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July 31, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Limited Brands’ Nick LaHowchic Unplugged, Part 2

In Part 1 of my interview with Nick LaHowchic, former head of supply chain at the Limited Brands, I called him “the thinking man’s supply chain executive,” and as I reread the Transcript of Part 2, I came away convinced that characterization was spot on. There is an intellectual rigor to the way Nick thinks about supply chain that is simply not often found.

Gilmore Says:

"I also really enjoyed our dive into how you might assess whether a company’s supply chain needs fixing or not.  His first step – look at what the organization said it would do over the past few years, versus what actually happened. How would your supply chain stack up in that regard?"

What do you say?

Send us your comments here

We covered a lot of ground in part 1 (link above), and now I would like to summarize part 2, which again traversed some very interesting supply chain terrain.

One consistent theme through any discussion with LaHowchic is looking at the entire supply chain as a truly connected system – not a series of different functions. The supply chain is like a balloon, he told me – you squeeze it in one place, and a problem pops out somewhere else.

“Without a total business systems view, if you want to make corrective actions, you look at simplistically as just fixing this or that, without looking at the whole,” he told me.

Another consistent theme is getting the metrics right – again, not letting metrics create a siloed functional view of supply chain performance.

“If you are continuing to reward subsets of the process with no connection to the results in any other areas, then you are forever going to have people trying to do the best they can do at that one area and really screw up the rest of the supply chain,” he said. You want metrics that help “get to the best answer for the company, as opposed to looking at what’s best for manufacturing or what’s best for transportation. It just never comes out right for the company overall if you have that type of culture and systems.”

I also really enjoyed our dive into how you might assess whether a company’s supply chain needs fixing or not.  His first step – look at what the organization said it would do over the past few years, versus what actually happened. How would your supply chain stack up in that regard?

“You will learn a lot from that exercise,” he said.

“In many companies, it’s often that the discussion hasn’t been at the right level, nobody brought a focus to it, or there has been some great rhetoric but no action was taken,” he added. In too many companies, plans for supply chain improvement “continue to go as just great rhetoric.”

I asked LaHowchic how a company would know it was time for a “supply chain transformation.” A key point, he said, is recognizing that what makes a good supply chain for a given company can change very rapidly. Understanding what the right supply chain is for a company right now is an exercise in constant vigilance.

Many companies “are doing what seem to be good [supply chain] things, but those good things are against a set of targets that are years old. So they are not the right things today to really make a difference to be more competitive with the customer in the marketplace,” LaHowchic said.

One easy example – companies that were running a tight supply chain ship, but which have been focused primarily as a domestic supply chain. Go global, and what worked well in the past no longer is very relevant.

Companies “come to find out is that when they start to go overseas, the existing models they had were way off in terms of global organizational and operational performance,” LaHowchic observed.

Next, a very important topic for many SCDigest readers. My experience is that when a supply chain transformation is initiated, it’s almost always when a new supply chain executive is brought in, or perhaps a new CEO who perceives a need to shake up the supply chain. So, the key question is: can the existing team really lead a supply chain transformation?

Sometimes, LaHowchic said – but I got the idea not too often. He said frankly that sometimes a supply chain organization in trouble lacks the talent to lead a transformational effort. Even if they have the talent, too often complacency with the current model and performance has set in, and changes need to be made. Who hasn’t seen that situation sometime in their career?

“When you have people doing the same thing for a long time, it becomes equally challenging for them to really think in a sense about their self-destruction and reinvention,” LaHowchic added.

Interestingly, LaHowchic brought up an example from his own career, when he was at medical device maker Becton Dickenson. It had a fine, global executive team. It developed a solid strategic plan. Just as a double check, they brought in well known author/consultant Jim Collins (Good to Great) to have a look at the plan – and he promptly told them it was mostly baloney (a little stronger term, actually).  Collins told the execs “You think you are this capable, but it’s an aspiration, not a reality. Test your numbers. Detail what it will really take to get there.”

Finally, I liked the discussion we had about changing delivery schedules at Limited Brands. When LaHowchic came in, store deliveries were optimized based on transportation – not store efficiencies. LaHowchic wanted to change that – deliver on scheduled times, allowing stores to get the right receiving personnel in place and also increasing selling time on the floor.

“When I started to look at it that way, the first reaction was: We have never done it that way, why would we want to do that?” LaHowchic said. “The result of this effort was hitting 98% of deliveries within 2-hour windows, to 6500 stores, doing it for less than they did 5 years before relative to overall increases in transportation expense.”

There is a lot more, including LaHowchic’s advice for middle managers wanting to reach senior levels, but we’re out of space – hint: work hard, but don’t be too patient. You’ll find all that and more in the full transcript.

I promise you will enjoy it.

What’s your reaction to LaHowchic’s view on supply chain management? Can the existing team really lead a supply chain transformation? Why do companies settle into supply chain complacency – and how can you avoid that trap? 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 31, 2008
Supply Chain Graphic of the Week - Green Supply Chain Rhetoric?

July 31, 2008
Supply Chain by the Numbers, July 31, 2008


Wall Street’s recent positive movement was slowed up a bit last week.  Our Supply Chain and Logistics stock index results were varied and dramatic.

In the software group, Ariba was up 6.1% last week, while Descartes fell 3.6%.  In the hardware group, Intermec was up 5%; however, Zebra was down 5.1%.  In the transportation and logistics group, Expeditors’ International slid 16%, followed by Ryder (down 9.8%) and Yellow Roadway (down 9.2%).  Also within the group and on the positive side, Norfolk Southern was up 10.5%, followed by Union Pacific (up 6.8%) and Canadian National (up 4.1%).


Each Week:

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

Weekly On-Target Newsletter
July 29, 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

Sorting it Out
By Cliff Holste

Developing Optimal Order Picking Strategies

The Central Question In Order Picking Strategy Is Whether To Move The Picker To The Part, Or Move The Part To The Picker

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 approach to process improvement does the acronym "TLS" stand for?

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.

We received many excellent letters on The Supply Chain Complexity Crisis. That includes our Feedback of the Week from David Armstrong of Flextronics, who says that complexity also creates confusion that can have a terrible impact on performance

Also thanks to our friend Mark Baxa of Monstanto, who found the source of a quote we had been looking for. You'll find those letters and more on this topic 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 Supply Chain Complexity Crisis:

There is no question that complexity adds to supply chain issues, however, there is another important factor - confusion. In the mid-1980s, Professors Robert Hayes and Kim Clark at Harvard conducted a major study on the sources of factory productivity.

They found that complexity had an impact and found that a factory's task became more complex as it grew, added products and processes and experienced a wider variety of production orders. However, they found that confusion, categorized as managerial actions that disrupted the stability of the operation, had a negative impact on productivity.

Managerial actions that created confusion included varying production rates, changing schedules once they had been established, expediting orders, changing work assignments, processes and ECOs, all of which contributed to confusion in the plant that led to lower performance.

So, an important question to consider when looking for performance improvement opportunities is what is complexity and what is confusion and is it possible to manage both, but with different approaches.

For example, the author of the article uses the example of small volume customers and order costs. Too often, we use the accounting system with totals and averages to try to get our arms around these questions, but the data is not suited for that type of analysis, so we use totals and averages, which gives an incorrect picture of results.

In one organization I worked with, we used exactly these methods for our supply chain planning until we did an order size distribution analysis and learned that our most popular order size was 1 unit, and orders of 3 units or less accounted for half of the orders, but from a unit standpoint, the majority of the volume was in truckloads. Even though we did not have exact costs to process an order, we had enough knowledge to know that small orders had high fixed costs and low unit costs and that the volume component was the driving cost component for the large orders.

The result: instead of a one-size-fits-all process based on the mythical average order, we designed one process for the small orders and another for the large. This resulted in lower costs and much less confusion. At the same time, we were able to better associate our pricing with order costs and as a result, improved our margins.

David Armstrong
Sr. Manager - WW Inventory, Worldwide Materials

More on Complexity:

Good article. I do not think that accounting systems lack the ability to capture the impact on profits. Now that efficiency has come to the forefront about driving out costs when a process is miscategorized is causing the problem.

Organizations failure to do a root cause analysis on the actual problem and only address the symptoms. Today's software is so complex it can track anything and everything. This then becomes an exercise in data aggregation, and assigning the correct cost structures to the correct business process. As stated, "What is the cost to fulfill an order?"

Software now will have to look at the business process as a whole and relate each event (which is now tracked) to figure out a cost. Only when costs are calculated, then appropriate decisions can be made pertaining to profitability of that process or product. BI, performance management become key and understanding the data completely is where organizations will have to focus.

Dylan Persaud
Sr. ERP/SCM Analyst

An excellent piece as usual. Kind of makes you wonder what happened to all of the Value Stream/Value Chain thinking. Wouldn't it not seem to follow that leaning out of all those non-value activities and eliminating waste out of the supply chain would lead to less confusion and complexity?

I think that the outsourcing movement may be a big part of the problem, at least it facilitated it to some degree. When most of the operations necessary to build a product were conducted in house, there was an understanding that you could only do so much. As soon as we decided to outsource all but the core competency, we found that there is almost unlimited capability. Why not utilize it to "imagineer" products which can capture market share, even if only for a short period?

If supplier X can't build it, then have that one built by supplier Y. Need new materials and processes? No problem. Don't get me wrong, I think outsourcing has its place. I just do not think most companies think it through well, particularly when they are planning new products. Henry Ford may have been wrong when he thought his company should own all of the processes, but at least he kept things fairly simple: one model in one color -- black.

Steve Murray
Principal and Chief Researcher
Supply Chain Visions

I think you will find the answer you are looking for below:

"If you are in Supply Chain Management today, then complexity is a cancer you have to fight. Process management is the weapon. Understand that Supply Chain Management is too important to be simply a function. It is everybody's job."

Tom Blackstock Vice President Supply Chain Operations Coca-Cola North America

Mark Baxa
Global Logistics and Trade Compliance Lead

Who said what:

Not sure the source of the quote ("Complexity is like a cancer that destroys supply chain efficiency."). It does, however, bring to mind another quote that is in the same spirit. Again, not sure of the source, but here ya go: "Better is the mortal enemy of good."

Ken Finkel
VP Sales & Business Development
ScheduleSoft Corporation


Q. What approach to process improvement does the acronym "TLS" stand for?

A. A strategy that combines Theory of Constraints (T), Lean (L) and Six Sigma (S) in one unified approach.

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