CSCMP Notebook

2009 Annual Conference Report

Attendees at CSCMP's 2009 Annual Global Conference may have come from all over the world, from companies big and small, but there's one thing they all had in common: a desire to hear the latest ideas and innovations from leading practitioners, consultants, academics, and service providers in the fields of logistics and supply chain management.

Despite the challenging economic picture, some 2,600 participants gathered in Chicago, Illinois, USA for CSCMP's biggest event of the year. In addition to educational sessions and keynote/general session presentations, attendees could choose from a wealth of other events, including the Learning Exchange, the Student Showcase, special award presentations, networking luncheons, and many more.

If you weren't able to attend this year —or if you did but couldn't get to as many sessions as you would have liked —the following highlights from this year's conference will give you a taste of what you missed. Next year's conference will be held in San Diego, California, USA from September 26-29, 2010.

CSCMP elects new officers

Each year CSCMP introduces its new board of directors at the Annual Global Conference. For 2009-2010, the board will be chaired by Robert B. Silverman, vice president, IT business systems for Tommy Hilfiger USA Inc. Silverman, a CSCMP member for over 15 years, oversees the development and support of information technology systems that support product design, supply chain operations, and finance at the international apparel maker.

Other newly elected officers include:

• Immediate Past Chair Roger W. Woody, founding partner of Performance Consultants LLC and executive lecturer and director, SCM external development at the School of Business of the University of Kansas;
• Board Chair-elect Keith Turner, general manager, alumina and bauxite sales for ALCOA Inc.;
• Board Vice Chair Nancy W. Nix, executive director, EMBA Program and associate professor of supply chain practice at the MJ Neeley School of Business at Texas Christian University (TCU); and
• Secretary and Treasurer Rick Jackson, executive vice president, Limited Logistics Services.

For a list of committee chairs who have been appointed to the board of directors, go to cscmp.org/aboutcscmp/inside/board-directors.asp.

CSCMP bestows awards for excellence

CSCMP recognized a number of special achievements at the Annual Global Conference. Here is a brief rundown of the awards that were presented for excellence in business and academics.

• The 2009 Distinguished Service Award was presented to Joel Sutherland, managing director of Lehigh University's Center for Value Chain Research. Over the course of his 30-year career, he has been a leader and innovator while a shipper, freight forwarder, ocean carrier, third-party logistics provider (3PL), and academic. He helped to create the non-asset-based 3PL Transplace and later served as president and chief operating officer of Air-Road Express.
• Lieutenant Colonel Timothy J. Pettit received the Doctoral Dissertation Award for his research project "Supply Chain Resilience in a Global Enterprise." Pettit is an assistant professor of logistics and supply chain management at the Air Force Institute of Technology.
• Matthew A. Waller of the University of Arkansas and Brent D. Williams of Auburn University received the E. Grosvenor Plowman Award for their paper "Improving Order Forecast Accuracy: A Vector Error Correction Approach." The Plowman Award is given to the best research paper presented at CSCMP's Supply Chain Management Educators' Conference.
• The Bernard J. La Londe Best Paper Award was given to Daniel J. Flint of the University of Tennessee, Britta Gammelgaard of Copenhagen Business School, and Everth Larsson of Lund University for "Exploring Processes for Customer Value Insights, Supply Chain Learning and Innovation: An International Study." The La Londe Award is presented for the most valuable paper in the Journal of Business Logistics.
• Intel Corp. received the Supply Chain Innovation Award for its initiative to improve customer satisfaction. "Just Say Yes —Innovating Responsiveness at Intel" resulted in an improvement of more than 40 percent in customer- feedback scores, supported by a 300-percentplus improvement in change-order responsiveness. The company now responds to a customer request for supply in only one day; previously it took seven to nine days. Intel used hub-based fulfillment, crossorganizational coordination, forecast improvements, postponement, and reduced cycle times to help improve responsiveness while reducing pipeline inventory by 33 percent.

CSCMP session sampler

Here are summaries of just a few of the educational sessions that sparked interest and debate at the annual conference, as reported by the staff of CSCMP's Supply Chain Quarterly. You can learn more about these and other sessions by downloading the presentation slides, which are available on CSCMP's web site. Member ID and password are needed to access them.

Kraft uses SCM to increase cash flow
Improving cash flow is top of mind for everyone these days. But for Kraft Foods, it is also a corporate mandate. The food and beverage giant sharpened its focus on cash when its chief financial officer publicly promised that the company would improve its cash flow by more than US $1 billion over three years.

Philippe Lambotte, senior vice president of global customer service and logistics, outlined how Kraft encouraged its business units to free up cash. The company provided people with both an incentive and the means to achieve their objective. In the supply chain area, the company used a variety of tactics; the following are just a few examples:

• Provide managers with incentives linked to cash flow as well as to revenue.
• Monitor the number of stock-keeping units (SKUs). The fewer SKUs, the less inventory that must be carried (and therefore the less cash tied up in inventory).
• Create a fixed, weekly production schedule that produces the same sequence of SKUs for the same length of time, and only in the quantities actually needed. This results in a more regulated flow of finished goods and reduces raw material and packaging costs.
• Evaluate each SKU's revenue and sales volatility, and then phase out those SKUs that have low revenue and high volatility. While this means giving up some revenue, that loss will be outweighed by the increase in cash.
• Reduce service levels for some product lines in order to operate with less inventory coverage.

Crisis management begins before there's a crisis
Swine flu. Hurricanes and tornadoes. A supplier's failure. The potential causes of supply chain disruptions are many. In a session on planning for crisis management, the speakers offered suggestions for creating an effective crisis management plan and increasing an organization's resiliency.

Developing crisis management processes involves several challenges, said Philip S. Renaud, a vice president for DHL Exel Supply Chain. These include defining just what constitutes a crisis, developing consistent practices across multiple cultures, and determining when and how often to update business partners. Renaud outlined the "operational risk controls" that DHL has in place to manage crises when they do occur. DHL has also developed internal and external communications tools for use during emergencies, including an incident reporting system.

Lew Roberts, president of L. Roberts & Associates, discussed how to handle supplier risks. He suggested using tools such as managing currency fluctuations, developing rigorous supplier-evaluation processes, developing long-term supplier relationships, and double translation of contracts.

The third panelist, Omar Keith Helferich, professor of supply chain management at Central Michigan University, encouraged participants to investigate software that can help with monitoring and managing risk.

While sound crisis management programs and tools are critical, it's also important not to overreact. "There's a fine line between responsible risk management and overplaying it," Helferich said.

Simplicity beats complexity in managing inventory
Mergers and acquisitions may be good for growth, but they can create headaches for inventory and delivery performance. This was the case for Johnson Controls, according to Michael Maltz, director of global manufacturing and logistics for the Business Efficiency division.

As a result of Johnson Controls' growth by acquisition, Maltz's division lacked a consistent methodology and processes for managing inventory and replenishment of its build-to-stock, assemble-to-order, and build-to-order products. What processes were in place were informal, inconsistent, and specific to local organizations.

To rectify the situation, the Building Efficiency division implemented a two-tiered approach to inventory management. It exerts centralized control over strategic inventory issues, including sales and operations planning, management policies, and development of standards and procedures. But tactical processes, including purchasing and implementation of corporate directives, remain in the hands of local managers.

The division also simplified data collection and decision making by using forecasting software that sits on top of multiple enterprise resource planning (ERP) systems. The software brings together sales, marketing, and operational information from all of the component groups and produces forecasts at both the stock-keeping unit (SKU) and product-family levels. It also provides inventory visibility for both domestic and international distribution centers —information Johnson Controls did not have before. In short, Maltz said, applying standard procedures and a flexible, scalable software program allowed his organization to gain a realistic view of a complex distribution and sourcing structure for the first time.

Do you really understand cargo insurance?
Many logistics and transportation managers assume that their service providers' insurance will adequately cover their shipments in case of loss or damage —a dangerous assumption that can leave them with a hefty and unexpected financial liability.

Carriers, third-party logistics companies, and warehouses do carry insurance, and they are subject to various degrees of liability for the cargo they handle. But they buy policies that protect themselves, not their customers, warned James H. Nerger, a vice president with the insurance company Roanoke Trade Services Inc. during the session "Using Cargo Insurance to Uncover Hidden Risks." "Liability is not insurance," added Theresa Garcia, also a Roanoke VP. "That is protecting [carriers] against their own negligence. It is not insuring your cargo."

Here are some other thoughts the panel of four insurance executives shared with the audience:

• Brokered freight can be subcontracted. Make sure insurance coverage still applies when an additional party is involved.
• "Warehouse to warehouse" coverage ends with delivery at the receiving warehouse. If freight will be stored for even a short time, get coverage for storage and staging.
• Shippers often buy inadequate insurance based on incorrect or outdated assumptions. This typically occurs because of a lack of communication between those who are responsible for arranging coverage and those who know the shipment details.