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August 23, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Supply Chain Best Practice – The Book

Regular readers will recall the interesting discussion we had over the past few months on the topic of supply chain best practices, tackling such topics as:

  • What are supply chain best practices?
  • Are they real?
  • Can companies really take advantage of them, or are they mostly used by consultants to drive business?

The root of the argument, of course, has to do whether there can be any universal “best practices” in light of the unique strategies, industries, and operating variables each company brings to the table. If you missed them the first time, we think you will enjoy these discussions (see What is Supply Chain Management Best Practice?; Readers Respond – Supply Chain Best Practice; What is Supply Chain Best Practice? (Part 3)).

Gilmore Says:

Holding individuals and functions accountable for their forecast accuracy, and rigorously tracking that, is certainly close to a best practice.

What do you say?

Send us your comments here

I haven’t actually even offered my concluding thoughts on this, so you can expect one more column in this series in a few weeks. But I promised awhile back to do a review and comment on the book by Dave Blanchard, editor of IndustryWeek magazine, titled Supply Chain Management Best Practices.

At the time, Dave wrote us and said: “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).”

I read the book awhile back, rescanned it this week, and come away with the following thoughts: it’s a good and interesting book, and has a place on every supply chain manager’s shelf, but I am not sure it really answers some of my questions about supply chain best practices.

For anyone developing a supply chain strategy, you could do worse than following these simple goals Blanchard identifies as being core to managing a successful supply chain:

  • Articulate what a company’s supply chain looks like and encompasses.
  • Identify the bottlenecks that are slowing down the movement of goods, information and services.
  • Put process in place to get the right products delivered at the right time and place [probably should add something about cost].
  • Empower the right people so that they can accomplish the above.

The book certainly provides many stories of companies that are running excellent supply chains, using innovative processes and technologies. Some examples include:

  • Korean automotive manufacturer Hyundai, which like many companies has developed a strong visibility system for the large volume of parts it moves to the US from Asia. The system monitors inventories, events and exceptions across each of the many legs of the route, and has helped Hyundai both improve service to its dealers, as well as reduce inventories. “You can run Lean if you have confidence in the Estimated Time of Arrival,” said George Kurth, director of supply chain and logistics there.
  • Chemical maker Dow Corning has also invested a lot in visibility, noting it is critical when 25-35% of your total inventories are in transit. In addition, the company implemented a self-service web ordering system that provides guaranteed delivery times for each product in the order. If a customer wants faster delivery, the portal shows them the options and any expedited costs. Reacting quickly to market changes, the prices for the chemicals are updated as often as several times per day.
  • Food manufacturer Land O’Lakes, interestingly, took back control of its transportation management process from a 3PL – cutting out the added cost of the service. It also participates in a few collaborative transportation networks, hoping to share capacity and get lower freight rates by finding complementary shippers. “We’re making logistics one of our core competencies,” said one logistics manager, noting the moves reduced total freight spend by 20%.
  • Network gear maker Lucent (now part of Alcatel Lucent after a merger) had to battle back a few years ago from an inventory crisis (way too much). It did so by shutting down most of its own factories in favor of contract manufacturers, cutting the number of suppliers it had in half, and implementing a multi-tiered visibility system, which combined to drive huge levels of inventory out of the network. It also established a goal of “zero latency” when responding to customer needs. When a request for quote comes in, a cross functional team is quickly applied to respond rapidly to the request, and much more of the company product is now made to order. The number of warehouses in the network dropped from 200 to 15, and the quote-to-cash cycle was reduced by 50%.
  • Companies like Campbell’s Soup and National Semiconductor (and many others) have improved supply chain performance and the results of the Sales & Operations Planning process by rigorously tracking forecast accuracy, and holding functions and individuals accountable for their numbers. Ultimately, this focus reduces the forecast bias that tends to creep in to many demand planning processes.
  • HP has been frequently cited for its use of sophisticated risk management tools in its procurement processes. This involves applying statistical modeling to its own potential volume requirements, as well as the variance of market price for components that can swing widely up and down in price over a given period of time. The result are agreements that often have price caps and floors in conjunction with ranges of volume commitments – contracts optimized as a result of the statistical analysis.

These are all good stories, and just a few of the several dozen in the book. There are lots of ideas for supply chain managers here.

Are they “best practices?” Again, I am not sure. My sense, for example, is that holding individuals and functions accountable for their forecast accuracy, and rigorously tracking that, is certainly close to a best practice. Not doing so is certainly a “bad practice.” Supply chain visibility is good, but is there a “best practice” around it? I am less sure of that. And certainly the Land O’Lakes example, while it worked for them, is just one of several logistics strategies that could be successfully employed, or be right for a given company.

I think I finally have my head around how to frame supply chain best practices, but that will have to wait for the next column on this in a few weeks.

Do you think the stories cited here represent “best practices?” Why or why not? Please let us know your thoughts at the Feedback button below. As always, we will keep your identity confidential upon request.

Let us know your thoughts.

Want a printable version? Go to:



Dan Gilmore


New Certified Lean Masters Lean Supply Chain Training and Certification Schedule Released


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

August 23, 2007
Supply Chain by the Numbers: August 23, 2007

August 23, 2007
Global Logistics: Congestion is Low at Every U.S. Port as Peak Volume Approaches

August 23, 2007
Supply Chain Graphic of the Week: Were 2003 RFID Tag Price Estimates Accurate?

August 21, 2007
Global Supply Chain: Amidst Unclear Consumer Complaints, Wal-Mart Removes Dog Treats Sourced from China from Its Shelves

August 20, 2007
Retail Supply Chain: In the Face of Tesco Invasion, Wal-Mart to Launch Smaller Store Formats


Credit worries on Wall Street continued last week with only five of our Supply Chain and Logistics stocks managing upward movement.

In the software group, Logility recovered from some of last week's slide (up 16.7%). There was little movement in the hardware group.  In the transport and logistics group, both CSX and Union Pacific were down significantly, while J.B. Hunt finished the week up 3.2%.

See stock report.


Supply Chain Tip of the Week: Improving Quality and Reducing Risk in Offshoring

After Mattel Incidents, Arrow Electronics Executive Offers Recommendations to Reduce Supply Risks; SCDigest Review and Comment

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

Expert Insight:
Living Supply Chains

by Dr. John Gattorna

John Gattorna All Pathways Lead to the Customer

Leading Companies are Segmenting Customers by Supply Chain Requirements, Not Traditional Characteristics


Reader Question: Why Isn't Port Congestion at U.S.Ports an Issue Any More?

Reader Question: What Kind of Savings Do Companies See When They Implement EDI Transactions With Their Suppliers and CMs?


SCDigest is pleased to welcome Tom Jones, of Ryder System, Inc.,

and Robert Belshaw of GE Commercial Finance

as the most recent additions to our growing list of expert panel members.

If you have supply chain or logistics related questions you need answered, ask our panel of experts.

Share your insight.


Q. Roger Milliken of Milliken & Company is noteworthy for championing what supply chain concept?

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!

We received a number of letters on our review of the key trends and events for the first half of 2007. That includes our feedback of the week, from VP of logistics at a large consumer package goods company, who offers several comments on our analysis, and suggests we should have also emphasized the current corporate focus on S&OP. A logistics manager at a food manufacturer in the UK writes that he is looking for data to help support his belief that the company needs additional stocking points to help combat rising transportation expense, and another writer, responding to our story about use of “bucket brigades” for order picking, wonders if companies employing the strategy still need a “queen” bee.

You’ll find all these and more below.

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 1H Supply Chain Review

Your review of the 1H 2007 supply chain trends was thought provoking as always. A couple of comments:

We are a consumer goods company, and there is no question we are embarking on some “green” supply chain initiatives simply to look good to Wal-Mart and I suppose to the public, without really being inspired for other reasons. Does this mean we shouldn’t be taken these steps? I am not sure. As yet, the cost-benefit equation is unclear. But CEOs are on-board, for various reasons.

The RFID situation is exactly as you have described it – treading water, mostly, and most of us looking for real value. Your interview with Dick Cantwell [of Procter & Gamble] was the best thing I have seen on this topic. But what works for them may not work for us. And agree benefit seems to be more on the merchandising side than the supply chain side.

Finally, I would have added a trend about Sales and Operations Planning. Both within our company and other supply chain execs I talk to, most everyone is putting a lot of focus there.

VP of Logistics
Consumer Packaged Goods Company
Name withheld by request

More On 1H Supply Chain Review:

I read your articles always with great interest. In my capacity as a logistics manager I'm responsible for our company's global warehouse infrastructure including its costs and quality levels.

Our company grew partly by acquisitions. As a result, our supply chain infrastructure was not very effective some years ago.

We embarked on a network optimization program, which led to a fewer number of warehouses. At C-level the number of warehouses or the reduction of them has become more or a less a KPI for them.

As you and I know, and also confirmed by the report  “state of the logistics union" we currently face a situation that, in certain circumstances, it makes perfect sense to open extra stockholding points to take away the pressure in the transportation area.

The struggle between service, cost and number of warehouses keeps us busy during our daily work. Any ammunition to support the outcomes of our modeling exercises is welcome.

Logistics Manager
Food Manufacturer

Good 1H2007 recap. I definitely expect to see more and more counterfeit product and product safety news going forward.

A news story on Good Morning America talked about the dangerous content of lead in common garden hoses and how unsafe these levels of lead are for human consumption - now you can't even take a drink out of a hose on a hot summer day while gardening without being affected! We can only expect to get more and more alerts on a global basis surrounding counterfeit versions of products. Whether these goods have "entered the legitimate retail supply chain" will be an interesting challenge for manufacturers, distributors, transportation companies and retailer and their attorneys - especially where human lives and health are at risk.

The "legitimate supply chain" - new vernacular that I'm sure will be part of contracts and legal cases for years to come. The global supply chain is more visible today to the average consumer than it has ever been. As members of the supply chain community, we will all have overwhelming challenges as well as unbelievable opportunities going forward as supply chain awareness is heightened as a result of our global economy. Simply put, today, people want to know where products are coming from and who 'touched' them - in the event of a catastrophe it is likely that everyone along that particular product's supply chain will be at risk. Information will drive this ever-increasing level of scrutiny. What a fascinating challenge for all of us!

John Naisbitt, author of Megatrends 2000 based a lot of his projections and forecasts simply by analyzing the content of leading news sources around the world. Counterfeit product and product safety issues are increasing daily. I believe there is a lesson to be learned here.

Steve Simmerman
VP Marketing & Business Development

As a Brit based in the USA, I would be interested in your thoughts on Tesco's Supply Chain v Wal-Mart's.

As Tesco is planning to roll out it's Fresh and Easy concept in the South West USA, I noted that AMR reported two European based ready meal and salad producers are co-locating next to the Tesco DC. I wondered if this is because local suppliers are not "Tesco ready" or if there was some other reason.

A consultant I met who knows both retailers quite well suggested that Tesco was way ahead of Wal-Mart in the art and science of Supply Chain Management.

It would be an interesting comparison.

Nick Turner
Columbus, OH

On Self-Organizing Systems:

Wow! Bucket brigades really solve the issue of efficient task assignment. Without direct management intervention. Without royally expensive and over engineered task-interleaving-and-optimization software. Now, if ONLY there was a 'queen' who could produce an near infinite stream of ready-trained workers...

Peter Zalinski
Senior Applications Engineer
Miles Technologies, Inc


Q.  Roger Milliken of Milliken & Company is noteworthy for championing what supply chain concept?

A. Quick Response, meant to speed the flow of information and goods in the textile-apparel-retail supply chain.

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