Category Archives: Supply Chain

On the Third Day of X-Mas (Emotional Intelligence)

On the third day of X-Mas
my blogger gave to me
tri-focal lens,
two boxing gloves,
and a lesson in strategy.

When coming up with a good strategy for your supply chain, you first need to understand that there will always be three views of the best decision, the procurement view, the logistics view, and the executive view. Your number one challenge could easily be the transformation of these viewpoints to a common viewpoint that permits a common solution.

This will probably require a lot of good negotiating skills, good listening skills, and innovative problem solving skills to propose designs and solutions that can appease everyone’s desires. This is where Jason’s “Emotional Intelligence”* (on Spend Matters [WayBackMachine]) really comes into play. You have to see their viewpoints, understand their perceived problems, get to the real issue, and come up with solutions that can meet your needs and theirs.

Management will want the solution with the perceived lowest cost or highest profit, or both, logistics will want the solution that makes their life easiest, and you should want the solution that meets the needs of your stakeholders – engineering, marketing, etc. – while keeping your costs down. A narrow focus on lowest cost can lead to quality issues, a narrow focus on the easiest solution (local sourcing enabled by a national carrier that can meet all of your shipping needs) can overlook lower cost or higher quality sources of supply, and a narrow focus on minimally meeting your shareholder’s needs in a cost-controlled manner can overlook opportunities for innovation.

So not only do you need to be able to understand each of these viewpoints, you need to be able to see their strengths and weaknesses so that your team can collaboratively design an over-arching supply chain strategy that exploits all of the supply chain strengths available to you while blocking out the potential weaknesses.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

The Nokia Saga

Both Spend Matters, in “Nokia, Front and Center, Led Well, Almost”*, and Supply Excellence [WayBackMachine] have recently discussed Nokia and their journey to a center-led organization. According to Tim, Nokia has made the move in an effort to save $300 M Euro over three years by better aligning supply strategies with business requirements, reducing purchasing operation and transaction costs, and better integrating supply management with supply chain management and product creation.

The reality is that they are doing a lot more than just moving to a center led model. According to the presentation at eyefortransport’s recent Supply Chain Directions Summit in the San Francisco Bay Area, they are also focusing on:

  • improved capacity planning
  • 3PL cost management programs
  • offering new service levels to manufacturing centers and to sales
  • collaborating with suppliers to reduce packaging requirements
  • better supply base management
  • improved frame agreements
  • location-based supply chain improvements

Although they did not release the dollar values associated with improvements they have made to date, they have reduced packing requirement ratios from as high as 2.0 to under 1.4, almost doubling the amount of product they can fit on the same shipment. They have improved capacity utilization by focusing on lane-based planning and dealing with short term and mid-term plans separately, with long-term plans updated quarterly. They have evolved outbound shipments to small lot order sizes which they are better able to optimize, since the vast majority of their orders (> 85%) are now small lot sizes. They are also evaluating non-traditional delivery methods in some regions and achieving great success.

They’ve restructured their frame agreement to include a standard contract which includes all of their standard clauses and SOX compliance, fill-in-the-blank appendices to deal with standard requirements such as compensation, storage, service levels, and service levels, and customized fill-in-the-blank appendices for each region to deal with specific local requirements such as TAPA or C-TPAT compliance, GPS monitoring, driver screening, security escort requirements, etc. This allows them to draft better contracts, faster, with reduced risk.

They’ve found that:

  • controlled variables can be a large source of improvement
  • tangible metrics are essential to achieving success
  • the revised frame agreement regulates requirements
  • risk management, security teams, and 3PL collaboration guarantee risk reduction
  • constant audit and process reviews sustain growth
  • collaboration is essential in strategy, tactic, and action plans

Note that eyefortransport’s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum
next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.

* All posts prior to 2012 were removed in the Spend Matters site refresh in June, 2023.

Creating a Proactive, Demand-Driven, Value-Creating Supply Chain

This was the title of one of the panels at eyefortransport’s Supply Chain Directions Summit on November 28 and 29 in San Francisco. The panel, which consisted of David Pieper from HP, Ashley Hall from Intel and Lonny Warner from Menlo Worldwide, offered suggestions for enhancing value in your supply chains. These were some of their suggestions:

David Pieper

  • Don’t try to do everything in-house
  • Your partner data is important too
  • Event management capability is important
  • Measure your KPI’s across your supply chain
  • Don’t just push inventory and costs down the chain
  • Collaborate closely with your strategic suppliers
  • Improve your fill rates
  • Use Dynamic Replenishment
  • Adopt innovative terms and conditions in your contracts

Ashley Hall

  • Use outsourced inventory handling services
  • Use an internal ERP for tracking all of your transactions
  • Outsource manufacturing where it makes sense
  • Use a common data standard

Lonny Warner

  • Replace inventory with information
  • Consider direct-ship strategies
  • Use information to manage your overall supply chain network
  • Use smart-docks
  • Move from make-to-stock to finish-to-order strategies
  • Collaborate

In other words:

  • collaborate,
  • achieve visibility,
  • outsource,
  • reduce inventory,
  • manage your data, and
  • optimize your network.

The best supply chains are those where everyone collaborates and shares information to achieve visibility up and down the chain. This allows for event-based management and proactive alerts notifying you of a potential problem before it occurs. For example, if a product should reach the outbound port in three days and it hasn’t and you need it in twenty-one days, there may be a problem and you need to know whether it is just delayed a day or if it hasn’t even left the warehouse yet due to a production problem that shut the line down.

The best supply chains track all of their transactions and demand data and share the information that is derived to pull inventory out of the chain, not just push it down to a supplier. They also use finish-to-order strategies for flexibility and postpone orders late into the chain.

The best supply chain partners focus on their strengths and outsource their weakness to a partner that is strong in those areas. They collaboratively optimize the network to be robust and adaptive and capable of handling single points of failure. They use new technology and do as much as they can at each touch point, using smart-dock technology, for example, to minimize the number of parties and transit points requires.

Note that eyefortransport’s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.

AMR’s 7 Supply Chain Best Practices

The following are the best practices covered by Greg Aimi of AMR in his presentation Is the World “Flat” or Not? at last week’s Supply Chain Directions Summit sponsored by eyefortransport.

  1. Use an integrated S&OP process team
  2. Collaborate with a “transparency” information infrastructure
  3. Consider Geography and Supply Chain Network Redesign
  4. Build in Distribution Flexibility
  5. Monitor and Manage Logistics Complexity
  6. Explore RFID
  7. Customer / Supplier Collaboration

Use an integrated S&OP process team

  • Form a cross functional team that breaks down silos
  • Analyze and rationalize all sources of data with a customer focus
  • Change sales priority from revenue to profit
  • Embrace demand variability in optimization
  • Adjust forecasts more frequently based on sense-and-demand
  • Attempt to “shape” or “influence” demand
  • Push for integrated product introduction “design for supply”

Collaborate with a “transparency” information infrastructure

  • Intra enterprise departments, freight forwarders, customs brokers, international and domestic carriers, suppliers, contract manufacturers, customers, and consolidators should all be working off of the same data

Consider Geography and Supply Chain Network Redesign

  • Fight the all-or-nothing bias (multiple sources of supply mitigates risk)
  • Mitigate capacity shortages and distribution network congestion
  • Consider new and mixed geographies
  • Understand Free Trade Zones and tax implications
  • Frequent analysis to (re)position inventory optimally
  • Total landed cost modeling

Build in Distribution Flexibility

  • Develop configurable postponement capability
  • Enable multi-channel fulfillment
  • Mix traditional DC fulfillment, direct to store, and supplier direct strategies
  • Consider building outsourced networks for flexibility

Monitor and Manage Logistics Complexity

  • Automate transportation optimization and execution
  • Reduce variability (take control of shipments early, for example)
  • Form strategic supply relationships with carriers
  • Use international security requirements to raise priority of automation initiatives
  • Build a 4PL organization internally for increased 3rd party execution

Explore RFID

  • For real time sell through visibility
  • Insure products are where they need to be when they need to be there
  • Help manage new product introductions
  • Increase productivity in goods handling
  • Speed handling of SC security requirements

Customer / Supplier Collaboration

  • VMI / SMI programs
  • Late stage final product postponement strategies
  • Increase customer fulfillment flexibility
  • Use the latest systems to automate flexibility

Since many of these recommendations are posts in themselves, I will not attempt to tackle them all in a single post and simply point out that many of these are issues I have covered and will continue to cover in the months ahead.

Note that eyefortransport’s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.

AMR’s Top 10 Supply Chain Issues

One of the presentations at last week’s Supply Chain Directions Summit, sponsored by eyefortransport, was Greg Aimi’s presentation on Is the World “Flat” or Not?. In this talk, which I’ll also cover in later posts, Greg presented AMR’s top 10 Supply Chain Issues. These were:

  • Customer preferences / product option explosion
  • New product introduction speed and lifecycle end decisions
  • Reducing forecast issues / better demand visibility
  • Right-sizing network inventory levels
  • Creation and coordination of a multi-tiered flexible supply network
  • Obtaining the right landed costs for sourced products
  • Controlling complex global logistics
  • Minimize expediting need
  • Lowering operational costs and improving profit
  • Managing outsourced relationships for flexibility and profit

Customer preferences / product option explosion

These days, SKU’s are proliferating like wildfires through gasoline soaked dry deadwood on a zero humidity day. What can you do? I’d start by adopting a Product LifeCycle Management (PLM) solution.

New product introduction speed and lifecycle end decisions

Not only are SKU’s proliferating out of control, but product lifecycles are getting shorter and shorter. Not only do you need a good PLM to manage the cycle, but you need a good methodology to make sure you are designing the right products with the right technology. I’d recommend starting with TRIZ-based “Innovation on Demand”, as elucidated on e-Sourcing Forum [WayBackMachine].

Reducing forecast issues / better demand visibility

This is where collaboration takes center-stage. The entire organization needs to be working off of one number, that is collectively agreed upon based upon demand data coming down the chain and manufacturing capability data moving up the chain.

Right-sizing network inventory levels

Once you have good demand visibility, this is where inventory management systems and transportation network optimization come into play. See my 4th post on CombineNet (acquired by Jaggaer) for some insights on how to accomplish the latter.

Create and coordinate a multi-tiered flexible supply network

This is where supply chain visibility comes into play. Make sure you are using multiple tier 1 suppliers and that each tier 1 supplier uses distinct tier 2 suppliers and so on. This helps to mitigate risk in case a supplier goes out of business, a lane goes down, or a disruptive force affects your supply chain.

Obtaining the right landed costs for sourced products

These days, everyone is focusing on low cost country sourcing with its promises of cheap labour and cheap manufacturing. However, these countries typically have poor infrastructures, little or no IP protection, and higher crime rates. Furthermore, they are usually located far away from you and with rising fuel costs, transportation costs can dwarf your manufacturing and labor costs to the point where your perceived outsourcing savings evaporate, especially when you add import and export tariffs and duties.

Controlling complex global logistics

How do you get your order from a factory deep in mainland India or China to your distribution centers deep in the American heartland – in thirty days or less – guaranteed – every time – affordably?

Minimize expediting need

This involves getting a good handle on your demand and your global logistics. Expediting adds multiples to your logistics costs, eating away both your savings and your profit!

Lowering operational costs and improving profit

To be truly effective, procurement best practices need to be applied across the board, not just to your direct goods, indirect goods, and services procurement. Your best practices need to be applied to internal operations, sales, and marketing. See my posts on Magic and Logic for some insight onto how good procurement best practices are often universally applicable across the organization.

Managing outsourced relationships for flexibility and profit

In today’s ultra competitive marketplace, success often depends on doing what you do best and outsourcing the rest. However, outsourcing only adds value if the proper relationship is formed, managed, and used to improve your business. This is a topic I tackled briefly in my procurement outsourcing series (I, II, and III) over on the e-Sourcing Forum [WayBackMachine] and a topic I’ll take up again in future posts.

In response to these top 10 issues, Greg Aimi presented seven best practices to tackle them. Check back tomorrow to find out what AMRs recommendations are.

Note that eyefortransport’s sister organization, eyeforprocurement has a number of upcoming events next year custom designed for today’s procurement professionals, including the Supplier Management Forum
next April in Miami. Registrations received before year’s end save $400 off of the regular registration rate and those who quote “sourcing innovation” in the discount code field save an additional $100.