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April 5 , 2012 - Supply Chain Newsletter

This Week In SCDigest

bullet The Visible Supply Chain
bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic of the Week and Supply Chain by the Numbers bullet This Week In "Distribution Digest"
bullet New Cartoon Caption Contest Begins This Week! bullet Trivia
bullet New Expert Contributor bullet Feedback

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first thought

The Visible Supply Chain

Almost like the search for the Holy Grail, the quest for greater visibility has similarly been driving supply chains across the globe for the past decade.

One could argue that the Supply Chain Visibility era started in the late 1990s, when Art Mesher, then an analyst at Gartner and now CEO of Descartes Systems, wrote a series of research notes on "The Three V's of Supply Chain," which were velocity, variability, --- and visibility.

From that point on, visibility has been at the forefront of supply chain issues, and improving the level of visibility has moved in the last 7-10 years to the top of the corporate supply chain priority list for the majority of companies.


"Not only is this simply a concise but powerful vision of where we are headed, but again shows how visibility has moved well beyond just 'where’s my stuff?'"


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Ah but what is it, really? Can a company ever really achieve a satisfactory level of visibility? What are the keys to success?

We tackle these questions and more in our latest version of the Supply Chain Digest Letter, this month focused on Supply Chain Visibility. I proudly say it is one of our best ever. Mail copies of the full 16-page Letter are on their way to select readers. An e-version of the Letter can be accessed here: SCDigest Letter on Supply Chain Visibility 2012. Our full resources page is here: Supply Chain Visibility Information and Resources page.

I cannot possibly well summarize the full contents of the Letter in this space, but can relay some key thoughts and points.

First, as I have said for the last decade or so, I really do believe that supply chain visibility is very much like the proverbial onion: it has many layers that must be peeled back over time to reveal more and more data and insight to a company's managers and executives. When progress is made, it at first appears that this new level of visibility has solved many existing problems. But over time, that level of visibility seems not nearly sufficient, and the company must look to peel away another layer of the onion to address another set of challenges or opportunities.

Second, there are no longer any real technical barriers to achieving near perfect visibility, and it is coming soon to a supply chain near you. Auto ID/RFID, GPS, video, mobile, wireless, sensors, the Cloud, etc. - these are largely very mature technologies. The costs for most keep going down. To really get where we can go with this, we'll need to see RFID adoption pick up some more, as in some applications bar coding provides challenges, but really RFID technology is moving along nicely, regardless of the initial Walmart RFID mandate debacle.

So the technology is there - what is missing? Well, along with the onion analogy, it just takes companies time to mature and evolve. That said, some are clearly evolving lot faster than others.

We recently did an interview with an executive at Levi's, which has developed a very aggressive visibility platform (the video interview is available on the Visibility Resources Page). The real point is that it just seems that Levi’s and others have really just mustered the will (that really is the best word to describe it) to achieve a high level of visibility, while most still nibble around the edges.

Visibility is a complex thing, touching nearly every aspect of the supply chain. The initial thinking was primarily a logistics-oriented one - "where's my stuff?" That is still a very important question, especially with both Lean and global supply chains trying to exist simultaneously), but visibility thinking and action has gone way beyond that today, embracing demand and supply visibility, risk visibility, and more.

For this Letter, we developed a new Supply Chain Visibility framework that encompasses eight "vectors" of visibility information and insight. It then incorporates concepts related to performance management and analytics that are also components of visibility. You will find a small version of it below. A link to a larger image is right below this smaller one.

View Full Image

You will note we have at the center something called a "Visibility Hub." We may never get there, but the ultimate end game would be the creation of a central portal that would contain integrated visibility information across all the eight sectors.

As we note in the Letter, such a hub might be seen as analogous to the "grid" capabilities supposedly developed by the FBI, CIA, and other government entities. That grid brings in information from a wide variety of sources (credit card usage, cell phone and other calls, bank records, and who knows what else) that not only can be made visible in the effort to investigate, thwart or find the bad guys, but also can link that visibility data across sources. Or at least, that is what the TV show NCIS and others would have you believe. I believe it is true.

Here today for supply chain? Not quite yet, though so-called "Control Towers" in the logistics arena provide a type of model for it. Are vendors working on somewhat analogous concepts for even wider supply chain data beyond logistics? Absolutely.

What I think many don't appreciate are the changes that this level of "turbo visibility" is going to bring eventually. It will drive rethinking about our existing supply chain organizations, especially as operational planning and execution start to blur into one thing. We actually didn't use this in the Letter, but one of my all-time favorite quotes relative to visibility comes from Nick LaHowchic and the late Dr. Don Bowersox from their excellent book "Start Pulling Your Chain" from a few years ago.

They wrote: "If information was shared fluidly between participating firms in a channel, then a great deal of “anticipation” would be replaced with facts. In a collaborative environment, it would not be necessary to forecast what others are planning to do or what they are planning to buy. You would see it."

Not only is this simply a concise but powerful vision of where we are headed, but again shows how visibility has moved well beyond just "where's my stuff?"

I will close it off here with just one very interesting example of a "visibility fail." When the financial crisis and the recession hit in 2008 into 2009, the high tech and consumer electronics industry almost completely froze, as a lack of visibility caused something like a reverse Bullwhip Effect. In Q4 of 2008, consumer purchases were down 8%, but final goods shipments were down 10%, and component orders were down 20%. This was in large part because the tier ones and two didn't know have good visibility to what was happening at the consumer level, and thus feared the worst.

Best Buy later said it could have sold a lot more stuff if suppliers had only sent it.

Oh, and did I add that this turbo visibility will result in Perfect Logistic? You will find that in the Letter too.


What are our views on supply chain visibility? How will it impact our supply chains? Let us know your thoughts at the Feedback button below.


Supply Chain Graphic of the Week:

A Framework for Retail

Supply Chain Excellence

This Week's Supply Chain by the Numbers for March April 6, 2012:

  • US Manufacturing Continues its Streak
  • Panama Canal Announces First Expansion Project Delay
  • Foxconn/Apple Workers Want More Hours, Not Less
  • Diesel Prices Will Keep Rising, Chuck Taylor Says


April 3 , 2012 Contest

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Weekly On-Target Newsletter:
April 4, 2012 Edition

New Cartoon, Apple Audit Exaggerated, Shelf-Connected Supply Chain and more

Supply Chain Volatility
Never Stops

Justifying The Cost Of a TMS By Automating Freight Audit and Payment


Holste's Blog: Conveyor, Sorter, and Operational Modifications Yield Expanded System Capability & Performance


Top Stories: Undercover Boss Hits the Distribution Center for the Second Time, and Paints a Lousy Picture of Work in the Warehouse

Top Story: In Astounding Move, Buys Robotic Material Handling Provider Kiva

Top Story : E-Commerce Operations Are Increasingly Being Brought "In-House" and Developed As a Core Competency

Visit Distribution Digest


Anti-Dumping and
Countervailing Duties

J. Anthony Hardenburgh
Vice President,
Global Trade Content
Amber Road


The 2012 Retail Outlook

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


What percent of global oil reserves are controlled by nattional oil companies, such as Saudi Arabia's Saudi Aramco?
Answer Found at the Bottom of the Page

Upcoming Videocast:

The End of Cheap Oil

Is Your Supply Chain Obsolete?
Conserve, Cooperate, Get Lean.

Featuring Chuck Taylor, Former Transportation Executive, Founder of Awake!, and Peak Oil Prophet; Greg Holder, CEO and Founder, Compliance Networks; and Kevin Harris, Director, Compliance Networks

Upcoming Videocast:

Operations Rules for Driving
Business Value & Growth

Part 2: Supply Chain Segmentation for Improved Profitability -
Strategies to Trim the Long Tail

Featuring Dr. David Simchi-Levi,
Professor of Engineering Systems, MIT

Important Research Project:

Building the Supply Chain from the Shelf Back

These responses will be aggregated and become part of a new report on Building the Supply Chain from the Shelf Back to be released later this Spring.

Can you please help by taking this quick 10 minute survey? All respondents will receive a summary of the data in just a few weeks.

Tuesday, April 10, 2012

Tuesday, April 17, 2012

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As promised above, below are a handful of the Feedbacks we received on our First Thoughts columns on metrics and supply chain performance. That includes our Feedback of the Week from David Schneider of David K. SchneIder & Company, who as usual responds with some flare. You will find others as well, and more next week.


Feedback of the Week: On Metrics and Supply Chain Performance:


What does KPI really mean? I saw a definition on the white board in a DC manager's office years ago "KPI = Keep Pushing Idiot!" Surrounding that were about 10 different measures that the DC manager said were irrelevant to his operation, but he had to calculate and send to corporate.

I suggested that he change the "Idiot" to "Information" - as in "Keep Pushing Information", just so his opinion did not reach the pointed hair boss.

Could it mean Knowledge Power and Image?

Being a student of that old man Peter Drucker, I look at measurements as a form of manager self-control. Drucker teaches us that the greatest advantage of management by objectives is that the manager controls his own performance. Now Drucker always considered the word control to be in ambiguous word. In his mind it meant that the manager had the ability to direct one's self and one's work. Drucker stressed that the major contributions of management by objectives is that it allows management by self-control to replace the practice of management by domination.

A manager needs to know more than what his goals are. He must be able to measure his performance and results against the goal. Many think that is where KPI's come into place. For this practice to work well, you have to set hard, achievable and time bound goals that challenge the manager. Drucker argues that you set a managers goal in a broad sense - something that means something real to the company, and something that the manager understands contributes to the success of the company. I argue that a specific increase in Operating Cash Flow (OCF) is the perfect measurable goal. Frankly, I don't care what the manager does in detail to measure his himself as long as he understands that the only measure I am going to use for him is how he contributed to company OCF.

Go ahead and argue that operating cash flow is too broad of a goal, or too hard for a manager to understand. I will just give you a blank stare of contempt. Operating Cash Flow is not hard to understand, and a good leader will help a manager understand what activities a manager does that delivers positive OCF. Yes, there's a whole variety of detailed measures that have an effect on operating cash flow. It is the duty of the managers to figure out how to measure the details of their operation that helps them manage and control the functional area to create more OCF!

Too often KPI's are created by the bosses, or by the engineers, delivering a greater world of dueling goals - goals that are in apparent conflict. An example is the need to increase productivity and reduce error rate. Both can contribute to OCF, but there is no guarantee if managers don't make the effort to leverage the gains. I have witnessed countless productivity improvement projects that just created more free time for ways to waste, not adding any profitability because managers chose not to pay attention to the monetization of the KPI improvement.

Perhaps KPI means Key Panacea Image?

Companies that engage in benchmark measurement and metrics not to improve but for their ego's, to show how well they are doing against other companies. The annual WERC DC Measures could be considered an example of the "my numbers are better than your numbers" process. Before anybody gets up in arms, I believe that the WERC metrics and benchmarking process is a worthwhile effort, as long as you keep a very large grain of salt handy. Other benchmarking efforts, including Mr. Tompkins Supply-Chain Consortium, the transportation cost benchmarking Chainalytics provides, and a whole host of other industry segment benchmarks have their place. These are positive activities for supply chain managers to engage in as long as the managers make a commitment to use the data with a worriers commitment to victory! A well done benchmark effort will deliver imagery of the company's imperfection and operational impotence, highlighting the possibility of improvement as long as management doesn't engage in the insanity of inaction.

Maybe we could use the term Kindred Perfection Influence for benchmarking exercises. As in you must make sure that you measure yourself against the kindred company, that you measure perfection the same way, and that you make the commitment to be influenced by the results to take action.

Returning to the teachings of Mr. Drucker, I think it is very hard to argue against Operating Cash Flow as a measurable goal. OCF is a clear measure of success or failure of the business enterprise. OCF doesn't work very well when comparing one business to the next, but definitely is a great measurement for an individual enterprises performance. Following Drucker's mandate of self-control of the manager, it is incumbent upon the functional manager to determine not only the performance of his realm, but how his performance contributes to the collection of the gold.

David K. Schneider
David K Schneider & Company, LLC


More on Metrics and Performance:


As you know, we folks at Supply Chain Visions are pretty serious about the value of Metrics and Performance Measurement / Management / Improvement.

Not just "metrics", but the right metrics and the right target levels for the situation. This can change a bit from facility or product / customer type even in the same company.

We promote and firmly believe in what you saw with Sara Lee - metrics driven by corporate strategy at the top and linked down throughout the business to each functional area and work center. This may end up with a large number / variety of measures total for the business, but we like to see something in the range of 3-5 at each level.

If this structure can be built, and the individual measures captured easily and economically then rolled up through the levels of the business it is like Heaven on earth. BUT, this will not ensure success. Having the right metrics can tell you if you hit your target, but it won't do much more.

A good performance management and process improvement program, linked to the metrics will help. Training of employees on the value of their work and how it affects customer satisfaction and profitability - future viability of the business also helps.

Finding the root cause for lower that desirable performance and letting the employees who do the work understand the business strategy and develop solutions to the problems builds a foundation that will reap dividends ongoing as problems are resolved in a timely manner at the lowest level possible.

This is part of something we call Validating the Value Add. A companywide performance management strategy which functions at the grass roots.

I don't think the targets are the problem as much as what is done with the results.

Steve Murray

Supply Chain Visions


0n Metrics Strategies - I think you are spot on - what is being measured is likely the wrong thing or is measured at a superficial level that doesn't tie to actual business operations. We can also be hurting ourselves with averaging and aggregating - we need to look at the high level, but we must be aware of the exceptions and their root causes, then we know we are looking at the right measures. I think corporations can get stuck on metrics and use the same ones forever vs. adapting them as the business needs change for various reasons.

Emily Rodriguez
SC Strategy




Q: What percent of global oil reserves are controlled by nattional oil companies, such as Saudi Arabia's Saudi Aramco?

A: About 85%; the Exxon Mobile's of the world actually control a small percent of the world's total reserves, though they do develop the reserves for these governments in some cases.

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