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September 18, 2014 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Consumer Goods Companies are from Mars, Retailers from Venus bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & By the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet Supply Chain by Design and Expert Insight bullet Videocast/On Demand Videocasts

Vendor Performance Impact on Safety Stock Videocast, WebEDI, Retail Supply Chain Special Reports and more



first thought


Supply Chain Graphic of the Week:

The Four Use Cases for Supply Chain Simulation Technology

UPS Bulking Up Manpower for 2014 Peak
Here Come Ships Bearing Gypsy Moths
Some but Not All Getting Procurement ROI
Tesla's Sweet Nevada Factory Deal


September 9, 2014 Contest

See The Full-Sized Cartoon and Send In Your Entry Today!

Holste's Blog: Innovation - Paramount Importance Driving Operational Improvement


The Logistics and Transportation Insight and Solutions You Need - Without Leaving the Office

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October 15, 2014


Weekly On-Target Newsletter:
September 17, 2014 Edition

Cartoon, WMS Trends, Procurement ROI, Tracking Strawberries, UPS Challenges and more


Just Because the Feature Exists, Doesn't Mean You Should Use It

by Dr. Michael Watson

Will the Evolving Connected World Construct Change the Paradigm of SCM?

by Prasad Satyavolu
Global Head – Innovation, Manufacturing & Logistics Practice


Not really supply chain related, but fun: what are the top 5 airports worldwide in terms of passenger traffic?

Answer Found at the
Bottom of the Page

Consumer Goods Companies are from Mars, Retailers from Venus

There is I would offer significant agreement across some manufacturers and retailers that collaboration - in many forms - is really the next frontier for meaningful supply chain improvement.

Why? Because such collaboration provides the next most rich source of savings and improvement, as most have moved their internal supply chain processes to some level of goodness. That is not to say there is no room for internal improvement, but just that often the opportunities there now fall below the potential from some true manufacturer-retailer collaboration.


"The key point is that these cultural and belief-window issues are the things that probably constrain collaborative efforts, yet are almost never talked about or discussed. "


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Of course, maybe it has always been this way. As I often note, the long string of initiatives that have been promoted in the industry - Quick Response, Efficient Consumer Response (ECR), continuous replenishment, Collaborative Planning, Forecasting, and Replenishment (CPFR), RFID and more (what am I missing?) have in general each used almost identical language in terms of the describing opportunities and benefits from tighter collaboration.

There have been a few examples of where manufacturer-retailer collaboration can go. My favorite example is the process between Lowes and Whirlpool, in which the two companies run a joint sales and operations planning process (under a more retail sounding name for it), such that the two firms largely operate as if they are a single company. It is quite impressive - and successful.

Why don't we have more of it? All kinds of reasons, of course, but I am convinced a good part of it is that the two sides simply see the problems/opportunities differently. I will say it this way: in general, manufacturers are more interested in deeper end-to-end collaborative processes; retailers' thinking is something like "here is the data, now just make damn sure the product is here."

That is a great simplification, of course, but yet I think is largely on target. It goes back to the early days of CPFR, when the joke was from the retailers' perspective was that it was really "cpfR" - the process was all about replenishment.

Once or twice a year, I am invited to JDA Software's excellent demand optimization council (DOC), a gathering of some of its top consumer goods and retail customers to discuss key cross-sector issues. I usually participate meaningfully in some way, and am very limited in what I can report back, due to the confidential nature of the discussions and presentations.

But I can discuss high level themes and perspectives. For the meeting this past May, I did a survey of DOC members on issues related to collaboration, and the results were very interesting. I have been kind of just sitting on them ever since, awaiting a good week to share. That week is now.

Even though there were only a little over 20 respondents, about equally split between retailers and manufacturers, I feel the results would not be materially different if I had surveyed 200 companies- and the DOC members largely agreed with me.

So, let's start here: how important do retailers and manufacturers view collaboration? As shown below (you can link out to large image), 60% of manufacturers believe supply chain collaboration is "near the top" in terms of importance; the number for retailers was just 22%. While many retailers believed collaboration was "high but not top" of importance, I believe the difference in perspectives is real and meaningful. Retailers do not view collaboration as being as important as manufacturers do.


See Full Image

I also asked the group about barriers to better collaboration with their retail/manufacturing partners. Interestingly, both sides saw the lack of the "right tools" as very high in importance, and I was a little surprised frankly that neither side saw the lack of skills/capabilities of the other side as being a top barrier (though it was cited for sure).

More interesting in this area may be in the comments. Relative to collaboration barriers, one manufacturer cited the following: "Bi-lateral versus cross-vendor collaboration - meaning it is not just about sharing production schedules but also getting the carriers, freight forwarders and distributors involved."

Another pointed to "misaligned internal incentives," while another cited "lack of process standardization."

On the retail side, one participant said "The sheer number of trading partners makes true collaboration difficult with the majority of our suppliers. We only have the bandwidth to effectively collaborate with a limited number of key suppliers in a meaningful manner."

That is very interesting - and rarely discussed. Another took this same basic issue but reversed the focus: "From the supplier end, we are one of many customers. The supplier must decide whether to invest time and resources investing in my business versus their other customers."

One other retailer cited the IT challenges: "Most collaboration requires some degree of IT resources. Retailers in particular have to balance priorities internally on what to spend resources on- - this is an area of difficulty."

We next asked participants to rate themselves on their level of collaborative excellence - very interesting. The data may be a little tough to see even in the full size image below, but just 10% of manufacturers believed they are "near the top" in terms of collaborative skills, while 40% of retailers put themselves in that category. All told, 70% of retailers said they were either "near the top" or "above average," versus just 40% for manufacturers.

See Full Image

Finally, what's the bottom line in terms of how collaboration fits into overall supply chain strategies? 80% of manufacturers said "it's where the battle will be won or lost," versus just 40% of retailers who felt this way, as shown below.

See Full Image

We asked several other questions that I do not have room for here, but we will make available in next week's OnTarget newsletter under the "Trends and Issues" category.

So, I think there is a bit of "manufacturers are from Mars and retailers are from Venus" going on here. The key point is that these cultural and belief-window issues are the things that probably really constrain collaborative efforts, yet are almost never talked about or discussed.

Case in point: at a previous JDA DOC meeting, there was a bit of a brouhaha over the fact that as retailers began sharing time-phased forecasts to suppliers to help them with their own planning, they wondered why those supposed savings weren't coming back some way to the retailers. Good question.

To achieve the promise of manufacturer-retailer collaboration, we will need to discuss and resolve the often hidden issues that are rarely reflected in the latest technology initiative from GS1/VICS, as good as those recommendations may be (though there are some interesting technology development brewing - stay tuned).

Am I correct?

Are manufacturers from Mars and retailers from Venus when it comes to collaboration? Do we need to get more of these kinds of issues on the table to make real progress? Let us know your thoughts at the Feedback button (email) or section (web form) below.

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Big Ideas Videocast:

The Internet of Things: Where it's Headed, and Practical Strategies for Leveraging RFID Right Now

We are Entering a New Era of "Turbo Visibility" - Learn How Connected Assets and Data-Driven Analysis are and will Make Companies More Efficient

Tom O'Boyle, Director of RFID, Barcoding, Inc., McLeod Williamson of Zebra Technologies and SCDigest editor Dan Gilmore.

Tuesday, September 23, 2014

On Demand Videocast:

Achieving Supply Chain "ESP" with Advanced Simulation Techniques

Enterprise Simulation Planning Enables Companies to See the Future of Their Supply Chain - Learn How

Featuring Toby Brzoznowski, executive vice president at LLamasoft and globally recognized authority on supply chain network design and SCDigest editor Dan Gilmore.

Now Available On Demand

On Demand Videocast:

Case Study - Flowcasting Vision and Success at Sigma Alimentos, a Leading Food Manufacturer and Distributor in Mexico and the US Southwest

New Approach and Technology Will to Take Supply Chain Performance to the Next Level

Part Two of a Series

Aldo Santarelli, Head of Logistics, Sigma Alimentos and SCDigest editor Dan Gilmore.

Now Available On Demand


We received several letters stemming from our First Thoughts column on The Coming US Logistics Cost Crack-Up?, in which SCDigest editor Dan Gilmore says a confluence of factors are coming together that could spike transportation costs 20% or more in the next few years.

Most commentators agreed with Gilmore. That includes our Feedback of the Week from Tom Miralia of Distribution Technology. You will find that letter and several others below


Feedback on the Week on the Coming US Logistics Cost Crack-Up?:


I think you are close to being on target Dan. And the reaction of shippers is similar to what you have portrayed.

So what's shaping up is an irresistible force heading toward an immovable object. I'm thinking that the "object" is going to lose, but it won't be initially in the transportation budgets! The impact will be felt in terms of falling performance of shipper logistics networks due to carriers not "having equipment available," resulting in stock outs, missed MABDs, DC labor planning inefficiencies, and growing safety stocks.

We already see it happening! But it won't be in Transportation's budget! At least not for the near future.

The less hide-bound shipper and retailer organizations will sort it out first I suppose. It's not pretty or fun from a 3PL perspective.

Tom Miralia

Distribution Technology

  More on Logistics Cost Crack-Up:  

Gilmore, a very nice person, may be optimistic regarding cost increases.

In transport alone, impacts could be even greater than now expected. Add to that, enormous societal pressures to increase minimum wage, increase -significantly - traditionally low-wage scales in fast food (among other industries). Warehousing/distribution labor rates will have to increase substantially to remain even marginally attractive when compared with, relatively speaking, no-brainer, limited skills jobs.

Art van Bodegraven
Managing Principal, van Bodegraven Associates
Founding Principal, Discovery Executive Services


I recently read a letter to the editor by a truck driver claiming that in his 20+ years of driving he had never seen items left at the dock due to the lack of a driver. He indicated that there is no driver shortage; that the real problem is the lack of a decent wage paid be trucking companies and other shippers.  Those are the companies having a "driver shortage" problem. Companies paying better wages are not experiencing this "shortage of drivers" problem.


I personally have no real knowledge of the trucking industry so all I've read has primarily been about the shortage.  But this driver's comments certainly raise an interesting point that you might want to look into.  Is there a "real" shortage or are shippers just being cheap and squeezing smaller truck drivers with inadequate compensation.


Tony DeVico


Great analysis.  I am glad you are bringing this to the attention of CSCMP members.  I think you are spot on, if not a little on the low side.

Dan Wancura

Supply Chain Networking



Q: Not really supply chain related, but fun: what are the top 5 airports worldwide in terms of passenger traffic?

A: (1) Atlanta; (2) Beijing; (3) London; (4) Tokyo; and (5) Chicago O'Hare, according to 2013 data released this week.

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