Category Archives: Supply Chain

Are You Doing It Wrong?

If you’ve been following the media, you know that we have reached a point were most major business publications are now putting focus on Supply Chain as your top risk and your top opportunity.

You also know that these same publications, and the solution providers that follow, and reference them, have been preaching the following solutions to not only tame the risk but increase the opportunity.

Comprehensive Category Management

Spot buying individual categories at market lows or evening running reverse auctions at opportune times is not category management. And for that matter, neither is an event that covers the entire category. At this point you probably think that the doctor is losing it a little, because how could it not be category management if you are addressing the whole category?

It’s Simple. Category Management isn’t just about grouping all seemingly related items and running an event, it’s grouping items that have related characteristics that allow the items to be sourced effectively under the same strategy. For example, while it might make theoretical sense to group printers, ink, and paper together — because you use them together, from a sourcing point of view, ink and paper often go better with office supplies and printers with hardware. You can probably get them thrown in for free with a server purchase. But that’s just the start. If you source a lot of metal parts, you should probably group them by primary metal, since the price of steel, aluminum, etc. will largely dictate their prices and it might even make sense to not only source all of the parts from the same supplier but even buy the metal on behalf of the supplier with your better negotiating power and/or credit rating.

Supply Chain Risk Monitoring

Natural and Man-Made disasters devastate supply chains when they result in raw material or product unavailability for weeks or months. When a company doesn’t understand their dependence on a single source or the risks that single source is subject too, they can figuratively get caught with their pants down to say the least.

As a result, most leading companies in the Risk Management arena are now tracking and monitoring their tier 1 supply base for not only missed deliveries, but late shipment dates and inquiring immediately when something is late shipping. However, by the time a shipment is late, it’s often too late to go to another source if the reason for the lateness is the lack of an important raw material. So the smarter companies also ask their suppliers to let them know when their suppliers miss a delivery. This is better, but sometimes this is still too late. You need to track the primary sources of the raw material and their ability to produce. Not only the companies, but their locations. All natural and man-made disasters in the region and then evaluated for impact and if the producer of the primary raw material or part is potentially at risk, they make sure, or ask their tier 1 supplier to make sure, that the raw material or product can still be delivered on time and if it can’t, these leading companies immediately seek a secondary source (or lock up available supply pre-emptively) — not two weeks after the tier 1 supplier required the raw material to meet the commit date.

Big Data

The only buzzword on par with big data is cloud. According to the converted, or should I say the diverted, better decision are made with better data — the more data the merrier. This sounds good in theory, but most algorithms predict demand, acquisition cost, projected sales prices, etc. based on trends. But these days the average market life of a CPG product, especially in electronics or fashion, is six months or less, and the reality is that there just isn’t enough data to predict meaningful trends on. Similarly, every disruption impacts the cost, and these disruptions are as unpredictable as future sales predicted using trend models with insufficient data.

You use all of the data available to validate your operations, procurement, and financial situation. Not to blindly predict future sales or prices. An over-reliance on big data is often more dangerous than not having data at all.

Supply Managers Will Be the RockStars of The Resource Revolution


I’m through with standing in line
To clubs we’ll never get in
It’s like the bottom of the ninth
And I’m never gonna win
This life hasn’t turned out
Quite the way I want it to be

  from Rockstar by Nickelback

Supply Management hasn’t exactly been the poster-child of the corporation in recent years. In fact, in some organizations it would have been lucky to be the Island of Misfit toys that Mr. Dominick of Next Level Purchasing has compared it to. But if the Resource Revolution comes to pass, that might all change.

A recent article in the 2014 Q2 Edition of the McKinsey Quarterly that asked Are you ready for the resource revolution? said that another industrial revolution is coming, and while the first two focussed on labour and capital, two of the three primary business inputs identified by Adam Smith in his classic treatise The Wealth of Nations, the third will focus on the last input identify by Adam Smith — resources that come from the land.

According to the authors, who recently authored Resource Revolution, five approaches will be utilized by companies that lead the resource revolution. And three of these — namely substitution, optimization, and virtualization — will be critical to success. (The other two, circularity — or design for reuse and recycle, and waste elimination — or lean to the next level, will primarily be used in conjunction with the other methods to deliver significant enhancements that neither approach on its own to achieve. )

Substitution, the process of replacing costly, clunky, and/or scarce materials with cheaper, better, and more readily available materials, is already being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Optimization, the process of embedding software in resource-intensive industries to improve how companies produce and use scarce resources, is also being used by those companies that have advanced to the highest stage of maturity in Supply Management.

Virtualization, the process of moving processes out of the physical world, is being employed by leading manufacturers (who will use a platform like Aravo’s) to determine the most efficient and cost effective process to produce a part as well as aircraft and car manufacturers (who will use advanced 3D modelling tools) to determine the most environmentally friendly or best performing design. But this too will be used more and more by leading Supply Management organizations to design the best supply chain to support the products and the business.

And when you get right down to it, no other organization in the corporation is in a position to make more use of these approaches than any other. That’s why, if the Resource Revolution is to come to pass, forward-thinking Supply Managers will have to lead the way, and become the corporate rockstars they always desired to be. (And put those motor-mouth marketers in their place.)

Projects Fail — Here Are Four Proven Reasons Why!

An article over on Outsource Magazine on “Project Delusion” summarized research from a group that has been tracking UK project management for more than a decade. This group, which has seen budget overrun recently climb from 18% to 27%, investigated the minority of projects that ran more than 200% over original projections. When the causes of deviation from the plan were analyzed, the following major contributors were found:

  • Missing Focus
    Specifically, unclear objectives, poor requirements, and a lack of business focus.
  • Execution Issues
    Specifically, unclear objectives and reactive planning.
  • Content Issues
    Specifically, shifting requirements and uncontrolled technical complexity.
  • Skill Issues
    Specifically, an unaligned team, lack of skills, experience, and resource.

That’s why you should never start a project until

  • The Goals Are Clearly Defined
    along with the metrics that will be used to measure against them.
  • Disaster Recovery and Business Continuity Plans Have Been Defined
    along with processes and procedures for creating new plans for unexpected situations.
  • Change Request Procedures Are Clearly Defined
    so that requirements don’t shift and technical complexity does not spiral out of control.
  • Proper Training is Provided Before the Product Starts
    so that team has the right training, is led by the right experience, is aware of, and able to use, the resources at their disposal, and have what it takes to align toward the project goals.

Also, you should adopt some best practices based on lessons learned. Four best practices, as detailed in the article, include:

  • Manage strategy and stakeholders.
  • Master technology and the business.
  • Excel at core project management practices (as defined in the PMBOK).
  • Fail quickly and cheaply.

For details, see the great article on “Project Delusion” in Outsource Magazine.

15 Ways to Shave Costs From Your Supply Chain Part II

As per yesterday’s post, earlier this year, Inbound Logistics ran an article on 163 Ways to Supercharge Your Supply Chain that had good advice to improve your global logistics, customs, documentation, expedited shipping, warehousing, optimization, equipment, trucking, 3PLs, maritime, security, risk management, and general supply chain operations. Besides all of the obvious ways to improve your supply chain and cut your costs, and the more advanced ways that are covered regularly on SI, there are a few often overlooked nuggets of cost savings that should be singled out because they cost many companies money and go undetected. Today we will cover the remaining eight (8).

3PLs
Determine What Each 3PL Does Best
Most 3PLs excel in a niche such as global logistics, transportation, or warehousing because most of them started off focusing on one function and added others as they grew. Understand their strengths, and weaknesses, before selecting a 3PL.

Inventory Accuracy
Establish external and internal product traceability.
It’s not just inbound and outbound shipments, but internal transfers between different warehouse locations, etc. that need to be tracked. Knowing you have 10 units of a product is only useful if you know where the units are.

Lean Logistics
Manage your empty container flow.
Moving empty containers is equivalent to burning money. It’s a complete waste.

Seasonal Peaks
Know Your Overflow Potential Before You Need It!
Don’t be scrambling for overflow space and trailers, etc. when you need it — have a plan in advance.

Maritime
Bypass Distribution Centers
If you can consolidate a large shipment that can go directly to a store, or a local DC that serves multiple stores, do so — temporary storage costs money and so does unnecessary unloading and reloading of inventory.

Port Selection
Know Your Port’s Infrastructure Limits
Especially if the port is near capacity. If the port isn’t investing in infrastructure to expand capacity, or can no longer expand its infrastructure, then it should be expected that the port will hit capacity and that could be a problem for your organization in the future if you plan to do more global trade.

Security
Protect Against Malicious Behaviour By Former Employee … Credentials
It’s not just the former employee that can cause you problems, it’s their credentials! Just because an employee left on good terms does not mean that their login and access credentials won’t cause problems. A current employee trying to arrange an inside job will happily use the ill-gotten password of that esteemed former employee for their illegal gain.

Risk Management
When Selecting Geographically Distributed Vendors, Consider the Ports!
Multiple suppliers who ship through the same primary port can all be taken offline as a result of a typhoon that destroys the port.

For another 148 ways to optimize your supply chain, see the Inbound Logistics article on 163 Ways to Supercharge Your Supply Chain.

15 Ways to Shave Costs From Your Supply Chain Part I

Earlier this year, Inbound Logistics ran an article on 163 Ways to Supercharge Your Supply Chain that had good advice to improve your global logistics, customs, documentation, expedited shipping, warehousing, optimization, equipment, trucking, 3PLs, maritime, security, risk management, and general supply chain operations. Besides all of the obvious ways to improve your supply chain and cut your costs, and the more advanced ways that are covered regularly on SI, there are a few often overlooked nuggets of cost savings that should be singled out because they cost many companies money and go undetected. Today we will cover the first seven (7).

Global Logistics
Collect Data About Your Products
Not only is understanding product composition vital to correct classification, which determines your tariffs, but it makes sure you don’t get any surprises when you product gets detained at the US border because your new hard drives with built in encryption were designed primarily for industrial information security and do not automatically qualify under Category 5, Part 2 of the Electronic Code of Federal Regulations like your hand-held personal digital cameras.

Customs
Focus on What You Can Control
When it comes to customs, you have no control — but you can create a position for a Customs Compliance Officer and make sure everything you do is fully compliant, fully documented, and fully auditable at a moment’s notice to prevent unnecessary delays when some newbie mistakes your fig paste ship for hash.

Documentation
Confirm Document Receipt
Just because you sent the documents, it doesn’t mean they were received, even if they weren’t returned (or the e-mail didn’t bounce). For critical shipments make sure the documents were received and noted in the system before your goods hit the border.

Expedited Shipping
Eliminate Padding
It’s a typical situation where everyone along the logistics chain adds “safety” time to ensure on-time delivery. It only takes a few layers to transform a shipment required by 9 am into one that is required by 5 am which requires expensive expedited shipping. Make sure unnecessary padding is not added to the delivery time.

Warehousing
Processes Need to be Quality Based
When a mistake happens, get to the real root cause. As per the article, if a forklift knocks off a sprinkler, don’t just ask why it was so high and how to prevent the forklift from getting so high again, but if it should even have been there in the first place. It might not just be a storage height issue, but an overall storage plan issue. If boxes are being stacked to the ceiling in multiple locations, maybe you need a new storage arrangement or maybe you need more storage space!

Equipment
Recognize the Environmental Impact of Your Pallets
Plastic pallets, which require oil, cannot be repaired and must be melted down to be recycled — requiring more energy that likely uses more oil. Wood pallets are easily repaired and recycled.

Trucking
Place your production facilities close to major cities.
Metropolitan areas have a substantial concentration of LTL trucking firms and terminals, which minimize your freight charges.

Come back tomorrow for Part II.