on-demand supply chain management
By Art Van Bodegraven and Kenneth B. Ackerman

For the last couple of years now, a concept called on-demand
supply chain management has been rattling around the business. But what
does it mean?

For the last couple of years now, a concept called on-demand supply
chain management has been rattling around the business. But what does
it mean? Is it about physical supply chain management? Is it about
information systems? Or is on-demand an invented term to superficially
differentiate service offerings in the marketplace?

Two principal schools claim the on-demand domain, and they are
radically different. One, led by IBM, stakes out its territory in the
realm of supply chain operations and the development of ondemand
businesses. The other promotes “on-demand” supply chain management
software, with GSX, Mitrix, and Kinaxis among the leading early
providers. More new entrants in the on-demand derby pop up every day,
it seems. The software is typically accessed through the Internet, with
costs based on usage, rather than on the traditional
license-and-maintain model.

Aberdeen Group, the respected research organization, has chosen the
software path and has reported positive developments in the use of what
it calls software-as-a-service (SaaS). Its position is that early
adopters of on-demand supply chain software are also early
beneficiaries of lower costs, faster implementations, and quicker
returns on investment (ROI).

In fact, Aberdeen reports that over half of its survey population is
considering on-demand applications for at least a part of their total
supply chain management suite. It also says that companies can be up
and running with on-demand software in as little as three months and
realize an ROI in less than a year—all at a significantly lower total
cost when compared to the traditional model.

Current on-demand solutions are not expected to replace traditional
applications, but they may be finding favor with small and mid-sized
businesses by bringing them into a milieu in which only larger
companies could previously afford to play. According to Aberdeen,
functions currently available include forecasting, customer inventory
management, supply chain visibility, and transportation management in
customer- and supplier-facing applications.

But what does it do?
The software developers appear to have a somewhat grander view of their
landscape than the consulting community does. Each seems to define
on-demand supply chain management to fit the limitations of its
particular product sets. And it takes a close reading of the
developers’ materials to work through the extravagant language and
ferret out what the software really does.

One firm promotes its product as “revolutionary” and a “first-ever,”
with “critical functionality.” The core premise is the creation of
trading communities and the provision of information about inventory
availability, inbound shipments and open purchase orders, outbound
sales orders, forecasts, and target inventory quantities.

Another software and services provider focuses its on-demand supply
chain management solutions on business-to-business cross-enterprise
process coordination and simplification. Apparently aimed at somewhat
larger companies, its products typically support demand planning,
product development, and marketing and sales.

A third provider takes another tack, concentrating on support for
supply chain agility, with a manufacturing focus. The high spots
include real-time visibility into systems throughout the supply chain,
alert and event management capability, change-impact analysis, what-if
analysis, and collaborative scorecarding. The vendor is clearly
positioning this product for decision support in a rapid-response world.

The point is that even when dealing solely with software, we do not have uniform definitions of ondemand
supply chain management. Then, there’s the operational
perspective.

Big Blue speaks
If IBM were just another small consultancy, it would be easy to dismiss
its position and concentrate on the software aspects of on-demand
supply chain management. But it’s not. With an army of thousands of
consultants and an enormous marketing budget, IBM cannot be ignored.

IBM has been promoting the concept and language of ondemand business
for some time now. Even if it is merely marketing hyperbole, it is
powerful: IBM contends that the process of energizing the supply chain
is the key to enabling the on-demand business—transforming the base
model for sustained, and sustainable, competitive advantage.

Its 2006 CEO survey showed responsiveness to be the number two
issue, after growth. Eighty percent of the respondents rated their
companies as “less than capable” in responding to changing conditions
and supply chain events. That assessment is interesting in light of the
attention given to the subject of agility in recent years (to say
nothing of Yossi Sheffi’s wake-up call of a book, The Resilient Enterprise.)

IBM has focused on responsiveness and the on-demand concept after
recognizing the impacts of major business trends, including
increasingly demanding customers; shrinking product life cycles, with
innovation and speed to market as make-or-break factors; supply chain
complexity, including globalization; physically extended supply chains
involving more players; prevalence of e-business techniques and
transactions; and unrelenting pressure for cost cutting.

Its vision for on-demand supply chains embraces four key capabilities:

1. Dynamic—and fast—response to events and changing conditions
2. Open architecture systems infrastructure, with realtime visibility throughout the supply chain
3. Adaptability to seize market opportunities quickly
4. Variable cost sensitivity, moving up or down, based on revenue.

A fifth element may be the development of sense-andrespond
capability to monitor and manage exceptions as
well as to respond to—or even influence—demand shifts.

Other features of the on-demand supply chain from this operational
perspective include online and real-time order configuration, updates,
and status; scalable infrastructure; dynamic product/service bundling;
and tight integration with supply chain partners in the areas of
technology, communications, information, and planning.

Of course, IBM’s process for determining where a company is,
relative to on-demand status, and what it has to do to move up the
scale is designed to generate any number of consulting projects. That
is to be expected.

In IBM’s view, the on-demand supply chain and the ondemand business
are the next steps in the evolution of enterprises, taking the flexible
and collaborative business to another level of technology-enabled
integration. It argues—emphatically—that, ultimately, on-demand is not
an option, but a necessity.

How we see it
On-demand supply chain management is here to stay, no matter how it is
defined or what it is called. On the software side, we appreciate the
continuing development of better and better tools made available to
broader markets.

On the physical side, the concepts IBM espouses are both solid and
indicative of the direction that our supply chain world needs to
travel. No matter that the concepts are being used to provide gainful
occupation for all those consultants; that doesn’t mean that they’re
wrong.

Whether all of us will include on-demand supply chain management in
our professional vocabularies remains to be seen. We’re reasonably sure
that we’ll be using the concepts and the tools in some form or another.

logistics and the cost of food
By Peter Bradley

There’s not much logistics managers in the food industry can do
about rising fuel costs. But there still may be some things managers
can do to make those networks even more efficient.

Food has been much on the minds of just about everyone this summer,
and not because it’s barbecue season. Food costs have been rising fast.
According to the Department of Labor’s Consumer Price Index Report for
June, food prices grew 0.8 percent during the month, including the
biggest jump in vegetable prices in four years.

It’s not just a U.S. phenomenon: The International Herald Tribune
reported in July that food prices in Europe had risen by 6.4 percent in
a year. The reasons for the cost increases are manifold. Much of it has
to do with production costs. Material and packaging costs are rising,
too. And some of it is directly related to distribution expenses,
especially the cost of transportation, which has been rising rapidly as
a result of high diesel prices. There’s not much logistics managers in
the food industry can do about rising fuel costs. And most have already
taken steps to cut waste from their distribution networks. But there
still may be some things managers can do to make those networks even
more efficient.

One grocer that has done just that is featured in our cover story
this month. The Co-operative, the largest grocer in the United Kingdom,
has revamped its distribution network and updated its software tools to
better serve its 3,300 stores. The exercise was not aimed primarily at
costs. The company needed to coordinate the flows of three different
types of products and reduce stock-outs, among other things. As James
Cooke reports in the story, which begins on page 41, it took much
effort and investment, but it provided a significant payoff for the
company.

We lead off this issue’s features with an interview with Gen. Norton
Schwartz, commander of the U.S. Transportation Command since 2005. The
interview is worth reading for the Air Force veteran’s insights into a
logistics network that’s about as complex and challenging as they get.
Since our interview, Gen. Schwartz has been nominated by the White
House to become the next Air Force chief of staff.

We also offer some more down-to-earth pieces this month.
Contributing Editor Mark Solomon reports on how high-tech tools are
playing a larger role in one of the oldest and most frustrating
challenges for logistics managers—stopping cargo theft. Editor at Large
George Weimer looks at improvements in tools for managing lift truck
batteries. And we offer a report on how lean principles may be applied
to DC labor management. Finally, we add a new column to our lineup.
Editor at Large James Cooke, who has had the technology beat for a
couple of decades with us and other logistics magazines, offers his
perspective on technology for the logistics market. You will find his
initial offering on page 39.

snake eater to box kicker: interview with Gen. Norton Schwartz
By Steve Geary

It’s not every day that a snake eater (Special Forces operator)
rises to the top of TRANSCOM, the U.S. military’s transportation
command. But Gen. Norton Schwartz has done just that.

Talk with Gen. Norton Schwartz, the Defense Department’s senior
logistician, about the challenges of moving freight around the globe on
a moment’s notice, and FedEx’s marketing slogan (”when it absolutely,
positively has to get there overnight”) might pop into your head. But
it’s really not an apt comparison. Imagine calling a private sector
carrier and asking it to deliver a 38,000-pound MRAP (mine-resistant,
ambush-protected) vehicle to Northern Afghanistan via second-day air.
You’d likely be turned down flat. Yet the organization Gen. Schwartz
heads up, the U.S. Transportation Command, or TRANSCOM, carries off
feats like that every day.

As commander of TRANSCOM, which is headquartered at Scott Air Force
Base outside of St. Louis, Gen. Schwartz leads the organization within
the Department of Defense that is responsible for moving people and
things worldwide by air, land, and sea. Though many people aren’t aware
of it, TRANSCOM does more than just support deployed forces in wartime;
it also has a role in peacetime delivering supplies and equipment for
humanitarian and other operations.

Heading up TRANSCOM is not Gen. Schwartz’s only role. The four-star
general also leads a collaborative effort to improve and integrate the
DOD’s end-to-end supply chain in partnership with agencies and commands
across the department. He is also a “combatant commander,” one of the
most senior officers in America’s combatant force, and reports directly
to the secretary of defense.

Gen. Schwartz graduated from the U.S. Air Force Academy in 1973 and
is an alumnus of the National War College. His assignments have been
varied, ranging from special operations to logistics. Translated into
military slang, he’s been both a snake eater—a term for Special Forces
operators, whose wilderness survival training is said to include
capturing, cooking, and eating snakes—and a box kicker, someone
assigned to logistics.

His major awards and decorations include the Defense Distinguished
Service Medal (with oak leaf cluster), Distinguished Service Medal,
Defense Superior Service Medal (with oak leaf cluster), Legion of Merit
(with two oak leaf clusters), Defense Meritorious Service Medal,
Meritorious Service Medal (with two oak leaf clusters), Air Force
Commendation Medal (with oak leaf cluster), and the Army Commendation
Medal.

To put that in terms that most of us will understand, Gen. Schwartz
is a warrior, a fact that is tough to reconcile with the soft-spoken,
almost professorial man who recently met with DC VELOCITY
Editor at Large Steve Geary. Geary caught up with Gen. Schwartz in
southern Florida, home of three combatant commands, to talk about his
career, his vision for TRANSCOM, and some of the challenges TRANSCOM
faces.

Q: Looking at your background, I notice you were trained in
special operations, yet you are now a logistician. How did you go from
snake eater to box kicker?

A: Largely fortune. I think over time, I grew some reasonably
sound operational skills. Cross-services [experience], particularly in
the special operations, came to me early on and certainly through the
years. I ultimately led at the various levels of supervision in our Air
Force units and commands at various levels. I had the opportunity to
serve in increasingly senior positions in the Washington national
security environment as well.

So I have grown, and it is a great tribute, I think, to our armed
forces that the son of a typewriter salesman from a small town in South
Jersey can grow up to be one of the nine combatant commanders in the
U.S. Armed Forces. It could only happen in America and only with some
hard work, some good fortune, some people who invested in you over
time, and a lot of teammates who helped me. And it was just fun to do
for the last 35 years.

Q: One of your roles at U.S. TRANSCOM is that of combatant commander. Can you tell us what that means?

A: There are two fundamental roles in the department. You
have what are known as force providers within the Department of
Defense, which is largely the services: the Army, the Navy, the Marine
Corps, and the Air Force. They provide forces.

Then you have those folks [the combatant commanders] who have
responsibility to employ the force, to use those resources to perform
and accomplish missions, which are assigned by the president and
secretary of defense. There are nine four-star officers who are
responsible for employing the force and who, in a number of instances,
have geographic responsibility … for example, in Europe or the
Pacific or the Central Asia area, as is the case for Central Command.
And you have four officers like me, who have functional responsibility.
I am responsible for transportation and distribution in the Department
of Defense.

As for our chain of command, if you will, my senior is the secretary
of defense. I work for him and the president, and I serve at their
pleasure. My role as one of the functional combatant commanders is to
make sure that the others, and most especially the geographic
commanders, have all that they need to accomplish the missions that the
president and secretary of defense assign.

Q: Would it be fair to say that you are, in effect, the head logistician for the Department of Defense?

A: Let me indicate that I am, in a sense, the senior
logistician, but the truth is, this is a distributed enterprise. It is
not a fair description to say that I “own” the defense logistics
enterprise. Nor do I want to give readers the impression that I am sort
of the “king of logistics” because that’s not the case. It is a
distributed enterprise. The key thing about this is really
collaboration and orchestration. That is the fundamental role.

This position is probably less about the mechanics of logistics than
it is about, again, having an enterprise and making sure that this
larger system functions as efficiently and effectively as
possible—again, to make sure that the geographic combatant commanders I
mentioned earlier can get it done.

Q: How do you make sure that the larger system functions as efficiently as possible?

A: It’s a matter of looking at this at the enterprise level,
not the functional level. For example, if I were just a transporter, my
role would be to drive down transportation costs for the department in
any and every way I could. However, by doing that, I might actually
cause increased costs for the department, although my books might look
good at the [functional] level … because transportation interfaces
with inventory.

There are times when you want to have minimum inventory and use
premium modes of transportation to deliver to the warfighter on time,
as expected. Take, for example, very expensive circuit cards. You don’t
want to have dozens or hundreds of these in your warehouse. It makes
sense for you to use premium air transportation to make that delivery.

On the other hand, what you don’t want to do is use premium air
transportation to fly concrete or things that are very large and
typically cheap. That is not a smart use of DOD dollars. If you don’t
look at this at the enterprise level and instead you try to make sure
that your functional books look good, that is not the supply chain view.

So my role is not to own this whole enterprise—I don’t believe that
is wise and I don’t think it is manageable—but rather to orchestrate
the activities of those who do have that responsibility. We’re not
looking to assert dominion but rather to orchestrate this in a way that
delivers the needed capability at the least cost at the enterprise
level.

Q: As the military moves to a nimbler, leaner operating approach,
it would seem that theater distribution will be evolving. I was
wondering if you could comment on that.

A: I think it is true. Part of that is, again, recognizing
that the role that we had as the quarterback sort of goes across
theater boundaries and it goes across organizational boundaries. In the
old construct, the way we used to do things back when you had a fixed
theater and fixed lines of communication and so on—sort of the European
battlefield, the Cold War—people in the theater didn’t think that
anybody back in the rear had any role in trying to help them get their
job done and certainly nobody back in St. Louis, Mo., had any role in
moving stuff from Kuwait to Baghdad. This was the theater’s
responsibility.

What’s needed today, by contrast, is to have someone who can take
this global view and can move assets, organize activity in a way that
can provide the right results.

There is a level of integration with the other combatant commanders
that did not exist before. There were boundaries before. There are
seams now and those seams are closing by the day, so we are becoming a
much more integrated team. The deal is that the [warfighter] doesn’t
need to spend a millisecond a day worrying about his backside. He’s got
plenty of targets at 12 o’clock to worry about. Let him leave that
worry about his backside to us. That is certainly the role we try to
play.

I think the other aspect of this is that as we have become more
expeditionary, making this work, having the command and control, having
the in-transit visibility, having the inventory in sight, and so on is
largely a matter of information technology. Just like the big
companies, we are investing in information technology that allows us to
do this business better, that makes it possible for the sergeant at the
end of the supply chain to have confidence that what is coming is
really going to get there quickly.

Think of it this way: You buy your wife a gift off the Internet on
Dec. 21st, a small box. You get a tracking number and you put that
tracking number into the UPS or the FedEx Web site. You can see that
box coming to you. What that means is, on December 23rd you are not
going to buy a backup gift just to make sure that you are not
embarrassed on Christmas day.

Supply sergeants are exactly the same. What will happen here as we
take advantage of the revolution in information technology is that
again, the kids at the end will have confidence stuff will get there.
It means they won’t hoard quite as much. There will be some hoarding,
but it won’t be the monumental hoarding we’re used to. They won’t order
three or four times to make sure that one actually gets there. This is
discipline in the system, in the process.

This is the kind of thing that we are bringing. And in a place like
Africa, where the lines of communication are so thin and the
infrastructure is very delicate, multiple orders can be a killer. You
can appreciate how the confidence that stuff I need will get there can
change the game, and it has and it will.

Q: We’ve spent a lot of time focusing on the military aspect of
it, but TRANSCOM has a tremendous partnership with the private sector.
One initiative in particular that is getting a lot of visibility is the
Defense Transportation Coordination Initiative, the program through
which the DOD is outsourcing the management of all of its domestic
freight, but there are others. I was wondering if you could talk about
the private sector partners.

A: First off, our commercial capability is our secret weapon.
There are two things that the transportation command and our team,
about 138,000 folks all together, do extremely well and that is mixing
the modes of transportation— air, land, and sea—to best effect. We do
that with our component commands from the Air Force to the Army and the
Navy.

But the other very powerful thing that we do is mix government-
owned organic assets for planes and ships, for example, and their
commercial counterparts. The longstanding relationships that we have
had with both the airlines and the ocean carriers, through the U.S.
Merchant Marine, are remarkable, frankly.

As an example, for our surface shipping, we use Navy ships but they
are not combatants. As a result, they are manned by the U.S. Merchant
Marine. These ships are very important to us, both the commercial
carriers as well as the U.S. government-owned shipping. On the airline
side it is very similar.

It is important to the country as we go forward to think about how
we continue to incentivize American companies to participate with the
government and to make available their resources on short notice for
the next time we have to surge. In the airline industry it is typically
48 hours, depending on how many aircraft we might need. The first ones
would show up in 48 hours. For the sealift industry it is not quite as
tight a timeline as that, but they make commitments to do that.

What we do is offer them government cargos to move as an incentive
to make that commitment. It is something that has been long-standing,
50 years in the airline industry, and it is something that you must
preserve because the U.S. government could never own all the assets
that we need in a surge. It is very important.

Second, we’ve looked to some of the private sector players—our
commercial counterparts—to see what we can learn from them. There are
fundamental differences. I mean, in the end, Wal-Mart stores don’t
move. Ours do. But there is a lot to emulate from Best Buy or Wal-Mart
or FedEx or UPS. If we do that reasonably well, then we have an
opportunity because we’re a $10 billion operation. If you knock 1
percent off of $10 billion, that is real money, serious money.

In the case that you mentioned, the Defense Transportation
Coordination Initiative, we have taken a page from the industry
playbook. That is, we have contracted with a transportation service
coordinator to manage our domestic freight rather than having
installation transportation officers call a local broker or trucker
every time they need to move a box from, say, Texas to Colorado; make a
deal; move the box; and pay for the move. That’s all fine except that
happens four or five thousand times a day in the Department of Defense.
You have to ask yourself, is that the best way to run this business,
this enterprise?

It’s not, because that truck that moved the box from Texas to
Colorado might not have been full. Had we aggregated those four or five
thousand individual actions in a way that would lead to full
truckloads, optimal routing, and so on, we’d save money. So the Defense
Transportation Coordination Initiative, which we have already rolled
out at the first sites—Puget Sound, Corpus Christi, and so on—will do
exactly that.

Menlo Worldwide Government Services is the contractor that will be
that single node that will coordinate all the individual actions and
… probably save us $40 million or $50 million a year. To the Defense
Department overall, $40 million or $50 million may not be major money,
but to us it is major money.

Q: Is there anything we haven’t talked about yet that you might like to add?

A: One of the questions people typically ask is what keeps me
up at night. I tell them relatively little; I sleep soundly. But one
thing that is a concern—and this would be any business’s concern—is
what happens in a post-Operation Iraqi Freedom environment when the
workload subsides.

Right now, we are working our tails off. We’re humping. Yesterday
morning, for example, we delivered the 3,800th mine-resistant
ambush-protected vehicle to Central Command. Now these are not trivial
vehicles. These are 20, 30, or 40 thousand pounds apiece, depending on
which version, and we have done that. We have maintained and sustained
the warfighters in theater. We have just finished a season in
Antarctica. So what we have done is, you know, Antarctica to
Afghanistan. So we are busy and we are working hard.

But what will happen when the workload tapers off? This is a
strategic question for us, because what typically happens with
companies is that when the workload goes down, you have to shrink. You
cut overhead, which is a good thing to do, and you shrink, or the other
strategy is to expand your business base.

The reason that is important for us is that we can’t afford to
shrink too much because the nation depends on us to be ready to get out
the door when the next crisis occurs and deliver America’s military
might or humanitarian assistance to wherever it might be required.

Managing that decline in workload is a thing that we will all
struggle with and likewise on the commercial side. I don’t want to see
my long-term industry partners disappear because I will need them
someday, soon probably. How we do that sensibly in a measured way is
the strategic issue for me and for my successors, I am sure.

One of the things we are doing is trying to expand the business.
There are people out there in the Department of Defense and elsewhere
in the government who do not use the defense transportation system.
There are lots of reasons for that. What we are endeavoring to do is to
make the defense transportation system more attractive to folks so that
they will be inclined to use it.

When we are not moving as much stuff to Central Command in the
future as we are today, we will have other demands, which will kind of
compensate. That is the logic; that is the major strategic concern and
the thing that we are working on conceptually and at the street level.

Editor’s note: Shortly after this interview was completed,
Defense Secretary Robert Gates announced a shakeup in the top ranks of
the Air Force. As part of that reshuffling, the White House nominated
Gen. Schwartz as the next Air Force chief of staff. Senate confirmation
hearings were pending as this issue went to press. If his appointment
is confirmed, it will be the first time a pilot without bomber or
fighter experience has held the position; Gen. Schwartz’s experience is
in transport and special operations.

Link
By John R. Johnson

How will companies drive down supply chain costs in the future while shipping exponentially more product?

Jim Kellso has a problem on his hands. Over the next five years, his
company expects to increase sales five-fold. That’s great news, but
there’s a catch. During that same period, the logistics budget will
remain flat.

How does Kellso, manager of supply network research and supply chain master for Intel, meet this challenging corporate edict?

By planning ahead. Kellso and other logistics execs at Intel cleared
their calendars for a two-day brainstorming session last month to
address that very issue. It’s only the first of many meetings to
determine how to drive down supply chain costs in the future while
shipping exponentially more product. In fact, Kellso says that some of
Intel’s supply chain masters, as supply chain folk are called at Intel,
will spend a good part of the next two years on this topic in order to
have a solution in place well before the 2012 deadline for shipping a
billion more CPUs.

“How do we create a supply chain system capable of handling five
times more product coming out of Intel?” he asks. “How are we going to
deliver the next billion units each year in addition to the 250 million
we have now?”

Logistics managers need to be thinking about questions like those.
What will your supply chain look like in three years? Five years? How
about 10 years out? Those are tough questions when so many managers are
preoccupied with putting out the daily fires. Who has time to think
about next year? Or the year after?

But that very topic was the primary agenda at the MIT Center for
Transportation & Logistics’ Crossroads 2008 event, titled “Supply
Chain, The Next 10 Years.” During the day-long symposium, Kellso and
others tried to provide a hint of what the future holds and how to deal
with the rapid change on the horizon for logisticians.

Kellso notes that aside from an expected increase in volume, there
are other obstacles to prepare for, such as changing locations for
production. China will not always be the answer, he says. Inexpensive
labor will give way to logistics costs as the top priority when
$3.50-a-gallon fuel becomes $7- or $8-a-gallon fuel, he observes. In
addition, as demand for technology increases in emerging markets, Intel
must be ready to fulfill orders to remote areas of the world.

At the same time, buying habits continue to change. In the
not-so-distant future, somebody watching an Internet-enabled TV show
will be able to mouse over a product being advertised and buy it
online. “The way people are buying things is changing constantly and
it’s all moving at a rate that’s hard for us to keep track of,” says
Kellso. “That and the inability to predict demand will drive us to the
need for speed and to be incredibly responsive.”

Link

Is there a single function you can’t outsource?

Probably not. Companies are now farming out many processes to
third parties—everything from marketing to supply chain to back office.

For one thing, it’s affordable. For another, it allows the company to focus on other areas of its business.

According to a study by Georgia Tech University and Capgemini LLC,
transportation and warehousing remain the most commonly outsourced
business functions. Others include customs clearing and brokerage,
forwarding, shipment consolidation, reverse logistics and cross docking.

The study reports that about 80% of companies now use 3PL
services, an increase of almost 10% from five years ago. And there’s
plenty of room for growth: half of the businesses that do not outsource
logistics plan on doing so in the future—at least in part.

But no one enters into a 3PL deal without a little trepidation—and
rightly so: If the piece of your company that you want to fix performs
even a little bit worse after outsourcing, your whole business could be
in peril. That’s why you have form strong relationships with the third
parties you go to contract with.

How does one go about picking a 3PL? Well, first you should
determine for sure that you really need one. Otherwise anyone will be
able to undermine your rationale. Here are six basic questions to ask
when considering outsourcing:

1. Is the task highly complex?
2. Is there a risk to the business while performing the task inhouse?
3. Does the task require more than the available resources?
4. Does the task require highly specialized training or tools?
5. Is the task outside of your core competencies?
6. Could outsourcing cut costs and improve service levels?

If you’ve answered some or all of these questions in the
affirmative, it’s probably time to outsource. Things you’ll want to
keep in mind when going through the selection process include:
commitment to quality, price, references and reputation, flexibility of
contract terms, resources, value-added capability, culture, location,
and existing relationships.

Sendin’ out an RFP

There are several ways to determine if a 3PL is right for your
company. One method is to send out both formal and informal/blind RFIs
(Requests for Information). From responses to the RFI, you can then
request RFPs (Requests for Proposals) from vendors whose RFIs met your
established goals and criteria. After evaluating all RFP responses, you
should perform as many site visits as possible and begin conducting
negotiations with multiple vendors.

As you go around and visit the facilities, pay close attention to
the management style and culture of the 3PLs you are considering.
Remember that if you are to successfully work together, you’ll need to
share similar values.

Asset-based vs. Non-asset-based

Before you get too deep into the selection process, though, you’ll
want to decide whether your needs are best suited by an asset-based or
non-asset based 3PL. An asset-based 3PL is a logistics provider that
owns many or all of the assets necessary to run its clients’ supply
chains. This allows the provider to leverage internal strengths and
infrastructures to provide direct, immediate solutions; however, an
asset-based 3PL may be internally focused rather than customer focused,
can have internal biases, or may falsely overemphasize its flexibility.
Also, a customer will often pay for all or part of the assets,
resources, and tools owned by an asset based 3PL.

A non-asset based logistics provider, on the other hand, is one
that does not own the assets to manage the supply chain. This allows
non-asset based 3PLs to avoid being limited to one infrastructure of
assets, allowing for more creative alternatives. They also possess
greater objectivity and typically deliver better ROI, since more
capital is available, and since they do not need to realize value from
an inventory of assets, their focus is entirely on their clients’
needs. However, with more pieces to manage, it is imperative that a
non-asset based 3PL have the experience necessary to negotiate
effective contracts and realize sources of improvement in every aspect
of the supply chain.

When the best-suited vendor is found, the contract or partnership
can be awarded, and both sides should commit resources to the success
of the relationship.

Contract is king

Remember that a carefully drafted contract is one of the most
important elements of any successful outsourcing plan. A 3PL-client
contract should include detailed descriptions of services, performance
tracking criteria, clearly measured improvements in service levels,
peer-to-peer relationships that provide guidance and sponsorship, and
clearly measured cost reductions.

With the right 3PL partner, an outsourcing plan can have a
significant impact on the bottom line: for example, companies which
outsource their logistics report an average reduction of 18% in fixed
logistics assets, a savings of 13% on logistics cost, and a reduction
in the average order cycle length of almost four days.

But if your contract isn’t written carefully—and scrutinized by an
expert who is familiar with such contracts – you could easily end up in
a bad deal.

Time to get closer

Building a close relationship with your 3PL is just as important
as getting the right performance metrics down on paper. Right from the
start, be sure the lines of communication are open: If possible, make
quarterly communication (i.e. reporting) part of the terms of your
contract. Remember that building a strong, respectful relationship with
your 3PL is key to your success.

A good 3PL relationship should create a performance-based culture
and workforce that conveys high expectations and implements incentives
that drive behaviors. By investing in continuous improvement in time
and capital, maintaining the lines of communication through a quarterly
meeting rhythm (not just when there are problems), thinking right to
left by always keeping the end state in mind, and remembering that
every business has an Achilles’ heel that just needs to be found, a
company can feel in control, safe, and secure with its decision to
outsource.

Warning Signs

Despite a company’s best efforts, not all 3PL relationships are
the right fit, and it is important to be aware of the warning signs.
Statements like “the 3PL is on its own” show an absence of trust and
respect, and a lack of communication, that can cause a 3PL-client
relationship to fail if not addressed.

An absence of cost-out and continuous improvement; one or both
parties constantly referring to the contract; or no time spent
evaluating productivity and success are also indications that a 3PL
relationship has gone sour. When this is the case, the relationship
must be evaluated and reworked, or a new 3PL that is more in line with
the culture, goals, and expectations must be selected.

Conclusion

Outsourcing is often perceived as
complex and error-prone, and indeed it can be if a strong, respectful
3PL relationship is not established. Such a relationship will only be
as good as each side makes it, and it should be treated like an equal
partnership.

Ron Cain is president /CEO and Andy Dishner is senior director of client solutions for TMSi Logistics.

Link

Once upon a time – say, maybe a decade ago — few companies mandated
socially responsible products and practices in their day-to-day
business operations. The climate has changed, and sustainability isn’t
just a sound business objective: It’s producing healthy bottom-line
results.

Businesses are moving away from eco-unfriendly parcels to
environmentally responsible packaging such as recyclable paperboard
mailers made from post-consumer content. And they’re finding that
shifting to sustainable packaging doesn’t require a seismic shakeup
inside the mailroom.

Here are eight easy steps you can take to help move your business toward sustainable packaging:

1. Adopt a company mandate. Many companies are requiring
paper-based product suppliers to provide products made from sustainable
materials. Even without a corporate policy, purchasing departments
often include sustainability requirements in RFPs and only purchase
packaging products made from FSC- or SFI- certified paper, recycled
paperboard or, at the very least, materials that can be recycled.

2. Reduce filler materials by using fitted packaging. For
instance, paperboard mailers are designed to accommodate contents of
various thicknesses with no dead air space to fill. This versatility
eliminates the need for bubble wrap, foam peanuts or other
environmentally unfriendly filler materials.

3. Consider two-way mailers. These paperboard packages have a
second flap that can be pulled out to allow the envelope to be
resealed. Two-way mailers make a significant statement about a
company’s commitment to sustainable packaging, and the benefits are
immediately apparent.

4. Insist on eco-friendly ink. Whether companies need a simple
return address printed on a package or a full-color marketing piece,
water- and soy-based inks are the most environmentally friendly. If
using color, the graphic designer or marketing firm needs to understand
any sustainability goals.

5. Eliminate packaging containing non-recyclable materials — such
as padded mailers containing non-recyclable plastic bubble liners.
Replace these packaging options with products made with FSC- or
SFI-certified paper or paperboard containing a high degree of
post-consumer recycled content.

6. Show off sustainable practices. Consumers and other businesses
respond to companies that use socially responsible practices. Once a
business makes the move to sustainable packaging, marking paperboard
mailers with the appropriate sustainability information can generate
goodwill with customers and business partners.

7. Know the true environmental costs. Companies should consider
the total carbon footprint of sustainable paper products when comparing
prices. For example, if wood is harvested in Asia and transported to a
U.S. plant thousands of miles away from the end user, the carbon
footprint is far greater than purchasing from a manufacturer that gets
wood from an FSC/SFI-certified forest located near its manufacturing
facilities.

8. Consider the Five Rs. Keep in mind the basic environmental hierarchy:
–Restore. Use materials and companies that practice sustainability
–Respect. Packaging has many aspects—from the source of the material
to final distribution. Keep these in mind when choosing products.
–Reduce. By using fewer materials with less weight, the cost of transporting the packages will be less.
–Reuse. If what’s already been made can be used again, then practice reusing.
–Recover. Recycle what can’t be reused.

Consumer demand has fueled the increased availability—and
affordability—of environmentally friendly packaging options. Now it’s
up to companies to practice their commitment to the three Ps: people,
planet and profit.

Bob Makofsky is vice president and general manager for Conformer Expansion Products.

Link

Everyone knows contact centers have high turnover rates. But many
managers have little idea of what this churn is doing to their
operations. They think they are helpless to do anything about it.

But that’s a dangerous attitude. Most agents don’t stay with a
contact center for more than two years, and it takes at least a year to
train and develop a new one. Meanwhile, customer service declines.

Not only that, it’s expensive to recruit and train new agents. Some of the costs include:

–Recruiting: Normally, you have to run print or other forms of advertising, go to job fairs, and conduct promotions.
–Hiring: Your human resource department must process applications and
screen employees. And contact center staffers must take time to
interview candidates.
–Training: It takes money to run training facilities, hire teacher and
produce student training materials. And the effort has to be ongoing.
–Supervision: The cost of additional supervisory time to assist new staff in their early learning stages.
–Unproductive paid time: That’s the money you spend on wages during
the initial training period when staffers are not yet available to
process calls.
–Overtime costs: The expense of paying overtime to existing staff to cover call workload during understaffed periods.

In addition to these hard-dollar costs, there are “hidden”
expenses, particularly if the contact center is a revenue-producing
operation. You can lose sales during while recruiting, training, and
getting the employee up to speed.

So what can you do?

As we discussed in Part 1
of this two-part series, your contact center supervisors are on the
frontline of managing attrition. They are the ones who deal with your
agents every day—and they are in the best position to address their
personal wants and needs. Therefore it is wise to train them in how to
reduce attrition rates.

In the book, “Love Em or Lose Em,” authors Beverly Kaye and Sharon
Jordan-Evans present an A-to-Z guide to improving staff retention in
all types of organizations. The general business strategies presented
in the book can be adapted for use in the contact center.

Here is what you should be telling your managers, as spelled out in “A SUPERVISOR’S JOB:”

A – Ask. You should regularly ask your subordinates what things
about the contact center make them happy and what things would make
them leave. These things will vary with each person, but you may want
to file them and refer to them periodically to ensure that each
person’s needs are being met on a regular basis.

S – Scheme. Next, have a scheme in place for the employee’s
success. This should cover training, performance improvement, and a
career path plan. The latter should map out several options based on
the person’s aptitudes and desires. Some changes will be vertical moves
upward while others may simply be enrichment opportunities.

U – Understand. Take the time to listen to feedback and
understand your staff’s concerns. Have trouble listening? Almost
everyone can improve skill—there are many exercises that can help you
practice it.

P – Passion. There’s more to life than work. Allow your
employees to bring their passions to the contact center. Ask them what
they love to do, and find a way to facilitate—at work. For example, you
can throw an employee-led scrapbook party once a month. Or you can
organize a sports team, support children’s class projects or create a
flexible schedule so that people can volunteer.

E – Enrich. We’re not talking only about money. Employees also
need to grow. Rotate assignments, build teams, combine tasks, and
support individual goals.

R – Reward. Positive actions must be rewarded—that is, if you
want employees to repeat them. These rewards should come often and be
attached to specific behaviors—soon after happen. Some recognition
should be private, some public.

V – Values. Practice what you preach. Serve as a role model.
Teach your staffers how to support the company’s mission and values.
And demonstrate those behaviors yourself.

I – Information. Don’t hold back—share relevant information with
your staffers. Keep them up to date on news on the contact center,
company and industry. You can do this through a newsletter, bulletin
boards, emails, and face-to-face conversation. Let them know how
they’re doing on the job, too.

S – Space. This is as important as anything when it comes to retaining people. Personal space must be adequate—and respected.

O – Opportunity. Look for ways for employees to succeed and
grow. Stop focusing on what people are doing wrong—and tell them what
they’re doing right. Then reward them for it. You should always be on
the lookout for growth and career opportunities for your staff.

R – Rules. Every company has values (or should). Make sure you
grasp them yourself, and then communicate them to the people who report
to you. Some rules will concern performance, others the work
environment. People should come away with the belief that your company
is fair and consistent.

S – Spur. Okay, encourage employees to learn and grow. Many
contact centers have both formal and informal mentoring programs in
place where a supervisor or team lead serves as a model for the job to
encourage and nurture employees, as well as to teach them
organizational realities.

J – Jester. Look for ways to have fun on the job. Most contact
centers have a constant flow of games, contests, and activities. These
efforts result in a more pleasurable work experience, a sense of
teamwork, higher job satisfaction, and lower turnover.

O – Outside Concerns. Do you really know your subordinates? Do
you understand their lives outside the job? Try to support them. Go the
extra mile to have a family friendly workplace, where family members
(and even pets!) are recognized and welcome in the center.

B – Buck Stops Here. Know who’s responsible for employee
turnover? That’s you—you’re accountable for staff retention. And we’re
going to train you in the supervisory and leadership techniques you
need.

A Word on Retention Planning

Every contact center should have a strategic staff retention plan.
Many contact centers base supervisory bonuses, in part, on acceptable
levels of staff turnover.

You also have to figure out why agents leave the center. Conduct
exit interviews, and also ask long-term employees why they stay. Don’t
just assume that turnover is inevitable—fix all the elements under your
control and you will be rewarded with a loyal and steady staff.

Penny Reynolds is a founding partner of The Contact Center School, a Nashville, TN-based consulting and education company.

Link

It’s a logical question, considering the parallels of these two Asian
neighbors: longtime communist nations that introduced free-market
reforms and are riding export-driven growth to stunning success.

That is the happy story — to a point, anyway.

Despite inflation of 25% and recent worries of a looming financial
crisis, Vietnam is the new poster child for global sourcing. For the
past decade, the former Cold War hotspot has produced annual GDP growth
of 7.5%. Intel Corp. is among the latest arrivals, investing $1 billion
in a semiconductor factory near the capital, Hanoi.

“Vietnam is a great place for sourcing,” says Robert Gladden of
Deerfield-based private-equity firm Pfingsten Partners LLC, who for the
past 10 years has tapped that country as well as China, Taiwan and
India. “You’ve got a hardworking workforce that produces excellent
quality and spectacular pricing.”

Mr. Gladden points to his experience sourcing marine antennas from a
factory in Bac Giang, a province in the Red River Delta between Hanoi
and Haiphong Harbor. He had been using a South Korean supplier, but the
move to Vietnam improved profit margins by “20% or more,” he says.

The attraction of Vietnam is obvious. Aside from abundant cheap labor,
there is the rapidly improving infrastructure — roads, rails and
harbors — necessary for moving product in, out and around the country.
There also are the two decades of “Doi Moi” (New Changes) reforms,
which have given Vietnam one of the world’s most open economies.

All that free enterprise (bilateral trade with the U.S., for example,
has grown from almost nothing in 1994 to $10.6 billion last year) has
helped boost living standards. The proportion of households with
electricity is 94% — double what it was two decades ago. Nearly all
children attend primary school, and the country’s literacy rate is
higher than 90%.

But Vietnam is not the next China. And it never will be.

China’s population — the engine of its growth — is 15 times bigger than
Vietnam’s. Nor does the country have the raw materials or skilled
workers to compete with its gargantuan neighbor.

Still, for many manufacturing companies looking to source a limited
number of products, Vietnam is a viable option. “For little guys like
me it’s great,” Mr. Gladden says.

By Thomas Mucha

From the floors to the loading dock, opportunities for accidents are everywhere

By Allison Manning, Associate Editor — Modern Materials Handling, 8/20/2008

Link

U.S. Fastest Growing Wind Power Market
The
U.S. wind power market added 27 percent more global capacity this past
year, securing the country’s position as the largest wind growth market
by annual installations for the third straight year.