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October 8, 2015 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Trip Report: MHI Annual Conference 2015 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 Winners Announced bullet Trivia      bullet Feedback
bullet Supply Chain by Design and Expert Insight bullet Videocasts and On Demand Videocasts


Download the Aberdeen Group's S&OP: Beyond the Demand/Supply Match

first thought


Supply Chain Graphic of the Week
Mapping Supply Chain Initiatives

Nicaraguan Contractor will Need Massive Cash to Build a Canal
ATA Quantifies Truck Driver Shortage
What Reshoring? US Trade Deficit with China Jumps Yet Again
What Shippers Think of 3PL IT



September 8, 2015 Contest

See Who Took Home the Prize!

Holste's Blog: Navigating The Twists & Turns Toward A Successful Project Completion


Weekly On-Target Newsletter:
October 7, 2015 Edition

Last Chance Cartoon, Home Depot Fulfillment, CSCMP - Who Presented? and more

CSCMP Report: Two Supply Chain Design Lessons from Starbucks CEO

by Dr. Michael Watson

WMS Myth Number 2 - Fast Path Implementations are Always a Good Thing

by Mark Fralick



Townhall Meeting! The State of Retail-Vendor Relationships 2015

Results from SCDigest's New Benchmark Study of Retailers and Their Suppliers - and SCDigest's New Index to Measure the State of the Relationships

Featuring Interactive Event Format - Live Expert Panel and Audience Questions

Featuring Greg Holder,CEO, Compliance Networks, Kim Zablocky, President,

RVCF (Retail Vendor Compliance Federation), Victor Engesser, Retail Executive Advisor, RVCF and SCDigest's Dan Gilmore


What percent of GDP do federal, state and local governments combined spend on road and highway construction and maintenance?

Answer Found at the
Bottom of the Page

Trip Report: MHI Annual Conference 2015

We are almost at the end of the Fall conference season, and I am back for just the second time ever from the new and improved 2015 MHI (formerly the Material Handling Institute) annual conference in Ponte Vedra Beach, FL.

I attended this event for the first time last year after long time MHI proponent John Hill (now of St. Onge) wouldn't relent until I said Yes. It was a good event in 2014, and I was back this year as both an attendee and session panel moderator.

All told it was very good again, though as always with some room for improvement, as I shall suggest at the end of this column.



"Anyone else out there get a new set of objectives before you even had the chance to finish the ones you've been working on?"

Patrick Murzyn, Caterpillar


Send us your
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So why had I never attended MHI before, and why did I say "improved" relative to this event? The conference has been around I believe for decades, but until last year was almost exclusively for MHI members, who range from WMS software vendors through DC automation solution companies to racking and fork truck battery charging equipment providers - quite a range indeed.

But under relatively new MHI CEO George Prest, the organization has become much more aggressive, and is clearly swinging for the more general supply chain fences. That manifests itself, for example, in the bi-annual MODEX show in Atlanta, which MHI has had some success in positioning as a true supply chain event, versus the historical focus of the other year ProMat show on traditional materials handling.

The name change to just MHI is of course also reflective of this strategy, as was the development in 2014 of the US Roadmap for Material Handling & Logistics, which clearly has an overall supply chain orientation despite the title.

So MHI wants to make this conference a "world class supply chain event," attracting attendees beyond its own MHI members. In the past, the conference had some good content from outsiders, but was at least as much dominated by meetings by the numerous MHI industry groups. Starting last year, that aspect is somewhat downplayed, and the external speakers and content are much on the rise.

To cross this bridge will not be easy or cheap, but I believe MHI is in strong financial position right now, with both the ProMat and MODEX shows bringing in a lot of cash, and the environment for most of its company members is strong, likely meaning membership is also likely healthy. MHI seems very willing to invest to make this a more general conference, including for example having as a keynoter this year Mike Rowe of "Dirty Jobs" fame, who I am sure commands a hefty fee.

That said, while I saw a few interesting "end user" badges at this year's event, they were a small minority of the 550 or so attendees. We will just have to see going forward. Moving to a new market is never easy.

Again this year, the keynote presentations were almost all excellent. On Sunday was the "executive summit," which featured entrepreneur and "disruptive innovation" expert David Roberts. Unfortunately, I missed the first half of his session, and catching up with the flow is often hard.

That said, he made the interesting point that China's Alibaba is one of the world's leading retailers but carries no inventory, taxi company Uber has achieved this giant market valuation yet owns no taxis, while Airbnb has a huge valuation as a hotelier but owns no hotels.

Roberts sees huge opportunity in the virtual reality world, including in the supply chain, and I will note at last year's ProMat show we featured a Euro company that offered a very cool virtual reality platform for training fork truck drivers. So as I putt this together, could you perhaps become a leading toy company and actually make no physical toys? Maybe yes.

He also provocatively forecast that when Tesla reaches its goal of a third generation electric car that will sell for some $35,000 it will likely dominate the market and put many current auto OEMs out of business.

Our good friend David Simchi-Levi from MIT was there to present his excellent supply chain Risk Exposure Index (REI), much of which saw its first public airing either in Supply Chain Digest or our Supply Chain Television Channel.

To greatly simplify, developing the REI for a given supply chain involves calculating the time-to-recovery (TTR) in each supply chain node if a major disruption is encountered, and the financial impact of that disruption. Add in to that the concept of time-to-survival (TTS) - how long a company can continue to meet market demand if a given node goes down, generally through pipeline inventories plus how long it would take to switch production (internally or from a supplier) to another facility.

If TTS is greater than TTR (i.e., you can survive longer than it takes the node to recover) you are in good shape - except there may be hundreds or thousands of nodes to analyze. How do you do that? Well, Simchi-Levi uses analytics to determine TTS and the financial impact of a disruption, greatly narrowing the field of which nodes need more detailed analysis to, for example, calculate and perhaps reduce time-to-recovery. 

One critical insight: rarely, contrary to what most companies think, are the most worrisome risks with suppliers with which the company spends a lot of money. Nearly always the real danger is with suppliers with which a company spends relatively little money, and thus escape much scrutiny. But these firms are bottleneck suppliers that could bring production to its knees in a relatively short time after a disruption. Simchi-Levi, some colleagues and Ford won first prize in 2014 for a program using this REI approach at the prestigious INFORMS operational research conference.

Patrick Murzyn of Caterpillar gave another in what have been a series of excellent presentation by CAT execs in recent years on the company's on-going value chain transformation. I liked this comment early on: "When I come into the office I often don't know what to focus on. Whatever I was working on yesterday is trumped by something else new that has happened in the meantime."

And this one too: "Anyone else out there get a new set of objectives before you even had the chance to finish the ones you've been working on?" he asked to audience, receiving many raised hands.

Visibility is key to much supply chain improvement, Murzyn said, and can in effect reduce the need for complex planning processes, showing some slides that summarized the incredible visibility Caterpillar has built for inbound logistics across its huge supply network. It is beyond impressive, providing very early warnings and dashboards for potential issues with inbound inventory needed for production. 

It was quirky to say the least, but perhaps the most interesting and for sure the most non-traditional keynote presentation was from David Butler, with the excellent title of VP of Innovation and Entrepreneurship at Coca-Cola - though his outfit and style are almost the exact opposite of a button-downed corporate type.

Butler noted that the innovation goals depend on whether you are small or large, either as a company or as a group/initiative within a company. When you are small, the goal is to reach scale, where you can achieve efficiencies, standardization, etc. When you are large already, the mission is to become flexible, so you can react faster than the competition to changes and opportunities.

Well said. But most cool is Coca-Cola's program to fund new age technology companies to solve vexing problems the company won't get to on its own. Success from this innovative program include a system for addressing out of stocks at retail shelves using Uber-like freelancers, and another system that improves sales from vending machine by some 17% though advanced analytics.

I have largely seen it before, but Paul Dittmann of the University of Tennessee gave a great presentation on supply chain strategy and transformation. He estimates that only about 18% of even large companies have a formal, documented supply chain strategy.

His 9-step process: (1) Assess current and future customer needs; (2) Audit internal supply chain capabilities against those customer requirements; (3) Evaluate supply chain game changers (trends, technology); (4) Analyze competitive supply chain capabilities (easier than you might think); (5) Survey current/emerging supply chain technologies; and (6) Incorporate supply chain risk planning.

After those six foundational steps, then: (7) Develop plans to build those supply chain capabilities; (8) Relook at what is needed in terms of performance metrics; and (9) Build the business case. This is a great place to start if you lack a supply chain strategy. Dittmann is a fine joke teller, by the way.

There is a lot more, but I am out of space. Will do separate, longer summaries on some of the above presentations over time. This was a very interesting conference for the second year in a row. The keynote presentations were all excellent, and I think very well received by attendees.

The breakout sessions (not covered here) were not of the same quality, with a few that were OK (including I hope the one I moderated), a few that left me a bit disappointed. Virtually every one of them was a panel - that means you need to pay a lot of attention to the skill of the moderator, and that you have a lot less certainty about what you are going to get than a traditional presentation.

MHI's annual conference - good now, still a work in progress, but certainly an event to keep an eye on.

Did you attend MHI? What were your thoughts? Do you think it can attract a general supply chain audience? Let us know your thoughts at the Feedback button (email) or section (web form) below.

View Web/Printable Version of this Column

Thursday's Videocast:

Making Supply Chain Business Intelligence Pay Off for Mid-Market Companies

New Technology Options and BI Use Cases Delivering Competitive Advantage and ROI

Includes demystifying supply chain BI, the keys to deployment success, key trends such as the move beyond scorecards to dashboards, and how new BI offerings are enabling cost-effective, easier to implement BI solutions to mid-market and even many larger companies

Featuring Donna Fritz of TAKE Supply Chain,Tom Dadmun, former head of supply chain for high tech manufacturer Adtran and SCDigest's Dan Gilmore

Thursday, Oct. 15, 2015

October Videocast:

Innovations in Supply Chain Design

How Smart Companies are Finding New Ways to Reduce Costs and Improve Performance

Includes a Number of Real World Case Studies about how Leading Companies are Putting these new Applications to Work

Toby Brzoznowski, Exec Vice President at LLamasoft, Dr. Michael Watson, Partner Opex Analytics Lead Author, Supply Chain Network Design and Dan Gilmore, Editor, SCDigest

Wednesday, Oct. 21, 2015

On-Demand Videocast:

The Six Uses Cases for Distributed Order Management Systems

Distributed Order
Management is Rising!

From Omnichannel Fulfillment to Enterprise Order Hub, We Detail the Six Use Cases for DOM - New Insight Only from SCDigest!

Featuring Dinesh Dongre, VP Product Strategy, Softeon and SCDigest's Dan Gilmore.

Available On Demand


We received quite a bit of Feedback on last week's First Thoughts column on  "The Supply Chain Efficient Frontier," in addition to the great email from Tom Davis featured above. Below are some additional Feedbacks. More next week.

Feedback on the Efficient Supply Chain Frontier


I don't really care if I get mentioned personally, but I did the first off the self commercial work on supply chain trade off curves when I was a scientist/programmer for IBM. I ended up applying for a patent with them, and won an award for it. The patent application covered graphical interaction with trade off curves in a general way that didn't mention supply chain in particular.

I'm not sure if IBM followed through in terms of actually acquiring the patent. (I no longer work for IBM). But if they did, I have a good understanding of what it does and doesn't cover.

I also published some algorithmic ideas with IBM that are in the public domain.

It's worth pointing out that computing a trade off curve for a reasonably sized optimization problem is more "parallelizable" than computing a single optimal result for a really hard optimization problem. That is to say, if your optimization problem is really hard, then adding 100 computers to work on it parallel will be unlikely to give you a 100X (or even a 10X) speed up. But if you're optimization problem doesn't take that long to solve in one instance, and you need to solve 100 somewhat similar instances in order to compute a trade off curve, then 100 machines might actually get you (almost) a 100X improvement (and even more likely a 10X improvement).

As we move into a cloud computing world, where 100 computers are not terribly hard to rent, this observation becomes more prescient. Hopefully, when combined with articles like this, it will result in trade off curves becoming a more common part of data analysis in general, and supply chain analysis in particular.

Peter Cacioppi
Chief Scientist
Opalytics Inc


Nice Article. We would like to understand how these curves are drawn and how we can understand them better.

SCM Consultant



One of Sean's last points was interesting. It leads to the question "Are we working on the right projects - the ones that will actually move the dot in the right direction?"

But that’s another story.

Bill Pritz
VP, Logility Transportation Solutions         



Q: What percent of GDP do federal, state and local governments combined spend on road and highway construction and maintenance?

A: Someone who believes the idea that human capacity can be enhanced by technology – like implanting RFID chips in your hand to control objects.

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