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August 23, 2012 - Supply Chain Newsletter

This Week In SCDigest

bullet Turbo Supply Chain Visibility
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 Cartoon Caption Contest Continues This Week! bullet Trivia
bullet Expert Contributor bullet Feedback

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Turbo Supply Chain Visibility

Several months ago, I did a two part series summarizing my new set of Supply Chain Megatrends. You can find the links to those columns here: Supply Chain Megatrends Part 1 and Part 2.



"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 be able to see it."


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I said at the time I would be providing more detail on my thinking on each Megatrend over the following months, but my First Thoughts docket has been so busy since then I haven't had the space. But I realized I better get moving.

Megratend number 1 is what I termed "Turbo Supply Chain Visibility." The idea is actually very basic: While companies have been pursuing increased visibility over the last 10 years, and it usually shows up on the priority list of corporate supply chain strategies in various surveys pretty regularly, we are now on the cusp of a brand new visibility era.


This is what has changed: the technology to deliver near complete supply chain visibility is here, and companies can now see a path to getting there at a level hardly imagined before: turbo visibility. While no one has reached it completely yet, in specific areas of their supply chains many companies have achieved near total visibility, and see a path to achieve those same capabilities in other areas.

A variety of technology tools used in various combinations are making turbo visibility possible:

Auto ID/RFID: Traditional bar coding has been an important tool to increase accuracy and hence visibility for two decades, but RFID has many advantages (automatic readability, no line of sight) that eventually will lead it to dominate the auto ID landscape. "Inlays"(chips before they are put into a label) for passive RFID tags are now down to about 6 cents apiece, as the cost barrier to RFID will continue to fall. More expansive use of RFID to enable automatic reading of goods/assets will really be key to turbo visibility, however, but I believe we will see that start to happen over the next few years.

Wireless/Mobile: The growth of wireless technologies and devices from beyond the distribution center floor to other areas of the supply chain is extending the reach for real-time communications and automatic data capture supply chain wide.

Sensors: Technology for monitoring temperature, moisture, etc. have been around for decades, but are now increasingly being tied to RFID and other communications technologies to provide real-time visibility to environmental conditions and changes.

Motes: A small wireless device that when deployed with other motes can form its own communication network by "talking to each other" without human intervention. Motes are often connected to sensors, especially in manufacturing.

Global Positioning Systems: Increasingly sophisticated GPS technology provides a real time view of where a truck, a person, or even a pallet of inventory is in the supply chain. That can enable, among other benefits, dynamic routing in case of delays.

Video: Video technology is now being used primarily in a reactive way (a customer says the order is wrong, supplier shows video evidence the carton or pallet was accurately built). But "video analytics" are coming that will also enable more proactive use of video. It will become ubiquitous in our supply chain over the next 5 years, dramatically changing supply chain visibility opportunities. Often, companies will be able to really "see it," not just on a computer screen.

The Internet: Obviously, a broad communication pipe that provides the ability to communicate and share data easily, often with less painful connectivity efforts and potentially even "ad hoc" connectivity.

The Cloud: Related to the Internet, but the real promise is visibility-related workflows and the ability to house and manage supply chain data in a multi-party environment. Few people understand yet how significantly Cloud-based data will significantly impact supply chains.

What the industry and individual companies need to do right now is to begin thinking about what this really could mean for our/their supply chains, and develop a vision and a roadmap. As I wrote many years ago all the way back at the first EPCglobal RFID conference in 2003, it struck me then that a few leading companies in the consumer goods industry had realized, for the first time, that there was now a path to being able to seeing everything in their supply chains, in real-time, all the time.

Unfortunately, the Walmart RFID program debacle set all that back almost a decade, but in the meantime many of the other technologies (video, GPS, Cloud, etc.) made major gains.

That level of visibility is and will certainly be a game changer. One of my favorite supply chain quotes comes from Nick LaHowchic (former supply chain executive at The Limited Brands and others) and the late Dr. Don Bowersox of Michigan State.

In their book of a few years ago "Start Pulling Your Chain," 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 be able to see it."

Turbo visibility then isn't really just about making some incremental gains in supply chain performance and customer service, though those often are the first notices benefits.

Rather, it will alter in many ways, most of which we don't well understand at present, the entire supply chain paradigm.

I had an interesting conversation with LaHowchic down at Georgia Tech right about the time the book was coming out, and he asked me, paraphrasing here from my memory, a question something like "Would you really organize a company or supply chain today the way they were organized in the past and thus most companies still are today, given the level of information availability?"

He believed the answer would be No - the level of information visibility would call for new paradigms, moving away from the highly functional, hierarchical organizations and processes would need to give way to something new. He cited the practices at Europe's Zara apparel retailer as a company that is getting close to this new operating model (cross functional teams as the organizing principle, rapid replenishment response to actual sales in stores).

Similarly, visibility to demand, inventory, capacity, etc., is already serving to dramatically change our traditional notions of supply chain planning and execution. As the impact of our plans becomes visible in real-time, and companies react and make adjustments, where does operational and in some cases even tactical planning end and execution begin? The lines are increasingly blurred, and will get more so.

IBM reschedules a semiconductor factory every five seconds or something based on order flow and what is actually happening during manufacturing execution, just as an example.

I could cite many other interesting examples, but will basically close with this.

I noted above the technology tools of visibility, including GPS and mobile devices. Today, GPS is in cars, on phones, on our trucks, etc. GPS software providers are now turning their attention past roads to things like bike trails and hiking paths in parks.

We may be the last generation who can actually get lost. We'll be telling our grandkids how it was once actually fairly common to get lost, and they will laugh at how funny that idea seems.

The point: if we can't get lost, then neither can our supply chain stuff up and down the chain.

That, in turn, is going to set the stage for Perfect Logistics. We'll talk about that next Megatrend very soon.

Do you agree we are entering an new era of Turbo visibility? Do you agree it will have a dramatic impact on supply chain practice? What is your company doing in this area? Let us know your thoughts at the Feedback section below.


Supply Chain Graphic of the Week:

Snapshot of Rail Carrier Performance

This Week's Supply Chain by the Numbers for August 23, 2012:

  • Samsung Plans Billions for Texas
  • ILA and Port Negotiations - that Didn't Last Long
  • Your Electric Razor - Human or Robot Made?
  • Most Sectors Improved Inventory Management in 2011


August 13, 2012 Contest

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Weekly On-Target Newsletter:
August 22, 2012 Edition

Inventory Performance Detail, WMS/SCE Trends P2, LTL Q2 Results and more

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Holste's Blog:

Understanding Key to Obtaining High Sorting System Productivity


TOP STORY: Key Trends in WMS and Supply Chain Execution Technology (Part 2)

TOP STORY: Key Trends in WMS and Supply Chain Execution Technology (Part 1)

TOP STORY: Amazon to Add 18 New Distribution Centers Worldwide in 2012. as It Keeps Investing in Logistics


Global Supply Chain Comment: Cargo Security Needs to Start with Contents Verification at the Shipper

By James Giermanski,


Powers International, LLC


Chris Giermanski

Director of International Operations
Transportation Services Inc.


What do former companies RGTI, KRAM, Logisticon, and PCS have in common?
Answer Found at the Bottom  of the Page

Tuesday's Videocast:

Achieving Powerful Results at Medtronic with SAP Enterprise Inventory Optimization

Detailed Case Study Supported by Educational Overview of Inventory Optimization Software

Tim Boos, Sr. Program/Project Manager, Medtronic, Dave Strothmann, Senior Director, SCM Business Development, SAP

New Videocast:

Predictive Analytics and Perfect Logistics Execution -
The Future of the Consumer Goods to Retail Supply Chain

Part 1: Understanding Predictive Analytics in the Consumer Goods to Retail Supply Chain

Featuring Mark Krupnik of Retalon and
Greg Holder of Compliance Networks


Last Chance! Survey Closing Soon

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Tuesday, August 28, 2012

Tuesday, September 18, 2012


We are admittedly way behind on Feedback, but this week we are going ahead and publishing several of the strong number of emails we have received on David Schneider's guest First Thoughts column last week on "The One Best Supply Chain Metric." That piece argued that Operating Cash Flow (OCF) is the most meaningful and potentially transforming metric that can be used.

We've exceeded the usual number of responses for a FT's piece, somewhat depressing SCDigest editor Dan Gilmore, but he is trying not to dwell on it.

The Feedback of the Week is from our friend Kevin O'Meara, former AMR Research executive now involved in a number of other pursuits. He very much likes the concept. A couple of others aren't so sure.


Feedback of the Week: On One Best Supply Chain Metric -
commaBravo! on the article referencing Operating Cash FLow (OCF). This is a fantastic topic, one which is not understood well (by many business people, not just supply chain managers) and is a timely topic. Your point on the fact most supply chain managers do not manage a P&L (even though they call it that) is spot on as well.

I have a saying which I tell my finance people all the time when I ask them for cash flow metrics: "A P&L / income statement becomes 'impure' as soon as an accountants hands touch it!". The maneuvering over what is capitalized and what is not, what will be accrued for and what is not etc. etc. makes it almost (I am obviously embellishing here to make a point) a fictional document. Cash flow tells you what is really happening. And, cash flow from operations (versus financial and investing) is the king metric for a supply chain manager.

May I make a suggestion: Run a series of articles which starts with just what is cash flow, what are the three and how are they calculated. Then it would go into why (in more detail) it is so important and finally what are some things a supply chain manager can do to improve it.

For example, a supply chain manager would have a far better appreciation of the trade off of transportation cost v. speed to market if they understood the impact on operating cash flow when they compress the cash to cash cycle. So many I have seen will go for a lower transportation cost even at the expense of a much longer cash to cash mainly because they are measured on expense and have no accountability to OCF.

Anyway, just my thoughts. A great article and I would love to see more. comma

Kevin O'Meara

I understand the value of measuring OCF but, if used as a metric or goal, how do you reconcile when cash is used to pay down debt or make a major purchase? That will drive down the OCF but not because of poor performance.

Dwayne A Wildhagen C.P.I.M.
Manager Demand Forecasting, Planning & Product Configuration
Springs Window Fashions, LLC

Editor's Note: What I believe David is saying is that you only measure OCF that is impacted by the supply chain, not financial activities such as you suggest.

No doubt, this could require some special accounting efforts.  Many companies also do report cash flow from operations separate from financial and other areas.

Dan Gilmore

I do not buy all of what you are suggesting here. So much of what happens on the sales front can impact the supply chain. Using OCF has so many variables that it would cause to much debate in this company.

Rick Sawyer
Vice President, Supply Chain
Marks Supply Inc.

Editor's Note: Same basic answer as the above letter. Agree if those other factors cannot be separated out there are issues.

Great for you to cover such a topic. I have been on this theme for awhile. Large corporates have to act as a bank, whether they want to or not. Too many external forces are driving us this way. Banks, in being the primary originators of trade finance assets, are facing challenges like never before. Revisions to capital based regulation (Basel Accords) as well as changing regulations (Dodd Frank and FASB accounting regulations among others) are creating significant balance sheet pressures.

Corporations have two major assets on their balance sheet to finance, Receivables and Inventory. A Non Investment Grade corporate really has two options to finance these assets, self-fund or use bank credit. My analysis has shown most is self-funded. If you do not have a handle on your operating cash flow, how can you manage shortfalls or surpluses.

This will be an ongoing story, with some interesting developments.

David Gustin
President, Global Business Intelligence




Q: What do former companies RGTI, KRAM, Logisticon, and PCS have in common?

A: All were one time important players in the Warehouse Management Systems market, circa 1990 to 2000 or so. All have been acquired or gone away since, but in some cases there is still current software out there that can be traced to the products these companies developed.

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