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June 5, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

The Integrated Supply Chain Organization

I’ve spent a decent amount of time over the past couple of years focusing on gaining a better understanding the “integrated supply chain organization.”

Gilmore Says:

"Since supply chain is all about the horizontal integration of processes, and should be about optimizing total supply chain performance, for many of us, the “integrated supply chain organization” seems like it should be the natural state of affairs."

What do you say?

Send us your comments here

Just what is that, you might ask? Well, in general, I take it to mean a unified organizational structure, under a single leader, that encompasses all the traditional supply chain-related functions from source to consumption: sourcing/
procurement, manufacturing, global logistics, distribution and transportation.

But the topic is actually quite complicated.

I got on this theme two years ago at a great meeting on this topic at the Supply Chain Executive Forum at Georgia Tech. There, we heard IBM’s Sal Calta describe the company’s 10-year journey to integrate its vast global supply chain operations. I’ve heard other versions of the IBM story before at larger venues, but in the smaller, more informal setting of the Executive Forum, Calta described very candidly the great benefits – and challenges – that resulted from making this transition from a more traditional functional supply chain organization to an integrated one.

As some of you know, we recently launched a new publication CSCO (Chief Supply Chain Officer) Insights, under the editorship of Gene Tyndall. It’s the only publication and web site geared specifically at the information needs of current and aspiring supply chain executives. The first issue of the hard-copy newsletter was mailed in May to about 4000 SCDigest subscribers who fit that profile, and focused on the integrated supply chain organization.

You can download an e-version of the premier issue and/
or apply for a subscription at The web site will soon be expanded, but we are off to a good start.

For the premier issue, the research arm of CSCO Insights did an analysis of the Fortune 125 product companies (manufacturers, retailers, wholesalers – not banks, insurance, utilities, etc.).  It looked in detail at company web sites, and supplemented that with some additional research.

The research showed 25% of these Fortune 125 companies had a single executive in charge of an integrated global supply chain, per the definition above. Another 26% of the companies had a supply chain-related executive/title among corporate officers, but that executive did not have responsibility for the entire supply chain. Often, purchasing/procurement was the missing function; in other cases, it was manufacturing.

A few companies, such as Whirlpool, have an integrated supply chain organization within North America, but not yet on a global basis.

34% had no supply chain-related executive listed among corporate officers/executives on the web site. While this does not conclusively demonstrate the lack of an integrated supply chain organization, logic says that such an organization/executive would be listed among the company’s senior executives.

This research is supported by anecdotal evidence from the executive recruiting world.

“The number of fully integrated supply chain organizations is still surprisingly low, but increasing,” says Dave MacEachern, head of the thriving supply chain practice at Spencer Stuart, one of the leading executive recruiters in this space. “If I were to guess, it is 25% of the time that we see true end-to-end supply chain requirements when companies are searching for a supply chain executive.”

Since supply chain is all about the horizontal integration of processes, and should be about optimizing total supply chain performance, for many of us, the “integrated supply chain organization” seems like it should be the natural state of affairs – even if we recognize it may take a while to get there. There is no question we now see more announcements of people with the actual title of “Chief Supply Chain Officer,” or at least VP of Supply Chain with end-to-end responsibilities. But these are often at mid-sized companies where the transition is simpler – I’ve noticed, for example, a number of restaurant chains in the last year creating the new position of CSCO – who’d have guessed?

But it’s actually a complicated decision framework. In deciding how much to “integrate,” you need to consider at least three variables:

  • Business Unit Level: Is there an integrated organization for a given division, or the whole company? When does it make sense to start to think corporately? For example, I don’t think anyone would argue for GE having an integrated supply chain across businesses as diverse as medical systems and aircraft engines. But what about Unilever? In North America, it had separate supply chains for its food and personal care products businesses, until the businesses themselves were merged a couple of years ago. This can be a tricky question.
  • Functional Level: What functions go into an “integrated supply chain organization?” Above, I defined it as procurement through delivery, but procurement can also be tricky. Should the direct procurement function be under the supply chain, and a separate purchasing function under finance or something for indirect materials? Interestingly, we are seeing a simultaneous rise in both CSCOs and Chief Procurement Officers. Also, in consumer packaged goods, customer service has often fallen under logistics – when should that be part of an integrated supply chain organization? Ditto with other functions not clearly part of the traditional supply chain domain.
  • Geographic Level: Many companies are organized by geography. So, to have a single supply chain organization that manages the supply chain across those regional businesses may be tough to accomplish – meaning the changes would not be welcomed by geographic execs who want to control their own destinies.

So, these are the questions, as Gene Tyndall likes to say. I used to think once a company moved to an integrated supply chain organization, there would be no turning back, but find now that it isn’t the case. In the past 2-3 years, HP, GAP Inc., and 3M have all retreated from the integrated supply chain model, each for different reasons.

Still, I believe we will see the continued rise in the integrated supply chain organization and more and more Chief Supply Chain Officers, whether by that exact title or not. I can just point to what IBM has said have been the benefits of their integration efforts – billions in costs savings and free cash flow generation, 6% reduction in cycle times, lower inventories and more. Scale those big numbers down for your business, and it’s still a lot of savings.

I don’t know how far, how fast, but I think there is no question that 5 years from now, the percent of companies with CSCOs will be much higher than where we stand today.

What do you see as the framework for building an integrated supply chain organization? What are the limits of the model? Is this the right model ultimately for almost every company? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore


Upcoming Videocast

Inventory Optimization Series - Part 2

How to Mitigate the Impact of Global Sourcing on Inventory Levels

June 17, 2008


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

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Supply Chain by the Numbers: June 5, 2008


The month of May ended with optimism as all major indices recorded gains.  Our Supply Chain and Logistics stock index reaped the benefit of the more positive outlook.

In the software group, Descartes finished the week up 9.9%, followed by i2 (up 9.6%), and Ariba (up 8.5%).  Both Intermec and Zebra in the hardware group had a good week (up 2.7% and 2.5%, respectively). Even the troubled transportation group had no complaints this week with Union Pacific up 8.2%, Norfolk Southern up 7.4%, and Burlington Northern up 6.5%. 

See stock report.


Each Week:

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

Weekly On-Target Newsletter
June 3, 2008

By Gary Girotti

Two Shades of Green - A Quick Note on Carbon Emissions and Fuel Surcharges

More Fuel Efficient Transport Modes Have Inherent Advantages in Fuel Surcharge Levels to Shippers

Supply Chain Technology Insights
By Dwight Klappich

Technology Support for Reverse Logistics is Minimal

New Group of Specialty Vendors is Offering Solutions for These Tough Problems


Where does China rank in terms of which countries are the largest source of imported goods into the US?

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.

Reader feedback from our our pieces on The New Supply Chain Lessons from Dell and Transcript of Dell’s President of Global Operations Mike Cannon’s presentation that announced the new strategies continue to come in.

That includes our feedback of the week from Tom Hall of VWR Scientific, who in part notes just how hard it is to stay number 1 in any line of business. Dr. Charles A. Watts of John Carroll University says it’s all a bad sign for Dell – they have moved into a commodity business. Sebastian Mieres of Jigsaw Consulting says Dell’s product was commoditized a long time ago, and these changes should have been made sooner.

You’ll find these and other letters below.

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:

I read both of your articles on Dell. Very interesting.  I have to agree with the majority, that Dell is just doing what it has to do.  However, I'd like to offer a different perspective.

I just read an article today by leadership guru John Maxwell entitled, "First Place is not an Easy Place to Stay." Basically, it covers reasons why we may be in first place and lose it, as well as how to stay in first place, but the point is that once you get to first place, you still have to work continuously to stay there.

Think about the automotive industry nearly a century ago. The Ford Model T was absolutely revolutionary, but because the company (or, more specifically the leader of the company) refused to change the design of the Model T and adapt more to consumer demand, Ford gave the rest of the automotive industry an opportunity to catch up.

I'm not saying that Dell has an ego issue within its organization or anything like that.  What I am saying is that change is essential for growth.  I first heard in a college class about 8 years ago that Michael Dell kept zero inventory.  I was so impressed when I heard that, but that was 8 years ago.  I was 22 when I heard that, and this year I'll turn 30.

You'd better believe that my mentality has changed since then.  If Dell's had not, they'd be in trouble today.

Tom Hall
VWR Scientific

More on Dell:

Unfortunately, this may signal the end of Dell. I remember when Gateway decided to do a similar thing and created their own stores. I agree with Scott Brown’s comments about knowing where to apply the right supply chain model based on value to the customer.

My concern with Dell making the switch is that they do not have any competitive advantage. What makes them any different than HP, Lenovo, Acer, etc. They will find out why Best Buy has to spend up to a billion dollars on air freight to meet customer demand that ends up being different than the forecast during the holiday season. They also will no longer be able to take advantage of the expensive upgrades that consumers add on at the web site. How will they know exactly what final configurations to produce for stock? They are now admitting that they are a producer of a commodity product and will only be competing on price.

Dr. Charles A. Watts
Professor of Operations Management
John Carroll University

Impressive first step – recognizing where the problems are and where effort needs to go in.

Dr. Ramesh Srinivasan
VP Business Engineering
Aankhen Inc.

I'm interested to see how these supply chain and manufacturing changes - limiting complexity of units by essentially increasing the number of core configurations will impact the buying experience through their traditional online, custom-configuration model.

While it may help with the retail model, from an inventory and stocking standpoint, will it complicate the experience for those who enjoyed the one million possible configurations of the former "core" unit by forcing the buyer to sift through a large number of slightly variant "custom-core" models to locate the one with the options they desire? Will the added complexity, if it exists, cause the long-time Dell loyalist to explore other options? As a third-generation Dell owner soon in need of a fourth, I look forward to finding out.

Chris L Attardo
Senior Sales Consultant

I believe that computing became a commodity a long time ago when the Asian region opened themselves as cheap Contract Manufacturers. As a commodity, there is not much to add to the good. Customers looks for price. They do find extreme customization on these products when they approach the retail store.

We also all know that boards and screens are all made in the same factories with the same design and same quality assurance. So why will people pay more for what Dell was proposing?

I think Dell should had done this some time ago - but then again, it's not too late.

Sebastian Mieres
Jigsaw Consulting


Q. Where does China rank in terms of which countries are the largest source of imported goods into the US?

A. Not surprising to most, China is now number 1 – but what may be surprising is that it just became so in 2007. Through 2006, Canada was the source of the most imported goods into the US, and it is still not far behind China.

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