bill stankiewicz copy of cvcr summer 2010 newsletter

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Summer 2010 Vol. 5, No. 2 NEWSLETTER Center forValue Chain Research In This Issue: Directors' Column: What Is Industrial Engineering? The Role of Gain-Sharing in Supply Chain Collaboration The Economic Recovery: Smart Companies Are Investing in People — Now! Achieving Successful and Sustainable 3PL-Shipper Relationships CVCR Spring Symposium Recap News and Upcoming Events Questions? Comments? Ideas for future articles? Contact us! Lawrence Snyder [email protected] 610-758-6696 Joel Sutherland [email protected] 610-758-6428 Robert J. Trent [email protected] 610-758-4952 Center for Value Chain Research Lehigh University 621 Taylor Street Bethlehem, PA 18015 USA www.lehigh.edu/cvcr DIRECTORSCOLUMN: What Is Industrial Engineering? Most non-engineers have a passable understanding of what mechan- ical, electrical, civil, or chemical engineers do. But ask a random person what an industrial engineer does, and the likely response will be, at best, a guess based on the name. Design factories? Make factories more effi- cient? Make factories more productive? Indeed, in its early days, industrial engineering (IE) was mostly orient- ed toward industrial settings, and its name is a legacy from those days. In the late 1800s and early 1900s, industrial engineers performed time- and-motion studies, designed facility layouts, balanced assembly lines, and improved other aspects of factories and other workplaces. Early pio- neers included Frank and Lillian Gilbreth, famous for their ergonomics studies and immortalized in the book, Cheaper by the Dozen. Today, you could replace “factories” in the guesses above with near- ly any complex system — hospitals, financial markets, supply chains, theme parks, energy grids, humanitarian aid networks, etc. Industrial engineers apply a wide range of quantitative tools from mathematics, computer sci- ence, economics, the physical sciences, and even psychology to design and improve systems such as these. The Industrial Engineer s Toolbox An important part of the industrial engineer's toolbox is operations research (OR), a set of quantitative methodologies for making decisions about complex systems. The tools of OR include mathematical optimiza- tion (for example, linear programming), simulation, probability and statis- tics, queuing theory, and game theory.Today, the curricula of many IE departments, including Lehigh's, contain a heavy dose of OR techniques. In the supply chain arena, IE is applied to a wide range of problems, including choosing distribution center locations, setting order quantities and inventory targets, improving workflow through factories and ware- houses, routing trucks, and evaluating procurement contracts. As supply chain management matures and becomes an increasingly important driver of a firm's overall performance, firms increasingly recog- nize the value that industrial engineers add in supply chain strategy and operations. At the CVCR, we have seen an increased demand from industry for students who have both supply chain business acumen and quantitative IE expertise. As a joint business-engineering center, the CVCR believes strongly in the synergy that results from bringing both dis- ciplines to bear in improving supply chain performance. Wes Kemp, CEO of ABF Freight System, Inc., agrees. "At ABF, we are committed to providing our customers with the most efficient and effective levels of supply chain performance," he writes. "Over the years we've determined that the most capable talent to achieve these results possesses both a strong supply chain business and IE background." —Larry, Bob, and Joel

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Bill was also on the Board of Directors for the St.Vincent DePaul Foodbank in Roseville California helping with the fund raising and meals to the poor program. While based in Northern California he was successful in fund raising programs for the Crusade of Mercy and helped Father Dan Madigan at the Sacramento Food Bank also. For 2008, Bill is a member of the Board for WORKTEC on also an Advisory Board Member for Boys and Girls Club for Metro Atlanta-Clayton County Chapter. See www.worktec.biz or www.bgcma.org . Bill is also on the Board of Directors for the Southeastern Warehouse Association & represents Georgia for 2010-2012.Bill StankiewiczVice President and General ManagerShippers Warehouse

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Page 1: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

Summer 2010 Vol. 5, No. 2

N E W S L E T T E RC e n t e r f o rVa l u e C h a i n Re s e a rc h

In This Issue:• Directors' Column: What Is

Industrial Engineering?• The Role of Gain-Sharing in

Supply Chain Collaboration• The Economic Recovery:

Smart Companies Are Investing inPeople — Now!

• Achieving Successful and Sustainable3PL-Shipper Relationships

• CVCR Spring Symposium Recap• News and Upcoming Events

Questions? Comments? Ideas for future articles? Contact us!Lawrence Snyder [email protected] Sutherland [email protected] 610-758-6428Robert J. [email protected]

Center for Value Chain ResearchLehigh University621 Taylor Street

Bethlehem, PA 18015 USA

www.lehigh.edu/cvcr

DIRECTORS’ COLUMN:

What Is Industrial Engineering?Most non-engineers have a passable understanding of what mechan-

ical, electrical, civil, or chemical engineers do. But ask a random personwhat an industrial engineer does, and the likely response will be, at best,a guess based on the name. Design factories? Make factories more effi-cient? Make factories more productive?

Indeed, in its early days, industrial engineering (IE) was mostly orient-ed toward industrial settings, and its name is a legacy from those days.In the late 1800s and early 1900s, industrial engineers performed time-and-motion studies, designed facility layouts, balanced assembly lines,and improved other aspects of factories and other workplaces. Early pio-neers included Frank and Lillian Gilbreth, famous for their ergonomicsstudies and immortalized in the book, Cheaper by the Dozen.

Today, you could replace “factories” in the guesses above with near-ly any complex system — hospitals, financial markets, supply chains, themeparks, energy grids, humanitarian aid networks, etc. Industrial engineersapply a wide range of quantitative tools from mathematics, computer sci-ence, economics, the physical sciences, and even psychology to designand improve systems such as these.

The Industrial Engineer’s ToolboxAn important part of the industrial engineer's toolbox is operations

research (OR), a set of quantitative methodologies for making decisionsabout complex systems. The tools of OR include mathematical optimiza-tion (for example, linear programming), simulation, probability and statis-tics, queuing theory, and game theory. Today, the curricula of many IEdepartments, including Lehigh's, contain a heavy dose of OR techniques.

In the supply chain arena, IE is applied to a wide range of problems,including choosing distribution center locations, setting order quantitiesand inventory targets, improving workflow through factories and ware-houses, routing trucks, and evaluating procurement contracts.

As supply chain management matures and becomes an increasinglyimportant driver of a firm's overall performance, firms increasingly recog-nize the value that industrial engineers add in supply chain strategy andoperations. At the CVCR, we have seen an increased demand fromindustry for students who have both supply chain business acumen andquantitative IE expertise. As a joint business-engineering center, theCVCR believes strongly in the synergy that results from bringing both dis-ciplines to bear in improving supply chain performance.

Wes Kemp, CEO of ABF Freight System, Inc., agrees. "At ABF, weare committed to providing our customers with the most efficient andeffective levels of supply chain performance," he writes. "Over the yearswe've determined that the most capable talent to achieve these resultspossesses both a strong supply chain business and IE background."

—Larry, Bob, and Joel

Page 2: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

CVCR Newsletter, Vol. 5, No. 2 2 Summer 2010

The Role of Gain-Sharing inS u p p ly Chain Collab o r a t i o nBy Bill KeoughPrincipal, Supply Chain Visions www.scvisions.com

This is the third article in a series exploring the attributesof successful supply chain collaboration and how yourorganization can leverage them to deliver operational andfinancial results. The first article explored the importanceof a robust and flexible IT infrastructure in enabling supply chain data to be shared with members of yourvalue chain. The second article examined how a firm'scorporate culture shapes its perception of suppliers (asmere inputs or as supply chain partners) and how thisoutlook impacts overall supply chain performance.

A corporation's approach togain-sharing is very often whatd i fferentiates successful long-term collaborative relationshipsfrom short-lived efforts that failto bear fruit. A useful definitionof gain-sharing is “an approachto incentive compensationwhere supply chain partnersshare in the savings deliveredby productivity improvements.”The prospect of gain-sharingmotivates suppliers to partici-pate in collaborative improve-

ment efforts. If your company won’t share the monetarybenefit of improved collaborative operations with your sup-p l i e r, then you can’t expect the supplier to collaborate withyou again on a second gain-sharing effort. Bear in mind, aswe will see later, gain-sharing does not necessarily meancutting a check to your supplier, but it always means givingthe supplier some additional value in exchange for the valuethey have created for you.

Are You Really Willing to Share?The willingness or reluctance to share financial benefits

with suppliers tends to be dictated, sometimes tacitly, by afirm's corporate culture (see the article in the Summer 2009edition of this publication). Unquestionably, there are large,powerful corporations whose single-minded focus on short-term financial results makes successful collaboration unlike-l y. However, there are many enlightened corporations whorealize that their supply chain can be a competitive weapon,and that their suppliers can help drive the overall success ofthe corporation.

In many enlightened firms, there are business units ded-icated solely to the establishment, nurturing, and improve-ment of supplier relationships to enhance the company's competitive position and growth. However, this supplier-management unit, particularly its leadership, is very often

measured and rewarded according to how well they drivedown supplier costs; then, if financial benefits of processimprovements were to be shared with suppliers, the group'sleaders would move further from their bonus targets.O b v i o u s l y, this approach is decidedly un-collaborative. Butwhen companies incentivize their supplier-managementunits based on business value created, rather than costsreduced, gain-sharing has a much higher rate of success.U n f o r t u n a t e l y, “business value” is notoriously difficult to cal-culate, in part because it is often created across multiplefunctional units in a company. Clearly, well-considered met-rics and incentives are required to encourage collaborative,supplier-facing behavior in your firm.

Is There a Way to Make It Wo r k ?S a d l y, in many human relationships, there is a tendency

for the more powerful person to take advantage of the weaker one. In the long term, this strategy may prove to becounter-productive. Think of the bully who grows up and dis-covers his new manager is the boy he used to torment inmiddle school.

A heavy equipment manufacturer, facing a difficult quar-t e r, sought to improve its short-term financial position byrequiring suppliers to accept 120-day payment instead ofthe former 90-day term. Not only did their supplier commu-nity loathe them for this breach of trust, but a number ofsmaller firms, including some who provided unique compo-nents on a sole-source basis, were driven out of business.Their short-term savings may have cost the equipmentmanufacturer 50 times more in the long run than whateverthey saved in that quarter.

To set the stage for effective gain-sharing, Step One is toaddress any perceived “asymmetry” in the customer-suppli-er relationship. (This topic will be discussed in greater depthin a forthcoming article.) Making relationships with your sup-pliers more symmetrical is a key step towards realizing gen-uine collaboration. It requires establishing a higher level oftrust with your suppliers, and that takes time. Honesty, anddoing what you promise to do, is essential.

Let's say you were hired into a supplier-managementorganization several months ago, and you have managed toovercome your suppliers’ skepticism and won their confi-dence. Should you begin working with your suppliers onimprovement ideas and drawing up gain-sharing agree-ments? No! Because unless you have the authority to cutthese suppliers a check at the end of each month, you needto be certain that you have buy-in for your plans all the wayup the management pyramid. If you proceed without thesupport of top management, you will probably destroy thetrust and credibility you have established with your supplierswhen those promised gain-sharing rewards don’t arrive.

In some organizations, you will need to establish a bul-let-proof business case that shows hard dollar-cost reduc-tions. (In many companies, savings from “better utilization oflabor” are discounted, unless it means they can reduceheadcount.) Establishing the business case and getting thenod from the management team can also be difficult if your

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Page 3: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

CVCR Newsletter, Vol. 5, No. 2 3 Summer 2010

gain-sharing plans deliver benefits across multiple function-al organizations within the company. Very often the peoplein one department feel they have no incentive to supportimprovements that benefit another department, and obtain-ing their support is almost impossible.

Calculating the Benefit But what if your company is excited about your approach

to gain-sharing, and they vigorously support you. After youjointly identify an improvement idea, you need to put a dol-lar value on these improvements. To accomplish this, it iscritical that your company has a coherent performancemanagement program that employs accurate, timely dataabout the operations of the business.

Gain-sharing with a supplier need not always involve acash payment, nor does the value of the improvement nec-essarily need to be precisely valued in dollar terms.

H e r e ’s an example. The new manager of a medicaldevice manufacturer noticed that the facility suffered frompoor and untimely delilvery of their raw materials. He foundthat the firm's key supplier often delivered incomplete, dam-aged or incorrect orders, and often delivered them late. Hemade a very simple but compelling off e r. When the supplierdelivered a shipment that constituted a “perfect order” (rightproduct, on-time, undamaged, high quality, correct paper-work) as verified on the dock, the manufacturer wouldimmediately pay the supplier for the full shipment via EDI.The result: soon, nearly all orders from this supplier were“perfect”. The company’s inventories dropped dramatically,and production became more stable and predictable. T h emanager and the location's finance chief could easily calcu-late the time value of these immediate payments. The man-ager was convinced that the business value he receivedexceeded the cost of immediate payment by a large multi-ple. It was a clear win-win.

So How Do You Get Started?• Honestly assess your company's appetite for gain-

sharing. If it's not there, find more productive uses foryour time.

• Talk to your CFO about gain-sharing. Ask what sort ofdata you would need to provide him in order to get himon board with your idea. Then consider, could you real-ly obtain and deliver that data to support your eff o r t s ?

• Select one of your best suppliers, a high performer withwhom you do a lot of business and have a good rela-tionship. Discuss the concept of collaborative processimprovement and gain-sharing. And discuss expandingthe amount of business you do with them. As a litmustest, ask if they already have some ideas about howyou could jointly improve your operations. Are theseideas worthwhile and valuable to you?

• Implement a pilot project with this supplier. You shouldboth keep in mind that this pilot will teach you how bestto work together. How gains are divided between youand your supplier can be a bone of contention. Is it 50-50 or 80-20? If you are unable to come to an agree-

ment, dispassionately evaluate why. Is he beinggreedy? Are you? Is this really the right supplier towork with?

• Based on your earlier discussion with your CFO, collect the data required to help your finance depart-ment establish business value so you can arrive at afair compensation for your supplier.

Chances are, there will be more than one improvementopportunity with your best supplier. Use what you’velearned from the first project to fine-tune the process forthe second. When you feel the process is well established,do the same with your second-best supplier.

Rev i ewing the CVCR Spring 2010 Symposium

Participants Discuss Supply ChainCollaboration: Proven Strategies toCreate Value

On May 12-13, 2010, Lehigh University's Center forValue Chain Research held its annual Spring Sympo-sium. The symposium was attended by nearly 190 participants, including about 140 from industry, repre-senting over 80 different organizations. The symposiumattracted attendees from 18 states.

The event featured formal presentations from indus-try leaders illustrating how their companies or industriesare creating value through supply chain collaboration.Each session included intense audience participationdelving more deeply into each issue. Breakout sessionsled by Lehigh faculty addressed key supply chain topicsthat supported the symposium theme.

The annual Student Research Poster Session andCompetition drew eight entries from Lehigh’s colleges ofbusiness and engineering.

PowerPoint presentations and notes from the 3PLpanel and breakout sessions can be found on theCVCR website: http://www.lehigh.edu/cvcr/Spring2010Symp.html

Announcing the CVCR Fall 2010 Symposium— see pg 7 for information about this annual event

CVCR Newsletters can be downloaded from our website. Each current issue is available to thepublic. Older issues are archived and accessible toregistered users with a CVCR login. Go tohttps://docark.web.lehigh.edu/cvcr/newsletters.php

Page 4: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

CVCR Newsletter, Vol. 5, No. 2 4 Summer 2010

The Economic Re c ove ry :S m a rt Companies AreI nvesting in People — Now !By Lynn FailingVice President, Supply Chain Practice Leader,Kimmel & Associates www.kimmel.com

IntroductionAs the Dow Jones Industrial

Average continues to bouncenervously around the 10,000mark, we see and hear conflict-ing signs about the directionsand prospects for the nationaland global economy. The recentindication by China that it maybe relaxing its monetary policy,years before most punditsthought they would take thisstep, illustrates the seismicshifts that are taking place.

I m p o r t a n t l y, the global nature and the depth of thisrecession have introduced an entirely new “fear factor” forgovernments, businesses and individuals — global financialu n c e r t a i n t y. In 2008 we saw the foundations of our globalfinancial institutions being ripped apart. Today we are facingthe possibility of sovereign debt default. Neither was in therealm of the possible two years ago.

New Business Factors: Risk and UncertaintyThe economic and financial rules of engagement — the

competitive marketplace itself — broke down. It is not sim-ply that the issues are bigger today; it is that they are morecomplex than we had thought. There are new variables,new factors of risk and uncertainty.

Reacting to risk and uncertainty produces many diff e r e n tresponses, but reducing a firm's exposure was the mostprevalent throughout most of 2009. Initially, manufacturerscut production and reduced inventories while trucking com-panies, starved of freight, reduced their fleets.

Responding to Risk and UncertaintyBy mid-2010, as trucking volumes begin to increase and

inventories are being replenished, the first rumblings of a'driver shortage' are being heard — again. In response,businesses and governments are beginning to incorporatethese and other risk and uncertainty variables into theirstrategic planning and investment decisions. For example,smart mid-tier third-party logistics companies (3PLs) havebuilt on their core competencies to grow rapidly as compa-nies seek to outsource distribution and logistics functions.

The “deer in the headlights” mode that many companieshave been in since October 2008 is beginning to change. InMay 2010, the Vice President Staffing at a Fortune 100

industrial manufacturing company emailed his senior man-agers to report that staffing demand was rising, particularlyin the integrated supply chain and procurement area. Hewent on to report that many other companies were hiringaggressively and that it was clear that the market for talentwas going to get more competitive in the coming months.

Professional search firms are seeing this trend acrossmost industry sectors. Smart companies are seizing theopportunity to invest in talent, especially since the beginningof 2010. Price competition for top talent is re-emerging.Professional search firms are beginning to track a rise incompensation levels for certain areas where the best andbrightest are in high demand. This is especially evident inbusiness development and sales positions at 3PLs. Ini n d u s t r y, there has been a shift in hiring priorities since thebeginning of 2010. Cost-cutting experts in inventory man-agement, planning and logistics optimization were in greatdemand throughout 2009. While this continues, there hasbeen a significant increase since the beginning of this yearin the number of companies addressing strategic issues byrecruiting “C-Suite” executives. It's a move from tactics tos t r a t e g y.

In the second quarter of 2010, unemployed senior sup-ply chain executives, across virtually all industry verticals, aswell as 3PLs, almost universally reported to Kimmel andAssociates that they experienced “more activity” in learningof and pursuing quality job openings. The “best in class”companies in most industries today appear to grasp the sig-nificance of supply chain excellence, and we are seeing ris-ing demand for the very best supply chain talent.

What Is Driving These Changes? A recent CSCMP Roundtable panel discussion of supply

chain executives was asked, "What are your main concernsduring these difficult economic times?" All three panelistsagreed on two fundamental concerns: 1) managing cashflow and 2) people. Their main concern regarding peoplewas that with so much great talent on the sidelines since2008, as economic conditions improve and the demand fortalent increases, companies will have a very challengingtime filling critical roles. It's not that people aren't anxious toget back to work, but responding to the recovery will requirean effective process to find the right people, with the rightskill sets, and then provide them with lengthy training. T h i scould have the effect of dragging out effective successfulrecovery in their respective industry sectors, especially con-struction, retail, and CPG.

H o w e v e r, conflicting economic signals will be part of lifefor some time to come. The sovereign debt/deficit cloud willnot go away quickly.

Planning for the FutureMoving ahead, companies are exploring new ways to

respond creatively to the new environment of risk andu n c e r t a i n t y. In preparation for the economic recovery, com-panies are becoming more nimble and innovative, whiledeveloping niche strategies and cutting costs. As an exam-

(Continued next page)

Page 5: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

CVCR Newsletter, Vol. 5, No. 2 5 Summer 2010

ple, we are seeing an increase in the integration of supplychain activities in companies with multiple strategic busi-ness units (SBU's). The integration of activities such as pro-curement of raw materials, components, and finishedgoods, previously managed by separate business units, isincreasingly being centralized.

It is the 3PLs which see themselves not simply as “SKUcounters”, but as true partners with their customers.Leading 3PLs are applying their experience and expertiseto optimize each client's overall supply chain activities,ranging from procurement to manufacturing and from plan-ning to merchandising management. They are focused onthe changing economic challenges and bringing forth newideas in order to respond to the push toward more integrat-ed supply chain solutions. Included in these new ideas isa relentless focus on customer service and on creatingbrand loyalty.

For unemployed supply chain executives, it is importantthat they not to be apologetic about their current or recentperiod of unemployment. One way to handle this is toproactively provide professional references that are willingto discuss their qualifications with a potential employer. T h euse of social networking tools, such as LinkedIn, is anexcellent way to expand one's network of professional con-tacts. While there is currently an ample amount of availableunemployed talent, an increasing number of employers arenot letting the fact that a candidate is in transition excludethem from consideration.

Cash may be king, but it is people who make the crown.T h a t ’s why smart companies are investing in the best peo-ple — now!

A c h i eving Successful andS u s t a i n able 3PL–ShipperRe l a t i o n s h i p s

By Joel SutherlandManaging Director, Centerfor Value Chain Research,Lehigh University www.lehigh.edu/cvcr

During the spring, I hadthe pleasure of attendingand presenting at severalsupply chain conferences inthe U.S. and Canada.Besides formal presenta-tions, I led three days of in-tense discussions with well-known Fortune 500 compa-

nies and facilitated topical workshops with leading third-party logistics service providers (3PLs). The discussions

were broad ranging and provided some very enlighteninginsights into what shippers need from 3PLs and what3PLs should be providing in response. While the discus-sions were initially focused on planning for an economicrecovery, the insights uncovered should be considerednecessities regardless of when a recovery might occur.This article synthesizes the results from these discussionsand provides some clear and compelling recommenda-tions for 3PLs.

Economic Recovery?Before anyone can discuss preparations for the eco-

nomic recovery, it must be asked: When will the economyimprove? The following represents some “food for thought”.

U.S. GDP (Source: http://www. f o r e c a s t s . o r g / g d p . h t m )

• The U.S. GDP is $14.2 trillion, or 22.9% of the worldeconomy — the world's largest.

• The U.S. GDP growth for the first quarter of 2010 wasrevised down to 3%, showing that the recovery maynot be as strong as many had expected.

U.S. Balance of Tr a d e (Source: Bloomberg)

• The U.S. balance of trade deficit in April was $40.3 billion. The trade deficit with China was $19.3 billion —nearly 50% of the total.

• The total 2010 deficit is estimated at a record $1.84trillion. This represents 12.9% of the U.S. economy —the highest since 1945.

• These high fiscal deficits will likely lead to higher taxeswhich will inhibit economic growth.

E m p l o y m e n t (Source: Bloomberg)

• Private employers in the U.S. added fewer workers topayrolls in June than forecast, reinforcing concerns therecovery will weaken as Americans curtail spending.

• Consumer spending (needed to increase production) isweak mostly due to high unemployment rates.

• With unemployment rates continuing to hover around10%, it may take a few years to revive the 8.5 millionjobs lost since the recession began in December 2007.

Logistics Costs (Source: 21st Annual "State of LogisticsR e p o r t ® " )

• Logistics costs were 7.7% of U.S. GDP in 2009, downfrom 9.3% in 2008.

• Warehousing costs fell 2% below 2008. Although early2009 saw warehouses full of inventory, by mid-yearinventories were reduced, leaving facilities with emptys p a c e .

• Transportation costs were 20.2% lower than in 2008,with all modes of transportation being negatively aff e c t-ed. Trucking, by far the single largest transport expense,had a 9% drop in the amount of tonnage carr i e d .

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CVCR Newsletter, Vol. 5, No. 2 6 Summer 2010

Provided with all this not-so-promising information,supply chain professionals agreed that the jury is still outregarding when the economy will realize a meaningfuland sustainable recovery. They did not believe that noaction should be taken in preparation for the eventualr e c o v e r y. There was universal agreement that to achievesuccessful and sustainable 3PL-shipper relationships it iscritical to understand shipper's needs and for 3PL's toadapt an effective strategy that responds to these needsn o w.

Shippers Challenges and NeedsSavvy shippers are preparing now for the eventual eco-

nomic recovery. Although they are confident a recovery willhappen, they are uncertain when that recovery will start,what the strength of the recovery will be, and how long therecovery will last. Regardless, many shippers are alreadypreparing to increase capital investments, replenish the tal-ent that was depleted during the recession, and make suretheir supply chains are sustainable going forward.Following are some specific strategic needs identified bys h i p p e r s :

1 . Control supply chain costs — this means total delivered cost

2 . Provide supply chain visibility and event management capabilities

3 . Mitigate supply chain disruptions, whether they be natural or man-made

4 . Improve service to achieve superior end-customer satisfaction

5 . Manage expanding and contracting global supply chains

What Can 3PL's Do to Support These Needs?Companies that outsource all or a portion of their sup-

ply chain activities to 3PL's are no longer satisfied with3PL's that do not go the extra mile. Shippers are continu-ing to demand more from their 3PL relationships andexpect their 3PL's to be proactive solutions providers.Looking at this from the 3PL perspective, if 3PL's do notconsider themselves as an extension of their customerssupply chain, then your days are numbered. 3PL's mustput themselves into their customers' shoes and under-stand that they must continually apply their special talentsand expertise to help their customers gain competitivesupply chain advantage. Anything less and shippers maylook for another 3PL that better fits their strategic needs,or possibly decide to insource their logistics activities.

Delving deeper into the five areas identified by shippersas areas where 3PL's can best help them, shippers as wellas 3PL's agreed that the following actions are needed:

1 . Control supply chain costs (total delivered cost) Recommended 3PL Actions: Develop lean and agilesupply chain capabilities that allow rapid response to

customers' changing needs and provide variable coststructures that fluctuate with revenues.

2 . Provide supply chain visibility and event management capabilitiesRecommended 3PL Actions: Provide effective visibilitytools and facilitate the identification, collection, and useof information to improve supply chain performance.

3 . Mitigate supply chain disruptions, whether they be natural or man-madeRecommended 3PL Actions: Become an expert inmanaging a variety of potential supply chain disrup-tions. Enhance processes and information technologyto more effectively monitor and respond to disruptiveevents.

4 . Improve service to achieve superior end-customer satisfactionRecommended 3PL Actions: Facilitate increased coordination, integration, and collaboration with shippers and suppliers, utilizing information tech-n o l o g y, to improve end-customer satisfaction.

5 . Manage expanding and contracting global supply chainsRecommended 3PL Actions: Provide end-to-end solu-tions, including comprehensive visibility and eventmanagement, to ensure reliable service and lowesttotal supply chain costs.

In ConclusionAs noted earlier, the original purpose for my recent

meetings with shippers and 3PL's was to discuss whatpreparations firms should be taking now to prepare for theeconomic recovery. What resulted was the identification ofkey shipper concerns and actions 3PL's should be taking tosupport these shipper needs.

The most critical need is to control costs. Shippers areespecially concerned that as the economy improves supplychain costs (especially transportation) will increase. Whilediscussions ranged from popular “green” initiatives tohuman resource management, shippers universally agreedthat controlling costs is, always has been, and always willbe their most pressing need. It was also clear that supplychain professionals are focusing on reducing total deliveredcost, versus transactional costs such as unit procurementand manufacturing costs, transportation costs, and invento-ry carrying costs.

It was also clear that as many shippers are focusingmore on their core competencies (such as manufacturing,marketing and selling their products), they are increasinglyturning to 3PL's to help them achieve competitive supplychain advantage. Shippers are expecting their 3PL p a r t n e r sto accomplish this through the use of best-in-class technol-o g y, integrated end-to-end solutions, local expertise inglobal locations, and a level of flexibility and agility torespond to supply chain disruptions.

Page 7: Bill Stankiewicz Copy Of Cvcr Summer 2010 Newsletter

ANNUAL CVCR FALL SYMPOSIUMS u p p ly Chain Complex i t y :

R i s k s, Rewa rds and Tr a d e o ff sNovember 10-11, 2010

Hotel Bethlehem, 437 Main Street, Bethlehem, PA 18018

The event starts with a Networking & Student RecruitingReception on November 10. This event provides a greatopportunity for companies to get to know some of Lehigh’sbest and brightest undergraduate and graduate-level students.A full day of presentations and discussions on November 11will feature an impressive list of speakers, and BreakoutSessions on various topics will be led by Lehigh faculty.

For more information, visit our website later this summer:http://www.lehigh.edu/cvcr/upcomingSymp.html

The Symposium is co-sponsored in part by the Lehigh ValleyRoundtable of the Council of Supply Chain ManagementProfessionals www.cscmp.org

C e n t e r f o rVa l u e C h a i n Re s e a rc h

CVCR Newsletter, Vol. 5, No. 2 7 Summer 2010

New, Improved Website!The CVCR is excited to announce the launchof our new website. We have completelyoverhauled the look and feel of the site,added new content, and made older featureseasier to use. Visit www.lehigh.edu/cvcr andtake a look. We hope you find the site moreuseful than ever, and we welcome any feed-back you may have.

C V C R Newsletters can be downloadedfrom our website. Each current issue isavailable to the public. Older issues arearchived and accessible to registered userswith a CVCR login. Go tohttps://docark.web.lehigh.edu/cvcr/newsletters.php

N ews and Upcoming Eve n t sFrom July 30 through August 8, Joel Sutherland will be in Istanbul, Turkey, representing Lehigh University as a facultymentor for the Pennsylvania International Ambassador Program. Joel will also be presenting at the CSCMP Turkey Roundtable. For more information, check out www.cscmp.org

On September 16, the CVCR is offering its first-ever ProfessionalDevelopment Seminar, “Straight to the Bottom Line: How LeadingCompanies Win Through Supply Management”. For more informa-tion, please visit http://www.lehigh.edu/cvcr/proDevSeminars.html

On September 26-27, 2010, Joel Sutherland will attend the CSCMP Doctoral Symposium in San Diego and will participate in a Roundtable Discussion on “Engaging the Business Community:Do's and Don'ts”. For more information, visit http://cscmp.org/downloads/public/academics/symposiumagenda.pdf

Beginning October 1, the CVCR is offering APICS CSCPCertification Training. This course helps attendees prepare for the APICS Certified Supply Chain Professional certification exam. It consists of five eight-hour classes, with each class covering onemodule of the CSCP Learning System plus a review session. Formore information, please visithttp://www.lehigh.edu/cvcr/apicsCertificationTraining.html

Questions? Comments? Fe e d b a c k ?If you have questions about the Center forValue Chain Research, would like to discussthe content of this newsletter, or have ideasfor future articles, please contact JoelSutherland at [email protected] at 610-758-6428. We look forward to hearing from you!

Wh at attendees have sa id about recent CVCR Symposi u ms:“The symposium was a wonderful event. Thebreadth of topics and the quality of presentationsmade for an enjoyable and educational experi-ence. The presenters were well prepared andtouched on many key topics that we are allfocused on in supply chain today.”

— Bill Medvidofsky, C&S Wholesale Grocers

“The breadth of companies represented acrossindustry and the region, along with the range oftopics and best practices, has made the CVCRSymposiums a value-added experience eachyear.” — Caldwell Hart, Dresser-Rand Co.

"I learn more in this one-day program than manyother 2- or 3-day programs that cost significantlymore money and time. The symposium topics are always right on target to what is driving ourindustry." — Ted Uhlman, Rodale