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1H 2011 Supply Chain Review and Comment
Supply Chain Graphic of the Week and Supply Chain by the Numbers
New Cartoon Caption Contest Winners Announced!
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  Newsletter Archives                Can't View In E-mail? July 14, 2011 - Supply Chain Newsletter

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Learn How Tier One Automotive Achieved Customer, Supplier & Inventory Alignment
For Their Global Parts Operations Center While Reducing its Inventory by 25%!


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

Tuesday, July 19, 2011


Thanks for the Memories:

An Electronics & Memory
Supply Chain Update

Featuring Mike Howard, Principal Analyst, DRAM & Memory
for IHS iSuppli

Tuesday, July 26, 2011


SAP Supply Chain
Response Management:
The New Benchmark for Supply Chain Leadership

Breakthrough Technology Enables Companies to React Much Faster to Changes in Supply and Demand and Precisely Optimize Customer Order Fulfillment

Tuesday, August 9, 2011

This Week's Supply Chain News Bites
Supply Chain Graphic of the Week: The Most Common S&OP Pitfalls

This Week's Supply Chain by the Numbers for July 14, 2011:

  • Australia Finds Carbon Emissions Taxing
  • Goya Foods Plans for Improved Fill Rates
  • Truckload Capacity Harder to Find
  • Oil Prices Settle in Over the Century Mark


Achieve Customer, Supplier

& Inventory Alignment

Learn how Tier One Automotive Achieved Customer, Supplier & Inventory Alignment for their Global Parts Operations Center while reducing its inventory by 25%!



June 27, 2011 Contest

See This Week's Winners!

New Cartoon Monday on



Weekly On-Target Newsletter
July 13, 2010 Edition

Last Chance Cartoon, DC Performance Culture, NITL Rail Petition , and more

Holste's Blog: When is it Time to Abandon Your Aging DC System?

Top Story: Building a Performance Culture in Distribution
Top Story: Where Does the Intelligence Belong in Automated Material Handling Systems?
Top Story: WESCO Distribution goes with 100% Wearable RF Terminals to Improve DC Performance

Q: When the Panama Canal expansion is complete in 2015, what size ships in terms of TEU capacity will the Canal be able to handle?
A: Found at the Bottom of the Page

1H 2011 Supply Chain Review and Comment

Every six months, we review the supply chain world that was, and today I have a look back on the first half of 2011 in supply chain. It's amazing how easy it is to lose track of news and events even just a few months back, and we get good feedback from readers on these pieces which help them remember the news that was.


As unfortunately has been the case now for nearly three years, the dominant supply chain story was really the economic backdrop, with a sluggish economy in the US and much of the developed world, which impacts supply chain strategies, investments and more.


"The Japan earthquake gave us another lesson to absorb in our on-going supply chain risk management education."


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feedback here

US GDP grew at just 1.9% in the first quarter, with about the same expected for Q2 when the numbers are released in a few weeks. This is very anemic for an economy that should be charging out of recession, and obviously is not enough to add jobs both in economic theory and in fact, as job growth is barely moving and the unemployment still over 9%, dampening demand.

Meanwhile, the Euro zone was fighting fire after fire with the sovereign debt crises in Greece, Ireland, and Portugal, somewhat in Spain, and maybe now most dangerously in Italy. There is a real chance these crises could take down the Euro and result in a return to country-specific currencies again, and worse, create a new financial debacle that will have  a huge impact on the global economy. Keep your fingers crossed, but it doesn't look good.

To keep some economic spark going, the US Federal Reserve in effect printed a bunch of money (quantitative easing), which is far more than just a financial concept. Many have shown how this easy money policy has led to a devaluing of the dollar, which would have been worse if not for the Euro's troubles. Since most commodities are priced globally in US dollar denominations, that is the key factor in why oil and many other commodities rose sharply in price during the 1H, despite tepid overall global demand (see below).


It also led China, Russia, Brazil and others to further plot how to eliminate or reduce the role of the US dollar as the world's "reserve currency."  We're trying to find someone who can explain exactly what impact this would have on import costs and other matters should it occur, but until we do, I will just say it cannot be good.


China, meanwhile, says it had GDP growth of 9.7% in Q1 and now 9.5% in Q2. But there are some dark signs on the horizon, including growing inflation that the government is trying hard to fight. That could mean slowing down growth, which will impact global exports to China, and perhaps increasing the value of its currency, which might increased costs on Chinese sourced goods (though the government clearly won't go too far in that direction).

More worrisome is what some say is a gigantic real estate bubble and huge  debt incurred by many local Chinese governments. Some say there will a huge crash there, while others predict a soft landing. Everyone seems to believe there will need to be some sort of reckoning coming up.


Manufacturing through most of the first half was seen as the engine that was carrying the US economy. Capacity utilization continued its slow rise from the 2009 depths, rising from 73.8% in December to 74.5% in May, well above the disastrous 65% or so seen in June 2009, but still well below the 79% overage over the last 40 years.


But there are some worries that the manufacturing sector is now again slowing. The Purchasing Managers Index was roaring along early in the year, with levels above 60 from January to April, numbers that point to strong growth. That has changed in May and June to 53.5 and 55.3, respectively however,  still indicating growth (any number over 50) but clearly decelerating the past two months.


Though it might be hard to perceive from the relatively modest month over month numbers, total retail sales excluding automobiles were up 8.5% in the US for 1H of 2011 over 2010. However, much of that was due to rising gas prices. Retail sales barely budged in the just released numbers for June, and some analysts have now pushed down their estimates for Q3.


Top Supply Chain Stories


Clearly the top story for 2011 thus far was the devastating earthquake and tsunami in Japan March 11. The event showed that even in these days of hyper-supply chain risk sensitivity, it turns out there are many of them lurking out there that companies may not realize. Apple, for example, developed a huge backlog for iPads because of shortages of some needed components coming out of Japan. It turned out there where many such vulnerabilities, especially in electronics and a few little know chemical products that represented tiny but essential parts of many recipes and caused production slowdowns and rising prices in many product markets. Another lesson to absorb in our on-going supply chain risk management education.


The second top story was the rapid rise in global commodity prices, echoing the story was saw in the first half of 2008 - and which was followed by the economic crash then. Prices for West Texas Intermediate started the year at about $88.00 per barrel, rising  continuously in the next few months to a peak of around $113 by late April.  Diesel prices naturally rose with it.  WTI prices have now pulled back to about $95.00, up about 10% on the year.


The prices of many other commodities also rose sharply, leading to global concerns about "food inflation," and causing many US companies to reduce earnings estimates based on rising input costs.


Other supply chain news worth noting:

  • The US EPA, in the absence of any climate change legislation, started issuing its own regulations for greenhouse gas emissions, under a controversial authority it gained from a Supreme Court decision several years  ago. The first rules are not too burdensome, but have left some concerned about how far this will go amidst "separation of powers" arguments.
  • In other government-related news, the National Labor Relations Board caused quite a stir by: (1) suing Boeing over its plans to open a nearly complete airplane factory in South Carolina over unionization issues, saying the company broke the law by opening the factory in retaliation for strikes in Seattle, the first ever such move; (2) proposing changes in the process from the time a unionization drive begins until the voting, which many believe will favor the union activity.
  • Proposed changes in hours of service (HOS) rules in late 2010 led to a number of hearings and other matters before the Federal Motor Carrier Safety Administration, with much evidence showing the changes would have little safety benefit, and the FMSCA itself saying the move was mostly driven by "driver health issues." No final decision yet, but it could come any day, and we believe the HOS will change.
  • There was much discussion about whether rising wages in China would soon reach a tipping point and cause the US to become very competitive if not even advantaged with China within a few years. Studies from The Boston Consulting Group and Accenture both reached similar conclusions on this issue, predicting a rebound in US manufacturing and giving companies something to think about when making network plans.
  • There was much genuine excitement and some of the usual hype over item-level RFID in apparel retail as the year started, coming off the announcements of WalMart and others in 2010, but data has showed activity slowing by mid-year, for reasons that are not clear.
  • In February, Maersk announced it was pushing the envelope again by ordering several new 18,000-TEU megaships, with delivery of the first in 2013.
  • In what could presage future action, a GAO report tells Congress freight carriers, especially truckers, are not paying their fair share of full transportation costs, notably "social costs" from pollution and congestion.
  • Seeing its same store sales slipping, in April WalMart announced it is reversing course on SKU reduction and bringing 8500 previously cut items back to its shelves.
  • The battle over efforts in California to basically eliminate independent drayage drivers continued, with the Port of LA winning a legal battle in May that would allow the new regulations to be implemented, defeating (for now) the ATA lawsuit. But the battle isn't over, in what could ultimately have big implications across the US by bringing back local regulation of the freight transport industry. Stay tuned.
  • The Annual State of Logistics report finds logistics costs in 2010 rose 10.4% to 8.3% of GDP, a reversal of direction from 2010 but still well below the 9.9% seen in 2007.
  • Supply chain pioneer and thought leader Dr. Don Bowersox of Michigan State, one of the most important men in the history of supply chains, dies at age 79.

That's our 1H 2011 wrap-up - what did I miss?


Any reaction to our 1H 2011 summary? Did we miss any other important stories? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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We're changing things up a bit this week and posting some of the tribute letters we received just over the last two days remembering the stellar career of Dr. Don Bowersox, who passed away this week.

If you knew Don, you will enjoy them, and we would be happy with more.

Remembering Dr. Don Bowersox:


Don Bowersox will be greatly missed by me, my family and many, many others. As we both retired about the same time he and I and our wives got to enjoy more time together, starting when we wrote a book together continuing from then on. Don and I had a friendship that built over the last 40 years in the evolving field of supply chain, developing and maturing in academia, business and consulting. Many in all disciplines I think would agree with me that Don was The Logistics/Supply Chain thought leader of our time. Through his continual collaboration among all he was known for not only doing supply chain work of the day but also continually articulating the Supply Chain vision of tomorrow.

In 2006 I had the privilege of speaking for the industry at Don`s retirement tribute dinner at MSU. As I reached out to leaders across industries to get their input I repeatedly received a common response - ``I don`t know where to begin!" They then quickly talked about their earliest experience (like Don had been around forever!), his energizing talks, his leading edge thinking in the field of Supply Chain,his many valued books, world class logistics research studies, his passion on the subject of Supply Chain, his continual giving back to the field in academia and business and it went on. They all talked about his personal side, never too busy to answer questions or provide council advice and coaching.

His lifework in Supply Chain had him partnering with over 200 of the Fortune 500, doing speaking assignments in over 16 countries around the world and published over a dozen books in multiple editions, some in over 10 languages. Don was a global visionary of Supply Chain Management who wrote, spoke and befriended global individuals in academia, business and government. While I will personally cherish my time and friendship with Don and family and will miss being with him I am but one of many through the world who will miss his friendship, thinking and personal caring.

Nick LaHowchic

Former President

The Limited Brands Logistics Co.

A true giant passes to the Eternal Supply Chain.

One of my greatest honors was to know and be able to work with Don Bowersox several times through my career. His advice and counsel was extremely important in guiding how I practiced my craft beginning with meeting him many years ago at a conference for a fledgling organization then known as National Council Physical Distribution Management (NCPDM)
His vision and understanding of what was then and what was going to be in the future was remarkable. He prepared his students, mentored his associates, served his university and guided our industry with professionalism and insight that few others have been able to achieve.

He will be sorely missed by a grateful legion of professionals in Supply Chain around the world

Jim Nelson
Solutions That Deliver

The Logistics and Supply Chain profession has lost a true Mentor and Thought Leader in Don Bowersox. So many of us can point to Don as Mentor, friend, and even as a ``guidance counselor.`` He was always there for us, no matter if we were a student or alum at MSU or not. He taught us so much about Logistics and Supply Chain, and always challenged us to improve the state of the art as well as the science.

He touched thousands of lives and improved the Logistics of life as well as business. We ALL owe thanks and gratitude to Don.

Gene Tyndall
Executive Vice President
Tompkins Associates

Superb leader in the field, and in the Michigan State University community.

His influence goes well beyond Supply Chain Management -- to business in general to students of every level, and to those looking for a way to connect the dots between building a market, serving a market and growing a company.

Daniel Wolf
Dewar Sloan
MSU, 1976 Business


Dr. Bowersox was a truly inspirational person. He was one of the great teachers at MSU that got me excited about a career in supply chain more than 20 years ago.

Thanks Dr. Bowersox!

Lori (Bellville) Dunch
MSU, MLM 1992

With sadness I read of Don`s passing.

He was a dear, dear friend of my parents Ed and Sharon Morrison, and I remember the family fondly.

With thoughts and prayers to you all.

Mary Morrison

Don was a true Gentleman, Scholar, and indeed, a Legend. His legacy will live-on. He will be missed greatly.

Charles Clowdis
IHS Global Insight

Don was an inspirational leader and one of the true pioneers of today's supply chain industry. He was a wonderful thought leader and will be missed by all of us who knew him as well as those whom he inspired through his books and numerous publications.

David I. Beatson
Ascent Advisors, LLC

Q: When the Panama Canal expansion is complete in 2015, what size ships in terms of TEU capacity will the Canal be able to handle?
A: Officially, 12,500-TEU vessels, which was the design criteria, but unofficially authorities say some shipbuilders have ways they think they can handle even more TEU on the Canal given the specifications.
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