The "perfect order," low-cost warehousing software from Asia, the impact of volatile oil prices on the supply chain ... name a topic and there was probably a workshop, lecture or panel discussion about it at this year's conference of the Council of Supply Chain Management Professionals (CSCMP) in San Antonio, Texas. When they weren't out on facility tours or networking in the halls, conference goers could choose from a list of 160 educational sessions held during the four-day event. Here's a brief look at some of the highlights:
Yesterday, today and tomorrow
In a talk titled "Supply Chain Management—Yesterday, Today and Tomorrow," Dr. Donald Bowersox shared his thoughts on what's ahead for the supply chain. The future will see the emergence of many-to-many connections between trading partners in supply chain networks, resulting in a challenging environment for business, said Bowersox, who recently retired from his post as a professor at Michigan State University. (At the conference, Bowersox was honored for a lifetime of service to the group he helped found in 1962.)
As for technology, Bowersox predicted that the second generation of the Internet will bring about the creation of information models that will enable supply chain professionals to "see everything at one time." Companies will have to rethink their traditional notion of procurement in the demand-driven 21st century with its rapid product lifecycles.
Despite those impending changes, Bowersox urged industry organizations not to abandon their emphasis on what he called "the ABCs of logistics," which he termed critical to companies' efforts to meet those new demands. "Remember, logistics is not supply chain," he told his audience. "It's part of the supply chain."
Don't be afraid to fail
In his keynote address, Steven Levitt, co-author of the best-selling book Freakonomics, warned that corporate America's aversion to experimentation is hampering American business. "Corporations are reluctant to experiment even though it would show them how to be successful," Levitt told the more than 3,200 conference attendees.
A University of Chicago economics professor, Levitt gained prominence with the publication of his book (co-written with Stephen Dubnet). In that book, he argues that many apparent mysteries of contemporary America could be illuminated if people were only willing to ask the right questions and draw the connections.
Levitt told his CSCMP audience that corporations should pursue multiple paths and experiment to find the answers to business problems. He added that corporations are reluctant to follow his advice because that means that top executives "don't know the answers."
The wolf at the door
What more appropriate place than Texas to discuss the impact of oil prices on supply chains? In one of the more thought-provoking sessions, a prominent logistics executive warned that the end of the era of cheap oil will force companies to rethink their supply chains. "Today's supply chains run on cheap, available fossil fuels," asserted Charles L. "Chuck" Taylor, who now heads the consulting firm Awake in Smithville, Texas. But those supplies won't last forever. Based on a methodology developed by the late Shell Oil geologist M. King Hubbert, world oil production is projected to peak between now and 2015. In the '50s, Hubbert correctly predicted that U.S. oil production would peak in 1970.
During a panel discussion on the impact of rising energy costs on the supply chain, Lawrence Lapide, a research director at the Massachusetts Institute of Technology's Center for Transportation and Logistics, agreed with Taylor that cheap oil has supported such supply chain practices as Just-In-Time and offshore manufacturing. In all those cases, Lapide pointed out, companies use speedy shipments to meet customer demand while keeping inventories low. "There will be oil, but the question is at what price," he said. "Less energy-intense supply chains would be the right direction now."
In order to form a more perfect order ...
What passed for "perfect" yesterday may no longer qualify tomorrow, at least in the grocery distribution channel. Donald "Dee" Biggs, director of customer logistics at Welch Foods Inc., told his audience that a grocery industry committee has redefined the "perfect order," expanding the list of measures used to assess order fulfillment performance to seven from four. Representatives from Wegmans, Meijer, Pfizer, Land O' Lakes and Welch Foods participated on the committee, which was jointly sponsored by the Grocery Manufacturers of America and the Food Marketing Institute.
Biggs noted that the original metrics for the perfect order contained the following four elements: order shipped complete, ontime delivery, no damage, and accurate and timely invoice. "Those metrics were a narrow vision of the supply chain because they are not end to end," he said.
The new definition contains the following seven measures to characterize the "perfect order": case shipped vs. ordered (fill rate), on-time delivery, data synchronization, damage (unsalables), days of supply, order cycle time, and shelf-level service (out of stocks). Biggs noted that the committee decided that the "case shipped vs. ordered" metric served a more useful purpose than the "order shipped complete" metric used in the past. Although the group retained the "on-time delivery" metric, it has now defined that measure as a shipment arriving one hour prior to its expected arrival. Any shipment arriving after the appointment window will be deemed late. In the past, a delivery was considered "on time" if it arrived 30 minutes before or after its appointed time.
The "data synchronization" metric looks at whether both shipper and receiver have the same items and descriptions in their respective databases. Damage will now be measured as a percentage of unsalable items in relation to overall sales.
The new "days of supply" metric will track the days' worth of inventory at the retailer's warehouse and store. The new "order cycle time" metric will be defined as the amount of time elapsed from the time a manufacturer receives an order to the actual delivery of that order to a customer's warehouse.
Service at the shelf level is regarded as a key measure of supply chain effectiveness. If a product is not on the shelf – even if it's in the retailer's backroom – it will be judged out of stock.
Biggs said that the new measures were developed to help trading partners in the grocery distribution channel better define supply chain success.
Asian WMS-makers target U.S. markets
First cars, then electronics, now this. Asian software suppliers will soon begin marketing low-cost warehouse management systems (WMS) in the United States. During a panel discussion on WMS, Stephen Mulaik, a partner in the consulting firm The Progress Group, predicted that Asian vendors will enter the U.S. market in the next one to two years, with the predictable effect on pricing. "You'll see new WMS vendors emerging in India and China," said Mulaik, who has been doing systems consulting work in Asia. "It will cause prices to drop in the lower end of the WMS market."
Mulaik added that Asian vendors will emphasize different features in their WMS packages compared to their U.S. counterparts. For instance, Asian WMS packages are apt to build in intelligence to handle piece receiving, instead of just focusing on cases and pallets. He also predicted that Asian WMS vendors will design their systems to support speedy implementation, a hugely important requirement in the Asian market.
Editor's note: CSCMP holds its next annual conference in Philadelphia from Oct. 21 to Oct. 24, 2007.
Wreaths Across America