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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.

Educating Future Supply Chain and Manufacturing Employees

By Herb Shields | 05/31/2012 | 10:47 AM

 Regular readers of my posts know that I have an interest and involvement with the education of students who will be looking for jobs in supply chain organizations here in the U.S. and globally.  I attended two recent events in the Chicago area that provide some positive news that I want to share.

 On May 16th, Daley College, one of the City Colleges of Chicago held its 2nd Annual  Manufacturing Reinvention Workshop to address questions related to how and what digital technology skills are needed for machine operators and other workers in manufacturing.  A representative from Caterpillar, Inc. spelled out their needs for more educated machine operators in no uncertain terms.  Cat is working with community colleges and other organizations that can educate potential employees in manufacturing skills.  Many smaller companies were also part of the 80+ attendees.  Jobs are available now, we need to train more people in those skills.  If you want to know more about the Daley College programs, contact Ray Prendergast at:  rprendergast@ccc.edu.

On May 23rd, I had the pleasure of serving as a judge for  Manufacturing, Pre-Engineering, and Logistics Capstone  projects done by high school students from 6 Chicago Public Schools – Gage Park H.S., North Grand H.S., Martin Luther King H.S.,  Austin Polytechnic Academy, Prosser H.S., and Wells Academy.  The projects all related to skills that the students had gained through a 3 year program aimed at preparing them for careers in industry.  Here in Chicago, much of the news about CPS that reaches the media leaves you with a negative impression.  Some of that may be justified, but it was really great to see students who I believe are well equipped to enter the work force and add value for companies in manufacturing and supply chain functions.  For more information about these programs at CPS, contact Veronica Martinez at:  vamartinez@cps.k12.il.us

CSCMP's Chicago Roundtable Seminar

By Herb Shields | 04/17/2012 | 6:56 AM

I had the good fortune to attend the 29th annual seminar held on April 12 at Hamburger University, McDonald Corporation’s expansive meeting facility in Oak Brook, IL.  Like most of you, I attend industry events to get new information and to network.  This event exceeded my expectation in both categories.  Kudo’s to Bob Shaunnessey of Partners Warehouse and his committee.  In the interest of full disclosure, Bob and I have known each other for many years, he is not aware that I am writing this post.

Some of the information I heard included:

Rick Blasgen, President of CSCMP announced a new certification program which will be of interest to all those with careers in supply chain.  More details can be found through the organization’s web site.  I will be discussing the certification program with CSCMP to see how it might apply to students at IIT and other schools that offer a supply chain degree.

Barbara Spain from Aon provided her audience an update and insights into the many aspects of supply chain risk management.  Understanding the many options a company has to mitigate its exposure was new information for me.

Trey McClure from Loparex talked about several of his own supply chain re-engineering experiences.  I found his comment that “people’s capabilities is the biggest supply chain challenge” to be right on.  Finding and retaining the right personnel is a concern of many CEO’s and other execs that I talk with on a regular basis.

Rick Rothermel, CEO of LaMarsh Global, discussed change management as it applies to supply chain or systems implementation projects.  He recommended three questions that address the impact that the change will have on people as a good first step in any change process.

Daniel Stanton of Caterpillar Logistics gave a very interesting talk on managing the talent supply chain and shared several practices that are being used to recruit people into Cat Logistics.  They are taking a very unique approach to on-campus recruiting.

The day ended with a very interesting panel discussion that included four C level executives – Todd Jackson of U.S. Foods, Steve LaVoie of ArrowStream, Jeff Silver of Coyote Logistics, and John  Kolar of Organic Logistics.  Interesting subjects covered by the panel included:

  • Internal collaboration may be as hard if not harder than collaboration with customers and suppliers.  I agree with that based on my many years working in large companies. 
  • All four companies are actively pursuing sustainability options that make sense for their respective businesses. 
  • They also urged all of us to tell people that if they are working in a job where they are not happy, they should go somewhere else.  I have been advising people who worked for me in the past and now, my students at IIT, the very same thing.  We spend the majority of our waking hours at work, at least some of that time should be rewarding and fun.

I have to mention that since there were two tracks for presentations for most of the day, I was not able to attend several presentations.  I am sure those presenters were excellent as well.

Testing the Boundaries of Consumer Research

By Herb Shields | 04/05/2012 | 9:14 AM

Several recent articles have addressed what companies are doing to mine information on consumers and trends from data and in-store observation. There have been articles about Target’s efforts to track customers and predict what they might buy, then send coupons, etc.  An article in The New York Times Sunday magazine in February stated:  “Almost every major retailer from grocery chains to investment banks to the U.S. Postal Service, has a predictive analytics department devoted to understanding not just consumers shopping habits, but also their personal habits, so as to more efficiently market them.”  Target was featured in the article, but chose not to comment directly. Marketers are also making efforts to better use data. McKinsey Quarterly recently published a very interesting article that discussed Proctor & Gamble’s efforts to better use all of the data available to it.

A former colleague of mine, Ralph Blessing, Executive Vice President, GfK Custom Research,LLC.had this to say about the subject:  “Digital technology is influencing market research in many different ways - from data collection which is much more immediate and mobile to understanding behavior in much deeper ways throughout the entire shopping process (from purchase consideration, researching, shopping, buying, using and post use). As this occurs the industry also has to be much more thoughtful and careful about maintaining confidentiality. For example, many companies use net mining (or netography) which can yield very rich insights, but can also unearth potentially sensitive information.”

“It raises all sorts of privacy, security and ethical issues about what is appropriate to collect, use, and 'sell' as well as how to use the information. Consumers will certainly react very negatively if the power of this information is misused and feels evasive or leeks out something they feel is private. Retailers should be highly transparent and cautious before over-zealously using the data and power they now possess.”

Stay tuned for more discussion on this topic.  As Ralph said, it is something that responsible companies are addressing in an effort to provide what consumers want without over-stepping bounds in many important areas.

Sales & Operations Planning with Suppliers

By Herb Shields | 03/27/2012 | 7:53 AM

 

Many companies have been active practitioners of S&OP for years with great success.  While there have been many refinements to the process, I was intrigued by a conversation that I participated in last week.  Tim Wilson, who is currently the District Manager for APICS’ Great Lakes District started an informal monthly breakfast discussion group seven years ago.  The conversations have covered many different supply chain issues over the years and this is certainly not the first time S&OP was discussed.

Several participants mentioned that their companies have begun to include suppliers in their S&OP process because suppliers are a key factor in achieving some objectives related to cost and customer service. 

Don Jensen, a former S&OP consultant, who now works for Freudenberg Corp recently attended a Wal Mart conference for its suppliers.  While the conference focused on Replenishment activities, Don mentioned Wal Mart has recommended suppliers compare plans with Wal Mart to ensure alignment between expected sales volumes and supplier deliveries. Coming out of the recession, keeping stores stocked is increasing in importance for retailers. If stores are out of product, sales and profits suffer.

Outsourced activities can also be a critical part of your S&OP process. Providing suppliers with more than purchase orders can help align supplier plans with your requirements. Information on future needs and potential changes will help your supplier anticipate supply needs. When suppliers have to rely only on purchase order history and future PO’s, they may not be able to provide the responsiveness that is needed when demand increases.

A related idea that we discussed was the possibility of extending the flow of requirements information back up your supply chain to your suppliers’ suppliers.  Many large global companies have taken this approach with great success.

WERC Fed Ex tour – a Learning Opportunity

By Herb Shields | 01/24/2012 | 1:46 PM

 The Warehouse Education and Research Council (WERC) arranged a tour of the Fed Ex hub facility in Chicago on January 18th for its members and interested parties.  I thought that the tour would be informative for some of the students from the Industrial Technology and Management program at the Illinois Institute of Technology where I am adjunct faculty.  The Chicago Hub is one of 500 facilities in the FedEx Ground network.  Bill Burgoon, Senior Manager, led about 30 people, including four INTM students, on the tour.

Here are some of the students’ reactions and observations:

"The visit to the Chicago Hub of FedEx Ground was a great opportunity to directly observe a huge facility with the ultimate technology, like scan tunnels which capture bar codes labels information for accurate sortation. It's very interesting to attend to visits like this and see what's in the industry related to what we are studying.”  Fernando Gimenez Garcia

 “I am a shopper…many times of my orders are shipped by FedEx, but I didn't know how were they shipped. I know only, if it was shipped by FedEx, it would come very fast. Today was a good chance for me to see how it works. I was impressed when I saw one box was opened, the people didn't let it go through to shipping, they stopped the conveyor to take it for repair. Thus I can make sure that all of my orders which are shipped by FedEx will not only be shipped quickly, can be tracked, and will be safe.”  Sukanya Meebangkoed

 “Visiting the Chicago Hub of FedEx has been a great experience. With its almost 400,000 square feet, and with more than 890 employees working in it, this facility processes about 30,000 packages per hour. This fact it is not surprising if we consider the amazing technology which the facilities are provided, such as the use of bar codes and the devices that workers use to scan them; the use of scan tunnels that scan the six sides of the package and the sortation of…packages to the loading area, all of these based on the bar code label information. All of these let me think about how amazing and fast the technology evolution is being, and the need of investing in new and innovative technology, like FedEx does. Therefore, building a company upon innovation, where the pursuit and development of new technologies are an integral part of the company culture and business strategy, is crucial in my opinion. FedEx has achieved it, thus it is considered as one of the most admired companies in the world.”  Teresa Martinez Silva

One of the challenges in teaching topics related to supply chain processes is that it is hard to describe with words, diagrams, or even videos, the scale of many of the facilities that are critical to the timely movement of goods on a global basis. Our thanks to WERC and FedEX for providing an opportunity for students to see a great example of a real world supply chain company in action. 

Are You Ready for a Busy 2012

By Herb Shields | 11/23/2011 | 9:44 AM

When I read or listen to the news, I am often reminded of the old adage:  “Bad News Sells.”  This “good news” post suggests that the challenge for supply chain professionals in 2012 will be based more on upside risk than downside.  I had the good fortune recently to attend an economic forecast presentation by Brian Beaulieu of the Institute for Trend Research.  Brian’s firm does economic research and he and his brother Alan are frequent speakers to many business groups.  Here’s the 20,000 foot view of 2012 from Brian’s perspective:

  • In spite of the news as reported by the media, the data is positive, both GDP and Industrial Production indices are up in 2011 versus the same periods in 2010.
  • Employment is rising, (many mid-size companies that I talk to are hiring)
  • The Purchasing Manager’s index published by the Institute of Supply Management continues to show that the economy is growing.
  • There is a stimulative monetary policy and companies have liquidity.
  • Exports are increasing.

From a supply chain perspective, Brian made these recommendations:

  • Check your distribution system for readiness to handle increased activity.
  • Build inventory where appropriate considering lead time and turnover
  • Introduce new product lines
  • Implement more training for employees.

More positive news:  Material Handling and Logistics News just published some very encouraging transportation numbers based on a summary from the Georgia Center of Innovation for Logistics.  Here are just a few:

The Dow Jones Transportation index was up 6.9% during the month of October and the NASDAQ Transportation Index was up 2.3% for the same period. The USDOT's freight transportation services index increased 0.9% in September 2011 from the previous month. The index’s reading of 109.6 was the highest reading since July 2008. The index is up 4.4% year-over-year.

In September, the U.S. exported more than $180.4 billion of cargo (the highest on record). September U.S. exports have increased 1.4% in terms of value over the previous month and grew 15.9% year-over-year.

I don’t mean to discount the challenges that many companies still face.  Some specific industries  are recovering more slowly – i.e. housing and construction, but consumer products should continue to produce positive growth through 2012.  I would add one suggestion to Brian’s list – focus on building collaborative relationships with suppliers and customers in 2012.

Happy Thanksgiving.

Sustainability and Supply Chain Cost Savings

By Herb Shields | 10/19/2011 | 7:52 AM

The headline in the Sunday Review section of The New York Times on October 16th read – “Where did Global Warming Go?”  According to the article, both the public and the politicians in Washington have lost interest.  While that may be true, from a business and supply chain perspective, sustainability continues to be a priority.  In consumer products, major retailers such as Wal Mart and marketers such as Proctor & Gamble and Unilever continue their emphasis on sustainable products and practices.

 I had the opportunity during September to do two presentations on the subject of sustainability focused on the idea that not only is it the “right” thing to do from an environmental perspective, it can reduce costs as well.  The audiences were very different, one was a group of business owners in the construction industry, the second was the Northern Indiana chapter of the National Association of Purchasing Managers.  Both groups included companies who have already developed some activity aimed at sustainable products or operations.

 The key opportunities for mid-sized companies to save money by becoming more sustainable are usually in these areas:

  •  Energy reduction – implementing changes in process or equipment that result in less energy consumption
  • Energy cost savings – purchasing natural gas and/or electricity from non-regulated suppliers
  • Supply chain efficiencies – improving transportation practices to reduce fuel consumption, reducing the amount of packaging, using products that are greener in content, and reducing waste.

 I am not suggesting that these are the only possibilities, they are just examples.  If you want to know more, there are many industry resources that can help with each and every one.  DC Velocity has been publishing articles on the subject of sustainability regularly.  I do hope that, at some time in the future, both the public and public officials will realize that this is not a topic that can be ignored.  The preponderance of scientific data shows that global warming is real.  What business people recognize is that we can address the issue and save money at the same time.

Interesting Developments in the Food Sector

By Herb Shields | 07/29/2011 | 2:31 PM

 Several recent news articles signal some interesting changes in both food products themselves and in the food supply chain.

 Wal Mart opened the first of 5 Express stores in Chicago.  These stores will be located in areas that have for years been termed “food deserts” due to the lack of traditional grocery chain stores.  Recently both Walgreens and some dollar stores had entered some of these markets with fresh food offerings added to their more traditional lines of consumer products.  The new Wal Mart stores are one-tenth the size of a standard Wal Mart Supercenter. Given the scale of these stores it will be interesting to follow what adjustments, if any, Wal Mart has to make to provide the right mix and quantity of products.  An article in the Chicago Tribune mentioned that “Wal Mart is counting on shoppers to tell them what they want.”  Even before the first store opened, Wal Mart had changed the product mix in the hair care category to emphasize more ethnic products.

 McDonald’s announced a change in the product mix for the Happy Meals which are targeted at young children.  The changes include apples or other fruit as standard instead of an option, making milk the beverage unless a customer asks for soda and reducing the size of the fries portion from 2.4 ounces to 1.1 ounces. All told, the changes are expected to cut the calorie count of a Happy Meal by about 20%.

 The third news item this week discussed a proposed tax on soft drinks to reduce their consumption among young people. According to the Wall Street Journal, “The Center for Science in the Public Interest, a Washington-based watchdog group that pressures food companies to make healthier products, plans to propose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks and ready-to-drink teas. It would not include most diet beverages.”  This is clearly not a done deal, but it would potentially change the demand for some products if a law is finally passed.

 The food industry, both the marketers and the retailers, are always making changes to products and store offerings designed to get the consumer to try new products, stick with old products, etc.  It will be interesting to track some of these events to determine what, if any, changes result in the supply chain process for food products.

How Important are Knowledge Workers to a Supply Chain?

By Herb Shields | 06/15/2011 | 12:40 PM

Several weeks ago I participated in an interesting discussion with a group of middle managers who work in supply chain roles here in Chicago.  Most are APICS certified practitioners who deal with supply chain issues every day.  Several people had lost jobs and found jobs during the last three years.  We all agreed that most companies have eliminated a significant number of middle managers and knowledge workers.  Several of the participants are carrying a broader responsibility because the next few cubicle or offices that used to house other people are vacant.

 Two recent reports helped me decide to address this question in my blog.  Thompkins Associates issued a new report on the top priorities for consumer products supply chains.  The list includes many important topics – i.e. outsourcing, globalization, China, inventory/SIOP, etc.  It is a good list but what is not mentioned is any priority having to do with people in an organization. 

 Wharton management professor Ethan Mollick recently published a paper that addresses the issue of knowledge workers in what he calls “knowledge based companies” in industries such as high tech, gaming, and biotech.  His advice: “Pay closer attention to your middle managers. They may have a greater impact on company performance than almost any other part of the organization.”  While Professor Mollick does not include consumer products, some of us would agree that knowledge workers are essential for the success of that industry and supply chain processes in general.  Having managed a very effective supply chain organization myself, I credit my managers for most of our success.

 I spent the last few years of my corporate career with Unilever and observed the following: as Unilever consolidated three separate companies into a North American consumer products business, many knowledge workers ended up leaving the company.  Those leaving included many scientists, process engineers, and supply chain professionals who had spent their careers in specific disciplines of value to consumer products companies. The majority of those people are now applying their knowledge elsewhere.

 In the years prior to the recession of 2008/9, there were numerous articles and internet commentary on the coming shortage of trained professionals to replace the baby-boomers as they retired.  With unemployment still in the range of 9%, and the significant consolidation that has occurred in many verticals, that topic is now passe’.  Most economists continue to project recovery through 2012.  As the economy continues to improve, I think that Professor Mollick’s position on knowledge workers will become an important priority for consumer products and supply chain organizations.

 What do you think?

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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