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July 12, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

1H 2007 Supply Chain Review

I find it beneficial for myself to look back each six months on the key news, trends and events that have shaped the supply chain and logistics profession, and most readers seem to enjoy it as well.

We’re all so caught up in the day-to-day that it is often (always?) hard to see emerging trends, or even remember noteworthy events.

Early in the year, we identified the “Green Supply Chain” as the number one supply chain trend of 2007, and that turned out to be a good call. We’ve already seen an increasing number of “green” or “sustainable supply chain” conferences launched in 2007. Dedicated managers and executives are emerging, such as Dell’s Brittain Ladd, who focuses a big chunk of his time looking at more environmentally friendly transportation strategies. We are even seeing a growing number of related executive positions, such as Gene Kahn, Vice President of Sustainable Development at General Mills.

There is pressure to go Green from many quarters; for example, GE was again named American’s most admired company, in part because of CEO’ Jeff Immelt’s Green focus. You know other CEOs are watching closely, and would also like some recognition.

In the first quarter of this year, a large food company told me they were pursuing a transportation improvement program, in part to save money, but also out of a desire to impress Wal-Mart that the company was doing its job to support the retail giant’s own Green strategies. That was a key factor in the project rising to the top of many potential cost saving projects the company might consider. In the first half of 2007, Wal-Mart launched a Green supplier scorecard, we saw eco-friendly product identification coming to Wal-Mart and Home Depot, etc. – the list keeps growing. More on this soon.

We enjoyed the RFID brouhaha early in the year, when the Wall Street Journal reported in the Spring that Wal-Mart’s RFID initiatives weren’t being rolled out as expected, and CPG companies couldn’t find value. That was followed by a barrage of Wal-Mart generated PR, in which they rebutted the Journal’s assertions, and got statements from a few CPG CIOs who said “Of course RFID is great.” This was about the same time at which the CIO of Sara Lee was saying there could be no value at current price points, and the stuff didn’t work well enough yet, etc.

That all died down, but it was fun for a few weeks. Both sides were right, in part.

The first half of the year also saw a continued reduction in logistics/transportation capacity related issues. The Bear Stearns quarterly shippers report has shown record perceptions of overcapacity in the truckload market for the last two quarters. Port congestion has for the moment also disappeared as a concern, as slowing import growth, port efficiency gains, and changing import strategies have combined to dramatically relieve pressure for now.

I think we’ll see the pendulum swing back again before too long in both areas, but perhaps not near the “Perfect Storm” (overused term) conditions of 2005. Transportation markets have a strong tendency to clear themselves to the shipper’s advantage. Now if we could just get rid of those pesky fuel surcharges.

Supply Chain icons Dell and Wal-Mart continued to struggle. Perhaps to the surprise of some, when Michael Dell returned as CEO early this year, he stated Dell had lots of room to improve its supply chain, and named Solectron’s Michael R. Cannon to the position of what is, in effect, the company’s first Chief Supply Chain Officer.

Wal-Mart has struggled with its overall results (some store sales down or flat, not much success with major apparel initiatives, etc.). It’s unclear how much of an impact two of its big 2006 supply chain initiatives (Inventory DeLoad (slow growth of inventory versus sales), and Remix (streamline fast moving products to the shelves)) have had in improving the numbers. We are going to look at Wal-Mart’s supply chain in more detail in a few weeks.

It seems to us, in part as we report nearby in NewsBites, that the first six months of the year have also seen a strong focus on addressing issues of counterfeiting and the product safety for imported goods. These are two separate but, at a high level, related issues. There is emerging legislation in Washington, China is promising to crack down on companies that don’t address safety concerns, new companies are starting that provide services that provide brand protection, etc.

From a supply chain software perspective:

  • Many providers are doing OK right now – the market is healthy, which means companies are buying.
  • The software mergers have slowed a bit, for now, as the weak or extremely attractive have been winnowed out.
  • The first half of 2007 saw the real hype to begin over Service Oriented Architecture (SOA), as our Mark Fralick has been reporting. SOA is good, but as we’ve noted, it will be hard for companies to separate the real from the baloney.

Finally, the first half of the year has seen continued commodity price inflation, especially in agricultural products (“Agflation”), putting lots of pressure on the production costs of many companies, squeezing margins as price increases are still tough to push through to consumers.

From a Supply Chain Digest perspective, a few notes:

  • Our new “Your Questions Answered” feature is taking off – too much! We need help. Do you have strong expertise in some area of supply chain, logistics, material handling, RFID, procurement, etc? Join our distinguished and growing panel of experts. Send an email to – please!
  • As many have commented, we have too much content for one issue. Starting the first week in September, we’ll be going to two weekly issues. The first – SCDigest On-Target – will feature news stories, tips and other content along seven consistent supply chain and logistics categories. The traditional SCDigest on Thursdays will be slimmed down a bit, and have my column, our guest columnists, and Your Questions Answered. All the News and NewsBites will be moved to Tuesday. You’ll also see further features on our excellent web site!
  • You will also find a new weekly feature nearby: Supply Chain by the Numbers…

Those are my first half thoughts. Would love to hear yours.

What are your comments on Gilmore’s 1H 2007 supply chain review? What would you add, or change? What do you expect might happen in the rest of the year?

Let us know your thoughts at the feedback link below.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore


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

July 12, 2007
We're picking the best new products of 1H 2007 (Software, Hardware, Service). Have a Candidate?

July 12, 2007
Supply Chain Graphic of the Week: Inbound Container Volume Growth Slows Dramatically

July 12, 2007
Global Supply Chain: China, Ummm... Gets Tough on Product Safety Issue
s - Official is Executed

July 11, 2007
New Feat
ure: This Week's Supply Chain by the Numbers - Take a Look

July 10, 2007
Global Supply Chain: Rash of Recent Safety and Counterfeiting Cases Seems Sure to Lead to Legislation
from U.S. Congress


It was a mostly up week for our Supply Chain and Logistics stock index.

Software provider Logility posted the week’s strongest gains (up 11.3%).  In the hardware group, both Zebra and Intermec netted positive results, while in the transport and logistics group, Prologis and JB Hunt emerged with the largest gains. 

See stock report.


P&G's Dick Cantwell RFID Interview - Full Transcript

By popular demand - full transcript of our Unplugged interview with Procter & Gamble's Dick Cantwell on RFID. Excellent!

This Month's Supply Chain Marketing News - Exclusively for Supply Chain and Logistics Solution Providers


by Dan Gilmore
How to Select the Right Consultant for Supply Chain Network Planning Projects

You will almost certainly use a consultant for Supply Chain Network Optimization projects; here's our guide to picking the right one for your needs


by Stephen Craig and Erik Markeset

What Kind of Results Can You Expect from Carrier Bid Optimization Projects?

Question to SCDigest Has Us Thinking about CBO and the Factors that Impact Potential Savings


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.

Reader Question: What Kind of Savings Do Companies Typically See When They Do a Formal Carrier Bid Process by Lane?

Reader Question: Are Supply Chain Certifications Valuable?


Q. What percent of world oil output does the U.S. currently consume?

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 really behind again - bear with us. But keep the letters coming!

Again just catching up on a few letters this week. Our feedback of the week is from Jon Kirkegaard of DCRA, who shares some interesting observations on RFID and retail supply chain success generally, stemming from our Unplugged interview with Procter & Gamble's Dick Cantwell. We also received another interesting letter from a supply chain director at a large consumer goods company, who says this was the best piece he's seen on RFID to date.

Also a letter from Optiant's Bob Ferrari, with additional comments stemming from our Gene Tyndall's review of the recent AMR Executive Conference.

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 Cantwell/RFID

Like you – we have been quite outspoken on what our calculations show is a negative ROI on RFID - and we have actually been even more outspoken on how the RFID crowd franticly tries to hijack value from other areas and claim those financial returns come from RFID when in fact they come from good inventory policies, logistics innovation or demand supply balancing techniques.  This RFID push does even more harm as it delays, or kills real value add initiatives over false RFID hope - or at a minimum saddles talented people in RFID seminars instead of learning about real needs and solutions J

We at DCRA have always suspected Wal-Mart, P&G and the other major pushers of RFID real economic case (that they do not share) is to be first to deploy scanner pay in the store thus eliminating head count and providing higher throughput (profits) through the physical store ( a real ROA for the store but not the supply chain).      

We don’t see this store economic case as an investment that should be pushed on the suppliers to pay for -any more then the suppliers should pay for repainting the store and installing faster cash registers.  However, we have all seen the RFID crowd push, cajole, fabricate the implementation of RFID as the one size fits all “EASY BUTTON” (to use another retailers metaphor) to a perfect supply chain – whatever that is ?  When if fact it is the synchronization of the extended supply chain’s information from raw material, on demand production through fulfillment lead time coordination to customer expectations (of which full implemented RFID will just be one more data feed of thousands) that truly is the real financial enabler. 

To RFID’s credit it undoubtedly makes sense for high value goods subject to loss, theft, counterfeiting and or returnable recyclable good such as a beer keg or aircraft part exchange, high value pharmaceutical, heart pacemaker etc.

Until we see Wal-Mart and P&G’s stock prices take off because their ROA, inventory turns, overall cashflow is exceeding their competitors - and their CFO”s and COO’s give credit to RFID I will remain highly suspect.   In fact, the past few years Wal-Mart and P&G’s stocks have languished while nimble retailers and virtual manufacturer based retailers like Coach, JC Penny, Ikea have had magnificent returns through cutting cycle time in production, using private label contract mfgrs, logistics innovations etc.. 

I think this recent history tends to confirm true ROA from improvements in the extended supply chain back into true manufacturing and production (e.g. JC Penny and Coach) are real competitive differentiators    It seems to us that decision makers should use the recent hype curve and what is becoming a clearer reality as support for more vigilance on demanding proven ROI metrics to any “supply chain” initiatives.

Keep up the good work SCDigest and keep pushing the real value add solutions and continue to help readers discern real supply chain solutions.

Jon Kirkegaard

More on Cantwell/RFID:

Your two-part interview with Procter & Gamble's Dick Cantwell may be the best single journalistic piece to date on RFID in the retail sector - congratulations. I can tell you lots of people in our company, which is not nearly as bullish right now as Cantwell is, read it with great interest.

I too have been somewhat cynical, but Cantwell raises some excellent points. I have simply never heard the issues framed the way you were able to do with Cantwell, and in the straight talking way he responded.

Thanks to both of you.

Director of Logistics
CPG Company
Name withheld by Request

Good interview….keep it up.

Dean Frew
President & CEO

On AMR Conference Review:

In addition to Gene’s insights on the AMR Conference, I’d like to add a couple of insightful observations that I took away from the conference.

In the context of what do best-in-class companies do differently, AMR pointed to a recent survey that compared best-of-class companies in both Consumer Products and the High Tech industries. What was pointed out was that the leaders among both industries demonstrated three simultaneous capabilities:

  • High frequency of planning and sensing product demand- often on a weekly basisFrequent measures and updates for component lead times, capacity constraints, and supply decoupling
  • Monitor costs on a weekly basis, and analyze supply chain network design more frequently than just annually.

In the customer panel discussion on supply chain network design and inventory optimization, both Boston Scientific and Microsoft pointed to the use of these tools of connecting value and supply chain risk with senior business executives, with the ability to communicate smarter inventory positioning, rather than just pure inventory reduction, as a means to deliver both supply chain efficiency and flexibility to the business.

Another takeaway that had value for me was a observation from head of global technical operations (supply chain) for Novatis Pharmaceuticals: “align with the speed of lean, and don’t take something complex, such as global supply chain, and make it more complicated than it needs to be..”

Finally, what I heard in many of the presentations from the represented top 25 supply chain companies is that the business, and supply chain, needs to be actively leading transformation, and IT needs to be enabling that transformation.

Bob Ferrari
Vice President, Corporate Strategy and Marketing


Q.  What percent of world oil output does the U.S. currently consume?

A. About 25%.

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