Panel Discussion: Managing the Complex Supply Chain
Monday, February 25th, 2008
In this session, Andrew Reese hosted a discussion with Rob Wehrman from 3M, Anna Ross from Fonterra and Derek Nelson and David Simchi-Levi from ILOG. The session explored strategies for handling complex supply chain networks and touched on challenges like green logistics, risk management and rising transportation costs.
The session provided real insight into the complexity inherent in manufacturing and shipping on a global scale. Below are a few snippets from the discussion…
Fonterra: We use local offices (”mini-Fonterras”) around the world staffed with people with local knowledge to reduce the complexity of managing our global supply chain.
3M: Our biggest issue is data availability. Global infrastructures are expensive to manage and hard to standardize. You probably wouldn’t think of Post It Notes as complex, for example, but with over 300 colors (including at least 15 different shades of yellow!) to manufacture and deliver to markets worldwide, the humble Post It note is perhaps more complex than you might think!
Fonterra: We involve people in the modeling of the supply chain and explain to them how the data is processed. People are less likely to trust a new kid on the block who comes in with a fancy new solution that changes the way they’ve been managing their warehouse inventory for the last 20 years. Involving employees in the process helps everyone learn more about the product and fosters employee buy-in for improving these processes.
3M: Reducing complexity should not be an objective in itself, though. It’s likely that you can actually make more money by making your supply chain more complex. At the same time, there’s a certain amount of chaos built into the system. If left unchecked, a supply chain will always tend towards complexity because of the push towards local solutions that optimize local processes but fail to take into account the bigger picture.
Fonterra: We thrive on complexity. Staying on top of that supply chain is invigorating. If your supply chain isn’t complex, then you probably don’t have a very good supply chain or a competitive business model. Tools like those from ILOG are making the challenge of managing that increasing complexity easier and easier, so don’t be afraid of complexity. If you have the right tools to manage that complexity, you stand to generate considerable competitive advantage.
3M: Another import issue to take into account is the skill sets of your staff. Very few projects fail because of technical issues. People in your team who are able to identify the real problems behind your supply chain inefficiencies are invaluable. They need to be able to interpret your SCM data intelligently and use the system to identify appropriate adjustments. If your system reveals inefficiencies in shipping semi-finished goods between two different plants, it might suggest investing 60 million dollars or more to consolidate the production into a single plant to improve efficiency. However, if the underlying problem is in fact a simple issue of insufficient stock level management in one of the plants, you could save yourself a whole lot of money by digging a little deeper into the problem. Your staff need to be able to identify those failure modes and go beyond the surface data to investigate ways to improve the system in the most intelligent way.
Fonterra: We have a mix of older, more experienced supply chain planners and younger graduates with more up to date operations research and supply chain theor. The challenge is getting these two groups to work together effectively. We need to stay aware of new techniques, but also temper the enthusiasm of the younger generation with the reality of what is possible.
David Simchi-Levi: 10-15 years ago, supply chain management systems were designed for leading experts. These days they are aimed at business level users. It’s like purchasing a car. You don’t need to be an experienced mechanic to purchase a car these days. You’re concerned about issues of usability and practicality for your needs, but you don’t want to have to get under the hood with your oil can and wrench every time you want to go for a drive.
Fonterra: Green logistics is a huge issue for Fonterra. Every project we embark upon must include a carbon emissions impact study or it doesn’t get funded. Find out more in my session later today.
3M: One of our corporate values is to minimize our impact on the environment. We’ve not yet implemented carbon footprint evaluation into our supply chain, but we are following progress in this area carefully.
David Reese: To sum up, complexity is increasing. It’s unavoidable. Deal with it. When handled effectively, complexity can bring you significant competitive advantage. Think global when optimizing your supply chain activities. Technology itself can create unnecessary complexity if not managed correctly. Ensure you involve cross-functional and interdisciplinary teams in your SCM decisions.
If you’re anything like me, you probably do most of your reading online these days. Of course, blogs, wikis, forums, e-newsletters and the like are great for staying on top of the news. Nevertheless, I’m still a great fan of the good old-fashioned printed word.
There is growing interest in understanding the impact of various supply chain decisions on a firm’s carbon emission footprint. This awareness is moving rapidly up the corporate, consumer and legislative agenda. I was pleased to see, therefore, that “green logistics” also features highly on the 
