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  Newsletter Archives                  Can't View In E-mail? March 3, 2011 - Supply Chain Newsletter

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Videocast: Benchmarking As A Catalyst For Supply Chain Improvement

Most Supply Chain Managers Understand That Benchmarking Can Play A Vital Role In Improving Operational Performance

Featuring Eric Deutsch, Senior Manager of Sales & Operations Planning, EMD Chemicals and
David Johnston, Senior Vice President of Manufacturing & Wholesale Distribution,
JDA Software

Wednesday, March 9, 2011


Special Videocast:
The Dell Supply Chain Transformation

How Dell Has Re-Optimized Its Supply Chain To Address Market Challenges And Drive Success

Wednesday, March 16, 2011


Videocast: Optimization 3.0: IBM's Guide to Leveraging the New Wave of Business Analytics for Next Generation Optimization-Based Decision Support

How To Create The Truly Adaptive Supply Chain

Featuring Thomas Dong, Senior Product Marketing Manager, IBM Software Solutions

Tuesday, March 29, 2011


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This Week's Supply Chain News Bites
- Only from SCDigest

Supply Chain Graphic of the Week: Are Shippers Getting Subsidy from US Citizens on "Social Costs" of Transportation

This Week's Supply Chain by the Numbers for March 3, 2011:

  • Schneider Exec Says Proposed HOS Impact Significant
  • Dell Orders Chinese
  • DC Construction Implosion
  • Has One Company Solved the Energy Problem?

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Weekly On-Target Newsletter
March 1, 2010 Edition

Schneider Natl on HOS; Biofuel Breakthrough; Commodity Cost Picture and more


By Jonathan Gold
Vice President, Supply Chain & Customs Policy
National Retail Federation

The 2011 Retail Outlook

Aligning Supply Chains with Real Customer Needs

Is the new supply chain imperative understanding the people and behavioral sides of both sides of the value chain?

Unquestionably, there has been much more attention to the people dynamic in supply chains generally in recent years, but to me it seems that has been mostly focused in two areas: (1) "Change Management" and the natural resistance of employees to accepting major changes in processes and technology; (2) "Talent Management," with more companies recognizing that the level and development of supply chain managers in their companies is a critical element of success.


""Customers, and customers alone, are the ultimate frame of reference when designing and operating enterprise supply chains," Gattorna says."


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But there are many more dimensions of the role of people in the supply chain that companies usually do not well consider in the design and execution of supply chain strategies.

That's one of many messages in my friend Dr. John Gattorna's new book, Dynamic Supply Chains. I had some thoughts on what the book is telling us a few weeks ago (See Time for more Dynamic Supply Chains?). As promised then, I am offering a few additional thoughts this week.

It's worth noting that for all the talk about how "dynamic" our supply chain environments are, it is usually couched in terms of inanimate aspects: oil and commodity prices, changing regulations, volatile demand, etc. But the people in and connected to the supply chain are by definition dynamic too, and drive much of what manifests itself in environmental dynamics. Yes, customer requirements are ever changing, but that is because the people running those companies have dynamic needs and strategy changes. We don't often look at it that way, it seems to me. We look at the current of the river, not its source upstream.

There is increasing understanding that the real problems - and the opportunities - exist at the seams and interconnection points of our supply chain networks, and that those connection points are multiplying rapidly as we develop "networks of networks" in today's global, virtual supply chains.

"Value is either created or destroyed through the management of those interfaces along the "chain" or across the network," Gattorna notes, adding that nearly all companies have "multiple supply chains running through them in a complex three-dimensional array."

However, "Managing supply chains actually involves understanding the interaction between human behavior, information technology, and infrastructure. This is the antithesis of what actually happens in business today," Gattorna adds.

Well that's a pretty bold statement.

The root of much of the problem is that companies don't really understand well the people-driven buying behaviors and cultures of their customers. While customer segmentation has been around a long time, it's usually done in a way that marketing might think about: channels, size of company, those sorts of things. Often, the focus of the segmentation is on the "marketing message" and communication channels.

Those are relevant attributes to be sure, but Gattorna says that market segmentation is more often than not disconnected from the supply chain strategy. And this, I think, is the crucial point: There has been tremendous progress in general in achieving better supply chain alignment within a company, using Sales & Operations Planning and other tools, to get the team rowing in the same direction internally. But is the output really well aligned with the market, and - critically - different segments of that market, in terms of customer buying behavior and resulting supply chain needs?

Gattorna, again, says not very often.

"Customers, and customers alone, are the ultimate frame of reference when designing and operating enterprise supply chains," Gattorna says.

Now think about that for a moment. When developing supply chain strategies and optimizing supply chain networks, are the customers and their needs really the starting point for those activities? Sure, forecasted demand is a key input, as well as lead time targets, but that is not what different customer segments really require from our supply chain. We are starting to see some of it with the notion in the consumer goods industry in "designing the supply chain from the shelf back," but Gattorna I think would say that those "shelves" have different needs depending on which customer it is.

To greatly condense the thinking here, Gattorna has a framework of four major customer segment "meta-types" (my word) based on total service needs. Those are:

Continuous Replenishment: Predictable demand, easily managed if there is good collaboration

Lean: Fairly predictable demand, somewhat looser relationships, focus on efficiency

Agile: All about pull - responding rapidly to unpredictable customer demand; use of various "buffers" needs to be a key supply chain component

Fully Flexible: Extreme example of Agile. Looking for customized solutions.

From my view, there may be other ways to segment customers in a similar way, though Gattorna (who was a long time Accenture consultant as well as an academic) provides quite a bit of support as to why these are usually the right four.

But the key points are again two: (1) You need different supply chains for each segment; and (2) Many if not most customers have needs for two or more of these type of supply chains across different products they buy, their own channels, and time.

So, the message is that companies need to align their own supply chains with these different customers needs and buying cultures (not just achieve internal alignment, which tends to result in "one size fits all supply chains"), and because customer needs and buying behavior changes, this alignment needs to be dynamic.

There many chapters dedicated to how to make this alignment happen on an on-going basis, and for some companies, especially those that need to transform rapidly to survive, a later push for something Gattorna calls "embedded alignment," which in summary involves development of an internal or external "4PL" or lead logistics provider approach that can rapidly use outsourcers and thus not constrained by the company's current culture, history, capabilities, etc.

That approach is certainly not for everyone, in my view, but for some this path in fact would be the fastest way to transformation.

I also liked this supply chain model, recreated by SCDigest from the book, that shows the most important questions that must be asked and answered at various levels of supply chain strategy - perhaps for each of the supply chains a company must design and manage.


Source: Dr John Gattorna

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Get to the point of dynamic alignment, Gattorna says, and "customers are serviced appropriately, no more, no less, eliminating under and over-servicing forever."

Is that future state vision truly achievable? I am not quite sold on that, but I do truly believe we are going to see new paradigms for managing our supply chain for the next 20 years of its history emerge, and at least some components of this thinking is likely to be part of that.

Do supply chains need to be better aligned with customer buying needs and behavior as Gattorna suggests? Does a "one size fits all" create a lot of our apparent supply chain complexity? Can we really get to a much greater level of precision in terms of the right level of total customer service? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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HolsteHolste's Blog: Fire Protection Code Limits Product Stacking Height

Top Story: Distribution Center Space Still Largely a Buyer's Market in 2011, New Report Says, though Rates Slowly Inching Up from 2009 Nadirs
Top Story: The Overlooked Keys to Warehouse Management System Success

Q: Name the logistics technology oriented trade show in Chicago that enjoyed great popularity throughout the 1990s, started to lose momentum in the early 2000s, and then faded away completely about five years ago.
A: Found at the Bottom of the Page

This week, we are publishing a few of the many letters we received on our First Thoughts piece and related video on the Top 10 Supply Chain Innovations of All-Time.

That includes our Feedback of the Week from Dr. Wolfgang M. Partsch, who wanted to make sure the origin of the term "supply chain management" was also acknowledge, which we have.

Other mostly short and sweet letters on this topic as well, and another reader who isn't surprised that Cancun climate meeting was a big dud.


Feedback of the Week - on Top 10 Supply Chain Innovations:


I find it great to try investigate the history of SCM. Thank you for your efforts! Most of your points are very good, relevant and are in some ways cornerstones for the art of SCM as it is today.

Please let me add one piece to your historical research, which might be forgotten, because it was not created and visible in the USA:

In 1979/1980 a small team of consultants in the Operations Group of Booz Allen & Hamilton in Europe around Mr. Keith Oliver, Partner of BAH in London, coined the phrase of "Supply Chain Management". I was a member of this team from the BAH German office, and was the project manager of the documented first SCM-project, which was executed under this label, in the world! This project was a Pan-European Supply Chain Strategy plus implementation for the company Landis & Gyr (today integrated into Siemens) in Zug, Switzerland. The project was performed in the years 1980 - 1981 and published in the German business magazine "Wirtschaftswoche" in 1982. For your reference, I attach a copy of this publication.

I hope, you can add this cornerstone in our SCM-world to your list of breakthrough achievements.

Dr. Wolfgang M. Partsch

Editor's Note:

We have referenced this achievement from  time to time, and actually included the cover of the referenced publication as our Supply Chain Graphic of the Week shortly after Dr. Partsch sent it.

More on Top 10 Supply Chain Innovations:


I can’t be certain as my aging brain cells sometimes confuse dates, but I think the first company to actually attempt to computerize supply chain optimization in a software matrix was Cleveland Consulting, right after the first IBM PCs were developed. I think they used a combination of Lotus 123 and dBase III and dBase IV tools to create an optimizing environment that they could use to help their clients start consolidating and rationalizing their networks.

It is possible that someone tackled it before that, but I do remember Cleveland Consulting making a big splash at the WERC and CLM conferences in the early to mid 80’s with their optimization presentations.

I can’t think of anything I would put ahead of the other 10 you listed in the column. Thanks for the ride down memory lane

J. Kevin Michel
Vice President
Seaboard Warehouse Group

These kinds of things are like best movie lists. Somebody’s favorite is always left off.

No room for Six Sigma?

Matthew Erion, LCB

Traffic Manager


Editor's Note:

You know, I came very close to using six sigma. If I had more space, would have noted that.

The main reason I didn’t put it in the top 10 was it wasn’t clean enough from an origin perspective. Yes, Motorola was the first, it seems, but that built upon TQM that preceded SS, Deming, etc. So, seemed like we would have had to included all those sources, so it didn’t meet my first criteria.

Feedback on Cancun Climate Summit:

In reading your article and watching the snow / foul weather cripple Europe I find it laughable that most people still believe the “scam” the likes of Al Gore & George Soros are still trying to put over the people of our world. While it is recognizable that as good stewards of the Earth it is our inherent duty for each of us must do our own bit in reducing our waste and only consuming what is needed there is no reason private individuals & corporations / banks need mandate a tax for the act of exhaling CO2 into the atmosphere. It’s ridiculous that we should listen to these to blokes who tell us how much carbon we should emit while they live in luxurious large homes with huge carbon footprints, fly around on jets spewing out gasses, and commute in luxury automobiles.

If they want to tax something let them attempt taxing the volcanoes that spew out tons of gases each year! This bit about capping & taxing the users of carbon is rubbish designed to a) create enormous amounts of wealth for a very elite bunch and 2) continue the de-development of industrial countries like the U.S. & Japan as outlined in the books ECOSCIENCE and Tragedy & Hope. These few elite bunch believe that they are on the verge of creating their self proclaimed utopian New World Order on the backs of the rest of us, they are dead wrong indeed. They may be creating their police state like prison planet but the human fee spirit will reject and eventually break free of the shackles they intend to bind us with.


Vincent Lloyd
Purchasing Agent

Q: Name the logistics technology oriented trade show in Chicago that enjoyed great popularity throughout the 1990s, started to lose momentum in the early 2000s, and then faded away completely about five years ago.
A: Distribution/Computer Expo, usually known just as D/C Expo.
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