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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're really behind again - bear with us. But keep the letters coming!

We have Letters on a number of topics this week. We received a great letter from Jim Tompkins of Tompkins Associates on our 1H 2007 Supply Chain and Logistics Review – it’s our feedback of the week, and adds a lot to our perspective.

We also publish more letters on our review of the annual state of logistics report 2007, and one from a member of our growing international readership, this time from Saudi Arabia, who said our article on Supply Chain Best Practice Tip: Managing Your Career has helped him think about his manage his own career path.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – On 1H SCM Review

As always I find Dan's columns thought provoking and worthwhile. His key news, trends and eventscover a broad path and I could easily write a response longer than Dan's article. However, let me focus onfour that are key in today's SCM evolution:

1. On the Green side: Wal-Mart’s CIO spent a lot of time at the RFIDLive! conference talking about the “green” initiatives. He also spent time talking about using supply-chain initiatives to drive down the cost of healthcare. He gave an example of how basic supply-chain practices could reduce the cost of generic drugs and supplies (such as the same supplies that go to Wal-Mart with a barcode go to hospitals without one, thus making it hard to track such things in the hospital using auto-ID technology). He mentioned a ten-year-old study called the “Efficient Healthcare Consumer Response” which identified $11B worth of process improvements in the health-care industry, and claimed little progress had been made there. So, basically, the Wal-Mart vision is to use efficient supply-chain initiatives to save the planet and also save the US healthcare system. They have a pretty good handle on what will play well politically these days and continue to use topics like Green and health care to boost their public relations image.

2. Dan mentions food company's pursuing transportation improvement programs. I see this but also see Transportation 3PL's continuing to broaden their service offerings.

• Expanding into new modes to provide complete transportation management coverage (such as CH Robinson and MIQ(Now YRC Logistics) handling parcel shipments).
• Expanding global capability (All the big guys have offices in China now)
• Enhanced shipment visibility tools
• Flexible solutions (willing to manage client systems, assets, etc.)

3. On the RFID side, CIOs are still not seeing pay-back for the EPC retail compliance model. But those CIOs who have reported success in implementing RFID have used it to fix other problems in their supply chain. The HP executive who attended the RFIDLive! conference mentioned that “we didn’t know how broken our process was until we started getting the data from RFID.” So there’s nothing new here. Some companies implemented RFID as an act of faith, and then reaped process-improvement rewards from fixing their broken processes armed with the new data provided by the RFID technologies. Other companies attack their processes with more traditional data-collection means, and therefore don’t see a payoff for adding RFID to the mix. The “system integrator” trend continues in the RFID marketplace. Industry press releases are starting to confirm that companies who provide a total solution to a business problem –- and that solution incorporates RFID --- are thriving. Pure hardware or software vendors are being driven to a commodity market, so the future action in RFID will be with qualified integrators. Here, “qualified” means a stable of CompTIA certified workers, combined with an executive-management team with good prior accomplishments in the field.

4. I noteDan's well-phrased statement of the “perfect storm” analysis. Tompkins, with our large client base of shippers, has listened to their concerns about the “up-chain” component of the supply chain (before it gets to the national or regional distribution center). Yes, the west coast ports have predicted a smooth peak season for 2007 but the “storm clouds” are brewing for 2008 and beyond. There are several factors that will play havoc with established and yet to be established supply chains. They are (and not in any particular priority):

• ILWU 2008 contract negotiations with PMA and the ghost of 2002
• Substantial rise in intermodal contract rates from both the BNSF and the Union Pacific across the board
• Significant new terminal capacity coming on-line at Tacoma, Prince Rupert and (a big maybe) Punta Colonet in Mexico without any guarantees of cargo commitment
• Environmental and legislative pressures (really big in California) to limit growth of marine and rail intermodal cargo
• A lack of a National Freight Strategy that equates to a lack of funding to increase infrastructure capacity (road and rail) anywhere along the supply chain
• US and Foreign Governmental criteria for security policies and logistical processes that don’t necessarily move the freight faster, safer and more efficiently

All of the above have a significant number of our clients actively moving toward an “all-water” routing, either through the Suez Canal or in an attempt to grab capacity slots in anticipation of the 2014 expansion of the Panama Canal. This could very well mean a complete re-analysis of their distribution and sourcing strategies. The industry is still in a state of uncertainty and rapid change requiring flexibility and options, all not without cost. Therefore what we see today is not what we will see tomorrow. The “storm” is coming and it is our job to prepare for the consequences.

James A. Tompkins Ph.D.
CEO
Tompkins Associates

On State of the Logistics Union 2007:

I agree with you analysis. Your points of railroads almost hitting capacity give their current infrastructure is on point. Also initiatives such as RFID mandates are adding additional handling costs as wells as IT spend. Your report is outstanding.

Dr. Erick C. Jones
Assistant Professor
University of Nebraska-Lincoln

The retail sector, which is the example often quoted for warehousing and logistics efficiency is perhaps contributing to more logistics spend in absolute terms with more products and more malls in more towns and City centers. Even so, I doubt whether this can be proven, as the major logistics costs are pushed back to the producer/manufacturer of the goods that are retailed in the stores.

Even in inventories, the increasing requirement for high service levels (with penalties beyond just loss of sales) and the just-in-time sort of inventory models, are resulting in a push back effect on the producer's inventory. Therefore, physical inventories may be growing as a result of the insistence on lean inventories at the upper end of the Supply Chain

T A Krishnan
Larsen & Toubro Limited-Mumbai (India)

On Managing Your Career:

I am working as Supply Chain Consultant for Saudi Telecom Company in Saudi Arabia.

This article gave me ideas about how I can improve my career path.

Syed Iftikhar Ahmed
Oracle Applications Consultant
Saudi Telecom Company

Q.  What noteworthy contribution did Keith Oliver of Booz Allen Hamilton provide to the Supply Chain industry in 1982?

A. He coined the phrase "supply chain management."