This Week in SCDigest:
Thinking About the Consumer Goods-Retail Supply Chain
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
New Blog - Gilmore's Daily Jabs
SCDigest Introduces "Distribution Digest"
Your Supply Chain Questions Answered! This Week's Question - Task Interleaving in WMS
Trivia, Supply Chain Stock Index
Can't View this E-mail?  
Become a sponsor
October 30, 2008 - Supply Chain Digest Newsletter

FEATURED SPONSOR: Supply Chain Consultants

Thinking About the Consumer Goods-Retail Supply Chain

Let’s face it, the consumer goods-to-retail supply chain gets a lot of attention – maybe too much so at times, relative to other industries.

However, consumer spending represents more than two-thirds of the US economy, so a proportional level of coverage probably makes sense.

Also, just consider how many important supply chain developments had their start or at least became mainstream in this sector:

  • Bar coding
  • Vendor Managed Inventory
  • Efficient Consumer Response (ECR)
  • Collaborative Planning, Forecasting and Replenishment (CPFR)
  • EDI
  • The “Perfect Order”
  • RFID (yes, used in many non-retail applications first but the work at MIT’s Auto ID Labs, which really was the catalyst for more widespread interest, focused on consumer goods-to-retail applications)
  • “Demand-Driven” Supply Chains, etc.

Also, even if your company is not a consumer goods manufacturer or retailer, chances are you are part of that supply chain in some form anyways, as your products either go into or are used by companies in those sectors.

So, it was appropriate I think for the most recent issue of the Supply Chain Digest Letter to focus on developments in the consumer goods-to-retail supply chain. If you didn’t receive a copy in the mail (we target these mailings) you can download an electronic copy here (SCDigest Letter on Consumer Goods-to-Retail SCM); you can also find that electronic edition and a lot more information on our companion resources page: Consumer Goods-to-Retail SCM Resources.

As we did research for the Letter, a number of things occurred to me that I would like to discuss here – one of which is that more than any other industry this value chain is full of contradictions and conundrums, it seems to me. Some observations:

  • The whole history of industry programs (Quick Response, ECR, CPFR, RFID) can be seen as continually chasing the same set of problems (too much inventory, too many out of stocks, etc.) In fact, if you go back and look at the wording in documents from various industry groups promoting say Quick Response back in the late 1980s, you could take certain passages and almost just cut and paste them into similar documents for CPFR a decade later and RFID a few years more after that.

Every one of these programs has delivered results, especially for individual companies, but I also think each has never fully produced the expected industry-wide changes many envisioned from them (I expect a retort from the very smart and passionate Joe Andraski of VICS). Why is that?

  • Collaboration is a great example. There are in fact many areas of consumer goods-to-retail collaboration. Some even use the formal 9-step CPFR model, and there have been many documented cases of success.
Gilmore Says:  
"I believe that in this (and other) supply chains, the next frontier is to really close the gap between supply chain planning and execution. "

What do you say?
Send us your Feedback here

The “customer logistics team” concept used by large CPG companies like P&G, Campbell’s Soup, Unilever, and many more certainly is evidence of that collaborative mentality. So are many “one off” areas of collaboration embraced when the opportunity presents itself.

Yet, is anyone really happy with the current state of collaboration here? Very few on either side are, especially the manufacturers, it seems to me. We just completed a recent Videocast on “Strategic Supplier Management,” for example, where our experts opined that the concept of really viewing their suppliers strategically was really very new to most retailers. How well can you collaborate when you look at suppliers from a highly tactical perspective? (See our Videocast Listing.)

Then there is the whole area of “compliance” and chargebacks. Needed tools for supply chain improvement, or retail profit center? Some of both? We’ll look at this issue in more detail in the future (it was also covered in our Videocast series), but clearly it is a stretch to call many of the chargeback programs “collaborative.” As just one example, I continue to hear stories of manufacturers not being able to get a carrier appointment at the retail DC, then getting a chargeback for missing the delivery date on the PO.

  • I believe that in this (and other) supply chains, the next frontier is to really close the gap between supply chain planning and execution.

You can see so many examples of this – the interest (if still lack of adoption) in RFID, especially in achieving better execution of promotional programs; the high level of interest and progress in the area of Sales & Operations Planning; the “demand-driven paradigm” and new technologies and approaches for getting POS and other data back into planning processes; efforts to unify demand signals across increasingly complex channels of distribution.

This I think really will be the next wave for industry leaders – and will have many process and technology implications as we begin to totally eliminate information latency and hierarchical flows.

(As a quick note, we recently did a major survey on this topic, the results of which will be released in the next couple of weeks.)

  • Seeing the whole picture: A handful of consumer goods companies and retailers have an individual responsiblity for looking at the entire value and logistics chain – from manufacturing to the store shelf. For everyone in the past, and still most companies today, these views were often disconnected – manufacturers thought their job was done upon delivery to the retail DC; retailers had disconnected thinking across logistics and store operations. Now, a company like CVS, for example, keeps digital floor layouts of each of its thousands of locations, and picks and packs store orders to maximize stocking efficiencies.

There is a lot more, but I am out of space. You can find a lot more in the Letter.

I’d also love your thoughts about what is happening in this value chain.

What do you think are the key issues in the Consumer Goods-to-Retail Supply Chain? Why does the industry seem to make such jerky and inconsistent progress? What do you think will be the key supply chain trends? Let us know your thoughts at the Feedback button below.


Let us know your thoughts.


Web Page/Printable Version of Column

*** Upcoming Videocasts ***

A Faster, More Affordable Way to Print Labels from Your ERP System

Streamline the Printing
Process while Lowering
Middleware Costs

November 12, 2008


Optimizing Your Warehouse

Strategies Behind Efficiencies
Within Warehouse Operations

November 13, 2008


Increase Effectiveness
in the Supply Chain
using RFID Technologies:
A Case Study with
Lowry Computer Products

Improving Data Quality
and Productivity with Mobile
Data Collection Systems

November 18, 2008


Warehouse Distribution

Learn How to Optimize Your
Warehouse Workforce with
Voice-Based Material Handling

November 19, 2008


This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week - Asia Procurement Organizational Structure

Supply Chain by the Numbers: October 30, 2008


And the saga (i.e., sell-off) on Wall Street continues. Our Supply Chain and Logistics stock index results were somewhat mixed but, in general, falling fast with no end in sight.

In the software group, Ariba fell 23.6%, Manhattan plummeted 16.1%, while Descartes was up 8% for the week.  In the hardware group, both Intermec and Zebra suffered double-digit slides – 15% and 11.1%, respectively.  In the transportation and logistics group, Prologis nose-dived another 45.7% this week.  Also within the group, Yellow Roadway lost another 18.7% and is currently down 88% for the year.   

See stock report.

Each Week:

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

Weekly On-Target Newsletter
October 28, 2008 Edition

Gilmore's Daily Jabs

Should You Build Your Own Warehouse Management System (WMS)?

One Company is on that Path after Large Quote for Customization; Can that be Right?

THIS WEEK ON Distribution Digest

Holste's Blog: What Can You Do About Rising Shipping Costs?

>> Top Story: Annual 3PL Study Again Finds Plans for Increased Outsourcing not Being Realized
>> Vendor News: New Guide to Traditional Versus Rack-Supported Building Design

Q. What happened in an article in London's Financial Times in 1982?

A. Click to find the answer below

Have supply chain or logistics-related questions you need answered?
Ask our panel of experts. Share your insight!

Featured Question and Answer:

Task Interleaving in WMS

Your article on task interleaving in a distribution center was excellent, but I have a follow up question. Which is mathematic algorithm that a WMS uses to do this optimization?

Do use an RSS reader? Do you have a MyYahoo! or personalized Google page? For these and more you can have SCDigest delivered right to your personal pages, all week long.
You can subscribe to our RSS feeds in two ways:
  1. Copy our RSS link into your RSS reader - it's easy!
  2. Click on a button below to quickly add it to your favorite readers.

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.

A few late arriving letters from our several pieces related to "Supply Chain Complexity."

That includes our Feedback of the Week from David Armstrong of Flextronics, who cites a study that links "complexity" with "confusion," and how that impacts productivity. It's a great letter.

On the same topic, Aristides Smith of Next Generation Logistics says some in the industry are contributing to complexity, while Radhika Subramanian of Emcien Corporation says a key problem is the complexity and decisions around "product mix."

You’ll find several other interesting letters on this topic below. We are almost ready to begin awarding our first Fuel for Thought gift card rewards – we are going to start giving this Feedback of the week prize for letters received after we announced the program on September 11.

Feedback of the Week - On Supply Chain Complexity:

There is no question that the world is becoming increasingly complex and that does have an impact on company profitability.

However, there is another factor that contributes as well – confusion.

Over twenty years ago, Professors Robert Hays and Kim Clark at Harvard University, did a significant study of productivity differences in factories.  While the study was on factory productivity it would seem to make sense that the same factors would be applicable to supply chains as well.

Hays and Clark recognized increasing complexity as a factor characterized by such things as size, product proliferation, more and different types of technologies; very much along the lines of the factors identified by Mr. Mariotti.  However, a surprising finding of the study was the impact of confusion on overall factory productivity.  Confusion was defined as “managerial actions that disrupt the stability of a factory’s operations”, including such factors varying rates, haphazardly changing processes and management of ECOs.  They found that complexity bred confusion and confusion bred further confusion.    

So does this carry over into supply chains?  I think so.  As the quote from Mr. Blackstock notes, “Process Management is a weapon” and if done right, can be effectively used to mitigate and deal with the debilitating effects of both complexity and confusion.

We often use the term, agility, and I think it belongs in this discussion as well.  Supply chain complexity has the potential to negatively impact performance and profitability and if not well managed create confusion which further contributes to the crisis.  Agile organizations recognize this and have the process management tools and culture in place to recognize impacts and changes.  While they may not know exactly what is coming, they have the tools, processes and expertise to rapidly and orderly respond to the changing environment in such a way that they are able to mitigate the impact of complexity.

David Armstrong
Sr. Manager - WW Inventory

Global Operations Materials


More on End of a Supply Chain Complexity:

You are right on with your observations and comments! I would also like to add that we have recently seen many consultancies and software providers that now market themselves as “SCM thought leaders”.

Basic common sense SCM practices that we all learned about in school and in our jobs are now being made far too complex. They are being arrogantly remarketed by these companies using new “buzz” words and marketing dollars in an effort to justify higher rates for their products and services.

However, we as practitioners have no one to blame but ourselves for falling for these gimmicks.

Keep up the good work!

Aristides P. Smith
Next Generation Logistics, In

Very good article on supply chain complexity.

And yes, John Mariotti's book does a good job of talking about the issue. 

However - while supply managers may need or want to quantify the cost of complexity.  The root cause of the problem lies in the product mix that is offered to the market.  The supply chain managers do not have the authority and controls to change the mix.  If the mix is wrong, complexity cost is inevitable.  Not even the most efficient supply chain can combat a poor product mix. (e.g. Dell)

Radhika Subramanian
Emcien Corporation


Q. What happened in an article in London's Financial Times in 1982?

A. It is believed to have been the first public use of the term "supply chain management," coined in the article by Keith Oliver of consultant Booz-Allen.

Copyrights © SupplyChainDigestTM 2003-2008. All Rights Reserved.
To Unsubscribe: Click Here
PO Box 714
Springboro, Ohio 4566