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This Week's Supply Chain News Bites
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Supply Chain Graphic of the Week: Dramatic Year over Year Inventory Reduction

This Week’s Supply Chain by the Numbers for October 14, 2010:

Posco Brainstorms Supply Chain in China; One Carrier's Own Extreme Driver Shortage; WalMart Going Urban; Total Landed Cost Challenges




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Each Week:

Global Supply Chain
Trends and Issues

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Weekly On-Target Newsletter
October 12, 2010 Edition

Driver Shortage Redux, Total Landed Cost,, Womack Steps Down, and More


By Greg Johnsen
EVP Marketing & Co-Founder

GT Nexus

Control Towers for Everyone?

Yes – in the Cloud.


HolsteHolste's Blog: Improving DC Productivity and Accuracy Requires Adoption of Basic Picking Technologies

Top Story: Total Landed Cost Calculation, Key to Supply Chain Optimization, Still Immature Practice, 2010 3PL Study Finds
Top Story: Review of the 2010 3PL Study
Vendor News: Voxware Inc. Announces 4.0 Of Its Voxware 3 Product Is Now Available


What company is by far and away the world’s largest 3PL by revenue?

Click to find the answer below

Execs on Supply Chain Flex

As many of you know, supply chain flexibility has been a recurring theme this year, with a couple of 2010 columns trying to ponder what it is and if it can be measured, among other issues.

So it was timely (and not in-coincidental) that the Fall session of the Georgia Tech Supply Chain Executive Forum (SCEF), under the capable leadership of Dr. John Langley, focused on just this topic, and with interesting results.

Gilmore Says:

"Several said the biggest barrier was that flexibility had a cost - and right now companies don't want to pay it."

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your Feedback here

I (along with our friend Gene Tyndall) assist Dr. Langley with getting an agenda and speaker list together for the two annual meetings, and I am limited in what we can report back based on the semi-private nature of the meeting. However, I can highlight overall themes and anonymous quotations.

To support this Fall meeting, we conducted a survey of SCEF members, and received about 40 responses, primarily from supply chain executives (VPs and some directors-level).  The results are worth sharing.

We first asked members to provide their definition of supply chain flexibility, and we received a wide range of responses.

“I don't know exactly how to define it, however, I do know how it behaves on a daily basis," said one executive, adding that "the supply chain must react quickly to inefficiencies coming from all directions: suppliers, customers, partners, and internal to itself.”

Another said that SCM flex was: “The ability to respond to fluctuations in demand or capacity with minimal impact on cost or service.”

That notion - being able to adapt without hurting cost or service - was a consistent theme. Another along those lines: "The ability to support significant and rapid changes in demand, supply, mix, etc., without customer service failures.  Ideally flexibility is designed into all aspects of supply chain - manufacturing, warehouse facilities, transportation, etc."

All told, it certainly again supported my earlier contention that for something this seemingly important, the supply chain profession right now lacks any clear or generally accepted definition of flexibility. It was also interesting to note that the definitions tended to be either focused on short term flexibility (what I've called micro flexibility - response to disruption and exceptions right now or over a few days) or longer term, more strategic agility (what I have called macro flexibility - how fast can the supply chain adjust to meet changing business requirements and strategies) but not both aspects.

We also asked respondents to rank a series of "drivers" of the business needs for flexibility. As you may be able to see in the graphic below or easily on the full size image, both the strategic and real-time aspects of flexibility rose to the top, with "improve responsiveness to corporate strategies/opportunities" and "better manage disruptions/exceptions in supply chain execution" topping the list with average scores of 4.2 on a scale of 1-5.

In total, all of our selections scored high in importance, though I would have thought "moving to a more variable cost structure" might have been a bit higher.

View Full Size Image

Perhaps the most interesting part of this survey discussion at the meeting was actually around the barriers to greater supply chain flexibility. Again, as shown in the chart below, we asked the members to rank various obstacles to flex. Here, I was a little surprised, as "flexibility of supply chain software/integration of systems" was rated the top barrier.

View Full Size Image

In the discussion, a supply chain executive from one of the world's largest technology companies supported this view, noting that his company had built so many custom systems over the years to do this or that that whenever a change was needed, it took months because all these systems had to be touched. His/their plan was to dramatically reduce those systems, and in a sense be constrained by what the core systems could do, but be able to then make changes rapidly as needed within those contraints.

I am not so sure on this one, as today's supply chain software is incredibly more configurable and flexible than it was in the past, and my sense is the integration issues have also dropped dramatically. But then, how you view that depends on what you have right now. If you have dozens of custom, "legacy" type applications that are stitched together like a ball of yard, than surely that is a large barrier to fast reaction.

I will also note that IT/systems issues would primarily seem to me to be barriers to strategic flexibility more so than short term disruptions/issues. For example, if a company now needs to be able to do this new thing in its supply chain, or change product flows, or whatever, and the IT system may need to be modified to support those changes. But then again, a company like Procter & Gamble now can react more quickly to short term changes in demand based on new "demand sensing" technology it has deployed, so perhaps tech issues are key to both the macro and the micro.

There was a lot more to this barrier discussion. Several said the biggest barrier was that flexibility had a cost - and right now companies don't want to pay it. One attendee noted that "You talking about making an investment in flexibility now that may not ever be needed or may only come in to play two years down the road. Is that investment going to play in this environment? No way. Companies want immediate returns."

Organizational structure was cited as the number 2 barrier, and there was some great discussion around this issue too. One attendee noted that "the challenge is that improved flexibility that might help the whole supply chain often comes at a cost to someone else's P&L or some supply chain function."

We can all say that is old thinking or a bad metric system or whatever, but it was clear from these executives at many great companies that these types of issues were still very real barriers to enhanced supply chain and flexibility.

There is so much more but I am out of space. Will consider doing more on the outtakes from this great meeting - one of the best SCEF's ever - very soon.

But I will close with this, from the same IT industry exec who made the comments supply chain systems issues.

Despite those IT barriers he has, he noted in an excellent presentation that at the end of the day the most important attribute of all was "Leadership Flex" - how committed company and supply chain leaders are to building a culture of business agility, and constantly driving and (making the necessary investments) to ensure rapid reaction to this ever changing business and supply chain environment.

In the end, he said, like most things flexibility all comes down to the people.

Amen to that. At last, we have some clarity.

Are people and culture in the end the real keys to supply chain flexibility? How big a barrier - or in your case perhaps an enabler -are IT and systems integration?  What are the real drivers of the need for greater flexibility? Let us know your thoughts at the Feedback button below.



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We received a large number of letters om a series of articles we did on WalMart's program to take greater control of its inbound freight, including a guest First Thoughts column from Dsvid Schneider on the subject.  (See Understanding WalMart's Inbound Freight Strategy.)

Most of the letters were short and sweet thank yous for the work and thoughts, but some added additonal insight ,including our Feedback of the week from Paul Soper.


Feedback of the Week - WalMart Takes Control of Inbound Freight:


The 100 mile deadhead from DC back to a vendor is one point, but a similar deadhead exists at the other end or at the Store.  For an inbound carrier to go to a store sounds good, he is unloading at one side of  the DC and the load to “a store” is already loaded on a fleet trailer with roll up doors, whether its truly their own or a contracted dedicated fleet who has to operate with specified grocery trailers.

  If its food DC and perishables it’s a multi temp trailer,  it may work with dry vans but here again, that inbound carrier would have to have drops or live load.   The drops on the dry side are mostly walmarts own trailers for outbound I believe with exeption of a few very large carriers.    I think they can accomplish more on the dry side than the Grocery DC side.  The stores and the DC prefer roll up doors.

Shippers on the other hand often prefer swing doors on refrigerated longer haul movements  Also many grocery trailers are flat floor and lack circulation for temp controlled loads and generally weigh more.   In that the grocery side represents 51 percent of WMT sales revenues, they will have to deal with these scenarios.

Many of the big volume vendors have drop trailer from the core carriers, but presently its not feasible to have all the extra trailers that may be needed,,,,not so much a cost standpoint of trailers, but the shear lack of room for them  at vendors premises, some vendors now only have so much room for drops.  The same goes for the Walmart DCs, they do have extra property to pave, but presently they were designed for X number of trailer spaces.  The guy coming in for a customer pick up live load at a vendor is getting loaded later, not faster in most cases.

I watch it closely, as I was instrumental in talking WMT into using outside dedicated carriage for grocery distribution in the fall of 1992, at a time when they had every intention to do it themselves..the trucks and trailers form Great Dane were already ordered for the first food DC in Clarksville, Ark.  We called it Clarksville Refrigerated Lines, or CRL, later named it Transport Industries. I left, 2 years later it was sold and the new owners renamed it Greatwide.    (and yes we did plenty of pickups when it made sense.) its an old idea being aggressively ramped up. 


Paul Soper

More On WalMart Takes Control of Inbound Freight:


Great article; excellent work.  I particularly liked the delineation between tactics and strategies.


Andrew Owens

Ingram Micro

Good edition.

We saw the value of leveraging our in-house fleet following the implementation of our E-Tendering tools in 2009. Later that year, we launched the Direct Ship Initiative to ensure that our suppliers had visibility to our delivery routes/returning vehicles for the purposes of scheduling inbound materials. Rolled-out in January 2010, the program has begun to gain real traction as the tendering application continues to evolve in both coverage and sophistication. As we evaluate the next generation TMS, the ability to manage, expand, and optimize the utilization of the in-house assets will be a key differentiator.

Bill Ray
Director of Procurement
Ply Gem Industries, Inc.


Billing back every Wal-Mart vendor 6% of invoice doesn’t hurt their cause either !  I believe that was the point being made in the original article “Wal*Mart Takes Control Of Inbound Transportation”.  That extra cash pays for a lot of potential ½ loads and “dead” miles.

What I can’t wait to hear about is what is going to happen when Wal*Mart can no longer blame and (more importantly) penalize vendors for “missed window” deliveries as they will be handling these themselves.

For my money, Wal*Mart will never service themselves in this area as well as they are being serviced by others.  Transportation is not now – nor will ever be a “core competency” of Wal*Mart.  They will find (like many others have already) it is better to be a customer of someone else who is actually in the business of the service they need – than to try and provide it themselves.

Wal*Mart isn’t just any other retailer and their culture certainly shows that – just ask their vendors. 

Sometimes you just have to know when too much is too much!

D. Anthony



I agree with everything you’ve stated so far. However, the high percentage of empty miles the Wal-Mart fleet is traveling has got to be one of their main goals. As an experienced cost justified transportation manager with a large grocery retailer, I can attest to the benefits. It took me years to battle the merchandisers over this concept and just days with our distribution management group. We became a profit center as a result, not a cost center.

P. Bleeker

Rochester, NY



What company is by far and away the world’s largest 3PL by revenue?


DHL Supply Chain and Global Forwarding, which at about $32 billion in 2009 revenue is about double #2 Kuehne + Nagel, according to Armstrong Associates.