This Week in SCDigest:
Getting Supply Chain Alignment Right
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
New Blog - Gilmore's Daily Jabs
Expert Insight - Sorting it Out: Sorting Completed Picks for the Smaller DC
From RetailWire: Penn Traffic Turns Buying Over to C&S
SCDigest Introduces "Distribution Digest"
Your Supply Chain Questions Answered! This Week's Question - Should Receiving be Counted as a Product Touch?
Trivia, Supply Chain Stock Index
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October 3, 2008 - Supply Chain Digest Newsletter



Getting Supply Chain Alignment Right

I often get asked, “What makes a supply chain great?”

That’s a tough question to answer, but I have come to some conclusions. Right now, what makes a supply chain great are two things:

  1. How well supply chain strategy and performance are aligned with the company and the brand’s overall business strategy.
  2. The speed at which the supply chain can respond to opportunities and requirements.

When we first published our popular list of the 10 Supply Chain Megatrends last year, I promised we would do some follow-up columns on each one, and finally we are. Naturally enough, we are starting with our first one, which is Supply Chain Alignment.

(As a quick aside, I hope you are following our Supply Chain Megatrends web page, where we have been posting video discussions and executive briefs on each Megatrend – it’s good stuff).

When supply chain thinking first really came on the scene in the early to mid-1990s, it wasn’t so much about “alignment.” Back then, it seems to me it was more about trying to “see the big picture,” not just individual functional silos. It was about looking holistically at processes and how they connected, and how better integration with trading partners could improve performance. This was all new thinking.

Gilmore Says:  
"Retail chain Canadian Tire, for example, broadly shares a rolling 26-week forecast with thousands of trading partners, in the “units of measure” (units, cases, pounds, containers, etc.) that are most meaningful to each of them."

What do you say?
Send us your Feedback here  

The real focus on alignment came a bit later, and has really just picked up steam in just the past 3-4 years. I remember hearing current CSCMP president Rick Blasgen give an excellent keynote presentation when he was at ConAgra at a 2004 Manugistics User’s conference on this very topic – how ConAgra was learning how to have the supply chain be more attuned to and aligned with its brand strategies.

Back when I was marketing various supply chain solutions, I would often visit with customers/prospects. Whenever I could, I would read the company’s most recent annual report, and look for their public strategies and objectives that I could then link to what we were proposing. It was amazing back then how often even at the VP of Logistics level it was obvious I knew more about what the annual report had said than he or she did.

That would be much less common today, but most of us still have room to go. One of my favorite presentations in recent years – indeed, it was an SCDigest presentation of the year I think in 2005 – is the one Paul Mathews of The Limited Brands was eloquently delivering on “Aligning SCM and the Boardroom.” In it, he asked a simple question: Can you draw a line directly between your supply chain strategies and initiatives and those of the CEO and the board? What was most interesting in the presentation was how Mathews described his own personal journey here – it took him many years to get this alignment right, and part of that was realizing CEOs and boards don’t really care about the details of making and moving materials. You need to interact at the level of discussion they want to understand the supply chain.

Why is alignment perhaps the most critical element to supply chain excellence? The supply chain does not exist in a vacuum. Wal-Mart’s supply chain probably wouldn’t be quite right for Nordstrom, or vice versa, and either one might be great. We can see that principle in spades with the changes this year at Dell, where its once vaunted “make-to-order” supply chain and hugely productive factories turned out not to be so well aligned with where Dell the company wanted to go.

So, companies are pursuing alignment along three vectors:

  • Between supply chain and company/brand strategies, as we said
  • Between supply and demand (of course)
  • Between the supply chain and trading partners (the hardest one and the next frontier where leaders are really working)

The tremendous focus on Sales and Operations Planning (S&OP) is of course centrally related to this alignment imperative. Clearly, a “consensus forecast” coming out of that process that drives supply chain planning and execution across the enterprise is where alignment has to start.

Some leaders are taking it even further. Retail chain Canadian Tire, for example, broadly shares a rolling 26-week forecast with thousands of trading partners, in the “units of measure” (units, cases, pounds, containers, etc.) that are most meaningful to each of them.

One challenge of S&OP is then to really connect downstream activities with those consensus goals. So, leaders are working on better integrating supply chain planning and execution processes, and developing “line-of-site” metrics that directly connect KPIs for everyone in the organization, down to the individual dispatcher if possible, to corporate goals and objectives. While no one can really get all the way there, some companies are making good progress.

I also love what Nick LaHowchic, recently retired supply chain leader at The Limited Brands and before that at medical devices maker Becton Dickenson, implemented at both companies: broad and detailed service level agreements between the supply chain organization and individual brands/business units.

What supply chain services and results does each division really need? How much are they willing to “pay” for it, in terms of costs that would be required to, say, move service levels from 95% to 98%? LaHowchic and his team would work with the businesses to define those and many more parameters to craft an annual agreement. The point, of course, wasn’t really the document itself; it was the dialog and process that much more clearly created alignment between the business and the supply chain. The SLA document was simply the catalyst that made that happen.

I’ll end it with a quote from our “Unplugged” interview earlier this year with LaHowchic: “Are people being rewarded properly for what it is you are asking them to do in the supply chain?” he asked.“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.”

It’s all about alignment. It should be the explicit goal of every supply chain organization. (View Megatrends page for more details.)

What are your perspectives on Supply Chain alignment? Do you think it is actually the key measure of supply chain excellence? What is your company doing to improve alignment, especially with trading partner supply chains? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Web Page/Printable Version of Column

*** Upcoming Videocast ***

Selecting ERP Systems for Mid-Market Companies

A Discussion on Understanding the Differences Between ERP Offerings and the Right Way to Structure an ERP Selection Project for Success

October 8, 2008


This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week - Sustainable Manufacturing Framework

Supply Chain by the Numbers: October 2, 2008


Like a fighter jet on fire, the Wall Street market took a steep and spiraling nose dive as the government plan to bail out troubled financial companies appeared to be in jeopardy. The development left a burning hole in the nerves of most investors and there were few survivors in the broader market indices.

Our Supply Chain and Logistics stock index emerged smoky and charred. In the software group, Ariba fell 11.2%, followed by i2. Still, Logility managed to escape the flames and recover all of last week’s losses.  In the hardware group, both Intermec and Zebra slipped (down 7.7% and 6.2%, respectively). In the transportation and logistics group, Yellow Roadway plummeted 19.9%, Ryder fell 10.6%, and FedEx was down 9.5%.

See stock report.

Each Week:

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

Weekly On-Target Newsletter
September 30, 2008 Edition

Gilmore's Daily Jabs

Is a Green Supply Chain Post a Good Career Move?

Will Probably Look Good on Resume, but Plan Path Back to Main Supply Chain Track

This Week On Distribution Digest
  • Holste Can a Low-Cost Sorting System Work for Smaller DC Operations?
  • Finding the Order Picking System that is Right for You
  • Video: Labor Management Systems Overview
Sorting it Out by Cliff Holste

Sorting Completed Picks for the Smaller DC

Can a Low-Cost Sorting System Work for Smaller DC Operations? Our Cliff Holste Says Yes

BrainTrust Panel Discussion Question: Is the Deal Between Penn Traffic and C&S Wholesale Grocers the Way of the Future for Regional Supermarket Chains?

Penn Traffic Turns Buying Over to C&S


Actionable Supply Chain Visibility at Electrolux

picture Learn How this Consumer Goods Giant Created a "Collaboration Hub" to Connect Thousands of Trading Partners



What year was the original Collaborative Planning, Forecasting and Replenishment (CPFR) 9-step model first officially promoted by the Voluntary Interindustry Commerce Standards Committee (VICS)?

A. Click to find the answer below

Have supply chain or logistics-related questions you need answered?
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Share your insight!

Featured Question and Answer:

Should Receiving be Counted as a Product Touch?

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Feedback continues to pour in each week – but we want more and, with this in mind, are pleased to announce our new “Fuel for Thought” program. If your response is selected as our Feedback of the Week, we’ll send you a $20 gas card. Must have complete name and company, and you can only win once every three months. Send in your Feedback regularly! Make it thoughtful if you would like to win.

Catching up on a variety of Feedback this week. Our feedback of the week is a great letter on our piece on the basics of cost justifying auto ID systems (RFID, bar code) from Ken Waldrop
of Booz Allen. We also hear from readers on the need for more standard shipping containers, SKU profiling, and the lack of mature integrators channels for RFID.

Good responses all – have a look.

Feedback of the Week – On Cost Justifying Auto ID Systems:

I will caveat my response by stating that my experience with RFID has been with DoD RFID projects. In the government, you cannot count on labor savings as a way to justify your expenses. You can increase resource utilization rates, but the reality is - people will not be fired just because 30-60 minutes are saved per shift. The benefits must be stated in terms of benefits to the end-user: increased visibility, increased data accuracy leading to better planning, availability of new metrics for calculating operational efficiency, identification of bottlenecks/need for additional resources need for additional training, etc. Occasionally, you will be able to reduce inventory or spoilage, but many operations have already moved to a lean process and only hold a few days worth of inventory at best.

Studying the benefits "within the four walls" is a great idea because most managers are rewarded for internal savings and not on their ability to increase the efficiency of the overall supply chain. Solutions that benefit the supply chain, but that do not benefit the local manager are a non-starter. To me, this translates into the old auto sales joke, "We lose money on each car but make it up in volume." The historically touted "supply chain benefits" also rely on data sharing as a cornerstone of success. Most commercial organizations are not comfortable in exposing additional data to potential competitors. In the government, departmental budgets encourage stovepipe data management rather than data sharing.

Next consideration; before you start the ROI calculation, be sure to include all the costs associated with RFID. The expense associated with site analysis, site preparation, engineering analysis, safety considerations, running power and network connections, WLAN additions, legacy software upgrades/modifications, middleware licenses, middleware development, hardware, integration testing, user testing, and training. I may have missed a few expenses in there, but you get the idea. Another possible cost consideration - always have a backup process because you will never get 100% read rates (nothing is perfect). Be sure to identify any added cost of working by the backup plan.

Finally, just because you install RFID and can justify it with a positive ROI, that does not mean that the workers will accept it. I have seen unions flat out refuse to use new technology just because of a hint of a threat to their jobs. Be sure to set appropriate labor expectations up front.

Ken Waldrop
Booz Allen

On SKU Profiling:

The issue you raise in your article "Logistics News: Order and SKU Velocity Profiling is Key to Picking System Design and Technology" is crucial for any warehouse operation; I see my customers face the problem of correct picking design every time we audit an existing or future warehouse.

You are absolutely right, that one shall take into account not only 'order velocity' for SKU, but UOM breakdown as well--it gives understanding of how bulky the orders for that SKU are, and allows for optimizing picking and more effective picking zone utilization. Obviously, the suggestion of a pick face volume shall result from (1) number of picks (order lines) per shift, (2) number of items per pick (order line), (3) volume of one item, and (4) packing of the item. An A-mover may be such thanks to lots of small orders, or thanks to few big orders. And orders big enough to be fulfilled in whole pallets do not require any pick face allocation.

But apart from that velocity profile there are two essential factors that influence the whole concept of picking design for a given warehouse--how expensive pic kfaces they have and how much does it cost to replenish them. Pick faces are expensive because of ground-floor scarcity, shelving costs, or vertical pickers. Replenishment is expensive because of reach trucks, drivers' salary, and administrative costs. These costs help to find the golden mean between storing all goods on the floor and deploying a unit-size pick face. To some extent, EOQ concepts can be applied to find solution.

When it comes to source data, it is a problem indeed, even for a WMS-equipped warehouses. In some cases this problem is the driver for WMS implementation in the warehouse. Surprisingly, picking design (and warehouse design as a whole) inspired by intuition is often not that bad, compared to professionally calculated design--simply because calculations become wrong at the very moment they feed inaccurate data. For new warehouses with high degree of uncertainty I recommend my customers to use basic best practices to figure out a simple design, which can be further developed as WMS accumulate quality data from current operations.

Odissey Ivanov

On Standard Shipping Containers:

We have almost the standard shipping container with the 53’/102” over the road trailer, and its brother the 53’ rail container.

The problem is that the physical constraints of our road systems and the fact that there are 48 different states that each have a “standard” set of rules regarding the length, width, height and size of the vehicles on the road.

There is the California 65’ overall length rule. You can use a 53’ trailer on state roads, but not with a conventional twin screw tractor with a bunkhouse attached, too long.

How about getting freight into Manhattan? Have to go through the Holland tunnel, 13’-6” tall trailers will get a haircut. That is part of the reason why there are so many logistics providers in Newark and Secaucus that provide import container transload services.

Just two of many examples of the constraints of the transportation legacy.

David K. Schneider
David K Schneider & Company, LLC

On RFID Channel Maturity:

The biggest problem I see as a user of RFID tagged products is the failure of manufacturer's to embrace this technology because of the cost.  I have had contact with numerous integrators who would like to help implement a RFID program within our hospitals but without products to scan it is difficult to implement a RFID program of any substance.

Like the article stated the majority of benefit and ROI comes from asset tracking of materiel within the hospital.

Garry D. Duvall
Deployment Manager/RFID Project Office
US Military


Q. What year was the original Collaborative Planning, Forecasting and Replenishment (CPFR) 9-step model first officially promoted by the Voluntary Interindustry Commerce Standards Committee (VICS)?

A. 1998.

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