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Supply Chain Whirl
Supply Chain Graphic of the Week and Supply Chain by the Numbers
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  Newsletter Archives                  Can't View In E-mail? March 31, 2011 - Supply Chain Newsletter

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Counterfeiting, Compliance and Other Key Life Sciences Issues

Recent Gartner Research findings revealed




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Wednesday, April 20, 2011



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Tuesday, April 26, 2011

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

Supply Chain Graphic of the Week: Impact of Diesel Prices on Switch to Rail Transport

This Week's Supply Chain by the Numbers for April 1, 2011:

  • Pricing Geiger Counters
  • Hershey Responds to Input Inflation
  • Apple Pays Dearly for New Display Panels
  • China Labor Costs Rising, but Less than Expected

Counterfeiting, Compliance and
Other Key Life Sciences Issues

Recent Gartner Research findings revealed



March 14 , 2011 Contest

See This Week's Winners!

New Cartoon Monday on



Weekly On-Target Newsletter
March 30, 2010 Edition

Last Chance Cartoon, ProMat Cool Products Detail, Lost RFID Killer App and more


By Greg Marmulak
Vice President of Professional Services

JustEnough Software

Balancing Push and Pull Strategies


Holste's Blog: Justifying the Full Range of Benefits Automation Has to Offer Requires Digging Deeper
Top Story: ProMat 2011 Day 2 Video Review and Comment
Top Story:ProMat 2011 Day 1 Video Review and Comment
Vendor News : Kollmorgen Introduces Mobile Order Picking Solution for Automated Lift Truck Operation at ProMat 2011

Supply Chain Whirl

"We didn't start the fire. It was always burning Since the world's been turning. We didn't start the fire No we didn't light it But we tried to fight it."

I always liked "We Didn't Start the Fire" by Billy Joel, if nothing else for its catchy list of people and events from the 1950s-70s, a musical trip through history meant to remind us that any current craziness in the world and society is simply part of the permanent current of the human condition.


"The companies that thrive are the ones who do not fear change, but rather embrace and harness its energy."


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That said, I don't know we've seen anything to match the last decade or so since maybe the late 1960s through the 1980, and these past few since the recession have been astounding. I am a news junky, but almost feel like turning off my radio lately. Anyone else?

Why bring any of this up? As supply chain has gone mainstream, it is now connected at the hip to the greater world and social, political and economic environment, which itself is now global. And as I have noted before, you can't think about the supply chain of the future without assumptions of the world of the future.

Easy example: how the energy situation looks and thus how and at what expense we move goods could certainly be dramatically impacted based on how the current turmoil and disruption in the Middle East plays out over the next few years.

Anyone have a crystal ball on that?

What really triggered this column were the several big news bites this week relative to inflation. We all know commodity and energy prices have been rising rapidly for the past year or more. That has been pushing retail prices up as well, but frankly in moderation versus the underlying cost changes.

That may be over. Hershey, for example, announced a general price increase to retailers of 9.7% this week. That's a big number.

Meanwhile, WalMart CEO Bill Simon told USA Today that "serious, rapid" inflation was coming - right now.

Riots over food prices were part of the trigger that led to the demonstrations in Egypt and the overthrow of the government there, by the way.

We have not had serious inflation in the US since the late 1970s, when again oil prices as now were on the rapid march. It's been so long most of us have little real knowledge of how this plays out, generally or for the supply chain, a concept that was just being invented the last time we saw it.

But here are some guesses:

  • Procurement strategies become critical - do you forward buy? For how long are you willing to sign a contract - and how long will a supplier offer one? What are the escalators in a contract for price increases? All standard stuff any time, but now the importance is put on steroids.
  • Being the low cost producer becomes even more important. WalMart's CEO predicted their lower cost supply chain would lead it to gain market share in an inflationary environment. If you can hold price or have the least increase, there is a lot to be gained.
  • Naturally, if the price of Hershey chocolate and many more goods go up 10% or more, workers are going to demand more money to keep up, starting with blue collar/lower paid workers first who can least manage the impact of inflation. That means input costs rise still more, strikes make something of a return for unionized plants, unionization drives become more appealing for non-union shops, and companies look even harder at offshoring (especially Mexico) and automation technology in response.
  • As was happening to a degree before the recession hit, some commodity-dependent companies look to some level of vertical integration to take control of raw material sources and costs. Of course, China has been busily doing just that in South America, Africa and elsewhere for some time. But perhaps with say the price of cotton up over 100% in six months some apparel company will decide it should have some interest in a farm or two.

I am waiting for nano-technology to get us out of this.

But inflation is just one of the many turmoils and challenges the supply chain faces today.

I had this thought over the weekend, stemming from the supply chain issues as a result of the earthquake/tsunami and now radiation problems in Japan. There are more than 190 countries in the world today. That means that for large global companies, they are running 190 or near to it different supply chains as they source or sell from all or most of these nations, or soon will.

Think of the level of supply chain risk and complexity there. Procter & Gamble, for example, had to close plants in Egypt during the protests. Japan's problems are playing havoc with automotive, electronic, and other supply chains. Iceland volcanoes, bird flu, etc.

I have been trying to think of the right analogy, and I am liking this one: the supply chain is like a truck driving down a curvy road in some war movie. Every minute or so, a bomb hits alongside the road, shaking the truck, but generally not stopping its forward progress, even though for a few seconds the dust makes it impossible to see. Some blasts are big enough that the officers and enlisted troops have to get out of the truck to inspect the damage, but then they get back in and on the road, maybe not even completely sure of the destination.

Does that sound about right today?

I am keeping it fairly short this week, and will end with this.

1. While many/most companies have adopted risk management strategies of one form or another, is there really a lot of knowledge or science behind how to do this well? I don't think so. We know little about quantifying risk other than a 2 x 2 matrix on impact and likelihood. The industry needs more science on quantifying risk, and just as important, the benefits of agility.

2. More companies should/will develop "emergency response" systems and teams similar to what WalMart and probably some others have in place.

3. Global companies will need to be able to better model their networks to understand the impact of disruptions and market changes and create more optimal responses. Carrier Schneider National did this a number of years ago using consultants from Princeton University to great effect on its analysis and decision-making. UPS has a very powerful network modeling capability. Network optimization tools are increasingly being used for immediate analysis and decision support.

4. As some are already saying, is the "strategy" era over, and now what really counts is the ability to more nimbly navigate in a dynamic environment with a general but looser strategic framework?

5. As my friend Jim Tompkins has said for many years, and as Jack Allen of Cisco said last fall at the Georgia Tech Supply Chain Executive Forum in a similar way, the companies that thrive are the ones who do not fear change, but rather embrace and harness its energy.

And as I often remind myself, using the old camping joke, you don't have to outrun the bear of change and turmoil, you really just have to out run the other guy.

Those are my thoughts - would love yours.

How do think a high inflation environment would play out for the supply chain? Is the global environment more challenging these days really, or just better reported? Do we need for understanding of risk management and supply chain agility? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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We had all kinds of Feedback on Gilmore's column on What to Tell the Students Bureaucrats about Logistics, and publish some of them below.

That includes our Feedback of the week from David Armstrong of Inventory Curve. You will find that and a few others below. More next week.

Feedback of the Week - on What to Tell Students and Bureaucrats about Logistics:


One of the biggest challenges in getting people to understand logistics and the supply chain is that to an extent, it is invisible. It is so extensive and pervades and touches on most area of organizations that it is "just there". Many times when people are discussing the meaning of supply chain and logistics, I'm reminded of the poem, "The Blind Men and the Elephant", where six blind men touch various parts of an elephant and describe what they feel: it's like a wall, a spear, a snake, a tree, a fan, a rope. Each was partially right, but no where do the complete picture emerge.

I became involved in this field early in my career, and was very comfortable with the definition of "physical distribution" used by the NCPDM. Basically, it was all of the activities associated with moving product from the initial source of supply to the ultimate customer. The definition included an information component as well. When NCPDM changed its name to CLM and later to CSCMP the definition was updated each time. There were wording changes and more activities and functions were enumerated to reflect the grown and developments in the discipline, but the basic concept stayed the same. Personally, since I have lived this for over 40 years, I use the terms logistics and supply chain interchangeably and don't get "wrapped around the axle" trying to parse differences between the two supply chain and logistics.

One of the most important pieces in my early learning what from the article, "Logistics - Essential to Strateg", by James Heskett, November, 1977. This is still avail as HBR reprint 77604. Heskett lays out the concept of the Logistics Process with two flows moving in alternate directions. One is the flow of information moving from the customer end (demand) to the procurement end (supply) and the other is the flow of material moving the other direction from procurement to the customer. From this I was able to apply multiple concepts: logistics is a process linking flows across and through multiple functional areas and with multiple partners, that you have to balance and manage both the operations side (material flow) and the IT side (information flow) and that trade-offs abound. This requires data mining and analysis to understand product and process dynamics to develop and implement logistics systems that provide the holy grail of high service and least total cost. The whole range of functional activities as available, but how they are put together is determined by the customer and strategic needs of the organization

Too often, I think organizations look at the functional areas of their organizations (like the blind men and the elephant) and apply the current terms being used to a functional activity or area. For example in one firm, the term, Supply Chain management, is applied to a group that basically does customer account management. One of their primary activities is expediting. In another firm, the major organization unit is materials. Logistics in responsible for day to day warehouse operations and shipping. Buyers have the title, Supply Chain Specialist, with major functional activities are sourcing, replenishment ordering and expediting. Key supply chain and/or logistics process activities such as process development, channel analysis and differentiation, and integration of activities across the full supply chain are missing.

To sum up:

  • I use logistics and supply chain interchangeably. Debate to differentiate the two is counter-productive and akin to trying to determine "how many angels can dance on the head of a pin."
  • The key is to understand that logistics and the supply chain pervade the organization and connect with external partners.
  • Recognize and understand the information and material flows that move in opposite directions across and through the organization.
  • Understand customer needs along with corporate strategy and develop the logistics network that serves both.

David Armstrong
Principal, Inventory Curve

More on What to Tell Students and Bureaucrats about Logistics:


This is an interesting article and topic. As a potential candidate in a SCM MS program, I am pleased to know that SCM is discipline that holds promise. I like the definition given by Dr. John Gattorna, because I tend to be a "details" type of person. In any event, thanks for the article and I enjoyed reading the feedback others submitted.


Anthony A. Burgher

Defense Logistics Agency

I really enjoyed reading your article on "What to Tell Students and Bureaucrats about Logistics?". I'm based in Cape Town and work for one of South Africa's top Clothing and Lifestyle Retailers - The SC environment is changing here at a rapid rate. Stock turns and stock efficiency are now commonly talked about alongside sales. Logistics is now considered during procurement decisions. There is a strong belief that good logistics and SC management will provide stronger financial results - there has been a paradigm shift in our company's thinking!!

One of the main contributors to our success (that is, the SC and Logistics departments within our company) is the continuous internal marketing of the benefits of good practice in this area. This can only be achieved through employing Logistics Professionals that can communicate at all levels. This has to be done together with strong operations excellence to avoid having to be sent into the detail to fix short term issues within the Logistics area. Once there is trust that the operation runs well, there is almost an "invitation" to participate in the company wide decisions and a will to listen to the Logistics person.

We have achieved a win for Logistics and will continue to read your articles and SCdigest for input and encouragement.

Thanks for the contribution you've made...

General Manager
TFG Logistics


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