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2013

I interviewed Rosemary Coates who discussed the movement to bring manufacturing to the US. Rosemary is the author of a top-selling book on Amazon called 42 Rules for Sourcing and Manufacturing in China.

 



Dustin:          Thank you, Rosemary, for spending your time to discuss the movement to bring manufacturing back to the U.S. Can you start by providing a brief background of yourself?


Rosemary:        Sure. I’m the president of Blue Silk Consulting, and it’s a small boutique firm. Mostly, we help clients design their global supply chains with a lot of emphasis on manufacturing in China. I’m also the author of a top-selling book on Amazon called 42 Rules for Sourcing and Manufacturing in China. For the past five or six years or so, I’ve been helping my clients do a lot of global expansion in their manufacturing operations throughout China and seeing how they can take advantage of both the marketplace there, as well as manufacturing items for export to the rest of the world. That’s what I do in terms of my consulting work, but in the last year or so, there’s been quite a movement in the U.S. to evaluate when and if some manufacturing can be brought back to the U.S. As I’m sure you know, America has experienced a pretty deep recession over the last few years, and a lot of that, hopefully the repair to the economy will benefit from having some manufacturing brought back. I have a new initiative, my company has a new initiative to help companies in the U.S. evaluate whether they can bring at least part of their manufacturing back.


Dustin:             And can you talk about who do you think needs to move manufacturing back?


Rosemary:        I think, a lot of it is still very anecdotal, and when you look at the numbers, there’s still a three hundred-million-dollar trade deficit with China, so we’re still importing, in the U.S. we’re importing way more than we’re exporting, but I think it’s time for a lot of companies to take sort of a step up with a more strategic view so they understand how to manufacture in China and to take advantage of selling into the burgeoning China market but also how they manufacture in local economies, whether it’s Europe or the Middle East or South America or North America to address the specific needs of the markets in those areas. I think most companies are going to start evaluating a more global sense rather than just manufacturing in one country or another, to really think about their manufacturing footprint, where’s the most appropriate place to manufacture, and how they take advantage of being close to their customers around the world.


Dustin:             Is there anything you could say about how this would be done?


Rosemary:      Yes. Our approach is to do a front-end analysis, and we work with our clients to evaluate the potential possibilities of product lines, whether or not there are enough suppliers in the local areas, whether the customer base will sustain manufacturing in a local area. There’s a whole analysis; we have a ten-point diagnostic that we do to determine whether or not it’s feasible. To that we add the government regulations and some of the new incentives that the Obama Administration has recently rolled out together with some of the things that are happening in the individual states in the U.S. to provide tax incentives and so forth.


                        The problem is that a lot of the manufacturing technologies have already moved offshore, so even though a company may want to manufacture their product here, the supportive technologies may be gone and the supportive skill-set. It’s not as easy as saying, “Well, we’re gonna bring a manufacturing line back.” You may have to evaluate whether or not you've got suppliers locally, whether you've got the skill-set with your workers, whether or not there is reason to have, to produce high-end goods here, that sort of thing. An awful lot of companies are doing it, though. Apple’s a good example. They've already announced that they’re bringing a manufacturing line back to the San Francisco Bay Area, one of their lines that will represent a small piece of their business, but it’s one step. Starbucks has brought back the manufacturer of their ceramic cups to the U.S., reopened a plant in Ohio. General Electric has brought back several production lines for white good or appliances to, I believe, a place in Kentucky. There are a lot of examples like that where companies are starting to rethink their strategies and determine if they can, in fact, bring things back to the U.S. Obviously, this is gonna have an effect on China as well. I don’t think there’s any desire to put Chinese out of work or to cause a recessionary environment in China. Really, it’s not a zero-sum game; it’s really about thinking about a new strategy, moving forward, taking advantage of world markets and the potential for manufacturing in all different regions.


Dustin:             What type of products are more suitable to bring back to the U.S.?


Rosemary:        That’s a very good question. It depends, I think, on where the markets are. If a product, for example, requires a lot of labor, it’s a very labor-intensive assembly product, then it probably is best to stay in a low-cost-labor country, whether it’s China or Vietnam or Indonesia or Malaysia. If it’s a product that requires more advanced skills and engineering, then, potentially, that’s a good product to bring back. We also help our clients consider new technologies like 3-D printing. As you may know, 3-D printing is layering of products that are sort of built layer by layer, and it’s a new technology that is gaining a lot of interest and popularity. There may be products—plastics, for example—that could be 3-D printed, requiring additional technology and support that could be done in the U.S. So, what kind of products? I think it depends on what kind of products you’re making and a whole bunch of different variables that might go into the decision process.


Dustin:             And where in the U.S. have you seen manufacturing moving to?


Rosemary:       Interestingly enough, Apple’s bringing it back right here to Silicon Valley. I live in Silicon Valley. I’ve seen over the last twenty years, almost all the manufacturing has moved away because it’s very expensive to manufacture here. So many high-tech products are designed here, new software is created, and so forth. There’s very little manufacturing that’s local. However, Apple has committed to start a factory again here locally in Silicon Valley, so I think it’s just a matter of time. Each place in the U.S. has different cost structures and different advantages for manufacturing. In the South, in the Deep South, for example, the labor costs are less, so there a lot of factories that are locating there.


                       For call centers and other sort of information processing, a lot of those are located in the Northern part of the U.S., in the Dakotas and some other areas where labor cost is relatively inexpensive and there are a lot of people available. It could be anywhere. We also know that a lot of the governments of each of the individual states are starting to put incentives out there to bring companies back because it, of course, represents more employment. There may be tax holidays or some kind of tax incentive or free land, something that’s going to assist with the economics. I think the biggest problem that I see in the U.S. is that our infrastructure is not in very good shape.

         

                       When I go to China, I’m always amazed at the infrastructure, the highways, the railheads, the deepwater ports, the logistics warehousing, the infrastructure’s just spectacular, really spectacular. And modern, obviously, ’cause it’s all been built in the last twenty-five years or so. In the U.S. our infrastructure—our electric grids, our highways and bridges and so forth—are not in very good shape. There has to be a concurrent investment in infrastructure in order to make a really big difference. I really think there are three factors. There’s gotta be tax incentives and financial incentives; there has to be focus on infrastructure; and there has to be additional emphasis placed on education. The U.S. has to start graduating many, many more engineers and math and science majors than we have in the past twenty years or so, so there’s gotta be some emphasis there.


Dustin:             And do you have any final recommendations for companies considering moving manufacturing back to the U.S.?


Rosemary:        I think it’s certainly worth a try. The one thing that we counsel our clients about is not to just simply close up shop in China and move back to the U.S. I mean, that’s really not a very good strategy, and it’s not very thoughtful. You really have to make sure that you are aware of all the implications for manufacturing and also that you wanna pay attention to the Chinese market because it’s the largest target market for consumers in the world, so you don’t want to just walk away from the ability to address that market and to manufacture good that are gonna be sold in that market. So, the caution is: Go slowly and do a lot of evaluation to determine what’s the right answer for both China and for the U.S.



About Rosemary Coates


Rosemary_Coates.jpg

President

Blue Silk Consulting

Management Consulting

LinkedIn Profile

I interviewed Greg Brinkman who discussed retail supply chains.

 


Dustin:             Well, thank you, Greg, for spending your time today to discuss the retail supply chains. Can you start by providing a brief background of yourself?


Greg:               Sure. I guess I started in logistics many, many years ago in the warehousing aspect, third party, the 3PL side. I went to work for a fairly large retailer, Eckerd Drug Company, which, at the time, was an independent drugstore chain in the eastern United States, where I was director of supply logistics. In that position one of the most important things, the contribution that we had made to our overall company—besides all the other, I guess, logistics activities we were involved in—was working closely with our supply chain and our merchandising department to work on various metrics to improve overall inventory position: metrics, supplier metrics and measurements, benchmarking is what we created. We actually worked closely with our suppliers to develop metrics and measurements that really had a significance on cost to the business, to both our supplier side and our retailer side. It was a great opportunity to try and develop win-win negotiations between supplier and retailer, and we realized the gain from that activity when we saw the results; results such as lower lead times, lower inventory investment to provide a higher service level, and then the ability to react quickly to market conditions because of some of the better supply chain performance metrics that both companies had developed together, both as a retailer and a supplier. I guess I learned that—this was back in the nineties we started doing some of this.


                        We were initially one of the first to actually do this, and we felt a lot of other drugstore chains in the United States started copying what we had done. I think Target and Wal-Mart had been doing that and been prospering doing that, so we, as a drugstore chain, began prospering as well. That’s kind of my background in supply chain logistics, and I’ve taken that now to the furniture industry, which has been a little more difficult because right as the furniture industry was getting better at supply chain, in the early 2000s they had a huge change in where the origin factories were, and so, a lot of the older manufacturers in America were closing down their plants, and these people, these furniture manufacturers are now becoming managers of outsourced factories—mostly in China at that time. The dynamics for them changed dramatically in their ability to manage their factories; it put a strain on probably the entire furniture industry. The opportunity began there to try and build these collaborations, these relationships between our company, which is just about a five hundred- to six hundred-million-dollar corporation, with three hundred retail stores. We began to work hand in hand with our key suppliers to try and improve the benchmark standards that had been set and try and improve upon it year after year.


Dustin:             How can an effective retail supply chain minimize total landed cost of goods to its customers?


Greg:               Well, one example, I guess, that we’ve found as we work closely with our suppliers is finding out how the process of us placing orders can have an impact on their cost and then how they react to our orders can have an impact on our cost. So, if, as a retailer, if we’re trying to maintain service levels, poor performance on a supplier side or by becoming what they feel is more efficient on their side can actually hinder the final cost of goods and cause us to keep more inventory to react to their performance. For example, if lead time goes from ninety days to a hundred twenty or a hundred fifty days, it’s instantly gonna cause a retailer here in the States to try and maintain higher safety stock levels to protect against the potential, the variation in your demand during that lead time. That forces us to sit on more inventory.


                       At the same time, suppliers that are habitually late or factories that are habitually late at providing the product, we would also run out of stock in those situations, and now we would have lost sales, so both the factory and the retailer would lose because now the factory has less business because sales have dropped off because a retailer’s in-stock position had gone zero. What we try to do is sit with suppliers and sit with factories and actually realize what a retailer will do to make adjustments based on how they address it and then let them know, I guess, what is the best way to increase sales for both parties, which is then the win for the factory and the supplier, because now sales could go up ten, twenty, thirty percent based on supply chain performance so that you’re not running out of stock.


                       You also look at the lowest total potential cost. If the retailer is stocking extra safety stock, we’re paying at the higher amount, whereas the supplier or the factory themselves actually has the lowest cost of finished-goods inventory if they were to stock it back at the origin. So, where that inventory sits is important for your supply chain, and unfortunately, in the furniture industry, most of the inventory still sits with the retailers in finished goods, totally packaged, at its highest potential cost. Our investment is higher as a retailer than it would’ve been at the factory. We’d be better off to get our factories to hold finished goods there, and we could compensate them for their storage cost.


                       What would happen then is, overall, the total product cost would be less. We’ve been able to do this with some of our factories and some of our suppliers, but it’s rare. Fortunately, with the lower cost of inventory investment recently because of the financial climate around the world, our interest rates to sit on excess inventory have been low, so they haven’t been as impactful, so it’s been easier for us just to keep the inventory here and manage it ourselves. But that’s the type of philosophy; it’s an example of one aspect of it. There are some suppliers that have come to us and said, “Look, if you order via EDI and you allow us to get rid of these office staff, then that helps us and that helps us keep our costs lower to you.” That’s another example of having a full electronic commerce where you don’t need people mailing or faxing POs; instead, we have our computer talking to their computer, which is a lot less labor-intensive and there’s money savings to the supply chain.


Dustin:             Is there anything more you can say about why it’s important for the retail supply chain to minimize the total landed cost of goods to its customers?


Greg:               Well, I see it as a value add to your organization. A supply chain within a retail organization wants to provide as much value, which means: How can we help sales, and how can we minimize costs? By being in stock, by following these best practices, and collaborating with suppliers and factories, what we’re able to do is lower our cost on the shelf, which provides us to stay competitive within the marketplace to the final consumer. That would drive up revenue because now we’ve got a situation where our customer base feels comfortable that we’re gonna be in stock at a very competitive price, so that helps us compete in the marketplace.


                       The other thing is just the in-stock condition of being there for your consumer allows revenues to be maximized because you don’t have any actual lost sales. For a furniture retailer, for example, we will not have excess inventory in our stores; it all comes from our distribution center. Now, if you run out of stock in the distribution center, there’s not an extra couple of bedroom groups sitting at a store that a customer can walk away with. They’re looking at waiting until the distribution center’s at stock. We have a lost sales calculation that allows us to monitor how many sales we lose on a day-to-day basis because of out-of-stocks, which makes us instantly feel the pain, and we report that throughout our organization. We actually report it by supplier, and we report it by factory, which allows our factories to know how many sales they’re losing because of different inefficiencies between them and us along the supply chain. It piques everybody’s interest because if all of a sudden, now a factory or a supplier or a merchandise manager here in the States for Badcock realizes that, “Wow, I lost a million dollars in sales in that category last year because of out-of-stocks, and they were caused because of excessive lead times or because of short shipments from a supplier,” then we all feel the pain.


                        If it’s a forecast problem, then you try and correct your forecast and improve so that your demand doesn’t exceed forecast. But then that’s a collaboration effort as well. That’s something else I didn’t mention earlier on collaboration: We’re actually feeding a nine-month future forecast back to our suppliers and back to each factory, which allows them to procure space needed, people, labor, and raw materials on time to help them reduce the lead time. This is an information flow from our computer to their computer, and that future forecast is valuable to everybody in the supply chain. We try and be much more open, this collaboration. We try and be more open with exactly where our positions are, what our projected sales our with our key supplier partners so that they can then adjust to our future demand and be ready for our orders as they come in. That’s the critical importance of all this collaboration with each other is: Who’s most prepared to provide the lowest cost to the consumer and guarantee that trip assurance? When that customer drives twenty miles to your store, do you have the product for them? Ultimately, there’s too much competition to disappoint there, and there’s too much competition out there to have higher prices, and that’s the win for both factories and for the retailer and for all suppliers in between.


Dustin:             Who needs to minimize total landed cost of goods?


Greg:                I think that any successful supplier and every successful retailer needs to realize the importance of this. You look back and the old philosophy was: Tell your suppliers as little as possible. Beat ’em down for the lowest price. That’s quickly falling by the wayside, and what’s important is collaboration of sharing what we see, sharing with suppliers, and then vice versa, suppliers sharing with retailers so that we know what they’re seeing. It’s anybody that wants to learn, that wants to improve each other’s performance. If I can help a supplier get better, I win. If they can help me get better, their product on my store floor becomes more sellable. Who needs this? Really, I think the entire retail supply chain industry benefits when suppliers work well with retailers no matter what channel it is, whether it’s discount department stores, whether it’s discount stores, furniture retailers, or drugstore chains. the collaboration between supplier and retailer can allow lower-priced products for retailers that order properly with suppliers and for better sales for suppliers that partner with retailers that know how to execute.



About Greg Brinkman


Greg_Brinkman.jpg

 

Senior Vice President of Supply Chain

WS Badcock Furniture & More Stores

LinkedIn Profile



Dustin:             Thank you, Joe, for spending your time today to discuss LTL KPIs. Can you start by providing a brief background of yourself?


Joe:                  Yeah, sure, Dustin. My background, I started off in automotive; I worked automotive pride development, both as an engineer and eventually moved up to management and then program management. Later on I got into operational consulting, which led me into supply chain consulting. I spent most of the 2000s in supply chain consulting, mostly in the automotive space. I started doing some value stream mapping on lean work, and that led me into seeing a great opportunity that was in logistics, so about four years ago, I made the move into logistics full-time, and now I’m the general manager of Rock Solid Business Solutions, which is 3PL, nonasset-based, and we operate mostly ground transportation in North America.

 

Dustin:             What are LTL KPIs?


Joe:                  LTL is less than truckload—I think most of the people know that—and key process indicators. KPI stands for key process indicators. I would say KPIs are a little different than metrics. Metrics are, in general, all measurements, but not all measurements are reflective of whether my process is working. All key process indicators are metrics, but not all metrics are KPIs. Only the very most important metrics grow up to be KPIs, so look at a KPI as something that measures something that’s critical to your success.


In the case of LTL, which is what I manage most of my days, we’re looking for a handful of key process indicators. I don’t want to spend too much of my time doing it, so I want kind of a snapshot of what makes, what shows us to be successful. Obviously, when you’re moving freight, the things that matter are on-time performance, cost, damage-free shipments matter, and, also, billing accuracy matters. If the bills are wrong, the cost is going to hit you later. The last thing I like to measure is customer satisfaction. We at Rock Solid have developed KPIs for each one of those areas. My cost-performance indicator is cost per pound. On-time performance is simple; it’s just what percent were on time. Damage, same thing; what percent of my shipments delivered damage-free. Billing accuracy is what percent of my shipments have the same quoted price as the invoice price. And last but not least, we manage customer satisfaction with a quarterly survey.


Dustin:             Why should you use LTL KPIs?


Joe:                  I think it’s really important to have KPIs and use them to measure because, otherwise, what tends to happen is, you focus just on what you know, which is cost. If someone was to say, “What’s better to take, the carrier that has the two-hundred-dollar quote or the carrier that has the two-hundred-twenty-dollar quote?” obviously it sounds at face value that you’re gonna go with the cheaper carrier. But if you find out that one carrier—the cheaper carrier in this case—had poor on-time performance and they damaged a lot of shipments and their bills are always wrong, maybe it’s not a bargain after all. From our perspective, what we like to look at, we’re kinda looking at a series of value tradeoffs, meaning, if I don’t have to have it there on time, maybe I can go with a carrier that has poor on-time performance as long as their bills are correct. I don’t have any customers who say it’s okay to damage my stuff. Use it first for a value tradeoff. I think another way to use those KPIs is to show progress.


                        When you use these KPIs and you say, “We did ten shipments for you last week, and a hundred percent of the bills were correct, on-time performance was eighty percent, and damage-free shipping was a hundred percent,” it shows we’re okay right now, but it also says, “Hey, there’s a gap. You should have had a hundred percent on-time,” so next week when we report KPIs, we’re looking to show a hundred percent. They will use the cost-per-pound and graph that. Our customers, when we bring them on, we create a benchmark. What is their cost per pound? I’ll give a for-instance; recently, we had a customer that came on at twenty-five cents per pound was the benchmark, which is a very transparent KPI. It’s just taking the cost by weight. When I say you’re twenty-five cents a pound, can then every month, every week we graph that, and they’d better be below twenty-five cents, or we’re not doing our job. KPIs can show progress also, a way to show you’re making progress or explain why you’re not making progress.


Dustin:             Can you talk a little bit about how you establish the KPIs?


Joe:                  Again, when you step back for a second, what would be the most important elements of a shipment? On-time performance matters quite a bit; cost matters a lot; not damaging anything; and what you quoted me better be what you invoiced me. Those four things, those are the four most important things for a shipment. We created KPIs for each one of those. We call those critical success factors for every shipment, so we created critical success factors, and for each one we have a KPI. There are many other things you could measure, Dustin, that don’t matter. I could measure twenty-five different things about the truck and the shipment that no one cares about. Everyone cares about, for the most part, on-time performance, billing accuracy, damage through shipment, on-time performance.



About Joe Lynch


04ece21.jpg

Founder and Chief Blogger

The Logistics of Logistics (TheLogisticsofLogistics.com)

Strategies for LTL shippers | Logistics management | Education | Continuous improvement | KPIs | Communication

LinkedIn Profile



I interviewed Cheryl Paradowski who discussed the importance of supply chain credentials.



 

Dustin:             Cheryl, it’s great to speak with you today. We look forward to hearing your views on supply chain credentials. Can you start by providing a brief background of yourself?

 

Cheryl:              Yes, absolutely. I’m the national president and CEO for the Purchasing Management Association of Canada, and we are the leading and the largest association in supply chain management in Canada. We have over sixty-five hundred members, and we’re divided into a federation, so we have provincial and territorial institutes in ten of the provinces and territories across Canada.

 

Dustin:             Can you talk about why supply chain credentials—what are supply chain credentials?

 

Cheryl:              I’ll give an example within our organization, PMAC, and I’ll refer to PMAC as the acronym as the Purchasing Management Association of Canada. We offer a designation called the supply chain management professional, or SCMP designation. That would be a credential that individuals would use to demonstrate to employers in particular that they have a certain set of skills, knowledge, and aptitudes that demonstrate that they can perform as a professional in this field of practice.

 

Dustin:             Thank you. And why are they important?

 

Cheryl:              For us, they’re really an important demonstration of the evolution that’s going on within supply chain management right now, and we made a transition with our designation about nine years ago. It was based on feedback that we heard both from our members, who are practitioners in the field, and from their employers, indicating that this was a field of practice that was evolving. Typically, in the past it may have been operational in nature and quite a tactical role, but what was happening, the field was moving into a position where supply chain was becoming recognized as a way in which a company could gain competitive advantage in the marketplace, and that moved it into a much more strategic role.                       

 

Certainly in Canada that was happening at a time where there wasn’t a lot of support for the field of practice in the post secondary community, so as a result, we have stepped forward as the professional association in the field of practice to say we’re in a position to be able to define what those skills, knowledge, and aptitudes should be and to be able to develop a program not only to allow people to go through education programs to gain those skills, but also a way to be able to evaluate and to be in a position to confer a designation on people. So, for us, it’s a very important part, if nothing else, in terms of establishing the credibility of this field of practice and the fact that our members and individuals working as professionals in supply chain as a whole can contribute on this level to organizations and can make a real demonstrable difference.                       

 

For us, then, that extrapolates not just within businesses, but it’s something that governments should be keeping an eye on for the economy as a whole. Without having this kind of credentialing system or some way to establish that, it makes it very difficult for companies themselves, particularly if they’re looking to try to evolve this field within their own organizations, to know what they should be looking for in terms of a skill set. Professional associations that can do this kind of work provide a proxy for employers having to do that definition and figure out just based on résumés what people would be bringing to a role.

 

Dustin:            And how do you establish supply chain credentials?

 

Cheryl:             Well, we have gone about it at two levels. When PMAC first developed our program, we did it based on a competency profile. What you basically do, then, is you develop a working group of individuals who are in the field of practice and work through with them and with their employers to define exactly what the skill sets are that individuals need to possess in supply chain management.                       

 

The competencies that we established for our supply chain management professional include: procurement and supply management; logistics and transportation; operations and process management; knowledge management; global sourcing; supply chain management in the public sector as a separate skill; being able to perform the skill in doing procurement for services, capital goods, and major projects. Then there are some more generic, what we would call leadership skills, involved in the competency profile such as: professionalism; negotiation skills; communication and relational skills; contract writing and tendering; ethical and social responsibilities; as well as international business and multicultural skills. We basically used that as a general profile, and around that we built a program with a series of learning objectives related to achieving those competencies.                        

 

Then we developed a measurement program. It includes going through classroom-style and workshop-style training; it includes assignments and exams related to each of those individual modules; and then our designation in particular culminates with an in-residence week at the end, where we bring all our candidates together across the country to prepare for a final exam and also to review the most current trends within the field of practice to make sure everybody’s going forward with the same base of knowledge.                       

 

We also have quite a rigorous final two-day exam that’s all case-based that our individuals participate in. So, for the individuals looking at participating in a program like this, it is a commitment of anywhere from three to five years for the individuals who are involved. When we have looked at comparing it in the marketplace, we very much consider it equivalent in rigor to taking a master’s in supply chain management. Where an additional step comes in, PMAC is also involved with an international federation, the International Federation of Purchasing and Supply Management, or IFPSM, and that’s basically an association of associations from around the world in the fields of purchasing and supply chain management. Within the last year, that organization has launched a global standard for credentialing programs in supply chain management. PMAC’s SCMP program is only the second program around the world that has demonstrated compliance with that global standard, and we now have that as an additional stamp on the program that we offer to our members.

 

 

About Cheryl Paradowski

 

Cheryl_Paradowski.jpg

President and Chief Executive Officer

Purchasing Management Association of Canada

Toronto, Canada Area | Nonprofit Organization Management

LinkedIn Profile

I interviewed Adrian Chen who discussed optimizing export controls in the supply chain.

 



Dustin:            It’s good to speak with you again, Adrian. Today we look forward to hearing what you have to say about export controls and optimizing export controls in the supply chain. Can you start by providing a brief background of yourself?    

   

Adrian:             Thanks, Dustin. Thanks for the invitation again for today. I have been involved in supply chain and probably global trade compliance for over twenty years, twenty-plus years now, basically from  end-to-end with global management experience. I still keep close professional relationships with a lot of various customs and governmental agencies in China and also within Asia Pacific, Europe and the U.S. due to my background in global trade compliance. Basically, in a nutshell, my qualifications and my experience, plus my knowledge come from various industry backgrounds, generally in the areas of electronics, electrical goods, manufacturing; specifically in acoustics, audio, finished goods, white good, home appliances, medical devices, and, especially, semiconductors, which is actually very close to my heart. I have been involved in industries like: mechanical; poly medicine; resins, which basically are pigmentation dyes used for the textile industry; I have been involved in commodities and raw materials as well; and also, from the 3PL, auditing integrated logistics providers. I also did a short stint in trade financing. Basically, my background is actually two decades of regional management experience, and I have both technical and operations and also client-facing roles that I’ve actually been involved with from a global trade compliance, logistics, and a supply chain perspective.

   

Dustin:            Can you talk about optimizing export controls in the supply chain?   


Adrian:              Sure. The title itself, generally, the theme itself, optimizing export controls in the supply chain or channels operations is quite self-explanatory. The standard supply chain or channels operation is actually the lifeline of any exporter or manufacturer in developing, producing, and selling products. What any exporter or manufacturer hopes to achieve at the end of the day is to manufacture quality goods, being able to export all their produce without any hiccups or problems. A trouble-free supply chain, that’s what they’re looking at. Now, in my article that I’ve actually written on optimizing export controls in the supply chain (See article at bottom of this post) is basically to look at a process within the back-end of the supply chain, exporting products, exporting quality products trouble-free and how to optimize export controls, what actually assists a trouble-free supply chain. That’s the main objective and the main focus of the article.


Dustin:            And why do you want to optimize the export controls in the supply chain?


Adrian:             Very good question, Dustin. To have a hundred percent trouble-free supply chain, we have seen that in many supply chains, export controls tend to play a potential stumbling block, or it could be a potential hurdle in exporting products freely and trouble-free. Now, there are many controls that actually control or monitor how products are actually crossing borders or how products go into another country, who is using the products ultimately, why the products are being used and what is it being used for?


                        Export controls, at the end of the day, will be and could be a major hurdle when a product is actually ready, when it’s out of the production lines, into the warehouse, it’s been picked, packed, orders are ready, and prior to exporting, the physical exportation of the product, export controls come into play, and it could be either a hurdle that could actually stop the whole process, or it could be utilized to the fullest function whereby it could actually provide a trouble-free exporting process at the end of today. Why we need to optimize export controls in the supply chain is that instead of trying to overcome, find loopholes in trying to evade or go around the export controls within a supply chain or channel operations, I believe that the best solution for any major exporter or manufacturer is to actually look at optimizing what and how to use export controls to the benefit of the company in order to have a trouble-free supply chain, and that’s what the article discusses.


Dustin:            Can you talk a little bit about how it’s done?


Adrian:              Okay. One of the process diagrams that I had actually presented in the article is on the PGI process flow. The PGI process flow, or the Post-Goods Issue process flow, it’s generally quite a straightforward, simple process. It’s basically orders dropped into the system from customers and a certain product is actually allocated. The WMS, or the warehouse management system, does the pick list according to the sales distribution order. And once the order is approved and there’s an allocation from the warehouse for that particular product, the product is actually ready for exportation.


                        Now, prior to the physical exportation or prior to the physical product leaving the warehouse, there is a process, a final step in the process. That particular final step is actually called export controls. There will be a screening process to actually screen where the product is going to, who is it being sold to, and what is it being used for ultimately. Once that screening process has been given the green light, it will go into the second phase of export controls process; it will be called licensing. If licensing is required, it will then request for a licensing approval for the system to bypass and to approve the physical exportation. If no licensing is required, that particular product can actually leave the warehouse immediately.


                        Now, coming back half a step behind will be if there was no licensing required, physical exportation can happen. That is fantastic but if licensing is required, what if licensing was not done in preparation for the order that was picked and packed and ready for exportation? The order will be delayed, the whole supply chain will be frustrated, and at the end of the day, there will be a backlog of orders that will be facing the same difficulties because of the licensing requirements. This is where my article comes in, providing a PGI process flow that showcases a very clear step-by-step approach on when an order drops, the product is ready for exportation. Then the second phase, which is the export controls procedures, clearly shown in the PGI process flow to give a clear idea how, when, why, and who should actually be involved in the optimization program itself or the optimization activities itself.


Dustin:            Thank you, Adrian. Do you have any final recommendations or conclusion?


Adrian:              I’ve always believed very simply that having a trouble-free or gaining excellence in a supply chain will always be a contribution from various activities within the company itself. It could be from research and development, R& D; it could be from production; it could be from quality control; even from purchasing, logistics, and also trade compliance. Optimizing export controls in the supply chain isn’t just a job that’s actually confined to the trade compliance experts within the company. It’s basically a responsibility of every single employee within a company in trying to ensure that there’s a trouble-free supply chain.


                        My recommendation has always been that every single employee should take a personal interest (aside from the corporate interests) as a work interest to understand how export controls work. And at the same time, a particular person, let’s say from R& D, may not be a trade compliance expert involved in export controls work itself, but understanding that particular portion or having a general overview of what export controls do and how export controls could be optimized to obtain a hundred percent trouble-free supply chain would be ideal in any situation. It could be someone from the top-management level, at the C-levels, all the way down to the SVPs or the VPs, even down to the very lowest-ranking personnel in any company. Everyone should know export controls or at least have an idea how export controls work. At the end of the day, we could actually look at having their fair idea of how export controls work which will give them a very general idea on how to utilize or start doing things within their scope of work to be able to actually gain a hundred percent, trouble-free supply chain at the end of the day, when a product is ready to go out the front door.


About Adrian Chen



Global Supply Chain / Doctorate Candidate

University of Management & Technology

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I interviewed Art Koch who discussed supply chain core competencies.

 

 

Dustin:             Well, hello, Art. Thank you for spending your time today to discuss the focus on core competencies. Can you start by providing a brief background of yourself?


Art:                   My name’s Art Koch. I do operations and supply chain consulting. I started off in this field twenty-plus years ago, working as a materials manager and working through different organizations, everything from automotive to consumer goods, to a wholesale book distributor. My background I feel I do best is getting organizations to wade through the minutia or all the nonsense and focus on what I call the basics of what it takes to get the job done.


Dustin:             Great. And can you start by, can you define what are core competencies?


Art:                   Core competencies, when I look at a supply chain, my core competencies are the basics. How do you do inventory management? How do you do basic purchase orders? How do you do shipping, receiving? And making sure that the things that we take as granted are done accurately. What I see that happens all the time, especially here in the States, an excellent job of getting organizations to understand that supply chain is now a profession. There are some excellent schools that offer four-year Master’s and Ph.D.’s on the subject.


                        What you do is, you get a bunch of individuals out in the workforce that are looking to make a name for themselves, and they’re looking for the next big thing, they’re looking for a grand-slam home run where they can make a name for themselves in the organization. What happens too often, they forget to focus on the basics, and when you don’t focus on the basics, an ERP doesn’t work, your forecast inventory planning solution doesn’t work, and you get tied up into chasing the wrong problems.


Dustin:             Is there anything more you can say about why core competencies are important?


Art:                   Let me dig through this. The biggest reason why I feel they’re important is as that our supply chains stretch and what we’ve seen happen over the past number of years with our growth into China from the United States and now Vietnam, India, Indonesia, --- our supply chains are stretched. What happens is lead times are stretched, and at the same time, our dependency on data is at an all-time high. If that data is not maintained and scrubbed properly, what occurs is your information that you have to use to manage your business, it’s not as accurate as it needs to be, and what happens is, you’re making decisions on inaccurate data. That’s why it’s so important. One of the things I preach and I drive into organizations I work with is, we track manufacturing processes.


                        Some organizations, they’re really serious about Six Sigma, using Toyota’s tools in the manufacturing process, but they don’t use those same tools in managing their supply chain. You can walk into a place that has Xbar and R charts on machines in a factory, and they’re tracking something to where their parts per million is underneath twenty-five. Where you’ll look at the same organization, and they’ll have five percent negative inventory. How can you manage that business? That’s why I focus on it.


Dustin:             And who needs to focus on core competencies?


Art:                  What it comes down to is, it has to come from—I wouldn’t say in the C-levels, but when you talk about VPs in the organization all the way down to the supervisors, we have to get them focusing on this. Newly minted directors and newly minted managers, I think, too often veer off and do not focus on the basics, ’cause they’re tied up in strategic meetings, they’re tied up worried about their careers, and we have to get them to back up and focus on the basics and whether the core competencies that make your organization successful.


About Art Koch



 

art-koch.jpg

Founder

Arthur Koch Management Consulting, LLC

Independent Consultant | LEAN | Supply Chain | ERP | Project Manager | Forecasting | Inventory Management | Change Agent

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