This Week on SCDigest:
Why Bad Supply Chain Processes?
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On-Target e-Magazine
Guest Expert Insight - The Blurring Lines Between Planning and Execution
This Week on "Distribution Digest"
Trivia  Supply Chain Stock Index  Feedback

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  Newsletter Archives November 13, 2009 - Supply Chain Digest Newsletter

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This Fall's Featured Videocasts

Pride, Profit and Passion:
The New Framework for Working Together in the Consumer Goods-
to-Retail Supply Chain

A Four-Part Series

Part 4: Connecting Supply Chains

December 8, 2009

Operational Excellence with
Smart Planning and Scheduling

A Four-Part Series

Part 4: Advanced Topic - Gain Efficiency Through a Holistic
View Across Production and
Inventory Planning

December 9, 2009

This Week's Supply Chain News Bites
Only from SCDigest

Supply Chain Graphic of the Week: Increasing Supply Chain Role - Support for Innovation


This Week's Supply Chain by the Numbers - Steel Oil Well Pipe Tariff, JDA Software Acquisition of i2, FedEx Christmas Shipping, Emerson Electric Company Production



It was a good week for Wall Street investors, and aside from one notable exception, our Supply Chain and Logistics stock index finished last week with growth across the board.

In the software group, i2 climbed 13.5%, followed by JDA (up 11.6%).  In the hardware group, both Intermec and Zebra were up for the week (1.5% and 4.4%, respectively).  In the transportation and logistics group, it was an impressive week for all investors riding the rails, but particularly so for those aligned with Warren Buffett as he upped Berkshire Hathaway’s stake in Burlington Northern (up 29.1%).  As for the notable exception mentioned earlier – Yellow Roadway gets the unfortunate recognition with a whopping loss last week of 69.7%.

See Full Stock Report

Each Week:

Global Supply Chain
Trends and Issues

Guest Column

by Trevor Miles, Kinaxis


The Blurring Lines
Between Planning
and Execution

Companies Need  Rapid Response Capability to Enable Continuous Alignment of Demand
and Supply


HolsteHolste's Blog: DC Logistics Professionals – Still Searching for Non-Automated Alternatives for Improving Picking Productivity Numbers?

Top Story: Crown Equipment Corporation Releases Innovative New IC Fork Truck Developed in Partnership with John Deere

Video Review: New Crown IC Fork Truck

Other News: Measuring Inventory Accuracy - No Clear Answer, Experts Say

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What percent of US LTL industry revenue does troubled carrier YRC Worldwide represent?

Click to find the answer below
Why Bad Supply Chain Processes?

Am I the only one struck by how often companies seem to have poor supply chain processes? Why is this?


Now, nearly six years into Supply Chain Digest, I don’t believe I have ever actually specifically addressed this topic before.


What just strikes me is that virtually 100% of the time that there is a new supply chain or logistics initiative, companies find that the processes they have aren’t getting the job done. My question is, why does it take so long to figure that out? I have some thoughts, but first a quick bit of history.


It may seem hard to believe, but it was just in 1993 that MIT’s Dr. Michael Hammer (who died in 2008) wrote the seminal book Reengineering the Corporation. It was that work that brought the term “process reengineering” into every day business speak. The book had dozens of examples of businesses that had rethought processes; often, they involved examples of processes that, in length, took many days or weeks from end-to-end, but for which the actual time that real work was done might be hours or even minutes.

Gilmore Says:

"If the details of a process are invisible to you as a manager or executive, you are obviously unlikely to push for that process to change."

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your Feedback here

There is certainly some heritage to Lean thinking and value-stream mapping there, but the immense popularity of Hammer’s book seems striking to me now in the sense that just 16 years ago many companies had simply not thought about process improvement in this way.


Somewhat in parallel, there was a growing realization that automation, enabled by the incredible rise in corporate computing and networks, didn’t accomplish much if it was layered on top of poor process.


Microsoft’s Bill Gates once said, “Automating bad processes just allows you to do the wrong things faster,” and he was one of many that have offered similar sentiments.


All of us, right now, are using supply chain processes that aren’t as efficient, effective, or robust as they could be – but it takes us a long while to change them nevertheless. I am surprised at how often perceived supply chain leaders acknowledge that they had fouled up processes in one area or another when they present some success story later on.


Below are my thoughts on some reasons why supply chain processes are so often not what they should be:

  • Inertia: Most managers, including executives, simply are more comfortable “staying at rest” than they are driving constant change. It may even be partly hard wired into our brains to usually act that way. If we have been doing something the same way for a long time, the natural tendency is often to stay that way.
  • Things Change: Related to inertia, processes that were once good go bad because things change and processes don’t. In this crazy and volatile world we live in now, this is more likely to be true than ever. The obvious implication is that you have to relook at processes more frequently than ever.
  • Managers/Executives Just Don’t Know: One thing I have learned over and over again in my career, including now running Supply Chain Digest is this: if the details of a process are invisible to you as a manager or executive, you are obviously unlikely to push for that process to change. I often make myself go through, in detail, a process that I am not personally involved in executing, and it seems that virtually 100% of the time I find opportunities for process improvement – sometimes dramatically so. Sometimes, I am astounded how bad the process is that people are living with.
  • Job Preservation: Again related to the above, the people that are involved in poor processes may be highly unmotivated to call this out to superiors because they (too often correctly) fear that process improvement could, in fact, land them out of a job. While the company may have a large incentive to stop doing something that shouldn’t be done, the individuals doing it often have a large incentive to ensure that step in the process continues on forever. 
  • Processes Must Evolve: In general, things progress in evolutionary ways. So, you are unlikely to get to process nirvana on the first attempt. It takes evolution and continuous improvement – and companies often don’t have the wherewithal or culture to continue that evolution over time.
  • Leaning of Staffs: I continue to be astounded at how lean so many supply chain organizations are running today. What that means, in practice, is that everyone is so busy and so stretched that just getting one’s day-to-day job done – staying one step ahead of the devil – is difficult enough. Who has time for process improvement in that environment? To give just one of many anecdotes, I spoke with one global logistics manager at a medical devices company last year who said that he and his small team were so stretched that they simply had no time to make the changes that he knew they needed to take out costs and move to higher levels of performance.


  • Cross Functional Challenges: Today, a high percentage of opportunities for process improvement involve cross functional processes. That, of course, means a whole set of issues, and a significant amount of effort and often pain to bring the functions together to identify the opportunities and roll out the new process. It's simply much easier to stay out of that morass.
  • Lack of Technology Enablement: Clearly, many opportunities for process improvement depend on some sort of technology enablement to make it happen. If the resources or appetite for such an investment – whether internal or from external software providers – is not there, then opportunities for process improvement can be thwarted.

So, what we are left with, it seems to me, is this: processes tend to change when: (1) a new executive comes in who demands a new way of doing things, often bringing with them process models that were successful for him or her from a previous life; (2) a major new technology initiative is undertaken, forcing companies to relook at processes and opening opportunities for new levels of automation and efficiency; or (3) there is a crisis or other “near death’ experience that forces companies to do things differently if they hope to survive.


Having said that, I believe that the vast majority of companies have many opportunities for supply chain process improvement laying rather openly right before them. This is clearly part of the drive to push Lean and Six Sigma beyond the factory floor to the broader supply chain. Most aren’t there yet.


For execs and higher level managers, I would also encourage a lot more “management by walking around.”  Do it enough, and process improvement opportunities are sure to emerge, as I can attest first hand.



Why do you think companies are so slow to address poor supply chain processes? What would you add to Dan’s list? Do you agree or disagree that we live with a lot of poor processes today? Let us know your thoughts at the Feedback button below.

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We received a number of great letters on our piece on Warehouse Management to the Rescue for Retail Out-of-Stocks?, which argued that the basic task management engine of a WMS could go a long way to solving the out-of-stock problem in retail, and maybe even bring down health care costs.


Our Feedback of the Week on this topic is a good letter from Cédric Guyot of Retail Solutions, Inc., who likes the idea, but sees some barriers. SCDigest editor Dan Gilmore responds.


You will find that and a number of other good letters below.


Feedback of the Week - on WMS to the Rescue?:


Great article as usual – a few comments:


The solution you offer may work if:

  • Perpetual inventory was right, but it is not. A number of CPG companies have proven that, in the best cases, 35% of the item counts are accurate - 50% of the items have some form of phantom inventory (think theft and other forms of shrink, mis-picks, mis-checkouts, etc.), and the remaining 15% have hidden inventory;
  • Products were sold in one single place on the floor – however, unlike a well-designed warehouse, you may have a promotion display and a home location that are completely different. One of them may be stocked up and the other one is not (there were examples we found where a promotional display actually decreased the total sales lift vs. just operating the promotion from home location as customers were so accustomed to find the goods on the home shelf that it ran out of space and no one actually went to the display);
  • They had the same perspective: retailers tend to look at their business from a holistic, category-level standpoint and if an item runs out-of-stock, a “slide-and-hide” strategy is sometimes corporate policy (a famous club store does NOT have out-of-stocks, should you ask them, as they don’t care about assortment, just shelf fill rate) whereas, a supplier wants to push their own products and view slide-and-hide as the worse practice in the industry; and
  • Finally, retailers and manufacturers (and their brokers) were to agree on a distribution of tasks. That may be the most difficult problem.

Altogether, I think that the ability to drive retail execution will end up being a competitive differentiator for CPG companies – but that it will be primarily driven on a relationship-by-relationship basis, potentially integrating with retailer task management systems when they exist. 


Industry leaders are figuring out how to do a better job for THEIR SKUs and avoid brand shifting (or shift towards private labels) by offering better availability using the data coming from their retailer partner.


Thanks for the excellent newsletter.


Cédric Guyot

VP - Marketing
Retail Solutions, Inc.


Editor's Note:

Cedric, good letter.

I am least concerned about #2 - most warehouses have the same SKU multiple places - easy to handle (piece picking, case picking, reserve storage, etc.). And sometimes those locations are 'dynamic' based on need, and if fact can change frequently. So, I think this could be easily handled within a store.

Other ones are more problematic, I agree, but still have confidence in this. Think the approach might improve PI accuracy, for example.

Dan Gilmore

More on WMS to the Rescue:


Retail could probably use RFID, but the work we've done says that it is still too expensive to get an acceptable ROI.  I did a very large project with AT&T in their new IPTV program.  They have an RFID pilot going on now to track set top boxes, which are $100 to $250 items.  This RFID program is weighted with technology and cost issues.  So, while it has been an interesting experiment and technically successful, the commercial aspects of tracking $100 inventory items is a long way off.

We also did an interesting project with a large beer brewer who has a penchant for freshness.  The project involved a light WMS to keep track of and rotate stock to help distributors manage FIFO.  A simple concept, but if you have ever been to a beer distributor's warehouse, they have other priorities much higher than running an efficient warehouse operation.

That project did substrate your postulate that, in retail (since distributors do act a lot like a retailer from an inventory perspective), there is a place for, and value for, a WMS. The WMS supports stock management (FIFO), inventory management and, in some cases, operational optimization such as slotting. (I wonder who decides that the pallet of 100 watt bulbs should be on the top, rear shelf at Lowes?)

Ron Johnson

You are absolutely spot on here.  I worked for Safeway Stores in the late 1970s and we had developed a tool for store managers to use in planning headcount.  Mainframe based, it looked at calendar cycles, store traffic, events, weather and a number of other factors, including department volumes, to predict the number of employees needed on any given day.  I know these guys think about tasking a lot.


Having said that, they (retailers) also obviously know how to manage inventories. This is where CPFR was born, along with the promise of gathering POS data.  Things are just things, and things may be in multiple places – multiple floor locations, in the back room stock, in stales/RTV inventory, etc.  Knowing where the stuff is, is what WMS systems do really, really well.  A good POS system, coupled with a good WMS/Space-Stock management system should provide most of what a retailer needs to ensure consumers can find things on the shelf (if it is in the store).


One potential hiccup is that many shelves are stocked by vendors and route drivers.  The systems used must be able to collect restock and damaged/stales removal data from these suppliers – hopefully, through common interfaces with their own handhelds.


Steve Murray

Principal and Chief Researcher

Supply Chain Visions



Thomas A. Moore

Warehouse Optimization

There is more activity in this direction than you think.


Manhattan Associates presented at the RILA Logistics conference this year how a SaaS model of their warehouse management systems are being used in grocery and convenience store operations to pull stock from the back room to the sales floor.  It is being activity tested, but there are still some roadblocks.


First and foremost is the lack of discipline on a retail sales floor.  A superior DC operation has a high level of operational discipline, where there is a clear expectation that the human staff will follow the systematic processes.  In the DC culture, the associates are trained over and over to follow process, and where the discipline is absent, the processes get sloppy.  Now go to the sales floor of any big box retailer and look at the staff in the store.  Do you see the discipline needed to make a WMS type of task management system work?  Not that it cannot be doesn’t – but the odds are stacked against the process.


It is a great idea – but a culture remodel that builds process discipline is needed to make the foundation processes work.


David K. Schneider


David K Schneider & Company, LLC

Excellent thought. I totally agree with your assessment. A lot of the problems in retail stores can be solved in this manner. The POS systems in place do not help in this process. They only help in identifying the distribution orders to be raised. The task of replenishing the locations is definitely a huge task. With the size and scale of the retail stores, it becomes a huge task managing that. I think definitely a lite WMS is a wonderful option.


Ramamurthy Swaminathan

Founder, Director,

ACIES Technology Solutions Pvt Ltd

I spent a few years working in a hospital when I was in college and observed first hand that, for the most part, hospitals are pretty inefficient.  I have seen little to change my mind in the many years since college.  It struck me that there are many redundant tasks and ineffective management of Central Supply (excess inventory, inventory in the wrong location, inefficient purchasing processes, etc.)  With nearly 35 years of Supply Chain Management in industry, I haven’t been able to get beyond a phone interview when applying for Supply Chain jobs in the medical field.  I am not saying everything we do in industry would apply, but there is an awful lot of Demand Management, Purchasing, and Inventory Control that would apply in a hospital setting.


So, I guess I am saying that I definitely agree with you on Warehouse Management to the rescue.


Joe Kirchner

Materials Manager

Smith & Nephew

Very good article and I agree with you that a task management system, along with RFID and a disciplined work ethic, can solve this problem.


K. Rahul




What percent of US LTL industry revenue does troubled carrier YRC Worldwide represent?


About 25% - in 2008, it had revenue of $8.9 billion in  a market estimated at about $34 billion.