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2018

I interviewed Mario Buckley who discussed Supply Chain Risk Management.

 

 

 

 

 

Can you provide us with a brief background of yourself?

 

Absolutely, and thanks for the opportunity to talk to you, Dustin. My name is Mario Buckley. I am Halliburton’s Eastern Hemisphere supply chain attorney. I cover a span of 90-plus countries, anywhere between London and Japan. My job consists of negotiating, reviewing, and giving the company business and legal advice regarding supply chain contracts at its various levels. I have been in this role for a little over six months now however my overall legal experience is over 12 years.

 

With regards to the topic, of supply chain risk management, there are three major buckets, as to how I look at this.

 

The first bucket is what I call the compliance risk management. This applies when working with suppliers that, for example, might represent a company before a governmental entity. We take particular measures to vet them and perform due diligence to make sure that these vendors will not do anything wrong in terms of bribes or kickbacks with regards to government employees, because of FCPA and UK Bribery Act potential violations. So if we know that a particular vendor or subcontractor will be dealing with a government entity on our behalf, we undertake due diligence measures to make sure that the companies that we're hiring are legitimate, that the principals are not related to government employees either by marriage or blood. There are a number of issues on due diligence that we perform in order to make sure that everything has been done above board.

 

The second bucket is the legal risk management. We are basically looking at the contractual risks — the indemnities, liabilities, warranties and obligations. That is where a big chunk of my job falls into, which is looking at the contract and looking at the jobs or the scope of work of each vendor or subcontractor and trying to align that with our operations.

 

For example, if I am going to sign up a vendor to do gardening services, the risk structure there is much, much lower than a subcontractor that is going to be performing work at a well site along working with our people. Those are two completely different extremes, but it gives you an idea of how to approach a contract vis-à-vis the risk a particular job.

 

I try to look at the risk management from the contractual side — what the paper says versus what is actually being done on the ground. If we have a contract for gardening, for example, I am not going to be really worried about what are the indemnities and liabilities in the contract, because the risk is minimum from an operational perspective. However, If I am looking a contract for somebody subcontractor that is going to be working with us on the field, then obviously the concern is a lot greater in terms of indemnities and liabilities because the risk of exposure is much higher.

 

The third bucket is the insurance aspect. When we hire vendors and subcontractors, you must have indemnities and liabilities, and these companies — even Haliburton, for example — must have insurance to provide the financial guarantee for those indemnities and liabilities.

 

In my experience in this role that I am in now, many times the vendors will have a hard time understanding why they need to buy insurance, explaining to them the insurance is for everyone's benefits because it provides the financial backup for the indemnities agreed under the contract. And many times, these vendors will say, "Okay, we will agree to acquire or purchase the insurance as mandated by law in our country." And that's very common in Russia, in the CIS countries. But many times, the mandatory insurance required by law is not necessarily aligned with the risks of the contracts. So you still might end up with a gap with regards to the insurance that’s provided by law — which the vendors are happy to provide — versus the risk of the contract that might require additional insurance.

 

It is a tricky conversation and try to educate the vendors of why it is advisable for them to purchase insurance versus not. Many times, either they don't want to understand or they simply do not care. It is an uphill battle all the time.

 

That is how I try to look at risk management on these different levels. On a day-to-day basis, I deal with one or all three of them at a time. It is a challenging environment, depending on which country and level of sophistication you are dealing with a particular country or a particular vendor. It is an interesting experience because you are also on your toes. Obviously, your more sophisticated vendors will understand where you're coming from, and so the discussion is a lot more straight forward, and it's a lot more objective. Whereas, if you're dealing with a small vendor in a not-as-sophisticated country, you have to go through the whole educating process, and that's where the challenges come up because a lot of times, they just don't really get what is the practice in the business world versus what they're used to in their particular geography. So there's a lot of discussions and a lot of educating and not necessarily a simple process. Nonetheless, it's fun. Like always there are good days and bad days but that is just part of the game.

 

That is how I try to structure the contract reviews in these three big buckets that I just explained.

 

Can you talk about how you overcome some of these challenges? How is it done effectively, the supply chain risk management?

 

At the end of the day, as an attorney, we are in an advisory capacity. All I can do is try to get the parties to reach a middle ground that is as closely aligned as possible with the policies of my company. I try to bring everybody together. And whenever there is a gap or we cannot reach an agreement, at the end of the day, my function is to advise management of the risks.

 

I will give you an example. A lot of times, a vendor will request an overall liability cap limited to the amount of the contract which might sound fair, but the liability cap does not necessarily reflect the consequences of a faulty job so you might have a contract for $100,000, for example, but this particular vendor, if he does not do his job well, can cause a $10-million exposure. So you have $100,000 versus $10 million. So that causes a big gap, and it's my job to bring that as close as possible where there is a match. When that doesn't happen, I advise management, "This is the risk. This is what we can get out of the vendor. Ultimately, the business needs to decide whether they are willing to take that risk or not."

 

All I can do is advise and explain the risk versus the reward and what are the consequences so my business folks can make a decision. At the end of the day, the decision to move forward or not is no longer a legal decision but a commercial point for the business to decide.So my job is to get them as close as possible to the point where they can make a decision whether to do something or not.

 

Do you have any final recommendations ?

 

I think that the only recommendation I can think of right now is to, anybody that is reviewing a contract and trying to bridge gaps is try to keep in mind what is the actual work being done versus what the contract says. Because as bad as a contract might look on paper if you look at the actual performance, at the actual job, the risk might not be as bad as what the contract reflects.

 

Always try to keep that in mind. Even though a contract might look terrible on paper, the actual execution and performance is not as risky as what the contract says. So that's the biggest recommendation I have. Try to keep an eye on both. The more you understand about the business, about what's being done, the more comfortable a lawyer is confident to give the advice as to accept the risk or not based on his or her knowledge of the actual operation.Having as much knowledge, asking as many questions as possible to the folks that are going to be managing this particular subcontractor or vendor, will help you understand the risk and translate that into the contract, either by negotiating the contract or by simply saying, “the risk of execution is very low". I know the contract does not look very good, but reality is that the execution is low. Therefore the exposure is limited as well.”

 

Try to keep an eye on both and try to learn as much as possible from the particular service so that you can advise your customer in a more effective way.

 

Thanks for sharing today, Mario.

 

 

About Mario Buckley

 

 

 

 

 

 

Mario Buckley

 

Attorney, Supply Chain and Real Estate, Eastern Hemisphere

 

LinkedIn Profile

I interviewed Julio Franca who discussed How Blockchain Can Transform the Supply Chain.

 

 

 

 

 

 

Question 1 - How Blockchain Can Transform the Supply Chain

 

Supply chain has become complicated. Some would say cumbersome. It takes days to make a payment between a manufacturer and a supplier, or a customer and a vendor. Contracts must be handled by lawyers and bankers, which means extra cost and delay. Products and parts are often hard to trace back to suppliers, making defects difficult to eliminate. Whether for industrial equipment, consumer goods, food products, or digital offerings, supply chains have headaches a-plenty.

 

Friction in supply chain is a big problem. There are too many go-betweens. There is too much to-ing and fro-ing. The rise in uncertainty stops supply chains from working well. Suppliers, providers and clients must deal via central third-party entities, instead of directly with each other. What should be simple transactions turn into lengthy procedures with many steps.

 

Blockchain could be the answer to many of these issues. This recent technology is what drives bitcoin and other so-called cryptocurrencies. However, it goes much further than a hackproof way of holding and exchanging money. Blockchain can be used for any kind of exchange, agreements or tracking. In a supply chain, it can apply to anything from self-executing supply contracts to automated cold chain management.

 

Question 2 - A Blockchain Primer for Supply Chain

 

What is blockchain? Here’s a simple explanation. A blockchain is a distributed, digital ledger. The ledger records transactions in a series of blocks. It exists in multiple copies spread over multiple computers, which are also called nodes. The ledger is secure because each new block of transactions is linked back to previous blocks in a way that makes tampering practically impossible. As it is decentralised, it does not depend on any single entity (like a bank) for safekeeping. The nodes connected to the blockchain network get updated versions of the ledger as new transactions are made. The multiple copies of the ledger are the “truth” about every transaction made so far in the blockchain. Trying to falsify the ledger would mean having to falsify the copies at precisely the same moment. The chances of being able to do this in blockchain networks of any useful size are negligible.

 

That’s all a bit abstract. Let’s look closer at the real-life example of bitcoin. It is important to recognise bitcoin as just one way of using blockchain. However, it also happens to be one of the best-known examples. Bitcoin is a recently invented currency that is separate from any state-controlled currency. Entirely digital, it exists thanks to the distributed ledger of transactions on computers across the world. You can buy bitcoin from bitcoin exchanges. You can then use bitcoin over the Internet to make and receive payments. Each payment transaction is added to the ledger, which can be consulted by anyone at any time. Details like the amount, time and date of each payment are visible, although your personal identity is not. Bitcoin holders therefore usually do not know each other. To deal with this anonymity, bitcoin uses another distributed mechanism called mining to add blocks of transactions to the ledger in a secure, tamperproof way.

 

About Julio Franca

 

 

 

 

 

 

Julio Franca

 

Director at Spin Consulting

 

LinkedIn Profile

I interviewed Stefan Reidy who discussed IoT-Enabled Services For Real-Time Green Supply Chain Monitoring.

 

 

 

 

 

 

It's nice speaking to you again today, Stefan. I am looking forward today to hearing this new information and update you have on green supply chain and its relevance to the Internet of Things (IoT) and real-time monitoring of the green supply chain. Before we start, can you provide a brief background of yourself?

 

Hi, Dustin. It's a pleasure to talk to you again. I'm one of the founders and the CEO of the company called Arviem. Arviem is in the business of real-time cargo monitoring and, based on that, making use of the data and provide additional services around cargo monitoring.

 

Can you talk about the green supply chain award that you won and what is it about?

 

Actually, we are very honored to receive this green supply chain award in December. It shows that the work we're doing is actually accepted, not only by the industry, but also by a broader audience. The reason we started to work on this is we have seen some reports, for example, from the OECD and other surveys, which show that actually the supply chain contributes a lot of the greenhouse gas emission effect, as I would call it. For example, the OECD, in a study they have done in 015, they say that the volume of global freight will increase over the next 20 years by 400%. And that has a direct implication, obviously, on the CO2 emission or the greenhouse gas emission of something like 300% as well.

 

As you all know, the governments around the world and other, let's say, non-governmental organizations are worried, and we, as well, human beings are worried about the global warming effect, and we want to do something against that. But all others, they want to do something against it.

 

Therefore, monitoring what's happening actually out there is like a first step, because if you don't know what's happening or if you don't know how much CO2 you've spent, then you cannot take actions against it. One of the first steps where we can contribute something is monitoring based on the solutions we have, monitoring what's happening out there and measuring the data of CO2 emission.

 

How is this done effectively?

 

As I just mentioned at the very beginning, we are in the business of cargo monitoring. Thanks to the latest technology in IoT, we have devices out there where the cargo is. Is it a container? Is it a truck? Is it pallet? We see exactly where that container, that pallet, that truck is. And we see how much time it spends on a certain mode of transport.

 

Let's simply it. Let's take a container we see has been loaded and then transported by a truck to a train station. And then it was moved on a train and has moved certain kilometers on a train, etc. By knowing exactly where it is, by which mode of transport it has been moved for how long and calculating the exact distance, we can calculate the carbon footprint there. So that's the carbon measuring or calculating a carbon footprint is not something completely new, obviously. That has existed some years. But having better data, having more granular data and knowing exactly how long and distance it spent on a certain mode of transport, and based on that, calculating the carbon footprint, that's the new part of it.

 

Do you have any specific examples that you could share regarding the results?

 

The results, it's probably too early because we started now half a year ago doing that with some first clients. I'm not allowed yet to name some clients. But if you really want to compare the data, you probably need a year to see what are the effects now. The only thing I can say is we have more meta data than they used to have before. And they can now also look at it on a dashboard and say, okay, if I have this route, then I, in average, spent so much carbon footprint, or CO2. If I take this route, then it's better or worse. So these kinds of comparison analysis, they can do in real time on our dashboard.

 

Your question is, obviously, absolutely valid. However, it's too early to answer that yet, because you probably need something like a year or more to make comparison and look at the different data.

 

But the effects we see already. Based on the data they get, they can not only look at the CO2 emission but also increase the utilization. So, again, if you have two containers half loaded, then you spend, obviously more CO2 than if you had one container fully loaded. So high utilization. And that's all, certainly, an effect of the analysis we do here.

 

Do you have any final recommendations regarding individuals who might be interested in corporate social responsibility or green supply chain?

 

We have seen, interestingly enough, I never thought that this was going to be such a huge topic, but interestingly enough, we have seen on our website quite a lot of downloads of the white paper we provided there. We see that major Fortune 500 companies are interested in that. They either have special organizations within the company around sustainability or also the supply chain managers themselves are getting more interested, more affected by this topic and want to know what could actually be done. Because, again, it's not just that there is a worldwide intention to reduce CO2, it's also pressure coming from the end clients, the consumers. They want to make sure that they're consuming goods from companies that are worried about sustainability.

 

There are also governmental initiatives going on where, for example, France is legally forcing companies to measure their CO2 emission. There is also a council, the Global Logistics Emission Council, that is making these approaches around measuring carbon footprint, or defining the approaches, defining the template, how you calculate emissions so that you can compare it universally across all different industries.

 

So a lot of initiatives, a lot of pressure from different sides are going on which now force supply chain managers or sustainability managers in companies to have a look at this. And we want to give them. We cannot change it. I cannot go to a company and change how they produce, how they ship. But we would like to give them measurements. We would like to give them tools, how they can take actions.

 

Thanks for sharing today, Stefan.

 

You're welcome.

 

 

About Stefan Reidy

 

 

 

 

 

 

Stefan Reidy

 

CEO Arviem AG | Smart insights for supply chains | The leading Swiss real-time cargo monitoring service provider

 

LinkedIn Profile

I interviewed Randy Kesterson who discussed Change Management, Lean, and Supply Chain Management.

 

 

 

 

 

 

It's good to speak with you today, Randy. Looking forward today to discussing change management, lean, and supply chain management. Before we start, can you provide us with a brief background of yourself?

 

I've been in executive-level positions for nearly years with companies like Cobham, Doosan Bobcat, General Dynamics, Curtiss-Wright, also with companies like John Deere and [0:00:29] of that. And I've also worked as a management consultant with companies like Bank of America, Caterpillar, and Motorola, Bank of Montreal, Ford Motor Company. A pretty broad spectrum of companies, mostly working on process-related strategic change.

 

Can you provide an overview of your recent book that's titled The Intersection of Change Management, Lean, and how it applies to supply chain management?

 

Absolutely.I've spent time in a fairly small niche, and that's the intersection of the people who have employed organizational change management tools and approaches, which tends to be kind of a right brained thing, oftentimes occupied by people who are organizational development experts. The other part of the group I've been working with are the more left-brained folks, the Lean, 6 Sigma black belts, if you will, who approach things more from a data, analytical standpoint.

 

What I've been trying to do is bring those two practices and approaches together to solve a problem that all of us face — whether it's in supply chain management or elsewhere — which is dealing with resistance to change.

 

So the book is all about how to use those two methodologies in concert to reduce resistance to significant changes within an organization.

 

Can you talk about why this topic is important?

 

It's important because many of us — probably all of us — have been faced with significant changes we've tried to bring about within an organization, whether it's an organization structure change, whether it has to do with process changes, whether it has to do with systems, IT related changes, whether it has to do with culture or changes in key metrics and so forth.It's important because what I've found is without using... Especially the organizational change management approach oftentimes, the changes are not successful.

 

How is it done effectively? And where have you seen good results?

 

It's done effectively by, first of all, having people with skills in organizational change management and execution deployed together. Either a person equipped with both of those skillsets or two people working together on a project team. I've seen it done effectively in many of the companies I mentioned before. Caterpillar tractors is a perfect example. Another example of a company that does it well is a privately held organization that's grown to multi-billion-dollars revenue in size — Milliken. Many others are doing it well. Unfortunately, there's a lot of organizations out there that are just not doing it well.

 

Do you have any final recommendations on change management and lean and SEM?

 

Yes, absolutely. When I think about change management, I think about resistance to change. Change is very hard. Just for an example for you or anyone else who happens to listen to this recording, I want you to try a little experiment. I want you to cross your arms in front of you. How does that feel?

 

Dustin: it feels good.

 

I want you to unfold your arms, and I want you to cross them again. But I want you to put your other arm on top this time. So if your right arm was on top before, put your left arm on top this time.

 

Dustin: Okay.

 

How does that feel?

 

Dustin: It feels different.

 

Typically, what people say is it feels awkward and uncomfortable. So uncross your arms again. Now cross your arms one more time.

 

Dustin: Okay.

 

Did you go back to the original way or to the new way?

 

Dustin: I think I went back to the original way.

 

Probably 95% of the people I work with, that's what happens. So why is that?

 

Dustin: I'm assuming it's because I—

 

I gave you a new, better way to do it. Right?

 

Dustin: Yep.

 

So that's what we encounter, whether it's a new system or whether it's a new way of working a process. Anything new in the work at work, when you're exposed to it, your first reaction is to go back to the original way of [inaudible 0:05:58] to do that. That's a perfect demonstration of resistance to change.

 

One more thing I want you to think about — and this applies to supply chain, and it applies to, really, any type of project we might want to take on in the world of work...

 

When a project team is formed, the team gets together. And let's say it's for a new ERP system, for a new spend analytic system that the supply chain team is going to be using. So the team gets together, and they consider alternatives, and they select the system, and they understand why it's needed. They understand the business case. They understand the WIIFM, the what's-in-it-for-me to use the new system and so forth. So the team hits the ground running, and what's the first thing they do?

 

They typically want to train people in how to use this new tool. So they start with the what-are-you-going-to-do and how-you're-going-to-do-it and how-you're-going-to-do-it and who's-going-to-it and when-you're-going-to-start and so forth. The problem is that is the project team has already gone through the most important step, which is understanding why. So with regard to any change — whether it's supply chain or any other part of the organization — the most important thing to do is to get people to understand and embrace the why. What's in it for me if I make this change? Just like crossing your arms. Right?

 

So what the project teams forget is that they went through that process of understanding the why, what's the business case, what's in it for me to make this change within the organization. And so that, to me, is the primary take away from the book. It's that if you're going to drive a change, transformation of an organization, the first thing you have to do is get that entire team — those people who are going to be changing in some way — to understand the why. They might not all get there, but enough of them will. Understand why we're changing, what's the business case, what's in it for me. Then and only then will they be ready to listen to what you want to tell them in the training course with regard to what are you going to do differently, how are you going to do it, who is going to take this next step, when are we going to take it, where are these changes going to be put into place.

 

For me, that's the primary mistake that most people — whether it's supply chain or elsewhere — make when they're trying to bring about a significant change within an organization.

 

Thanks, Randy, for sharing today.

 

You're very welcome. Appreciate the phone call. Have a good ev—

 

 

 

About Randy Kesterson

 

 

 

 

 

 

Randy Kesterson

 

SVP Operations & Supply Chain Mgt. at Cobham

 

LinkedIn Profile

I interviewed Glenn Rosenholmer who discussed Reframing your Products and your Offer when you go to Market.

 

 

 

 

 

 

It's good to speak with you again today, Glenn. Looking forward to discussing this topic of reframing your products and your offer when you go to market.

 

Thank you, Dustin. I think I can see clearly that we have some sort of mismatch about the future and the current situation now. And the most obvious scene for this is business to business. But you can see it also in the business-consumer with early adopters and late movers — both if your customers that are not ready for your offer, as well as consumers not ready for being aware of what the technique today can do

.

What's the relationship between physical products and services in the supply chain?

 

That's a good question, Dustin. I would say that a lot of the historical ways of looking at it is that you have your physical product and you have services around it. Or you will be adding services after you have presented as a salesman or showing your offer to your clients with your physical product. It could be a robot. It could be a TV. It could furniture. It could be a system for your house or whatever. I don't see any difference anymore. Everything has relationships. But what, I think, companies need to do now is to converge your thinking about how you present your product and service offer.

 

digital transformation supply chain pricing

 

If it was 80% your product and 20% your service in the mind of your salesforce or salespeople, it should be the opposite. It's actually about 80% services. You need to get

the extra warranty or the relationship in a more long relationship with your customer, meaning the supply chain also has to adapt to this.

 

It's not only about the last mile. It's not only about the lead time to the customer. It's about making sure that your customer, when they receive the goods with the services around it, using that word, needs to be adapting to the new situation.

 

What does the pricing have to do with the supply chain?

 

Of course, instead of offering 80% for your physical product and 20% your service, we offer 80% as a service and 20% for the physical product, then you need to reframe and re-do your prices and your pricing management system. To do that, you need education. It's not only your salesforce that needs to be adapting to the new situation. It's also actually learning from the relationship with your customers to understand how mature is your customer and what is the price going to be for your services because you're going to have another pricing model. If the supply chain is not together with the price, we are lost in what is the value in the end for the customer.

 

Can you talk about why are the right demand forecasting methods needed?

 

Demand forecasting methods, applying what I have said about the services would be 80% of your offer and 20% would be the physical product. Saying that, you need then to also be aware that all those sales or the deals you're doing, need to be much, much more aware that your customer’s way of buying things would change.

 

Pricing Discounts Services Forecasting

 

 

 

Forecasting methods need be much more systemized, and you need to be even better at scheduling your service offer because the service offer is more about making sure you have the right up time in your system for the additional services you gave.

 

It could be we actually are getting paid for the warranties. So it's not about forecasting your physical product. It's much more about forecasting your services. And that is a different story, actually, when you forecast that. It's going to be tougher, harder.

 

But it's possible. I'm dead sure that we will see a development where we'll have much more pricing management and different business models with different types of customers. If you are that type of company where you have different products and you have different service offers or offers and different segments.

 

The different segments will need different business models.

 

How is pricing and demand forecasting done effectively?

 

I would say that if you have an ERP system, and you have some sort of MRP system and several helping hands in terms of systems nowadays, I think what is lacking in many companies is actually making sure that the pricing and demand forecasting also need support in terms of data support and also how you deal with your master data in that case. Because if you are selling, in early days, a physical product, you will have a much, much more complex master data to be tracking down all the transactions that are going to happen, not at one time. It's going to happen in five or six or seven years from now. Without a tool to use, I think you're going to lose a lot of money because you're not seeing the money that is lost because you give away services that you should be paid for.

 

Thanks, Glenn, for sharing today on this topic.

 

Thank you, Dustin. I hope you have a good day, and I'm looking forward to giving my point of views later on this spring, coming up. I wish you a good new year, the [inaudible 0:8:00]is just starting. Thank you.

 

About Glenn Rosenholmer

 

 

 

 

 

Glenn Rosenholmer

 

Senior Management Consultant

 

LinkedIn Profile

I interviewed Akif Azimov who discussed Supply Chain Management Process.

 

 

 

 

 

 

1. Please provide a brief background of yourself

 

First of all Dustin, I would like to thank you for doing a great job to share exciting stories with the audience interested in supply chain management. I have been in the supply chain for over 20 years and found my aspiration from the first step in the field. My drive to get wider knowledge of supply chain management continued with entering to CIPS to get professional accreditation, first with MCIPS and later with Fellowship from that Institute granted as a hallmark for contribution to the Procurement profession.

 

My MBA research project from University of Bradford considered issues in E-Procurement implementation. Throughout the research, it was discovered that many implications at the first instance are not driven by concerns over adversarial relationship be put at the forefront for the sake to obtain cost saving, but mainly from the appreciation of opportunity to build long-term supply chain relationship leading to partnership.

 

I found stimulating to share supply chain management knowledge not only providing consultancy to various organizations to achieve supply chain management optimization of processes, but also delivering training sessions to other professionals through CIPS accreditation program. Management of many organizations worldwide acknowledged advantages of supply chain to manage with process methodology, however not always there is a clear vision on the movements required to undertake to achieve efficiency in operation with supply chain management advancement. That’s why, throughout my career I was very keen to identify supply chain management best practices to bring value to different organizations in terms of increased effectiveness in customer and supplier relationship management, demand and procurement management resulting in process of cost reduction and positively impacting revenue directly.

 

 

2. What is supply chain management process?

 

Supply chain management process in simple words can be identified as business process integration both internally and externally. Many international companies trying to consolidate business processes to achieve efficiency through transparency and it can be realized only with supply chain management playing leading role.

 

You can ask how efficiency and transparency are linked together in the supply chain management process. Today transparency requirements across supply chain processes are not primarily driven to impose control and strict monitoring; on the contrary, its main objective to identify opportunities or gaps in the sub-processes and find optimization routes to obtain cost savings or cost avoidance.

 

The objective of the supply chain management process is to achieve integration of Customer and Supplier Relationship Management, Demand and Material Flow Management, Procurement, Product Development and Revenue streams across the whole supply chain. Such supply chain integration will result in costs reduction, quality upgrading, and making operations swift and efficient.

 

The process is seen as a chain of clearly defined stages, which target to transform input into outcome. It is not possible to look at suppliers and contractors beyond the single supply chain management process.

 

Hence, supply chain management process shall integrate business processes of all players in the supply chain in one complete process with clear transparency of sub-processes for example such as; product specifications, sourcing strategies, supplier segmentation and classification, supplier costs,  performance measurements, framework of metrics, and so on.

 

 

 

3. How is it put into practice effectively?

 

That is the most challenging task and today, to make supply chain management process effective it requires integration of customers and suppliers working closely, from the stage of product design up to its final delivery to the market. Such supply chain cooperation will allow shortening time to market for product delivery with greater rate of success. This can be achieved through collaborative supplier relationships based on mutually beneficial conditions.

 

It is of paramount importance to implement arm-length relationship approach rather than adversarial, as all parties in the supply chain shall obtain mutually advantageous outcomes. Otherwise, the effectiveness of the relationship will be weakened resulting in supply chain management process impossible to benefit, even if other stages would develop smoothly. One of the known WalMart example of supply chain management process optimization resulted in sharing cost savings equally between WalMart, suppliers and customers. That’s why Commercialization of benefits achieved through the supply chain shall be profitable to all parties to ensure consistency of successful performance.

 

It is not coincidence that initially developed ERP system for internal purposes progressed to look for expansion opportunities with supplier and customer relationship management modules and e-procurement. Merger of such systems like SAP and Ariba can be taken as an example, on how organizations shall develop to build strong supply chain management process.

 

Although, it is critically important to seek opportunity for process integration across the supply chain it is not practically feasible or efficient to seek close collaboration with all suppliers. The importance of segmentation and classification of suppliers demand the readiness of suppliers for complete commitment. That is why, to put supply chain management process into practice effectively, require commitment to sacrifice short term advantages for the sake of the long-terms mutually beneficial relationship and that is the key to success. The process of integration shall start with core suppliers and contractors, which have proved to be reliable and responsive to the needs of the customer.

 

Therefore, in order to put supply chain management process into practice effectively, it requires to coordinate supply chain sub-processes within internal functions of organizations, as well across key external parties in the supply chain.

 

 

 

4. Where have you seen good results?

 

As mentioned earlier, the supply chain management process to bring good results shall be linked closely, both with internal and external functions, with smooth coordination and collaboration to realize opportunities in larger scale.  Being in consultancy business I have seen good results with consolidation of supply chain management processes between two and more companies. It may sound strange, but it is not rare today, when two competing companies in order to reduce operational costs consolidate the cumulative spent, to obtain bargaining power or economies of scales. Many companies I came across, using this practice to obtain cost savings. It shall be emphasized that the reduction of costs by 100 dollars has bigger positive impact on the profits than 500 dollars in increase of sales.

 

Nowadays it becomes a widen practice no longer to compete as a single entity. Many companies integrate their supply chains in order to operate as an active player on the market enticing suppliers to collaborate effectively. As suppliers are attracted to collaborate further, expansion of supply chain management process is happened, resulting in adding value to the chain. The time for adversarial negotiations with suppliers to drive their profit margins to economic sustainability coming to an end and opens opportunities for strategic integration leading to partnership relationship.

 

For Supply Chain Management process to bring good results require continuous relationship development of company with key suppliers, customers and even competitors. I have seen amazing results in Telecommunication business, where several competing operators shared supply chain, operational and maintenance costs to stay effective even at crisis time.

 

However, integration of supply chain management process is not easy as it could be seen, and in order to gain commendable results, it requires to take into account costs; such as ERP / ICT system implementation, with preparation and structured plan in place and potential risks mitigation strategy.

 

 

 

About Akif Azimov

 

 

 

 

 

 

Akif Azimov

 

Director Procurement and Supply Chain

 

LinkedIn Profile

I interviewed Shah Anwar who discussed Warehousing and Inventory Management.

 

 

 

 

 

 

It's good to speak with you today, Anwar. Looking forward to hearing your views today on warehousing and inventory management. Before we start, can you provide a brief background of yourself?

 

I got my Master's from a public university in Bangladesh. It's Chittagong University. And then I got an MBA in marketing. When I started my career, I started with a company called [inaudible 00:00:33]. It was the largest road transport contracting firm in Bangladesh. So that's my startup. I started as a junior executive and gradually I was promoted and became a management of the company. And it started managing all the transportation and warehousing for the company.

 

About the same time, we got the opportunity to establish a private inland container depot. So we were the pioneer in establishing inland container depot in the private sector. And we did it. So it's become a new trend.

 

I had the opportunity to work with all the major shipping line transporting companies and with all the major exporters of our country. You know that Bangladesh is very big in [inaudible 00:01:28] exporting. So I started working with all the exporters. And we established a big warehouse.

 

That opened my door to work with the warehouse and supply chain and networking era. So I started working with major shipping lines like [inaudible 00:01:53] and not the sourcing company called [inaudible 00:01:57]. And then after working a couple of years there, then I moved in Canada, and I started my career in the logistics and supply chain industry. And now I am working with a German company called Freudenberg. I'm looking after their warehousing and distribution.

 

In a nutshell, this is my [inaudible 00:02:21].

 

Can you share with us whom of the challenges that you face with warehousing and inventory management?

 

Warehousing and inventory management, I would say that the major challenges are, in a lot of sectors of warehousing, they think it is the least important. So a lot of things are not structured. The walking areas are not defined properly. So when people expect to do something, there's a lot of gaps on the expectations and the demands. That's the main challenge in the sector of warehousing and inventory management.

 

Can you share with us some of the opportunities that you see?

 

Yeah, definitely. Warehousing — actually it carries the inventory. Inventory carries a lot of capital. By managing the warehouse and inventory, [inaudible 00:03:34] actually, it gives an organization a lot of power to control their capital, their money. So this is really, really important— how to manage their inventory and how to utilize their capital. We need to give a lot of attention to manage warehousing efficiently so that we can protect and save a lot of extra expenses which actually eventually count as a profit for the company.

 

How is it done effectively?

 

To do it effectively, number one, I would give priority to the planning. Proper planning is very important. So when the planning is done properly, 50% of the work is done here. So all the inventory and all the warehousing activities should be defined properly.

 

And the people are working in warehousing and inventory, they must be trained properly. And the company should have proper objectives and goals set. And the employees and the workers, they should be aligned with the goals and the objectives of the company. And they should be trained properly so they can give their 100% to achieve the goal of the company.

 

Do you have any final recommendations regarding warehousing and inventory management?

 

For warehousing and inventory management, we need to give a lot of scope to improvement in warehousing and inventory management. So proper training is necessary. So if the top management of a company, they understand the importance of warehousing and inventory management, and they [inaudible 00:05:38] proper manning, proper training, and proper education for the employees, they definitely can save a lot of money for the company, and they can give the best support to the business. So both can grow together.

 

Well, thanks for sharing today, Anwar.

 

Thank you, Dustin.

 

About Shah Anwar

 

 

 

 

 

 

Shah Anwar

 

Senior Supply Chain Manager at Asia Pulp & Paper Canada

 

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I interviewed John Martinous who discussed Importance of Accurate Inventory Control.

 

 

 

 

 

 

...today, John.And today we're going to discuss the importance of accurate inventory control. Before we start, can you provide a brief background of yourself?

 

  1. Thank you for having me. I've been in various supply chain management positions throughout my career. I was an inventory control manager with Merck Pharmaceuticals, and I've been a director of logistics with a slot machine manufacturing company and a senior director of operations in supply chain with a pharmacy benefit manager. So I've had many different supply chain management roles where I've managed large warehouses full of inventory up as high as almost a billion dollars with Merck. It was a billion dollars in drugs in probably, maybe, a 200,000 square-foot warehouse. It wasn't a real big one, but the drugs were very expensive. So it was a lot of money involved.

 

So the importance an accurate inventory, throughout my whole career, I've always seen the repercussions of not having an accurate inventory. You end up stressing out your purchasing department because they have to buy something that you already have. This is assuming that you don't have an accurate inventory, and there's something in your warehouse that you need. Your system is saying that you have it and that it's in a specific location. And somebody goes to that location to get it, and it's not there. And they send out search parties looking for it, and no one can seem to find it, but you thought it was there, and now you have to end up doing an emergency purchase order and having it expedited and paying expedited shipping and buying the same thing twice. And those are all expenses that you could avoid if you had an accurate inventory. Not only that, but you improve customer service because now the customer has to wait an extra day or two to get the product because you have to buy it again and then prepare it and ship it to them.

 

One of the more important aspects of inventory control is cycle counting. That's the way that I've found that we could keep very accurate inventory. A lot of people do wall-to-wall inventories every year, and we used to do that at Merck and at the slot machine company which was Aristocrat Technologies. That's one way to keep an accurate inventory. But if you only do it once a year, the inventory will stay accurate for maybe a couple of months after you do your wall-to-wall inventory, and then it will slowly start to creep back into being inaccurate. You might be at like a 95% after your wall-to-wall inventory, and then it will go down to 90 and 85 and 80. And before you know it, you're at a 60% inventory accuracy level,and many things are starting to disappear.

 

So one of the better things you can do as a warehouse manager or inventory director or manager is put a cycle counting together that will go out and count various items every month. What you want to do is you break down your items into A, B, C, and D movers, and you stratify them. And the A's are your most important ones. They're the ones that make you your most money, and they're the highest velocity and highest dollar amount items. And you have to fig out — there's different way you can do this and figure out which ones are your A's and B's and C's. But usually, it's the 80/20 rule. The A's make up 80% of your sales and 20% of your inventory. Then the B's are usually about maybe 10% and the C's are about 5% and the D's are generally items that you don't really keep on hand that often. You just kind of order them when you need them. And if they are on hand, they're generally pretty slow and don't get used too often. And they may, if they're a drug, they could expire before you even use them.

 

So what you want to do is put together a team of cycle counters that can count all the A items. Generally, you want to do it about every two to three months. And then the B's you generally count about every six months. And then the C's you can count once a year or once every six to nine months. And then the D's you generally do once a year or during a wall-to-wall inventory.

 

What that will do is you'll make sure that if the system says you have 100 of your A items and you go out and you only count 95, you're going to know that there is a discrepancy. What you want to do is have a process in place for reconciling those differences. So if somebody goes out at the beginning of the month and counts an A item, and there's supposed to be 100 of them in the warehouse and they only count 95, then you want to come up with a process where step one is you go out and you send a search party out and check some other locations where the same item might be and see if someone put it back in the wrong spot. And then the second step might be to pull some receipts and make sure that when it was received that it was received correctly because a lot of times, people could do what they call a "fat finger" and key it in wrong when they received it.And say they received 10 cases, they may have typed in an extra zero and put 100 cases. Or they could have shorted it and only put one case instead of 10. Then that goes into the system. The product will be there, but it will be represented incorrectly because whoever received it typed in wrong.

 

So you want to check the receipts and make sure all the receipts are accurate. When I say accurate, you want to make sure that whatever you're getting billed for from the vendor is what you actually received and keyed into the system. And if there was something on backorder or something was damaged in return, you can see that and take that into consideration. But you're just trying to make sure that it matches up.

 

And there's probably two or three other steps that you want to put into this process that, when you find an inventory discrepancy, that you go through this process to make sure that you get it straightened out. And a lot of times, you'll either physically find it, or you will find that there was a receiving error or somebody may have counted it incorrectly during a previous cycle count, and you have to reverse their adjustment. It could be a number of issues. You want to make sure that when you do an adjustment that you're actually helping the accuracy and not hurting the accuracy.

 

There's different ways to keep an accurate warehouse. But we'll stick to cycle counting for right now.

 

So after you count your A's... It's all up to the manager of the warehouse or the director how often they want to do the A's. Because the A's are the most important items. You can do them every week, every month, every quarter. But you want to make sure that you're doing it at an interval that is keeping everything accurate. And if you have any items that are problems, that historically give you problems because they're in an odd lot, like they come in cases and packs and rolls or something that's hard to count and people pick them wrong and pack them wrong... They may give someone extra ones when they shouldn't have or short someone... You want to make sure that you count their more often because those are going to be ones that will pose problems. You'll be able to identify those as you cycle count. There will be ones that are easy, and they're always correct. Then you'll have the ones that need to be counted more often because they get processed incorrectly just because of the way they're packaged.

 

What you want to do is identify these. As you're cycle counting, you can use your cycle counting results as a sort of training guide where you can say, "Wow. We've counted this one wrong. Every time I count it, it's wrong. Somebody is either picking it wrong, packing it wrong, receiving it wrong, or something, and we need to do some training to make sure we get to the root cause and that this doesn't continue to happen."

 

I've talked quite a bit now, Dustin. I'm sorry. Did you want to ask any other questions before I...?

 

No, I think this is great. Do you have any final recommendations?

 

My final recommendations is I've always seen, when I was warehouse manager or director of operations, training is very important. And you want to have a staff of people, of employees, that understand the importance. So you want to be keeping them informed of what you know as far as which items pose problems and which items are easy and all the things that I just discussed. You keep everybody informed so they're as smart as you and can go through the warehouse and identify those things when you're not around and be able to reconcile them. The smarter everybody on your staff is, the more accurate your inventory will be.

 

Thanks for sharing today, John.

 

 

About John Martinous

 

 

 

 

 

 

John Martinous

 

Supply Chain Solutions

 

LinkedIn Profile

I interviewed Julie Thompson who discussed Supply Risks and Transportation Management.

 

 

 

 

 

 

...Julie, and looking forward to discussing with you supply risks and transportation management. Can you first provide us with a background about yourself?

 

  1. I have been in transportation, logistics, and supply chain for only 30 years. I started first as a freight forwarder and then gradually made my way over to work in different international settings. Through the work, I've also been able to work from a supplier standpoint in a client's supply chain doing warehousing, demand planning, as well as supply planning. So I've had a pretty broad experience base over the past 30 years, both on the transportation and in the supply side and planning side as well.

 

Can you first define what are supply risks and transportation management?

 

  1. I have seen, specifically since 2008, a massive change in both road, air, and ocean transportation, particularly as it relates to international transportation. And specifically, what I'm talking about is, since the 2008 economic crisis, transportation has inherently changed.In our world, when you start talking about ocean freight, for example, concepts like slow steaming have really come to be really part of the common-day transportation. I think what has happened a lot in our world is, while there is increasing demand from a client-base for accurate transit times to be able to fulfill orders, transportation has not kept up with that. They are increasingly going to hub and spoke in air freight modalities where you don't have direct flights from point A to point B but rather through second, third, or different routings.

 

And on the ocean freight side, like I said, slow steaming, as well as other transportation-related infrastructure issues, have really hindered accurate on-time performance.

 

On top of that, many countries have also implemented increased and enhanced security measures that have really been evolving, particularly over the past decade. And I find that many of our clients are not keeping up with either one of these trends when we start talking about lead time accuracy, start talking about landed cost analysis. A lot of those concepts are not actually filtering into reality. So what a lot of my clients are finding is that things are arriving a lot slower than they thought and at an increased cost than what they had anticipated.

 

Can you share some more details about why supply risks and transportation management are important?

 

The bad bone from a planning perspective is when I buy something, am I going to get it when I need to? Can I fulfill that order? Can I fulfill the line in a reliable way, in that I also don't have to worry about inventory carrying costs. I mean, everybody wants that perfect vortex of not having an inventory as well as fulfilling the client orders or the line orders the way that they need it to.

 

It takes a very nimble and very flexible supply planning process to keep up with all that is happening inside the actual transportation world. And sometimes I feel, from a client perspective, that many of our clients, they don't have nimbleness in the most basic processes, like their lead time tables. How long does it take with all the different influences in there? Did they factor in increased security into the US, for example? Did they factor in the cost and the lead-time impacts of the ocean freight carrier potentially not coming in time? Did they factor into their lead time tables and the cost potential time delays at any of the ports in the world that are unable to handle the huge vessels that are now coming in?

 

So I think it boils down to the demand side really understanding how transportation works on a real time, having that kind of dialog with their transportation or their supplier base so that they understand the obstacles that are there, so that they aren't constantly behind the eight ball or running out of stock or supply or whatever.

 

And can you share with us how this is done effectively?

 

The most effective groups that I work with are ones that have an ongoing dialog on a lane-by-lane basis. And I think it does take a real partnership with the transportation end of your supply chain. And I think that's where someone who is looking to add more reliability from a cost or from a transit-time perspective, what they really need to do is develop that sort of relationship with their underlying carriers and freight forwarders, that there is a dialog and an expectation that risks are being... There's an ongoing dialog about those risks. They are changing all the time. Now that, let's just say, inbound into China, we have advanced manifests requirements. What does that mean for the clients that import goods into China? What does that mean from a cost perspective? What does it mean from a transit perspective?

 

What it means from an exporter's perspective from the US is that the client has to get their documents that much earlier to the right authorities and into the steam ship lines so they can advance and manifest all of the cargo. Sounds like a small deal, but I've seen more cargo roll going into China because clients didn't understand they couldn't wait until the last minute to do the documentation to fulfill the security measures. A small example, but it's one that can have reverberations all the way through your supply chain.

 

Thanks, Julie. My final question is do you have any final recommendations?

 

In my mind — and this is not just because I am a freight forwarder or because I'm in logistics — but it's extremely important that you work with your logistics providers to understand deeply what's going to happen with whatever lane they're working with you on. I like to think of myself as being partnered with my clients in order for all of us to understand how can we serve you better. And we can't serve you better unless we understand more about you. And I think that's really the message I would like to get across, that we need to work together to develop that knowledge base and that dialog so that we are able to help the clients, the supply chain groups, avoid unnecessary expenses and in an unnecessary shortfalls in supply. If we work together and we work on a dialog together, ongoing, that, I think, can help immensely in avoiding any kind of destructions inside the supply chain.

 

Thanks for sharing together, Julie.

 

Absolutely. Thank you so much for allowing me to participate. I appreciate that.

 

 

About Julie Thompson

 

 

 

 

 

 

Julie Thompson

 

Experienced high energy supply chain professional at KOG USA Inc

 

LinkedIn Profile

I interviewed Mihai Stroe who discussed Customs Compliance within Supply Chain: Dealing With Risk and Complexity.

 

 

 

 

 

 

Can you first provide us with a brief background of yourself?

 

My name is Mihai Stroe. I am currently the customs and trade manager for Amer Sports in the Americas. In the last 10 years, I've been living in Vancouver, Canada, but I'm originally from Bucharest, Romania. I started in the industry about 20 years ago with a great German company without any plan to build a career in supply chain.

 

In the last 20 years, I've relocated a few times. I was also a carrier, a freight forward, an official customs broker. And by now, I like to think that I'm able to connect the dots issuing the proper movement of goods from point A to point B, regardless of where those points are and what goods are being shipped. I hold an MBA, a bachelor degree in International Relations. I'm a licensed customs broker in Canada and the EU. I'm a certified customs specialist in the US, Canada in the EU. And I have a few designations from transportation and freight forwarder associations around the world.

 

Can you talk about what is customs compliance within the supply chain?

 

First of all, this area of supply chain, I believe it's neglected. I think companies don't understand the importance and don't understand what customs compliance is. We have to consider, when moving good internationally, we have legal responsibilities, or the exporter record has some legal responsibilities, ensuring that they meet the requirements and to check if they are allowed to export those goods from the country of shipping.

 

At the same time, on the way from the exporting country to the importing country, goods might go through different customs territories where it might have some implications on the duty being paid, or they might have some restrictions on how those goods are handled or storage or how they're supposed to be shipped.

 

When the goods arrive to the country of destination, they have to go through the importation process. Those processes could be streamlined if they are prepared in advance. But sometimes companies don't realize that customs have the power and authority to hold a shipment, to confiscate a shipment, or even to deny the entrance of those goods into the customs territory. So I think it's a very important piece in the supply chain, ensuring to the goods are moved properly, and they can be delivered on time and under budget.

 

Can you share with us how you think this impacts the supply chain?

 

First of all, there are some costs associated with customs compliance. There are different programs and different approaches that companies might choose to use to ensure compliance. It is very important to understand that there are some risks and liabilities that the importer and exporter bear conducting business in some countries. So the biggest impact is on the lead times and cost. So you might have, for example, you have 30 days to deliver your goods to your customer. But if there are any customs issues, those 30 days might easily transform in 60 or 90 days, which is definitely going to have an impact on your supply chain.

 

If you look at cost, to have goods inspected by customs, containers and packages have to be moved in a specific inspection facility which is on the customs provision, where the inspectors will conduct the search. All of those costs associated with moving the containers or the packages to those customs inspection facilities, they go back to the company who is shipping and importing those goods.

 

From a lead time and cost perspective, it can have a significant impact. We're not going to go into the liabilities and the personal risk at this point.

 

Can you share a little bit about how it's done effectively?

 

Well, effectively, I think it starts with some due diligence. So before agreeing and signing a contract with your potential customer, you have to ensure that, first of all, that customer is not on the denied party list. In the last few years, there's been an increase compliance [inaudible 00:05:42] shipping goods to people or organizations that are not allowed to get in position of any type of goods. For example, it could be terrorists or any governments or companies associated with groups that are on those denied parties. So that would be the first starting point.

 

Second, it's wise to start checking with the rules in the country of shipping to see if you're allowed to ship those specific products. With technology, that might require a specific license. It could as simple as batteries. They might require a special handling, and you have to check with the carrier and the freight forwarder. It might be different special requirements in the country of shipping.

 

It's recommended to have good communication with your customer, ensuring that they can do the due diligence in the country of importation, ensuring that whatever goods they're importing, they're allowed to import in that specific customs territory, ensuring that they are aware how much the customs duties will be and if there are any restrictions of the importation.

 

I can give an example. Not a long time ago, a company bought a significant number of trucks from Europe. They had them shipped to Canada. Unfortunately, they didn't check in advance with the transportation authority in Canada. And those trucks could not be registered to be operated on Canadian roads. Therefore, they ended up owning a significant number of trucks that they could do nothing with them.

 

Thank you, Mihai, for sharing today.

 

More than welcome to share everything that I have experienced.

 

About Mihai Stroe

 

 

 

 

 

 

Mihai Stroe

 

Supply Chain/ Customs and Trade Compliance Manager - Americas

 

LinkedIn Profile