Developing the Super Supplier

A central component of getting your firm to run through its daily operations is the quality of the supplier relationships and the inbound materials that are processed. So in the natural progression of superlatives, if the supplier relationships that were the base description at the beginning of the SCM initiatives, then it is quite natural that we must have by now arrived at the "Super Supplier". Ofcourse, what is the next superlative then? I suppose it would be "Next Generation Total Quality Super Responsive Supplier". Jokes aside, developing supplier relationships are critical to the supply chain, so much so that I view the proliferation of technology into the space with suspicion. This suspicion is not really about the efficacy of the technology that is making inroads into the firm but about its impact on the way that business relationships (the intangible side, specifically) are affected.
The article Developing the Super Supplier at CPO Agenda delves into the issues of who, what and how a super supplier comes about.

"Super collaboration" is the most advanced form of customer-supplier interaction possible. Unlike combative, co-operative and even partnership types of relationship, it aims to create competitive advantage for both parties over the long term, argue the authors - three professors at the IMD business school in Switzerland.

Hmm... create competitive advantage for both parties over the long term? Let's see...

Four conditions are required for super collaboration to take off: procurement has to be focused on enhancing competitive advantage; a genuine market opportunity must exist; all functions in both organisations must be committed to making the relationship work; and a strong communication and evaluation structure needs to be in place.

It appears from the summary that the competitive advantage so developed has more to do with cost rather than differentiation. I'm guessing that the notion of cost employed here is not the lowest price bid but lowest total supplied cost.

Update: Only the executive summary was available and so I cannot access the rest of the article.

posted by AJ @ 4:03 PM 0 comments

IBM's Dynamic Inventory Optimization Solution

I am currently watching a webinar sponsored by the Electronics Supply Chain Association (ESCA) on Dynamic Inventory Optimization from IBM. The Center for Business Optimization (CBO) group has two individuals - Terry Gleason and Michael Datovech, presenting their DIOS (which I suppose stands for Dynamic Inventory Optimization System) tool in a brief manner.
According to the service template that IBM's CBO uses for consulting with clients, they have a timeline of working through an entire engagement in a 6 week timeframe, reporting back the potential savings that could be had i.e. ROI analysis. The actual implementation of the recommendations i.e. to inteface with a SC planning tool or ERP tool takes about 12-20 weeks.
Beth Enslow of the Aberdeen Group also presented during the webinar (before I actually logged into the presentation). According to the slides that she presented:

Interest in advanced inventory optimization is especially strong in electronics and high tech, retail, consumer goods, industrial distribution, make-to-stock mfg, medical distribution, chem/pharm and aftermarket parts.

Update: Just finished the webinar. Was alright - got some more fact based market research, so to speak. The IBM tool had a degree of sophistication that will be lost on line managers who will resort to doing what they know or "tinkering" around to see what fits. Ideally, that makes for contracts for supply chain consultants who can adjust the appropriate distributions to use for modeling and the like.

Let me reiterate a commandment of successful change practice - "Thou shall not confuse those you upon whom you wish to impress change." Perhaps, it should be changed to - "Thou shall not confuse" but that is sometimes too restrictive because in confusing others, sometimes, I see very clearly what the problem is with the issue at hand- call it: a mental clarification through numerous what-ifs that lead only to error.

posted by AJ @ 2:05 PM 0 comments

Creating Competitive Advantage in Supply Chains - Real Differentiation

In a previous post on Creating sustainable competitive advantage in your supply chain, I ended it thinking that the true source of competitive advantage that is available for firms is differentiation. Here is an article by James Conley that describes the competitive advantage created by Apple with its iPod series of MP3 players.

Frog Design's Luke Williams suggests that the "clean" look of this product is an intentional consequence of references to the white ceramic and polished chrome tropes of the humble bathroom design experience—we keep calling the iPod such a "clean design" expressly because it references these materials and finishes

I have always been attracted to the iPod series (especially the Nano) even though I ended up getting the Sansa MP3 player player from SanDisk and I surmise that it is because of the "clean" look - it inspires.
Here is one key takeaway from the article about how Apple might have intentionally created a success from the iPod series:

These reflections on design strategy are interesting, and speculating on future target markets is always provocative. But I suspect that something more clever is afoot; that Apple's design strategy is in line with something we call value transference—a dynamic strategy that can be quite successful in technology markets.

So what is value transference?

Value transference, in a nutshell, is the premeditated use of multiple intellectual property regimes at specific points across the product lifecycle, in order to realize sustainable differentiation.

The article sites that rather than patents, trademarks are a source of sustained competitive advantage because when trademarks are successfully used, they can last a very long time. The authors claim (and I think rightly) that using value transference successfully results in the following:

When done correctly, value transference helps to mitigate the enormous cost reduction pressures inherent in markets with short product life cycles such as electronics.

It is a way of saying - that which created and sustains the object, is beyond the object and there in lies the sources of competitive advantage at least from the differentiation aspect.
Other examples of successful value transference are:

Classic examples of value transference that contribute to enduring brand advantages include the Dolby name in consumer electronics, the NutraSweet red swirl in food ingredients, the Purple Pill (Prilosec and Nexium) in pharmaceuticals, Legos and Barbie in the toy market, and the shape of the Nintendo game boy or the original game controller. All of these now famous brands began as patented products—the Barbie doll included. Achieving this level of brand strength is the result of integrated product innovation and marketing.

So what is the result of this process with the Apple iPod series - it might be right in front of you but until it is put in the form as it is on the site, it just doesn't click. Well, that probably isn't true for everyone but then again.
And thus an icon is born.
Now, the proper question to be asked is how such a thing can be analogized to the supply chain space.
That will be next.

posted by AJ @ 10:35 AM 0 comments

Fine-tuning your supply chain

David Margulius writes about the recent McKinsey Quarterly (registration required) article about the data capture for supply chain in his column titled Fine-tuning your supply chain. Just reading the headline made me think about i2's ABPP system post wherein I was thinking about whether it was really "fine tuning" or "fine tinkering" that managers are upto in the supply chain.

McKinsey research offers:

The problem, according to the McKinsey research, is that companies today not only buy more from far-flung third parties in an effort to cut costs, but they also rely more on third-party contractors to move these goods around the globe. That means critical supply chain data (such as quality, inventory, and capacity) is “locked up in the IT systems or spreadsheets of a dozen or more companies.”

I think this was always a problem (I blame Microsoft for the Excel program) especially with technically clueless managers who have just gotten trained on some spreadsheet or powerpoint tool and know only how to deploy such tools. Another source of the problem is as David himself outlines:

Although the McKinsey report makes sense, it misses the boat in one key area: human nature. Companies, as do people, sometimes don’t want to pass information on to partners for competitive reasons, control reasons, or just for no reason at all.

If you've worked in the business world, you just know that this is true - its just human behavior.
McKinsey outlines its view of best practices for reuniting supply chain data:

1. Fit information flows to supply chain types. For fashion-oriented products such as iPods, for example, focus on IT connections that help you “chase demand rapidly by providing repaid coordination between designers and suppliers.” But for commodities such as TV tubes, focus on cost and inventory data.

In other words, customize your supply chain operating model (that should ideally integrate a supply chain information and data exchange mode) with your business strategy.

2. Develop deep monitoring capabilities, or systems that allow you to pull key data from both your suppliers’ systems and their suppliers’ systems (you’ll probably have to give suppliers incentives to invest in this, McKinsey warns).

How about "bull-whipping" your suppliers as an incentive to developing deep monitoring capabilities. This should really be the only incentive for suppliers to cooperate with you and anything above and beyond that is a premium that you're paying out for reducing the uncertainty for suppliers for free.

3. Think cross-functionally and use detailed scorecards. Your purchasing people may be rewarded for selecting the lowest-cost supplier, but the manufacturing group may be rewarded for keeping inventory low and fill-rates high. They must get in a room and agree on performance metrics to make sure you get all the data you need from your suppliers.

Basic supply chain execution meaning that the supply chain is here and not here. By definition a chain is not one link though the strength of the chain is limited by the strength of its weakest link. If two functional departments are operating together, it makes sense not to incentivize or measure them in contradictory or incoherent ways. There is a thing to be mentioned here about truth - it needs to be repeated or else it is forgottten.

posted by AJ @ 9:34 AM 0 comments

Top 25 3PLs

The top 25 third party logistics (3PL) providers as reported by Global Logistics and Supply Chain Strategies magazine are:

1. Exel, PLC - $13,335
2. Kuehne & Nagel - $10,700
3. Schenker - $10,700
4. DHL Global Forwarding - $9,500
5. UPS Supply Chain Solutions - $7,700
6. Panalpina - $6,320
7. CH Robinson - $5,689
8. TNT - $4,270
9. Expeditors - $3,902
10. Schneider Logistics - $3,852
11. NYK Logistics - $3,560
12. Penske - $3,171
13. Eagle Global Logistics - $3,096
14. Nippon Express - $3,000
15. PWC/Geologistics - $3,000
16. Bax Global - $2,899
17. UTi Worldwide - $2,785
18. Ryder - $2,181
19. Caterpillar Logistics - $2,100
20. Kintetsu - $2,025
21. Menlo - $1,340
22. APL Logistics - $1,290
23. Maersk Logistics - $800
24. SembCorp Logistics - $713
25. Fedex Trade Networks - $672

posted by AJ @ 11:24 AM 0 comments

Marrying business cycles with business activities

InformationWeek's Q&A with UC professor Peter Navarro about Riding the Business Cycle more wisely...
According to the professor,

Enterprises can be more competitive by better managing the ups and downs of the business cycle, notably via sharper control of inventory and capital outlays such as technology spending.

Well, that's something that harkens me back to my days working in the semiconductor equipment industry which is notorious for its expansion and contraction cycles. I went through two cycles of expansion and contraction which was more magnified in the South-East than in the US. The management in my firm was very keen on synchronizing their business decisions with the cycle because it was simply impossible to sit on equipment worth sometimes a quarter of a million swiss francs each and hope to ride out the cycle. The cycles in that time were getting shorter and shorter in time periods. However, my firm had one foot stuck firmly in the past as they manufactured their machines exclusively in Switzerland which meant that even though the quality of the machines were well acknowledged, agility and speed to market were not up to the competition. The market had no problem informing us of the same too.
Professor Navarro avers:

But timing, very often, is as [important] or more important. In terms of inventory-type management, the kind of micro approach to managing inventory is to increase your inventory turnovers as much as possible all of the time. In fact, what you want to do going into or out of a recession is to cut inventory more subtly. When you are coming out of a recession, you want to be building up because you want to be the first on the stock shelves and have the opportunity to sell.

Easier said than done. Imagine the plight of an inventory manager acting contrary to all the information he is getting from the marketplace and his peers in the industry. I'm a fan of contrarian investing but I've also found that investing contrary to the market is no easy thing - fear, herd mentality, emotion - they just overpower the rational decision making process. However, there is something else that is missing - in stock trading parlance, it would be, "Never catch a falling knife" or "Don't try to call the bottom". If you called the bottom or the top as the case maybe, you'd reap the maximum benefit but then you'd also be trying to catch the falling knife. Nothing like this could work without involvement of the top management but then again that would mean that if the timing were wrong it would be their heads on the chopping block with inventory write-offs and the like. I don't think that they like their heads getting chopped no matter the bounty of future reward.

You can't wait until good times are back. Moreover, recessions tend to be shorter than expansions, so there is a window of opportunity there. If you move three, six or nine months faster than your rivals, then you've got them.

Well, that's probably true from government statistics but I don't think thats the case with reality (Or that's what I think of government statistics). Official recessions are short and recovery is swift. Take a look at this chart and then tell me that recessions have been swift uniformly.

One thing is certain as we speak. Looking ahead, there seems to be a real chance of a recession looming not in the distant future (like the end of the year). That means that companies ought to be tightening up right now but then government data reports some of the lowest unemployment rates (Ok, I have a quibble with the government data on how unemployment is measured) and from my experience firms have opened up their hiring again. So who's cutting back right now in the industry at large? I'm seeing more furious M&A activities at this moment instead.
So what should business executives be paying attention to according to the professor:

One of the things I preach is that executives need to be attentive to economic information on a daily basis, and it does not take a lot of time compared to the payoff. The weekly Economic Cycle Research Institute (ECRI) has two really good indices for businesses to keep their eyes on. The first is the Weekly Leading Index, and the second is the Future Inflation Gauge. Together, they provide executives with a simple but powerful forecasting tool.
In addition, the yield curve, which measures the relationship between short-term and long-term interest rates, has a tremendous amount of information in it. The Federal Reserve determines short-term rates, while long-term rates are basically determined by thousands of savvy investors betting billions of dollars on the direction of the economy. When you get the unusual case of an inverted yield curve, where longer-term rates are actually lower than short-term rates, this is can be a sign of a coming recession. An inverted yield curve has, in fact, predicted five out of the last six recessions. ...

Here's something more that Professor Navarro has to say about using the supply chains themselves as forecasting tool:

A well-constructed supply and distribution chain can be its own forecasting tool. I urge your readers not to think of the goal of supply-chain management to always inventory as slow as possible just to tighten, tighten and tighten. In times of recovery, economic recovery and expansion, you actually want to decrease your inventory turnover ratio. But that is not the goal in and of itself. The goal essentially is to move more products into the sales channel at a time when you think demand is going to be moving upward. That way, you can push out your competitors and take advantage of the pent-up demand that gets unleashed. This goes to the point of macro-managing vs. micro-managing your inventory. I think that is a really important distinction, because businesses tend to focus on micro-managing their supply chain, in a sense that they are always trying to squeeze things down, when in fact it is often better to move things up.

I think businesses to a great extent do this that is build up inventory in anticipation of great sales coming up but whether they do this in concert with business cycles I cannot say. However, what I have seen is that there is no risk management applied to the efforts to ramp up or ramp down. I'm looking into how I can adapt stochastic optimization into supply chain design and development and that would address the matters of uncertainty that crop up with business cycle forecasting.
In conclusion, I think that the Professor has some great points and insights to offer but then again do those recommendations jive with the behavior of man in general. I think what the Professor is advocating is contrarian business cycle management or efforts that go towards that. But there's a reason why there are only a few good contrarian investors and that's because there are only a few good investors to begin with.

posted by AJ @ 10:47 AM 0 comments

Things that make you go hmm... - What is i2 upto?

SupplyChainDigest reports on what i2 plans as its "Next Generation" solution in the supply chain space.
Whatever i2 is pushing is based on its Agile Business Process Platform (ABPP) - so it helps to ask what exactly is the ABPP? ABPP is explained on i2's website as:

The i2 Agile Business Process Platform is a finely tuned, synergistic development suite designed to support new-generation supply chain management solutions.

Alright, what does that distil down to?

This new-generation platform functions much like a "factory", in which standardized application components such as data models, business rules, user interfaces (UI), and business workflows can quickly be assembled and then adapted to meet company-specific business and market needs. The platform can bring greater speed, agility, quality, and cost-efficiency to any supply chain.

I have a lot of experience, way back in 1998-2000, working with Labview from National Instruments which is a prototype systems software development tool that I used in the R&D labs. And the above description by i2 sounds a lot like a Labview type of environment within which a business can structure its supply chain planning, design and development processes. More details about the ABPP:

The platform makes up a comprehensive environment for supply chain management application development, including:
Core platform services. Including distributed process modeling, execution and monitoring, business rules definition, and web and rich-content UI generation.
Data services. With extensive supply chain data models and processes for validation, synchronization, staging, and aggregation.
Integration services. From bulk data transport and mapping to web services support for messaging and generic EAI.
Application development. With a proven studio environment for the integrated development, modeling, testing, deployment, and maintenance of new solutions.

Now, that is something to look forward to and I suppose it was bound to happen sooner or later. However, I would like to see how successful i2's efforts are going to be in bringing a client's organization up to speed on using even half of the functionalities described above. Will it turn out that i2 itself would have to invest a significant portion of resources to develop templates that will be adapted by the end-user. Or will there be special programmers such as ABAP programmers who do such customization. Time wil tell.
Back to the SupplyChainDigest article:

John Cummings of i2's chief marketing officer says, "Historically, not enough of customer spending on SCM solutions went to true process innovation. Next generation supply chain is also about trying to change that."

So here we have the notion that process innovation is going to be spurred within a firm by bringing in a tool from i2. Really? I don't think so. What could happen is that in firm's that have truly grasped and implemented process innovation is going to find i2's tools more than helpful in building up a significant competitive advantage. But the source of that competitive advantage resides in the process innovation that prexisted the arrival of a tool but the extent of success derived would be greatly assisted by a tool such as that envisioned by i2.

John Cummings continues, "If you look at the Plan-Do-Check Act model, we've always been able to deliver the "Plan-Do" part, but not necessarily been able to close the loop on that and get to "Check-Act".

All he is saying is confirming the view expressed above. The success of the PDCA model, a continuous process improvement methodology, is that it is a competency that pre-exists any tool that is brought in from the outside. In fact, I'd think that it is not dependent on any tool. But the next sentiment gets my undivided attention:

Now we like to do what I call "managing while tuning" the supply chain, tuning all the parameters in the planning cycle to make sure you're getting the right answers.

I'd hazard a guess that John Cummings has a systems background of some sort, either in education or in some previous work experience capacity. "Managing while tuning" is so fine an art which is unfortunately not taught in any school except in control theory and perhaps then only for control systems and not for general systems that abstract control models - such as the activities of the firm. However, in the world at large, we usually "Manage while tinkering" which is just about the opposite of "Manage while tuning" which implies a strong grasp on the fundamentals of how to structure and execute the firm's activities. But I'm impressed at the sweep of what i2's tinkering with here.
More from John Cummings:

What struggled a little bit with what to name it, but it’s really an integrated planning and execution environment. We went from MRP to ERP, which is essentially an execution environment, then to APS [advance planning systems], which are planning tools. Now, we’re looking to combine those environments, and the agile business process platform for us is essentially the glue that enables you to do things like demand-driven strategies, combine lean and theory of constraints strategies at the same time, these kinds of things.

Glue? I think given the sweep that this next generation tool is aiming at and various disparate philosophies that its trying to bring together, glue severely underplays the effort - call it the wholethingamajig thingy instead because that's what it truly is. If I had to look at i2's strategic product positioning, I'd say that such a tool, if successfully placed, would turn SAP/ORACLE into a database product with a few stored procedures that interconnect different business departments or units.
I'm impressed!!
McGrath i2's CEO adds:

The world changes so fast. With closed loop, you are able to continually update those parameters based on accurate, updated data. You just can’t do that manually – it would take armies and armies of people. So this is a case where you aren’t optimizing in total, but you are enriching a portion of your supply chain with fresh information.

This is control systems methodology writ large because the essential character that is lacking in business systems is defined feedback channels and how they're analyzed and insights generated. So what i2 claims to do is to go from Open loop systems planning, design and execution to closed loop systems, planning and design.
Now, the question that I have for i2, is are you implementing a Gopinath/Laurenberger observer for the ABPP? God, I wonder what that looks like. I'm sure going to brush up on my control theory.

posted by AJ @ 4:52 PM 0 comments

Logistics Cost Survey - 2006

SC Digest released its Logistics Cost Survey for 2006 in March of the year. I'm catching up on it here.

posted by AJ @ 4:07 PM 0 comments

Drucker on Real Transformation

Bill Waddell at Lean Affiliates writes about Principles for Real Manufacturing Transformation:

Sixteen years ago, Peter Drucker's article, "The Emerging Theory of Manufacturing", appeared in the Harvard Business Review. That is probably about the right incubation period for the rest of us to catch up to his thinking. Drucker points to four principles that defines what's needed for real transformation, and establishes the critical role of the chief executive. These principles are:

1. Integrate the factory into the total value stream


2. Instill a statistical quality focus across the entire company


3. Implement a completely new accounting model


4. Treat the entire business as a system

Remember that Drucker is writing this at about the time that Six Sigma had just appeared on the scene but his recommendation seems to be spot on. Bill goes on to elucidate the differences between looking lean and being lean and how the above principles, proposed by Drucker in his "The Emerging Theory of Manufacturing" are essential to a lean transformation.
1. Integrate the factor into the total value stream: A quote from Taiichi Ohno of Toyota captures the central thought here -

All we are doing is looking at the time line, from the moment the customer gives us an order to the point where we collect the cash. And we are reducing the time line by reducing the non-value adding wastes.

. Bill calls this idea - "from call to cash", meaning that every activity that occurs in the intervening period and process space is evaluated on the basis of its integrity with respect to the value to customer that each activity confers. Such totality begs for C-level executive involvement, not in sense of micro management but in the authority conferred to such a process overhaul.
2. Instill a statistical quality focus across the entire company: Ever since the surpassing of Newtonian physics, scientists have been engaged in the description of the natural world through statistical techniques. However, the education system relies primarily on the promulgation of facts implying the completeness of the description which actually only statistically implied. Its nice to see that businesses that imbibe this statistical approach to their activities are achieving coherence with the kind of descriptive and prescriptive pattern inference also called science. Though, I think that the day is so far off into the future when accountants shall describe a firms financial activities in statistical terms - what a sea change that would be? The other key takeaway is the relentless focus on quality that such statistical processes describe.
3. Implement a completely new accounting model: Accounting is quite integral to how management decisions are made and how they're represented to the world at large. However, if even half as much continual transformation and improvement were carried out in the accounting departments as are carried out in the manufacturing department, the manufacturing department might be four times better than it is today. Yes, the ratios of supposed benefit are imaginary. However, that management often makes decisions based on accounting gimmickry is and should be the object of scorn because accounting doesn't report information in a way that lends itself to decision making. While accounting should be about informing business decisions, I suspect accounting is really about accounting. And that's Drucker's view as well though I suppose I am twice as cynical as he is prescient.
4. Treat the Entire Business as a System:The central point here is that the manufacturer within his ecosystem provides a solution over and above providing a product/widget/service. Therefore, a manufacturer is as much part of the solution as he is part of the problem that crops up because of a particular deficiency in the solution that he provides. The expectation of a customer is not how finely finished a product might be (if that were the sole contribution of the manufacturer) but that it meets or exceeds his expectations of product peformance and value.

In the end, abstractions such as performance and value are what the manufacturer or business is aiming at fulfilling. The problem with abstraction is that people abstract without particular attention to reason or logic. One part of the business should be about addressing those abstractions in a value laden way but another part of the business should be about clarifying the abstractions, informing and educating the customer as well.

posted by AJ @ 2:55 PM 0 comments

Supply Chain Execution Applications Lead SCM Market Growth

Supply Chain Execution Applications Lead SCM Market Growth, says Arc Advisory Group.
What are the key takeaways?

1. Supply Chain Execution (SCE) solutions that include Collaborative Production Management, Warehouse and Transportation Management is a key growth area.
2. Supply Chain Synchronization - The role of a manufacturing plant is becoming the focal point in a supply chain network and is often the determining factor of its overall performance. While costs remain an important issue of performance in the customer-centric and demand-driven environments, other factors such as time-to-volume, determining the correct product mix, and having the flexibility, adaptability, and responsiveness to exploit market opportunities are increasingly becoming important to success. Supply chain synchronization depends on supply chain solutions that provide accurate real-time information from operations to enable improved decision-making at all levels of the company and for trading partners in the supply chain.

posted by AJ @ 2:31 PM 0 comments

2006 Supply Chain Pros

The cool dudes and dudettes!
Supply & Demand Chain Executive honors today's supply chain leaders in many categories.

posted by AJ @ 1:48 PM 0 comments

Creating sustainable competitive advantage in your supply chain

If I were to saunter down to a manufacturing/operations floor and impress upon the line managers that what they should really be doing in their operations is creating competitive advantage, chances are I'd be shown the door toute suite. Perhaps, I should be. A wise consultant does not get his head chopped off by spouting well worn academic/business terminology even if it is essential to business survival.
T'is something that I have learnt from working with managers - a commandment to savor - Thou shall not confuse the managers you seek to change.
What is the Competitive Advantage Model of Michael Porter?

Competitive strategy is about taking offensive or defensive action to create a defendable position in an industry in order to cope successfully with competitive forces and generate a superior return on investment (ROI).

And more or less:

The basis of above-average performance within an industry is sustainable competitive advantage of which there are two essential types:
1. Cost leadership (low cost)
2. Differentiation
No matter the scope of the above two types, the resultant competitive strategy is:
3. Focus

If one were to adpat such a model into one's framework of developing a supply chain, it is quite obvious that both cost leadership and differentiation can be adapted.
Here's a view of how a firm can create sustainable competitive advantage by Innovation labs.

The only way a competitive advantage of any kind can be made to sustain is through innovation.
This might logically lead you to ask how we define innovation. In our view, innovation is improvement in the value that a company offers to its customers, or reduction in the cost of delivering value to customers.

They go on to differentiate continuous innovation which is characterized as small and incremental and discontinuous innovation which is characterized by breakthroughs and disruptions. But is there any reason to think that even innovation can be sustainable ad infinitum - I think not. How about the process of continuous and discontinuous innovation? Perhaps, they can be sustained a little longer than the actual service/product created.
Going back to the outline from Porter's model:
More than cost leadership, which may be a function of continuous improvement and strategic decision making to outsource or offshore low-value added activities, differentiation - real differentiation, seems to be the more significant lever of creating true sustained competitive advantage. How? - I'll try to elucidate that in the next few posts.

posted by AJ @ 11:15 AM 0 comments

Leverage Supply Chain as Competitive Advantage - the how to?

The article deals with a new book put out by two partners at PRTM - Shoshanah Cohen and Joseph Roussel called Supply Chain Management: The 5 Disciplines for Top Performance.

Too many senior officers don't view their supply chain as a strategic business asset," commented Cohen, co-author and partner at PRTM. "But when aligned with the overall business strategy, supply chain management provides major opportunities to impact both the top- and bottom-lines."

The above is probably because there is a disconnect between business strategy (which thanks to Porter's work) and supply chain strategy which has always been seen as an operational thingy that happens regardless. The companies that have successfully competed using their supply chains (eg: Dell, Walmart) as a competitive advantage view things slightly differently.
According to the authors,

The five core disciplines for top supply chain performance are:
1. View your supply chain as a strategic asset
2. Develop an end-to-end process architecture
3. Design your organization for performance
4. Build the right collaborative model
5. Use metrics to drive business success

Again, here the operational thingy of a supply chain seems to figure prominently and perhaps for the right reason - because a top performing supply chain is primarily about execution and getting things done. However, what about the very structure of the supply chain, which components should be finely tuned and focussed on relentlessly etc etc? You can only get things done within the framework that is imposed on from above by a company culture, philosopy or business strategy. As more and more companies turn onto the quest of using their supply chains as a strategic asset, I'd hope to see the supply chain strategy rise up to the level of being a business strategy.
And that should be a whole lot of fun!

posted by AJ @ 11:12 AM 0 comments

RFID Reshapes Supply Chain Management

Is RFID reshaping Supply Chain Management?
If you go by the talk of the town or are collared by the US Department of Defense or Walmart, then chances are that RFID is one of those uber initiatives that are top priority. From my viewpoint, which is from that of a large warehouser (GENCO is a large warehousing company principally) and that of a 3PL provider, RFID is at the pilot stage but nothing more than that.
What RFID does of course, in theory, is create a feedback situation i.e. if you're aware or even comfortable using an analogy from Control Theory. In the past, the only recourse that managers typically had to determine whether something was stocked in the warehouse was to trust that the ERP/WMS system said that it was so. Frequently, such trust could often turn out to be misplaced, the magnitude of the error quite likely to be directly proportional to the state of completion/success/health of the ERP/WMS processes.
So along comes RFID (there are two main kinds: Passive and Active RFID) to close the loop in a sense that a WMS/ERP system could ascertain the actual state of affairs (I guess damaged tags being an issue not addressed yet).
Passive RFID refers to the technology that uses tags that need to be powered by the reader and then transmit information to the reader. They're cheaper and will probably be the backbone of the first wave of adopters.
Active RFID refers to tags that contain power elements such as batteries and transmit information to the reader by themselves and also can be linked to other sensors (such as temperature/pressure sensors).
No new technology comes into being without a wrangle over standards. However, RFID seems to have escaped the brunt of such a battle. The EPCGlobal standard for RFID is the standard for embedding information in RFID.
What is of great interest to me is the increase in SKU level informaiton that is going to at once flood all levels of the supply chain. In order to manage a supply chain information, one thinks that one would require accurate and detailed information. That will quite likely happen with the widespread adoption of RFID. However, what are also equally necessary are data collection, manipulation and reporting tools (such as those from Business Objects or the like) that create a better reporting structure.

posted by AJ @ 9:22 AM 0 comments