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March 27, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

The Easiest Actions for Big Supply Chain Improvement

Last year, we did a piece on “The Top Supply Chain Technologies and Strategies” for 2007. We recently had a reader ask if we were updating the list for 2008, and my response is that I think these kinds of things are best done on a two-year cycle, as they don’t change that much year to year.

Gilmore Says:

"Do you really know what is happening with SKU, cube and order profiles and velocities? Most companies don’t."

What do you say?

Send us your comments here

That said, it got me thinking: what are some of the top supply chain strategies and tactics that it just seems like almost everyone should/could be doing? To compile the list, I focused on comparatively simple things that (mostly) don’t have a strong technology component – basic steps to consider taking right now.

I also didn’t include some tactics that today seem to me to be so basic and pervasive (e.g., global sourcing) that it would not add much value to mention. Rather, I am trying below to identify some comparatively simple, proven steps that can have a big impact on cost and/or performance, but which, from my view, a lot of companies still have yet to adopt.

Because I was focusing on the relatively simple, the majority of the ideas focus on basic execution. My top 10 list is below, grouped by functional area (transportation, sourcing, etc).

  • Centralize Transportation Management: OK, maybe this isn’t simple, and yes it often involves new technology support (TMS), but I just can hardly think of any reason not to do this – and the potential freight and overhead savings are huge versus de-centralized approaches.
  • Take Control of Inbound Freight: We’ve written about this before, and it’s somewhat controversial in the sense that any particular inbound shipment is someone else’s outbound. Taking that shipment away from them can lead to higher costs for the supplier, etc. (Yes, we should in theory look at lowest total supply chain cost to make this decision, but who does, really?) But the barrier most often given to me for letting suppliers control the freight is simply internal politics – purchasing managers want to keep the control and use freight as part of the negotiation process. Fine, but there is money to be saved, and control of the inbound freight decision should be looked at objectively. Leaders generally take control of inbound, in my view.
  • Enforce Routing Guide Compliance: In company after company, I hear stories of routing guides that are regularly ignored not by suppliers but by internal transportation managers or others deciding the company’s own moves. This is especially true in a very decentralized scenario. The first place to start: measuring execution against what the routing guide recommends. Step 2 – focus on the resistors.
  • Use Labor Management in Distribution Centers: This also is a bit more complex than some of the other recommendations, but LMS software is among the easiest of deployments, and the savings from standards, reporting and incentives can be huge. One of the first things I would do in any medium to large facility.
  • Profile SKUs and Orders to Reslot the DC: Do you really know what is happening with SKU, cube and order profiles and velocities? Most companies don’t. Analyzing this data can lead to simple improvement opportunities in product slotting and warehouse layout that can drive big productivity improvements. Bring in some outside help as needed.
  • Revisit Safety Stock Levels and Policies: Consultants tell me that in almost every company they visit, safety stock levels and policies are not maintained with nearly enough discipline – or hardly at all. The result: too much of some inventories, not enough of others, and a total cost to the bottom line that can be significant.
  • Analyze Supplier Lead Time Variability: Do you know which suppliers and purchased goods have the most trouble with on-time delivery? Have you profiled that variance, looked for root causes, and systematically worked the problem areas? We all know the costs of this variability. Leaders such as Raytheon and Harley Davidson have gained huge benefits from reducing supplier variability, and the starting point is some fairly easy analysis.
  • Use E-Auctions: Maybe there are some product categories where this doesn’t make sense, and companies will always have strategic supply relationships, but most companies are leaving a lot of dollars on the table by not making greater use of this procurement tool, which can be used as a hosted service. In a Videocast we did with Hallmark on this topic, the company said it thought it could use e-Auctions for almost anything, and was saving big time.
  • Consistently Compare Actual Total Landed Costs with Forecasted Costs: Very few companies are doing this well in global sourcing operations, from my anecdotal discussions, and research presented by Penn State researchers at last fall’s CSCMP conference (see In Search of a Landed Cost Model.) Is it any wonder too many global sourcing initiatives fail to deliver expected results, if we can’t really measure how we’re doing?
  • Start a Lean or Six Sigma Initiative in the Supply Chain: OK, maybe in some cases we’ve taken Lean too far, as readers have reminded me, and huge numbers of companies have already started to use Lean, Six Sigma, or Lean Six Sigma. But more have not, at least outside the four walls of the factory. The risk/reward ratio for starting some pilot efforts here seems very compelling to me. I’ve heard many stories of interesting supply chain improvements, some in some novel areas, from using one or both of these approaches to continuous improvement.

So there’s my list. With the possible exception of centralizing transportation management over a large network, I think all of them fall on the “easier’ side of the continuum than many other types of supply chain projects. I also tried to pick areas where results are consistently achieved from those that make the effort.

But that’s just my perspective. Please let me know what you would add or take away from the list of relatively simple, proven techniques for improving supply chain performance that a large number of companies still aren’t doing today.

What would you add or subtract from Dan’s top 10 idea list? What are the barriers to adopting often simple improvement steps? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore


Using On-Demand TMS to Power Inbound and Outbound Transportation Excellence

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

March 27, 2008
Supply Chain Graphic of the Week - The Child Labor Element in Global Sourcing

March 27, 2008
Supply Chain by the Numbers: March 27, 2008


Although shortened due to the Easter holiday, it was a refreshingly sweet week on Wall Street.

Overall, our Supply Chain and Logistics stock index finished the week up.  Manhattan led the software group (up 7.3%).  The hardware group saw virtually no movement;  however, in the transportation and logistics group, Prologis was up 12.7%, CSX was up 11.4%, and Expeditors International was up 11.2%.         

See stock report.


Each Week:

-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Weekly On-Target Newsletter
March 25, 2008

Discussion Question

China Ain't So Cheap Anymore

Are we witnessing the end of China as the dominant manufacturer in the world?


Q. Who coined the term "Lean Production?"

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.

The Feedback continues to come in at high levels.

This week, we publish more responses to our piece on “The Real Barriers to 3PL and Contract Manufacturer Collaboration.”

That includes our Feedback of the week from Sharat Satyanarayana, a consultant who shares some thoughts based on a project he is working on now with a mobile phone provider. We have several other respondents as well on this topic, plus a new response on the environmental battle between wood and synthetic pallets, and a nice letter on the need to build out rail infrastructure.

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 Barriers to 3PL/CM Collaboration:

I am a consultant in the reverse logistics and after market services arena (specifically the high-tech industry) and am currently working on a project developing a large and most complex (of its kind worldwide) reverse logistics hub for one of the world’s largest mobile phone manufacturers. In this project, the client owns the processes and the IP. However, a major global 3PL/LSP runs the show at the hub and takes ownership for infrastructure, WMS sourcing, staff recruitment/training, process/IT implementation, customer call handling services, etc.

I have a slightly different perspective on the idea of collaboration between clients and 3PLs/LSPs. One of the real barriers to collaboration, I believe, is the lack of consistent and in-depth knowledge of the internal operations and procedures, both at the client side and the LSP side. This is a result of short-lived careers within companies due to the booming economy and demand for professionals in the logistics sphere. Professionals jump jobs within less than two years, on average, as a result of better pay or higher roles. Perhaps this has to do with the fact that the market in India (with respect to job opportunities) is very dynamic. This could also be applicable to other developing markets. As a result, when contributing know-how and opinion to a collaborative/outsourced project, there might be a significant amount of oversight, missing of important points/requirements while defining scope/parameters/processes and contractual limits; all this because an existing pool of knowledge is lost to the company or someone new and inexperienced has joined in between such a collaborative project.

I wouldn’t be able to comment on the North American or European markets, but Gene Tyndall’s opinion makes sense.

Sharat Satyanarayana

More on 3PL/CM Collaboration:

It is true that a 3PL will be reluctant to suggest improvement ideas that cuts deep into their billing volumes. Hence, it is all the more important that while contract manufacturing or 3P engagement takes place, the concerned employer of 3PL should at no stage lose knowledge and full understanding of the processes. You do come across situations where a 3PL has not shared a vital cost reduction idea, but what about your own intelligence? It cannot be a "sub-contract and forget" attitude.

Another aspect to think about is: What makes a 3PL not share vital cost saving ideas? Mainly, it is the fear of lower billing. The way to address this perhaps is embedded in the Toyota example quoted by you, that of being in there for the long haul with the customer. Even as portions of outsourcing businesses are lost, there are more opportunities available to the restricted number of 3PLs who are in with the Company for the "long haul," thereby compensating the loss of billing if any (by implementation of cost reduction ideas), by new business opportunities. Reasons for outsourcing initiatives today are much more than simple cost reduction: in fact, cost reduction may be a minor factor in relation to the aspects of freeing resources towards core activities of the company. And with this trend, there will always be incremental outsourcing that can offset or even exceed the billing volumes lost by implementation of cost reduction ideas from within the processes entrusted to Contract Manufacturing or 3PL.

General Manager-Corporate Supply Chain Management

Like any relationship, it's all in the communications. You either have it, don’t have it, or are working to make it better. That's why we have SCDigest as well.


On Wood versus Synthetic Pallets

The debate of the synthetic versus wood pallets in New Zealand for many companies is centered around the extra time and cost in paperwork/compliance requirements.

The mandatory use of fumigated wood and packing declarations to certain markets is a major exporting issue.

The environmental and human impact regarding treating wood and it's disposal must have some final chemical waste factor - Table 1 shows none?

Synthetic pallets for exporting companies seem a good option at this stage. Possibly the use of recycled cardboard/solid paper pallets for some lightweight goods is a possibility. NZ exporters use the "Clean Green" image as a good marketing strategy, especially for organic and primary product - our main export products.

Allyson Wood
Logistics Lecturer
NZ Maritime School

On Building Out Rail Infrastructure

I was a former teacher in a small New England College (retired) and long time student of transportation in America.

My answer to the question is: Americans had better hope it's really true! With the already existing overloading of our highway network and the projection of huge increases in the future, we need massive infrastructure increases in ALL modes of transportation. Increases in rail infrastructure are most welcome, along with the implementation of ever improving technologies for rail that should be brought forward with all due speed.

It would behoove our Federal Government and the individual states to work to ease restraints and apply funds toward this end. Transportation is vital for the survival of this great nation both now and for the foreseeable future. All of our transportation modes are lacking in capacity---especially rail, which is best situated to do the most for the movement of consumer goods---the one mode that for the past 5 decades has been allowed to decay and only in recent years (since the Staggers Act) has finally got a chance to help this wonderful nation we live in towards a survivable future. One may yet have hope as the Rail Roads lead the way once more to a good future for us all.

Donald L. Pass


Q. Who coined the term "Lean Production?"

A. That's the name authors James Womack and Daniel Jones gave to the Toyota Production System in their seminal book "The Machine That Changed the World," published in 1990.

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