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January 24, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Supply Chain Impact 2008

“May you live in interesting times.”

Gilmore Says:

" For most of us today in supply chain and logistics, we are living in “interesting times.” Count your blessings."

What do you say?

Send us your comments here

Most of you have probably heard this phrase, an English translation of an ancient Chinese proverb. The meaning is two-sided, especially around the word “interesting,” which is really thought to mean “turbulent.” The sense is this: if your daily experience is dynamic and challenging, you’ll have a richer existence in the grand scheme of things than you’ll find in the easy life.

For most of us today in supply chain and logistics, we are living in “interesting times.” Count your blessings.

That continues to be the sense I have as we start 2008. Global supply chain pressure, ferocious competition and the demand for continuous improvement, short cycle times, etc. – you know the litany – are likely to be combined with a slowing economy, which adds new pressures.

So with that intro, we decided to ask a number of industry experts to offer their perspectives on what issues, trends, and strategies are likely to impact supply chain and logistics thinking in 2008. Several of the prognosticators are friends; others are individuals whose expertise I have come to respect. As always, we strive to find the best insight for SCDigest readers.

Below I summarize just a few of the key observations of each. You’ll find the full 2008 predictions from each of our nine experts on our web site: Key Trends Impacting Supply Chain Management and Logistics for 2008. I promise you’ll enjoy them.

Gartner’s Dwight Klappich says conditions may force companies back to basics in 2008.

“Supply chain management organizations will be forced to divert their attention away from strategic initiatives like innovation; instead they will have to focus more time and effort on tactical and operational issues driven by economic and competitive pressures” he notes. But interestingly, he says that many leading companies have already attacked the low hanging fruit. “The next level of cost reduction is going to be more difficult and require more organizational sophistication and creativity to identify different ways to streamline processes and remove costs,” he adds.

Larry Lapide of MIT agrees – and says this may mean a reversal of some current trends.

“With oil and logistics costs over the past few years, we'll see more effort in trying to keep these costs down. Many companies will 'slow down' their supply chains by using less expensive and slower transport modes,” Lapide said. “This will, of course, mean that inventories will increase - especially in-transit and at just-in-time sites.”

He also thinks there may be some return to in-house manufacturing over both quality issues and the need to be more reactive to demand without inventory build-ups.

Dr. John Langley of Georgia Tech, in part, says companies will need to get more focused on “integrated logistics.” 

“Practitioners and academics are still searching for the “holy grail” in terms of supply chain integration, but daily, pragmatic issues continue to stand in the way of needed progress,” Langley said. He cited barriers including: functional silos within organizations; inability of supply chain organizations to put the betterment of the supply chain ahead of major objectives such as short-term profitability; continually-changing, unpredictable, and frequently irrational demands of customers throughout the supply chain.

DRCA’s Jon Kirkegaard has two takes – what he thinks will happen, and what he thinks should happen.

In the former category, for example, he thinks the fall in the value of the dollar and other factors may lead to more production being brought back to the US. He sees a “decline in the false dialog that the future is in service industries and the realization that the future is in “value add manufacturing” of many types.”

In the latter, he thinks we ought to see buyers more rigorous about demanding ROI from their technology spend – but is not optimistic, saying companies should “demand quantifiable IRR/ROA in weeks from investments and not fall prey to “trust me” technology investments.”

Jeff Karrenbauer of Insight (another “Dr.” actually) agrees with Kirkegaard on the likely evolution in views about offshoring , saying too many outsourcing decisions have been based on faulty analysis.

Going to China “was once seen as an obvious decision (and still is by too many firms and Wall Street analysts), based myopically on comparative labor rates,” he said. “However, such questions are increasingly being subjected to much more sophisticated analyses that include procurement, manufacturing, transportation, warehousing, cross-dock, in-transit, cycle, and safety stock inventory, port handling, duty, and tax costs, together with an assessment of quality, intellectual property theft, and disruption risks. In short, the “obvious” outsourcing choice of, for example, the Pacific Basin, is often simply wrong.”

More on this interesting thesis later in SCDigest.

Dr. Jim Tompkins of Tompkins Associates also looks at the global perspective, saying that companies need to think more about “total delivered costs,” not just total “landed” costs.

“Organizations continue to rely upon total landed cost, and this results in not effectively looking at which ports should be used, as well as the reconfiguration of their domestic distribution network,” he says. This focus on understanding total delivered costs, combined with sourcing trends that are changing the physical flows of offshored Asian goods, “really sets the table for some huge supply chain transformations” in 2008 and beyond, he adds.

Several of our experts, such as Adrian Gonzalez of ARC Advisory Group, looked closely at trends in transportation. He’s sees a collision emerging between the “solutions” of TMS software vendors, 3PLs and some consulting firms.

Simply stated, software vendors will add managed services to their offerings (e.g., i2, LeanLogistics), 3PLs will offer technology-only solutions (e.g., Transplace), and consultants will also leverage technology to provide managed services (e.g., Chainalytics with their benchmarking service),” he told SCDigest.

Speaking of Chainalytics, consultant Gary Girotti thinks the overcapacity seen lately in the transportation market to the advantage of shippers will disappear in 2008. That situation “will end as carriers pull back capacity and hit the wall on margin reduction potential.”

This will also reflect itself in service challenges for shippers, “as carriers exit unprofitable markets and lanes.” He also expects a continued shift from truckload to rail/intermodal.

Last, but by no means least, Dr. Marshall Fisher from the Wharton School at the University of Pennsylvania thinks the consumer goods-to-retail supply chain will continue to focus on “the last 50 yards” – getting goods to the retail shelf effectively.

Many retailers report numerous execution short falls, including stock outs on the shelf due to inadequate stocking from the backroom, inventory record errors, and incorrect signage and pricing, all of which hurt the quality of a customer’s experience, and therefore sales,” he told SCDigest. “Most retailers view in store labor as a cost to be minimized, rather than an asset to be leveraged. As a result, many stores have a minimum number of store associates earning minimum wage, and this is having a huge negative impact on the top line.”

That’s all we have room for. Again, please read our experts’ full comments. We are in interesting supply chain times.

What are your comments on our experts’ predictions for 2008? What are some of your own? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

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Dan Gilmore


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

January 24, 2008
Supply Chain Graphic of the Week - ERP versus Best-of-Breed Warehouse Management Systems (WMS)

January 21, 2008
Logistics News: Industry Veteran Cliff Holste Joins Supply Chain Digest as Material Handling Editor

January 21, 2008
Supply Chain by the Numbers: January 21, 2008


Stocks on Wall Street continued their slide this past week and our Supply Chain and Logistics stock index remained troubled as well.

In the software group, Ariba was down another 4.8%, followed by Descartes and Logility (both down another 4%).  In the hardware group, Zebra slipped another 9.4%.  In the transportation and logistics group, Prologis and Norfolk Southern were both down (7.6% and 5%, respectively).  

See stock report.

Guest Contribution

by: Wilson Rothschild
SCM Solutions Marketing Manager,

Not your Father’s Warehouse Management Solution

Today's Robust Warehouse Management Systems are Far Different than Those Previous Generation Solutions

Guest Contribution

by: Pär Wetterlöf
VP Product Management,
CDC Supply Chain

Using Warehouse Management Systems (WMS) to Support High Performance in Distribution – and Change

In Today's Dynamic Environment, WMS Flexibility is an Imperative; You Must Plan for Change


Each Week:

-- Transportation
-- Procurement/ Sourcing
-- Manufacturing
-- Global Supply Chain
-- Distribution/Material Handling
--Trends and Issues

Read it Now

Weekly On-Target Newsletter
January 22, 2008


Q. What year was the first certification offered by the American Production and Inventory Control Society (APICS)? 

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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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 letters sent in late 2007 this week.

We received almost 40 letters from readers on our coverage of the 2007 CSCMP conference, mostly thanking us for the daily video updates provided by SCDigest's Dan Gilmore and Gene Tyndall. We print a collection of them below, as our "Feedbacks of the Week."

We also received a few letters on our piece on Wal-Mart and the Wheel of Retailing, which suggested that if you study this well-known theory, Wal-Mart market challenges should almost be expected.

Another reader offers some interesting thoughts on our graphic of the week comparing UPS and FedEx revenue sources, while another comments on several of pieces we published on the problems with counterfeit products.

All are good - take a look.

Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedbacks of the Week - On CSCMP Video Reports:

Nice recap.  I really appreciate hearing this condensed assessment of the conference.  It makes me think I should attend next year.  I also appreciate the candid assessment of the keynote.  I hope CSMP leadership takes notice and focus on a more supply chain centric speaker next time.

Dan Prochaska
VP Supply Chain
Ace Hardware Corporation

Listened to both the Day 1 and Day 2 summaries. Both were top notch … particularly since it didn't look like scripts were in use! Almost as good as attending.

Matt Di Fiore
CSCMP Member

I'm a little disappointed at how dismissive Dan and Gene were about Carly Fiorina's keynote speech. Gene, who actually attended the session, must not have been listening very well, because the whole talk was about supply chain management. Carly highlighted the value HP gained by streamlining its supply chain and the importance of SCM to national and global security.

I agree with Dan that it would be better to have supply chain experts speak at the keynote, like when Mike Eskew of UPS spoke in Kansas City in 2001. But I think Carly did a good job of relating to the audience.

Jonathan Smith
Logistics Network Analyst
Network Design & Development, WWL Vehicle Services Americas
Wallenius Wilhelmsen Logistics

FYI, I heard Carli Fiorina speak last week at the "Peninsula Speakers Series" in San Mateo, CA. Basically shared her life story (1 hour) and how it shaped her and gave her the inner drive to accomplish many great things.

Overcoming her own fears all the way up to gaining respect as a woman CEO of HP.  It was very impressive and interesting. Her leadership qualities have already been tapped for problem solving by 2 of our gov't institutions: the CIA and and FBI, she claims.   I'm sure much of her presentation in Philly was similar to what I experienced last week; exerts from her book, but nonetheless, I'm a believer that she is a unique person we can all take some guidance from.

Wish I could be at CSCMP but feel fortunate to have your video recaps as a substitute.   You and Mr. Tyndall are a good team with contrasting presentation styles. Thank you for making the videos available.

Ken Post
Director, Global Key Accounts - Sfo ZVK
Kuehne+Nagel, Inc. USA

Great video updates from CSCMP for those that could not make it…keep them rolling.

Jeff Gantt
Product Management
Manhattan Associates, Inc.

On Wal-Mart and Wheel of Retailing:

I believe that Wal-Mart is imploding. After Sam Walton passed away, their biggest fear was not the competition but losing the Wal-Mart magic, enthusiasm, focus and can-do attitude that Sam Walton instilled in its associates and it was contagious. In the 80’s and 90’s, you could see and feel the energy in the stores, in the associates and in the press. Today what do you see? Wal-Mart is taking themselves out of the game. It’s a mega ship and it’s very hard to turn it around. Bottom line, we can deploy all the best practices, technology, metrics, etc. but it still gets down to having the best people, motivated and focused on being the best.

Steve Schappe

A great thought piece and nice compliment for P&G's ongoing investment in supply chain innovation.

Keep up the good work ...looking good from here!

Ralph W. Drayer
Supply Chain Insights LLC

On UPS and FedEx Revenues:

Interesting, very interesting. As much as you hear about China (& to a lesser extent, India) gobbling up all the world's resources, you'd think the export portion of the Asian markets for each company would be far & above the US market. Anyway - the real story might be how the US is faring against the growth of the Asian markets - i.e., is our rate of shrinkage (or growth?) inversely related to the growth in the Asian percentage?

So, comparative to what we see & hear almost daily - if the US market continues to hold some growth or the rate of decline is not as fast as the growth in the Asian market - that would be a huge plug for the strength of the US markets. Granted, I realize that if the percentage shows an increase for Asia, then the percentage has to decrease for the US. The story behind the story would be to look at total dollar value and total shipments to gauge the activity.

Another thing that would be of interest - is seeing if there is an Asian logistics provider that is experiencing the growth to the detriment of market share for UPS/Fedex. Has another "elephant" entered the room unfamiliar to most of us, somewhat silently? Similar to the story reported recently concerning the largest RFID vendor or solution partners in China. Of the three mentioned - only Intermec was a company I've heard about. Was quite surprised.

Keep up the good work.

Damon S. McDaniel
Alcon Manufacturing, Ltd.

On Counterfeit Products:

I agree with the need for action on counterfeit products. However, the industry should look to open standards for their solution and not proprietary solutions like the ones you mention. EPCglobal and ISO provide a wide array of physical marking standards (barcode, RFID, encryption standards, etc.,) while the internet provides a cheap and convenient medium to create a central clearinghouse for validation and verification. A consistent marking scheme based on open standards combined with the ability for anyone in the supply chain (all the way to the end user) to verify a product provides a solution that is easy to implement, is free of license or royalty fees and greatly increases the chances that a fake product will be detected. For example, look at recent moves by Philip Morris Intl. (PMI) to have EPCglobal certify a barcode based serialization scheme so that PMI can use the Electronic Product Code (EPC) network to combat counterfeits.

That said, nothing will ever eradicate counterfeiting. Some people simply want the look-alike product because they can't pay for the real thing. These people will continue to demand fakes as an alternative to waiting until they can afford the real product.

Ken Waldrop
Booz Allen Hamilton


Q. What year was the first certification offered by the American Production and Inventory Control Society (APICS)? 

A. 1971

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