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2013

I interviewed  Vikram Kumar Singla who discussed Sustainable Growth, Insourcing and Outsourcing of Logistics.

 

 

 

Can you start by providing a brief background of yourself?


Sure. I’m currently working as Business Development Leader for supply chain and applications for U.K. and Ireland. My background has been about 15 years working in supply chain domain in various capacities, right from deploying the solutions at Fortune 500 corporations to sales and marketing of these solutions. In terms of my academic background, I’m an engineer from IIT Delhi, and I did my M.B.A. from Warwick Business School in U.K.

 

Can you define what is sustainable growth?

 

Sure, yes. What we saw few years back was complete focus on cost. Now as the companies are looking to grow, we are seeing their wish to not keep costs under control but also ensure that their carbon footprint is kept in control as well. So ambition to grow while minimizing carbon footprint is sustainable growth.

 

Data from recent study by MIT Sloan School of Management confirms the focus on sustainability –

 

a) 31 of companies think sustainability is contributing to their profitability

b) 70% have placed it permanently on management agenda

c) Corporate responsibility has become important for CFOs.

 

How is sustainable growth related to insourcing and outsourcing logistics?

 

Sustainable growth is a topic in its own right, so that’s an end objective in terms of what companies are looking to achieve. They can achieve reduction in carbon footprint from various functions such as procurement, product design or logistics and planning etc and IT solutions are available to enable these initiatives (http://www.oracle.com/us/solutions/green/business-operations/index.html)

 

Reducing carbon footprint in logistics is where insourcing/outsourcing discussion comes in. Logistics function has their own KPIs and carbon footprint is becoming one of them and hence a key decision criteria while looking to insource or outsource.

 

Where do you see insourcing and outsourcing of logistics going in the future?

 

We are seeing 4 key factors when companies are deciding to insource/outsource logistics –

 

a) Taking control of the financial and physical supply chain

b) Reducing Cost

c) Reducing dependency on 3rd parties

d) Better service to end customer

 

We believe the above criteria will decide whether companies insource or outsource. There are many examples now where companies such as Kraft have decided to insource the decision making of running the logistics function but the actual shipping is still done by 3rd parties. This trend will probably strengthen going forward.

 

How should insourcing and outsourcing of logistics be done?

 

The insourcing or outsourcing of logistics is tied in to the overall supply chain and corporate objectives. The corporate objectives are driving the supply chain strategy which in turn drives logistics strategy and KPIs. As said earlier, the 4 key factors as defined above are going to determine an objective decision making around insourcing or outsourcing and the extent of those.

 

a) Taking control of the financial and physical supply chain

b) Reducing Cost

c) Reducing dependency on 3rd parties

d) Better service to end customer

 

And it is not going to be one size fit all approach. It will vary in terms of the extent to which the function is insourced as well as the scope of the supply chain e.g. primarily decision making but actual movement still done by 3PLs or only inbound being insourced etc..

 

Where have you seen some success?

 

Many companies have now done this in multiple sectors including Consumer Goods, Industrial, Auto and Oil & Gas. The stories from Kraft and Unilever are outlined here (Kraft  > > http://www.environmentalleader.com/2009/11/23/kraft-rolls-up-50m-miles-saved-through-transportation-efficiency/

, Unilever - http://www.youtube.com/watch?v=_EIgAVHnqDo)

 

Do you have any final recommendations?

 

Final recommendation in terms of insourcing and outsourcing or sustainability is to really look at it objectively. Look at the corporate and supply chain objectives and then drive the logistics and insourcing/outsourcing or sustainability decisions from there. The 4 key drivers as defined earlier along with the current maturity level of the company and the ability to change should set the direction and the pace of the journey.

 

Thank you for sharing your views on insourcing and outsourcing, as well as sustainable growth.

 

Pleasure, Dustin.

 


About Vikram Kumar Singla


 

vikram.jpg

Vikram Kumar Singla

 

 

 

Business Development

Director at Oracle

LinkedIn Profile

I interviewed Kohl Gill who discussed Using Worker Intelligence to Drive Supply Chain Operations and Sustainability.





Can you start by providing a brief background of yourself?


Well, thank you, Dustin. I really appreciate having the chance to speak with you and to communicate with some of your listeners and your readers. My background, actually, If you go back far enough, I’m actually a recovering physicist. I got my doctorate in 2005 in semiconductor physics. From there I always wanted to have a broader impact than lab work, and I angled myself toward work in international development and policy work. I went to India for just over a year and did some anticorruption work there in Delhi, in the slum areas there. I came back to D.C. and worked with the Department of Energy in their Office of Science and then with the state department in their Bureau of Human Rights and Labor. In that office I actually worked in the Labor Rights and Corporate Social Responsibility office, and there I covered South Asia and the Middle East. That’s how I went from science into policy work and specifically into labor, and I brought some of that technology background into that role. When I was traveling to Sri Lanka and to Bangladesh on behalf of the State Department, I recognized some of the issues that many people have noted in supply chains and started looking at the ways we could connect with workers. That brings us to today’s chat.

 

Can you talk about what is worker intelligence?

 

Sure, worker intelligence essentially is all of the latent information that workers, line workers and factories and farms and mines and supply chains around the world have that’s not actually being tapped today. You could think of this as, if you could imagine every worker having a little viewpoint, their own personal viewpoint on what the operations of a supply chain are. Today no one is capturing that information, and someone should because we have very limited visibility into our supply chains that leads to some very tragic outcomes in some cases and great inefficiencies. We can improve that if we actually want to capture information that workers have, the wisdom that workers have to drive supply chain decision-making in a rational way. What we do is connect directly with these mobile workers through their mobile phones and gather information on them on their own observations regularly, repeatedly so that we can aggregate that information into what we call worker intelligence and use that for driving insights with our customers, with the local factory and farm and mine management, and also with the workers themselves. At the end of the day, we’re very interested in connecting with workers over a long-term, with gathering information from them, this worker intelligence, and also providing the benefits of this benefits of this worker intelligence back to those workers to complete that feedback loop so workers know where they’re going to work, they know why they’re going to work, they can find the best working opportunities for them, and they can help drive other workers toward those opportunities as well.

 

How can worker intelligence be used to drive supply chain operations and sustainability?

 

It’s an interesting question, Dustin, because we’ve seen some real failures of operations and sustainability here recently, particularly in the apparel sector of Bangladesh, where we’ve had the Tazreen factory fire last year, in November. Then the Rana Plaza collapsed here in April this year. These tragedies are really an example both of a failure of operations and sustainability. On the sustainability side, it’s pretty obvious that workers shouldn’t be working in these dangerous environments, and if you’re a supply chain manager, you don’t want your company connected with these kinds of working environments. In fact, you have a code of conduct, and you're trying to enforce that code of conduct across your supply chain. But again, you have very limited visibility to do that, and that’s where worker intelligence comes into play, to let you know about these issues before they become urgent so that you can make some smart decisions.

 

On the operations side, it’s also a real issue because in many cases, particularly in the fire case last year and the collapse this year, these factories were often being used as subcontracting facilities. That is, a major brand, a Walmart or a Gap or a Target or a Primark had sourced, had created a contract with a particular facility, and that facility had been vetted, had been qualified to be an ethical sourcing facility. But then that facility had subcontracted the work out without notifying the buyers, without notifying the brands. That unauthorized subcontracting leads to work for those brands going into factories that they had not approved. And we can’t really know about that information, we can’t really know that that subcontracting is going on without the information that’s coming directly from workers that we can see so that we can monitor these supply chains in real-time. in many cases what we’re seeing now is that there are a lot of calls for improvements in working conditions, improvements in wages and hours, and empowerment of workers, and we applaud all of those efforts.

 

At the end of the day, just to take one example of wages, you don’t know what a worker’s being paid unless you actually ask that worker, because there are so many other people, so many other entities involved that may try to take some of that worker’s income; sometimes in a legal way, sometimes in an illegal way. If you don’t understand that, then simply raising wages is not going to help you, so it’s not going to help the worker. We need to know exactly what the situation of individual workers are; we need to be able to aggregate those situations out to get a very good picture on what the working conditions are like so that we can drive better sustainability, better responsibility in supply chains, and also drive better operations.

 

When we look at some of the major operations’ questions that supply chain managers are facing, they’re often looking to find suppliers that can deliver quality products on time, on budget, and if we can gather some insights from workers into the conditions inside a factory—the maintenance of equipment, the management practices—that gives us great insight into how much progress is actually being made in that factory and actually allows us to compare facilities against each other so that you, when you're making a sourcing decision, you can look at the track record of a particular facility even if you haven’t sourced from that facility before. It’s very important to get that real-time information; that’s why we’re talking about both the operations side and the responsibility side.

 

Why should this be done?


Well, first off, we’re talking about supply chains that are very, very complex. They span the world if you're looking at everything from a laptop to a simple shirt. The cotton comes from one place, the buttons come from another place, and if there are disruptions anywhere in that supply chain, it could cost the company millions, if not more, to reset their supply chain, to find other vendors, and to qualify those vendors. This is a very complex system, and when there are supply chain disruptions, they’re very expensive. What you're able to see is that, if you look at the data of supply chain disruptions, it has a major impact not only on the immediate performance of an individual product, but on the overall performance of the company itself.

 

We’re starting to see a confluence as we look deeper and deeper into the data between efforts on the sustainability side and efforts on the operations side. That confluence is where you're looking at long-term behavior of individual suppliers and analyzing your investments in your suppliers.

 

The reason that this should be done is that because we’re starting to see this confluence at both an operations urgency and a sustainability urgency, it makes sense for us to pay more attention, to measure these supply chains in a more rational way, in a more real-time way, in a way that’s scalable with your actual supply chain. Right now, the ways that we have to measure sustainability in supply chains in particular are very crude. We have inspections. These are audits that are done on a period basis—typically once a year, once every couple of years—and they’re very, very useful for catching issues and preventing issues from happening, but they’re not terribly scalable, and they’re definitely not real-time.

 

Then we have, on the other side, we’ve got hotlines, places where workers and other folks within a supply chain can go to report issues that are urgent. The challenges with hotlines are that, oftentimes, the users of hotlines don’t trust the hotline because they don’t have a long-term relationship with it. It does gather information in real-time, but it’s not terribly scalable because you need to have a live person on the other end, and the types of information that comes out are really varied quite widely. It’s definitely not preventative because you're only addressing issues when they’ve already become urgent. If we’re looking for something that’s real-time, scalable, preventative, then you're really looking for a more consistent approach, and that’s why the worker intelligence perspective is so important.

 

We connect directly with workers through their phones; we provide information for those workers on an ongoing basis; we provide incentives for them to deliver information to us; and we make this, we deliver value to those workers up front so that they have a vested interest in participating in our system over the long-term. And then we cultivate those workers as sources of information for us, and we try to provide them with the best of our worker intelligence so that they can make intelligent employment decisions themselves. And by doing this, we create a long-term and a real-time relationship with these workers that allows us to get this perspective that’s, as I said, real-time, scalable, and preventative for issues coming down the road.

 

Thanks for sharing your views on worker intelligence for driving supply chain operations and sustainability.

 

Well, thank you, Dustin. This has been a real pleasure and I hope that your listeners gain something from our experience and I hope they feel free to reach out to us at LaborVoices.com for any further information.


Thank you.



About Kohl Gill


 

kohl.jpg

Kohl Gill

 

 

 

CEO at LaborVoices

LinkedIn Profile

I interviewed Brian Marcel who discussed The Future of China Supply Chains.

 

 

 

 

A bit of background on myself. I started in the barcode and supply business back in 1982, where I set up my first company in the U.K. And then in 1987 I ventured into Eastern Europe looking for new markets, thinking the Berlin Wall would come down, which it did in ’89. I worked with state-run employees that I thought would be quite good with entrepreneurial skills and set them up a business, gave them shares and money and business best practices.


Over five years, I developed and formed the IBCS Group with companies in Poland, Hungary, Czech Republic, Slovakia, and Bulgaria. We’d been number one in that region with barcode solutions right across all horizontals because it’s an emerging market and we’re market leaders, so we have to address all markets.


A year or two ago, I decided to invest in China. I set up a joint venture here, or rather in Shanghai, as I am back in England. The idea was to focus on supply chain solutions and warehouse-management solutions and maybe some retail, as I feel that there is the biggest need in China for that. I think the supply chain is broken and fragmented, and one of my missions is to try and fix it. That’s probably enough about me.


What is the current state of the supply chain in China?


Well, they have lots of problems. First of all, they have moved from a central command economy, a planned economy even, to a more open market, so they’re falling a bit under Western influence, introducing such things as culture and empowerment. These things are very slow to implement, and we’re up, of course, against local culture barriers.

 

Other problems are the suppliers don’t think of themselves as suppliers; they think they’re just contractors. Nobody’s really “owning” the total supply chain, which is why it’s fragmented. They’ve all got their own agenda, and they’re not focusing on the customer. Moving data around is another problem because without accurate information management, the supply chain could break down as well. As far as IT is concerned, lots of the biggest companies have enterprise results planning systems but smaller subcontractors don’t. And if they don’t have automatic systems, you can’t do things like meet sudden changes in demand.


The culture is very important because in China, there are different values. For example, if you want to build a relationship, whereas in the West, you’d have contractual agreements between companies. This doesn’t work at all in China. In fact, upfront contracts are a no-no. There’s this huge power culture that managers have complete power and control over everything, so subordinates can’t question decisions. The managers are using power, not empowerment, to get things done.


And with this face-saving issue so prevalent in China, it’s difficult to have rules, to maintain these rules, because your major focus is on making sure your boss or he’s focused on making sure he doesn’t lose face if anything goes wrong. This causes transparency to suffer in the business as management becomes more opaque. Effectively, control of information is a sign of power, and it makes it very, very difficult to allocate resources.


How are supply chains in China changing?


I think, actually, they’re probably changing for the worst. There’s a lot of state and logistic providers coming into the market. They don’t have wide networks; they have too much bureaucracy; too few skilled workers; and this culture issue, as I mentioned in the previous occasion.

 

There’s still this issue of trying to service outlying regions, like in the west of China; there isn’t so much industry, so much business going on, so goods can go out there on trucks full but come back empty. A lot of people don’t find it economical to ship out there. There isn’t a company I know that has a complete joined-up network that can ship from right across China without joining up with a partner.


The biggest change, really, is e-commerce. E-commerce is expanding exponentially and causing a huge number of extra packages to be shipped. In fact, I think it’s 10 percent of all packages being shipped around China of all commerce, and this is mainly because of the number of companies using e-commerce, because it’s so easy to set up a storefront, but it’s not so easy to set up the back end to become a fulfillment house, as a result of which a lot of the e-commerce companies like Alibaba are developing their own express deliveries. This is causing enormous amounts of city congestion. Already cities are pretty much clogged with traffic, but these deliveries are making it almost impossible.


A lot of companies are focusing on city deliveries and by setting up their distribution center just outside each city. That, of course, means the country isn’t very well-served. There are, of course, quality issues with damaged and lost parcels, a tremendous amount of spoilage, especially in food. There’s a lack of security, very poor 3PLs with late deliveries and without a proper returns processing situation and lots of negative attitudes of delivery people. Basically, it is not a great situation.


Where do I see the future of supply chains in China?


Well, actually, there is some hope. The government are wanting to get involved very much and understand what’s going on, but, of course, there are conflicts of interest in several situations. For example, government are trying to control the number of vehicles going into the cities, but with the extra e-commerce packages, this is exceeding their controls. It wouldn’t be a problem if it was just double the number of vehicles, but it’s coming toward about a hundred times the volume, which is a serious problem.

 

They’re trying to reduce the number of deliveries. For example, use public utilities. They’re thinking of using storage boxes in the cities where consumers can go and pick up their packages using an electronic key, and they’re thinking of using the metro stations as the distribution centers. The problem with this, of course, is that the government will be the only company delivering, and we know how inefficient they are. They’re trying to maybe group deliveries because sometimes customers aren’t there when they have their package delivered. We reckon at the moment one delivery boy can deliver 60 parcels a day, but if grouped, he could deliver 200, so there are cost inefficiencies there.


There is a huge increase in business-to-consumer from overseas both ways now, e-commerce, but there’s no governance, there’s no guarantee, there’s no management. What about customs? What about foreign currency transactions? You’ve got companies like Amazon accounting for about 2,000,000,000 RMB of volume just in overseas transactions alone last year.


The Government is trying to sort this through rail links overseas. At the moment they’re testing a rail link between Chongqing and Hamburg, which would simply be a freight train delivering e-commerce stuff. A single journey would take 18 days, whereas a sea journey would take 36 days.


Another thing they’re looking at is shipping to overseas ports, and then they’re linking in with that nationality’s distribution system. At the moment, for example, when they send stuff to the States, the cargo goes out full but comes back empty because Chinese products are big volume and low value, and they think these links could lower their costs and give them opportunities to bring back new types of import perhaps to China, such as maybe fresh fruit back from South America.


So, current e-commerce initiatives at the moment is, I think I mentioned Alibaba before. They’re spending 200 billion RMB in testing a large distribution network managed by themselves, but they’re finding a lot of technical issues and problems, especially using their single platform and getting all the other companies to integrate their platforms with Alibaba’s and also to develop standard coding.


Another initiative from the government is, once again on the railways, there’ve been lots of developmental high-speed trains, which means building new lines, thus leaving old lines free, as they’re doing nothing.

 

About Brian Marcel


 

brian.jpg

Brian Marcel


Chairman at IBCS Group

LinkedIn Profile

I interviewed Emre Göllü who discussed Progress of Supply Chain from a Simple Operational Duty to a Strategic Strength.

 

 

 

 

 

My name is Emre Gollu. I’m a chemical engineer and Master of Science as background. I graduated Istanbul Technical University, where I used to work as resource and teaching assistant.

 

After fulfilling of military service, I just extended my career to pharmaceutical sector, where I started with quality management. After completion of M.B.A., again at Istanbul Technical University, I just moved to supply chain management, starting raw materials management area. Then I moved into production planning. After changing the company to Johnson, the Turkey subsidiary, then I became the responsibility of full supply chain management, which included all the import activities, technical purchasing for local toll manufacturing, planning, and coordination and warehousing and distribution activities as well. This lasted one and a half years; then I changed to my current company, UCB Pharma, which is normally a Belgium-based company.

 

Again, I became the title of logistics manager, first with the same responsibilities as my previous company, Johnson. After performing five years as a logistics manager with the basic responsibilities, again, all import activities, local toll manufacturing, warehousing, and distribution, I just changed to supply chain manager, first for Turkey, and since one and a half years, I have been working as supply chain manager for Turkey, Middle East, and Africa regions. This regional duty and job enrichment has given me strong motivation and has strengthened my strategic understanding of the business, especially how to harmonize and how to allocate the supply chain and the company’s expansion strategy to the Middle East and Africa region; how to coordinate the new product launches; how to organize and arrange the relations with the partner company.

 

Directly, the establishment of new processes, the system, how to go on with all supply-related issues, and make coordination between different functions, like finance, planning, regulatory affairs, quality affairs, to act as a bridge between all of them, which directly emphasizes the position of supply chain as an interdisciplinary function over there.

 

I think it has been a real asset for my career and very good experience for myself as well, both professional experience and personal experience and I see that supply chain becomes more and more important for the companies, the whole pharmaceutical sector, in order to compete and survive in critical markets in which the competition caused by pricing policies, reimbursement policies is increasing day by day. In this strategic position of Middle East and Africa regions, which attracts attention of all companies for expansion, I think. Supply chain will become a critical role for the whole region.

 

I would like to evaluate how a company’s supply chain process can really progress from a simple operational duty to a strategic strength of the company. As you  know, previously in the ’70s and the ’80s, the major target for the companies used to be to meet the customers’ orders, because that time, the demands used to be greater than the supply, so the companies’ focus used to be to produce more and to supply directly more. There was no thinking of the effectiveness and the efficiency.

 

One of the only major concerns used to meet the customers’ demand, but this was normal under the conditions. Regarding the globalization and the involvement of companies with this process into more global entities by directly expanding their areas of operations, the competition is increased day by day, which directly made it mandatory to make savings by reallocating the business processes into more effective and efficient manners. In this process, the supply chain plays a key role, in my opinion.

 

Let’s consider if you have a company with a supply chain, there you can reach all of your customers through different distribution channels. Without any interaction of supply, you will have the most benefit, and you will be the most desired company by the customers. Let’s imagine if you're a customer and you go shopping for a particular product or particular item you need to purchase, the most important for the customer is availability of the product on the shelf. If you would be able to provide the sustainability of the products, they’re existing right over there on all the shelves and without differentiating to regions, the countries, et cetera, they’re all considering all the different needs coming from local harvests, you will be surviving definite in different market, which will bring to you to make all this added value to your business.

 

In order to achieve this, you must design your supply chain processes into a manner in which you will directly receive the customers’ needs, the customers’ demands. You will then convert them into your demand command, and you will create your seasoned operations plan, then you will integrate this operations plan into your supply chain processes, which directly includes the efficient planning, then the utilization of resources accordingly, stock policies and production and supply from different locations to different regions, to ensure the product availability through the different distribution channels ’til the final end customer. I think the final consumers. This is the key.

 

Most of the companies in various sectors give particular attention to that. Anyway, in order to stay competitive in this sector, you must directly balance your operations, even in terms of raw material and in terms of cost efficiency. In order to achieve this, especially the cost efficiency, you need to design your processes according to your business volume, to your target needs, and to your capabilities on a personal basis and on an entity basis. Now, in today’s world, if you want to survive, even as a local or a global company in the market you are existing, you need to allocate your supply chain in the most efficient and most effective manner, which means that less cost needs to be incurred, but you need to reach all of your customers. Reach out and interruption in supply. We directly can call this the other principle, which is on time and in full quantity. All your products need to exist in the markets, reach out, and the interaction in supply.

 

As an example of supply chain strategic strength to create added value to a company, I can give the Turkish company Ǖlker, which is mostly known after the accusation of famous Belgium chocolatier Godiva. This company used to be a local company in the early ’40s, locally in Istanbul to produce biscuits for the internal market and expanded their portfolio to chocolate and chocolate products. Right now, in the recent year, especially if we look at the ten years, probably about all of it, apart from the Godiva accusation, we can say that the company has expanded even not only to a local company to a transregional key player in not only the biscuit or chocolate sector; but in most of the ready-foods sector by vertical integration and such kind of expansion policies in which the supply chain used to be the key strength of the company. I mean that.

 

The company is now directly to have the widest distribution channels in Turkey, which makes it possible to find the company’s product everywhere you need. You can imagine yourself like the metropolitans, like Istanbul, Ankara, and Izmir and from the farthest village in eastern Anatolia. It’s directly possible because they have the supply network directly dedicated to production and to distribution of the products in any of the points they have available. If you look at each shelf when you go to hypermarkets, supermarkets, or only grocery stores in the directly far part of Anatolia, it is always possible to see an Ǖlker product.

 

The consumers do not hesitate. Even though they might have no other option if they need to buy a food product directly, they know that, and they are really sure of that, they have the preference to find an Ǖlker product on the shelf. This is why they do not hesitate to make the purchases. And the company’s growing after and after. The same strategy they have expanded the business regions twice. First, they increased their export to the Middle East region and then to Balkans, and then Russia and central Asian, the Turkic countries.

 

The main strength on the expansion has been the supply chain also. Where to make the production, how to distribute the products using which channels, and how to ensure the product availability in each of these markets considering to local needs. They have focused on that as a key strength, and as soon as they have achieved the product availability, they were using vertical integrations, local companies or factories and acquiring some key suppliers, which are necessary for their continuity of the processes. They still exist in every market they have entered without any disruption in their processes. This is why their products are demanded.

 

Their brand’s reputation has directly strengthened, and their existence is well-known in the companies. In today’s competition, if you intend to extend your businesses on the regional basis or if you want to globalize your business, first you need to be sure of that. You need to harmonize your supply chain processes for this purpose. Otherwise, there’s no possibility for you to survive in any other market, neither your local nor the regional ones you intend to enter.

 

 

About Emre Göllü


 

emre.jpg

Emre Göllü

 

 

Supply Chain Manager,

Turkey & Middle East and

Africa Region at UCB Pharma

LinkedIn Profile

I interviewed Emre Göllü who discussed Pharmaceutical Supply Chains.

 

 

 

 

I would like to share my opinions and thoughts about pharmaceutical supply chains. My name is Emre Gollu. I’m working as a supply chain manager for Turkey, Middle East, and Africa regions at UCB Pharma, which is a Belgium-based company. I have a background in chemical engineering, Bachelor’s of Science and Master’s of Science degrees. Graduated Istanbul Technical University, where I used to work as a research and teaching assistant before I joined private sector in terms of pharmaceutical business.

 

I started by career in pharmaceuticals by Roche, a Turkey subsidiary of the Swiss company, with quality management. Then, after completion of M.B.A. study, again in Istanbul Technical University, I just moved to materials management, which I can say was to be entry to supply chain management. Then I just went into production planning and warehousing distribution parts of supply management.

 

After having fulfilled five years at Roche, I just changed to the Belgian company Johnson as logistics manager of Turkey subsidiary. In this occupation my main responsibilities used to be all the legs of supply chain management, like importation, demand planning, local toll manufacturing, planning, technical purchasing, warehousing and distribution. For six and a half years, I have been working for UCB Pharma.

 

The first five years I have spent as the logistics manager for Turkey, and since one and a half years, I’m still working as the supply chain manager for Turkey, Middle East, and Africa regions, which is a duty still consisting of all supply chain-related activities in Turkey and coordination of, again, the establishment of supply chain network for Middle East and Africa regions, which still comprises the coordination of new product launches, management of relations with the partner over there, ensuring the preregistrations and supply, and making products available for the launches, as well as management of supply chain efficiency an effectiveness. I directly make the establishment of a continuous system to ensure the supplies for all the regions.

 

The current problem I see with pharmaceutical supply chain is, I think, simply, the real supply chain concept is missing in the pharmaceutical sector. What I mean with this is that most of the pharmaceutical companies do not recognize the supply chain as starting from the vendors and ending up at the final customers, the patients, in this case. Normally, they are considering it as a simple operation, like producing and supplying to the market via the wholesalers. This should be given continuity.

 

The other parts can be so easily neglected, but this makes the competition for the companies really different. Accordingly, we can say that most of the companies prefer a centralized concept of the supply chain, which is nonflexible directly. For instance, we can say most of the companies, even the major multinational ones, prefer to make production in particular places and make distribution at these particular prices to the whole prices to the whole world, which might be difficult sometimes, considering the distances to markets, considering lead times of production and lead times of procurement. It might happen in one particular market that prior competition with other companies over there, product availability needs to be increased, which means that more and more supply needs to be done in this market. And different policies in terms of stock management and supply might be needed to get conducted for particular markets. But if there is a centralized approach of supply chain, this is almost impossible to be flexible in the market in order to respond to the competition, especially to the moments of the competitors in the local particular market.

 

This is one of the major problems, but the nonflexibility is also related to the GMP approach as well. The GMP concept doesn’t allow the pharmaceutical companies to be really flexible, but in order to survive in the critical markets, the pharmaceutical companies should give particular attention, especially how they can act in accordance to GMP, by this centralized approach. In order to achieve this, the flexibility and competitiveness in the market, they need to give first their primary focus to build up the real supply chain concept in their organization structure, even in terms of management, in terms of process continuity, in terms of process harmonization. It will end the different geographical regions all over the world. What might be the needs to ensure the procurement in an efficient and effective manner and accordingly, the supply to the different markets in an efficient and effective manner.

 

The question of who is affected, I can easily answer that: Both sides are affected. First, patients are, namely, the end customers are affected because being not able to find the medicines they need to use on time and in full quantity. If their demand is not met, they intend to look after the alternative. In the meantime, also the companies are also affected because if they wouldn’t be able to supply the markets directly on time and in full quantity, they will lose patients, which will lead up to lose the market share and to lose their incomes, et cetera. A total negative impact like the domino play we can say, starting from losing the patients, continuing probably losing to market share, and losing the income. A total loss of business directly, which is easily impacted by single strategic problems, I can say.

 

Now, in today’s competitive environment, in each country we can say the most important thing is the existing in the markets. If you lose your patients or if you lose the prescriptions by the physicians, you lose directly your market share, because in each strategic area, there’s a strong competition. Most of the companies are entering the market with a practical approach, whether branded or generic, it doesn’t matter. For the patient, the most important thing is to have alternatives for the therapy and for the cure, which is necessary.

 

The patient looks after to have its medicine available. In order to have the medicine available, and if you intend to sustain in the market particularly, you need to make your supply chain really effective in order to ensure the product supply to the market with certain continuity, and without any problems, which will make it possible for the patients to wish the products every time.

 

Otherwise, you will be impacted definitely in a negative manner, and interruptions in supply might not be easily recoverable. Let’s imagine this. If you're supplying a particular product or an API for local production for a company, an interruption in supply, even with a short- or midterm duration, might directly lead, in the long-term, to the loss of prescriptions and then patients accordingly, and to recover this might take a couple of years, which will require more investment, more effort, more dedication of workload. Then you will be starting again from this zero point. It might be easy to lose the market share, but it’s really, really difficult to directly gain again the lost market share in that particular market. This is why the companies need to pay particular attention, to have their supply chain and main products available in the main markets.

 

In fact, the solution of the problem might be simpler than everyone will think of. The company should give particular attention of how to create the supply chain concept in their organizations. Directly, they should give priority to realize end-to-end chain, even starting from their organizational structure and directly reflected to the markets in which they are still assessing and to the ones in which they intend to conduct their operation. The end-to-end supply chain starts directly from the procurement, the interactions with the vendors, to the final delivery of goods to the patients directly and each consists of different particular steps which are mandatory to get conducted in a harmonized sequence between each other.

 

And in order to ensure this, companies should consider supply chain management, not only on operational tasks for themselves. On the contrary, they should perceive supply chain management as a strategic strength which will bring themselves certain advantages as cost efficiency and achievement of better market shares, existing and expansion to different markets, and ensuring their consistency of businesses from different perspectives.

 

If supply chain management is not considered like this, it’s inevitable for the companies to have particular problems in terms of business operations as well, and in terms of financial figures and objectives, as well, we can say. The most important thing is to be differently keen on the importance of supply chain from the strategic perspective and also from the operational perspective and to reflect this importance to the organizational structure and then be flexible in management of this supply chain network according to the organizational structure. At the global level for the, I mean the companies, the most connection with companies operating at the global level and even, also, the ones at the local level. This one’s big, one particular attempt to get rid of this problem.

 

For the future, the ones who will be able to create a real supply chain management concept in their organization, in their policies, in their strategies, and in their operations will be able to survive in the markets by responding to rapidly changing market needs so effectively. The ones who will directly resist into changes and who wouldn’t be able to adapt their structure strategies and operations to the changes, even on a local basis. And who will directly object to differences between regions and countries will have certain difficulties to conduct operations into directly strategic strengths and will have their definite difficulties o survive in the particular markets where competition will be definitely more increasing than today.

 

About Emre Göllü


 

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Emre Göllü

 

 

Supply Chain Manager,

Turkey & Middle East and

Africa Region at UCB Pharma

LinkedIn Profile

I interviewed Jamie Hannon who discussed Alternative Energy and Supporting the Future Grid.

 

 



Can you start by providing a brief background of yourself?


My name is Jamie Hannon. I’m a mechanical engineer by background. I spent ten years of my career working in the semi conductor industry for Teradyne as both a manufacturing engineer and as a mechanical engineer. I pursued my M.B.A. and ended up leaving Teradyne for a company called Nuvera Fuel Cells that does both hydrogen generation and hydrogen end use through fuel cells. After a number of years working for Nuvera, I’d moved on to SustainX, my current employer, where I work as a supply chain manager. SustainX is a company that does exothermal compressed-air energy storage. It’s essentially a large grid-scale mechanical battery that translates electrical energy from the grid into compressed air, which is then stored, and when there’s a need for the energy on the grid, that energy is translated back into, it’s expanded and turned back into electrical energy. That’s a basic background.

 

Thanks. Can you talk about the future grid and how it ties to supply chain?

 

Yeah, absolutely. As we move forward five years out, ten years out, twenty years out, what we’ll find ourselves doing is relying more on transient forms of energy. Right now we have a largely fossil-fuel-based—at least in the industrialized world—it’s largely a fossil-fuel-based grid taking coal or natural gas or oil and turning that into actual energy through steam to basically heat up water in terry steam turbine. As we move forward and our resources deplete, our fossil fuel and our bands of coal get thinner and it becomes more challenging to find and product natural gas and oil, we’re going find ourselves looking more to transient forms—i.e., wind and solar thermal—to produce more of our electrical energy. Some of the challenges that we’ll find are, you have this supply chain that’s set up. Right now to supply parts into a fossil-fuel-based economy, as those old technologies start to wane off, it’s gonna be more challenging to find and to support this large kind of global supply chain. Right now, if you have a wind turbine, for instance, there may be parts in that turbine that come from China, from Southeast Asia, from all throughout Europe, from North America. As you take the fossil-fuel part out of the equation, it becomes more and more challenging to support that supply chain, so what we may see, not a year out or two years out, but we may see more of a relocalization of manufacturing. That assembly that you were getting from China or Japan, you may need to turn that manufacturing capability back on, closer to point of use.

 

Can you talk about what supply chain challenges you face at your company?

 

For our company in particular, we are developing new technology. This has really never been done before. There are other forms of compressed-air energy storage but not isothermal compressed-air energy storage, so we’re really developing a supply chain from the ground up. It truly is kind of combing the globe to find the right suppliers, the right components, and doing it in a very short amount of time. As you can imagine, it’s a pretty great challenge. We’re dealing with a very small team overall between supply chain and engineering. We’re not a massive company, so you have to find ways to be creative and you have to be innovative and you’ve gotta be absolutely expedient about finding and securing the elements that comprise your machine.

 

Do you have any recommendations for managing supply chains in the alternative energy industry?

 

As far as supply chain management goes, I think the same basic tenets apply whether it’s alternative energy, the biomedical industry or the semiconductor industry. Clear, concise communication; finding the right suppliers for the job; building strong with those suppliers. These are things that carry over from every industry. There’s really nothing new there. The only other trick, really, maybe the added twist to alternative energy is that it is, in a lot of cases, it’s a new venture. The technology may not exist, so it does require maybe a little bit more of a creative stretch. Otherwise, it’s not very different than anything else.

 

Thank you, Jamie, for sharing your views on the future grid and supply chains.

 

Sure, absolutely. Thanks, Dustin.

 

 

About Jamie Hannon


 

jamie.jpg

Jamie Hannon

 

 

Supply Chain Manager

at SustainX

LinkedIn Profile

I interviewed Arnaud Deshais who discussed Scenario Planning and S&OP.

 

 

 

 

 

Can you start by providing a brief background of yourself?

 

Sure, thank you, Dustin. My name is Arnaud Deshais and I actually started my work in global supply chain in Europe, in France and Germany. I worked for about 20 years in all different aspects of supply chain, whether it’s inventory management, whether it’s production planning, vendor management, consignment, distribution, network. I’ve done a lot of different functions within supply chain, either as a consultant or in the functional view. I’m currently the director of supply chain for a company called Art.com. It’s an online business and we have about one million to two million SKUs and about 12 million customers and we are distributing in about 120 countries. We are doing this online. This is a good example of retail in business, and this is just one example of supply chain management on a global scale.

 

Can you talk about what is scenario planning in the context of S&OP?

 

Sure. Scenario planning is a structured program where executives or people working on a transactional level are looking at different scenarios based on supply, demand, and inventory and where they’re looking at the ability to change those levels based on different simulations if you will. It’s basically looking out in the future and thinking of what could change that will affect your business and how it will unfold if an issue comes your way. This is very important; this is something that every business should be doing either at the very strategic level or even at a lower level when they’re looking at how anything happening in the external environment or in the internal environment will impact their business.

 

Can you talk about why it’s important and what’s involved?

 

Sure. Why is it important? Because many companies are actually using a very simplified version of year-over-year growth or year-over-year constant change in their forecast, for example, and they’re nonexistently thinking of what out there could be totally changing the business dynamics. If you remember back in the ’80s, when Blockbuster was created in 1985. They were opening a new store in the ’90s, about 17 hours a new store was created. Well, very quickly after that, in 2011, the Blockbuster brand got totally dismissed and they were bankrupt. This is a very good example of why a business cannot just look at year-over-year or even five years when they are ignoring external shift in the demand.

 

It was the same thing back in the Quartz revolution in the watch business. Also the same thing when we are looking at September 11 and what came out of September 11—potential issues with demand coming down or supply not being available; that sort of thing. We have also seen that with the tsunami in Asia where, for an entire week, the total microprocessor chips were totally not available for companies to build computers. So, looking at scenario planning is actually thinking of those things and how they’re going to impact your business and what you can do about it.

 

Rather than just saying year over year, we are going to have this change in the marketplace or year over year we are going to change our supply strategy. Looking at while that’s something very important to do, but what if there’s a major shift that’s happening your way? How are we going to deal, and how are we going to go over that major shift?

 

In S&OP process where we’re looking at three different elements, when you think about the S&OP graph, there’s a line that represents the demand and the forecast; there’s a line that represents the supply and all of the vendor-provided product; and there’s a line that represents the inventory. When you do scenario planning, you're actually taking one line at a time, and then you create a scenario that is going to really completely change the dynamics.

 

For example, if you take the forecast or the demand line you can look at things like where is the major shift in the demand. A new competitor coming in and taking all your demand away. Or what if you’re introducing a brand-new product and there’s a strong canibalization and you don’t understand quite the canibalization between product A and product B? What if you have a demand that’s dropping all of a sudden as a result of a major earthquake? That sort of thing.

 

On the supply side, where you are looking at how you’re going to either make product or how you’re going to buy product. What if your facility explodes and you totally lose your source of supply? You won’t be able to provide product anymore or maybe a limited amount of product that will go to your demand. Which demand are you going to fill? Are you going to prioritize your customers so that you know exactly which ones are gonna get product? How are you gonna react to that short supply that you're getting from your own manufacturing? Or what are you going to do if one of your major vendors that’s providing a raw material is not able to fulfill or decided to give that product to somebody else? You will result out of a short supply, and then you will have to make decisions on what to do for fulfilling demand.

 

Then you have the same thing on the inventory side. Let’s say your demand doesn’t really come through and then your supply has been fixed on a regular, steady state. You will have an excess of inventory, and you can even turn that inventory into a space and calculating how much warehouse space you would need and how you would translate that and how you would maybe, potentially have to acquire a new warehouse or something. So, by really applying those scenarios to each of those lines, you really are putting yourself as a strategic leadership into looking out for big solutions or completely out-of-the-game, out-of-the-ballpark new ways of doing business. This is what you are being challenged with with S&OP.

 

Something also as well is to think about doing those scenario plannings with third parties and partners. For example, if you take the demand side, where you could very well think of bringing a major customer, like one of your top-three customers into the scenario-planning sessions and says, “Okay, well, we’re gonna partner with you, and we’re gonna use your forecast and your internal S&OP to fill our S&OP and see how that’s going to be connected and what that does to supply and demand. Same thing on the vendor and the supplier line. You could very well involve a major vendor and say, “Okay, let’s understand your cycle of production.” If you’re a seasonal business, you could take that cycle and then play it out in your S&OP process and see what that does to your supply and demand. And same thing on the inventory line. You can bring your third-party warehouse and see how they need to change the space needed as the supply and demand is changing. The S&OP process with scenario planning works very, very well with third parties.

 

I have, so far, only talked about one variable, but obviously you can think about how you marry a couple variables together. For example, you're doing a production-line transfer, and you're doing that transfer from one facility to another facility. Well, in this case, not only your demand might change because your quality might be changing—hopefully not, but there might be a quality expect—and your supply obviously will change. If you’re working those two locations in parallel, you are going to have a big supply. What if one location doesn’t come through? You will have to change your demand, your supply, your warehouse. All that, especially for a company in regulated environments such as medical or biotechnology, how will you have those different parameters change, and what is it gonna do? It’s very important, again, to look at all the different elements when you're doing your S&OP planning and really thinking of the future, the future in six months, in one year, in three years, and five years, all other things that are very important to consider.

 

And can you talk about how it’s done?

 

Sure. The best way to do this is, a strategic level is to really have a group of executives meeting in a room with the data, with, potentially, people that know the market very well and actually use the S&OP process in the long run and actually change the numbers, use the database, use the business economics and the analytics to really create those scenarios. Bring people from the outside that are gonna feed you scenario, that’s gonna help you find out how to do the scenario planning.

 

There’s one key when you do this exercise that is the most important thing and is counter-intuitive is to always look at the consequence and not at the cause. In all cost analyses we always think about always going to the root cause. In this case we have to go to the consequence. I am going to give you an example. When we think about a major shortage of raw materials, is this shortage created by an earthquake or is this shortage created by a quality issue or is this shortage created by a fire? Who cares, right? The bottom line is, you have a shortage. You don’t have to look at all the scenarios why you're having this shortage. It doesn’t really apply because you won’t have the time to think of all the different things. But what you know is that you could have a major shortage of a raw material; this is what’s going to be important. When you have those sessions the person who’s managing the session has to always make sure that the participants think of looking at consequences, not cause; that’s very important. And then looking at scenario planning at a very tactical level, I would think at a planner level is just to change one of those S&OP variables; see what it does. If it increases your supply by 10 percent, what is it gonna do to your inventory line? If you decrease your supply by 20 percent, how much inventory are you gonna be left with? Those sorts of things. But again, looking at the consequence, not the cause.

 

 

About Arnaud Deshais


 

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Arnaud Deshais

 

Director of Supply Chain

Management at Art.com

LinkedIn Profile

I interviewed Greg Warder who discussed Negotiations Contract: Is Your Contracting Process Wasting Time and Causing Your Organization to Miss Critical Opportunities?

 

 

 

 

Hi, Dustin, my name is Greg Warder. I am honored that you called and asked me to participate and then to send me an e-mail asking me to participate. My topic is Negotiations Contract: Is Your Contracting Process Wasting Time and Causing Your Organization to Miss Critical Opportunities? Is there effective alignment of the business? And can legal turn contracting into a competitive advantage?

 

Once again, my name is Greg Warder. I’m the vice president and chief contracting officer for Diebold, Incorporated. I’ve got a background in supply chain management. I’ve got a degree in supply chain management at Miami University in Oxford, Ohio. I have an M.B.A. from Kent State University. I have a JD from the University of Akron.

 

Miami is one of the first universities to offer a purchasing and supply chain degree. Miami’s program is an outstanding program. I had excellent training; I feel very blessed by that. I started my first job at Diebold, Incorporated. I was surrounded by outstanding leaders. One of my early bosses was a gentleman named Tom Lobe. He was rated in Supply Chain Magazine as being one of the top ten most difficult individuals to negotiate with on the supply chain side. I learned a ton from him.

 

As my span and scope of responsibility increased, I increased my passion for the field and really enjoyed negotiating. I had a fantastic opportunity to do many things in my supply chain role, setting up global supply chains, setting up change-management processes, global cost-reduction processes, various forms of development.

 

This led to just a massive amount of contract work. I understood negotiations very well from my training and my business background and, of course, my M.B.A., along the way there. I became increasingly frustrated by the length and the uncertainty of the negotiation process. It seemed, unlike all the other business processes that I was involved in, which was along the way of lean practices and Six Sigma type processes, the contract process seemed to be almost accepted, one of the few practices across business and across industries that was kind of like a black hole that no one seemed to focus on the importance of it, and it seemed so broken.

 

Part of the reason I felt that the legal team seemed to be very good negotiators and very knowledgeable and the business teams likewise, very knowledgeable, but the two fields didn’t seem to cross very well. The businesspeople didn’t necessarily trust or want to get involved with the legal folks, and the legal folks vice versa. And it seemed like both within my company and all external companies that I worked with and colleagues in different industries I worked with, we all had about the same problem. That’s one of the reasons I decided to go to law school, to become kind of an insider on the legal side and understand the ins and outs of the legal practice so I could have a much better approach in improving the contracting methodology.

 

I did, I went to law school, practiced law for five years, and then I assumed somewhat of a blended role between supply chain, supporting the sales organizations, so kind of both sides, the seller and the buy side, as well as the legal side. I like to use that to form as a framework to kind of walk through some ideas.

 

One of the things, Dustin, you and I exchange ideas on is: Can you talk harnessing the ability to set negotiation and contractual strategy? Not addressing specific strategies here, because each commodity and each project and each service, whatever the supply chain activity is, it could widely vary in strategy, but I would like to talk about general concepts. I think a couple realities, maybe four realities, might help set the stage here.

 

Reality number one, and we all know this, but once a contract comes out between the parties, it’s usually very serious, a relationship is likely to occur or at least the parties are serious enough to really start to spend some time and invest some money in it. This is usually after all the sales pitches and RFPs and discussions and proposals and pricing and everything, and then the contract comes out. For major contracts, I suggest project-management tools. Whatever your organization uses, whatever you're comfortable using, but identify and communicate the team members on your team. Who from legal, who on supply chain? Who are the stakeholders, who are the subject-matter experts? Who are the management-escalation points and so forth for that project?

 

It’s usually quite easy to get the same list from the other side. If you're on the supply chain side, the seller is highly motivated to sell to you, and if you ask them to fill out that ahead of time, who their equivalent parties are, it’s extremely helpful. Also important is setting negotiation format and schedule. How often will we meet? Who’s going to be present on those calls? Is it a full group, is it a subgroup? Are we going to be on the phone, some kind of Web-based tool, video, in person? You change up the format depending on the type of discussion taking place. In other words, if you need to see the words o the page, maybe use some Web-based tool. Maybe if it’s just a deep discussion on one or two issues, maybe it’s better to be in person or on video or something like that. It can change but I think it’s very important to set that schedule.

 

Also have regular status updates and communication and escalation paths within your organizations and make decisions quickly. And then set and track progress toward a decision point or an end date so the constituents within the organization know where the project stands, how quickly it’s going to be done.

 

Reality number two is: Sell fast or complete the project fast. By this, I mean, once again, it’s serious at the point of contract. Project-management tools can really help set the framework. But how do you quickly get the parties to a point of deciding whether this is going to work or not work, deciding whether this is going to work or not work. If the negotiation will be complex or tough, then start with a term sheet or a basic overview or outline or objectives or something like that, bullet points even.

 

Maybe 90-day payment terms are important to your organization. Maybe there’s some other strict form or way that you handle your confidential information or something like that, depending on the type of transaction. Get that out there early, and find out whether that’s going to be acceptable or not acceptable or how much flexibility there is in this type of thing, so rather than wasting time with a ball-type page agreement, setting those expectations up front and then spending the time documenting, even referring back to those term sheets, where the management does buy in, it saves a ton of time, as I’m sure some of you have tried that in the past.

 

I’m a big advocate on never sending out a standard agreement for a significant deal or project. Standard forms are standard forms, and they’re great for the mass majority of your projects, but if it’s something really strategic and important, before you send it out, take a look at it, double-check it. Sometimes you only get one time to really ask for what you want. If you want customized, you want a little bit more, or something’s, given a specific purchase, is particularly important, document that up front. Even if it’s not in legal terms or something like that, highlight some areas, add some bullet points, the parties you're going to need to talk about the following things or something. Quite helpful and moves things along quickly.

 

Reality number three is that wasteful contract negotiations harm our businesses. Each contract negotiation has its own risk reward complexity factors. Anticipating length of negotiation depends on the deal, on the size, and there is no right answer. Sometimes I get the question: How long does a contract take? Well, you don’t necessarily know. Six weeks might be appropriate for one kind of deal, but that may be five weeks too long for another type of deal. It all really depends.

 

Project management really helps you set up the stage work. You fill fast and complete with the templates and the bullet points and the term sheets and everything; that helps you get there too. But also, realistically assess your risk allocation. On this reality three, one of the big wastes is if the parties sit around and are stuck or just emboldened in their risk profiles, in their risk decisions. If there is no flexibility, that needs to be set up up front, kind of in the fill fast kind of thing, but once the negotiation starts and gets rolling, the team should have a pretty good idea within those boundaries of where they’re going to end up, who needs to be involved, what risk.

 

Best optimal average outcome kind of scenarios are helpful there, but it’s really important to understand risk, what you're going to do, how you're going to handle each aspect. I don’t like the baseline and the loss value for the supply chain organization. I see oftentimes a massive amount of consternation over an issue that might delay a contract negotiation several months, maybe even three or four or five or six months, depending on what the issue is. It ultimately may be a relatively important issue, but the real value and the real loss for the organizations, both the sell side and the buy side, is the failure to implement.

 

If there’s a tool that’s going to be implemented, it’s going to save $100,000 a month and there’s some issue that’s a very remote risk that the chances of it happening are one in ten thousand and the issue is delayed for six months while that’s being worked through, then the organization’s lost $100,000 a month for six months; $600,000 impacts both the buy side and the sell side. I think it’s very important to be realistic on these risks, assess them, try to quantify them. And just like any other project, ensure that the decisions are made quickly on a fill fast or a buy fast and risk reward type analysis and keep things moving along as best as possible, because the real lost in value is when things aren’t implemented.

 

Reality number four is: Our organizations believe the contracting processes are broken. Just about everybody I talk to in my industry and outside my industry, peers and colleagues both on the supply chain and on the legal side say that the number one complaint they receive is things are broken, it takes too long, it’s disorganized, it’s unclear, there’s no communication back to management.

 

It’s critical that we report out, so communicate with the teams, communicate how quickly, communicate escalations, make the management and the business solution part of the process. Communicate your wins; continue to sell the value not just in the price of the part, but in the implementation and the timeline and the contracting value with respect to contracts done officially, met our standards, released. It used to take us four months; now it takes us two months or whatever that approval process is. Show your work and show your progress. It’s very important to communicate the successes through leadership.

 

Dustin, the third question that we kind of exchanged about is: What about managing risk and reaching solid, well-conceived resolutions? Having been on both sides in the business and legal, I’m a firm believer that contracts are both 100 percent business and 100 percent legal. By that, I mean ever aspect in an agreement or negotiation, including legal clauses * (12:33—unclear) legal clauses such as infringement, indemnity, and levitation liability has a direct impact on the risk and business decisions.

 

Likewise, pretty much all business terms such as warranty, price, and quality statement of work and so forth have a direct impact on the legal network. Some of them are a waste of time and certainly a waste of value in the negotiations team perspective. You know, “You take this issue and I’ll take that issue and we’ll work it together,” and so forth. It’s extremely effective if the business teams spend the time to prepare and bring the legal counsel up to speed on the various projects.

 

Likewise, I can’t emphasize strongly enough that it’s important for the legal colleagues to bring the business folks up to date on what their concerned about on the project. Best practice on contract negotiations with the lawyers and the business people are on exactly the same page. When the other party’s lawyer is talking about a business issue, which is quite common in these negotiations, the lawyer has just as much credibility and just as much passion about resolving the business issue as does the business person. Then you have both parties talking passionately about an issue, about the importance of it moving forward as opposed to handing off and saying, “You take this one while I’m writing e-mails,” or something like that and then, “I’ll take the next one.” It’s very clear if everyone’s on the same page.

 

I’ve had the opportunity to form a team of business and legal negotiators who routinely work through complex negotiations. Experience has taught me the value of supporting each other with a deep understanding of the overall business. Immeasurable value when the parties are on the same page. I’ve seen that close alignment and the value it provides.

 

The fourth question that we discussed is: Why do you see the powerful alignment between supply chain and business and legal, a substantial strategic advantage? Competitors can clearly compete on the strength and efficiency of their supply chains, but every year this particular field is competitors are basically refining and proving and developing the manufacturer development of contractors, sales channels, tools and so forth. They’re doing the exact same thing that your organization is doing. There’s continued push for better pricing, higher quality, better performance, better capabilities and so forth. What separates your organization?

 

You can continue to tweak and improve, which will always be the case, but even with perfect alignment on all the business sides, one of the critical things that you can do as a supply chain organization is strategically negotiate. If you can follow these basic practices that we talked about here, such as contract managing and figuring out how to get to fill fast and complete fast and avoid waste, make sure that your organizations are communicating your successes, on the same page, working together both with the legal and the business teams, it’s significant that the value of your organization can compete.

 

If your competitor takes six months to negotiate with a contract manufacturer to build a product in a lower-cost geography and your organization can do that in three months, you're half the time and you’ve got a three-month advantage on your competitor. Once again, if you can do that well—speed isn’t everything; speed is important but you have to do it right, so it takes that preplanning and organization and alignment. Implementation time, you cannot recover that three months in any other way other than getting there quickly.

 

A negotiation is typically the barrier point for the contract-implementation and execution. Oftentimes the barrier point in which you're competing with your competition. I’d highly recommend you think about this as a business process—it’s just as much a business process as a legal process—and contract negotiations and contracts are, from my perspective, one of the few areas of business that has not been streamlined, leaned, improved, tracked. Even with contract-management tools and so forth, it’s still a means and method to move documents and exchange things back and forth, but it’s not a cohesive, strategic way to build discipline into the contracting process.

 

Thank you for the opportunity to participate, Dustin. I really appreciate it. Thank you, bye.

 

 


About Greg Warder


 

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Greg Warder

 

Vice President,

Chief Contracting Officer

at Diebold, Incorporated

LinkedIn Profile

I interviewed Jim Tompkins who discussed Supply Chain Challenges of China's Exploding E-Commerce Landscape.

 

 

 

 

Can you start by providing a brief background of yourself?

 

Sure, Dustin, I’m happy to. I’m not sure about brief, I’ve been doing this for 38 years, so it’s kind of a long background. To make it brief, I am a PhD engineer in industrial engineering, and I have done supply chain for 38 years. My company provides end-to-end supply chain consulting and implementation services. What we mean by “end-to-end” is from a process point of view: plan, buy, make, move, store, sell. From a business point of view, we talk about strategy through implementation. And from a geography point of view, we talk about the Americas, EMA, and Asia. What we do is we work with a wide variety of industries, but the largest growing scepter for our business today is retail and, in specific, e-commerce and online retail.

 

What are the major supply chain questions that companies face when they’re exploring China’s e-commerce landscape?

 

Well, one of the most difficult things that is different than what we would have in Europe and the United States is the issue of delivery in that Chinese companies do not allow online companies to deliver to the office. When it comes to delivering to the home, there’s no place to just drop packages off. Delivery is different in that you can’t typically do it between seven in the morning and seven at night, so you need to deliver after seven at night, or you need to use some sort of a drop location. Those drop locations are growing. The Alibaba folks are using several store chains to deliver, to allow you to pick up your orders. Amazon is working with a company called FamilyMart. There’re a lot of companies that are working with companies that have physical locations where you leave the product to be picked up.

 

Probably next to delivery, the second thing about China’s e-commerce landscapes that, to me, to be perfectly honest, is quite troubling is the promotion orientation. The promotion orientation, of course we have promotion in the United States and Europe as well, but it’s not unusual in China to find that some promotions will have days where the volume is 25 times larger than your average day. That’s very difficult on the supply chain from a processing point of view, but 11/11 is a huge event. November 11 is a huge event, and that one puts product at tremendous discounts and to see how much volume they can do. Well, no one’s making money at that time. It’s a real challenge to figure out what a company’s strategy should be when you’re going through promotions. There are some companies that simply won’t sell their best products online because of the promotion orientation, so you need to go to the store to buy their things, and then what they sell is some other product which seems to be a lower quality or maybe an out-of-date model online. Those are the two big ones that make China so different: the delivery aspect and the promotion aspect.

 

What is the status of omni-channel in China?

 

Well, Dustin, that’s an interesting question because omni-channel, as we know it here in the U.S., is not really practiced in China. In the United States and in Europe, companies are really looking at how do we integrate our online and our in-store experience. They’re doing that throughout the entire supply chain, from the planning of merchandise all the way down to the inventory available, the way you can buy anywhere, return anywhere, you can buy it online, return it to the store, and so forth. Although there are some companies that are attempting it in China. The one electronics firm, Suning, is really working hard at that, but the fact of the matter is, they have not integrated it fully yet. They still have problems with returns. For example, you can buy something online and you can return it to the store, but you can’t exchange it for anything. You have to wait for the item that you want to be exchanged to be returned to you from the online business. It’s not really an omni-channel play. Glom and Walmart are also not really doing that very well. There’s a real challenge in that omni-channel is not being practiced in China, so, therefore, a lot of the lessons that we’ve learned in the U.S. don’t necessarily apply to what’s going on in China.

 

Which operations should be outsourced and why?

 

Well, outsourcing the distribution from a warehousing point of view really isn’t viable because there are 3PLs to do the warehousing activity. That’s a function that needs to be done on your own. What can be outsourced is the delivery activity, but even that is somewhat confusing. One of the bigger delivery firms known as Shun Feng in China, is a parcel courier, and they were doing a great job and you could outsource to them, but now what they’ve decided is they’re going to become their own e-commerce provide. In addition, they own their own chain of convenience stores, so they can go everywhere from the online presence to delivery, to having the drop-off points where you can drop the orders off. It’s a challenging environment to find that capability as well. You don’t have the nationwide providers like UPS or Federal Express that can service the whole country, so delivery, when it is outsourced, tends to be much more regional, much more local than it is across China. One of the challenges you have and one of the growth engines of the Alibabas and the 51Buy and those types of people is that they are forced to do it themselves, so you have to have substantial investment capital. In China there tends to be fewer very much larger e-commerce players as opposed to Europe and the United States where there’re a couple large players, but then there’re a lot of other people in the marketplace.

 

Thank you, Jim, for sharing your views on China’s e-commerce landscape and supply chain issues.

 

Well, you're welcome, Dustin. Pleasure to be with you and look forward to being with you again.

 

 


About Jim Tompkins


 

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Jim Tompkins

 

 

Tompkins International

Supply Chain Consulting CEO

LinkedIn Profile

I interviewed Charles M. Intrieri who discussed Excess and Obsolete (O & E)/ Slow Moving Inventories (SMI) Management and Disposition.

 

 

 

 

How tight inventory controls helps maintain cash flow.

 

A company’s warehouse of inventory gives banks many clues about the operation’s efficiency, cash flow and overall financial health. If inventory controls are not in place, accessing credit lines and funds to obtain additional inventory may not be possible in today’s banking environment. We have to remember inventory is MONEY, not just pallets, parts and materials. It is a company asset.

 

There is a cost to handling inventory, warehousing it and not moving it quickly enough.es, Inc. With banks tightening up, there are less funds available. Companies need to control inventory levels and stock the right inventory.

 

Sure concentrating on “active” parts is also important, but never forget to manage O & E/SMI parts.

 

What signs indicate that a company’s inventory is excessive and could harm financial performance?

 

Companies can compare certain key performance indicators to similar businesses in their industry, looking at measurements such as inventory turns, return on investment and gross profit margin. Excessive inventory may come to light when the company begins feeling financial pains associated with too much of the wrong items or not turning inventory quickly enough. Cash flow might be tight, accounts payable may be excessive or aging beyond what is desirable. When assessing inventory flow and warehouse stock, the executive team should ask: How much inventory do we really need based on lead time to meet customer needs? Depending on the nature of the business, a company may be assembling products start to finish, producing a particular component or acting as a distributor. Regardless, when products are not moving efficiently, companies will struggle with cash flow, therefore limiting their ability to grow and prosper.

 

How does a company get back on track?

 

Careful planning, discipline and training are necessary so everyone involved, from purchasing to production and distribution, understands what steps are necessary to be competitive in today’s economy. One consideration is implementing a lean manufacturing approach, which will focus on improving the flow of the production process and elimination of waste. This process will establish effective controls and procedures that will require the buy-in of all departments and individuals and improve the company’s bottom line. The Supply Chain department should establish a replenishment schedule for each inventory item, which will provide efficiencies in the flow of inventory and reduce overall costs. Establish measurable goals and objectives, such as inventory turns and return on investment, for inventory management, purchasing and sales personnel. Motivate these individuals to reach their goals by tying performance to compensation. Implementing these types of systems is a top-down process, which requires management’s commitment to putting a process in place and training every employee to follow the system. It is important to make everyone accountable and responsible.

 

What can a company do to ensure the processes are being followed?

 

Establish an inventory locator system along with a cycle inventory system that will improve efficiencies and identify discrepancies on a regular basis. Document all procedures and routinely test that they are being followed. Be sure effective security systems, both within and outside the facility, are in place to protect the company against theft. It is critical to implement an Enterprise Resource Planning System (ERP)with an inventory management module that will enable management to capture crucial information and evaluate key performance indicators to assist in projecting customer needs. Providing tools, processes and procedures will assist in identifying and carrying items that will reap higher profit margins and improve cash flow.

 

What can a company do in the meantime with slow-moving or obsolete inventory?

 

Implement a system to identify and eliminate slow-moving or obsolete inventory that is consuming valuable warehouse space along with capital. There is value in slow-moving and obsolete inventory items, but if these items pile up and sit over a period of time, they become worthless. Inventory that isn’t turning or is no longer relevant to a company’s process can sometimes be returned to vendors. Offer special reduced pricing to help turn the inventory quickly. Give sales-people incentives to concentrate their efforts on moving that inventory. Determine if there is a market via the Internet or scrap. Or, donate the items to charity and realize tax advantages (though first discuss this with your tax adviser).

 

 

Implement a Materials Review Board (MRB) and create a standard operating procedure (SOP) for the MRB’s function... Put together a cross-functional team to analyze Excess and Obsolete/Slow Moving Inventory monthly (include a sales representative). Obtain a list of slow moving, excess and obsolete inventory from Supply Chain/ Inventory Management (which should have representatives on the team) and use Pareto’s 80/20 principle to analyze this list wherein 20% of the items on this list represent 80% of the total list. Have a chair person/coordinator of this team as well as a recorder/note taker. Go through each top item and put together an ACTION PLAN (recorder) on how to minimize and remove inventory that is DEAD and nor moving. Keep moving down the list until you take disposition notes on all the items on this list.

 

This MRB team should also save space by managing RTVs (Return to Vendor) materials and RMA (Return Material Authorization) goods. RTV and RMA won’t move themselves, they need to be part of the team’s materials disposition plan. Obviously the vendor/supplier has to be aware and approve of the RTV. An RMA needs an RMA number to dispose of it. There should be standard operating procedures (SOPs) in place to manage RTVs/RMAs.

 

You can find companies that buy and sell excess and obsolete/slow moving material on line and have three (3) of them bid on O & E/SMI inventories. Chose the one with the best value overall for you. The goal is to gain space (LEAN initiative), obtain cash for this category of inventory by disposing of it. What good is it in your racks now? It is a good idea to let top management, and particularly finance about your disposition plans. They should “sign off” on your plans, so there are “no surprises down the road.”

 

You should continue and FOCUS on MRB monthly, with the same goals, but less items, to continuously improve O & E/SMI disposition, and the addition of new space (LEAN initiative).

 

The cross-functional MRB team should be acknowledged by top management for their efforts.

 

Why will banks scrutinize a company’s inventory management before granting loans?

 

Banks want proof that the money they lend a company for inventory investments will provide a good return. If inventory is sitting, it is not paying off debt. A bank will review inventory turns and ask questions about excessive inventory, slow-moving items, aged accounts payables and how all this affects cash flow. (If the company were moving and sellinginventory, it would have cash to buy more rather than approach the bank.) A company will impress a bank if it has a well-planned inventory system in place.

 

Background

 

Chuck mentioned a company called GPS Inventory Solutions: they have two warehouses: their headquarters are in in Forney, Texas and they have a warehouse in in Tennessee: 600,000 SF in total. Their specialty is E & O/SMI as we discussed.

http://www.gpspartsmart.com

 

About Charles M. Intrieri


 

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Charles M. Intrieri

 

3PL/Warehouse/Distribution/Logistics

Consultant with helpful wisdom

and hands-on experience

LinkedIn Profile