site Visits:

Great article.


Only suggestion would be the introduction of a couple more specific questions to both the reference site and the vendor:


1. What would they have done differently were they starting this process again from scratch?

2.  What were the biggest obstacles to successful implementation and how did they overcome them?


Robin Evans

Supply Chain Coach

On Accounting Barriers to SCM Excellence:

It is very encouraging to see the spotlight be put upon accounting frameworks which as the article rightly points out was developed in another time and for a different purpose.  The hope is that academics and managers can take up the challenge created by supply chain management and develop a more relevant and supportive accounting framework. Activity based costing (ABC) is one obvious starting point for such research.


Kevin Burgess


Q. Which forecasting technique uses a variable's past behavior to select the best forecasting model from a general class of models, such as autoregression, moving average, and autoregressive-moving average?

A. The Box-Jenkins technique

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