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November 8, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Supply Chain Collaboration 2007 – Buy, Sell or Hold?

Every time I start to get cynical on supply chain collaboration, I run into a few things that help me change my mind again.

Gilmore Says:

"So, I too am a “buyer” of supply chain collaboration, but think this is a “stock picker’s market,” if that analogy makes sense."

What do you say?

Send us your comments here

Why the frequent cynicism? A variety of reasons – for example, I think the term collaboration is way over used, watering the meaning down. Integrating business systems in some way may be a good thing for both sides, but doing so doesn’t make it collaboration. I may have told this story before, but a couple of years ago I had to stop a TMS vendor which was talking to me about new tools to “collaborate” with carriers through web-based tenders and acceptances. The implication, I said, was that somehow traditional carrier EDI wasn’t collaboration, but the second you put the process on the web, it was. Nonsense, of course.

Second, I don’t think in many respects we’ve made much real collaboration progress. In many industries, as SCDigest Executive View columnist Gene Tyndall recently noted, collaboration “is stalled, at best.” (See The Lack of Progress in Supply Chain Collaboration - Why?.)

In the consumer goods-to-retail sector, I just don’t think Collaborative Planning, Forecasting and Replenishment (CPFR) has really met expectations, which started all the way back in 1999. In fact, in a recent issue of the new CSCMP magazine Supply Chain Quarterly, analyst Rich Sherman asked “Why Has CPFR Failed to Scale?," arguing that “for CPFR to realize its global promise and improve overall industry performance, it will have to return to its roots. That means separating the processes for managing and shaping demand from the processes for replenishing product based on actual demand.”

To which Joe Andraski, someone I have a lot of respect for and who is president of VICS (the retail and consumer goods organization that promulgates the CPFR concept), responded that he did not “agree with the author's contention that CPFR has failed to scale. Scale does not mean conducting CPFR with 100 percent of companies' trading partners. Scale may mean collaborating with the 20 percent of trading partners that represent 80 percent of sales.”

Take your pick.

Back to the positive. I recently moderated a simply outstanding panel discussion on supply chain collaboration at the 2007 CSCMP conference. I called it SCM Collaboration: Buy, Sell or Hold?, taking off on the common question asked of investment gurus on a particular stock. The idea: are you positive, negative, or in-between on the potential and reality of collaboration.

The panel featured Tom Dadmun, VP of Supply Chain at high tech company Adtran, Greg Kaiser, VP of Supply Chain Strategy at Hershey, Mike Slattery, Director Customer Service Operations at Campbell’s, and Nigel Jones, Director of Supply Chain for Fonterra of New Zealand, a co-op that is also the world’s largest dairy products exporter.

Getting to the end of the story, I would absolutely say our panelists were all “buyers” of collaboration – if it’s done right, as each of these companies appears to be doing.

Even though three of the four were in consumer goods-related industries, I was struck at the breadth of their thinking and practice of collaboration in general, which was only tangentially related to CPFR if at all.

Some examples:

  • Campbell’s has a retail customer that was moving to new automated distribution systems. The retailer contacted Campbell’s, requesting that it change a large number of its case pack configurations to make them more suited for the new system. In the end, Campbell’s and the retailer sat down and reviewed the opportunities and costs SKU by SKU. Where it made sense (Campbell’s could do with little or no cost impact), it did. Where it didn’t (negative impact on supply chain costs), they kept the current case pack, and that was just fine with the retailer. The key – jointly looking at total supply chain costs. Smart.
  • Much of Hershey’s volume comes in the Halloween season, and much of that is shipped in special displays that contain a lot less product for the cube than regular shipments. The result – very high transportation costs that cut into profits. Kaiser and his team looked at this, and came up with some ideas that could meet merchandising needs, but lower transport and handling costs. They approached a major retailer with the program, which required some ordering and logistics changes on the retailer’s end as well. The retailer accepted the program, resulting in a strong positive impact to both sides.
  • As part of its supply chain transformation, Adtran needed new capabilities and services from its suppliers. It could have tried the “compliance” route, just issuing mandates. Instead, it offered a program through which vendors could become “advantaged” suppliers – with the potential to earn more Adtran business for reaching that status. It was a success. At a supplier meeting, Dadmun noted that the suppliers’ support had helped Adtran grow 24% that year – but then put up a chart showing the advantaged suppliers’ share of business with the company had grown even more, at 36%.
  • Fonterra and global logistics partner Maersk evolved a major logistics relationship into what is basically a joint venture, enabling the two companies really to operate as a single unit, not only driving efficiencies but opening new business opportunities for both.

I wish I had more room. I have only scratched the surface of the outstanding panel discussion. I also recently attended an excellent session of Dr. John Langley’s Supply Chain Executive Forum at Georgia Tech, where the theme of the two-day event was collaboration. More on that later.

My quick take on collaboration overall:

  • 75% of the battle is simple communication, which seems like it should be so easy but ends up being the barrier.
  • As Slattery said in Philadelphia, you need to focus on collaboration with companies that have both the willingness and the capacity to collaborate. It’s generally a waste of time pursuing collaborative opportunities if the partner is lacking in either.
  • Funny how a true win-win, as all four of these example were, seems to lead to more rapid adoption and ultimate success.

So, I too am a “buyer” of supply chain collaboration, but think this is a “stock picker’s market,” if that analogy makes sense.

What is your opinion on the state of supply chain collaboration? Do you have any successes to share? What are the real keys to success? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

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Dan Gilmore


Workforce Management in the Supply Chain Videocast Series

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

November 8, 2007
SCDigest to Launch New Publication for Supply Chain and Logistics Executives

Globally Recognized Supply Chain Thought Leader Gene Tyndall will be Editor of New CSCO Insights Hardcopy Publication; First Issue to be Mailed in January, 2008

November 8, 2007 Supply Chain Graphic of the Week - Which Countries are the Most Logistics Friendly?

November 7, 2007
Supply Chain by the Numbers: November 7, 2007

News from Section Sponsor: Optiant

Optiant Announces Multi-Echelon Inventory Optimization Enterprise Agreement with P&G


Finishing the week down, U.S. stocks took another rollercoaster ride last week.

Our Supply Chain and Logistics stock index also closed out the week mostly in descent. In the software group, JDA bucked the trend (up 6.8%); however, Logility fell dramatically (down 13%).  In the hardware group, Intermec was down 7.4%, while Zebra was up 3.1%. Yellow Roadway of the transportation and logistics group suffered the index’s biggest slide of the week, down a whopping 15.5%, while Prologis fell 4.9%.         

See stock report.


Weekly On-Target Newsletter
November 6, 2007

The Executive View

by: Gene Tyndall

Excellent Presentation at CSCMP - "Are you the Weakest Link in your Supply Chain?"

Time for CEOs to do a Self-Assessment?


Q. Why is supply chain analyst firm AMR called by that name?

A. Click to find the answer below


Reader Question: Can Bucket Brigades Work with Mechanized Order Picking?

Reader Question: Is there a True Global RFID Standard?

See our expert answers at the links above. Share your knowledge or perspective.

Or, ask your question


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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! In the next few weeks, we'll start adding feedback right on specific story pages, so you can see what others are saying.

Catching up on a variety of Feedback again this week. We are publishing still more excellent feedback we received on our Supply Chain Megatrends, Parts 1 and 2. That includes our Feedback of the Week from Jason Rude of Source Medical, who says our inclusion of Lean Thinking in that list may have been off.

You’ll find several other excellent letters on that topic as well, plus one comment on the graphic of the week we ran featuring the Auto ID Center’s 2002 projections for tag prices and adoption, and a good letter on the rise of China’s Dragons in Manufacturing.

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 Megatrends:

In response to Dan Gilmore’s statement: “Everywhere I go, companies are moving Lean thinking and Lean initiatives from the factory floor to the broader supply chain.”:

I find it to be quite the opposite. I have noticed the outsourcing trend has captured so much momentum that it overwhelms lean principles. It is now quite common to have taken a product manufactured in Ohio, with a 2 week lead time to distributors throughout North America, and move its production to China where it now takes 4 months, requiring distributors to hold 60 days inventory versus 17; exactly opposite of Lean thinking.

Jason Rude
Director Materials Management
Source Medical

More on Megatrends:

I read your Megatrends with interest and agree in principle. In addition, I would include the following items:

1. Financial Supply Chain - bridging the gap between financial and physical SC, which will change the way corporates are financing business activities.

2. Business Continuity Management (BCM) - Globalization entails risk and corporations need to become smarter in assessing geo-political and socio-economic risk factors, not to mention the 'day-to-day' risk factors contained within any SC. Contingency planning is still pretty much in its infancy and more often than not restricted to IT.

Personally I'd include environmental issues such as carbon footprint within BCM, given that before long, legislative measures will come into force, mainly as another source of revenue (environmental tax, etc.) which impacts on the SC.

Ulrike Rowbottom
United Kingdom

Your description of the Megatrends is accurate and I am looking forward to see the next five Megatrends described.

My question would be how you rate the importance of 'global supply chain footprint', means how a company masters to find the right setup between managing the supply chain and distributed physical planning and execution across continents. China, Offshoring, Outsourcing play a major role, as well as being able to meet customer demand more quickly (e.g., through an optimized network design).

In addition I would like to get your opinion on the influence of private equity activities on global supply chains? M&A and more short-/medium term profit focus is having significant impacts as well.

Michael D’Heur

A thought on Megatrends to add or maybe frame your list as I have had this vision for past 10 years in watching how a lot of US businesses fail to understand value creation vs. short term SEC profits.

Last night I heard 5 analysts on CNBC describe how they expected the US to lose our #1 super power status to China in 30 years or so. They likened it to the way the US usurped the British at the turn of the 20th century at the end of the industrial revolution. They went on to make it clear as investors they see obvious signs that China, Japan, Northern Europe etc. all make it easy for their business to setup domestic operations in the US, but make it hard for US business to do the reciprocal in their countries. One investor, a former professional football player, took it one step further that the US should be using maximum negotiating leverage with China prior to next year's Olympics as the need for China to show “off” prior to the Bejing Olympics as this might be the best negotiating leverage the US has in the next decade. Not sure I agree, but was encouraged to see the competitive spirit.

So here is my Megatrend - that I think translates all the Megatrends back to the average US business / consumer – at some point in the next few years and makes supply chain leaders a lot more strategic than getting the next box out of the DC.

If business leaders and our political statesmen do not act now to leverage the supply chain for US business - worker competitive advantage, we will see the US prosperity engine increasingly unwind and erode and likely at an increasing rate. The fact the Japanese, Koreans, Northern Europeans and now Chinese can do business very effectively on our shores with equal access as US business, yet US flagged business continually struggle to do the same creating domestic domiciled equal footing in these countries, further compounds the trend. I have written extensively on one simple concept US business could use to compete (Domestic Postponed mfgr of offshore components) which all the international competitors use effectively on US shores (e.g. Auto assembly, hi-tech assembly, now appliances etc.). Even dedicated a not-for-profit web knowledgebase to the education first driven by philanthropic work we have done with the Texas governor’s office, local workforce boards and US dept of commerce and labor.

DCRA Inc’s exposure is US managed business continue to struggle with the concept – often lured by “just make the whole thing in China” CFO mentality and ship a lot of air in containers not realizing the risks to IP, costs, competitiveness, ability to tailor / modify / localize products. I find it part arrogance and part just lack of international multi-continent business exposure but am quite sure it is the mega trend of all mega trends for the US and North America. I don’t find many supply chain pros with this perspective but they don’t often have a strong enough voice to counter the quick profit leadership in charge.

One presidential candidate described all this as the US prosperity engine we have enjoyed since WWII, which was fueled by making things (manufacturing) adding value and taking on tough problems. Engineering business to “win” in global supply chains is the new key to unlock the next generation of the prosperity engines – thus a business Megatrend that encapsulates the right skills and practices in global supply chains. The 5% of top global business already knows this (e.g., Ikea, Phillips, Cisco, Dell, P&G, Nike, etc.) and use to drive global profits… when will we see this trend used to drive US competitiveness ?This is the mega trend I am quite certain has been on us for 5 years or more, yet I am still watching for – yet see little action to address - from our business leaders and statesmen.

Keep up the good work at SCDigest!

Jon Kirkegaard

I agree with your choices, but I would add one more, Risk in Supply Chains. If risk is volatility, not pursuing a strategy that reduces it in global supply chains would be harmful to both the customer, creditor, shareholder and capital communities. Recent events, tainted fish, lead paint, toothpaste while clearly indicate a breakdown in quality control; these products were carried form producer to store shelf before discovery. I think supply chains have to get be involved.

More importantly, current generation supply chains are built for efficiency. Perhaps, with a risk component at the product level, supply chains will be split in two—efficient and responsive, where the responsive one is geared to key customers, gross margin, shareholder value.

John A. Deasy
Managing Director
The Transitions Group
A Supply Chain Risk Advisory Business

On RFID Tag Price Graphic:

It appears that neither scenario has completely played out.

Tag (inlay) prices are close to 5 cents, in range of 6 – 7 cents, yet RFID adoption is moderate at best.

Very interesting to see this article.

Tim Hoffman
Zebra Technologies

On Chinese Dragons:

A quote from the past:

“Industrial supremacy is largely a function of the character of the population. If the people of India or China were as competent, from an industrial point of view, as England or the United States, there could be no question as to the race with which ultimate supremacy would lie, assuming the possibility of maintaining the conditions other wise the same. All production is more or less a function of labour, and as the nominal cost in the eastern countries is about one-twelfth the cost in the industrial centers of the United States, the race should be to the "Chinese cheap labor” if it were sufficiently effective.”

From J. Stephen Jeans, "The Shifting of National Industrial Supremacy," The Engineering Magazine. April 1898

Lee Hales


Q. Why is supply chain analyst firm AMR called by that name?

A. When founded in 1986, AMR was an abbreviation for its full name of Advanced Manufacturing Research. It later went with just AMR as the scope of its analysis expanded beyond manufacturing.

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