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Full CSCMP 2010 Review and Comment
Supply Chain Graphic of the Week and Supply Chain by the Numbers
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This Week's Supply Chain News Bites
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Supply Chain Graphic of the Week: The Path to Control of Inbound Freight

This Week’s Supply Chain by the Numbers for October 1, 2010:

CSCMP Edition: Driver Shortage Redux; P&G Senses Inventory Opportunity; Lowes Vendor Management Contingent; Glanbia Three Dozen Network Scenarios




Sept 15, 2010 Contest


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Other Great Entries

New Cartoon Monday


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Each Week:

Global Supply Chain
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Distribution/Material Handling

Weekly On-Target Newsletter
September 30, 2010 Edition

CSCMP Day 3 Review, Last Chance Cartoon, New RFID Pallet Guidelines, and More


HolsteHolste's Blog: Managing Slow Movers With Product-to-Person Technology

Top Story: Key to Lift Truck Optimization may Lie in Fixing Inventory Accuracy
Top Story: You May Need a New WMS If..
Vendor News: Voxware Inc. Announces 4.0 Of Its Voxware 3 Product Is Now Available


Many academics have won the CSCMP Distinguished Service Award. What is the only university to have produced two DSA winners (at the time the award was given)?

Click to find the answer below

Full CSCMP 2010 Revidew and Comment

Ok, I am back after a busy but productive week at the annual Council of Supply Chain Management Professional's (CSCMP) annual conference in San Diego.

First, I want to thank all of you who sent quick notes thanking us for our daily video summaries, which are also available at these links:  CSCMP 2010 Day 1 Video Review; CSCMP 2010 Day 2 Video Review; CSCMP 2010 Day 3 Video Review. It's frankly not easy to get these put together in time for the next morning, but I enjoy doing them and they have proven to be very popular - thanks.

I heard different numbers in terms of attendance, but I would say based on a few random room counts that there were somewhere around 3000 attendees. Just FYI, West coast conferences are almost always down a bit from baseline because a some east coast people just drop off the list.

As opposed to several recent years, I enjoyed the opening keynote sessions Monday and Tuesday. Carlos Gutierrez, former Kellogg CEO and Secretary of Commerce under the Bush administration, made an informed and passionate presentation about the need to aggressively continue with open trade, noting long-stalled free trade proposals with Columbia, South Korea and Panama.

Gilmore Says:

"There was a strong theme, that I didn't quite perceive until the end, of companies recognizing the supply chain as a critical engine for growth."

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Now, obviously not everyone agrees with this viewpoint, citing the loss of jobs from outsourcing, etc. Gutierrez, however, made what seemed to me a couple salient points: (1) Many European, Latin, and Asia countries are expanding trade agreements while the US sits still; and (2) China is working on a sort of European Union for Asia that would include more than a dozen countries and not use the US dollar as its means of exchange.

So, what is South Korea to think as China pushes ahead and the US dawdles? The global competiveness of the US is at stake, Guttierez said. He also noted calls for Yuan currency devaluation in effect means the US is telling China that the hundreds of billions of US bonds it holds "are 25% overvalued." Hadn't thought of it that way.

I also liked Gutierrez's humorous observation that as CEO, when his supply chain execs made presentations, he often had no idea what they were talking about with all the detailed analyses. Keep it simple and relevant, was the message, saying he and others often didn't ask questions so as not to look stupid.

Rodolpho Sebonge of the Panama Canal authority gave a great presentation on the progress and impact of the massive expansion project that will enable much larger cargo ships to traverse the canal. First, the canal will meet is project goal of 2014 - it is ahead of schedule and under budget.

The design goal of the canal was for 12,500 TEU ships. Sebonge said ship makers are figuring out how to get 14,000+ ships through and meet the physical constraints. That should lead to about a $75-100 or even greater reduction in the cost to get a container through the canal to the East coast, he estimated.

Even more interestingly, Sebonge presented some data on the tremendous overall growth in "trans-shipments," or moving containers from one ship to another. Panama is investing heavily in its port and trans-shipment capabilities, and is positioned to become the "Rotterdam of the Americas," as cargo doesn't just pass through the canal but is transferred to reach Latin America or Europe.

I attended 7 sessions over two days, and will provide highlights from some of them below.

Perhaps the best was one focused on "The War on Trucking," in which moderator Mike Regan of Tranzact Technologies described a variety of woes, especially regulatory, impacting truckers. A great panel of two shippers, a carrier and a former DOT official discussed all this in more, including one observation that the new CSA 2010 rules could take as many as 175-200,000 drivers out of the industry - the driver shortage redux.

From that paanel, John Smith of CRST said the carrier recently tried to hire 30 new drivers. Out of an applicant pool of 300, only 6 passed the drug test or otherwise were deemed qualified. Of the 6, only two passed the CSA safety screen. "You can't find drivers," he said in the midst of 9.6% unemployment. Proposed new hours of service rules could in effect reduce capacity by 12% or more - and raise wage costs. All panelists were worried about capacity. International Paper has gone to a dedicated fleet for just that reason.

Jake Barr of Procter & Gamble gave details on the substantial savings the company had achieved using "demand sensing" technology to improve forecasts for the next four weeks. While the improvement in forecast accuracy over that horizon was 30-40%, the even greater benefit was more accurate understanding of what inventory would be where, the two pieces together leading to more effective production schedules. P&G reduced inventories by $1 billion in year one, with more billions after that. "Rules-based DRP just can't cut it anymore," said moderator Lora Cecere of analyst firm Altimeter and previously AMR.

A panel on supply chain transformation led me to this conclusion: that we need a new term, continuous supply chain transformation, which I am coining here. It's the best way I can describe what P&G, Chiquita and PepsiCo are doing. They are inventing or re-inventing not their entire supply chains but threads of those supply chains in rapid fashion to gain competitive advantage or meet new opportunities. P&G has to rapidly align its supply chain internally and with trading partners to support the new ways the company "wants to attack the market," said Barr, who pulled double session duty at the conference.

Patrick Lanzing of Logitech (of computer mouse and other gadget fame) gave a fascinating presentation on the Logistics Service Alliance, a coalition of 10 shippers doing what is in effect carrier bid optimization across multiple modes and three regions of the globe (Americas, Europe, Asia). I am sort of embarrassed to say I had never heard of the thing - but then, I can't find anyone else who has either. The effort has driven substantial savings for the members. There were many, many questions from the audience, from how anti-trust concerns were avoided to how bid rates were maintained even when the full volume didn't go to a carrier. More on this soon from SCDigest. Anyone else out there doing this?


Consumer products maker Conair has eliminated millions of dollars in retailer chargebacks from new technology that manages ever-changing retail compliance requirements and proactively IDs "shipments at risk" before the time when violation occurs.

Lowes and Whirlpool have taken collaboration to a new level, doing what is in effect a Sales and Operations Planning process (S&OP) jointly, smartly however calling it a "Merchandising and Operations Planning" exercise to get sales and marketing support. It starts with a robust CPFR process that is used as the baseline for the subsequent planning processes, which involve a series of cross company meetings each month and one plan across both companies.

We will cover all the above stories as well as others not mentioned here over the next few weeks in more detail.

In terms of the conference itself, here are my observations and recommendations:

  • There was a strong theme, that I didn't quite perceive until the end, of companies recognizing the supply chain as a critical engine for growth. This is a great thing. More on this soon too.
  • At some point, I think the tracks and sessions need to be viewed as a whole, not just a series of individual tracks largely doing their own things.
  • The effort to build a much larger trade show attached to the conference, under the theme of "The Supply Chain of the Future" (a direct descendant of the former "Warehouse of the Future" years ago) was decent enough as a trade show but which, by general acclaim from my conversations, fell quite a bit short on the Supply Chain of the Future score.
  • This was too much the "consumer package goods show." Maybe I am wrong, but from my detailed review of the agenda, I found not much retail and even less industrial company participation and themes (there were a few exceptions, like chemical maker BASF). How about a track on production logistics, for example? I volunteer as chair.
  • As I noted last year, I would go back to 60 minute sessions from this year's 90 minutes, squeeze in another session per day (3 to 4, as it used to be), and repeat some of what are expected to be the most popular one.

But all told I had a very good and insightful week. Met lots of SCDigest readers at the event, and look forward to seeing you in Philadelphia for CSCMP 2011.


What were your thoughts on CSCMP 2010? If you didn't go, why not? Any reaction to our summary of keynotes or sessions? Let us know your thoughts at the Feedback button below.

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It's been awhile, but we did definitely want to include some of the other letters we received on our First Thoughts piece on The Probability of Supply Chain ROI, which argued for thinking about ROI as a probability range, not a single number estimate.

That includes our Feedback of the Week from Dr. John Hanson of the University of San Diego, who offers some complementary thinking to our ideas. You will also find several other good letters on the topic, mostly in agreement, but one reader who thinks the concept is all wet.


Feedback of the Week - On the Probability of Supply Chain ROI:

There are two issues involved in this that need to be considered.  The first is the hurdle rate.  The “right” but simplistic answer to this is that the cost of money (the hurdle rate) depends on the use of the money not its source. Therefore, each project should have its own hurdle rate, increasing with the risk involved. 

Most executives I have dealt with do this in an arbitrary way, jacking up the hurdle rate in proportion to their level of discomfort with the projections.  Unfortunately there is no definitively correct way to do this, but it is possible to construct market tests in some situations.  For example, the pricing of business application software will reflect what a broad selection of customers accept as an appropriate hurdle rate given the benefits they expect.  The second issue is the distribution of possible outcomes around some expected value.  Two projects with the same expected value can have very different distributions of outcomes, particularly if there are binary (succeed/fail) results involved. 

Here we have to deal with utility – the fact that decision-makers have different tolerances for risk.  The tolerance varies not only between individuals, but also with specifics of the case (size of the investment, possibility of a loss, etc.).  Again, there is no right answer, but I am a great believer in simulation to establish the sort of curves used to illustrate the article.  In the end, all you can really do is show the curves to the decision-makers and ask them if they are buying or not.  At least if they have confidence in the curves they probably won’t be arbitrarily adjusting the hurdle rate!

Thanks for addressing an important issue that many folks just don’t get, although good managers do tend to get it instinctively.


John D. Hanson, Ph.D.

Assistant Professor

Supply Chain Management Institute

School of Business Administration

University of San Diego

More On the Probability of Supply Chain ROI:


Good topic.

Going back fifteen years ago, a multi-national company I worked for used a similar approach.  Essentially, the deterministic IRR calculation was considered the "most likely" number. Then, through evaluation of borderline cases and a consensus-building meeting, we also estimated a "pessimistic" and an "optimistic" IRR. The optimistic, pessimistic and the most likely numbers made up the parameters of a Triangular Distribution which allowed for calculation of the likelihood of each IRR instance.

Any likelihood estimation method, including Monte Carlo simulation, will have to make a probabilistic assumption, and I have seen Triangular Distribution assumption to be flexible, robust and easy to use. Most importantly, the results of the overall approach was considered credible, since (1) management played a part in establishing the "pessimistic" and "optimistic" numbers, and (2) it was possible to calculate the likelihood of each IRR instance within the range.

Keep at it, Dan. 

Omer Bakkalbasi, Ph.D.

Solvoyo Co.


I definitely agree with you that the simplistic “one number” approach for calculating ROI will no longer satisfy the requirements of today’s Capital Review Committee.  I am familiar with Doug’s methodology and it does an excellent job of introducing the concept of probability into the decision making process:  for many large-scale projects, this level of review is fully justified.  Where it is not, one should at least use the simple Expected Value approach, i.e., the value of the event times the probability of its occurrence.

Regardless of how you calculate it, senior management is going to take a very conservative look at whatever you present.   From conversations I have had over the past year or so, I would change the acronym to:

R  for REAL.  Forget anything about “soft” savings!

O  for OBVIOUS.  No fancy footwork or prerequisite requirements – even a board member can understand it.

I  for INSTANTANEOUS.  If it does not payback inside of a year, you are not going to see any funding


Bill Petersen


Monte Carlo simulation is not solving the key problem of estimating ROI for projects with lots of uncertainty, particularly for R&D. The uncertainty of individual components in the R&D projects may change the make up of the critical path and thus fundamentally chance the required skill set and task list.


For example, say I want to solve fusion. The fact that I may use Monte Carlo simulation to estimate the uncertainty of delivery of a supercomputing coil does not materially affect the risk of not knowing what you do not know.


Only for projects that are trivial and have been done a dozen times over would the critical path be known and if you have done it a dozen times you really don't need Monte Carlo to tell you how to get to ROI.


It does create pretty pictures though.

Theodore Omtzigt



Many academics have won the CSCMP Distinguished Service Award. What is the only university to have produced two DSA winners (at the time the award was given)?


The University of Tennessee. Dr. John Langley in 1993, and the late Dr. Tom Mentzer in 2003.