@ Supply Chain Management


Updates will be slow because of a Hard disk crash

Forewarned is forearmed, they say – I wonder, if it holds when it comes to computers – very finicky things, these machines. Well, mostly so in this case. However, this month has not been very great on the computer front – I’ve trashed/burnt three computers now. First, two desktop computers at home that had a KVM switch between them went down together because of what looks like a power surge in one of the computers. So I had to buy a brand new one – got a Core duo which more than made up for the loss of the two. Then roughly a week and a half later, my work laptop just blinks (maybe the coffee that I splashed on it helped! :-)),flickers and then calls it a day. No! Year, No! life.

It will be a little slower than usual getting off the ground after this crash. I’ve recovered almost everything vis a vis this blog and so should be up and running to speed soon enough.


New Strategies for Financial Supply Chain Optimization

Yesterday, I signed up at the Aberdeen Group website to take advantage of a free report offer that is running through Jan 26th, 2007 to download a copy of the report titled – New Strategies for Financial Supply Chain Optimization. (Apparently at this link, you don’t even have to sign up to get the report) The focus of the report is,

Rethinking Financial Practices with Your Suppliers to Maximize Bottom Line Performance

and the introduction to the report outlines what the folks at Aberdeen think is a glaring opportunity for firms that have gone the route (I guess there are but a few firms that have not either lead or followed their competitors overseas) of global sourcing or offshoring/outsourcing:

Driven by the pressing need to lower the cost of goods sold, companies have embarked on sourcing from emerging markets and have been able to achieve significant benefits when the strategy was executed correctly, including 10%-35% savings on the cost of goods purchased. However, most companies are still leaving money on the table because they fail to take into account the SCF opportunity when undertaking low-cost country sourcing (LCCS). Applying SCF innovations can bring the next wave of cost savings into the corporate LCCS program, helping a buying organization optimize its working capital, reduce product unit costs by taking advantage of arbitrage opportunities due to the higher cost of capital in emerging markets, as well as reduce supply base risk by enabling faster and more predictable payments to emerging market suppliers.

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Toyota plans ultra-inexpensive car

As reported in the news today, Toyota plans ultra-inexpensive car – Wow!

Toyota Motor Corp. plans to build a low-cost car undercutting Renault’s emerging-market Logan through a “radical” rethink in design and production, the president of the fast-growing Japanese automaker said.

What is the Logan from Renault? (More information available at Wikipedia)

The Renault Logan is the latest car to enter the super budget automobiles, and will compete with the best of the world’s cheapest automobiles.

Renault aims to retail the car for Eur 5000 (about $6105) and the competition that its expected to take on are:

Targets for the Renault Logan include Rover’s CityRover, Kia Picanto, Seat Arosa, Daihatsu Cuore, Daewoo Matiz and shortly the Volkswagen Fox.

So what does Toyota plan in order to take on the competition?

“The focus is on low-cost technology,” Toyota president Katsuaki Watanabe told Britain’s Financial Times newspaper in an interview published Monday.
He declined to set a price for a low-cost car but said it would be “at least” less than the Logan.

Like I have said many times before, Toyota may come in above the Logan’s price to begin with in their first iteration but one can’t fault them for knowing what the market would support. And if you’re aiming to compete as the low-cost technology, they will quickly apply their TPS and continuous improvement methodology and push that price lower, lower with every continuing iteration.
Here’s the principal idea outlined by Toyota’s CEO:

Watanabe said that Toyota could slash the price by targetting costs throughout production.
“Everything from design to production methods will be radically changed and we are thinking of a really ultra-low-cost way of designing, using ultra-low-cost materials, even developing new materials if necessary,” he said.

Again, Toyota is focusing on its twin competencies of product design and production rather than advertising and financing to execute their strategy of competing in the low-cost car segment. Also consider their built-up experience in hybrids and whether hybrid power systems will get cheap enough to be put under the hood of a low-cost car.
Needless to say that this announcement will sound a loud boom across the bow of US carmakers.

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Former chairman and CEO set to buy back Swift Transportation

Logistics Management reports on the goings on with Swift Transportation (going on since November 2006 if I remember right).

After an unsuccessful attempt to buy truckload carrier Swift Transportation Co. Inc. in November, a group led by the company’s former chairman and CEO Jerry Moyes has entered into a definitive merger agreement to acquire Swift in an all-cash transaction for approximately $2.74 billion

And he’s taking it private?

“Swift has evolved into the operator of the largest truckload fleet in the United States with a dedicated and energetic team of employees, over 17,900 trucks and nearly $3.2 billion in revenues,” said Noyes in a statement. “I am extremely pleased to have reached this agreement with Swift and look forward to building on the unique Swift legacy that has positioned the Company for continued growth and success.”

What can I say? “A swift end to a public Swift truckload carrier.”

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Opening Pandora’s Box – Are you tired of this Out of the Box thinking thing already?

If you’re not, here’s more…
I came across a post by Steve Talbott titled – The deceiving virtues of technology. In a sense, this post is only peripherally related to the two previous posts in this thread – Imagining the tenth dimension (Or thinking out of the box?) and Before thinking out of the box, how about thinking in the box?. While the post might be dated November, 2001 the contents of the post as Steve articulates them are far older.
It is related to the previous post in the sense that a reliance (or over reliance) on technology makes us dependent on that technology to articulate our ideas or even carry out simple arithmetic. In the business context, it is true that there are some business applications or problems that would simply surpass the bounds of human competence (Since I work with optimization models, I’m entirely aware of that limitation in human beings because its a limitation in me – I think I can keep about 3 or 4 variables in my head at a time but not more than that). Here, technology is vital in filling in the gap that lies outside the bounds of human competence (as is conceived today) – technology (such as a computer, mathematical programming environment and optimizers) is a real aid. However, my co-workers are dependent on this same technology in a different way – for them it is not an aid in the true sense of the word. Optimization models are really black boxes that spit out magical answers when you click Run. Period.
But why make a big deal of it? After all, if I were to change the fields, I would find myself using some other technology less as an aid but more as a form of dependency. The difference is that I am troubled by this not because I’m a self control freak or too independent minded but because I’m skeptical of the spit out “answers“. Usually, there are too many assumptions that are never made explicit, calculations and underlying models that capture reality in a way that is very particular and finally limitations beyond which such black boxes perform erratically.
This is as true of a financial calculator as it is of ERP or SCM software. It is why I have been “suspicious” of the SOA and SaaS operating models that are being developed for the enterprise market. The learning organization (do you hear this term bandied a lot these days?) was found not learning and thus has been outsourced – that cannot be a good thing for the long term.
Also, I promise that this is the last of the thinking out of the box series. Really!

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Imagining the tenth dimension (Or thinking out of the box?)

Sometimes I wonder if it is fair for me to pick on a teenager’s inability to manipulate numbers. After all, I have the advantage of double their years to have it figured out. Well, then I am reminded that this is something that is commonly observable human nature. It is one thing not to know simple math, it is another thing to disdain any attempt to point out simple/simpler ways of being effective at simple math, it is another thing to argue utter nonsense in order to make the problem go away and yet another thing to acknowledge one’s ignorance or mistake and correct it. Various actors in my previous post display these characteristics and its opposites to varying extents (Before thinking out of the box, How about thinking in the box?)
My humble point is this – that the purpose of education should be to teach thoroughly the simple abstractions that are necessary for life, plant the curiosity for digging up facts and the human values that integrate these abstractions and facts in a coherent way. If there is a fact of life, it is that humans make mistakes with all sorts of combinations of abstractions and in order to make the world work, one must be willing to repair the effects of our errors. Ofcourse, one must be able to discover these errors in the first place.
There is a frequent observation that I have made during the course of my life – a paradox. It goes this way…
All school children are taught elements of grammar during their education. Well, at least, that was the way it used to be. I wonder if today, the authorities have dispensed with the need for learning grammar (segments of the creative arts have definitely abandoned any notion of grammar). However, if you read the great authors/speech writers etc, you would find that they frequently flout the rules of grammar. While grammar is essential to communication or the communication of ideas, particularily compelling ideas conveyed in improper grammar are still compelling enough to forgive the author’s ungrammatical ways. Or simply put, while grammar is essential to clear communication, sometimes the communication is quite clear despite wrong grammar. So why bother about grammar at all? Let’s just make it up as we go. Clearly, this is not going to work. This, I believe, is the motivation behind the pithy phrase – Rules are made to be broken. It could very well be that these rules are man-made rules but that is not the (right) reason why they’re broken, they’re broken because something more compelling is at hand even if the rule has to be broken in order to get at the result. Of course, this is the dynamic between revolution and orthodoxy – while a rigid orthodoxy is often stifling, endless revolution approaches chaos. The way through, the historical observation, is treading the middle ground or meandering in the middle.

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Global Supply Chain Best Practices Quiz

SDCExec.com has posted a Global Supply Chain Best Practices Quiz authored by Bernie Hart, a global product executive at JPMorgan Chase Vastera.

Start the New Year right with nine tips for evaluating your supply chain management organization

First the scoring matrix,

Upon finishing the quiz, if you find that you have responded with more “no” than “yes” answers, 2007 may be the time to transform these gaps into opportunities for improved supply chain management and greater profitability.

Bernie provides in total 27 questions under 9 major areas. The only problem that I have with this quiz is that reaching a ‘Yes’ or ‘No’ answer is a difficult proposition – in other words, this is a difficult (and perhaps for some, a very difficult) quiz. In fact, for a number of questions, the answers are likely to indeterminate.
Take the following question for example under the major heading:

Design of your Global Supply Chain Network should align with your customers’ requirements and expectations.

Are customer service levels understood, and is the supply chain designed to meet them?

How can you answer whether the supply chain is designed to meet the understood customer service levels? If you attempted to answer this question at the very strategic look (perhaps through some optimization problem), how would you incorporate the notion of customer service levels into that model. If you took the route of inventory modeling and optimization that allows you to position your inventories in appropriate locations in order to meet expected customer service levels, how do you account for the optimal logistics model to actually execute this inventory location. The answer, as of now, cannot be given so easily.

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About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

@ SCM Clustrmap

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January 2007