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

Four "Hidden Gem" Supply Chain Ideas

I don’t know about you, but one of challenges many of us face is to actually remember all of the good ideas we hear over the course of a few years.

With that in mind, I have gone back and looked through my notes and columns for some ideas I thought were worth making sure we didn’t lose track of. In doing so, I tried to find ones that were not “standard wisdom,” but rather ideas that present a unique insight or approach on supply chain – hidden gems, if you will.

So here we go, trying to hit a number of different supply chain areas:

Customer Service Does Not Equal Customer Satisfaction: Whether we’re buyers or sellers, it is easy to get caught up in the whole process of supplier “scorecards” and the series of metrics (on-time delivery, fill rates, etc.) that are compiled in such reports. Those metrics are important, for sure, and poor performance in those areas will certainly be bad news for the supplier eventually.

But does scoring well in terms of those customer service metrics really mean you have a high level of customer satisfaction? Maybe not, as I believe I first heard Dr. Jim Tompkins of Tompkins Associates say. There may be any number of other issues lurking underneath the numbers (lack of communication, not enough new ideas, lack of responsiveness to special needs/requests, etc.) that mean the customer is actually not well satisfied with the relationship and service regardless of the metrics – and thus more prone to switch business to a competitor.

The key takeaway: have consistent dialog that gets at the perceptions beyond the numbers.

Gilmore Says:

"To reduce "customer sacrifice, build a supply chain that is capable of customizing the products and supply chain services a customer receives and therefore provide something very close to an exact match to they really want."

What do you say?

Send us your comments here

Be Attuned to “Customer Sacrifice”: On a very related note, there’s an important difference between the level of customer satisfaction and the amount of “customer sacrifice.” That’s an interesting insight I learned a couple of year’s ago during a presentation by James Gilmore (no relation) at the Georgia Tech Supply Chain Executive Forum.

Most of our current notions about customer satisfaction are incomplete. The most common definition for customer satisfaction is something like this: satisfaction equals what we expect to receive minus what we perceive we did receive.

Meaning, in short, that if our experience meets or exceed what we expected, we will say we were satisfied.

But does that mean we received the product and service(s) we really wanted? Absolutely not. Customer sacrifice can be defined as equaling the gap between exactly (key word) what the customer wants and what they ultimately settle for.

As consumers or businesses, therefore, we can be satisfied with what we receive from a supplier, but only in terms of our expectations. But that “satisfaction” could still be accompanied by a deep sense that we didn’t really get just what we wanted, and if someone else could just provide it…

Customer satisfaction surveys are unlikely to discern the level of sacrifice individual B2B or B2C customers may be experiencing.

The key takeaway: be sensitive to “customer sacrifice” as an issue that may not be captured by customer satisfaction (or service) metrics. One answer: build a supply chain – or maybe better a demand chain – that is capable of customizing the products and supply chain services a customer receives and therefore provide something very close to an exact match to they really want.

Stop Trying to Collaborate with Customers Who Aren’t Interested: This is the recommendation made by Dr. John Gattorna in presentations at recent CSCMP conferences as well as his excellent book “Living Supply Chains.” The basic point: customers can be segmented in part by how collaborative they want the relationship with a supplier to be. Some value it highly, and are willing to put a lot of skin in the game. Others do not. Yet, many companies, because of their own interests, waste a lot of time and effort trying to collaborate with these customers, with (no surprise) very limited success.

Many companies I have spoken with have acknowledged this is a lesson they too have learned, after spinning their wheels with some customers for far too long. The key takeaway: segment customers by the type of collaborative supply chain relationship they want (Gattorna suggests there are four types) and focus more resources on the customers who really want to collaborate and are willing to put the effort and resources behind it.

Lost Project Time Can Rarely Be Made Up: I have heard this from a number of sources, but the point is not made nearly enough. When a supply chain initiative, especially a technology-related one, gets behind schedule, it is almost always better to acknowledge the reality and slide the schedule back appropriately than to try to invent ways to get the project back on the original time track.

Those schedule recovery efforts in reality almost never succeed, and bring with them tremendous risk. Trying to make up the lost time often involves taking shortcuts in review processes and system testing, for example. The worst examples of this, perhaps, are in the Warehouse Management System area, where go live is planned with too little runway before a peak shipping season or new building has to be active. When the original schedule slips, the actions taken to compress the remaining schedule ultimately result in a system that has major problems when it goes live on or near the date intended, causing far more grief than sliding the schedule would have.

The key takeaways: (1) It is almost always better to accept the slip and move the schedule back, and (2) it is smart to build in a healthy level of contingency time into the schedule to begin with, or at minimum leave a substantial amount of time between the “go live” date for whatever it is and the real need for the system.

I thought I would have more room, but that’s it. I have a lot more "hidden gems" – will do this again soon.

Any reactions to our four “hidden gems” supply chain ideas? Do you think we are too focused on service metrics rather than true customer satisfaction or possible sacrifice? Do companies spend too much time trying to collaborate with customers that don’t really have the interest? Do you believe lost schedule time in supply chain projects really can be made up? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore



Leading Edge Logistics Part 1 - In Search of a Global Logistics Strategy


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

July 23, 2008
Supply Chain Graphic of the Week - Logistics Operating Models

July 23, 2008
Supply Chain by the Numbers: July 24, 2008


The stock report will return next week


Each Week:

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

Weekly On-Target Newsletter
July 22, 2008


Featured Megatrend: Actionable Visibility

Watch Gilmore, Tyndall, Collins Discuss and Debate the Issue

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

Supply Chain InView
By Ann Drake

3PL Bids - The Good, the Bad, and the Only (Part 2)

Six Questions to Assess Whether your Outsourcing Relationship is On Track

Managing SCM Performance

By Kate Vitasek

How Good Is Your Supply Chain Data Quality? (Part 3)

Data Cycle Counts: You Track Inventory Accuracy - Why not Data Accuracy?


What is "the box that changed the world?"

A. Click to find the answer below


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Catching up as always this week on a variety of letters. Remember, feedback now is also available at the bottom of each article.

Our Feedback of the Week is from Brazil's Wilma Maria Roberto, who agrees with the need for an integrated supply chain organization, but says it's tough convincing other functions of the benefits. Jim Uncheat agrees supply chain software os getting better, but thinks "SOA" will really make the difference. Bradley Todd comments on the recent observations that closed loop RFID is where the action is now, Niak Wu adds some thoughts on Root Cause Analysis failures, and Walter Nodleman thinks we're un-American to be providing tools to help offshore decisions - to put it mildly.

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 Integrated Supply Chain Organization:

You cant imagine how excellent is your article: Congratulations!

Unfortunately, the need for integrated supply chain management may seem obvious to Supply Chain executives, but not for our partners from Sales, Marketing and so on.

Everybody is totally focused on increasing power instead of achieving excellence in performance, cost and customer service!

Mainly here in South America we´ve been facing, even at global companies, the same day in, day out of explaining the real meaning of Supply Chain; can you imagine the size of effort to reach an integrated model?

I see all it as professional opportunities and I am totally convinced that this role is on our hands and attitudes as yours come directly to help us!

By the way, I take opportunity to congratulate the new Megatrends series as well.

Wilma Maria Roberto
Supply Chain Executive

On Better Supply Chain Software:

I believe you have captured a number of the key points about a maturing software industry. There has been considerable consolidation in the solution provider base and the orientation to producing real value versus hype has never been stronger.

I also believe you understated the importance of SOA and the need for companies to understand how a SOA architecturecan affect their supply chain practices. While supply chain applications like TMS, WMS, and OMS all have their own compelling value propositions the opportunity to create strategic competitive advantage in the supply chain will come through SOA oriented solutions. SOA solutions lower the cost and speed the process of supply chain integration/collaboration as a complement to these other applications. Supply chain collaboration,visibility, process control, performance measurement, and adaptive execution further enhance lean strategies, perfect order programs, risk mitigation, and global supply chain effectiveness. Now that SOA has passed its hype phase and early development challenges it is time for supply chain professionals tounderstand the technicallimitations that have changed.

Jim Uchneat
Supply Chain Consulting LLC

On Closed-Loop RFID:

Companies focus on different things based on the goals of the company. For instance, start up’s focus on making people aware that they exist and have something new. More mature companies with significant customer bases are keen on insuring that customers keep buying their products.

I have never seen this more clearly displayed than in the RFID world. For a few companies, mine included, we have quietly observed the UHF EPC Global phenomena analytically. What is the reality of it? What are the features of the UHF RFID systems that merit consideration? How will it fit into closed loop applications? Can money be made and customers needs be met with these systems? What are the real economics of these systems in open loop applications?

I have been able to answer most of these questions and come to conclusions over the last 12 months but my real goals have been and remain insuring that customers finds solutions to their very real problems using our rugged industrial RFID solutions.

Bradley Todd
Manager, Americas RFID Sales
Datalogic Inc

On Root Cause Analysis:

Interesting article. Many a time, most managers would prefer to withhold information/knowledge rather than to impart it. This, I believe, is in the fear of a subordinate one day being able to surpass him/her information-wise. Truth be told, this will definitely be true but what a subordinate lacks is experience and experience only comes with time.

I opine that a possible cause of stagnancy in a company/department roots from managers who are overly protective of their turf, project the wrong message across without really knowing the facts and are reluctant to gain clarity in areas in which he/she is not competent at. This I assume stems from the mindset of some managers that think they are supposed to be almighty and blessed with omni-knowledge.

It really does seem strange that at this day and age with myriad books on managing people and companies, we all still make the same old mistakes.

A chain is only as strong as its weakest link.

Niak Wu, Koh

On Impact of Offshoring:

I was going to write my feedback to David Busch. Then I discovered that i had covered all the same points two years earlier to Dan Gilmore, editor at Supply Chain Digest.

Similar article in supply chain digest today. Similar reaction to such material from me. The selling out of my country and my countrymen by criminals who value green and black dollars – rather than the American flag, is in my mind still treason. SCDigest disgusted me in 2006, and you prove that things haven’t changed in two years.

There are many Americans like myself who are gleeful this week when we read about the corporations that are being driven out of business because they can’t sell communist china stuff to millions of unemployed Americans. I refer to ... Http://

the issue today is not which country to choose in your matrix. The week of Memorial Day in the United states of America is not a time to be choosing country of loyalty by means of a matrix.

The issue should be ... Why should your citizenship in my country be honored and permitted, when your behavior is so blatantly anti-American during war time ?

Walter a Nodelman


Q. What is "the box that changed the world?"

A. The description given in the title of a recent book on the impact of the ocean shipper container, invented by legendary SeaLand founder Malcom McLean in the 1956, which really opened the door to today's global trade.

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