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May 8, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

The Limited Brand's Nick LaHowchic Unplugged

The thinking man’s supply chain executive.

LaHowchic Says:

"Today it is equally as important to be moving the information, knowledge, and value as it is to be moving the physical product. But I see logistics as a legitimate, well-needed, required function of the company, but it is not supply chain management."

What do you say?

Send us your comments here

That’s been my impression over the years of Nick LaHowchic, who first gained industry prominence as head of supply chain for medical device maker Becton Dickinson, where he led a dramatic supply chain transformation before most companies had any real notion of the potential of supply chain to drive corporate success. More recently, he was Executive Vice President of Limited Brands, Inc. and President and CEO of the Limited Logistics Services, where he also drove many innovations, and remained very active on the industry speaking circuit. He semi-retired in 2007.

I spent an hour recently speaking with Nick about a variety of topics, which I’ll summarize in part here. The full transcript of our discussion is available on our web site (See Nick LaHowchic Interview Transcript, Part 1); the second half will be available in a few weeks.

A continuing theme of LaHowchic’s career and message has been moving supply chain from a “functional” orientation to one that not only sits at the executive table with other company leaders, but is truly a driver of company strategy and success.

Supply chain “needs to be a much more integrated discussion and execution within the management team, rather than a discussion of what a supply chain function can do. It needs to be about ‘How we can operate at a high level and how can we come together to do something extremely difficult to make us more successful?’” he told me.

One question I’m known to ask many people is the difference between supply chain management and the concept that preceded it – logistics. I thought LaHowchic’s response was worth noting.

He said that the best way to think about it is that logistics doesn’t really apply for service businesses – it really is about the physical movement of product.

But, he said, “If I was in the business of insurance, I would still have a supply chain. If I was in banking or brokerage, I would still have a supply chain.”

He noted that part of the difference is that “today it is equally as important to be moving the information, knowledge, and value as it is to be moving the physical product. But I see logistics as a legitimate, well-needed, required function of the company, but it is not supply chain management.”

Of course, these changes mean the skill sets need to change for people at every level of supply chain management, from senior executive to traditional functionaries in distribution or transportation.

“The skills today are also much different even if you are just moving boxes from A to B, just because everyone in the transaction continues to use new technology,” he said. Today, “You have to have a much bigger appreciation for the role of technology in doing that more effectively.”

It’s interesting, because when you talk with LaHowchic, technology and information are constant threads, and in a substantive way – and that frankly is not common in my discussions with most senior executives. Intertwined with that is the theme of time – and how to use it more effectively.

For senior leaders, LaHowchic told me, a key challenge is “how to govern an enterprise organization that is now operating in a time dimension that is so different than even the recent past.”

What’s that mean? “Today,” he said, “you have the ability to know everything from what just rang up at the register to where everything is in your business system to where everything is in your supplier’s system, and what’s running on a production line.”

Managing in this parallel information universe, versus the sequential, hierarchical information flow that was the rule until just recently for almost everyone and still the case for many companies, is the number one business challenge and opportunity, he says.

“Capturing the important information from end-to-end and understanding how to orchestrate an organization that uses supply chain management as its overriding framework is what is now key,” he says. “You can make things happen that in years before would have been sequential activities trying to self-correct themselves. Now, rather than doing that, you are able to more navigate your organization and possibly your supply chain channel rather than continue to forecast it positioning resources based on those outdated estimates.”

We also turned to the subject of the role of supply chain management – and how in many organizations it is still really all about costs.

“I think part of the question of how you think about supply chain management is really where does it fit in the strategic discussion of the company? If it is not sitting at the table talking about where and how to take the company forward, but rather as a second thought that means after we figure that out, we’ll look for the supply chain functions to come up with ways to either produce more value or reduce more cost, then you will forever be in that cost-focused paradigm,” he observed.

I think that really sums it up well. Is supply chain truly involved and playing a key role in crafting company strategies – or is it handed those plans and simply asked to execute?

“Cost you can pound out forever, and people will do that,” he added. “The real question is: Where does the customer or consumer perceive value, and how does supply chain management support that?”

He also noted how they had really used supply chain management to drive innovation and differentiation starting with his days at Becton Dickinson.

“We went beyond just selling syringes to managing the inventories of syringes from our factories right to hospitals, and building and executing supply chain physical models that had financial cash flow models in them that really drove profitability across customers and suppliers,” he said. “Our Supply Chain Management organizations would never have that discussion if they were viewed just a back end function, focused on finding a lower cost to transport syringes.”

That’s all I have room for. I know you will enjoy the full LaHowchic Unplugged, Part 1 transcript. The thinking man’s supply chain executive indeed. I’d welcome your thoughts on LaHowchic’s views.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore



Driving Lean Supply
Chains through
Improved Information
Flow and Supply
Chain Visibility

May 14, 2008


Featured Megatrend:
Supply Chain Alignment

Watch Gilmore, Tyndall, Collins Discuss and Debate the Issue

View Supply Chain Megatrends Focused Web Page, Download the Executive Brief


Bringing Lean Strategies to Companies in Process
and Manufacturing Industries



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

May 9, 2008
Supply Chain Graphic of the Week - Inventory Optimization Hierarchy

May 8, 2008
Supply Chain by the Numbers: May 8, 2008


Wall Street held steady again last week and the trend toward stability in the overall market was good for our Supply Chain and Logistics stock index.

In the software group, Ariba was up 7.1%, followed by JDA (up 5.4%).  In the hardware group, Intermec was down again (3.6%), however, Zebra gained 2.9%.  In the transportation and logistics group, Yellow Roadway added to last week’s gains (up another 8.5%) and Ryder remained strong with growth of 5.9%.         

See stock report.


Each Week:

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

Weekly On-Target Newsletter
May 6, 2008

SC Technology Insights
by Dwight Klappich

What’s the Latest in Transporta-tion Man-agement Systems?

Rising Transportation Costs Drive TMS Interest in Even Small Shippers; Bigger Shippers Looking for TMS Suites, Says Gartner’s Klappich


Q. The supply chain concept of the “Forrester Effect” is more commonly today known by what term?

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.


Want to understand and successfully implement an Advanced Order Picking System in your distribution environment?

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New feature - feedback is also published right on the story page, in near real-time. Take a look! Add your comments!

The Feedback continues to come in at high levels and we're really behind again - bear with us. But keep the letters coming!

We received tons of feedback on our piece on “The Supply Chain and $200 Oil” – thank you.

We publish a number of those letters this week. That includes our feedback of the week on this topic, from Ric Merritt of American TV, Appliance, & Furniture. There are a number of other mostly short and interesting responses, including one from Precision Software’s Bill Peterson, who says “A world of $200 per barrel oil would be a very different place.” We agree, but it looks like we really may be there soon.

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 and $200 Oil

(1) Thank you for coverage of this topic that is concerned and probing without being panicky. Most of the mainstream media (MSM to you savvy hip bloggers) display blithe ignorance, with projections of production, or at least demand, rising for decades. If production doesn't rise, consumption can't either, so price must rise until demand is reduced.

(2) Ignore anyone who blathers on about huge reserves. It's production that counts.

(3) I can't agree with one of your points, about a premium imposed on top of "core supply and demand": "The price of oil is fundamentally unhinged now from core supply and demand, and is controlled basically by what are called futures traders." Future expectations are part of the core market, and futures trading is just a mechanism expressing this. Markets are made by humans, so they fluctuate, but it does no good to point to particular players as bogeymen.

(4) Thinking about supply chain costs is a useful step, but energy and transportation are so fundamental that feedback loops throughout the entire economy will be huge.

Ric Merritt
American TV, Appliance, & Furniture

More On $200 Oil


Ton mile by RAIL is so much less then by Truck.  The government needs to get away from inventory taxes so that we can ship more by Rail and the overnight delivery
does not have to be done to keep factories running.

Jobs will still be available for local deliveries, with smaller trucks. Road damage from trucks will reduce what we are paying to keep up the highway system.

How much are we paying to keep roads clear when it snows - Fuel cost, also the Salt going into the environment... We have many problems that
Washington has no clue on and they won't listen to us.

What to do...What to do.....

Brent Cain

One has to believe that there will be a dramatic improvement in efficiencies as Collaboration will quickly become very popular - and the norm!

Martin Kelly
Director Carrier Development & Compliance
iWheels International

We've had 30 years of leadership vacuum concerning a viable energy policy. The lack of a coherent energy policy and a realistic path to "energy independence" for the US is the root cause of most all of our economic and international problems today and for the years to come.

We should have "energy bonds" just like we had war bonds in WWII as a means to support R&D into this critical sector.

Our biggest problem is our biggest opportunity. Once we figure out what to do, it is likely manufacturing processes will have to kick in to gear to assist with the conversion. A great way for some of our excess capacity to be put to use - that is until we outsource everything - but it will buy us some time while we re-orient our workforce.

Dave Rivers

A world of $200 per barrel oil would be a very different place. I wonder how valid the concepts of JIT and shrinking supply chains would be in that kind of future? If the cost of fuel were to become the single most significant factor in the equation, the need to manage a large number of small shipments may not disappear, but it would shrink in importance. Instead, the emphasis would be on large shipments and the economies of scale they would provide. A nice place for people that build warehouses and run railroads (and barge lines), but not so nice for air freight.

Perhaps of more interest to us in the supply chain business would be the period of ramp up to this kind of future. If it were to happen overnight, then it would be purely disruptive, but if it were to evolve over a period of several decades, the market demand for optimization products should see a significant increase.

Bill Petersen
Vice President, Business Development
Precision Software

Rising barrel price is a great indicator for us to change the way we live and work today in this great country.

Yes, we can start moving more freight via Rail and Intermodal Piggy back, but our customers will scream for back orders and longer lead times. All this boils down to is look ahead into the future and prepare for the future now. We should seriously consider working closer to home, if not from home. All these factors will help us reduce our consumption and it will definitely drive the oil price down.

We need to get back to smaller cars, smaller houses and the word SMALLER should be in our vocabulary more often than ever.

Mackief Baker


Q. The supply chain concept of the “Forrester Effect” is more commonly today known by what term?

A. The Bullwhip Effect – the roots of the model, which shows how demand signals get skewed as they move back up the supply chain from true end user demand, has its roots in work by J. Forrester, but really reached the supply chain consciousness when Dr. Hau Lee later wrote about it as the Bullwhip Effect.

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