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CSCMP 2014 Spring Seminar

By Herb Shields | 04/14/2014 | 11:33 AM

I attended this always valuable event along with several hundred supply chain practitioners.  There were many interesting presentations throughout the day.  Here are some comments that resonated for me:

Gene Tyndall was the key-note speaker in the morning session.  His comment that “metrics matter, but that the right ones matter more” seemed very appropriate in this age of too much information.  Gene also emphasized the importance of free cash flow as a C-level metric that has become a must- do for us in supply chain management.

Gene also suggested that universities are producing graduates who can think – but not do.  Full disclosure – I attended as a faculty representative of the Illinois Institute of Technology, so I have a definite interest in this subject.  I will say that we believe that the Industrial Technology and Management program at IIT produces doers, this is something that we work hard to achieve.  I am proud to say that 4 of our students presented a summary of their research projects during an afternoon break out session.

Nick LaHowchic spoke about the importance of “de-coupling” a company’s strategy and then asking how each element affects supply chain strategy.  Another interesting suggestion that Nick made was that every supply chain manager should take the time to train people on how to review and analyze a  company’s annual report and/or 10-K.  He is a real believer in the importance of relating supply chain activity to the financial aspects of a company’s performance.

Lora Cecere gave a very interesting presentation that was a reality check for the audience based on some detailed analysis of supply chain performance across several industries.  Lora stated that the Consumer Packaged Goods industry is creating too many products resulting in poorer than desired supply chain performance.  She suggested expanding our view of the supply chain from the customer’s customer back to the supplier’s supplier.

All three of the morning presenters – Gene, Nick, and Lora mentioned their concern that supply chain activity and potential is not well understood by c-level executive and Board members.  They challenged the audience to change that situation in our own organizations.

Thanks to Rodney Goulet and his team for a very productive Spring Seminar.

The Christmas Shipping Glitch in 2013

By Herb Shields | 01/07/2014 | 6:58 AM

 

I exchanged messages with Mark Solomon, Senior Editor of DC Velocity, over the holidays on the subject of the UPS and FedEx delivery issues that occurred just before Christmas.  I am sure all of you followed the situation with interest and, perhaps, concern if you work for a retailer, shipper, or other company that might have been impacted by the missed deliveries and irate customers.

Mark asked:  “does something need to give in the relationship between retailers and delivery firms when it comes to service commitments for holiday traffic? “

Here are my thoughts:  The physical world’s ability to respond to the digital world’s demands has limits.  The UPS/FedEx Christmas difficulties were exacerbated by physical events – higher than expected last minute on-line orders, snow and ice storms, less shopping days, etc.  It is easier and less expensive to build digital capacity as compared to physical capacity – i.e. airplanes, trucks, and workers.

Both the retailers and UPS and FedEx have created high expectations for performance without any way to simulate all of the what-if’s.  I do not think we have a handle on the total cost associated with omnichannel marketing yet.   But the need to compete is forcing the retailers to make new offers, not just in terms of product, but also in delivery performance.  Do we really need drone-delivered gifts?  Is it realistic to promise a customer that their holiday order entered on December 23rd will be delivered on December 24th?

I am not suggesting that there is a good answer, but I believe that it has to be based on cost and capacity.  Maybe a surcharge that increases based on date as we approach the Holidays and the lead time that is acceptable to the customer.  It is very hard for any marketer to say no to a customer.  But the retailers own some of this issue because they increase discounts at the holiday approaches and then promise next day delivery.

We need a better plan for 2014.

Wal Mart and Amazon - the Technology Battle

By Herb Shields | 10/21/2013 | 9:09 AM

Readers of my most recent posts on the subject of current trends in retailing may be interested in the New York Times front page article in the October 20th edition titled “To Catch Up Wal Mart moves to Amazon’s Turf.”

The article discusses how Wal Mart, in an effort to compete with Amazon’s on-line presence has established @WalmartLabs, the headquarters of its on-line operations in San Bruno, California.  Competition between Wal Mart and Amazon is taking place, not just with customers, but also for engineering and technical talent to continue to improve their positions in SEO, on-line sales, same day delivery, etc.

As I discussed in my August 13th post on the subject of same day delivery, Wal Mart and Amazon are both competing in offering this service, not just with themselves, but other familiar names such as E-Bay and Google.  The NY Times article provides a lot of interesting information on the @WalmartLabs operations.  Clearly, competing for the retail consumer has taken on new dimensions as technology continues to develop.

Omnichannel Retailing

By Herb Shields | 10/14/2013 | 7:12 AM

I attended the CSCMP Chicago Roundtable program on this subject on October 10.  The program was held at the Motorola Solutions Innovation Center in a Chicago suburb, more about the center later.

A panel of industry experts each gave a brief statement of their views as to why Omnichannel is an important issue for supply chain companies in the consumer products area or those companies that serve them in any way.  Then they answered many questions from the audience on this topic.

Robert Howard of Kurt Salmon moderated the discussion and started by recognizing how mobile devices have changed the retail experience for consumers and thus the retailers themselves.   Today’s retail customer may be texting, tweeting, and comparing prices with other retailers while he/she is shopping in your store.  This is the basis for the concept of Omnichannel marketing.  Bob also pointed out that there is a big gap between the retailer’s view of consumer satisfaction in the retail environment and the view of the actual consumer.

Rick DiMaio of Office Depot talked about some of the initiatives that Office Depot has underway to give control to the retail customer.  He cautioned that features such as same day delivery (see my blog from August 13) need to be evaluated based on its cost versus the consumer benefit. Rick then mentioned that he sees retailers looking for potential partners – 3PL’s, delivery services, and even other retailers – to be able to meet consumer expectations cost effectively.

 Mike Wohlwend from SAP Americas raised what I thought was a very interesting question – will same day delivery drive companies to more U.S. manufacturing?   Mike discussed how SAP is working with its clients to tap into multiple data sources to provide very fast analysis.

Jeff Starecheski from Sears Holdings talked about how Sears is now evaluating the cost of delivery from multiple stores and DC’s to determine the lowest cost, best service combination for each customer order.  Jeff also suggested that supply chain people will have to view their activities through the commercial lens, not just the traditional SC focused view.

Mike Maris of Motorola Solutions talked about some of the devices and technologies that Motorola is developing for retailers to better serve customers and run their operations more efficiently.  He hosted the tour of the Innovation Center where we saw everything from voice-activated devices for use in warehouses to new scanning and in-store devices that allow for direct consumer interaction.  For any history buffs, there is an interesting exhibit of the first military 2-way radios that Motorola developed in the 1940’s.

With the support of the CSCMP Chicago Roundtable and program chair – Jen Theisen, I was able to bring 15 students from the Illinois Institute of Technology to the event.  They are all interested in careers in supply chain so this was a great learning opportunity for them.

Same Day Delivery - Competing for Consumers

By Herb Shields | 08/13/2013 | 8:00 AM

Last December, there was an article in DC Velocity about the USPS effort to develop a service to compete with some of the major on-line and store-based retailers.  While the Post Office is still a minor factor in the market, the battle between some giants – notably Wal Mart, Amazon, and E-Bay is really heating up.

Wal Mart has been trying to increase its on-line presence ever since it introduced it’s web site back in 2004.  It appears that Amazon will be its primary competitor for the consumers who shop on-line and desire same day delivery of their orders.  Obviously, same day delivery is not an inexpensive service for any retailer to offer and there are a variety of charges and approaches to how Wal Mart, Amazon, and others offer the service. Interestingly, all three companies are experimenting with offering lockers set at specific locations as one way to “deliver” the product and let the customer make the final pick-up themselves.

Recently some other companies have entered the market here in the U.S.  Shutl, a U.K. based software company has already captured a significant share of the U.K. market for same day service.  Note the Shutl is a software company – no warehouses, no trucks, etc.  Its approach is to partner with stores and couriers in major markets.

A much more familiar company – Google- has also entered the competition in the San Francisco Bay Area which not surprisingly is the test market used by many of the companies that I have mentioned. It is densely populated with consumers who are oriented towards all of the features of on-line shopping and same day service.

About fifteen years ago, I participated in many discussions at Helene Curtis and then Unilever where the subject of customizable mass-market products was discussed.  It will be very interesting to see if customizable products will eventually be offered with customizable delivery as well.

Many of my readers know that I teach at the Illinois Institute of Technology here in Chicago.  I have to credit one of our current students from Spain – Sergio Lopez Lopez – for writing an excellent paper on the topic of same day delivery which served as the basis for much of the content in this article.  I have found teaching to be a great learning opportunity. 

Extended payment terms - clout versus collaboration

By Herb Shields | 06/13/2013 | 3:42 PM

Over the last several months, the Financial Times(June 2) and The Wall Street Journal (April 16) have published articles that report on the movement by the consumer products marketing and manufacturing companies – P&G, Mondelez, etc. – to extend payment terms with their suppliers up to 120 days.

As a Purchasing professional with experience in the consumer products industry, I question this approach for a number of reasons:

  1. The major global marketers have the clout to make this happen, but it’s clout not collaboration.  How can these companies talk about the importance of collaborative relationships with suppliers on the one hand and then tell them they won’t get paid for 120 days?
  2. In addition to the obvious benefit to P&G, etc., the other beneficiaries are banks and factoring companies.  I found the comment that “P&G will help its suppliers get low interest rates” really astounding – they recognize that suppliers cannot afford to finance P&G’s business, but that’s ok.
  3. Consumers – all of us- will eventually pay for this.  The suppliers are already being squeezed through the consumer products supply chain that starts with the retailers and extends back through the marketing companies.  The finance costs for the extra 60-90 days is an added cost to the system which they cannot absorb.
  4.  It will get much worse once interest rates go up. 

 

I hope that some readers will comment on this.  Maybe there is a piece of the puzzle that I am missing, and if so, I would like to hear what it is.

Integrating Procurement into Supply Chain Management

By Herb Shields | 03/11/2013 | 8:39 AM

 I cannot resist commenting on the Basic Training article titled “Everybody get on the bus” written by Art van Bodegraven and Ken Ackerman in DC Velocity’s print edition for February 2013.  As a “purchasing guy” in my early career, I watched along with Art and Ken as organizations moved first into “Materials Management” and then supply chain to take advantage of the information that was becoming available on a real time basis as computer technology and ERP systems developed.

From my perspective operations management was just a convenient label used by companies to describe what we know today as Supply Chain Management.  An important step in bringing purchasing into the mix started in many organizations when they combined buying jobs with planning jobs and the term buyer/planner came into fashion.  Some companies like the term planner/buyer, I hope that we can avoid debating which is the better choice.  It was interesting to watch how individuals in that role took advantage of the ability to make more holistic decisions including both cost and inventory impact.

I see very few companies, both large and small, with an Operations management function instead of a supply chain approach.  I agree with Art and Ken that the procurement community was probably more protective of its turf than made sense for many years.  I see sourcing as one of many important functions within supply chain, and it should be included in that organization.   

In the bad old days, companies wasted a lot of time and energy protecting organizational silos and treating their suppliers as adversaries, not partners in an end-to-end process.  Every time that I discuss this history with my students at the Illinois Institute of Technology, it reminds me of the true impact supply chain management has had on the global economy.

It will be interesting to see how some of the associations that include many supply chain practitioners among their membership will continue to re-label themselves.  The Council of Logistics Management is now the Council of Supply Chain Management Professionals.  The American Production and Inventory Control Society – APICS – is now the Association for Operations Management.  The National Association of Purchasing Management is now the Institute for Supply Management.  Whatever their names, all three play an important role in fostering the growth and knowledge of supply chain people.

Will Supply Chains become Supply Circles?

By Herb Shields | 01/07/2013 | 7:06 AM

A recent article published by McKinsey & Company posed a new concept for supply chain management practitioners to think about as we start 2013.

The article states:  “Many of the activities that affect resource productivity and sustainability—such as acquiring and transporting raw materials, assembling parts used in the manufacturing process, and using and disposing of final products—take place outside the walls of manufacturers’ facilities. Although companies do not have exclusive control over these activities, they can exercise their influence to increase the productivity of their supply chains.

To that end, companies could transform their supply chains into supply circles. Whereas the phrase “supply chain” may evoke an image in which materials are collected in one place and ultimately disposed of in another, the phrase “supply circles” emphasizes that materials can be looped back into the production process after they have fulfilled their utility over the life of a product.”

The authors then state that a company should consider not only what materials it is using and how much, but the environmental impact including how much energy is consumed in production.  This methodology clearly is focused on identifying the sustainability opportunities, but the authors also suggest that it will identify potential cost savings as well.

When I teach supply chain concepts in several courses at the Illinois Institute of Technology, I pose the concept of the end –to –end process as a pipe rather than a chain.  I like the pipe analogy because to me it represents seamlessness which is what I think companies are trying to achieve in the supply management area.  But the “circle” takes it a step further and includes the principle of sustainability as part of the supply process.

You can access the McKinsey article through the McKinsey Quarterly which is their newsletter.  The title of the article is Manufacturing Resource Productivity.

Supply Chain Skills Gap

By Herb Shields | 10/10/2012 | 7:44 AM

 Kudos to Art Van Bodegraven and Ken Ackerman for their timely column in the September issue of DC Velocity titled Mind the Gap, Mate: A critical supply/demand mismatch.  If you missed their discussion, they covered many issues related to the gap between available talent and the number of people required in supply chain jobs from fork lift drivers up into the executive suite.

As a practitioner for most of my career and now also as a teacher at the university level of students who aspire to positions in the global supply chain, I have seen the disconnect between companies and educational institutions first hand.  That said, I also see many companies making a concerted effort to close the gap.  A couple of Chicago area examples – Caterpillar Tractor has been aggressively working at the community college level to encourage the development of more programs that provide manufacturing skills training.  I mentioned that in a post back in May.  At the Illinois Institute of Technology, in the Industrial Technology and Management Department, we have established student chapters for both CSCMP and APICS. These chapters provide students the opportunity to interface and learn from people in the profession today.  Obviously, IIT is not the only university doing that, but it is a good example of a way for industry and education to connect.  It provides an opportunity for companies to influence what we teach about supply chain management and to let students learn more about the issues that industry faces today.  We will also regularly solicit advice on curriculum and course content through an Industry Advisory Board starting in January, 2013.

Art and Ken also commented on what they see as a gap between many supply chain managers and those who are true leaders.  That is a tough one, we can teach management skills to students.  However, leadership is something that you develop not just by “learning” it in the academic sense, but by observation and experience in the work place.   I’d welcome any thoughts or suggestions from readers.

Should You Consider a Regional Supply Chain?

By Herb Shields | 08/07/2012 | 7:57 AM

An article in the August 4th edition of The Economist provides an interesting perspective on global and regional supply chains.  The article states that the initial mass globalization was driven by the lowering of transportation costs both ocean freight and trucking.  Large firms were able to use transportation cost reduction to establish manufacturing plants far from their intended consumers.  And in many cases, this globalization created new markets for the products in the countries that offered the lower cost labor.

Less recognized is the fact that since the 1990’s, emerging markets in countries close to the industrialized countries were able to capture some of the supply process for themselves, even with limited resources.  Think Mexico in proximity to the United States or Vietnam in proximity to China and Japan.  Trade data analyzed by Professor Robert Johnson of Dartmouth College and Professor Guillermo Noguera of Columbia University show that the rate of GDP increase in developing  countries has been significantly higher than comparable data for advanced countries.  Interestingly, they note that a single component may be exported several times during its supply chain journey providing more opportunities for emerging markets to participate in the total supply chain process.

Messrs. Johnson and Noguera also state that regional supply chain clusters have resulted among neighboring countries.  Regional trade agreements can be a factor in facilitating the formation of these clusters.  “Industrialization is now within easy reach of poor countries, provided they are within easy reach of industrialization”.

This suggests that mid-size companies need to re-examine their current supply chains.  There may be cost and lead time advantages to thinking regionally as compared to going global in every situation.  Shorter transit times may provide enough advantage in terms of reduced inventory to offset some of the maximum global cost savings.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Herb Shields

Herb Shields

Herb Shields has run Chicago-based HCS Consulting since 2000, helping clients across multiple industries and in higher education improve their supply chain strategy and execution. Shields has more than 30 years as an operations executive for capital equipment, automotive, electrical machinery and consumer products companies. As vice president of materials management at consumer goods company Helene Curtis, Shields led the supply chain organization that helped Helene Curtis win "Vendor of the Year" awards from Wal-Mart Stores and Target Corp. Shields has a B.S. degree in Electrical Engineering from Clarkson University and did graduate work in business at Bowling Green State University.



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