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Supply Chain 2009 - Predictions Amid Uncertainty
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On Target e-Magazine
Guest Expert Insight - Kevin Piotrowski - Infor
Guest Expert Insight - Rod Winger - Epicor
Gilmore's Daily Jab
SCDigest Introduces "Distribution Digest"
Your Supply Chain Questions Answered! This Week's Question - Difference Between Supply Chain Software Terms?
Trivia, Supply Chain Stock Index
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February 12, 2009 - Supply Chain Digest Newsletter

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Supply Chain 2009 - Predictions Amid Uncertainty

I think I am justifiably proud of the supply chain and logistics community we have built and continue to expand here at Supply Chain Digest.

So, I am glad this year I could count again on a great group of supply chain experts to offer their predictions on what the supply chain will hold in 2009.

We did this same thing last year, which garnered very positive feedback. (See Key Trends Impacting Supply Chain Management and Logistics for 2008.) For this year, just to mix things up, we asked a few gurus to offer predictions again for 2009, and asked a few new pundits to offer their thoughts as well.

Gilmore Says:  

“When times get tough, many companies head for the trenches and turn inward in terms of their priorities," Langley said. "This is exactly the wrong thing to do."

What do you say?

Send us your Feedback here


I am highly impressed again this year with the level of thinking our experts provide. The group represents a spectrum from those whom I know well and consider friends, to those I know casually and more by reputation and the work they have done, but I was confident all would have something interesting to say.

It goes without saying that these are very unusual times. To their credit, our experts go way beyond just saying “times will be tough,” and also emphasize what companies should be doing to both cope now, but also prepare for the brighter future.

I wish I had more room to include their comments, but you can find them all in their entirety here: Supply Chain Gurus Have Their Say - Supply Chain and Logistics Predictions for 2009. Below, I select a few of what I saw as the best insights:

Our friend Gene Tyndall of Tompkins Associates says, “The smart executive teams will ask 3 questions: (1) How can we become more efficient, more lean, and more productive, without hurting our future? (2) How can we decide on, and stay focused on, the right initiatives that will improve our operations. (3) How can we come out of the recession stronger?”

But, he notes that reducing costs will obviously be high on the supply chain agenda: “Smart companies will attack cost drivers deep into supply chains – no matter where they exist in the mega processes of buy, make, move, store, or sell,” Tyndall says.

Dr. David Simchi-Levi of MIT and ILOG says that in this environment, “it is important to focus on three dimensions: Cost, Cash and Service. That is, it is important to identify strategies to reduce cost and cut working capital (cash) while at the same time maintain or increase service levels.”

He also says that now, as never before in this dynamic environment, increasing supply chain flexibility is critical. “Introducing flexibility into manufacturing, supply chain, and network strategies is essential if companies are to respond effectively to ongoing change,” he says, but notes that “the question is how to achieve flexibility and how much of it is required, since flexibility does not come free.”

Among his several recommendations for supply chain managers, Dr. John Langley of Georgia Tech says companies must re-assess what their core competencies really are, and think more collaboratively.

“More than ever before, it is essential for supply chain organizations to meaningfully assess their core competencies and to make tough decisions as they arise,” Langley says. He also says that in tougher times, the need for supply chain collaboration is more, not less.

“When times get tough, many companies head for the trenches and turn inward in terms of their priorities,” Langley said. “This is exactly the wrong thing to do, particularly as it relates to the need for inter-organizational cooperation in the supply chain.”

Jon Kirkegaard of DCRA Inc. says the tough times may help companies better understand the link between supply chain performance and overall company performance.

“Supply chain measurements are a leading indicator of a business’ cash flow generation and working capital consumption, and that they are far less corruptible then traditional GAAP accounting systems,” he says.

He also says times like these will further separate the supply chain winners from losers. “Companies will further differentiate themselves as the “haves” (firms with solid supply chain strategies and designs) versus the “have nots,” and will gain in terms of market share and profit margins,” he says. “For investors, the “haves” are good long-term holds. Firms without a real supply chain strategy and the experienced talent to implement that strategy in day-to-day operations will flounder and likely make decisions that compound their challenges.”

Andrew White of Gartner takes a mostly longer term view, saying that there are changes afoot in the software market.

“Most innovative business functionality will be added to enterprise application portfolios through edge applications, rather than enhancements to core applications,” he says. That means, in part, that “best of breed is back. Especially given the economic climate, many firms are having to focus on high value-add and focused initiatives that align better with niche and focused offerings, not full blown enterprise replacement strategies.”

Another analyst, Simon Ellis of IDC/Manufacturing Insights, offers 10 predictions for 2009. We liked number 5, which says larger firms better get thinking now about the financial condition of their suppliers.

“Economic uncertainty, particularly for smaller suppliers in emerging economies, causes manufacturer 'brand owners' to consider strategic investments at critical supply points and financial support for key suppliers,” Ellis predicts.

He also says these times will cause a new framework for thinking about the Green Supply Chain. Sustainability will “discover metrics,” he says. Green will “no longer [be just] a feel-good public relations proposition or even a regulatory compliance mandate. Emerging standard measures and a desire to benchmark will impact sustainability initiatives and the associated investment in technology and services.”

He also sees RFID becoming “just another tool in the toolkit” – an event we have been predicting for some time, as happened to bar codes in the 1990s. When that happens, volumes rise, but the excitement largely disappears.

David Schneider, former logistics executive at Pep Boys and now of David K. Schneider and Company (and new SCDigest blogger), thinks for several reasons that 2009 will bring slowly but steadily rising oil and fuel prices, with the “danger that the rise in diesel will be slow enough to “cook” the carriers before they notice it,” like the proverbial frog in the pot of slowly boiling water.

He also believes that the most heavily leveraged (i.e., in debt) carriers will fail or be forced to sell, and that we will see in 2009 still more carrier capacity leaving the market that will be tough to replace as the economy recovers.

He adds that supply chain “Profit Loss Prevention” will be “the mantra of the strong and the few, and they will fix the profit leaks before they feel too much pain. The slow will see the leaks, but will not get the patches in place in time before they sink.”

Finally, CEOs are busy, and our friend Art Mesher of Descartes System Group in Waterloo, Ontario, didn’t quite have time to get his more formal predictions in, so he asked us to go with these ideas off the top of his head: “(1) Canada gets electricity, (2) Newfoundland becomes the next China, and (3) 2009 is the year that two-dimensional bar code installs exceed the pace of RFID system installs.” On a more serious note, Mesher did add one prediction by way of his Blackberry: "Unbundling service levels will become a primary theme, as companies will become willing to accept lower services levels as long as it comes with an even lower cost. Failure to reduce prices will result in lost business. Failure to reduce service levels and, hence, costs when lowering prices will result in financial disaster."

Again, for the full comments of our pundits, go to: Supply Chain Gurus Have Their Say - Supply Chain and Logistics Predictions for 2009.

Do any of these comments or predictions resonate with you? Any seem off-base? What are your SCM predictions for 2009? 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: Kellogg's Corporate Responsibility Scorecard

This Week's Supply Chain by the Numbers - Retail Growth?, Chinese Export Volumes, Unilever Product Pricing, Truckload Carrier Rates


A bit of an upswing in the market last week as Wall Street investors continued to speculate on the government's economic stimulus plan.  Our Supply Chain and Logistics stock index results for the week were also decidedly up across the board.

In the software group, i2 led the way with a gain of 22.6% following the news of an agreement to buy back $58 million dollars in debt.  In the hardware group, Intermec bucked the upward trend with a substantial loss of 16.4%; however, Zebra climbed 11.2%.  In the transportation and logistics group, J.B. Hunt finished the week up 16.1%, followed by CSX (up 13.2%), Union Pacific (up 12.5%), UPS (up 10.8%), and Burlington Northern (up 10.1%).

See full stock report.

Each Week:

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

Weekly On-Target Newsletter
February 10, 2009 Edition

by Kevin Piotrowski
Director of Industry &
Product Marketing, Infor

Achieving a Holistic Approach to Lean Manufacturing

by Rod Winger
Senior Director, Product Marketing,
Manufacturing & Supply Chain Solutions, Epicor Software Corporation

Next Generation Enterprise Resource Planning Leads Truly Lean Organizations


SCDigest Editor Dan Gilmore

The Incomprehensible Chart

Looking Good is One Thing, Communicating Information is Something Else

THIS WEEK ON Distribution Digest


HolsteHolste's Blog: Labor Reduction and Automation can be a Very Touchy Subject

>> Top Story: Distribution Center Audits - - Real Value, or Marketing Exercise?
>> Other News: Organization Provides Platform for Logistics Professionals to Contribute Skills and Resources in Times of Crisis
>> Vendor News: New RFID Forklift System Pre-Engineers Components for Pallet Reading, adds New Capabilities

About what percentage of inter-city freight moves are paid using a 3rd party freight audit and payment service?

A. Click to find the answer below


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We received a good number of mostly short and sweet email responses to our piece on how Toyota was using its factory down time not to lay workers off, but to provide them with training in practices like Lean (the Toyota Production System) and quality management, and print some of them below.

Most respondents, of course, were very supportive of Toyota’s strategy, and contrasted it to that of the US auto companies. In fairness, however, Toyota was and is in much better financial shape than the US OEMs (though some suggest this approach explains why), and now has announced it is considering some layoffs itself for the first time ever, as it also struggles with shrinking global demand.

One respondent, who didn’t fully identify himself, accused us of being “another mouthpiece” for Toyota, but we will publish the response with unclear authorship anyway just to offer an opposing view.

We didn’t think any of the short responses merited a “Feedback of the Week” and $20 gas card, but keep them coming anyway! We’ll have another winner next week.

On the Toyota Difference:

... and we are giving the US automakers a bailout? for continuing their "job bank" practices?

This is why Toyota will be comparatively successful in the auto industry.

Christopher Gopal
COO, Open Energy Corp.

Toyota states the goal and then delivers. Respect for people.

It is nothing short of brilliant business process. It is a part of why they are successful.

Can the US union shops do this? Perhaps a paradigm shift of major proportions is needed, but I see no better time or conditions than now to start that journey.

Jon Denzin
Trek Bicycle

Impressive approach but simple.  It's a matter of turning a "problem" into an opportunity.

Tom Hall

During troubled times and a recession, Toyota has taken the opportunity in training and developing employees rather than laying off or minimizing its human capital for an interim period.

An employee that understands what he or she does is more valuable to a company than one that is droned to an every day or routine job. This long-term strategy can seek new opportunities and gain a competitive advantage.

This is highly commendable by Toyota - taking a pro-active approach in ensuring that its work force is properly geared for when the economy stabilizes.

Vireshan S. Pillay "Vee"
Group Leader: Inventory Planner

This concept is long overdue. Toyota's insight and foresight into the future is why they are in the top position in the world. Many of our U.S. companies could benefit tremendously if we plan ahead and be proactive instead of reactive.

Herman Malloy
Warehouse Tech.
Banner Pharmacaps

Toyota’s approach is laudable. Turning such situations into win-win ones where they even get some product or manufacturing issues solved is commendable!

Dr. Ramesh Srinivasan
VP Business Engineering
Aankhen Inc.

I guess you have spent time at a GM Jobs Bank? You praise Toyota, but who have you talked to about these classes? It sounds like management. Have you talked to any of the workers to see what classes they have actually been given? Are they in class for all eight hours a day for the 40 hours a week that they would have been on a production line? Or are they in a 4-hour class just one day a week?

You spout off about classes, but don't offer any information about how long or how many days a week they sit in class. Do "they" play cards or read after their "class"? I find it hard to believe that they sit in class for 40 hours.

Sounds like Toyota has another mouthpiece.

Wydock Sr.


Q. About what percentage of inter-city freight moves are paid using a 3rd party freight audit and payment service?

A. 20-25%, according to transportation industry expert Cliff Lynch.

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