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Jan 4 , 2006 - Supply Chain Digest Newsletter
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Featured Events

Sourcing and Spend Management Videocast Series - On-Demand

Interested in global sourcing, e-procurment, spend management and other hot topics for 2007?

You'll benefit from our on-demand Supply Chain Videocast Series

Spend Management Vision at Hallmark Cards: Using procurement excellence to drive success

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

Low Cost Country Sourcing Revisited: Understanding the total cost impact

More information and to view now

First Thoughts by Dan Gilmore, Editor

Top 10 Supply Chain Trends of 2006

A couple of weeks ago, I reviewed 2006 from a Supply Chain Digest perspective, highlighting many of the important stories and themes we covered – and those that drove the highest level of reader response.

As promised then, I am now going to offer my more general thoughts on Top Ten trends in supply chain and logistics for 2006. While we are flooded with similar lists in general news, entertainment and other categories, I really don’t see too much like this in the supply chain, so I hope you enjoy.

So, in reverse order, you will find my list below. As always, we’d welcome you comments, agreements, disagreements, or any other perspective you would like to share.

10. Voice Technology in Distribution Goes Mainstream: It’s been building for the last couple of years, but voice technology in order picking and other distribution processes seemed to really go mainstream last year, as price and performance continue to improve, and the recognition of the productivity gains available become much more widely understood.

9. Labor Unions at an Inflection Point: This was a story we specifically covered in 2006, with our piece on auto parts maker Delphi’s still inconclsive push to dramatically reduce its North American union wages and move many operations offshore. There has been more action, with GM and Ford getting UAW agreement to shed tens of thousands of workers, Goodyear wringing strong concessions from its union last month, Chrysler perhaps sending a message to the UAW before the 2007 negotiations with an agreement with a Chinese automaker (see story in This Week’s Supply Chain News Bites), and more. If this trend continues, it could have big implications for supply chain costs and offshoring decisions. But will a Democratic Congress ignite some union pushback? Stayed tuned.

8. Concern over Commodities: Though it abated in the fourth quarter, concern over the availability and price of raw materials, from copper to rubber, caused many companies to rethink supply chain strategies, sign very long term agreements, and even, yes, return to a level of vertical integration. Caterpillar blames a revenue shortfall in part on the inability to receive needed levels of supersized tires, that in turn blamed in part on rubber shortfalls. Is anyone really paying attention to all those commodity deals and acquisitions Chinese companies are making worldwide?

7. Continued Supply Chain Vendor Consolidation: 2006 saw plenty more of this action, including supply chain software pioneer Manugistics being acquired by JDA, Symbol Technologies agreeing to be acquired by Motorola, “roll up” company SSA being acquired by another roll up company Infor, and many more. Make no mistake – in a maturing software market, it’s now all about acquiring customers and taking out overhead costs through acquisitions.

6. The Perfect Storm Blew Over: Long term, we still have many transportation challenges to deal with, but port congestion was basically a non-issue in 2006, and trucking capacity certainly swung back much more in balance with demand, easing rate pressure. Fuel prices even managed to drop substantially throughout the fourth quarter (see nearby story on the year in diesel prices in News and Views). We say enjoy it while you can…

5. Focus on Risk Management: Following a lot of academic research and work in 2005, we saw a huge number of companies turn their attention to supply chain risk mitigation in 2006.

4. Supply Chain Icons Stub Their Toes: We’ve been talking about Dell and Wal-Mart as the supply chain leaders for so long, most of us say it without thinking – or often knowing why. Both these leaders had the overall troubles in 2006, with no clear path back to glory for either one. Important because it shows supply chain advantage is never forever, and if Wal-Mart someday loses it current level of dominance it will have huge industry ramifications across the supply chain and more.

3. RFID Slows - but Grows: Many observers, including Supply Chain Digest and certainly a number of RFID-focused vendors, saw little momentum in terms of real action in the EPC-based consumer goods-to-retail market, in part as Wal-Mart moved much its attention to a series of other supply chain, store strategy and external issues, rather than the RFID roll out. The number of consumer goods manufacturers doing anything meaningful with RFID is still just a handful, and RFID announcements on the retailer side were very quiet in 2006. On the other hand, we saw strong progress with RFID in a wide variety of other markets and applications, as a supporting technology, not a cause in itself.

2. Global Supply Chain Gets Serious: As we predicted early in the year, in 2006 we saw huge numbers of companies finally get that global supply chain isn’t a logistics sub-discipline – it’s an area where performance can mean the difference between company success and mediocrity or worse. We thought the CSCMP conference in October spent a bit too much time on global sourcing and logistics, but then again, maybe not…

1. The Greening of the Supply Chain: It’s just starting to ignite, but we predict the most significant trend of 2006 will be that this is the year where the environmentally friendly supply chain (aka “sustainability”) really turned the corner, and companies started to take real action. To the surprise of many, an early leader: Wal-Mart. From energy efficiency to alternative fuels to packaging and much more, the supply chain will increasingly be colored green.

That’s my list… would love to hear your reaction.

What are your thoughts on out top 10 2006 trends. What would you add – or subtract?

Let us know your thoughts.

Link to this story stand alone on the web site

Dan Gilmore


Supply Chain 

Videocast Series

Optimizing Transportation and Distribution Performance

You simply can get more goods on each truck.

How optimization at the order demand level will deliver lower transportation spend 4-10% and significant gains in productivity, and how leaders like P&G and Nestle are achieving real bottom line results.

It's an outstanding, highly educational presentation.

More information and to register.

Stock Report

It's back! Our supply chain and logistics stock report is back for 2007. See the performance of top software, hardware, transportation, 3PL and other public companies by week, month quarter and year.

The top performer in our index for 2006? Supply chain software provider i2. See who's up, and who's down.

See stock report.

Quote of the Week

The top misplaced assumption of 2007 is that "China will be for a very long time the outsourcing capital of the world.

"Yet wages there are rising, the cost of logistics for the U.S. and Europe is rising in dealing with China and a tilting point in some industries will soon be reached. This will mean more outsourcing work for India, South Korea and select African and South American enterprises."

Robert Malone On Logistics - Forbes magazine


Jan 4 , 2006

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

Final TWIC Card Regulations Published by the Department of Homeland Security

Wal-Mart Jumps on In-Store Workforce Optimization Bandwagon, but Move to Reduce Costs Could Cause More Labor Woes Some Say

Chinese Autos are Coming (from Chrysler) Putting more Pressure on United Auto Workers

New JC Penney Exec in Charge of Store Operations and Logistics Gone after only 5 months

Jan. 4 , 2006

SCDigest Editor Dan Gilmore’s Comments Help Lead Debate on RFID on Retail Wire Web Site

Group of expert observers comments on use of RFID in consumer goods-to-retail supply chain

Jan. 3 , 2006

Diesel Prices Had a Roller Coaster Year in 2006

But Prices End Pretty Much Flat with Where We Started in 2006 – See the Full Year Graph



Q. What U.S. city was the source of the most patents in 2005 (the last year for which data is currently available?

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 hope many people enjoyed our revised piece on "Twas the Night Before a Supply Chain Christmas" - take a look here if you missed it.

We're keeping it simple this week - our feedback of the week is from one reader (who asked to remain anonymous) who responded with a somewhat more cynical view of the state of affairs suggested in our piece - we think you'll find it amusing too!

More regualr letters next week!

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 a Different Supply Chain Christmas

What Fairy Tale are you reading???

First of all, why are you in your DC alone? Isn't that a Security Issue?

Then, for most businesses, it's the end of a Fiscal Quarter...and it's sure not quiet! (We'll be working 24/7 for 25 out of 28 days. They took ONE Sunday off in December!)

With Promotional items shipping and Spring displays being kitted, inventory levels are at the high point for the year! Bonuses? With thinner margins (to keep our "Big 4 Customers' business!)??? Not happening...

We're definitely more productive; with a veteran crew. We aren't using any more labor because that's been cut back like everything else! Our cycle times are shorter as well (but only because our supplies were LATE and we pushed everything out with PREMIUM FREIGHT!)

We plan and strategize only to wait and not see (it's that Legacy system that's been good this far; why change it now? E-mail everything; who needs visibility?...) They push and then pull back, as we pull and fall down. Dust off. Pull again. Fall again...same cycle.

We're expected to cut costs, so we spend Freight dollars shipping goods TO CHINA so it can be MADE CHEAPER, SHIPPED BACK (Freight Collect, of course!) to be held in Customs until it's too late!    

...sorry, but I see no joy in Mudville. We'll gladly take the new tools, technology, and the consulting, too. But chances are, We'll lose Wal-Mart business because they've found a cheaper manufacturer and can STILL add some profit as well.   I believe a "Humbug" is in order.    

(We do have new Raymond forklifts, though! Leases are a good write-off!!! And the repairs on the old units were getting costly.)

Please sign as "Anonymous"


Q. What U.S. city was the source of the most patents in 2005 (the last year for which data is currently available?

A. San Jose, home to many high tech companies and individual inventors, with 3,867 patents in 2005. Nearby Sunnyvale, CA was second, with 1881.

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