Monday, 18-07-16 16:53
Excellent article, Robert! The supply chain industry is finally -- and rightly -- becoming aware of identifying and managing supply chain risks at the "30,000-foot" level.
There is also significant risk "down in the trenches," inside each of the facilities where the day-to-day blocking and tackling of operating a supply chain occur. What happens if failures occur within these facilities? In most distribution centers (DCs), warehouses, and manufacturing facilities, the failure of certain information systems, equipment, people, and processes will bring the facility to a crawl, or even shut it down entirely. To avoid these issues, forward-thinking businesses must identify, prioritize, and mitigate these risks as well.
Stephen T. (Steve) Hopper, PE
Inviscid Consulting, LLC
Tuesday, 10-05-16 09:31
Conspicuous by its absence is any reference to Alibaba.
The suite of services they are providing seems to be setting a standard. Amazon has been the leader in Supply Chain. In my opinion, Alibaba will be taking the lead on Asian markets by outsourcing services and facilities, where Amazon has built their own infrastructure.
I would be interested in your research comparing Amazon and Alibaba.
Monday, 18-04-16 11:37
Great point Bob - thanks for the perspective. Seems similar to the move from bigger centralized distribution centers (DCs) to more nimble, smaller nodes closer to demanding markets as the total cost picture came into better focus.
Monday, 18-04-16 09:42
The most important point is Demand. Demand, the volume of freight is not there so larger vessels is not the answer to lower costs. Once you exceed the supply and demand balance, which we have now costs savings are not there. The bottom line, ROI, for carriers reflects the vessels laid up which negate any saving in the grand picture of a successful and profitable ocean carrier. Carries have far exceeded the balance of supply and demand and seemed to be just more concerned with who has the largest fleet of the larges ships!
Monday, 11-04-16 11:31
Marketplaces to promote supplier collaboration were introduced as early as 2000 at Oracle; It was seen way ahead of its time and sadly abandoned.
Now is the time, third party platforms are mushrooming that support integration and collaboration across all B2B activities (procurement, wholesale, value chain planning, logistics), and revenue being driven with brokerage business models.
Friday, 11-03-16 13:47
Biggest challenge we see is the lack of realization that effective S&OP requires the right people, the right processes and the right tools. Focusing a majority of your effort on just one part of the equation will provide, at best, marginal results.
In addition to Excel, there are a number of tools available to help S&OP leaders set and monitor KPI's. Put them in place but then make sure the monthly S&OP cadence includes the discipline to monitor the KPI's and use them in directing business activities.
Sunday, 06-03-16 06:42
I can relate to Eric's message on lack of measurement. My S&OP research shows that only 28% of businesses have clear S&OP targets that they check at least yearly.
Monday, 29-02-16 10:12
I agree about the need for metrics and results. Unfortunately today's systems do not tie together all the metrics however new predictive analytics have come on the market that utilize metrics like Economic Profit to tie together Demand, Lead-time, and Yield as well as their forecast uncertainty.
Too often, I see S&OP only focus on the demand forecast and they forget the role that other data plays in the results. You can have a great forecast but if your safety stock, reorder point, or order quantity are off - you will still get poor results
Tuesday, 02-02-16 14:56
Great post - it can also be ignorance with the ERP system itself. Most ERP platforms including SAP use outdated algorithms that are over 100 years old. The algorithm increase the potential to be out of stock as well as increase overall inventory levels
Monday, 07-12-15 13:57
Yes, I agree with the author: alignment is critical in our fast paced world of supply chain and finance is a critical part of that alignment. It's the balanced scorecard effect: bring everything along at the same time to avoid costly mistakes later on.
Monday, 16-11-15 13:54
Trade Agreements do not prevent anything. Careful design of the working documents and the final treaty can enable Enforcement functions to operate. An example would be the failure of US domestic law to gather complete respect among the populace, since there are enforcement rules for elements that vary widely. The same has been true of International accords (League of Nations Charter, UN Charter, various Geneva Conventions). It is quite rare when any Agreement/Treaty is clear and enforceable. The TPP appears to be another example of too many clauses and to little ability to enforce.
Monday, 16-11-15 08:40
I agree that what you need to do is motivate employees on a consistent basis by creating a friendly, competitive environment. There is a company out there that we use to pay our employees on a productivity basis created by Inbound Technologies. It provides real time productivity specifically geared for warehouse work. Our employees get paid to do a job then get to go home, so they know if they work hard and fast, they will make more money in a shorter amount of time. This gives them a better quality of life.
Monday, 09-11-15 18:09
Port Laredo's total trade, total Exports and total Imports, grew more than any other U.S. Customs District in 2014, en route to a fifth consecutive record and Number Three national ranking. The Mexican ports will definitely play a major role in the Supply Chain of commodities primarily as an alternative to the issues related to U.S. Pacific coast ports.
Monday, 09-11-15 01:45
Very interesting article. I actually used to wonder why professional car companies had these problems when they have been in business for decades. This article perfectly sums up all the reasons why defects and recalls are occurring. I completely agree that the solution for these problems is rooted deeply in communication between the OEMs all the way up to CEOs and CFOs. From a supply chain perspective, we can see that a lot of time and money can be saved if defects can be predicted ahead of time as well as using more professional analytics to solve these problems. I want to add that companies should consider their past mistakes in supply chain discrepancies in order to avoid making the same mistakes in the future.
Tuesday, 03-11-15 08:36
Robert Bowman's comments are very much on target. I see these forcing functions in almost every search we do. I certainly agree that the tools are out there, but not yet at the warehouse workers level.
Saturday, 31-10-15 20:23
From a procurement perspective it is interesting to take a look at the human-rights issues that can be created from the lack of supplier compliance programs. As stated in the article, more often than not, the challenge is not having immediate suppliers meeting regulations and contract guidelines, but suppliers that are found further and further upstream of the company's supply chain. Furthermore, it becomes increasingly difficult to manage these upstream suppliers and who these suppliers are subcontracting business to, leading to the possibility of these subcontractors employing children and other unfit laborers without the company's knowledge. Thus, visibility of the company's supply chain, constant communication between company suppliers throughout the chain, and even potential government audits of local businesses can help mitigate risks and ensure effective protocol.
Thursday, 29-10-15 10:17
Great article, Robert! It's fascinating to see Mexico growing at such a rapid pace. I'm interested to see how all this will pan out, because as you say a good port needs a good interior infrastructure such as roads to thrive.
Monday, 28-09-15 12:35
The volatility of the world market makes forecasting far into the future incredibly difficult, so Mr. Ghemawat has his work cut out for him. The fact that an index created using data from just two years ago is already obsolete is shocking to me, but definitely understandable. Creating short-term indices to forecast using more recent data is an interesting idea, but it runs into the problem of using too small a sample size for forecasts.
I am surprised to learn that global trade has only increased slightly in the last 10 years as a fraction of global GDP. I would have imagined that global trade had grown incredibly since 2005, but it makes sense that the recession affected the total growth rate.
Monday, 28-09-15 03:21
This is an innovative approach on China's part. From a supply chain perspective, this approach of using robots achieves the ultimate goal of increasing efficiency and productivity. However, this can potentially backfire on China's economy since the decreased amount of jobs mean less income and spending. It will be very interesting to see how this approach unfolds in the long-run.
Sunday, 27-09-15 16:43
After 30 years a Teamster I can no longer pay dues to this corrupt union that will not represent its members(BOUGHT OUT BY YRC in my case)
Thursday, 24-09-15 10:06
Things are bad enough that warehousing firms are buying or leasing their own chassis. This guarantees them the ability to move at least some of their priority cargoes. They also avoid having truckers in line for chassis at the pool, and needing to return the chassis after the move with any empties. Drayage costs are reduced, but overhead charges increase.
Wednesday, 23-09-15 07:40
Well, this is what happens when a business goes out of its resources and capacity. Competition is tough everywhere. If one drops out, others fill the gap efficiently.
Tuesday, 22-09-15 16:40
While I am happy to see manufacturing jobs returning to the USA, I wouldn't call this a permanent shift. Companies will continue to weigh the total cost of ownership to determine where to manufacture their products. I hope it does continue, though.
Tuesday, 22-09-15 15:43
From a procurement perspective, it would be interesting to see if companies requiring overseas shipping would start taking a look at their domestic supplier portfolio and conduct business with these domestic suppliers as a means to alleviate overseas spoilage. Potential benefits potentially include the tightening of the company’s supply chain along with reducing shipping lead time. On the other hand, it would be interesting to see if increased costs are unpreventable from utilizing domestic suppliers compared to outsourced suppliers.
Monday, 21-09-15 10:03
Companies are recognizing that with the use of the refined metrics of total cost of ownership (TCO) to uncover the hidden costs and risks of offshoring and reducing costs with sustainable strategies such as robotics, improved product design, innovation, automation, and LEAN they can increase competitiveness and manufacture in the U.S. profitably.
Tuesday, 25-08-15 02:47
IMHO, information and the flow of it will increase and not decrease over the years. The normal channels for such info are these gadgets for vehicles. We're seeing Internet-connected vehicles already, and this will open wide the floodgates for info to the driver. Because of this irreversible trend, the only way to make driving safer is by *building smarter vehicles* that will allow drivers/operators to give less attention to driving, and allow them to communicate (answering calls, even writing reports and sending email, being informed of safety, traffic / weather conditions along his route, receiving news, allowing him to indulge even in social media). Such smart-vehicle technology should be made mandatory in the near future, or accidents will continue to happen because of distractions brought about by the Internet and technology.
Just my 2 cents.
Monday, 10-08-15 12:59
The only way out of this problem is to get rid of automated factories. Robots don't pay taxes and don't produce children and future users of products. The rich certainly are not going to pay for social programs and infrastructure. The little people pay most of the taxes that fund everything else. Without people working who will buy the products of this automation economy. If this problem cannot be solved it does not bode well for the future. As the U.S.A has proven, the service economy doesn't cut it. It will be of interest to see how this turns out.
Wednesday, 17-06-15 13:23
If you put the West Coast port facilities to withstand the rigors of a good economics model the outcome would be predictable. It would select the most cost effective solution. When you introduce the avoidable expense and impact on Supply Chain reliability the glow of the West Coast ports looses its luster.
The parties involved have done their best to discourage commerce through the port facilities.
Wednesday, 10-06-15 07:08
In my experience the focus on the discipline of supply chain lessens in a growing or strong economy. Here in Australia we have had many recent years of 'boomtime' where the job of the supply chain personnel was to get the 'stuff' here as soon as possible whatever the cost. Now in a waning economy the 'management' aspect of SCM is becoming important, perhaps for the first time in many industries.
If executives in the US can develop and maintain supply chain management strategies and training opportunities, the country will be much better placed to withstand future economic softening. I sometimes feel like we are on the back foot trying to fix ineffective SCM practices that served us reasonably well when the driver was to 'get it now'.
Friday, 05-06-15 14:47
Yes Owner Operators can and have been Teamsters!
I am personally sick and tired of the public being fed the load of crap that that is not true. I have several friends and relatives who have been since the 50's and 60's. Further looking into the matter, apparently the way this was done was for the owner operator to operate as two separate entities: a truck owner and a driver. The company paying for the truck service then pays the truck separately from the driver. THIS IS NOT SOMETHING NEW!!!!!!. It was common practice in the steel hauling industry for many years. This matter today concerning the ports is nothing more than race/culture discrimination in disguise. It's practically common knowledge that the majority of truckers in Los Angeles that work from the port are Mexican/ Hispanic.
The Longshoreman Union could look into this and solve the whole problem by inviting the drivers into the union and doing the same as the steel companies.
But.... alas, we all know the Longshoreman don't give a damn about anybody. But take a nickle away from them and you will be killed. They would never be so intelligent as to realize that the end result would be good for them.
Friday, 05-06-15 11:50
I think part of the gap is due to a lack of understanding by company leadership as to what supply chain professionals actually do and require to complete the tasks at hand. Many company's groom their leadership on the sales side of the house with only surface knowledge of what supply chain is and how it links together to support the sale of the product. The nuts and bolts, the software and data mining, the logistics and the cross functional expertise required is often under appreciated or bypassed as supply chain functions are viewed as support functions to the sale when in all actuality they are the veins in which the product is delivered to the customer and consumer.
I have spoken to many sales team members who have crossed over into operations and are completely blindsided and dumbfounded what it takes to 'complete a sale" once the customer has agreed to the purchase. The wool is pulled off of their eyes when the curtain is pulled back and the wizard is revealed as his or her true from. It is a mentality change that will start to reverberate throughout all industries as the talent gap widens and the sales teams have a harder time seeing their product as a result of increased operating costs due to poor supply chain and logistics management.
Monday, 01-06-15 08:14
A major issue in port congestion in the sourcing policies of retailers. While they clog LA, other ports stand ready with better processes, capacity and closeness to consumer markets. As well, there are other sources beside China, Bangladesh and so on to manufacturer goods. Retailers have most of the responsibility for the port congestions. This is something they have talked about for decade, long before the longshoreman slow down, but have done little about. It is convenient to blame labor vs. understanding and doing the work on managing supply chains. That needs to change to support not only time and cost to market but the growing interesting of consumers for fair labor practices, more transparency and reduced risk in products.
Monday, 01-06-15 08:09
Container shipping lines are only one segment of global supply chain and here the most important is not the cost, but capacity to monitor supply chain to reduce inventory level and increase value for share holders. Any kind of freight forwarders all around the world with his network is in position to be the key player of the game subject to have the right IT tier tool
Sunday, 03-05-15 15:38
Very interesting article. In the latest report the $349 watch have about $86 worth of material and labor cost inside them. Would be interesting to know how much the more expensive versions have cost to produce.
Friday, 24-04-15 02:29
Container shipping has been a commodity in terms of pricing at least for quite some time. Wondering why the carriers not thinking of equipment sharing in order to optimise/balance the capacities.
Friday, 17-04-15 10:33
"To guard against deceptive pickups, companies can deploy scanners to verify a driver's identification, with the ability to detect counterfeit licenses for all 50 states."
How do I get one of these scanners? What if someone uses a valid license but steals a load?
Tuesday, 14-04-15 15:53
Forecasting in its very nature will never be 100% perfect. Perfect information is the future and without knowing the future we are at the mercy of uncertainty and how well we can recognize the patterns we see throughout business. The more we adhere to these trends the better we can forecast which aids the supply chain division in preparing for those demands.
Tuesday, 14-04-15 14:46
Thank you for the article! However, I am curious as to what other policies a company could make to reduce risk. As you said, hedging has risks of its own. Many companies would probably argue that locking an exchange rate is too risky since currency trends, as you also said, are very unpredictable. For example, the dollar itself could decline if problems with the national debt are not resolved. Also you suggested India as a possible long term opportunity, but companies have long had issues with entering that market.
Tuesday, 14-04-15 14:13
The suggestion to lock in currency rates, similar to other commodities that are increasing in value, is a very interesting situation for procurement professionals. I foresee international contracts with negotiated terms for a fixed transfer rate, with procurement heads at the forefront of those deals.
Tuesday, 14-04-15 00:57
I agree that the new pricing formula is going to impact many businesses and possibly cause them to rethink their shipping carrier choices. However, from UPS and FedEx's points of view, the new formula does make sense because large packages are a hassle, regardless of weight. Trucks only have a certain amount of volume capacity, so they will need to make more trips if they have more large packages.
Tuesday, 14-04-15 00:53
When doing business with suppliers in other countries, the issue of currency rate fluctuations is inevitable. Not every company will be hit hard by the fluctuations. If the company is able to use this to its advantage, it can actually be very beneficial for the company. Some companies think that if they contract in their own local currency, they can eliminate the currency, but is not true. Suppliers will price in currency risk, or they will find ways to adjust price over time to account for it. If the currency moves in your favor, you will miss cost saving opportunities. It is important to agree on the baseline exchange rate of the initial quote, so there are no variation between suppliers and unexpected price changes over time.
Monday, 13-04-15 21:12
This article shows great perspective about the current state and future of procurement professionals. Procurement is becoming increasingly integral to the success of supply chain operations and is delivering great value in return. In addition the increase in importance, the way procurement professionals do business is changing. Rather than just trying to cut costs across the board, there is now an emphasis on developing relationships with suppliers to create a mutual benefit and leverage supplier expertise. Often times a supplier will be able to assist with producing data driven solutions because they are an expert in their own fields.
Concerning future procurement hierarchy, I believe that every company needs to integrate a CPO into their executive level of management. Having the freedom of a C-level position to devote to improving supply chain operations can bring an immense amount of value back into a company.
Sunday, 12-04-15 01:34
I do agree that this West Coast Port Nightmare was a direct result of the workers in the ILWU seeking outlandish demands in addition to inadequate port infrastructure to handle incoming capacity of the ports. I believe the responsibility of this prolonged incident, however, falls on the shoulders of port managers who should have long foreseen a conflict like this on the horizon. When workers see inadequacies in the way their day-to-day business is run, and are operating at a two thirds capacity, there is bound to be frustration. Managers should have sensed that their workers were unhappy, and should have realized that at the root of these issues is the poor infrastructure of the ports. Most were built during a time-period that had not seen the levels of inflow that we see today. They were not built to handle the effects of a globalized world with the increases in international trade. Therefore, a strike like this one is a reasonably foreseeable result of these issues. To ameliorate the damages, those who run the ports need to create expansion plans that will allow them to handle the capacity of increased inflow.
Friday, 10-04-15 16:39
Very interesting article. Thanks. This is an area of interest for me as well.
Wednesday, 08-04-15 19:14
That's a great way of introducing kids to Supply Chain. In fact, as a part of my Lean Concepts and Application class, we performed similar lego-based supply chain simulations to understand the importance of Lean activities like Kanban, Binning system and involvement of suppliers in design and development phase.
Tuesday, 07-04-15 13:09
What a great concept and I too think reaching out to the home schooled population is a great idea. What about a summer program with other learning opportunities developed with local ISD's and colleges?
Monday, 06-04-15 19:24
I totally want to do this in Seattle! Who is with me?
Monday, 06-04-15 08:41
This is a great idea, but it needs to be extended beyond the factory school systems and made available to the home schooled population where some of the best and brightest talent is being shaped today.
Monday, 30-03-15 17:20
I believe that the negative impact of the new parcel dimensional shipping formulas was further exacerbated by the general increase and by the impact of the fuel service charge. This "triple whammy" has offered an opportunity to aggressive competitors and provides a window for segmenting the parcel market.
Monday, 30-03-15 16:14
6 ways to increase density book by Ray Bohman written in 1982. I had a comment that we could put sand in the package, Barrert from JOC said use stones, Ray said use bricks. All of us agreed to "Make it smaller".
Reduce your release value for LTL and see how the less than 500 pounds stacks up against the parcel carriers.
Tuesday, 17-03-15 11:34
It is very healthy to accept the faults of a forecast--it is a lot easier to measure forecast error than to change it. If you build known variability into a solid Production Run Strategy--the world becomes a much better place.
Thanks for writing this.
Monday, 16-03-15 23:24
Fantastic Article...Very Informative.
Thursday, 19-02-15 14:04
Peterson’s study is very enlightening in helping outline the roles a procurement professional should be involved in. The job definition of a procurement professional is changing. Procurement is no longer about cutting supplier costs to meet a budget, it’s also about quality, relationship management, and sustainability, among other things. Like Micah mentioned below, having a mutually beneficial relationships with your suppliers can yield more long- term results than just decreasing cost. While procurement is very important to any organization, I think dedicating a C-level executive to the position is highly dependent on the industry the company is currently in.
To answer Peterson’s question he hopes to pose in his next study, I believe they should. Strategic global sourcing should be a strong focus for any global company, and these decisions should be made with more than the traditional low-cost approach in mind. In his next study, I hope Peterson looks into the impact data analytics is having on automating and refining the procurement process.
Thursday, 19-02-15 12:31
This article is very interesting. Procurement has added numerous definitions over the last few decades. Procurement is no longer an inconspicuous department but has evolved into a major business management activity. As the article states, procurement officers are adding value to their organizations and the suppliers' organizations they work with. The idea that 10 percent of officers do not value external ties with third parties is very interesting. Procurement is leading organizations to innovations and better network relationships. This article was perceptive to the changes procurement has faced and is still continually developing into.
Thursday, 19-02-15 12:10
I am interested to see how companies in the food industry will perform with the amount of risk that they face in the marketplace for 2015. With stricter government regulations and increased consumer awareness, it is vital that food companies provide a quality finished product. Procurement professionals in the supply chain of these companies will be playing a key role in this! Since supply chains in the food industry are becoming globalized, I am interested to see how companies deal with natural disasters or other events that may disrupt the supply chain. This was a great article, Mr. Bowman
Thursday, 19-02-15 11:53
This was a very thought-provoking article, Mr. Bowman. As an aspiring procurement officer, I believe that all procurement professionals have a vital role in the operations and success of a business. I am shocked that many CFOs often “grade” their purchasing officers solely based on the money that they spend! I agree when you point out that purchasing managers add value to a company through managing external relations. I believe that procurement professionals also add value by ensuring the quality of all sourced materials and services. Furthermore, I think that procurement professionals play a key role in corporate social responsibility. Sourcing materials and services from unethical suppliers can have a disastrous effect on public relations and reduce revenues! I enjoyed reading this!
Thursday, 19-02-15 10:56
The new generation of customers expects products immediately. Their patience for waiting has slowly diminished due to the increasing e-commerce market, which in return has caused manufacturing companies to want to reduce their waiting time and outsource their products closer to home. By reducing their transportation costs and shortening their supply chain, companies will hopefully have a larger budget for labor costs and source their manufacturing in-home, or in countries in close proximity. Since manufacturing is showing a trend of leaving the China/Asia region, I think that many US based companies will move their outsourcing to countries like Mexico, which could ship their products to the US in less than a day's time. Since Mexico has a significantly lower labor wage than the US, and is still comparable to that of China, its closer proximity will bring a competitive edge to manufacturing while they compete with the upcoming e-commerce market. However, this kind of regionalization will come at a cost and may be a risky move that only well established, larger manufactures can handle.
Thursday, 19-02-15 02:27
I agree that nowadays, retailers are getting more and more competitive in terms of shipping in order to grab more market share. However, one recent option I've seen Amazon begin to offer is free No-Rush Shipping for Prime members. The order is delivered in 6 days rather than 2, and the customer receives $1 credit to use on Amazon Instant videos, books, and music. This is a move that takes Amazon in a different direction. Instead of competing with faster delivery, Amazon is offering a net savings for the customer, which in the end, probably ends up saving Amazon shipping costs in the long run when compared to free two-day shipping. This new move seems to forecast a potentially different direction the competition will take in the quest for market share.
Thursday, 19-02-15 02:22
I think many of the companies that decided to outsource production to China and other Asian countries were initially blinded by cheap labor costs and vast manufacturing capacity and jumped on the opportunity without developing a comprehensive expansion strategy. Non-market strategy wasn't completely integrated into global expansion market strategies and companies are now paying for their oversight in this facet. For example, the Foxconn plant in Taiwan has been engaging in unfair workplace practices to cut cost and maximize production. Foxconn's production numbers look fantastic on paper, but the non-market aspect of the plant is atrocious. Conditions became so bad at Foxconn that a mass-suicide was planned by workers in January 2012. There was a massive amount of criticism from the media and every company that had a stake in the plant was crucified publicly.
Now that labor prices are rising in Asia, companies will most likely turn their focus to Latin American countries, just as the article cites. To prevent another Foxconn-type situation, firms moving into Latin America need to fully integrate a robust non-market strategy into their market expansion strategy that aligns with their values.
Thursday, 19-02-15 02:10
I definitely agree that the shift to the cloud will occur eventually. Younger generations more easily embrace cloud technology, and as they move into the workforce, they will bring their use of the cloud with them. Therefore, more and more companies will begin using the cloud for their supply chain management needs.
It seems like Oracle's first customers may be younger, smaller companies who can more easily embrace the culture change. As mentioned in the article, the cloud also requires high levels of communication within the company, which is more easily accomplished at smaller companies. However, this does not take into account the cost of the cloud software, which may be hard for small companies to take on.
Thursday, 19-02-15 00:34
Wednesday, 18-02-15 19:46
Wednesday, 18-02-15 19:45
Tuesday, 17-02-15 09:56
To even entertain the notion that drone delivery systems are a feasible feat is a tribute to the technological innovation that has transpired in this day and age. However, as noted by the article, there are several obstacles that must first be overcome in order to aid in the fruition of unmanned aircraft systems for commercial use. I understand that the Federal Aviation Administration has its concerns over public safety and general privacy rights, but then why so stringent in regulating corporations like Amazon and Google (each of which are highly regarded in their corporate social responsibility practices)? By not acknowledging their request for domestic testing, the FAA has driven companies such as these to seek foreign implementation. Though, in this overseas alternative, we may find a methodology that suits the proper execution of drone delivery systems via UAS’ in the USA.
Monday, 16-02-15 14:47
It is so interesting to see the development of procurement officers within the business world. Procurement officers are definitely developing skill sets and taking initiative to transform their position from a cost-cutting role to a value-adding role. One skill set that is transforming this role is building and investing in supplier relations. As stated above, ninety-two percent of the top performing officers believe they can add value to their suppliers and some even go so far as to seek new technology from them. This shows a vibrant relationship with the supplier who will repay the business by trusting them and not just trying to cut cost, but give their partner the best value they can. This was a very insightful and interesting article.
Monday, 16-02-15 13:43
It seems like consumers have increasingly come to expect a short delivery time, thanks to things such as Amazon Primes next day delivery. Because of this, I think it is a safe assumption that companies will have to work to reduce lead times and increase market responsiveness to keep up with the consumer demand for shorter delivery times. It is likely that companies will opt for regionalization in order to reduce transport costs and lead times, but there are plenty of other issues to consider. Having several facilities around the world creates a whole new set of managerial challenges and risks. Larger companies, such as Caterpillar as Sandy said, would be able to handle these new costs and risks, but other companies might not be able to. Alternatively, small companies with lower overhead would be able to afford manufacturing directly in the consumer market. An example of this is Harley-Davidson, who, even though they could save money by outsourcing, chose to remain in the US to protect their "All-American" brand.
Monday, 09-02-15 05:32
Increase in productivity is an amazing things for every SME's and large organization.
Wednesday, 04-02-15 16:12
There is some interesting thinking on Oracle and a number of other providers available from a recent study by Nucleus research. I have attached a link to the study [ bit.ly/1zujoJx ]. In addition to the provider study it also offers some insight about what is happening in the supply chain space. It's a nice add-on to this excellent article.
Tuesday, 03-02-15 12:06
I am a large proponent of cloud based services and solutions....coming from an IT/SCM role where maintaining of systems and solutions was always in a lag of upgrade and hardware refresh.
The benefits of SaaS can definitely be obtained if 'IT' is not at the forefront of an organization. It can also drive disciplines within the business processes because you have less availability of customization, over configuration.
I don't believe you can do everything as SaaS, but a combination of true cloud and a miz of managed services or infrastructure as a service, can certainly add controls to an IT budget and help provide governance in maintaining solutions and processes
Monday, 02-02-15 12:28
An interesting comment on the yes/no debate about the cloud. Early adapters may win out, as long it is safe. Can I copy this into my School VLE for students?
Tuesday, 27-01-15 17:05
Companies are shifting manufacturing closer to customers because localization often reduces total cost therefore many times it makes more sense to produce a product in the market it is going to be consumed in.
Large companies like Caterpillar use this concept to produce near consumers, shortening supply chains, reducing shipping and moving products to consumers more quickly.
Changes in the global manufacturing market, technology and the benefits of locating manufacturing closer to customers are giving companies more options to reshore and manufacture competitively. Companies are investing and reshoring back to the U.S. because it makes good economic sense to do so.
Automation, Lean processes and new technology are tools that can increase productivity and competitiveness. When productivity is increased, it reduces the Total Cost vs. offshore and boosts competitiveness.
Wednesday, 21-01-15 16:33
Autonomous trucking? I would wager there is nobody old enough to read this article whom will see that technology successfully used in automobiles let alone trucks in their lifetime!
All the new legislation supposedly aimed at carriers is in reality destroying the lives of good drivers. Take Idaho for instance,
New legislation making over weight tickets a criminal charge was "aimed at the carriers", but promptly puts a criminal charge on a drivers record! No fine to the carrier, and if the carrier runs Canada/US border, then that driver is out of a job!
Ma and Pa outfits that cannot afford to maintain equipment just keep on chugging along while drivers get low pay, slow pay, and in a lot of cases they the brunt of the penalties!
We have the wrong people heading up these "studies" and passing new laws, and we are all paying for their shortcomings!
Wednesday, 17-12-14 14:22
The authors discussion on Industries going paperless is good, in fact from small to large sized companies must take ownership to protect the environment and ensure their suppliers also meet this requirement.
Sunday, 16-11-14 07:54
Closing the supply loop will cause a gigantic impact on the practices of doing business and our life. We should look beyond the financial impact, but also the ecological, environmental and scientific developments in this process. However, to improve the efficiency in business sustainability, this step should start from the product designing stage instead of the disposal stage. Governments and businesses should attach real attention to this issue instead of just putting up shows.
Monday, 10-11-14 22:25
This article hits many good points. I agree that all the practices listed are important for the fast paced future, especially found managing IP and patent protection to be most interesting. Maintaining security is extremely imperative because if not done correctly, it could cost a company millions of dollars.
However, I think another good practice would be continuous data gathering. I feel that gathering data at any time is no harm, but really helpful when needed. There's much to find about sources, suppliers, competitors, etc. Especially for the procurement side of supply chain, being on the look out for better deals is a must. Another element that ties in with this practice is knowing how to negotiate well. Negotiating well will be what drives a company to success.
Sunday, 09-11-14 18:59
Hi Robert Bowman,
My name is Ruby Arora and I am a Supply Chain Management student at the University of Texas at Austin.
After reading this article a couple of thoughts came to my mind. I have always been very interested in the ethics of supply chain management and as your article highlighted, this inevitable wage increase will raise the pressure for discount retailers to reduce their costs even further. Because of this increase in pressure, procurement professionals will be working closely with suppliers to reduce costs or find new suppliers with lower prices, which can all ultimately affect the quality of items. This raises two ethical concerns for me. First, it forces a lot of pressures onto suppliers to perform at a lower cost or else they will lose a customer. Many times, for global suppliers this can lead to ethical concerns about how the constant pressure to reduce costs affects supplier's workers mental health and well-being. Secondly, with the goal to reduce costs to meet the new minimum wage, retailers may decide to sacrifice quality of items to achieve their goal. In addition to decreasing the cost of their goods, another effort by retailers to make up for the increase in wages may be to increase their selling prices. Putting these two together, ultimately, they could be selling lower quality products at higher costs.
There are many ethical considerations that arise from this topic, but I just touched on a few. I think this article was great insight on what is to come regarding how wage increases will affect retailers, and I enjoyed looking at it from an ethical perspective.
Thank you for sharing!
Sunday, 09-11-14 16:11
Hello I'm a Supply Chain student at the McCombs School of Business and I really enjoyed reading this post. I was just wondering:
Suppliers are already feeling the pressure from big retailers like WalMart who use their buying power to get savings on their own bottom line. The suppliers are more likely to feel the impact of a higher minimum wage than big retailers are, what are some ways suppliers can cope with the change?
Friday, 07-11-14 23:07
Hi Mr. Bowman,
My name is Francisco Martinez, I am a senior undergraduate student at McCombs Business School at The University of Texas at Austin. I've noticed that your article involves two conflicting ideas at Apple. While Marketing wants secrecy for Apple's product, Operations and Procurement would like to have diversified production, however this would entail an increase in the risk of intellectual property to be leaked. I believe that this shortcoming could be avoided if Apple could bring some of its production back to the US, where laws on intellectual property are stricter and easily suable, or like you said, to Mexico. This would not only diversifying your production, but shortening the lead times for any variation not anticipated in forecasts. For this, Apple would have to incur some costs in order to qualify suppliers, but the amount of revenue made from extra sale, could easily cover it. Apple needs to look in the long term and ask themselves if their current production model would be able to sustain them, or diversifying it, and act upon it as soon as possible.
Thursday, 06-11-14 18:39
Apple's supply chain can be directly tied to its bottom line. Since outsourcing production involves knowledge sharing on Apple's strategically critical design process, Apple faces the issue of free riding if secrets are leaked to other companies or suppliers. However, adding an additional supplier in Mexico would reduce lead time to effectively meet its US-centered demand without backlog. Apple needs to conduct a spend analysis to calculate to balance between creating artificial scarcity and maximizing profits. Alienating loyal customers could be harmful in the long term - Apple's empire, after all, is not guaranteed to last forever.
Ultimately, Apple should evaluate its strategic sourcing criteria and at least consider other suppliers. Foxconn cannot sustain unlimited labor hours, and Apple needs to remember its focus on providing innovate products to its consumers. I do wonder, though - are contract agreements enough to protect intellectual property? That's the core question Apple needs to answer.
Wednesday, 05-11-14 22:47
Most accurate prediction by a leading economist in the recent past was that of Paul Zane Pilzer's. He rightly predicted that the wellness industry would surpass the "sickness industry" - ie the traditional health care industry which is cantered around treating the illness of the people rather than ensuring the wellness of the people at the first place. We can see, with the growth of nutraceuticals, fitness centers etc, the predictions that he outlined in his book wellness revolution is already coming into being. Day is not far when the wellness industry will take over the illness industry. Not all the economists need to be wrong..!
Monday, 03-11-14 13:10
Regardless of the popularity and the efficiency I do not believe a physical store can ever be replaced completely by online shopping. However I agree that retailers need to be more intelligent about the sizes, distribution centers and items they offer. Retail stores need to focus on what specific experiences and needs only they can offer as opposed to online shopping and take advantage of it; they must look at the aspects that cannot be replaced by online shopping such as trying on items or seeing them first-hand. I feel the case is similar to CDs and hard-copy of books, although there exists a completely digital copy for these items, they cannot fully be replaced by them. I believe retailers could decrease their in-store stock as it is also true that some people might just use the store as a “showroom” and will actually buy online. Additionally I agree that they should not step away from products that are e-commercial friendly, as these items are becoming an essential part of our everyday life, and some customers may want to see them up close first.
Paulina Delgado - McCombs School of Business, Supply Chain Management Student
Wednesday, 24-09-14 14:29
Robert J. Bowman,
I enjoy your blog. I am a student at the University of Texas at Austin studying Supply Chain Management, and I found this article particularly interesting.
In response to store-bound retailers attempting to offer products that are not e-commerce friendly, I agree that this is unrealistic with the progression of the use of technology in the world. Those retailers should, rather, focus on minimizing physical stores and improve timeliness of deliveries, straight from distribution centers. This has a wide affect on the suppliers and buyers because they will need to find faster and more efficient modes of transportation as well as be able to respond quickly to a change in the market and demand. These retailers may even consider having less distribution centers to cut down extra costs and send the product from a few central distribution centers to the consumer.
In response to retailers with a wide variety of brands, I agree that the Apple Store and other brands are adding competition. However, this does not mean an end to Targets and Wal-Marts. These retailers will have to shift their focus to improve consumer experience at their stores, as Apple has done, or to become a strictly online service. The retailers must find what it is that brings consumers to the stores and how they can use this to cater to the consumers desires. Also, rather than seeing the internet as the "Big Bad Wolf", it would be more beneficial for retailers to creatively use the internet to their advantage.
Thanks for the article!
Tuesday, 23-09-14 22:22
It was interesting to see that stores have the option of same day delivery mostly because of the competitiveness factor instead of providing for the customers' wants. I believe that most people do not bother with the same day option due to the costliness of the delivery. It would be more practicable for groceries since they are perishable. However, with commodities such as clothing, customers would rather try it on before buying, which cannot be done over online purchasing. Customers would not be willing to buy clothes or shoes online without a good solid returning/exchange policy. Stores must make returning or exchanging extremely simple and beneficial to the customers in order for them to purchase it. With a return/exchange policy like that, it would be really costly for the stores to provide delivery from and back to the store. Nevertheless, they would need to provide this to maintain good customer service.
Also, to provide same day service, stores must make sure they have all the inventory needed with them. If same day delivery actually were to be big someday, there must be warehouses at many locations globally that is frequently restocked. Once a customer buys a product, that product must be restocked quickly before the next customer buys the same product with a same day delivery. These stores would have to have a really good solid relationship with their suppliers to get products promptly and at reasonable prices. The stores would also have to make a decision on how much of a product they should hold depending on the turn over rate of the inventory.
Tuesday, 23-09-14 01:05
I am wondering if Mr. Bowman works for the DNC for his day job because reading this article makes me feel like I'm listening to a campaign speech.
Get used to it? Really? Remember, as retailer prices go up, prices go up which hurts the people intended to be helped.
This isn't the first article I have read from SupplyChainBrain that makes me feel like this website is coopted by the left.
Simply put, I want balanced supply chain information. I don't want to be told to "get used" to anything; especially when we shouldn't have to get used to it. Remember, Mr. Bowman, half of the country doesn't buy into the ideology of the left.
I am pro-business. Period. Minimum wage jobs are not supposed to be jobs that people stay in all their lives. The idea of a living wage is such a broad target; some think $25 per hour is a living wage. Do you really think retailers can afford that? Plus benefits, etc....
Please SupplyChainBrain.... check the Democrat policy pushing at the door.
Monday, 22-09-14 16:52
I think this is a great opportunity for large companies, with extensive supply chains, such as Walmart to go back and reevaluate some of their current processes. If the company has a hard bottom line for wages, then there is the option of cutting back on number of employees and streamlining processes to make their work more efficient. With a smaller work force, those employees will reap more benefits, and hopefully that will motivate them to perform better. As far as processes go, SKUs can be managed and organized by technology, like by robots or better sorting. If technology is implemented, then there would be less of a need for employees. Large retailers can launch apps that show whether or not the desired items are available in store, and the customer could purchase via web and just pick up in store. These new technological options help to optimize purchasing and utilize less physical workers.
If cutting back on the workforce is not an option, perhaps the companies can reevaluate their business models to see where else they could reduce costs to help compensate for the bottom line. Possibly changing suppliers, looking for new suppliers, ordering larger quantities, shipping larger loads, etc.
Very interesting article, and looking forward to seeing how this plays out!
Friday, 05-09-14 13:58
This is a great article. I agree that in tracing the minerals back to the mine it would be extremely beneficial to have the smelter validation program set up by the EICC.
Tuesday, 02-09-14 09:48
Great to see The PRC rejected their arguments and let the changes stand.
We needed more competition and it looks like we will get it. All the extras that the big boys charge usually are not in the USPS charges (free Saturday delivery, no residential charge, no fuel, no extended area) it add up.
Monday, 11-08-14 06:18
It's indeed a very good article, however the proposed Best Practice is not valid till 2025 with such rapid changing environment. I would consider one of the elements which is missing in the list is People development. With such rapid changes in environment, people should develop their skills to keep up the pace and in every organization, there is a need to have a team of people who will focus on people development, to retain the talent as well as develop them to make sure the progress is in line with the pace of external world.
Monday, 19-05-14 10:05
I'm still confused as to why we care.. Aren't there atrocities elsewhere in the world and even here at home we should focus our concerns on? How did the DRC become important and vital to U.S. national security? More important than say education or (insert cause)? Seems more a drain on profits and a waste of time. ($4 billion to implement and $200-600 million annually thereafter - Washington Post)
Wednesday, 30-04-14 14:52
I found this article very interesting mostly because, Whirpool is such a highly sensitive market to consumer demand. Since it is a commodity product, and a household brand, the logistics heavily involve sourcing to changes in consumer demands and pricing competition. I found this part very interesting, "With Whirlpool under constant pressure from competitors who manufacture abroad, smart logistics management becomes an important weapon in its struggle to control costs. The company’s products are relatively lightweight, cubing out trucks without approaching vehicle weight limits. Whirlpool is addressing the problem by working with other shippers that can fill out the loads with smaller, heavier items." By restructuring their weight limits when shipping, will hopefully lower costs among competitors and really bring Whirlpool to the front for consumer products.
Wednesday, 30-04-14 12:09
What’s essential to food safety is a two-pronged approach that addresses traceability and transparency. Traceability offers companies more than positive brand image – it benefits them economically as well. According to a study in 2004 by the U.S. Department of Agriculture and numerous studies by the FDA, traceable supply chains have seen positive, long-term revenue growth. Comparatively, transparency can help ensure food safety as well. According to a study published in Advanced Engineering Infomatics in 2010, there are four major areas of improvement that will help create more transparent supply chains. First is environmental reporting and ensuring that there are common standards of reporting across nations. As Bowman mentions, the FSMA was the FDA’s attempt to create this standard. Secondly, there should be lifecycle assessments that help determine standards both horizontally and vertically throughout the supply chains to get an idea of how different vendors compare to one another. Third, correct labeling, as mentioned in this article, is essential. Every aspect of the supply chain impacts how food is labeled, and therefore, more correct and explicit labeling can help increase transparency. And lastly, implementing traceability systems helps build up brand image by fully disclosing a food’s information to consumers.
I appreciated Bowman’s criticisms to the FSMA. It does seem unlikely to achieve universal standardization within this industry. Therefore, I also agree that the responsibility then falls to the food suppliers and keeping an “eye toward identifying the weak links in the chain” to ensure safe food is supplied to consumers.
For an interesting perspective on the FSMA from small, local farmers check out this video: http://www.youtube.com/watch?v=zyrGgHdTN_A.
Wednesday, 30-04-14 10:17
It is interesting to know there are now ways of calculating a companies green house gas emissions. Much more importantly is that organizations are willing to set their scores public. This as, Michele Carchman-Hinks mentions, allows for other organizations to benchmark against each other in their footprint impact. This can be a good step towards more environmentally conscious industries and a battle to be pollute less. In a time where the effects on the environment is become of interest to the end consumer this can definitely give a company a competitive advantage.
Wednesday, 30-04-14 10:16
I agree with the case for free as well.
Wednesday, 30-04-14 01:17
Although I agree that consumer demand for same day delivery given today’s fast marketplace pace does seem inevitable, I have sincere doubts that it will be cost-effective in the near future. In fact, Mariana’s comment below highlights even more costs and concerns than previously noted in the article. I was interested to read that the drive towards same day delivery has less to do with consumers’ pull demand and more to do with retailers’ and carriers’ attempts to be competitive against one another. Speaking as a consumer that often shops online, even when a retail store is within driving distance, it seems less convenient than ordering something from the comfort of my home. Having products arrive at my doorstep after 2 days (I am a loyal Amazon Prime member) is already changing my shopping habits; getting my orders in the same day would probably drive me away from certain retail stores almost altogether. Therefore, I have several facets of this trend that I would like to keep an eye on:
1) How soon will widespread same day delivery become logistically possible and cost-effective?
2) In what format will same day delivery manifest itself? Will retailers build more DCs, or will retailers collaborate with physical stores or carriers?
3) Which retailer or carrier will win the race to same day delivery, and how long will the resulting competitive edge last?
4) If same day delivery is implemented on a large-scale basis, how will consumers’ shopping habits change, and what effect will it have on physical retail stores?
However, as with most things, only time may tell. As a customer, I can only hope that same day delivery becomes possible sooner rather than later.
Monday, 28-04-14 10:32
Very interesting article. Some detailed information that you usually don't see addressed.
Sunday, 27-04-14 17:28
Delivering on the same day a customer orders sounds ideal; however, retailers have to consider many other issues. Ordering through the internet, and having delivered on the same day or picking up on the same day seems the ideal for the customer; however, how efficient is it for the retailer. Every retailer would have to build large distribution centers, as Amazon, to meet demand on time. With this huge distribution centers, retailer have to keep in mind costs. It not only costs more to set up more warehouses, but also keeping inventory. Retailers will have to forecast demand of online sales accurately in order to have sufficient inventory to meet demand. In my opinion, same day delivery works for commodity products and specialized retailers, for example grocery. Having a same delivery on a department store for example, will increase costs very high. A retailer who wants to change to this model, should know very well their market. If people prefer to see the product and try it on before buying it; this model will not work. It is important for the retailer to know the market, and realize that they will have a competitive advantage over their competitors with this new business model. It is also important to have an elaborate contract with the customer, with clauses explaining any problems if the product is not delivered on time. The retailer should look at its geographical location, and consider any risks, before submitting themselves to this type of business. The contract should emphasizes on any type of natural disaster or any force majeure to secure themselves from losses of not delivering on time.
Sunday, 27-04-14 17:06
Very insightful article. Big data and its role in supply chain processes has become an incredibly important tool for businesses. Information gathering and synthesis of that data can certainly transform the demand planning and customer service side of CPG businesses. Furthermore, big data is evolving the delivery process as well. Telematics systems in trucks are providing critical route planning and delivery data to managers allowing more efficient delivery of products. As easy as it is to be "overloaded" by big data, knowing what data to look for and making educated decisions with the data will allow companies to streamline their supply chains.
Tuesday, 22-04-14 19:41
The fact that passenger airlines are switching to widebody airplanes shows that they are focusing their market and profits on passengers, as they should be. They are not trying to compete with air-cargo carriers. I believe that air-cargo carriers should continue to improve their methods as well just as the passenger segment has. The passenger airlines are simply adjusting to their markets demand for more passenger space. The air-cargo carriers will just have to keep researching and developing their side of the market to better fit the needs of their cargo consumers.
It is however interesting that the passenger airlines can still have a small nitch market within the air-cargo market with such little costs for them. That does hurt the air-cargo carriers, but does not necessarily mean they are doomed.
Tuesday, 22-04-14 12:27
@bruce barnett, Science never ceases to question everything. But at least 97 out of 100 scientists agree about the existence of man-made climate change. There's nothing "false" about this conclusion. It's time to move past that debate and start doing something about this critical issue.
Tuesday, 22-04-14 08:36
Before one attempts to justify Climategate aka AGW...anthropogenic global warming, one first needs to verify "misleading facts" so we all avoid international environmental extortion which is what this concept leads too. Those who fell in this pit of nonsense should first look at what those misleading facts that gang is pushing & ask a simple question...why was historical temperature data falsified ? That should end the conversation. climate theory is based on deliberate deception on unproven climate hypothesis being sold as science. None of the claims are supported by "independent" verified scientific analysis & the motive is to force fear (a common stunt). This is nothing less than a cheap stunt to end around the goal of centralized one world govt. as if you need any example, just look what centralized govt in Europe has produced. If that's not enough, venture back to 1993 & the club of Rome where this is outlined with the goal of global govt or verify the statement of prof Dan Botkin...."to get society to truly change is to frighten people with the possibility of catastrophe". Earth does not maintain a static climate, its constantly changing & influenced by solar radiation, moons gravitational pull,cosmic rays, tectonic plate movements, effects of the gulf stream & emissions of volcanic eruptions. Sea levels have been rising approx 1 foot per "century" since the last major ice age due to gradual expansion of water as solar radiation warms & expands the volume of the oceans. While on the subject, why not mention the Boston Globe (Ross Gelbspan) who advised journalist not to report arguments by climate skeptics. Could this strangely be connected in the 1994 UN human dev report....mankind's problems can no longer be solved by national govt....what is needed is a "world govt". UN intergovernmental panel (Johnny Houghton)..."unless we announce disasters no one will listen". And then that infamous Albert Gore ..."the debate is over...the science is settled". Then one must ask Albert about his GIM (generation investment mgt) to manage carbon trading credits...now how in the world would Albert arrange such a convenient myth ? Gore can't debate his critics as he has nothing to stand on & Albert is part of the flat earth groupies. His polar bear scam failed to mention their population has risen 500% but he only spoke of the (4) that drowned. Lets not forget the Arctic ice stunt....its expanding & thicker, that might have something to do with their boat that recently was frozen into the ice in the last several months & had to be rescued at tax payer expense. In other words, the info you are feeding has been "cooked" to support a predetermined conclusion. How can you...Rob Bowman defend a biased science that legitimizes false theory? As the author of this piece, you should be ashamed. Bottom line direction is population limitation. Before anything is "settled" as Albert stated, there first has to be science & science does not support this nonsense, especially when temperatures have been falling. Science never ceases to question, global warming aka climate change aka whatever it will be this month. Besides, what's up with the name changes?