This Week in SCDigest:

September 27 , 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 | Feedback

Featured Sponsor: Sterling Commerce

Access information on how to grow sales opportunities, synchronize distribution channels and increase customer satisfaction. This cross-channel selling and fulfillment site is tailored to help you see and capitalize on market opportunities that make it easier for your customers, suppliers and partners to do business with you.

The IDC White Paper, Distributed Order Management: Maximizing Customer and Partner Sales Online, is now available.

Download the IDC White Paper

First Thoughts by Dan Gilmore, Editor

Aligning Supply and Demand

What, really, could be more fundamental to Supply Chain thinking and practice than aligning Supply and Demand?

Nothing of course. Yet, for any number of reasons, most companies find it extremely hard. Some of those reasons really are challenging – highly variable demand, for example - but many of them are simply self-inflicted. Such as the demand and supply side of the house really don’t talk. Sound familiar?

It’s interesting to take a step back. In just the past few years, two decades after both the term supply chain management was invented and the basic process of sales and operations was defined, S&OP has suddenly become hot. Though many companies have been doing S&OP and a few even been good at it, in the past year I personally have spoken or worked with three or four very large companies that are just getting the S&OP process down, and have a long way to go to come anywhere close to being considered excellent at it.

Gilmore Says:

"We’d ask, ‘Why did we miss the forecast?’” Dadmun said. “’Because customers didn’t order’ would be the response. But why didn’t they order? That we didn’t know.”

What do you say?

Send us your comments here

Awhile back, I had a friendly debate with SCDigest Contributing editor Gene Tyndall, who pushed back on the notion that S&OP was “hot.” But after a few new client engagements, he was reconsidering.

“I thought we had largely solved the S&OP issue by the late 1990s, but I was wrong,” Tyndall told me. He said that some recent experience on corporate boards and other consulting engagements had indicated that many, if not most, companies have still not got their arms completely around S&OP yet.

(All this in the context of our most recent edition of the hard copy Supply Chain Digest Letter – which focused this month on the Sales and Operations Planning. It’s a great issue, and though mailed to almost 30,000 readers, not all e-subscribers receive it. You can subscribe to the Supply Chain Digest Letter for future monthly issues or access our outstanding S&OP resource page right now – where you can download a pdf version of the Letter, access our S&OP library, read expert commentary, review S&OP technology solutions, and more. Feedback on the Letter has been great – think you will agree!)

It’s almost become a cliché, but the statement that “most companies do some form of S&OP, but very few do it well,” still rings true in 2007.

Jon Kirkegaard, President of DCRA Inc., a specialty supply chain solutions firm, agrees.

“S&OP should generally be the first and highest profile supply chain function, as it brings great clarity to where to invest in further improvement,”  Kirkegaard said. “Unfortunately, only the best and most advanced firms seem to understand this and use it for great strategic advantage.”

In the S&OP case study featured in the Letter, we also liked the perspective of Tom Dadmun, VP of Supply Chain for high tech firm Adtran. Before its highly successful Sales and Operations Planning initiative, Dadmun said Adtran (as with so many companies), suffered from a “wall of silence” between operations, sales and marketing, and product development.

“We’d ask, ‘Why did we miss the forecast?’” Dadmun said. “’Because customers didn’t order’ would be the response. But why didn’t they order? That we didn’t know.” Sound familiar again?

As we did research for this edition of the SCD Letter, a few interesting things emerged:

  • The initial concept of Sales and Operations Planning is giving way to the notion of Sales Inventory and Operations Planning (SIOP), which as should be obvious from the name more explicitly includes inventory levels as part of the planning process (more on this soon from SCDigest). “The basics of S&OP is understanding your inventory and balance sheet risk in as near real time as possible while simultaneously understanding your ability to meet promised dates with inventory to customers,” Kirkegaard added.
  • While it is almost always the supply chain function that initiates the S&OP initiative, an increasing number of supply chain executives subsequently push for ownership of the process by the sales or marketing functions.
  • Companies far down the S&OP curve start to focus on unearthing information and insight that can’t be found in the numbers. What qualitative information is out there that might impact the baseline or consensus forecasts?
  • Clearly, there is recently a much greater focus on better incorporating new product introductions (NPI) and product lifecycle management (PLM) that we ever saw in the past. With today’s rapid product lifecycles, this is critical.
  • Focus on communication. Even companies that did S&OP well often left the results at the executive suite, or the next level down. Leaders are clearly working hard to drive consensus forecasts and related plans deeper into the organizations.
  • One question that frequently comes up is: What is the role of technology in making S&OP work? I’d just say this. You can get started with S&OP with relatively little technology. But I’m just not sure how you do it well without strong technology support. What is really changing today is the testing of various alternatives, or what almost might be called simulation of various supply and demand scenarios, and robust tools are certainly required to achieve that kind of capability.

As S&OP guru Tom Wallace, author of our new S&OP Report column notes, the lack of this kind of technology support has been a large barrier to next generation S&OP., “but that barrier is now gone.”

A lot more we could say, but I’m out of space. Again, you’ll find a wealth of resources on our S&OP micropage. If you would simply like a zip file of the best of that material emailed to you, send us a note at

What do you think are the key trends in S&OP? What are the keys to breaking down the “walls of silence” between functions? What was the key to your company’s S&OP success? Let us know your thoughts at the Feedback button below.

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

September 27, 2007
Supply Chain Graphic of the Week: the S&OP Process

September 26, 2007 Supply Chain by the Numbers: September 26, 2007


Leading supply chain experts
will share best practices and strategies for coping with natural disasters, geopolitical risks, volatile fuel prices, as well as operational challenges such as forecast accuracy or sourcing problems

Learn More Here or Call 888-265-4706 for more information.


After a cut in the federal funds and discount rate last week, both the Dow and S&P closed with their best weekly results in six months. 

Our Supply Chain and Logistics stock index’s performance was similarly positive.  In the software group, Oracle benefited from better than expected earnings' results (up 9.5%).  Both Intermec and Zebra in the hardware group were up for the week. In the transport and logistics group, CSX was up 5.7%; however, Fed Ex and J.B. Hunt were both down (4.7% and 4.8%, respectively). 

See stock report.


Print Version Here

Cover Story: Better Preparation and Negotiation Can Avoid Expensive Material Handling Control System Modifications Later

Guest Contribution

by: Raymond Nieuwenhuizen

STB Ruling Makes Way for Deregulation-and Changing LTL Terrain

Will Freight Classification System and the Corresponding Base Rates Be Turned on their Heads?

Supply Chain InView

by: Ann Drake

3PLs as One-Stop Shops

High Transportation Costs Lead to Expansion of 3PLs Traditional Responsibilities


Q. What event that had a profound impact on supply chain costs happened in 1978?

A. Click to find the answer below


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?

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

Share your insight.



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:
Copy our RSS link into your RSS reader - it's easy!
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 really behind again - bear with us. But keep the letters coming!

We're catching up again this week,with letters from on a variety of topics. Our Feedback of the Week comes from Lori Schock of Dow Corning, on our review of the book "Supply Chain Management Best Practices," who says who says best practices are company unique, but there are still "fundamentals" every organization should pursue. As she was quoted in the book itself in a section on Dow Corning's story, it's only appropriate her comments are our top feedback this week.

Randy Littleson of Kinaxis writes us on the piece we did on research showing a disconnect between supply chain (cost-driven) and corporate (top line-driven) strategies.

A couple of more letters this week on on Labor Management and our LMS resource center, including one writer who says many companies would do well to move up implementation of LMS.

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 Supply Chain Best Practice

I believe "best practice" means something different to each company - depending on the company's strategy & long term plan.  There are however some basic fundamental elements that should be universal across companies, things like data accuracy, integrated data/information systems, visibility of data/information, established communication & change management practices/processes, consistency in business processes, articulating the expectations & holding people accountable (a tough one).  Without addressing & investing in these fundamental elements a company is likely incurring a higher cost structure (lots of non-value add) and isn't able to consistently respond to their customers.  It's all requires discipline, consistency and commitment!

Lori A Schock
Supply & Logistics Manager

On Supply Chain and Busines Strategy Disconnect:

I’m not terribly surprised by the findings.  First, the supply chain function in most companies is goaled and oriented around cost reductions – it’s been that way for quite some time.  If we look at the fulfillment (which tends to be more demand-centric in its thinking and orientation) and supply chain (which tends to be more supply-centric) functions in most organizations, we find that they both share a common desire to impact both top-line (revenue, customer satisfaction) and bottom-line (costs, margin, inventory) oriented metrics.  However, the emphasis varies greatly – with the fulfillment functions placing the greater emphasis on top-line metrics and the supply chain functions emphasizing the bottom-line metrics.

As you pointed out, far too few companies are leveraging their supply chains to drive top-line growth.  You also hit on a key to doing so as noted in the survey – responding to change.  In today’s market, an essential determinant of market success on both top and bottom-line metrics is the organizations ability to respond to change.  This is a unique area to impact both sets of metrics simultaneously.  Responding more quickly to change increases customer satisfaction and drives revenue growth while responding more efficiently and effectively to those same changes can drive breakthroughs in operating performance that drive bottom-line metrics.

If you focus on the response to change and the impact it has on both top and bottom-line metrics, you see that the research actually shows a strong correlation between business objectives and supply chain priorities.

Randy Littleson
Vice President, Marketing

On LMS Resources:

I work for Exel (actually DHL Exel Supply Chain) as part of the Contract Logistics group. We have embraced LMS and are in fact installing it across the board within our Consumer / Life Sciences groups. Any new start-up has LMS type standards built into the 'expected' productivities. Existing operations, even those we perceive as running well, are seeing 15-20% improvement. We use the LMS program as part of a productivity/quality/safety Performance Management Program that includes some pretty significant "incentive pay" opportunities.

I'm always interested in talking LMS and learning/sharing experiences.

Ken Novacich
Sr. Director of Operations
Exel - CHRA

There seems to be pervasive assumptions labor management should be considered only after every possible supply chain improvement has been pursued.  It is the “icing on the cake” after network design, automation, and WMS benefits run their course.  Quite the contrary, I find leading companies use labor management in strategic ways at every possible opportunity:  Such as to extend facility output before new capacity comes on line; or as part of a broad distribution network strategy to reduce the number of facilities in a network, their size and capital requirements. 

I even have a client who turbo-charged their current order fulfillment process and thus mitigated the need for expensive new picking technology.  But the most powerful one is where companies use the significant savings accrued from labor to fund a new WMS, technology, or expand a new business.   

Jeffrey Boudreau
XCD Performance Consulting


Q. What event that had a profound impact on supply chain costs happened in 1978?

A. That was the year the Interstate Commerce Commission began to dergulate the trucking industry, which led to more than a decade of consistently decreasing transportation costs in the US.

Copyright © SupplyChainDigest™ 2003-2007. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 45066