This Week on SCDigest:
Saving Western Manufacturing? Part 2
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On-Target e-Magazine
Guest Expert Insight - Memo to the CPO: Five Tips for Improving Supplier Relationships in 2010
Guest Expert Insight - Supply Chain Perspective; Automated Foreign Trade Zone Compliance
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Supply Chain Graphic of the Week: US Manufacturing Lost to Offshoring in 2000s


This Week's Supply Chain by the Numbers - Sara Lee, Copper Prices, Kraft Foods Strategic Suppliers, Chinese Tire Exports



Despite the shadow cast by the anniversary of the 9-11 attacks, Wall Street investors had reason to smile last week.  Our Supply Chain and Logistics stock index delivered gains across the board.

Descartes led the way in the software group (up 19.6%).  In the hardware group, both Intermec and Zebra had a good week (up 6.6% and 3.2%, respectively).  In the transportation and logistics group, Yellow Roadway soared an astounding 61.9% to its highest level in several months. 

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Memo to the CPO:
Five Tips for Improving Supplier Relationships
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Usual Recession Survival Tactics Tapped Out? Shift Focus to Different Facets of the Supplier Relationship

Guest Column
by Leon Turetsky, QuestaWeb, Inc.


Global Supply Chain Perspective: Automated Foreign Trade Zone Compliance

Software Support is Tricky, and Key to Maximizing the Opportunity

Holste's Blog:
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Top Story: Getting Logistics Asset Lifecycle Management Right

Other News: Wood Versus Plastic Pallet Battle Increasingly Focused on Green Supply Chain, as iGPS Lawyer Aggressively Pushes Plastic to Government Agency


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In honor of the CSCMP annual conference in Chicago next week, what was notable about the event in Philadelphia in 2004?

Click to find the answer below
Saving Western Manufacturing? Part 2


We generated quite a bit of discussion from my piece earlier this year on Can - and Should - Western Manufacturing be Saved?, and at the time I promised we would keep looking at this issue. That’s, in part, because I am personally of several minds over this topic, and am trying to get my mixed opinions better organized.


With that backdrop, a couple of things this week got me back on this subject: an interesting plane conversation with a small manufacturer, and an excellent – and worrisome – article I just read on this subject in BusinessWeek magazine.


This week, on a long flight to Salt Lake City, I sat next to the owner of a small (something like $40 million) manufacturer of auto parts (clamps, gaskets and such, sold mostly through repair shop channels). It is has been a family-owned business for two generations.


Over the last few years, the company has gradually started to offshore some of its highest movers to both India and China – regretfully, in fact, but the economics were compelling. One gasket cost his company 70 cents to make; the China price: just 15 cents.

Gilmore Says:

BW frets that we have entered a perhaps permanent “invented here, industrialized elsewhere” syndrome."

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I asked him how much labor cost was in that product domestically. The answer – about 35 cents, meaning there was another 35 cents in materials and other costs. If that’s the case, I asked him, how could a low-cost country possibly sell it for just 15 cents?


He wasn’t sure. Has heard the Chinese government pays a 15% export bonus to manufacturers. Maybe they are selling below cost to gain market share?


I then asked him how a small business such as his finds suppliers in China and India. No problem, he said – they find him. He exhibits at many trade shows each year, and at those events he is besieged by representatives from offshore companies. Those discussions lead to price quotes, and after samples, quality provisions, etc., the deal gets done.


But to this owner, his business still is those 50-60 people making products in his domestic factory. One salvation in that regard – a huge chunk of his business comes from thousands of relatively low-demand products that don’t lend themselves to offshoring for both volume and responsiveness reasons.


As I peppered him in a friendly way for about two hours with questions about both his business and the larger questions about the future of Western manufacturing, he ended by saying, “You are asking me questions for which I do not have answers. We are just doing what we can to survive, and with the pricing available on some items, that means China.” He had never heard of SCDigest, but added, “I think it is really important for publications like yours to keep asking these questions.”


BusinessWeek is thinking the same thing. A couple of weeks ago, it ran a major story that asked “Can the Future be Built in America?” that added some interesting data points to this debate.


As we too have noted before, BW says the US is in danger of simply losing its ability to support large-scale manufacturing. The infrastructure, the talent, the supply base – the country is rapidly falling behind in its ability to scale-up large manufacturing facilities.


The impact, it says, is that the US many not even be able to continue the cycle where new, innovative products are still mostly made domestically until later in their lifecycles. And this capability is doubly critical right now, because from robotics to nanotechnology, to “green” technologies, an exciting new generation of products is coming to market – but where will they be made?


“Unless the U.S. can magically resurrect its manufacturing base, the good-paying jobs from these breakthroughs will be offshore” BW says. And here is the kicker: “Cheap Asian labor has little to do with it. Unlike other industries that fled to low-cost offshore havens, these emerging tech goods are made on highly automated production lines. The problem is, the U.S. is losing its lead in large-scale high-tech manufacturing.”


Taxes and other costs are also a factor. The BW article starts by noting the dilemma of a company called Bridgelux, a Sunnyvale, CA company that has developed tiny, light-emitting chips that blaze as bright as some incandescent bulbs, but consume a fraction of the energy.


The market potential could be huge – and it needs to build a new factory to make these chips.


Business Week says that “For a host of strategic reasons, Bridgelux would like to keep manufacturing in the U.S., but financial realities point to Asia. Not only are taxes far lower and government incentives more generous in such nations as Malaysia, China, and Singapore, but it's easier to raise cheap funding offshore than in the U.S., where private investors frown on manufacturing and bank lending is nearly frozen.” 


The article also pointed out a startling statistic, which I had not seen before. In every recession recovery period until the 2000s, manufacturing capacity during a growth phase of the economy has always outpaced overall economic growth. From 1994-1999, for example, US GDP grew 26% - while manufacturing capacity grew even faster, at 44%.


Not so in this decade. From 2001-2007, US GDP rose 17%, but manufacturing capacity grew just 5% (see Supply Chain Graphic of the Week).


BW frets that we have entered a perhaps permanent “invented here, industrialized elsewhere” syndrome.


Bridgelux, for example, looked to perhaps ramp up some production by converting existing cleanroom facilities in California, which it assumed would be abundant. Not so.


"We were shocked that we found nothing," the company’s CEO says. "All of the cleanroom space was torn out and property owners converted these labs to offices."


The BW article (available here: Can the Future Be Built in America?) also quotes Bill Watkins, the former CEO of disk drive maker Seagate, as saying "Other countries actually pay you to create jobs. The rest of the world is chewing us up alive,” referring to taxes and a number of other barriers manufacturers find in the US.


How’s that for a cheery thought?


The BW article, as well the National Association of Manufacturers in several of its policy recommendations, calls for the US to relook at some of these tax and other policies to make it more attractive to set up shop here. The recognition seems to be that the lower-value added manufacturing in many sectors is gone and perhaps should be, but that the US is also in serious danger of losing both its ability to make innovative products here, and maintaining the skills sets and related capabilities to do so in more and more industries.


As we’ve noted before, when you fall below a certain level of critical mass in a manufacturing sector, the decline becomes rapid, until there is nothing left (e.g., US shoe production). At that point, even bringing it back becomes impossible.


Not sure what the answers are yet, but I am asking the questions. We’ll keep taking a look.


Is the US in danger of losing its ability to create large-scale manufacturing operations versus the rest of the world? Is it important or not that Western countries retain this ability, especially in the face of developments in many new technology areas? What, if anything, can be done? Let us know your thoughts at the Feedback button below.

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We received a number of nice letters on our piece on Lessons from the Greatest Supply Chain Disasters, which drew some observations from our previous list of the top supply chain disasters of all time.


That includes our Feedback of the Week from Bob Forshay of Transformance Advisors, who offers some additional thoughts on our recommendation to avoid hard deadlines on SCM software projects.


You will find that letter and several other good ones on this topic below.

Feedback of the Week - On Lessons from SCM Disasters:


Some thoughts about hard deadlines in technology implementations.


I suspect no organization can function well on its own good intentions with multiple, and often competing, business milestones, which generally requires a very firm plan for implementation deadline. The organization's own culture will ultimately dictate the tone of communication and hardness of deadline.  If a firm has a history of slippage, and more do than not I believe, then a hard date is one that is set, cast and carved to be firm - with the statement that nothing is sacred, and if the right conditions surface, is changeable for the right reasons.


All that said, the firms that plant their flag around a firm date and have not also adequately resourced and prepared are in for more than a few battle scars.  The folks in the trenches are the casualties and many do not survive even if the firm does.  We don't hear about these.  We only hear about the general pain the firm self inflicts in reaching a firm date.  Often the human capital battle is lost even if the war is won for the firm.  One of the measures of successful implementations might need to reflect the turnover of talent post-implementation for reasons other than opportunity.


My final thought is that all the above is consistently a function of executive leadership and vision.  As your article notes, it is usually not about the technology so much as execution, which comes down to leadership and choices.  I bet anyone involved with scheduling a space shuttle would agree.  The date (time/location) is firm but... when the landing site is in bad weather (too risky at that time), an alternate choice is made for the right reasons.



Vice President

Transformance Advisors

More On Lessons from SCM Disasters:


Good article - you won’t get feedback like that from a systems provider. 


I would add two items to the list of countermeasures against disaster, firstly - make sure you have goal alignment with all the internal and external players in the project.  It may take time and may lose some of the bells and whistles that were promised, but it is well worth it.  Secondly - try and make sure you work with people you trust and, again, if you don’t trust them, find someone else, and if you don’t know if you trust them, take the time to find out!


Andrew Downard

Managing Director

AD Supply Chain Group Pty Ltd

Avoiding supply chain disasters is quite a topic.


I think a fact to keep in mind is that, at its essence, supply chain measurement is essentially an alternative measurement of current and future business performance.  Thus, the capital budgeting prioritization of a supply chain project should be based on these measurements, and in the project/program management personnel well versed in business value.  Don’t allow GAAP or other manipulated accounting to fully measure benefits.    


At the roots, measurement should be based on clear and direct inventory turn increases, balance sheet reduction, cash flow improvements (order-to-cash cycles) and, in many respects, enablement of new or newly profitable business.  If there is time, and if CFO types demand it, yes - reconcile these measurements back to your company's accounting standards - but don’t base them on, or limit them to, accounting measurements.


If these concepts are the first and foremost in the selection and prioritization of projects - NOT some outside influencer trying to justify “some” effort by slapping a “supply chain” label on it  - then you and your organization will create initial, fast and sustainable value.   However, even ONE distraction from a non-value add effort labeled supply chain can blow your resources and then subsequently dilute the value of what supply chain solutions mean to you and your business success – that may take years to recover from.   This is why your supply chain project leader must be an effective cash flow-grounded business leader with direct communication to company decision makers.


Jon Kirkegaard


DCRA, Inc.

Great article and dead on!


We learned some painful lessons when we implemented our ERP system in 2007.  We did the big bang (bad); we set hard and fast deadlines (bad and delivered less functionality than we paid for); we were the beta for the software (disastrous outcome, albeit, we worked through it, but expensive and arduous repair process); we ignored the warning signs (accounting outvoted the SCM dept on software choice).  We will not make that same mistake when implementing Master Planning.


Kevin Hampton




In honor of the CSCMP annual conference in Chicago next week, what was notable about the event in Philadelphia in 2004?


That was the year the new CSCMP designation - Council of Supply Chain Management Professionals - was unveiled as the successor to the previous CLM - Council of Logistics Management.