sc digest
December 17, 2015 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet A Supply Chain Christmas Carol 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 Santa Cartoon Caption Contest Continues bullet Trivia      bullet Feedback
bullet New Supply Chain by Design and New Expert Insight bullet Videocasts and On Demand Videocasts


Almost Last Chance!
9th Annual Gartner-SCDigest Supply Chain Study



One of the Most Popular and Respected Studies Each Year

As Always, Survey Respondents Receive
Complimentary Gartner Research - a $300-500 Value

first thought


Supply Chain Graphic of the Week
Estimating Lead Times in Global Sourcing

Toys R Us Tries Bulking Up Store Inventories
No Retailers Say They are On Top in Collaboration
Diesel Cargo Ships Can't Find Anywhere to Unload in Europe
US Manufacturers Bullish on 2016


Week of November 16, 2015 Contest

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

Holste's Blog: The Value Of Dynamic Slot Management


Weekly On-Target Newsletter:
December 16, 2015 Edition

Santa Cartoon, Gulag DC? Total Landed Costs, Machine Learning and more

9th Annual Gartner-SCDigest Supply Chain Study

One of the Most Popular and Respected Studies Each Year

As Always, Survey Respondents Receive
Complimentary Gartner Research - a $300-500 Value

Machine Learning and High Quality Potato Chips

by Dr. Michael Watson

Simple Math Isn't So Simple: Total Landed Cost Calculation Challenges

by Gary Barraco
Director, Global Product Marketing
Amber Road
by Dan Gardner
Trade Facilitators, Inc.


How many packages will UPS deliver this year between Thanksgiving and Christmas day?

Answer Found at the
Bottom of the Page

A Supply Chain Christmas Carol 2015

It was Christmas Eve at Supply Chain Digest, but the small staff and editor Ebenezer Gilmore were still hard at work as the clock neared 5:00 p.m. A few of the crack staff members continued to look up at Gilmore from time to time - the tension growing.

"Where's that piece on automated case picking?" Gilmore barked at Cliff Holste, SCDigest's material handling editor.

"Almost done," Holste said. "I should have it by tomorrow,!" Holste responded.

Finally ending the tension, Gilmore said to the group, "I supposed you will all be expecting the day off on Friday ? Well, the supply chain will still be moving in China, you know. But I guess we can catch up with it Monday morning. Fine - the full day off for the lot of you!"


"Software applications weren't communicating well, and there were still significant gaps between planning and execution. There were opportunities for cross-company collaboration being missed all over the place."


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A cheer erupted from the small group. In fact, to Gilmore's consternation, they immediately packed up and went home with amazing alacrity.

"A merry supply chain Christmas to you Ebenezer! Try a day without supply chain for once this year!" editorial assistant Joan Nystrom yelled as she walked out the door. She and the rest of the small team chuckled as they headed for the parking lot.

Ebenezer harrumphed, then called sales chief Joe Salinas in Houston just to make sure he was still on the job. "After all, Houston's an hour behind," Gilmore thought. "It's barely four o'clock there."

Salinas was in his office, and Gilmore asked for the daily call report before officially giving him Christmas day off too.

"I'm thinking it may be hard to get a hold of potential sponsors," Salinas wittily observed. Ebenezer noted some may be doing email or texting, so consider that approach before blowing off the whole day.

Finally, Gilmore himself gave it up for the night, headed for home, and enjoyed a pleasant Christmas Eve dinner with his wife and five children. As always, they adjourned to the living room, and around the Christmas tree they were simply riveted by his annual holiday discourse on the role of supply chain in the product economy, the special supply chain challenges of the Christmas shipping season, what happened to commodity prices during the past year, and other interesting SCM topics.

When he was finally finished, he smiled and looked around warmly at his family, knowing just how much they had enjoyed the talk. They sat quietly together, breathing in the glory.

"What's supply chain again?" one of the kids finally asked.

"How can people not know supply chain! Does no one around here listen to a word I say!" Gilmore bellowed. "It ought to be taught in the high schools! Where do you think all this stuff comes from?" he asked, pointing to a healthy pile of presents under the tree.

"The store?" one of the kids answered. "" ventured another.

"Bah humbug!" Ebenezer responded. "Read Supply Chain Digest! Get educated!"

It was around midnight when Gilmore finally went to bed, after doing a last check of the news wires for any breaking supply chain stories. Not long after he drifted off to sleep, he awoke with a start at a loud noise. Next to him, his wife was still sound asleep, but there at the end of the bed was a strange ghostly presence.

"I am the ghost of supply chain past!" it said. "Come with me."

Soon, the two were soaring in the air over the countryside, and there in the heavens, the entire supply chain was visible to them both - accompanied by music.

"The Bee Gees?" Gilmore asked. Yes, it was the 1970s, and what the ghost displayed to him looked so strange. Every purchase order and invoice was being sent by US mail. He could see large mainframe computers churning out green screens of the most basic software applications, little of which had much to do with supply chain. Warehouse workers were tracking inventory with cards in a shoebox, wandering the building looking for inventory - which tended to stay there for a long time. Factories were cranking out products based almost solely on utilization and unit costs and what was best for the plants. 

Ebenezer could see right inside of headquarters buildings, where he viewed departments like purchasing and marketing and manufacturing and distribution all marching largely to their own drums, occasionally sending typed memos to each other about what they were doing, or complaining about how the others were goofing them up. Vast silos seemed to emerge across the landscape.

"This is kind of scary," Gilmore said. "Why are you showing me this? We are well past this era."

"Not far enough!" the ghost answered.

The next instant, Gilmore was back in bed. He again drifted to sleep, only to be awoken by a second specter.

"I am the ghost of supply chain present." he said.

"Follow me." Soon again, Ebenezer Gilmore was whisking through the sky.

"This is much better!" Gilmore said. He could see products moving very fast, not just across the US but across the entire globe. The world did indeed look flat from up here.

There was technology, lots of it, with software and powerful analytics optimizing transportation, inventory planning, factory scheduling and lots more. Products flowed rapidly through distribution centers, managed by workers scanning bar codes and even reading RFID chips [Ok, we're making that part up] while using mobile terminals, sometimes talking right into them. He could see Lean factories and S&OP meetings and even some CPFR. Most amazingly, occasionally the demand planning software was even getting close to the right forecast!

"Now this is supply chain!" Gilmore said to the ghost. "Look how far we've come."

"Look again!" said his guide.

Rubbing his eyes and looking a second time, new aspects of the supply chain were revealed that had not been visible before. He suddenly saw retail stores with lots of stock-outs, and many weeks of inventory in the pipeline, though much less was really needed. As S&OP meetings concluded, he could see the impact of those meetings dissipate as processes moved further down the supply chain to execution. There were vast quantities of information flying here and there, but just a fraction of it being captured and used to make better decisions.

Software applications still weren't communicating well, and there were still significant gaps between planning and execution in almost every area. There were opportunities for cross-company collaboration being missed all over the place. Many companies were not even taking advantage of opportunities to collaborate on their own internal freight moves. My goodness, a number of DCs were not even receiving ASNs from their own plants! And despite all this supply chain activity and technology, inventory levels did not seem to be really going down.

"This is a strange vista you show me ghost," said Gilmore. "I am not sure whether to be pleased or disappointed."

With that, he was back in bed, and soon enough, a third specter appeared.

"I assume you are the ghost of supply chain future?" Gilmore said, and the presence nodded. Off again they flew.

Below me was a truly new supply chain world.  The entire supply chain was visible to me - as it was to companies and their trading partners. The real-time supply chain was here!

Supply chain organizational structures had change significantly. The silo structures of the past were largely gone - managers were now part of process teams, not functional reporting structures. Operational planning and execution were no longer separate processes - they were a single, integrated, highly dynamic one.

The level of automation in distribution centers was staggering - robots of various sorts were everywhere. My goodness, and a handful of facilities were actually using RFID!

Wow, the level of collaboration was astounding - retailers were conducting joint S&OP processes with leading vendors, operating almost as if they were one company.

Thousands of companies had full time staff devoted to network design processes on a continuous basis - and were reaping the rewards from that practice.

Forecast accuracy had hugely improved - well now on second look it really hadn't, but companies were in fact much more effective at responding to demand variability. had about $2 trillion in sales - the Justice Dept. was conducting an investigation into whether it was a monopoly that needed to be broken up. Founder Jeff Bezos has recently acquired Canada, outbidding Alibaba's Jack Ma.


There was so much more.


"This is tremendous," I told the ghost. "The supply chain of the future has reached its promise."


"Hardly," the ghost whispered. "Wait until you see what's coming next. We haven't even looked at artificial intelligence in the supply chain. But we're out of time - maybe next year. Your job for now is to help others chart the course to this future."

As morning dawned I was back in bed - not tired, but pleased with the mission I had been given. We'll certainly keep at it.

Many changes coming from SCDigest in 2016, from a new web look to - finally - the official Supply Chain Television Channel and more.

Merry Christmas from Supply Chain Digest!

Did you like our Supply Chain Christmas Carol? Let us know your thoughts at the Feedback button or comment section below.

View Web/Printable Version of this Column

On Demand Videocast:

Trends and Issues Global Sourcing and Trade Management

Results from SCDigest's New Benchmark Study on Practices and Technology in Global Trade

You'll learn the results of the survey, unveiled in a new report launched with this Videocast. Not to be missed by anyone interested in global sourcing, global trade management and supply chain visibility.

Featuring SCDigest editor Dan Gilmore, Gary Barraco, Senior Director of Supply Chain Solutions at Amber Road, and Dan Gardner, President of Trade Facilitators Inc.

Available On Demand

On Demand Videocast:

Using Supply Chain Modeling to Improve Operations and Outperform the Competition

PriceSmart Builds Optimized, Aligned and Dynamic Supply Chain Network

You'll learn about key new trends in supply chain design, where companies are finding the value, and learn the powerful story of how leading retailer PriceSmart has used network design tools to craft its network of the future to support growth, optimize flow paths, and right size inventory levels.

Featuring Frank Diaz, senior vice president, distribution and logistics at PriceSmart, and Toby Brzoznowski executive vice president at LLamasoft and SCDigest's Dan Gilmore

Available On Demand

On-Demand 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

Available On Demand


As promised, are selection of original responses to our August Logistics Challenge. Great stuff from our readers, including an outstanding response from David Armstong of Inventory Curve.

Feedback of the Week on August Logistics Challenge:


One of the things I've found over the years is that when organizations have supply chain problems, they usually have more than one issue or condition, and that the issues feed on and support each other. These problems can be grouped into four general categories: cultural, organizational, strategic and tactical. In this organization, I see issues that can be placed into each of these categories.

Key observations

• While the freight cost issue is front and center, it appears that the freight manager quit of our frustration and had been faced with the accountability without authority problem. The freight manager seems to have been accountable for freight costs but had no authority to drive behaviors to manage the actual shipping.
• Performance information is available, but not shared/distributed on a timely basis. This seems to have been captured and maintained by the freight manager.
• Given the disparity and lack of transportation knowledge between the managers and shipping supervisors it appears that the plants operate independently.
• Evidence of a training need for basic traffic/transportation knowledge.
• Customer service to the stated shipping standard of a 3-day lead-time was not indicated to be an issue. But it appears there are lots of inefficiencies in plant operations to meet the lead-times.
• There is no evidence of a defined supply chain strategy.
• Given that it was the company president that called, that suggests an opportunity for top-management involvement and commitment to implement improvements.


One of the tools I use is the X-Chart. The X-Chart can serve as a living document and be adapted as situations change.

Major goals and objectives are listed on the top.
General strategies and guiding principles are listed on the right. These are the things we should always commit to do.
Specific actions and tactics to achieve the goals are listed on the bottom.
And related metrics are listed on the left.
Major interactions are highlighted in the corners.

The X-Chart I developed for this organization is shown below and serves a guide for discussion with the president.


Discussion with the president:

Short-term actions:

Inter-plant freight costs are out of control
Organization needs to establish clear responsibility and accountability for freight costs. Is it the branch managers? Is it the freight manager? Is it both?
Reporting of inter-plant freight costs by lane and mode needs to be implemented on a timely basis. The departed freight manager seems to have had that information, but there was no distribution, visibility or action taken based on the information.
Person assigned to the freight manager role needs to have a passion and desire for the position along with the support to drive the necessary changes.
Basic training need to be provided to all 26 branch managers and shipping supervisors on the basic traffic concepts including: small shipments are more costly than larger shipments, premium mode carriers are more costly than LTL and concepts of transit times related to distance. In addition, actual transit times by mode between plants are readily available.
Based on information developed by prior transportation manager, it would seem that an inter-plant routing guide could be prepared and distributed in short order.
Clear direction provided to plants to consolidate daily inter-plant shipments. This might be as simple as awareness and manual consolidation by the shipping supervisors.

Next actions:

It appears that a key driver for the inter-plant shipments is the need to move additives from one plant to another. Better planning, deployment and procurement of raw material additives unique to each plant would eliminate the need for much of the inter-plant shipping.

One situation I have seen in the past is that organizations tend to operate with a job shop mentality - that each order they will receive from a customer is a "one-off" order and not be repeated. In fact, customers tend to order the same things over and over, so with some analysis and planning, the unique additives and their respective volumes used be each plant should be able to be determined.

With that in mind:

Analyze additive usage by plant and by customer.
Use that information to re-evaluate stocking points, procurement and deployment of additives

By improving the balance of additive inventory, production planners should have an easier job to improve batch sizing, production runs and manufacturing effectiveness resulting in higher service and lower costs.

Longer-term actions:

With 26 locations, chances are that locations have different manufacturing competencies. Yet, it appears that each location had developed a "local" customer base that they strive to serve.

Once the short-term and next step actions have been taken, the organization has an opportunity to look at how best to serve the customer base from its 26 (the number could change) locations by evaluating plant capabilities tied to enterprise wide customer needs. And that would service as a good starting point to the development of a supply chain strategy.

David Armstrong
Inventory Curve

  More Feedback on August Logistics Challenge:  

The quick solution is to align incentives. The branch manager should own freight costs and inventory. My guess is that they only own inventory costs, hence the frequent stock-outs that are alleviated with premium freight. By owning both metrics, the branch manager would be able to make the trade-off between inventory and transportation costs.

A long term solution starts with a supply chain design analysis. Branch to branch shipments are not ideal and should only happen as an exception. The design effort should answer questions such as: Do you really need 26 locations making custom product? Where should safety stock be located in the network? Could a central DC hold the raw material? Is three day customer lead time realistic?

Finally, after redesigning the network, implement an improved planning process that uses the forecast error to plan the right amount of safety stock, capacity and safety time to respond to customer demand in an efficient manner.

Benefits will go beyond lower freight costs, and they should see improved customer service, lower fixed facility costs, and reduced inventory.

Patrick McNulty



Q: How many packages will UPS deliver this year between Thanksgiving and Christmas day?

A: An astounding 630 million, the company estimates.

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