Category Archives: Supply Chain

Not All CRM Ideas Will Translate to the Supply Chain

A recent article in Stores offered up “20 Ideas Worth Stealing”. It was interesting, but what really struck me is how sometimes even the greatest ideas don’t translate when we take the supply chain as a whole into consideration.

Specifically, the following ideas in particular don’t translate well:

  • 15 Seconds of Fame
    In supply chain, this usually results from a late shipment, a crisis, or a supply chain disaster, such as lead-painted toys, poisoned toothpaste, or tainted food.
  • Downward Dog = Upward Momentum
    You don’t get the same kind of collective experience in a classroom that you get at a concert, movie theatre, or yoga class. (And that’s probably a good thing.)
  • Lickity-Split Product Trail
    Try-before-you-buy is a great strategy, but it only works if you’re offering SaaS supply chain software. You can’t try out a custom made component before it’s built, and no plant is going to invest tens of thousands (or millions) to make a custom product before you commit to paying for it.
  • Luxury Goes Recession Chic
    “Good-enough” is not always “good-enough” where health and safety are concerned.
  • Temporary Stores, Lasting Impressions
    While it’s relatively cheap to put up a temporary store (just lease some available retail space), it’s very expensive to put up, or even lease, a temporary factory.
  • Tweet Success
    Please, No! Please, Please, No! (Like your suppliers are really going to care about your random thoughts.)
  • Putting the Gas in Gastronomy
    While a proliferation of easily configurable options might please the customer base of the food and beverage industry, a proliferation of SKUs will strain your operations.
  • Prime the Sales Pump
    The equivalent would be telling suppliers you’ll pick up the tab no matter how they ship. This is dangerous if they always ship late and you have to expedite every order.
  • Experts on Call
    Why is it your responsibility to hold all of the expertise? Shouldn’t it be a collaboration between you and your supplier?
  • Partnerships for Change
    Change is good, innovation is better.
  • Social Colonization Shifts the Power of Influence
    Customers usually know what they “want”, not what they “need”. They know the “problem” they want solved, but not the “solution”.
  • Crowd-Sourcing Flavour
    Again, customers can provide input, but not solutions. That’s why you’re in business.
  • Appetite for Apps
    While you need good technology to get ahead, application overload, or big-bang system upgrades, can kill you.
  • Door to Floor in a Flash
    While JIT sounds great in theory, too much in practice can be costly. Better demand management and demand planning is a smarter option.

On the other hand, these ideas do translate well:

  • Tapping Outside Expertise
    You should bring in outside expertise regularly to complement your own.
  • Driving Sustainability
    Sustainability helps you stick around for the long term.
  • Keeping Gen Y Engaged
    You need to keep them interested, if they are not already your employees today, they are your employees of tomorrow.
  • Credit Where Credit’s Due
    You should always credit your suppliers for the value and service they provide you.
  • Channel Shifting
    If you can shift, you have flexibility, and that can be a good risk mitigation strategy.
  • Smart Assist
    If you help your suppliers in their time of need, maybe some day they’ll return the favour.

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Nearsourcers – Is Brazil in Your Future?

I’ve been on a nearsourcing kick for a while now because I never really believed in the outsourcing craze (and the outsourcing craze to China in particular) as it’s just not rational that it should be cheaper to source the vast majority of products from half way around the world. Now, it was for a while, but I’m blaming that on ignorance and incompetence and not what pseudo-economists like to call “market reality”. Let’s face it, fuel is expensive. Labor is expensive … and if you need trucks, boats, and trains to ship your product, that requires lots of extra labor to load and unload. And lead-time is expensive. Who knows where the market is going to move during the 35 days it takes the product to reach your warehouse? You might end up with a lot of unmoveable inventory and that’s going to cost you. (So unless you can air-freight affordably and without a lot of environmental damage, and unless the other factors Dick pointed out in his recent post on Nearshoring are met, outsourcing half-way around the world just isn’t a good idea.) And if we’re as smart as we’re supposed to be, we should be able to innovate a way to produce the (vast) majority of products more cost effectively close to (if not at) home. (If we can’t, shame on us.)

Now, my thoughts were that the rising cost of oil and the rising cost of labor in the former “low-cost” countries would push us back to Mexico — which received a lot of investment before the China craze, which has a lot of excess capacity, and which has a good understanding of our needs — but after reading this recent special report on business and finance in Brazil in the Economist, I’m wondering whether or not Brazil should be getting more attention.

For what might be the first time in modern history, Brazil is democratic, experiencing economic growth, and realizing low inflation. If the trend continues, it could be one of the world’s five biggest economies by the middle of the century. It’s already self-sufficient in oil, it’s government paper is classified as investment grade by all three of the main rating agencies, it is now lending money to the IMF (which was wary of lending to Brazil but a decade ago), and FDI in Brazil is up 30% year-over-year while the FDI global average is -14%. Plus, GDP outpaced inflation in Brazil in 2006 for the first time in over 50 years.

Most economists are pegging its expected growth in the 4-5% range, which is pretty damned good considering the current global economy. Furthermore, this growth should pull its higher-than-average interest rates down to normal levels soon, which will make Brazil a fertile ground for (new) business expansion.

All-in-all, Brazil is looking like a very good location to be near-sourcing from.

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Where’s Our Leonardo da Vinci?

Leonardo da Vinci, the brilliant Italian scientist, mathematician, engineer, architect, inventor, painter, botanist, musician, writer, and the archetype of the Renaissance man, defined an entire movement almost single-handedly and inspired countless scholars to new and dizzying heights. He probably understood the connection between art and science better than any man alive during the last millennium and even conceptualized inventions (such as the helicopter and the tank) that could not be realized for almost 500 years. He was a leader and a visionary and someone who could serve as a focal point for an intellectual revolution.

Now, it’s true that the 20th century produced its fair share of great minds — Einstein, Feynman, Hawking, and Penrose who helped redefine the very universe we live in, to name a few — but most were fairly specialized, and these minds in particular focussed heavily on the fundamental sciences. In the arts we had the likes of Pollock, Warhol, and Lynch and in philosophy we had the likes of Wittgenstein, Russell, Rand, and McLuhan, but, like their physicist counterparts, they never crossed the divide. The only people who attempted to really bridged the divide were the science fiction writers like Asimov, Clarke, Adams, and Gibson. But even the greats never really crossed the line into the “world” of business which would, of course, at least as far as a scholar is concerned, sully true academic pursuits.

When you meander over into the world of business, in which most of us live in today’s mostly privatized world (where the market capitalization of six private corporations exceed 5 Trillion, which is an amount greater than the current GDP of every country in the world except the US, and the top corporation, Race World International, has a market cap that is three times the annual GDP of the US), and you look at the great business minds like Drucker, Kroc, Porter, and Ford, you see little connection to the sciences, except for Ford, who was an engineer.

We’re supposed to have reached a point where the world is flat but executing global trade, travelling internationally, and crossing the cultural divide seems to be harder than it has ever been. Technology is supposed to be simplifying the supply chain but the sheer proliferation of e-Sourcing — spend analysis, RFX, e-Auction, decision optimization, contract management; e-Procurement — P2P, EIPP, e-Document Management, e-Invoicing and e-Billing; logistics — transportation optimization, LTL marketplaces, and 3PL management; warehousing — inventory optimization, warehouse (layout) optimization, demand planning and forecasting; supply chain finance — discount management, receivables trading, and factoring; visibility — EDI/XML, RFID, and tracking; manufacturing — production planning, lifecycle management, performance management, and collaboration; compliance — regulatory, environmental, and carbon management; and other supply chain technologies is challenging even the most technologically proficient of us to keep up. And the new and improved “paradigms” the consulting firms unleash upon us every decade usually end up in the trash by the next one.

Furthermore, while the modern supply chain is, in some ways, more efficient than it’s ever been — at least at the handful of industry leaders, in many ways, it’s in shambles. We need a visionary who understands the art and science of the modern supply chain and the trillions of dollars in global trade it supports every year. Someone who understands the technology it requires and the science behind it. Someone who sees the architecture on which the supply chain is based and how to engineer a better chain based on that architecture. Someone who is comfortable with the underlying mathematics of modern supply chain models and how to use this knowledge to optimize the supply chain. Someone who hears the melodic, almost musical, patterns of a smooth flowing supply chain. Someone who knows the long history of the global supply chain which actually dates back to pre-history (and the realm of the archaeologist) … centuries before the spice trade in the 16th century and at least as far back as the 9th century during the time of the Vikings who traded with the Franks, Baltic, and Byzantine empire and pioneered trade routes down the Volga and Dnepr and to Northern India and China and essentially traded with the entire known world at the time. And someone with the vision to take the best that the art, science, and business schools (of thought) have to offer and take us firmly into the twenty-first century. Because, when you think about it, we’re still operating like it’s the 20th century, and it’s 2010.

It’s unfortunate that da Vinci lived 500 years ago, because if you take a long, close look at the world we’re supposed to be powering, it quickly becomes clear that we could sure use someone like him today.

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Is it Time for a New Renaissance in the Supply Chain?

The Renaissance was a cultural movement that encompassed a resurgence of learning based on classical sources and a gradual, but widespread, educational reform. It was also known for the humanist method of study, which focussed on the study of grammar, rhetoric, moral philosophy, poetry, and history by Latin and Greek literary authors, the development of techniques to render perspective and light in a natural way, and a scientific revolution that began with the likes of Leonardo da Vinci who intermixed art and science in remarkable ways.

After reading a recent article on “Supply Chain 2010” in the Supply Chain Management Review which noted that a “Renaissance” education is needed, I’m wondering if it’s not high time we brought a new renaissance to supply chain. I’m not saying we should dig out the dusty Latin and Greek texts (after all, how many of us could read them? I know a few Greek roots and could probably refresh myself on grade school Latin if I had to but beyond that …), just that we should look back a few decades to when growth was slow and steady, the market didn’t change overnight, and crashes didn’t come faster than we could log them. The Old Normal Is Coming Back, and it wouldn’t be a bad idea if we knew how to deal with it … especially those of us who weren’t working in the real world 20 years ago.

We have a rapidly expanding discipline. Sourcing, Procurement, Contract Management, Global Trade Management, Compliance Management, Green, Sustainability, Logistics Management, 3PLs, Asset Management, Supply Chain Finance, Inventory Management, Warehouse Management, Demand Driven Forecasting, Marketplaces, Supply Market Insight, Warranty and Returns Management, Service Management, IP Management, Talent Management, Supplier Information Management, Supplier Performance Management, Negotiation Management, and dozens of other self-contained disciplines that are impacting every aspect of the supply chain. In addition to having deep expertise in one of these areas to differentiate yourself and offer value above and beyond your peers (to ensure you keep your job in these lean and mean times), you also have to be reasonably well versed in each of these other areas to understand your role, where it fits in your organization’s supply chain(s), and where you fit on the cross functional teams. You literally have to be a jack of all trades and master of one.

We have technology platforms proliferating even more rapidly on a wide array of deployment options that leave even experienced IT pros dizzy. Traditional installed, single-instance ASP, multi-tenant SaaS, single-tenant Cloud, multi-tenant Cloud, Virtual Beowulf Clusters, and so on.

And it’s finally being recognized that not only is Supply Chain the core of the business, with the ability to contribute much more to the bottom line in a slow-growth (or flat) economy than sales and marketing ever will (as every dollar saved is equal to between 5 and 20 dollars of additional revenue as far as the bottom line is concerned), but an opportunity for revenue generation. Robert Rudzki (Beat the Odds: Avoid Corporate Death and Build a Resilient Enterprise) and David Jacoby (Guide to Supply Chain Management: How Getting it Right Boosts Corporate Performance) have written entire books about how the supply chain can boost your revenue and corporate performance.

And that’s just the tip of the iceberg. The experts are realizing that Supply Chain Process is Art and Science, that Collaboration Innovation is required for success, that we’re in for energy and water shortages if we don’t revolutionize our supply chains, that the 106 steps discrete steps to global trade are only going to multiply as more and more environmental and security regulations come into play (as we try to figure out how to truly trade across global boundaries), and that inefficiencies are costing the global supply chain hundreds of Billions of dollars each year.

When you try to achieve a coherence, you realize that we need a way to render global supply chain perspectives in comprehensible ways, a more humanist approach that links the man with the machine — which is extremely unlikely to acquire the true intelligence we have in our lifetimes, that integrates the morals of sustainability and responsibility into everything we do, that uncovers the poetry of an optimized supply chain, that outlines a philosophy for how an ideal supply chain should flow, and that scientifically revolutionizes how we produce and consume throughout the chain. And if that’s not a Modern Renaissance, I don’t know what is!

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Supply Networks CAN NOT be too flexible

Every now and again I see a headline that really grinds my gears. A recent headline over on Supply Chain Brain that asked can supply networks be too flexible is one of them. Even before I read the article, I can tell you I was quite annoyed because a supply network can never be to flexible. When you consider the almost infinite number of things that can go wrong in today’s supply networks, and that the ability to recover on a dime could be the difference between profit and bankruptcy in today’s economic climate for a company that’s operating on razor thin margins, it’s absurd to even ask this question.

Then I got more annoyed when I read the first line, which quoted MIT professor David Simchi-Levi that said “I will not tell you the obvious”. Great … not! Another ivory-towered academic leaving the question vague and open-ended and further strengthening the stereotype that all of us PhDs are arrogant and don’t understand business and the need to get to the point — quickly. (While the former may be true, the latter is not where those of us that left the ivory tower is concerned.)

The saving grace is that before the paragraph ended, the author noted that “companies can spend too much time and money on achieving total flexibility in their sourcing and fulfillment strategies”, which is true. There is always a trade-off, and after a point, returns will diminish quickly. But the question isn’t whether a supply chain can be too flexible — because it can’t, but whether the cost of adding additional flexibility is justified with respect to the risks you are trying to mitigate, or whether the savings that can be achieved by reducing flexibility is worth the risks you are going to add. After all, any flexibility you can get for free is always worth it. You do need to do a(n optimization supported) total value analysis to figure out whether or not you have enough flexibility, or whether you could sacrifice some for worthwhile cost savings, but you never need to ask yourself whether flexibility is good. It’s always good. It’s just a question of whether or not you can afford it if it has significant operational impacts.

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