This week in SCDigest:
Results from Annual Gartner-SCDigest Supply Chain Study
Supply Chain Graphic of the Week and Supply Chain by the Numbers
Cartoon Caption Contest Winners Announced This Week!
SC Digest On-Target e-Magazine
This Week In "Distribution Digest"
New Expert Contributor: Voice Picking: A Hardware or Software Decision?
New Expert Contributor: Can Your Internal Value Chain Economically Handle Growth Opportunities?
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  Newsletter Archives                Can't View In E-mail? June 23, 2011 - Supply Chain Newsletter

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Goya Transforms its Supply Chain to Enhance Profitable Growth and Service

Learn How Goya Grew from a Small Store-Front Business into The Largest Hispanic-Owned Food and Number-One Latin Brand Company in the United States

Featuring Peter Unanue, Executive Vice President, Goya Foods, Inc, Danny Halim, Vice President, Industry Strategy, JDA Software

Tuesday, June 28, 2011


Building a Better S&OP Plan

New Optimization Techniques Deliver
an Adaptive Supply Chain for
Global Automotive Manufacturers

Featuring Dr. Claude Fornarino, Director, Industry Solutions, IBM ILOG Optimization & Analytical Decision Support Solutions

Wednesday, June 29, 2011

This Week's Supply Chain News Bites
Supply Chain Graphic of the Week: Oil Prices in Historical Context

This Week's Supply Chain by the Numbers for June 23, 2011:

  • Tire Supply Chain not Rolling
  • China Energy Consumption Surges
  • WESCO goes Wearable
  • WalMart's Recent China Problem

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June 6, 2011 Contest

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Weekly On-Target Newsletter
June 22, 2010 Edition

Eating RFID, WESCO goes Wearable, HOS Battle and more

Holste's Blog: Are Audits, Assessments, & Evaluations Just an Intellectual Exercise?

Top Story: WESCO Distribution goes with 100% Wearable RF Terminals to Improve DC Performance
Top Story: Video: Making Smart Decisions about WMS and WCS Integration
Top Story: Interest in Crossdocking is High, but Challenges are Many


By Scott J. Yetter

Voxware, Inc.

Voice Picking: A Hardware
or Software Decision?


By Sheila Zelinger
Vice President of Portfolio Marketing


Can Your Internal Value Chain Economically Handle Growth Opportunities?

Results from Annual Gartner-SCDigest Supply Chain Study

For the last several years, SCDigest has partnered with the smart analysts at Gartner on a major supply chain survey, and again this year we would like to highlight the results.

The survey was done at the end of 2010, the findings issued a couple of months ago, and we just found a spot for it this week. The survey data is based on responses from about 300 SCDigest readers.


"Those of us closely tied to the technology side of supply chain tend I think to consistently over-emphasize the level of penetration of different supply chain technologies, as survey after survey attests. "


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Survey reports typically start with various charts indicating the profile of the survey population, just to provide some insight into who was answering the questions, but we thought one of these charts was interesting on its own. Gartner asked a series of questions that tried to profile the respondent company's supply chain "personality," as seen in the chart below.

For example, 34% say they consider supply chain the leading source of their company's competitive advantage, 40% identify SCM as one of several sources, and 26% that see it as largely a commodity function.

8% of respondents see themselves as supply chain leaders, and another 36% believe they have above average performance. 46% see themselves as average, and 10% believe they have below average supply chain performance.



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We see here a little bit of what I have called "the 50% problem" before, with the number of companies believing they are above average or leaders 4.5 times higher than those thinking they are below average, when of course the percents have to be equal in reality. But the fact that 46% believe they are average is likely a more accurate perception.

Finally, 12% of respondents say their companies are aggressive adopters of supply chain technology, versus 42% who say they are conservative. The rest (46%) say they are "mainstream." One of the report authors, Gartner's Dwight Klappich, tells me however that those companies identifying themselves as supply chain leaders were much more likely to also describe themselves as aggressive SCM technology adopters. Ponder that for a minute, as well as how your supply chain would fall in these personality categories.

The headline news from the results in a sense is that for the second straight year, improving supply chain productivity and efficiency topped "cost reduction" as the number 1 supply chain priority, as shown in the chart below. Cost reduction was number 2, followed by improving customer service. Of course, improving productivity/ efficiency is closely related to reducing costs, but Klappich believes there is an important difference.


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"As the recession hit, companies used a lot of "brute force" cost cutting in the supply chain, but it wasn't sustainable," he said. "Now, just like last year, as the economy somewhat recovers with hopes for better times ahead, the focus is on growing the top line but reducing overhead by not growing headcount at the same rate, or even to pre-recession levels. That, of course, is one factor in the poor jobs environment in the US."

Interesting, however, is the fact that actually reducing headcount was an extremely low priority - near the very bottom. Companies don't want to reduce staffing levels further, it seems, they just want to add it back very slowly if at all.

Gartner projects cost cutting will fall all the way to number 6 in terms of SCM priorities next year. I think that is unlikely, but the state of the economy and top line growth will be key factors in the rankings.

I also find interesting each year the chart that shows where companies are in terms of supply chain technology adoption. Those of us closely tied to the technology side of supply chain tend I think to consistently over-emphasize the level of penetration of different supply chain technologies, as survey after survey attests.

As shown below, for example, almost 50% of respondents (which included a high percentage of larger firms) said they had yet to deploy an advanced transportation management system (TMS). A similar percentage have not deployed a focused demand planning system. More than 40% say they have not deployed Sales & Operations Planning, though whether this means as a process or as supporting technology is not clear.


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Other highlights of the 2011 study:

  • Interest in sustainability is waning. It scored very low on one question related to SCM priorities. Conversely, dealing effectively with increasing government mandates scored very high on the priority list.
  • Dealing with supply chain complexity is a dominant concern for companies, but Klappich says supply chain leaders view it somewhat differently. "Leaders are much more likely to believe they can manage complexity to their competitive advantage," he said. "Others are afraid of it."
  • Plans for spending on supply chain technology increased this year versus the previous two, and the overall IT spending profile closely resembles the fairly bullish one seen in 2007. As an aside, Klappich tells me right now Gartner is fielding lots of calls for companies looking for WMS and/or TMS.

All told, a very interesting study. We will add one more chart as our graphic of the week next week (heck, you are supposed to be a paying Gartner client to get this stuff). I also hope you can participate in the next survey late this year.

Any reaction to the Gartner study data? Is there an important difference between a focus on cost cutting and productivity/efficiency? Do the SCM technology adoption numbers surprise you? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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Q: IBM Corp. turned 100 years old this week. IBM founder Tom Watson started IBM after he was fired by what similar business machines company at the time?
A: Found at the Bottom of the Page


We received a number of letters on McKinsey's view of the future supply chain, which included some thoughts on building different supply chains for different SKU groups based on a segmentation analysis.

Several of those letters are below, including our Feedback of the Week from James Vinces of Coco-Cola, who says that cost pressures can often get in the way of doing the smart supply chain thing.

You will that letter and others below.

Feedback of the Week - on Inventory Segmentation:


The supply chain segmentation has been a recurrent theory nowdays within different experts' investigations, and indeed it has to be for some strong reason.

From my point of view, I have no doubt that this is the best way to face actual uncertainty environment.  However, I think that the constant low-cost pressure under what the companies are everyday, focus them only on the short-term, driving them to forget the sustainable and profitable long term base needed.  That´s why I think that companies are going to learn this theory, the "hard way", I mean, only when they begin to lose sales.

Hope this point of view is valuable for your magazine.


Jaime Vinces

Technical & Supply Chain Manager

The Coca-Cola Company

More on Inventory Segmentation:

Good article. What should be added is the optimum Supply Chain strategy that should be adopted under each of the four scenarios

Blair Williams

Prof NYU Polytechnic

Wow! What a great idea!

It is about time that the “Big Guys” picked up on it, some of my colleagues were promoting it 10+ years ago.

When I worked for a multi-national 3PL (ModusLink) in 2000, they had actually developed planning and inventory management systems using this methodology.

For a great in-depth explanation and background on “Volume and Variability”, see the article “Solving the Supply Demand Mis-match” by Kate Vitasek, Karl Manrodt and Mark Kelly, in the Sept/Oct 2003 issue of Supply Chain Management Review.

Look for “Managing the Supply Demand Mis-match under the “Articles” page on the SC Visions Website

Dan – I have attached a copy for you personally.

Steve Murray
Principal Consultant and Chief Researcher

Supply Chain Visions


I think this is “spot on”…the question is how do we get ready? There are limited studies of actual examples of such flexible and “double jointed” supply chains. Who can design and implement one…or who can study one that is in existence and see how flexibility may increase market share…or avoid cost by having the ability to “get around” things like the Natural Disaster in Japan? This is really interesting stuff…we should all keep our eyes and ears open.


Patrick Boylr



A company's competitive strategy differs depending on where it is situated. Multi-nationals (MNCs) with operations in Asia typically compete on cost and hence strive towards operational excellence. With the luxury of simply relocating to a cheaper location (as in the case of Motorola in Singapore and Malaysia), it only shows that cost is still a major contributory factor to strategic decisions. Having said that, we are beginning to see SMEs accept a higher cost model in preparation for their changing consumer landscape. SMEs realise that their competitive edge differs from that of larger companies and are capitalising on this fact through the movement on the mechanisation/systemisation matrix.

KOH Niak Wu, Ph.D.

Singapore Institute of Manufacturing Technology


Overall I think it was an excellent piece on supply chain segmentation. I have a few thoughts on the SKU analysis:

I think it was a very well laid out analysis, but I wonder how dedicating/locating facilities based on this analysis can ever be “clean”.  For instance, if this SKU intensity analysis were done on a CPG manufacturer such as, for lack of a better example, Kraft – then I can’t imagine not finding a situation where this analysis could divide manufacturing of similar SKUs that should logically be produced together. Let’s assume Cheddar Cheese to be a high volume-low volatility SKU, along with Nabob coffee (high volume-low volatility) SKU, and then we can have Cheese crackers (high volume high volatility) and some other Nabob coffee SKU (high volume high volatility).

The article, albeit probably simple to illustrate the point, talks about having a facility dedicated to managing each type of volume/volatility combination, and in this case, would there be one facility producing Cheddar Cheese and Nabob Coffee, and the other producing the other brand of coffee and Cheese Crackers?  Does it make sense to segment the manufacturing of cheese products if they are really similar based on volatility/volume (shredded cheese, sliced cheese)? I think the manufacturing can be sorted out, as in today’s world, large manufacturers have multiple facilities anyway, but what about logistics? What if the raw inputs of Cheese are being sourced from one big supplier (putting it simply) located in India, and the analysis suggests having the facility for some Cheese SKU in North America?

I’m not an expert, just curious about the topic.


Ali Badruddin
Q: IBM Corp. turned 100 years old this week. IBM founder Tom Watson started IBM after he was fired by what similar business machines company at the time?
A: NCR, by legendary NCR CEO John Patterson.
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