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June 8, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet Gartner Supply Chain Executive Conference 2017 Part 2 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 Column bullet On Demand Videocasts

New Report

Supply Chain Executive Brief: How Distributed Order Management (DOM) 
and WMS Work Together to Power Omnichannel Supply Chains



Satish Kumar from Softeon and Kevin Hume from Tompkins International
Answer Key Questions on DOM and WMS



first thought


Supply Chain Graphic of the Week
Is Peak Oil Demand Coming Soon?


How Much Do Procurement Professionals Earn?

US Warehouse Market Remains Red Hot
Will Investors be Interested in US Infrastructure Deals?
Retail Execs Don't Expect to to See Shipping Revenue


May 15, 2017 Contest

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


Day 1 Day 2

Holste's Blog: DC Capacity Planning

Weekly On-Target Newsletter:
June 7, 2017 Edition

Great Cartoon, Self-Driving and eFulfillment News; Help Wanted in Dayton and more


This White Paper Discusses the Big Five Elements for Sourcing: Production Facilities, Raw Material Sources, Labor Pool, Logistics and Export Capabilities and Infrastructure.

What Toyota, Schneider National, PayPal, and Palantir Got Right

by Dr. Michael Watson

The China Factor: Global Trade's Big Hub

by Gary M. Barraco
Global Product Marketing
Amber Road

Consultant Oliver Wight is generally considered the inventor of what now common supply chain process in the 1980s?

Answer Found at the
Bottom of the Page

Gartner Supply Chain Executive Conference 2017 Part 2

OK, I admit this has been "Gartner month" here in this column, with my review of the keynote presentations at the Gartner Supply Chain Executive Conference in Scottsdale, AZ two weeks ago, followed last week by Understanding the 2017 Gartner Top 25 Supply Chain Rankings, after that annual list was announced as usual at the Executive Conference.

So this week I return with an Executive Conference trip report Part 2, and add for the first time a new conference review system that rates this and I hope future events that I attend across key attributes, from content to food, just for fun and maybe to stir up some discussion. See that later in this column.


J&J is "over-investing" at the start of this effort in high-priced talent in operations research and data science, because it wants to ensure initial success that will fuel expansion of the program.


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After having looked at the keynote presentations previously, this week I will summarize the breakout sessions, again with the note that it is important to understand the structure of these presentations.

Some breakouts feature only a single or pair of Gartner analysts. In a few sessions, a Gartner analyst jointly presents with a supply chain practitioner from usually a large company, with the Garner analyst generally starting with some overall observations/research on a given topic, followed by a case study from the practitioner.

Then there are sponsored sessions, which sort of look like regular breakout sessions on the agenda (though are reasonably well marked as such), but are in fact bought and paid for by software/consulting vendors for large amounts of money. A given 45-minute breakout time slot will be given to all sponsored sessions, with generally five alternatives.

Sometimes I attend one of these, and sometimes I don't, while I viewed a non-sponsored breakout in every available time slot while I was there.

With that introduction, on Tuesday I attended a good presentation on inventory management by Gartner’s Paul Lord, the net of which that the standard accounting system views of inventory - percent of sales, inventory turns, etc.- are really not adequate to drive the right inventory performance.

So as others have also noted, part of thinking about this differently starts with understanding the purpose of inventory - why do we have cycle stock, safety stock, anticipatory inventory, etc. - and how and when does inventory truly add value, not just soak up working capital.

Believe it or not, this is something many supply chain professionals - let alone company or commercial managers and executives - understand, and is really the place to start to get more enlightened in terms of inventory management practices. 

Lord believes we have a decent understanding of what he called "structural inventory" - inventory sort of inevitable based on the network design, the number of SKUs, etc., and also for "operational inventory," which has to do with the day to day jobs of ordering, scheduling, replenishing, etc. and how they impact inventories.

But there is a third category Lord calls "situational inventory," which is inventory based on things like seasonality, events and promotions, new product introductions, volume buying opportunities. and more. Here, he says, the ability to apply business rules and traditional supply chain math are more limited - and we need more work to get this type of inventory right.

This is sort of research in progress for Lord, but it looks promising, though I will observe the smart guys at some of the inventory optimization vendors can talk very insightfully about much of this.

Also on Monday, Gartner’s Noha Tohamy and Filip de Keersmaeker of Johnson & Johnson gave a solid presentation on use of modeling techniques in the supply chain. Tohamy began with a sort of "modeling 101" overview, noting that many different types of approaches are used to leverage models (heuristics, statistical, optimization, etc.). 

Certain techniques lend themselves to different supply chain problems, such as heuristics for demand-supply matching in S&OP, and optimization in network design. It is good to have some basic understanding of this, Tohamy said.

de Keersmaeker began by noting the tremendous challenges in optimizing the full supply chain, given all the interconnected trade-offs across many areas, and the huge amount of data that must be acquired and leveraged.

The focus at J&J was "end-to-end" and the implication it seemed to me was that J&J was running one giant galactic "solve" to optimize the entire supply chain. That it turns out is not the case, as separate optimizations are run for things like network design, what plants and lines should make what products, etc. But J&J is doing this in an iterative fashion that remains aware of the impact on other areas - a step forward.

There was a long search for a tool provider, and J&J selected LLamasoft, and the company is indeed using different approaches to different problems, such as mixed integer optimization for network design, standard linaer programming optimization for other areas, etc. de Keersmaeker said the focus is on "high impact, low frequency" decisions, meaning not day to day or week to week decision processes, but rather those run monthly, and especially quarterly, semi-annually, and annually.

A couple of interesting points. J&J is "over-investing" at the start of this effort in high-priced talent in operations research and data science, because it wants to ensure initial success that will fuel expansion of the program based on clear results. It plans to build a more balanced team in terms of experience/education down the road, including a role I had not heard of called "citizen data scientist" - non-formally trained supply chain practitioners who get very good at this.

Second, in a recent "run" of optimization across several of these process areas, a full 40% of J&J SKUs were affected - meaning safety stock, sourcing, manufacturing "cadence" or other decisions were changed versus before the new modeling process - and the model considered some 4 million variables. Try managing that in a spreadsheet. 

The last breakout session I attended (I have skipped a couple of other just OK presentations I do not have room for here) was one of the sponsored sessions from consulting form Accenture late Wednesday morning, on what Accenture calls "supply chain X.0." The claim is companies need to pivot to new models for things like organizational structure - less hierarchical and functionally siloed - along with greater use of supply chain segmentation, digitization, and other newer age techniques

It sounded interesting, and I think Accenture would have been better served by going through all this in detail. Instead, it was covered really at just very high level in only a few minutes, with most of the session then allotted to supply chain execs from Estee Lauder, Merck and HP, all of whom were OK, but oddly none of them really connected to this notion of supply chain X.0.

Most interesting of the three was the Merck executive, whose name I did not catch - they flashed the slide for like 5 seconds and his was the one name I didn’t get - who said the company was implementing a new planning system (Kinaxis).

The issue was this: the goal and the technology were meant to drive more end-to-end supply chain thinking. But Merck’s planners have operated for years in a more transactional, node-to-node way, not end-to-end.

So Merck actually put the project on hold, and is going back to retrain all these planners in the new way before restarting it.

I will note that in Part 1 of this review I summarized the observation from Gartner keynote speaker general Vince Boles that the reason the US M1 Tank wins in battle is not because of far superior technology but rather great technology combined with far superior operator training. Well with the Merck story you have that concept well echoed in a supply chain context.


Finally, as promised, below is my event evaluation system for this year's Garner conference. If you were there, how do my scores stack up with your experience?

All told, a solid event again at Gartner this year.

What is your reaction to Gilmore's Gartner trip report - and new conference review system? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

On Demand Videocast:

How DOM and WMS Work Together to Power Omnichannel Supply Chains

Experts from Tompkins International and Softeon Set the Record Straight in Fast Paced, Q&A Format

This discussion will be based on an outstanding new "Executive Brief" on this same topic, developed jointly by Kevin Hume of Tompkins International and Satish Kumar, a vice president at Softeon.

Featuring SCDigest editor Dan Gilmore, Kevin Hume of well-known consulting firm Tompkins International and Satish Kumar, a vice president at Softeon.

Available On Demand

On Demand Videocast:

New Cloud WMS Solution is Game Changer for Warehouse Management Deployment and Flexibility

New Technology and Deployment Approach Offer a Simply Better Way to WMS Implementations - Learn How

In this outstanding Videocast, we will cover the latest in each-picking robotics, co-bots, artificial intelligence, autonomous vehicles, sensors, drones and droids.

Featuring  Dan Gilmore, Editor, along with Mark Hawksley and Bruno Dubreuil of TECSYS, a leading provider of WMS solutions.

Available On Demand

On Demand Videocast:

Innovation in Shipper-3PL Relationships Benchmark Study Results

New Research will be Unveiled from SCDigest and JDA On This Increasingly Important Topic

In this outstanding broadcast, SCDigest and JDA recently completed new research study on innovation in shipper-3PL relationships, with the goal of obtaining the perspectives of both shippers and service providers on this increasingly important topic. All registrants will be sent a copy of the report will all the data shortly after the Videocast.

Featuring SCDigest editor Dan Gilmore and Danny Halim and Lori Harner of JDA.


Available On Demand


Some of the many emails we received on SCDigest Editor Dan Gilmore's column on Irrational Shipping Prices and the Demise of Brick and Mortar Retail and Reader Respond - Irrational Shipping Prices and the Demise of Brick and Mortar Retail.

More soon.

Feedback on Irrational Shipping Prices and the Demise of Brick and Mortar Retail Parts 1 and 2


Great article by Dan Gilmore, I think he's spot on with his commentary. The state of brick & mortar retailers is hard to watch from a consumer's standpoint versus and investor standpoint. When it comes to apparel, for the most part I personally I have to feel it, touch it, and try it on. Certain on-line purchases make sense and are extremely convenient. I guess it comes down to comfort level and how tech savvy the consumer tends to be with technology.

It will interesting to see how things play out with Amazon and their quest to dominate the world's global supply chain. When does it stop or does it ever stop? Will the success/failure continue to be investor driven, consumer driven or both?

I look forward to reading Dan's future columns and appreciate the opportunity to provide feedback. Wishing SC Digest much continued success in 2017 and beyond.

John L. Antonucci
VP Corporate Accounts
721 Logistics LLC


While I see the truth in what you are saying generally, I think you are being a bit too broad. Retail is surely suffering in some places, and some malls are having tough times. But I think it is tied more to the geo and the forward thinking of retailers. Most should have joined the on-line bandwagon sooner rather than worrying about B&M operations losing out. Most should have figured out how to incorporate the stores (kiosks, store pickup, etc.). I love that I can order from Walmart (and others) online and pick my order up at the store 1 mile away in 2 hours or less. Most should have figured out the Gen X and Millennials a long time ago.

On the subject of malls and geo. Consumers like the trick, new thing. Upgrade your mall (and your thinking) and you may find a real winner.

I live in the Salt Lake City area - a pretty tech savvy place (Ogden, Salt Lake, Provo). Recently the LDS church opened a new downtown (City Creek) mall to rave reviews and lots of business. There is a suburban mall (Fashion Place) which is almost too busy to visit with a soon to open, very large Macy's plus Nordstrom, Dillard's (replaced Sears), Crate & Barrel and many other high end stores. Fashion Place has been around for 50 years and has recently been revitalized to focus on a more selective (high income, young) market.

Another recent success is the Valley Fair Mall - which has been revitalized. Another downtown mall that was extremely popular until City Creek opened was the Gateway. Gateway (an open outdoor type mall) is going through modernization (although it is less than 20 years old) to better compete with City Creek.

A common feature of the successful locations seems to be the Apple Store. Hip, young (or young at heart) shoppers seem to enjoy good shopping, good food and features that appeal to them. Apple was at Gateway until City Creek opened.

Older malls and retail need to take notice.

Steven R. Murray
Supply Chain Visions

Editor's Note:

I think you are missing a few critical few points:

What would happen to ecommerce sales if appropriate pick pack and ship costs were charged?

Items in store should actually be priced lower than online products, because the costs are way lower - but they are not.

Because these things, brick and mortar woes, and the unbelievable change ecommerce is bringing, is happening much faster than it should.

Someday, these costs will have o be charged. They simply must be.

Dan Gilmore





Great article, really interesting perspective on how Amazon may be accelerating the penetration of ecommerce.

I would contest one statement you make about the price of typical goods, and that in most cases they should be priced cheaper than ecommerce. I understand the point you are making, that shipping costs are built into the in-store price but are not being built into the ecommerce prices yet; however, there are other brick and mortar costs (facilities, rent, equipment, labour, etc) that need to be built into an in-store price - many of these represent costs that ecommerce avoid completely. To me, these costs are material, and comprise the basic essence of why ecommerce is winning.

Mark Johnston



I do agree with Gilmore!

On this track, I read not so long ago that about 90% of new business strategies fail. Further, that it is typical to find that there's something that will work arising out of the failure, thus it is wise to maintain resources in reserve to apply in support of that successful element going forward. There are many stories of massive all-in, bet-the-farm commercial disasters. The other salient observation offered was that long term success was more often achieved by strategies that started small and achieved profitability early and then leveraged to gain share vs. those that stressed rapidly building market share at a loss from the start while striving to cross some far off break-even tipping point.

By appearances, Amazon's journey seems like it falls prey to the considerations above. Maybe they made some money early on when they only sold books. Since then, my sense is that it's been 2% or less profit or losses, and should revenue growth sputter- look out?

Meanwhile Mass Merchants and other retail leaders are dealing with the disruption, and from what I can tell, are mighty worried and not just a little grumpy about dealing with all the challenges associated with Omni channel.

Meanwhile, the ‘music continues to play'.

Tom Miralia
Distribution Technology



Q: Consultant Oliver Wight is generally considered the inventor of what now common supply chain process in the 1980s?

A: Sales & Operations Planning (S&OP).

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