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Strategic Supply Chain Always Just Around the Corner?
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
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Guest Expert Insight - Supply Chain Perspective by Karin Bursa - What Makes CPG and Retail Supply Chain Leaders Different
Guest Expert Insight - Retail Supply Chain by Wayne Usie - Using Next-Generation Space & Category Management Strategies for Supply Chain Excellence
New Blog - Gilmore's Daily Jabs
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November 20, 2008 - Supply Chain Digest Newsletter

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Strategic Supply Chain always Just Around the Corner?

Strategic versus tactical supply chain investments and initiatives – where does your company stand?

It’s an interesting question, and one subject to some vagaries of definition. One company’s “strategic initiative” might seem like a mere tactical response to someone else.

I bring this up because again this year, research firm Gartner has partnered with SCDigest to do a short, but impactful survey of our readership on supply chain priorities and technology. Your chance to participate will be coming along next week, and I ask that you please take the 10 minutes or so that it will take to complete the survey. The effort will be led by capable Gartner analysts Chad Eschinger and Dwight Klappich.

With the current economic climate, it will be interesting to see the results this year. Last year, we were in pretty good overall economic times, although the supply chain itself was being buffeted by soaring fuel and commodity costs, among other pressures. Even then, the current focus was primarily on the tactical, according to the research, with plans for most strategic initiatives and investments said to be coming 2-3 years down the road. The question of course is: will you ever get there?

Gilmore Says:  
"What is really interesting is that when the survey asked what individual respondents personally thought should be the company’s supply chain priority between now and end of year 2010, a more strategic focus emerged."

What do you say?
Send us your Feedback here

So for example, 17% of last year’s respondents picked “Reduce operating costs” as the top current supply chain priority among a long list of choices, versus 11% who selected “Drive business growth.”  Looking forward, however, those positions were reverse: 16% selected “Drive business growth” as the top priority their supply chains would have in 2010, versus 9% that selected “Reduce operating costs.”

Those questions were oriented around the company’s plans and actions. What is really interesting is that when the survey asked what individual respondents personally thought should be the company’s supply chain priority between now and end of year 2010, a more strategic focus emerged. As shown in the chart below, such goals as “Support and improve business agility,” “Improve cross functional collaboration,” and “Improve customer service metrics” were at the top. (You can click on this graphic for a full-sized image/printable.)

“Improved efficiency” and “Reduce operating costs,” were ranked only at 6 and 7, respectively, in this personal priority list. So, what individuals think the company should be doing with its supply chain aren’t matching what the company is doing, it appears.

Here were some other interesting highlights from the report, published earlier this year:

  • 18% of respondents said supply chain excellence was the main source of company differentiation in their markets; 22% said SCM was a necessary, but not differentiating function, and 60% said SCM was one of several differentiating functions. That sounds about right to me, across industries.
  • Interestingly, the survey asked respondents how aggressive their companies were with regard to supply chain technology. 9% said their companies often favored new and riskier technology; 56% said they generally adopted maturing technologies that still had some risk but at manageable levels; 35% said they preferred only mature, proven technologies.
  • The three biggest barriers to achieving SCM goals were: (1) lack of cross functional collaboration/visibility; (2) forecast accuracy levels, and (3) supply chain network complexity.
  • In terms of 2008 priorities, the bottom two responses were “improving external collaboration and visibility,” and “support and improve business innovation.” That surprises me. Thought they would be higher.
  • Respondents were looking for investment and improvement in supply chain technology support. The average response to “Our supply chain technology portfolio needs increased investment over the next 2-3 years” was 5.81 on a scale of 1-7, with 7 being “totally agree.” Conversely, the lowest score on a series of such choices was “Our supply chain applications/technology are/is flexible enough to adapt to market change in a timely fashion.”
  • But probably consistent with the tactical/strategic divide, just 14% of respondents in this year’s numbers said they expected current investment in SCM technology to increase a lot, versus 39% who believed those investments would increase a lot by 2010. Wishful thinking?

Some key takeaways? Eschinger and Klappich noted the disconnect between the fact that the most respondents identified SCM as a source of differentiation, while very few currently had the support of business innovation or agility as a top SCM priority. But again, I’ll note that individually, respondents thought more attention should be paid to strategic SCM.

Although not in the data I have, Eschinger and Klappich also said there were pretty large disconnects between operations and IT personnel when it came to supply chain priorities and perceptions. This gap continues to persist in study after study, and I am not sure why we can’t ever seem to close it.

I’ll also say that I think some of this is an “Urgent” versus “Important but not Urgent” scenario, using the timeless Steven Covey framework. Cutting short-term costs is usually urgent. More strategic initiatives often get pushed out of the way.

The survey is being revised for 2008 based on learnings from last year. Again, please take a few minutes to respond – you’ll receive some free Gartner research for the effort. We’ll summarize this year’s results I hope in Q1 of next year.

Are you surprised there were big differences between what individuals thought should be the top supply chain priorities and what they thought those of their companies would be? Is the strategic/tactical divide an “Urgent”  versus “Important but not Urgent” scenario? Anything in these results surprise you? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

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This Week's Supply Chain News Bites Only from SCDigest

Supply Chain Graphic of the Week - SCM Priorities 2008

Supply Chain by the Numbers Week of November 20, 2008

Syncron - Service Parts Management

Planning and Execution Makes the Difference

Investor nervousness and the consequent downward spiral continued on Wall Street last week.  Our Supply Chain and Logistics stock index seems to be just a passenger along for the ride.

See full stock report.

Each Week:

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Weekly On-Target Newsletter
November 18, 2008 Edition

Supply Chain Perspective
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Retail Supply Chain
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JDA Software Group

Using Next-Generation Space & Category Management Strategies for Supply Chain Excellence

Gilmore's Daily Jabs

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What is the link between oil giant Exxon and voice technology?

A. Click to find the answer below

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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.

We received a fair number of responses from our First Thoughts piece on Kimberly-Clark’s Supply Chain Network of the Future. That includes our Feedback of the Week from Sandip Sharma of i2, who says the decision around “dynamic sourcing” is a complex one.

Dave Mollenauer questioned the numbers around mileage savings from the network change, which Mark Jamison, VP of NA Supply Chain for KCC, was kind enough to clarify.

Len DeWeerdt of LW Consulting thinks KCC should look at some automation for its facilities, while Larry Stoner of ConMed Electrosurgery thinks KCC is late to the Lean SCM ball game, and Gary Lynch of Marsh wonders how risk was factored into the network design.

Feedback of the Week - On Kimberly-Clark’s Supply Chain Network Redesign:

As rightly said by Jamison, “variability is the virus of the supply chain” and consolidation always brings in cost savings. When KCC consolidated their distribution network from 70 DCs to just 9 large mixing-centers, it was bound to give them enormous financial advantage. However, I still think they could have gone ahead with dynamic sourcing after this kind of consolidation.

As defined in your article, dynamic sourcing is the ability to assign production to a facility which offers lowest supply chain costs. Given the revised network, the factories would need to ship from their production facilities to a small number of mixing-centers. Since KCC was already using dynamic sourcing (albeit at a much higher cost), the consolidation in its distribution network would have surely decreased the cost of dynamic sourcing. However, the real cost-benefit tradeoff depends on complexity of the network.

Sandip Sharma
i2 Technologies

More On Kimberly-Clark’s Supply Chain Network Redesign:

I am somewhat confused by the statistics at the end of the article. Does this mean that the vehicles KCC uses to move product only get 1.125 miles per gallon?

Dave Mollenauer


Response from Mark Jamison

Our numbers are correct.

The disconnect in the readers question is the assumption that the Customer miles are solely responsible for the total gallons saved. That is not accurate. The article states, '...2.4 million gallons of fuel because we increased efficiency in our network..' (this includes both Customer and Intermill).

We save 2.7 million miles on Customer deliveries, we also saved more than 10 million miles on Intermill moves, or more than 13 million miles altogether. That corresponds to the fuel savings of 2.4 Million gallons (rough math of 13.2 Million miles divides by about 5.5 Miles Per Gallon).

We pointed out the Customer mileage reduction as a demonstration thatthe Network of the Futurewas in fact getting us closer to Customer in the market place.

Mark Jamison

When I was at Retrotech Inc., many of our clients who went to mechanized warehousing (ACTIV Systems in this case), were using the technology for meeting demand driven applications in order fulfillmentthat came right out of supply chain re-engineering.

I can't help but think that the demand driven 'mechanized warehouse' model is the place for manufacturers with high volume and high turn to look at when they decide to go from push to pull. While there are many processes and practices to evaluate and new KPIs to consider, a well defined mechanically driven warehouse (ASRS of some kind) is frequently, but not always,the right approach.

With growing interest in DSD and clients like KCC who have the 'ship in full unit load' kind of business, mechanized warehouse technology seems like a shoe-in to me.From what I saw of the returns and service metrics, I have to believe it remains true.

Len DeWeerdt
LW Consulting, LLC

What's so special about what KC has done? it sounds like they've gone to Lean.......only about 10 years after most other companies has instituted these type of changes!

Larry G. Stoner
Electromechanical Buyer
ConMed Electrosurgery

Excellent article, was wondering if you could shed some light on how they designed and integrated their resiliency/continuity strategy in this new operating model?  Simplification sounds great but interested to find out how they thought about reducing risk brought about aggregation and concentration.

Gary S. Lynch, CISSP
Global Practice Leader
Supply Chain Risk Management


Q. What is the link between oil giant Exxon and voice technology?

A. Verbex, at the time a division of Exxon, is generally credited with developing the first voice recognition system in 1973.

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