The Supply Chain Management Association’s Ontario region held its annual conference October 22 and 23 in Mississauga. Attended by 441 members of the association and others, the event offered about 20 presentations, running the gamut from supply chain strategy to green procurement.
Looking at supply chains from a high level, Steven Melnyk, professor of operations and supply chain management at Michigan State University’s Eli Broad Graduate School of Management presented on “Bridging the Gap between the Tactical and Strategic Supply Chains”.
Melnyck’s thesis is that an innovative business model is the most effective way to improve shareholder value. To get that, a company needs to know its key customer, have a value proposition that differentiates it from the competition, and have the capabilities in place to create value.
He pointed out that the way businesses compete has evolved over the past couple decades. In the 1990s it was simply company versus company. Around 2000 there was a shift to supply chain versus supply chain, and now it’s business models going head to head, with Walmart versus Amazon as a prime example.
To manage the new world, he says that new supply chain leadership is required from managers who first must make supply chain visible and comprehensible to senior management. They also need to be able to focus on competencies and capabilities to be more integrative and strategic.
Information sharing really does work
On a more practical level, Michael Haughton, professor of operations and decision sciences and the CN Rail fellow in supply chain management at the Laurier University Lazaridis School of Business and Economics, shared the results of his study on the benefits that shippers and carriers receive from sharing demand information.
The research was motivated by the problem of empty miles travelled by transport trucks. According to the American Trucking Association (ATA), up to 17 percent of large carriers’ mileage and up to 22 percent of that for small carriers is run without a load. Haughton cited research showing empty truck movements cost nearly US$265 billion in the US.
There are a lot of factors that result in a positioning run for a truck, and many of them are not controllable. For example, geographic cargo imbalance, hours of service rules and cross-border concerns are primarily out of the traffic manager’s purview. Other factors, such as fleet size, length of haul, intermodal connections, number of stops and time available to wait for back haul loads are more under a manager’s influence.
The areas that the manager can truly control are transportation management practices, sharing of information among supply chain managers, and the use of technology.
Using a mathematical model, Haughton and his team determined how having earlier knowledge of a pending load provided by the shipper would help the carrier to make more efficient use of the equipment available.
Using various scenarios, they modeled 240 experiments. They discovered that by increasing the window of time the carrier knows about a load from 24 to 48 hours yields an average profit improvement of 22 percent.
The best results were found when there was a large service region to be covered and for long, loaded trips. For the shipper, increasing notice from one to two days allows the carrier or 3PL to lower rates by an average four to five percent, and improve customer service by providing an eight percent increase in the likelihood of their shipments being hauled by a preferred carrier.
Three senior supply chain execs took the stage for a panel discussion about navigating change at the strategic level, along with moderator Pat Cain, vice-president of business development with the Titanium Group.
First to the podium was Robert Wiebe, senior vice-president of supply chain with the Loblaw group. Loblaw is now Canada’s largest retailer (measured by number of transactions) and comprises six businesses, 435 locations and will be in 23 countries by 2018. More than 17 million Canadian visit one of their stores every week. All this is supported by one supply chain network, that was, a few years ago, famous for its deficiencies.
But that’s all changed now, Wiebe said, citing the smooth addition of the recently acquired Shoppers Drug Mart distribution network to the supply chain. There were significant differences to be reconciled. For example, the size and volume of Shoppers stores meant they required unit picks, while the grocery stores were predominantly case picks or larger.
As well, Shoppers stores don’t typically have loading docks or storage areas, and would receive maybe two or three deliveries a week of two or three pallets each time. A grocery store, by contrast, receives eight to ten 53-foot trailer-loads every day.
Wiebe said the seamless integration was a testament to the leadership at Shoppers. “We haven’t lost one person in the supply chain team at Shoppers Drug Mart since the acquisition (other than through low-level attrition),” he said.
It’s critical, he noted, in a transition, to do what you said you would, or people will stop trusting you.
Versacold CEO Douglas Harrison followed Wiebe, noting that Loblaw is a client of his company. Versacold operates 31 temperature-controlled facilities, has 40 percent of the Canadian market and employs 2,500.
He was brought aboard to help the company transform in order to stay ahead of customer consolidation, globalization and the demand for more services, capabilities and improvement.
The company launched a complete review of best practices, markets and metrics from other industries hoping to “steal best practices shamelessly”, not from competitors, but globally. They sought feedback from customers, staff and other stakeholders.
The transformation project was launched from a ‘burning platform” in order to gain commitment from staff, and those who were not aboard were “dealt with”, Harrison said.
So far, the company has launched a greenfield business unit, brought in a new technology platform and has experienced positive adoption of a new culture.
Concrete achievements include a 98.4 percent customer retention rate, a 48 percent reduction in lost time injuries, a 17 percent reduction in turnover, a 600 percent increase in hits on the company career page, and being on track for 15 percent growth in revenue.
Mike Owens retired from Nestle earlier this year, leaving his position as vice-president of physical logistics.
In his presentation Owens continued with the theme of the burning platform, saying that major transformation can only be event-driven. Once that platform is identified, it’s time to create a vision that all levels within the organization can understand and buy into.
Communicating the vision and progress towards it are crucial he said, as is using the naysaysers to help polish the communications to address their concerns. He also reiterated that you cannot assume senior management understands supply chain. Always be prepared to explain it.
Ensuring you have the right team who are all firmly aboard is key. Don’t allow those who are undermining the project to hang around, and do give the key people the power to make their own decisions. Just because they may not do it your way does not mean it’s the wrong way.
Owens had some practical advice for the supply chain manager: get your professional designation, learn several disciplines and work in them throughout your career, network, and adopt a LEAN approach to business.