Moving forward, sustainability will be a defining characteristic of these supply chains. Consumers are demanding it, shareholders are beginning to take notice and resources are becoming fewer by the day. According to the authors of one Oracle white paper:

“Today, sustainability has replaced cost, value and speed as the dominant topic of discussion among purchasing and supply professionals.”

So what are the types of discussions that need to be had at the leadership-level to ensure that sustainability coincides with cost reduction, risk mitigation, corporate social responsibility and other initiatives?

Michael Koploy, ERP Analyst at Software Advice, interviewed four sustainability experts to find out how leaders can make gains to ensure the right investments are being made within the supply chain. After speaking with these four experts, Koploy synthesized five questions that corporations have to ask about their supply chains:

1. How can we better measure sustainability?
2. How can we instill sustainability into our suppliers?
3. How can our products be designed to be more sustainable?
4. How can we avoid suppliers that are socially-negligent?
5. Who can we trust to lead sustainability initiatives?

You can read more of the discussion over on Michael Koploy’s website at: 5 Questions to Start the Sustainable Supply Chain Conversation.

To find out more about the state of Cloud-based solutions within the public sector, Michael Koploy, ERP Analayst at Software Advice, caught up with government IT expert Alan Webber of Altimeter Group. Webber believes that security, data ownership and perceived control are all deterrents to public-sector groups deploying Cloud-based solutions, but that the public sector will likely follow the private sector in deploying these systems–it will just take time.

Koploy asserts that procurement is one area of the public sector where the Cloud can be embraced. He feels that vendors can do the following to improve their eprocurement solutions for the government:

(1) Deployment via “Private Clouds”: The ownership infrastructure ownership is shifted to the user–perfect for public-sector groups worried about their data security.

(2) Specialization for the Public Sector: While some vendors already do this well, many others can focus on the adjusting the functionality of their procurement systems to match the needs and peculiarities of public-sector procurement.

Koploy also spoke with Mary Scott Nabers, a public-sector procurement expert on trends that could lead government groups to the Cloud. Nabers feels that there are two trends that will lead to more public-sector groups to the Cloud:

(1) Increasing Number of P3s: Nabers believes that the importance of public-private partnerships is going to reach a crescendo soon. These new groups will need software solutions, and because of budget-constraints, subscription-based programs hosted in the Cloud may be the only options.

(2) Popularity of Software Buying Groups: Because these solutions are often accessible through any computer’s web-browser, local groups can band together to purchase them. One example of this that is becoming popular is with school districts.

For more on Koploy’s discussions with Webber and Nabers, check out the original post: State of the Union: Public Sector and the Cloud.

Jobs are up, but which jobs are in the highest demand? Michael Koploy, an ERP Analyst that specializes in WMS systems for Software Advice, interviewed other industry experts to find the fastest growing jobs in logistics and the supply chain. Here are his top 5 along with some of the skills and certifications that these professionals need to find success:

1. Demand Planner: Many of these professionals have experience with various ERP systems, such as Oracle and SAP, are Six Sigma Black Belts and have obtained advanced certifications such as the CSCP through APICS.

2. Procurement Manager: A background in marketing, sales and supply chain operations are all important in this role, as the person must be both an analytical-thinker and a negotiator. Many professionals have obtained certifications through groups such as the ISM (CPSM) or Next Level Purchasing (SPSM).

3. Distribution Center Supervisor: These individuals are essential in running an efficient logistics operation. They must possess the ability to not only communicate with both in-bound and out-bound transportation units but also a crew of warehouse workers. While advanced degrees in supply chain management or certifications are not absolutely necessary for career success, a grounding in the supply chain is beneficial.

4. 3PL Business Development Manager: More and more companies are outsourcing their logistics operations, leading to an increasing importance within 3PLs to efficiently manage communication between clients. A background in account management, sales and finance are all very helpful–and an understanding of the supply chain is great for relating to clients, as well.

5. Supply Chain Analyst: Many consulting firms, from those that specialize in supply chain management to the Big Four accounting firms are always looking for more supply chain talent. This is a hot destination for many supply chain undergraduates, as well as newly-minted MBAs. These professionals are exceptionally hard workers and often earlier in their career–ready to to do their time to become the next leaders within the supply chain.

For more on these positions, check out Michael Koploy’s report: Top 5 Fastest-Growing Jobs in Logistics.

Internal Red Flags

• Evaluating in siloes. Even if they are not part of phase one, secondary department or group’s input can be vital and help avoid a plethora of similar applications in each department. Many times it helps to include these peripheral groups early and give them the option take a more proactive role in the project.
• Inaccurate budget. Make sure to include things in your project budget like time estimates, travel, trials, contractors, and other costs that are required for a successful evaluation.
• Previous failed deployments. Find out who rolled it out, what were the challenges, estimated benefits, lessons learned, and actual results of deployment. Communicate why your new project is different even though it may be supported by similar technology.
• Check box requirements. Make sure requirements have a priority and understanding of level of effort associated with each requirement. Although Pareto analysis of how many times you heard a requirement helps, make sure to poll users also on importance.
• Product driven requirements. Many times the check boxes are all product focused, and services are a single “has services” box. Look at the major categories of services needed (implementation, technical, adoption, training) and create requirements for each similar to your functional requirements.
• Soft ROI. When the business case reaches purchasing and finance committee, make sure it includes real hard savings along with assumptions for the estimated return so it passes the CFO “sniff test”.
• Company Politics. People internally may feel threatened, excluded, or burdened by a project. The key to winning them over in most situations is to include them, communicate, and not avoid confrontation.
• Meetings without meaning. New initiatives can be exciting, and there’s typically a high level of urgency on both sides. However before scheduling a meeting, ask yourself:
  • What is the purpose? (education, political alignment, etc.)
  • What is the agenda (and roles)
  • Who are the necessary attendees? (internal and external)
  • What is the desired outcome? (completed tasks, next steps)
  • What amount of time is required? (Overestimating is better than under)

External Red Flags

• Vendor Politics. An employee’s previous relationship with a vendor can be deep rooted. The question is how do you spot and react to this to ensure an unbiased evaluation, which is different in every company.
• Desperate Sellers. This can be a clear sign of financial insecurity within the vendor, or could be an opportunity for savings. Find out which this is and begin questioning the “what if scenarios”, however never skip steps to move faster.
• The Yes Sales Rep. Make sure to follow up with how their company did it, how long did it take, how much did it cost, with whom did you provide this for, and can you speak to them?
• “Next Release, you’ll be live by then.” Even with the advent of Agile development and cloud solutions, features slip all the time or are narrowed in focus to meet a release. Take them into consideration, but don’t make them part of your deployment plan or consider their requirements fully checked.
• Coached References. There are occasions where the reference call is biased and sellers always suggest their best references. Ask for a reference with a similar business problem, in the same industry, or of the same scope. Try to contact a new reference on your own, and speak to previous customers.
• Only Meeting Sales Teams. Sellers are always trying to navigate through your organization, however as evaluators we should be doing the same. Make sure to meet the leaders of their product, services, and support teams to understand the DNA of their organization.
• Pretty Pictures. Sales / pre-sales teams mitigate risk by demoing their application in screenshots or offline versions of the software, with small and simple data sets. Make sure to have them demonstrate their application live the most complex data, content, and processes to mimic your environment.
• Not logging in. Vendor demonstrations look so easy as their experts have been living and breathing their application for years, and know what to avoid. Make sure to get your hands on the software and test the things they haven’t shown, going through user scenarios, and testing around the world.

 Focus, Inc. San Francisco, CA

This week, we are going to take a look at those areas with a fairly broad brush, followed by a more detailed month by month review of key events in 2011. So let’s go.

For the fourth straight year, I would have to say the economy was once again the main supply chain theme of the year. The lack of relative clarity on the economy’s direction – let alone signs of a strong economic recovery – continued to weigh on supply chain strategy and investment. The US economy was modestly strong at best, and there were several periods, notably around mid-year, when threats of a “double dip” recession seemed to loom large. GDP growth was .4% in Q1, 1.3% in Q2, and 2% in Q3, though there are signs the economy is now picking up, and many expects Q4 GDP to be stronger than these weak numbers in what is supposed to be a recovery.

US manufacturing certainly held its own, with the ISM Purchasing Managers Index above a score of 50 – the level that separates expansion from contraction – every month of 2011, though it fell perilously close to the 50 mark several times. It ended the year with a December reading of 53.9, the highest number since June, but well off where we started the year, when we had four straight months of scores over 60.

China’s economy, while still relatively strong, was also a bit wobbly, with its PMI recently below 50, and exports – especially to Europe but to a lesser extent the US – dropping significantly.
But the primary economic news of the year was Europe and its dreaded sovereign debt crisis, as Greece, Portugal, Spain and Italy and their bonds dominating the news frankly to the point you were sick of hearing about it. But the issues are still there, it could still blow up and tank the world economy, and demand from Europe is likely to be bad – and maybe horrible – for some time.

With that out of the way, the other top themes/trends were (as they occurred to me):

Government Intersection with the Supply Chain: In no year in my supply chain lifetime was there more news and concern relative to government actions than in 2011. It seemed we were constantly reporting on one development or another: The NLRB blocking a nearly complete Boeing facility over perceived union issues; the EPA issuing lots of new regs over greenhouse gas emissions, taking over when Congress failed to approve Cap and Trade; new Hours of Service Rules; court battles over the Port of LA’s clean truck program for drayage drivers; the NLRB pushing almost through (soon will be) rules to encourage faster unionization campaigns, and more. Too much so, in my view.

War on Trucking: Directly related to the above, many, especially my new friend Mike Regan of TranzAct Technologies, saw an assault on the trucking industry ensuing. Cited were the new HOS changes, rising tolls, strong bias in some government circles for rail transport, likely increases in diesel taxes, the CSA 2010 rules that are eliminating large pools of current drivers, and more. I am not sure that “war” is quite the right word yet, but truckers and especially shippers need to pay close attention.

Predictions for a Manufacturing Rebound: 2011 was filled with predictions from many observers that the US was headed for something like a “manufacturing renaissance,” as a combination of factors such as rising labor costs in China, the rising value of the Yuan, and the growing unimportance of labor costs in the overall sourcing equation were likely to cause a reversal in US offshoring trends. Boston Consulting Group, Accenture, Booz Allen and others all weighed in with relatively similar analyses, with BCG, for example, predicting the lowest cost US regions would be cost competitive with eastern China by 2015. We agree to an extent, but is the move back to the US – or to Vietnam and Mexico?

RFID Makes a Comeback: Item-level tracking in apparel retail just might really be the catalyst that gets RFID going again in the consumer goods-to-retail sector, after its collapse following the debacle that was WalMart’s first go at it. WalMart is expanding its program – notably now to include some non-apparel categories – and Macy’s and JC Penney are also aggressively rolling out capabilities, with more retailers on the way. It appears this will stick, and I predicted that ultimately it will drive back up to the case level, just as UPC item bar coding did.

Green Supply Chain Goes Sideways: All told, a tough year for the anti-global warming forces, with a very weak accord coming out of the UN Climate Summit in Durban last month (an agreement for an agreement, and a goal of 2020 for a final binding accord – sure), more damaging “climate gate emails,” global temperatures which stubbornly refuse to rise, and several surveys finding consumers are losing interest. Still, many individual companies are doing great things, in their own interest to reduce costs, and the issuance in October of the final rules for California’s own aggressive Cap and Trade program could be a trend setter – or cause still more economic woes for the Golden state.

Supply Chain Technology Market Stays Strong:  Except for a few quarters in 2009, the supply chain technology market, meaning primarily software, has stayed robust, and that remained true in 2011. Like it or not, companies continue to spend money on software in part so that can do more with fewer workers. Among public companies, for example, JDA Software reported software and subscription revenues up 17% year to date over 2010, and Manhattan Associates recently projected full year 2011 revenue would be up 10-13%. While as always there is a mix, in general our discussions with private companies also indicate sentiments that things are pretty good. In the materials handling market, however, conditions are certainly well off the disastrous lows of 2009, but still a bit wobbly.

Commodity/Input Costs Take Wild Ride: Commodity prices and hence industrial input costs had a wild ride, soaring in late Spring to levels that caused great concern, but then falling from there, dropping sharply in the Fall over what looked like a weakening economy in China – which now really drives commodity moves – and a surprise strengthening of the US dollar as investors fled the Euro. All told, commodity prices were close to flat for the year across broad basket of agricultural, metals, energy and other commodities, through the range was wide. The Standard and Poor’s commodity index reach just over 763 in April from about 630 at the start of the year, then falling to about 575 by early October, a drop of 25% from the peak. It ended the year at about 650, up slightly.

London Brent oil surged as high as $127.02 per barrel in April and West Texas crude hit a two-and-a-half year peak at $114.83 in early May. Prices drifted downward from there, but Brent and WTI were up about 13% and 9% respectively on the year, and we seem to have simply adjusted to the once terrible idea of $100 oil.

Ocean Carriers and their Strange Ways: It was also a wild ride in ocean shipping, as volumes were very weak from Asia to the US and Europe, though overall traffic was up 6.5% given growth in Asia to Asia and Asia to South America volumes. Still, the growth in capacity keeps coming, capstoned by Maersk’s surprise February announcement it was contracting for at least 10 new Triple E megaships with capacity of an amazing 18,000 TEUs. Mind blowing. Then in June, Maersk Line CEO Eivind Kolding gives speech calling for radical changes in the ocean shipping arena that makes it easier for shippers and is more reliable and sustainable, among other recommendations. Drewry Shipping Consultants estimates ocean shippers lost $5.2 billion globally for the year.

Ok, that about does it. I am sure I left something important out, but think this is a pretty decent summary.

Dan Gilmore – Editor in Chief, Supply Chain Digest, January 2012

Warm regards,

Saul Cadoch

S. Cadoch Associates Inc.

The problem with these collection methods is that inventory data is more likely to be delayed, disconnected and error prone. This results in lost inventory information and inventory data that is inaccurate. To counteract this, supply chain managers should invest in a network of supply chain solutions that can communicate inventory information quickly and efficiently. Users can access the network via a “supply chain hub” – a centralized access point that allows other supply chain members to access vital inventory data.

Michael Koploy, manager of WMS Guide, discusses this topic in his blog post titled: “Today’s Supply Chain Secret Sauce: More Visibility, Fewer Silos.” The post describes how better visibility can result in more accurate spend analysis, improved policies on inventory storage and improved communicate during the logistics and transportation process.

1. Align business initiatives with scorecards

To figure out which KPIs and which suppliers to focus on, meet first with the executive team to determine what the main goals of the business are. Find out where improved performance will actually improve the business’ bottom line. Then, you can take a step back and develop scorecards that will benefit your business.

2. Establish how you will evaluate performance and communicate

The next step is to determine your thresholds for both excellent and poor performance. Before working with suppliers to improve their performance, you must internally set what your standards are going to be. When will suppliers be rewarded? When will you disengage with poor performers? Decide this before you begin working with suppliers.

3. Communicate with suppliers

From initial contact to the SLA to contract re-regotiations, performance mangers need to communicate the performance expectations of their suppliers. Communicate and open dialogue will help both sides – suppliers will know what to expect and where they need to improve to succeed, and performance managers will learn what’s working for suppliers and what’s not.

4. Communicate internally

Performance scorecard results are useful for other supply chain departments, but they need access to this information to be able to take advantage of this data. Internal visibility will allow for collaboration between performance managers, inventory managers and risk assessment managers as they attempt to decrease the supply base’s susceptibility to natural and financial disaster.

For more on this discussion, check out this blog post: Four Best Practices to Improve Supplier Performance Scorecarding.

AMR Research, now part of Gartner, started a supply chain “top 25″ sometime in the past decade, and can be commended for trying to bring a somewhat objective approach to those rankings, with a large part of scoring being based on metrics around inventory turns, revenue growth and other available financial data for public companies. There are, however, some subjective components to the scoring too.
But as fun as that Gartner top 25 can be to stir some debate, the reality is of course that there is no real way to determine which companies have the best supply chains. That said, I think one can develop some pretty reasonable frameworks for at least doing some internal and cross-company evaluations relative to supply chain excellence.

So below I offer for consideration the 10 primary determinants of supply chain excellence. There may be other models, but don’t think I have seen one quite like this. Importantly, there is some level of logic in the progression, related to both the dimension’s importance and how it connects to the next one on the list.

1. Alignment: It is clear to me that the “best” supply chains are characterized by having the tightest alignment between the overall business strategies and supply chain strategy and execution. Of course, achieving this alignment is the objective of Sales & Operations planning, but it can go much further, such as the service-level agreements Nick LaHowchic used to use when he ran the Limited Brands logistics services group with each of the company’s different business units. It is clear: the supply chain supports the business. Those supply chains that best synchronize that support with the strategies and objectives of the business are at the top of the performance heap – recognizing that the business itself may not execute well, or have the wrong strategy.
2. Strategic Depth: Great supply chains are characterized by detailed and “living” strategies that are directly connected to the support of the business(es). What is a supply chain strategy? More on that soon, but at its core, a strategy is a multi-year plan that details the what, why, how of the supply chain and more. Many companies have no real supply chain strategy. The strength of the strategy, and how well that strategy turns into what the supply chain actually does, are critical elements of supply chain excellence. This also includes such core decisions around what to do internally and what to outsource.
3. Customer Satisfaction with Supply Chain Performance: I could argue this should be number one, but think in the end it has to follow alignment and the resulting supply chain strategy. But where the rubber hits the road, the supply chain has to deliver in the eyes of the customer – this is the real lens through which supply chain performance should first be measured. The nice aspect of this dimension is that it takes into account the company’s overall value proposition or unique value props to different markets – the supply chain expectations from customers should be different depending on that (e.g., efficiency versus service).
4. Supply Chain Network Design: Hardly anyone mentions this as a core aspect of supply chain excellence, but it is at the heart of it. Network design is tied at the hip with supply chain strategy. It is the crucible in which the trade-offs between cost, service, flexibility and more must be managed, either explicitly or implicitly. Additionally, experts say network design determines some 80% of total supply chain costs. Supply chain excellence is clearly driven in large part by the quality of the network it operates in.
5. Macro Agility: One of the few true sources of overall corporate competitive advantage is the ability to respond consistently faster to opportunities and changing strategies than the other guys do. There are two components to this agility, as I have written about before – a more strategic, longer term view, and a more real-time, right now view. This is the strategic component. CEO after CEO says they want their companies to respond more quickly to market changes and opportunities. For product companies, this largely means how fast the supply chain can respond. I will admit this dimension is not easy to measure, however. But you know it when you see it.
6. Micro Agility: The other side of the flexibility dimension is the ability to react more quickly and intelligently to near-term changes in the supply-demand equation and other issues related to execution. Many current supply chain “buzz” concepts relate to this micro flexibility: demand sensing, real-time planning, response management and more. This area is a bit easier to measure than macro flexibility. Impacts both cost and revenue.
7. Talent Management: It seems hard to argue against the idea that how well a company manages and develops its internal talent is a key component of how good the company’s supply chain is. Clearly, many companies thought of as supply chain leaders (e.g., Procter & Gamble, PepsiCo, The Limited Brands) focus on this dimension continuously, even if that leads them to play the role of farm system for others that will not invest in that talent development. Talent management has a lot to do with how “sustainable” a company’s supply chain really is, and is seeing growing recognition throughout the industry.
8. Technology Management: This is another area that is often overlooked, but clearly there is a wide, wide range of approaches and results between companies, often in the same industry. This has to do not only how much is invested in technology (in general, should be more steady in nature rather than big peaks and valleys), but even more important than spend levels are such areas as how well new technologies are implemented, how often the returns are at or above what was projected, how well the full relevant capabilities are utilized, and more. Huge deltas between companies in all these areas.
9. Collaboration Intensity: Finally (more soon) companies are realizing that the next natural path to improve supply chain performance versus the competition is in improving integration and collaboration with trading partners. This is a major topic that we can just touch on here, but it is clear to me (with some adjustments for differences across industries and perhaps overall business models) that companies that are better at collaboration have better supply chains. But for many, the focus is still not really there.
10. Supply Chain Culture: This is probably the fuzziest of the 10 attributes, but one for which differences between companies are often large and easily identified. Again, there is much more to discuss in this area than room here allows, but it is simply amazing the differences that can be seen (and “felt”) in supply chain cultures across companies. Of course, that culture is set from the top, so leadership is the most important factor. But other elements include the approach to risk taking, the extent to which there is a “learning culture” in the supply chain, how well supply chain staff is truly valued, how well innovation is fostered, and more.

That’s my list. A noticeable absence, some might note, is anything specifically related to supply chain costs. I will simply say that while always important, the relative importance of cost is tied to business strategy and alignment, and that in the end, cost performance will be a derivative of these other 10 attributes.
I would welcome your thoughts on where I am right or wrong. More importantly, I am interested in building this out as something of a maturity model, with different levels for each dimensions so that companies can rate themselves, and would love to discuss with SCDigest readers what those levels might be for different categories.

Author: Dan Gilmore, SC Digest

But, when disaster strikes, how does one react? Japan was unfortunately asked this question in March, after being devastated by a massive earthquake and Tsunami. How were some of the biggest manufacturers and supply chains able to recover from the disaster?

A new article from Software Advice (click here) analyzes who are some of the post-tsunami supply chain all-stars, and how they did recovered. Some were pre-emptive: they had been affected by disaster in the recent past, and had effective action-plans. Others worked together, sharing secrets with competitors in order to help suppliers get up and running as soon as possible. And one in particular – Apple – was able to leverage its stranglehold on the supply chain and come out relatively unscathed. These companies are a testament to disaster readiness, as well as proof that quick-thinking and action can prove effective in repairing the broken links of a supply chain.

Today, businesses must take a closer look at their value chains and determine the weakest points – these are where calamity will hurt the most, and should be the first points of action. In the future, these instances of success will become great case studies on how to recover from horrible natural disasters quickly and effectively.

For more, check out: The Post-Tsunami Supply Chain All-Stars | Who Recovered the Fastest and How?