2011 Virtual Conference: Supply Chain Best Practices: Boost Productivity and Cut Costs

Boosting productivity and cutting costs are top priorities for most logistics and supply chain mangers around the globe. Logistics Management and Supply Chain Management Review have assembled an impressive team of analysts and practitioners to expound on the best ways to achieve these goals in the virtual conference titled Supply Chain Best Practices: Boost Productivity and Cut Costs that is now available to attend on-demand.

At the event, Group Editorial Director Michael Levans and Supply Chain Management Review Editorial Director Frank Quinn, along with a team of hand-picked presenters, share how today’s leading supply chain professionals are leveraging evolving best practices and technologies in an effort to reduce costs, boost productivity, and make a positive impact on overall business strategy. 

The event’s Keynote presentation focuses on the impact that energy trends are having on present and future supply chains. Hot topics covered in the Conference Sessions include practical steps for cutting costs and controlling transportation spend; tips for optimizing distribution networks; how to lower costs, generate cash, and improve inventory management; and top ways to enhance labor management.
Attendees will learn how to maximize their end-to-end supply chains and develop productive, efficient companies that grow and thrive in both good times and in challenging economic environments. Here’s an overview of what you’ll learn.

Keynote: How Energy Trends Impact the Supply Chain
Kicking off this year’s virtual event was a keynote from economist and popular Logistics Management Oil & Fuel columnist Derik Andreoli, Ph.D.c. In his keynote address, Andreoli offers his insights and helps attendees better grasp how trends in oil and energy costs will affect transportation rates as well as the future of global supply chain initiatives.

A senior analyst with Mercator International, LLC, Andreoli launches his keynote by showing attendees a graph highlighting on-highway diesel fuel cost in constant and nominal dollars and crude oil WTI spot price cost in constant and nominal dollars. “The problem with trying to predict prices is that you need insight into oil and fuel cost/demand,” Andreoli explains, “as well as being able to predict such things as the value of the dollar, the weather and geopolitical events.”

Andreoli also presents various scenarios built around the relationship of world GDP to global energy consumption and oil consumption, stating that “Oil consumption is driven by GDP growth, and rapid upward price swings are driven by low spare oil production capacity or a rapid decline in spare capacity.” He showed the audience what refiners pay for oil and explained the concept of “spare capacity”—defined as the oil that can be purchased with very little advance notice.

“We have billions of barrels of oil in reserves, but reserves don’t matter as much as production does,” says Andreoli. “In order to determine spare capacity one needs to know production capacity and demand. So spare capacity is simply the cushion left over after consumption takes place.”

Having studied the data and trends in-depth, Andreoli says that his team has come to the conclusion that “spare capacity will most likely be pinched by 2012, if not 201, unless there is an ideal scenario where we have low GDP growth across the world, paired with higher than expected oil production capacity.”

To supply chain managers looking to ward off the challenges associated with that anticipated capacity “pinch,” Andreoli says now is the time to start thinking about the location of production facilities. “Get them close to the market,” he suggests, “and save [money] by using some of today’s technologies that can help monitor your fuel spending.”

Transportation Management: Practical Steps to Cutting Costs and Control Operations
For the past few years, shippers have found themselves reacting to unpredictable and volatile changes at both the demand and the supply ends of the spectrum. That challenge isn’t expected to get easier anytime soon. As the recovery in the global economy inches forward, shippers are starting to see shrinking capacity and higher rates in all modes.

In this session, Brooks Bentz, a partner at Accenture’s supply chain management practice, offers practical steps for gaining more control of transportation budgets and overall operations. Attendees learn how to improve existing carrier relationships; harness technology to improve transportation operations to rein in costs; and get tighter control over transportation budgets.

Bentz starts the session by giving attendees a peek into the current state of the economy and emphasizes challenges like increasing transportation costs, slow economic growth, slow recovery, changing regulations and increasing margin pressure—both for shippers and carriers.

An effective solution to these and other issues, says Bentz, lies in transportation network optimization. “Essentially, it’s our approach to helping people who are consumers of transportation capacity acquire, manage, and use that capacity in a more holistic, systemic way and viewing it a little bit differently,” he says.

Bentz explains that such process improvements typically result in better supply chain performance, and that they also simplify administrative functions and enhance customer service. “We believe there are significant benefits in this approach, and it results in a sustainable business model,” says Bentz. “Today, more than ever, reducing operating costs and improving service is a top priority.”

Warehouse & DC Management: Tips for Optimizing the Distribution Network
It doesn’t matter how many production plants or distribution facilities are in a shipper’s network, the process of network optimization is a critically important one that can generate significant value. From improved customer service levels to reduced logistics expenses to minimized inventory assets, the list of benefits goes on.

The problem is that distribution networks change for a variety of reasons over time. Company growth, new customer service demands, mergers and acquisitions, regional market expansion, supplier network changes and labor strategy can all inhibit a firm’s ability to optimize its distribution network. External factors such as energy cost volatility or economic uncertainty also come into play and can negatively impact supply chains.

In this session, Marc Wulfraat, president of supply chain consulting firm MWPVL International, gives attendees advice on how to think through the process of distribution network strategy redesign. He opens the session by defining distribution network strategy as “the way in which we move goods to market and impact all supply chain participants.”

Regardless of company size or industry, Wulfraat says that every company participating in the global supply chain has some form of distribution strategy. He discusses distribution network optimization, which he calls “a balancing act between operating expenses and working capital versus service level.”

To shippers looking to optimize their own distribution network, Wulfraat says the key to success lies in knowing your demand volumes at a detailed customer level using data aggregation; knowing your supply points; knowing your products and inventory assets; and knowing your money. 

Looking ahead, Wulfraat says transportation costs will rise significantly, causing distribution networks to gradually expand closer to market to reduce miles. “Over the road transportation costs are expected to rise by 10 percent to 15 percent in the next couple of years, and there’s an expected shortage of about 300,000 drivers,” he explains, adding that distribution network optimization will give shippers the best foundation for combating these looming challenges. “It’s really the biggest thing you can do to change and improve your company.”

Inventory Management: Top Inventory Management Strategies
In today’s uncertain economic climate, controlling costs and conserving working capital are absolutely essential to business success. Inventory management plays a significant role in helping to achieve both of these key objectives.

In this virtual conference session, attendees listen to inventory management insights shared by speakers Linwood A. Kulp, Jr., principal at Brinmar Consulting, and Robert E. Murray, chairman at REM Associates. Both experts provide specific approaches and methodologies for improving inventory management and controlling—or actually reducing—costs and working capital.
Murray discusses various perspectives on inventory management and highlights several challenges that companies are dealing with right now, including increasing customer demands; increased costs and service sensitivity; and the need for quicker response times and improved forecasting.

“Virtually all companies will place increased emphasis on leveraging all business supply chain functions,” says Murray, “thus creating the need for effective management and control of all business inventories. If we look at the key to effective inventory management, it’s the linking of the product flows with the inventory that’s required to support those flows. Inventory typically represents 10 percent to 33 percent of business assets—that’s a very significant number.”

Kulp outlines the inventory management characteristics of today’s best-in-class companies, and says that processes common to companies that effectively manage inventory include: inventory optimization, supply chain visibility, integrated forecasting systems, identifying the causes of inventory error, and an effective forecasting/demand planning process.

Murray pointed out that 80 percent of sales dollars are typically generated from a group of items representing 20 percent of the product line. “Fifty percent of the product line represents only 5 percent of your sales dollars,” he explains. “This means half of the items that you sell, generate only five percent of those sales dollars. It’s key—from an inventory management perspective—to know what that 50 percent consists of.”

In summation, the speakers said that be successful in inventory management and segmentation, shippers must consider inventory levels, inventory velocity and inventory costs. “If we increase inventory dollars, we tend to increase customer service, and if we decrease inventory dollars, we tend to decrease customer service,” says Murray. “We need to optimize what’s best for our particular company and for our particular service to those customers.”

Labor Management: Eight Questions to Ask to Improve Performance
The people working in supply chain capacities—in warehouses, distribution centers, fleet operations, office staff—are among the most important resources in any organization. To ensure that these individuals are highly productive it’s important to apply effective labor management practices and techniques.

The final session of this year’s conference is lead by Don Cook, president of Cook & Associates. He walks attendees through the key questions that must be addressed to improve labor management in a firm’s supply chain operations. Supply chain professionals learn the core components of an effective labor management program; the cost and timely payback in labor management programs; the key technology enablers available for labor management; and how to implement an effective labor management program in the supply chain.

Cook starts the session by defining labor management as the skills and tools used by managers to help them reach an effective operating level. Skills include the ability to interpret reports and to use that information to provide meaningful feedback to the labor staff. “In turn, this is the basis for rewarding good performers and coaching low performers,” Cook explains. “In addition, managers need to use this data to identify problems and areas that need improvements.”

The tools include the training, software, and features provided by a good labor management program. “Of course, we always have to remember that the ultimate goal of all of this is to help managers reach that effective operating level,” says Cook.

During the session, Cook works his way through the questions one at a time and addressed issues like “How do companies know if they’re not already doing the best with what they have?” He pointed to benchmarking as one answer to that question, but says that listening to managers and discussing problems with them is an even better choice.

“Your managers are probably the smartest [tools] that you have at your avail,” says Cook. He also discusses the key elements and options that a company should be looking for in labor management software (LMS). “Obviously, the software should provide the management team with what they need and have the flexibility to respond to ongoing operational changes,” says Cook, who sees the most important feature as a wide variety of user-defined options.

“Above all,” he says, “make sure that the team doing the implementation has the qualifications and track record in all of the disciplines.”