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May 29, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Supply Chain Software is Getting Better

May is perennially the busiest travel month for me, and I am finally done with a slew of conferences and events.

Gilmore Says:

"My challenge now to the vendors is to do a better job of articulating how “1+1 = 3” – in other words, get beyond the technical/transactional integration, and articulate how that integration leads to better decisions and business results."

What do you say?

Send us your comments here

That includes in rapid succession, trips and speaking engagements at the user conferences of i2, JDA Software, and Manhattan Associates, plus several other industry events, including a very interesting day at the relatively new Medical Devices Supply Chain Council meeting, the Georgia Tech Supply Chain Executive Forum, a private presentation to one company’s global supply chain meeting, and more.

I know the supply chain software industry well, which means both the good and the bad, and we’ve have frequently commented on both here at SCDigest. But after visiting at these and other events and talking to many users, sometimes over cocktails where I can really draw out the best comments, I think there are some very positive and interesting trends overall.

  • As Vendors Mature, They Are (Finally) More Focused on Implementation Success: Why so many vendors for so long didn’t really put the effort and focus on making their implementations better, less painful, and less expensive remains a mystery to me. I could cite a number of factors: loss of talent in implementation teams, disconnects in the delivery process, resources spread too thin, too much emphasis on product development, etc., but clearly this has been a big issue for many years.

In past conferences across many vendors, I have perennially heard promises and commitments to make things better – often with little real result.

But I really do believe we’ve turned something of a corner here. My sense is that as the software market itself continues to mature, and with that in part a realization that a good chunk of the business will come from existing customers, vendors understand that problems in implementing one product or phase will have a big impact on selling the next product or phase. I also believe buyers/users have become a lot more knowledgeable and sophisticated, and are increasingly unwilling to put up with implementation snafus having already been around the block a few times.

I really like, for example, a new program JDA is offering in which the first few customers for new products or major new releases of existing products in effect get the “gold glove” treatment – testing at JDA with the customer’s own data, a high profile/priority for the project internally, rapid response to issues, and other services.

My friend Joe Broderick, a former executive at Manugistics (later acquired by JDA), RedPrairie, and other software companies once said, “Every new software product has a “beta” customer – the only question is whether they know it or not.”

While the issues aren’t and never will be totally behind us, I see a number of positive trends that should make software deployments increasingly less painful.

  • Lower Cost Implementations: Related to the point above, most supply chain software companies have been using lower cost development resources for some time. Now, many are considering or starting to use them for implementations as well.

That doesn’t mean there won’t be on-site/domestic resources, but it does mean that much of the configuration, customization and other services that were done domestically can be done offshore – at much lower internal cost.

Whether you like that idea or not from a macro perspective, it likely will in fact bring down professional services costs for many software deployments and upgrades.

  • Integration across Suites Moving from Powerpoint to Reality: Let’s face it, the messaging about “integrated” supply chain suites was always well ahead of the reality. But my sense is that in the last two years the suite vendors have put some real effort into harmonizing different technologies (often the result of acquisitions) and building real integration and work flows among suite components.

The powerpoints are probably still a bit ahead of the reality, but the gap is narrowing substantially.

My challenge now to the vendors is to do a better job of articulating how “1+1 = 3” – in other words, get beyond the technical/transactional integration, and articulate how that integration leads to better decisions and business results.

  • Same Company, Multiple Conferences: It was also interesting for me to see many of the same companies at multiple conferences.

I swear I saw one large specialty retailer at all three of the most recent events I attended, and I know I saw probably several dozen companies at two of them.  This is a good thing, I think. It keeps the different vendors on their toes, because when the next project starts for demand planning, transportation management, or whatever might be on the table, it means there will be two or more incumbents in the mix, as well as any new vendors that may be considered.

  • Less “Go, Go,” More “Show, Show”: Again as the industry matures, there is less pressure in a sense to keep racing ahead to beat the next guy to releasing the newest module, and more attention towards proving and substantiating value.

It actually is difficult to do both – be really driving the innovation and development horse hard, and to simultaneously focus deeply on understanding and delivering value and results. The software companies can and must continue to innovate, but they are now morphing the focus (really, not just in words) more back to partnering to achieve results.

  • “Customization,” of a Sort, is Back In: From both many vendors themselves, as well as conversations with users, there is a growing attraction for more “custom” solutions. That doesn’t mean “custom” as in the old days, but it does mean companies have unique needs, strategies, or opportunities for innovation, and want the software to enable that – which may not come in the “package.”

This is where SOA (Service Oriented Architecture), which generally puts supply chain managers to sleep, really does matter, and is something you should really pay attention to. It offers the opportunity, to some extent still being proven, to empower those customizations with a lot less pain, cost and rigidity than the old style of customizations brought.

Those are my thoughts on supply chain software trends. I will drill down on a couple of these in more detail in future columns. Would love to hear your reaction.

Do you see positive trends from a maturing supply chain software industry? Do you expect better, lower cost deployments? Or are you less positive on the trends? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

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Dan Gilmore


Upcoming Videocast

Driving Profit Through Improved Service Parts Management

June 3, 2008


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


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Addressing the human side of the equation boosts the success of voice deployments.


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

May 29, 2008
Supply Chain Graphic of the Week - Global Sourcing Matrix

May 29, 2008
Supply Chain by the Numbers: May 29, 2008


Investors on Wall Street pulled back last week as concerns over the surging price of oil and inflation continued to increase. Our Supply Chain and Logistics stock index felt the overall market’s stress.

In the software group, Ariba bucked the trend with a gain of 7.5%; however, both Logility and Manhattan were down 4.3%.  In the hardware group, both Intermec and Zebra fell (2.1% and 3%, respectively).  In the transportation group, Yellow Roadway plummeted 10.9%, followed by Ryder (down 6.8%) and J.B. Hunt (down 6%). 

See stock report.


Each Week:

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

Weekly On-Target Newsletter
May 27, 2008

Discussion Question

Time for the Retail Consumer Products Industry to Embrace ISI?

Where are the In-Store Implementation Best Practices?

Sorting it Out
By Cliff Holste

Improving the Performance of Your Central Merge Increases Overall Distribution Automation System Throughput

Advances in Conveyor Control Technologies are Reducing Delays Between Line Merges, Increasing Carton Sortation Rates per Hour


What is the average Days Inventory Outstanding (DIO) for US food manufacturers?

A. Click to find the answer below


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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!

Catching up as always on the many emails we receive.

Our feedback of the week is on the piece we did on The New Supply Chain Lessons from Dell, sent in from a supply chain manager at a Dell competitor, who understandably asked not to be named. You’ll find his letter, a response from SCDigest editor Dan Gilmore, then a follow-up from the reader – good stuff.

We also include two other letters on this topic, plus another good letter on our piece on Wal-Mart and RFID: Seems Obvious Now (that it wouldn’t succeed as planned).

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 The New Supply Chain Lessons from Dell:

This is a topic you covered to some extent in August last year with your article How Many Supply Chains Does Dell Need Now? The Dell business model and go-to-market strategy have both changed with their mass entry into the retail channel. As any good supply chain strategist knows, supply chain strategy is subservient to a company business model and go-to-market strategy. The direct go-to-market model has been served very well by renowned Dell BTO supply chain.

The indirect (i.e., retail) go-to-market model is not as well served by this. It is kind of overkill as the optimal supply chain is very cost-focused and leaned-out, with an emphasis on limiting variety (as opposed to the almost limitless variety enabled by the BTO model).

I do not see what Dell is doing as a complete abandonment of their supply chain strategy, but rather a tweak to the existing supply chain model (more outsourcing, less variety) and an additional supply chain to their portfolio (potentially build-to-stock to support retail). Dell has been a one-trick pony for many years, albeit a very good one-trick pony. I think what we are seeing is a natural supply chain evolution as the business at Dell evolves.

Kudos to Mike Cannon for having the guts to go after such a sacred cow. I would imagine that one of his biggest challenges is to convince Dell employees that the supply chain model they helped perfect and the one that has been put on a pedestal year after year has got to change.

Supply Chain Manager
High Tech Company
Name withheld by Request

Response from SCDigest Editor Dan Gilmore:

Just my quick response..

In the presentation, it was presented as a lot more than a tweak. It was presented as a major transformation.

I agree with you at one level, but:

-- it has been Dell MTO model and all that went with it, really, that has been held up as the paragon. Other PC makers, rightly or wrongly, were often criticized for the failure to get there.

-- For a long while, Dell got to compete on its own playing field. Now it has to compete on the same playing field - and it is starting almost from scratch. In that regard, it is all about execution, and the differences between the leaders will be small. Before, Dell got to compete on SCM design - and for awhile that gave it some huge advantages.

So, I think this is really big news. As I said to someone else, I doubt we will see any more How Dell Does It (real book) any time soon. And that ends an era.

-Dan Gilmore

Response back from Subscriber:

When I said tweak (as opposed to plain tweak) it was meant to imply a a fairly major change. Keep in mind, however, that Mike Cannon, as part of his MOC effort, needs to beat the drum loudly. Dell is suffering badly in the marketplace and rapidly losing analyst mindshare on Wall Street. If Mike Cannon, Michael Dell, and the rest of the Dell management team do not impart to the world that they are doing something major to fix things, this slide will become even more rapid. Mike has to position this as a blow-up. The fact that their BTO model was so lauded only makes this harder. From inside the company I can only is a blow-up. Step back, however, and I do not see this as a blow-up. Yes, it is a major change for Dell.

Other manufacturers did get there, by the way, doing so in a different way - all the while preserving one of our biggest assets...the channel. As it turns out this channel model is a whole lot harder to deploy effectively than a BTO model.

You are right, it really is big that many of us in the industry have been predicting. No new How Dell Does It books in the near future. Perhaps How Dell Did It with the subtitle ...And Why This Does Not Work Anymore.

Yes, that ends an era.

More on Dell:

A solid, comprehensive grasp of the supply chain industry and ODM's capabilities. Dell needs such leaders who can leverage the partners and extract maximum value from them at a competitive price. Thanks for publishing this presentation.

Prakash Tendolkar
Component Engineering
Dell Inc.

All I can say is, "About Time!"

I pointed out this trend to Dell management over 5 years ago and was told the Dell Direct Model will not change. It will be the diversity of channels marketing, in combination with more low-cost country manufacturing, that will impact the computer industry. Some developing markets can only be entered through their distribution channels - such as China.

The good old days of upselling from the base model worked during the growth period within U.S. and Europe, but a different approach is needed for other markets.

Denise Frohling

On Wal-Mart and RFID:

As always, great work.

Archimedes is said to have remarked about the lever: "Give me a place to stand on, and I will move the Earth." This statement is quite impressive. Someone had actually claimed (and proved in theory) that they could move this massive body called Earth if they only had a lever large enough and a place to stand!

I was first introduced to RFID when I conducted an assessment for a $5 billion player in the semiconductor industry circa 1996. I was exploring the possibility of eliminating a barcode scan & subsequent labor on Kanban deliveries that were delivered JIT to the manufacturing site. The challenge was to have their Kanban deliveries contain unique RFID chips that would identify the contents, its terminal location, supplier information, et al. When the deliveries came in, the would be placed on an unmanned conveyer and an active interrogator would determine the appropriate flow along this massive conveyor system into the correct manufacturing facility. The savings were significant. The problem: size and cost. At that time, the “chips” were the size of license plates and cost about $20 each (I think). We are now in a new century, the technology is better, the savings potential are greater, and we are still stuck on cost to implement.

I had hoped that the promise of reducing the size & cost of an RFID chip would help us “move the Earth” what with Moore’s Law and all! Today, I think that RFID is a solution in search of a problem that is expensive enough to be worth the effort.

Just like Archimedes, we must ask ourselves if it is worth the expense to “build a lever large enough & find a tenable spot to stand” just to capture more data with less labor than a bar code scan???

Rick Feltenberger
The Supply Chain Center


Q. What is the average Days Inventory Outstanding (DIO) for US food manufacturers?

A. About 29 days - that translates into a inventory turns number of about 12.5 (365/29).

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