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  Nov. 16 , 2006 - Supply Chain Digest Newsletter
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Featured Report

HighJump Software, a 3M Company


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First Thoughts by Dan Gilmore, Editor

Stop Wasting Time with Supply Chain Collaboration that Just Won't Work

Is supply chain collaboration a waste of time?

No... and yes.

So says Dr. John Gattorna, of the Sydney Business School (Australia) and Cranfield School of Management (UK).

Two weeks ago, we did part 1 of a review of Dr. Gattorna's new book, "Living Supply Chains," a work I found very interesting. (As a side note, this book, originally published in the U.K. and Australia, is just getting North American distribution. Many readers emailed me looking for how to find the book. I actually do find it when searching at Amazon through their partner sites, and we are told Amazon and other retailers will have it soon.)

To briefly recap part 1, Gattorna says the creating of "Living Supply Chains" can create enormous competitive advantage, and that there are two keys: getting the people/culture side of the equation right, which in nearly all companies is a huge barrier to strategy execution, and "dynamic alignment," in which a company's supply chain organization, capabilities, and services are specifically - but flexibly - linked to customer buying behaviors (with a similar concept for supplier relationships).

Last time, we focused more on the first part - the people side - and will try to explain this week the dynamic alignment part. But we did like this quote from the book: "While the downward force of strategy on an organization to deliver plans is considerable, an even stronger force exists - the upward force exerted by the organization's culture." The organization and culture most often decides which parts of the strategy it will embrace, and which it will ignore, absent some more innovative approaches to driving alignment.

Back to dynamic alignment, and deciding if supply chain collaboration is a waste.

Just as most companies under-serve many customers and over-serve (at great cost) others, Gattorna told the audience at CSMP 2006 that "Too many companies spend lots of effort and resources trying to collaborare with customers that don't want to colloborate."  Does that ring a bell?

So the answer to the question at the top is that supply chain collaboraiton is a waste if you continue to put effort and focus to "entice" a customer to collaborate who simply doesn't value the exercise. In addition, by doing so you suck attention and resources away from those who do.

Gattorna, relying on years of personal experience and research (he's a former Accenture supply chain leader) and much other supply chain and behavior research, says you can (and ultimately must) sergment customers (and suppliers) into four types, based on what they truly value in the relationship (customers) and your own supply chain requirements (suppliers) and their capabilities:

Continuous Replenishment: Characterized by predictable demand from known customers, these are generally the ones that both want to and benefit from tight collaboration. High levels of loyalty.

Lean: Mostly consistent demand, main focus is on efficiency and cost.

Agile: Unpredictable demand, opportunistic, need for quick response to new needs

Fully Flexible: Very unpredictable demand, customer looking for lots of customization in product design, programs and services. Values innovation.

Gattorna says that many customers will have characteristics of two of these types, but that one will be dominant. Here further states that almost every company has customers in at least three of these segments, and sometimes all four.

So what dynamic alignment? By first segmenting customers based on these buying behaviors, rather than traditional screens (channel, size, etc..) companies can tailor their relationships, supply chain services and price much more precisely to the total needs of those companies.

Second, needs change over time, based on market changes, different products sold by the company, etc. 

So, Gattorna advocates setting up separate supply chain teams, and separate logical and often physical supply chains geared towards meeting each of these types. Each focused on the differentiated approaches, relationships and services the segment requires. When a customer's needs changes, either for the short term or the long term, it should move into this different supply chain group. Indeed, different products sold to the same customers may need to be handle differently.

While the concept of different supply chains for different markets has been around for awhile, Gattorna says it is too often based on the wrong segmentation - for example, by product type, not customer buying behavior and values. Also missing has been the notion that this needs to be dynamically managed.

Finally, he believes (citing several examples of companies that have done it) that this supply chain segmentation approach needs to the basis for network planning and optimization, rather than the "one size fits all" approach that is often used.  Companies often simply optimize inventory, transportation and service trade-offs against basically a universal customer, and as a result develop a single supply chain strategy.

Again, I've have to a degree only scratched the surface of the thinking here, but believe there is much worth considering. Gattorna writes that this approach will allow companies to "understand, manage, and synchronize" to their advantage. I think he's right, even if you don't take his prescriptions all the way.

Three quick side notes: we think you'll enjoy our fairly new "Supply Chain News Bites" feature at the top of News and Views section. It's a great way to quickly stay on top of relevant supply chain developments. Second, there is still time to enter our transportation challenges acronym contest, and receive a nice prize if you win. Almost 300 entries thus far, and some good suggestions. Look here.

Finally, we're taking next week off. Happy Thanksgiving to those in the U.S. For the rest of our increasingly international readership, we'll see you in two weeks! We think you will also find this week's feedback especially interesting!

What do you think of the concept of "dynamic SCM alignment"? Is segmenting customers based on supply chain needs, and crafting unique supply chain teams and capabilities, the way to go? What would be the downside or other barriers? Let us know your thoughts.

Let us know your thoughts.

Dan Gilmore


Achieving Excellence in Spare Parts Distribution

What are the opportunities for improving distribution processes in spare parts distribution? How are distributors moving beyond WMS to a broader set of execution capabilities. Watch our experts from Ciber and Red Prairie tackle this issue.

Watch it here, now.

Spare Parts Distribution

Supply Chain Videocast Series

Next Live Broadcast

Spend Management Vision at Hallmark Cards

Using procurement excellence and e-auctions to drive success

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On-Demand Broadcasts - View it Right Now

Cutting Costs with On-Demand TMS

Learn the pros and cons of the on-demand model, and present an on-demand TMS success case study from salty snack leader Snyder's of Hanover.

More information and to view right now

Low Cost Country Sourcing Revisited

Understanding the Total Cost Impact

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What’s Driving Interest in On-Demand TMS?

By Stephen Craig and Erik Market, CP Consulting

For some, a simple answer is better, and the impact on connectivity and infrastructure requirements must be considered. But users must balanced short term and longer term considerations


Nov. 16, 2006

This Week’s Supply Chain News Bites – Only from SCDigest

Wal-Mart U.K calls for more supplier collaboration; Is a Chief Supply Chain Officer in Dell’s future? Engineering Offshoring – caused by lack of available talent, or killer of domestic jobs? Nissan to buy shuttered factories of the Big 3? Lenovo says supply can’t keep pace with demand; Unilever expanding its EPCIS efforts

Nov. 16, 2006

2006 Cannondale PowerRank Study Identifies Perceived Supply Chain Leaders among Consumer Goods Manufacturers, Retailers

Who’s up, who’s down? Pepsi, Unilever, Public, Kroger make big strides; CPG rankings chart

Nov. 9, 2006

Ingram Books Smooths the Waves

Distributor finds wave planning simulation reduces cost, improves cycle times, validates strategies in increasingly complex DCs

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. What are the only three U.S. states to grow manufacuring jobs in each of the last three years?

A. Click to find the answer below



New Report on Value-Added Warehousing: Differentiation in a Dynamic Logistics Marketplace

Why adding new, information-driven capabilities in your warehouse is an essential component to acquire new business and keep existing customers

Access the report at:



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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 some excellent feedback - and suggestions - on our column a few weeks ago on Time for New Supply Chain Icons?, which suggested the listing of just the usual suspects (Dell, Wal-Mart) as examples of supply chain excellence needed to be updated - especially since few can actually say why these supply chains are great, and some of the leaders have had a few stumbles of late.

A number of readers suggested we add Toyota to our list of new icon possibilities - and of course they are right. We had some other suggestions as well, some of which we publish here - more next week.

Our feedback of the week is from David R. White, Senior Vice President, Global Supply Chain for Campbell Soup Company, tooting his own company's horn - with strong justification, it sounds like. Another reader comments that there is often a correlation between overall company success and perceptions of its suppy chain, a point we raise in this week's article on the Cannondale PowerRank 2006 results. But that begs the question: can you be a highly successful company today with a mediocre supply chain?

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 Time for New Supply Chain Icons?

I believe Campbell Soup is doing some extraordinary things in the Supply Chain;


We are benchmarking with companies outside the food industry in most Supply Chain areas to bring the "best of the best" into Campbells.  Our Supply Chain is already solid versus our food competitors but we have a lot to learn from other world class companies outside the food industry.  No company is the best at everything today. The benchmarking has included visits (or exchange visits) with P&G, InBev, Colgate, Liz Claiborne, etc.


We have used AT Kearney and McKinsey to help benchmark our Engineering and Purchasing organizations.  We have found the best CPG company at reducing Total Delivered Cost each year is P&G.  The best at Safety is Dupont.  The best at quality/variation improvement is GE.  We benchmark ourselves each year in 10 areas against our food industry and then against the best in the world.  Our goal is to be the best in Food and equal to the best outside in food in each area.


IQ Maximizer gravity feed shelf organizer for soup has resulted in a dramatic improvement in sales,  really simplifies the consumer shopping experience, and reduces store handling costs.  We have dramatically cleaned up the soup aisle and now have this improvement in 14,000 stores in the US and are expanding to other countries.   The stores in the US are expanding IQ Maximizer  from just condensed soup to all forms of soup.  Several companies are starting to copy this shelf improvement idea in other categories.  (McCormick in spices for example).


Both the Cannondale and Global Advantage surveys have ranked the Campbell Soup Supply Chain in the top 10 in the US.  This is impressive for a small company like Campbells because the "big boys" such as P&G, Kraft, Pepsi tend to dominate those kind of surveys in part because they have so much volume going through a retailer and get lots of attention.


And finally, I believe the Campbell Soup Board of Directors has made the Supply Chain a key part of their agenda and believe our supply chain can be a competitive advantage.  I am not aware of any other CPG company where the Board is as involved and interested in the Supply Chain.  The Board had personal involvement in hiring me to lead the supply chain 3 years ago.  I have a Board member assigned to  mentor me.  I get time with each new Board member to train them on the Supply Chain.  The Board visits one plant each year as part of their regular agenda. The Board reviews the Supply Chain strategy and results each year.  I am included in significant parts of every Board meeting.  My people are given time to educate the Board on the Supply Chain.  (a recent presentation over dinner was my Engineering VP sharing "what does an Engineer do at a food company?).  The Supply Chain is "front and center" and "at the table" with the Campbell Soup Board of Directors.


David R. White

Senior Vice President, Global Supply Chain

Campbell Soup Company

More on on Time for New Supply Chain Icons?:

I thought I would respond to your request for 'Likely Suspects' in supply chain best practices.  Check out Sysco Corporation.  I had a chance to hear their VP of Supply Chain speak at a conference and it was very intriguing.  I would put them a head above the rest in their industry, and it would be interesting to see comparisons to other industries. 


Michael McGowan

DHL Customer Integration Services

HEB, Toyota, and Honda also come to mind.

Aileen Louik



The efficient Supply Chain Management very often gets associated with the success of the company when examples are quoted. If there is a very successful company it is easy to associate that with a Supply Chain Management which runs more efficiently - with few questions raised if at all- as compared to a less successful company. Many a time this may have little to do with continuous innovation in Supply Chain Management in the companies so quoted.


Another common perception that predominates is, associating Supply Chain management  primarily with retail segment and at best standard products (variations in a standard product included). Commodity related sector and engineering industry literally have huge supply chain challenge. However we normally do not get to hear much on the supply chain issues involved in Engineering Projects, of individual consignments of hundreds of tons moved in single piece from a source often located in a different Country, balancing inland infrastructure issues, organizing suitable transportation and loading arrangements at Ports and making arrangements for materials handling at destination in a third country. Perhaps these are thought to be one time or one off issues. They are not, to those in the industry.


I wonder why Supply Chain Management associated with execution of heavy projects do not get referred in Supply Chain Success stories, as often as  and  to the extent of importance they deserve



T A Krishnan




Q. What are the only three U.S. states to grow manufacuring jobs in each of the last three years?

A. North Dakota, Alaska and Las Vegas

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