This Week in SCDigest:

May 3, 2007 - Supply Chain Digest Newsletter
SupplyChainDigest - Your first stop for supply chain information

Become a Sponsor Click here for information on how to become a Sponsor
Send to a Friend Send this newsletter to a friend. Click here!
Not already subscribed? It's free! Click here.

Archives | Events | Featured Report | Featured Offer | Upcoming VideoCasts | Feedback

Featured Report

Sponsored by: HighJump Software, a 3M Company

Eye-Opening Report on Labor Management

Payroll is typically the largest expense in the warehouse. Yet, many businesses fail to gain visibility to the work their employees carry out each day. Discover five reasons you can’t afford to postpone your labor management project.

Download your complimentary copy at:


First Thoughts by Dan Gilmore, Editor

It Was Working at WERC 2007

I had the chance last week to attend and speak at the annual Warehouse Education and Research Council (WERC) conference in Nashville. It has been a few years since I’ve attended this event, and my sense was that the conference itself is on an upswing; some excellent material was presented.

My review and comment is below, including summaries of several sessions. We’ll have some detailed reports next week.

There were somewhere north of 1000 attendees, and it seemed that the attendee level and the overall “energy” of the event are trending positive. I enjoyed very much the Council of Supply Chain Management Professional’s (CSCMP) conference in San Antonio last year, but noted a somewhat lack of sessions around core distribution issues in favor of global sourcing/supply chain, transportation and other topics. WERC promptly wrote us at the time to suggest we head to Nashville in 2007 to get our fill of distribution related subjects, and that’s certainly what I found.

I was again reminded here of what interest there always is in “foundational” sessions, on topics such as comparing different order picking approaches, where and when to use automation in the DC, etc. There were a number of these sessions at WERC, and they all seemed to be very well attended.

I also give my hats off to WERC for having the presentations available as handouts for the start of most sessions, and the promise by the moderators when they were not to promptly get copies out to requesters. This is the number one gripe I hear from attendees at events – no handouts to begin with, and failure to receive  emails of the presentations after submitting a business card in the traditional bucket.

I also give a tip of my hat to Prologis, a 3PL and facility provider, which seems to be sponsoring valuable, genuine industry research with no hidden agenda. That includes current work by Tom Speh of Miami University and Arnie Maltz of Arizona State on “Import-Driven Warehousing.” The two spent many months visiting a number of U.S. ports and import warehouses to better understand how the rapidly growing movement of offshore goods can be improved.

Key findings: Total efficiency varies significantly from U.S. port to U.S. port, driven in part by differing longshoremen work rules but also many other factors. The lack of a “single window” into inbound container processing info creates huge challenges, and it is extremely difficult for import DCs to deal with the sharp ebb and flow of the number of containers coming at them. As such, access to a pool of temp labor can be critical. Much more so than regular warehousing, import warehouses are dependent on managing a wide array of relationships (ports, drayage carriers, ports/terminals) to be effective, often using non-electronic means. If you can’t manage these relationships, it’s hard to be effective.

Laurie Copeland of Home Depot gave a nice presentation on the use of metrics to drive and improve 3PL performance. Home Depot had something of a mess of a 3PL strategy until a few years ago, characterized by a very decentralized operating environment and great variance in policies and results. Copeland and her team first developed a more integrated, standardized approach, and then started the use of a strong performance measurement system to drive and in some cases “partner” with 3PLs to improve results.

Some key takeaways: Home Depot has built a powerful dashboard to let its own team and the 3PLs see performance results along a number of key performance indicators. Somewhat unusually, the dashboard shows the performance of both 3PL-run and Home Depot run DCs within a category (cross dock facilities, etc.), availble to both sides. There are significant financial penalties and rewards built into the contract for 3PLs depending on whether they meet, exceed, or fail to achieve metric targets (fines and bonuses, if you will). When a 3PL fails to meet targets, Home Depot executes a standard, consistent “Process Improvement Program” with that 3PL provider to get the metric going back in the right direction.

I also very much enjoyed the roundtable discussion on global supply chain, moderated by Honeywell’s Jay Fortenberry, VP of Supply Chain Integration. He was prepared, highly experienced, and had some materials to drive the discussion. I heard a few of the other roundtables floundered a bit from a lack of strong direction by the moderator.

As we’ve noted many times before, it’s clear so many companies are still in the very early stages of global supply chain execution. Common themes from participants in this roundtable session: challenges from asking domestic buyers to suddenly start executing global supply chain programs, without the requisite expertise; the much greater level of disconnects in activities in global supply chains and a lack of internal communication; rising inventory levels; and the temptation to just say “Forget it” and let an outsourcing do it all.

My take on the last point: outsourcing should be the result of a strategic decision, not a panicked one, and you still have to be able to manage the outsourcers, lest you be shorn like a sheep.

Omer Rashid of KOM International did a very nice job of demonstrating the potential improvement in space utilization and labor cost savings that companies can achieve from digging into their data and reslotting their warehouses (including changes in storage modes). It’s clear to me many more companies could be benefitting from this. One issue for Rashid and it seemed most of the audience: finding slotting software that really worked well in “maintenance” mode.

Jim Barnes of enVista and I did a presentation on the impact of consolidation on the WMS industry and potential WMS buyers. In case you haven’t noticed, there’s a lot of that going around, not just in WMS but every other supply chain software category. Our message in part: any vendor potentially can be purchased, noting the apparently semi-serious talks between Microsoft and SAP a few years ago.

So what do you do? First, recognize almost every vendor funded by VCs or private equity will be looking to cash out, and the “going public” route is a lot more difficult or even impossible for many today. That means a sale to someone is likely.

You should evaluate whether a vendor you are considering is likely to be purchased as a “strategic buy” – meaning it will largely be acquired for its products and level of growth, or (as is increasingly common) to acquire its customers on the relative cheap. In the former case, the acquired product is likely to get lots of support and development. In the latter, don’t expect much of either no matter what they say when the deal is announced.

Your best bet? Require source code to be escrowed in somewhat in the event of a lack of support and development, and that the technology is something your IT team could in fact take on itself.

Did you attend WERC 2007? What was your experience? What makes import warehousing different, and what are keys to success? Can we do a better job of using metrics to drive 3PL performance without it being only a club? Should more companies be looking at the data to drive reslotting programs? Let us know your thoughts.


Let us know your thoughts.


Dan Gilmore


Supply Chain Videocast Series

Driving Costs Out and Efficiency In with
Enterprise Bar Code and RFID
Label Management

Are you meeting changing bar code labeling and emerging RFID tagging requirements with maximum control and efficiency?

In this broadcast, we'll show you how to dramatically reduce labeling costs, better meet on-going compliance requirements, and integrate your supply chain with a enterprise approach to labeling management.

More information, and to register.


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

May 2, 2007
Manufacturing News: Holy KitKat Bar! Hershey to Outsource Chocolate Manufacturing

May 1 , 2007
Supply Chain Executives on the Move

May 1 , 2007
Will Growth in Consumer Diesel Usage Put Upward Pressure on Costs for Carriers?

May 1 , 2007
New Supply Chain Chief at Dell to Revamp Manufacturing and Distribution, While the Company May End Direct-Only Model


It was a mostly down week for our supply chain and logistics stock index last week, with just a handful of companies in our group managing gains.  

The week's biggest gainer was hardware provider, Intermec, up 5.7%, putting it back into positive territory for the month.  

See stock report.


RFID, Used Right, Will Fundamentally Change Distribution Center Operations

Users will Move from a "Periscope" to "Sonar," According to SCDigest's Mark Fralick

Retail Supply Chain: Is the Best Path to Reduced Out-of-Stocks a Little More Training for Store Employees?

New Study from Wharton Finds Better Store Execution May be Easier Place to Start than Sophisticated Planning, RFID

New Supply Chain Digest Report Identifies the 10 Keys to Global Logistics Excellence

Most companies must make major strides to realize the full potential of globalization, research finds; the report's valuable Diagnostic Tool helps companies assess where they stand versus the potential in technology and process

Supply Chain InView

by Ann Drake

Logistics Manager's Nightmares Can Be Cured

Collaboration is the answer to solving problems in distribution channels


by Dr. Edward J. Marien and John Kenny

Improve Product Lifecycle Profitability with End-of-Life Progressive Inventory Disposition (Part I)

Focusing on the end of a product's lifecycle can have a dramatic impact on the bottom line, especially for high tech manufacturers


Have a supply chain or logistics related questions you need answered?

Ask our panel of experts.See our growing list of questions and answers - share your insight.

Featured Question and Answer: Are there any rules of thumb about when you should use floor storage versus rack storage? Is there usually a "right" answer for a given operation?


Q. What was famous about a pallet of Scott Paper towels in 2003?

A. Click to find the answer below


Address today’s most critical issues for Supply Chain Management

A PROVEN expo and a NEW 3-day conference featuring over 85 tracked sessions tackling today’s most critical issues — all in one place.



Do use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.

You can subscribe to our RSS feeds in two ways:
1. Copy our RSS link into your RSS reader - it's easy!
2. Click on a button below to quickly add it to your favorite reader.
  Add to My Yahoo! Subscribe with BloglinesSubscribe in NewsGator Online

Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're now really! behind - be patient if your letter has not yet been published. 

Still more letters this week from a number of people who responded to our original column on "What is Supply Chain Best Practice?" a few weeks ago, some of which we summarized last week (see Readers Respond – Supply Chain Best Practice). That includes our Feedback of the Week from Dave Blanchard, Editor of IndustryWeek and author of a book on supply chain best practice, plus several more excellent letters.

Last week’s column generated even more feedback, so we may be at this for awhile!

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 – SCM Best Practice

Considering that I just wrote a book with the title, Supply Chain Management Best Practices, I guess I'd be among the group that says there most definitely are best practices for SCM (there are also worst practices, which I also mention in the book). It was published just last December by John Wiley & Sons.

Supply chain management best practices are important because, at the most fundamental level, they establish a benchmark for companies to try to reach. Everything in the supply chain is measured, but how do companies put those measurements into practice? When companies study their cash-to-cash cycle time, for instance, they're not just looking at that time as a static number, i.e., "Okay, we're at 28 days. Now, what should we measure next?" Instead, they want to know if this number is acceptable, if they can reduce the time, and also, how does that number compare to other companies in their industry. That's where the "best practices" come in. Just as there are best practices in accounts receivable and medical transcription and human resources, there are also best practices in supply chain management.

I think what some people object to is the idea that by calling something a "best practice," it implies there is only one right way to do it. That's certainly not the case, but what a best practice does, ideally, is illustrate that some companies and organizations are achieving "best in class" results by doing a certain process a certain way, and that other companies would do well to emulate that best practice as appropriate.

It's like anything else -- there's no single "right or wrong" way to throw a football, but the best players in the country tend to follow similar training patterns that make them "the best."

Dave Blanchard

More on Best Practice:

Is there really a best practice? The best of the best that you can be?

I think that is something achievable but it doesn't come in a can. What works for me will most probably won't work for you.

I do think these success stories more than a point of sharing the best practice, should serve to help us think a little out of the box for our own processes. I've been in the "Best Practice" industry for 10 years in three different companies, and benchmarking along with developing new processes is on the top of my list.  The common thing that I have found is that it is very easy to fall in to what I call the "comfort" jaws. "That is the way it has always been" and "it's not broken, so why should we change it?" are common phrases in most of my meetings. 

Through sharing great practices and success stories from other companies, it helps to loosen the tight grab of the "comfort" jaws.  People actually start to think differently and look a little outside their room often achieving a best practice for their job.

Neysha Arcelay

Regarding benchmarks: I personally think that they are great. But, like everything else in life, they can be abused. A benchmark is a number - a point on a continuum. Too often people think of them as the goal, and don't try to understand why or how to get there. I was in one company were a senior VP was trying to benchmark transportation costs as a percent of sales for their products (commodity consumer goods) against Dell. It just won't work.

Numbers are interesting, but the process that generated the benchmarks are also critical. We should ask ourselves how firms got the results they got.

Finally, we have to remember that we can't be the best at everything. Companies would go bankrupt chasing after being 'best in class' in all categories. Based on your strategy, you should pick a few key areas that you want to excel at, and be the best.

Dr. Karl Manrodt
Associate Professor
Georgia Southern University


Q.  What was famous about a pallet of Scott Paper towels in 2003?

A.  It was the first product to have its EPC tag read at a Wal-Mart distribution center. Scott is part of Kimberly-Clark.

Copyright © SupplyChainDigest™ 2003-2005. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 45066