Volume 5, Issue 3
October, 2007
Policy
Process
Process
Process

Process
P A R A L L A X
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an apparent change in the direction of an object caused by a change in observational positioning that creates a new line of sight.
From the Greek: to change
Para: to see.
Built for Change
Competitiveness for Today's Manufacturers
Means Agility
*
By Ann Grackin
With huge structural challenges confronting us, agility becomes a prime characteristic that an enterprise needs to acquire. But agility, change, etc. are terms that are ephemeral—hard to nail down. And most firms have been blind-sided and are only waking up to the unintended consequences of outsourcing: lack of business continuity, increased sourcing costs, lack of control on quality from outsourced contract manufacturers, and now the added risk of illicit trade and the subsequent erosion of brand and shareholder value that follows.
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The Effect of Demand—Supply Mismatches on Equity Volatility: An Analysis of Different Types of Supply Chain Risks *
By Kevin B. Hendricks and Vinod R. Singhal
Although firms have always faced supply chain risk, the attention devoted to supply chain risk has increased dramatically in recent years. The increased attention is likely driven by at least four developments...
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Complimentary articles marked with an asterisk *


Dear Colleagues,

Columbus Day always brings up thoughts about Supply Chain history for me.

If we look at global trade from before Columbus's time, the supply chain has always been fascinating and risky. Kerala State in India was the center of world trade in those days. (Vasco da Gama visited Calicut in 1498, but I think he was a late arrival, since the Muslems came in the 11th and 12th Centuries; and the Chinese and Tibetans much earlier, trading silk, fireworks, spices and religion; later the Dutch; and then of course the English showed up in ‘modern times.’)  Kerala was the dynamic melting pot and port hosting Chinese, Portuguese and Africans, with religions represented from Christians, Buddhists and Muslems.  And Kerala sports the world's oldest Synagogue outside of the Middle East.  African traders guided the Portuguese here, it is said, and this is where they learned about Indian spices and Chinese silks. Of course, this created a row, to dominate this important trade lane, once ‘discovered’ between the Portuguese and the Muslems. Ironically, it was the Chinese who withdrew from the scene. The new emperor thought that global trade would introduce disease and bad influences into China!

It appears to me that the global supply chain has always been the catalyst of cultural cross talks and the real driver behind the discovery of products, new raw material, new goods and services, etc. However, that does not come without a price. From ancient times the supply chain was fraught with Risk. The world’s oceans still are resting places for Spanish ships, clinging to their treasures.  Disease, spread by the God, Glory and Gold guys destroyed and decimated millions of lives in the Americas. (Pandemics, anyone?)  Innovations in crops/food products like maize, tea, lumber, coffee, tobacco and much more became staples in the European markets. (Tainted food supplies and sickness from food was very prevalent in olden times, too.)  And, of course, the global supply chain has spawned many wars.

We could go on. The point is that not much has changed—except that it is faster due to advances in travel, communications, etc.  We are all interconnected; and that has plus sides—such as hearing about the tainted food, lead in your lipstick and children's toys, etc., on TV.  So you can avoid it as a consumer. But then it also has a downside for the companies who ply the global trade to understand the global process and manage it!  The reluctance to tame the process amazes me. But to not address this is foolish, because the costs are so high—not just to lives—but to your company.  For example, this headline caught our eye:

NEWARK, N.J. - Topps Meat Co. said it was closing its business, six days after it was forced to issue the second-largest beef recall in U.S. history and 67 years after it first opened its doors… 87 people will lose their jobs…” 

The fact is that there is something that can be done about your supply chain— headlines are not hysterical, at all. In fact, there are only a small percentage of recalls that make it to the press. In fact, the cost is devastation to your company —even for small recalls. Yet company after company rates returns and recalls, etc. low on the list of automation activities. But that is changing. Stores like Penny’s and Toys-R-Us now are not waiting for the manufacturer to tell them of defects, but have started their own inspection process. Winnie-the-Pooh is the latest to be ripped from the heart and homes in America as well as many other toys. Tires, food stuff simply made with the wrong ingredients, faulty material in products, etc. all make the list. These errors cost millions to recover from that could be prevented. Hiring inspectors, running a recall campaign, or calling in the Consumer Product Safety Commission are all steps to take.  I took a look at a few of these recalls. Frequently the case is that the company selling the product generally is not the company making the product. Look at this example: Jensen's Old Fashioned Smokehouseone of many cases.  No surprise to us. But then a more pro-active approach—creating visibility throughout the chain— is in order.  Yes?

Vulnerability, Variability, Visibility, all are part of the dialogue now.
We have some key contributions this month on Global Trade.  Bill McBeath looks at the expanding role of Supply Chain and linkages to the Financial Chain.  Hendricks and Singhal, we are honored to have, provide us with their analysis on supply chain risk and volatility; and a contribution in our continuing theme of secure and traceable Supply Chains.  We have also provided an analysis on business agility in our report Built for Change; as well as recent testimony and position papers from the White House and the DHS on port security and import safety.

The term ‘visibility’ seems to be driving a lot of discussions, and will require investment in technology. But without tools to justify the investments, it will be tough to sell the program[1]. That is why we are working diligently in these areas, and continue to talk about them, whether sourcing strategies, RFID strategies, etc. Another thing we are planning: Securing the Chain will be the topic at Secure Chain 2008. There is a call for speakers now for this March 2008 event.

Get connected and learn!  Events, getting the right data, getting the right process, controlling the process, these are all hallmarks of a concerned and activated profession! You are part of that profession.

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“We have to remember that reputations are won or lost in a crisis.”
Ken Chenault, CEO, American Express