Supply Chain

On Oct 30, Northwestern’s Transportation Center is hosting a workshop on dealing with big data in the transportation industry:

Data-Driven Business: Challenges and Best Practices in the Transportation Industry

Tuesday, October 30, 2012 – 2:00-4:45 pm

Transportation Center, Chambers Hall, Lower Level
Northwestern University
600 Foster Street
Evanston, IL

Transportation companies are confronted with growing – some may say exploding – and diverse sources of data. This data may be mined from social media, obtained from customer surveys, collected from environmental sensors, and gleaned from geo-positioning radios, among others. Looking through the lens of the transportation industry, the Northwestern University Transportation Center’s fall Industry Workshop will examine challenges and best practices in data-driven business. In the workshop a keynote speaker and two panel discussions will address questions, such as:

  • Why “data-driven” is a different way of competing?
  • What does it take to unlock opportunity in data?
  • What are the organizational implications for being “data-driven?”

2:00 – 3:15 pm – Panel 1: Marketing and Operations: Social media, Location-based, System-health

3:15 – 3:30 pm – Networking Break

3:30 – 4:45 pm – Panel 2: Freight Management & Logistics

The final program will be posted on October 23.


Dan Gilmore at The SupplyChainDigest reported on a study that showed the importance of good inventory control:

“…permanently reducing your level of inventories relative to sales and sales growth can have a dramatic impact on a company’s share price.”

Inventory is a very visible way to measure a firm’s supply chain efficiency.  However, inventory is a great way to control for variability in the supply chain.  So, if you want to permanently reduce inventory, you need to go after the underlying variability.


Companies with a wide range of products always struggle with the question of how many SKU’s (unique product IDs) they should make.  Should they cut the number of different SKU’s? Should they increase the number of SKUs?

If you only offer a few SKUs, then you are potentially missing parts of your market, giving your competitors a chance to make inroads, and possibly losing shelf-space at the retailers.

On the other hand, if you offer a lot of SKU’s, you may be confusing your customers and adding extra costs through extra inventory and increased manufacturing costs.

Usually, the sales side of an organization wants more SKU’s and the supply chain organization wants fewer.  Our experience has shown that the sales side usually wins.

Two years ago, the Wall Street Journal published an article arguing that firms have too many products.

However, I don’t think there ever can be a right answer to this question.  But, posing the question and analyzing the situation should lead to better informed decisions.   Interestingly, the techniques of mass customization are an attempt to break through this dilemma.  If you can offer customers more choice, but without the extra cost, you can create a lot of value in the market.

Every supply chain manager must deal with variability.  Of course, there are techniques for reducing variability, but even the best program cannot eliminate it completely.

In Feb of 2012, we were able to publish a guest blog post at LogisticsViewPoints that addressed this topic.

The idea is that safety stock can help you buffer against this variability.  What is interesting is that that is really not a solution about inventory, it is about reducing lost sales, reducing late shipments (and upset customers), and reducing expediting expenses (and headaches).  Here is quote from the article:

Safety stock allows you to seamlessly meet unpredictable spikes in demand, and it allows you to protect your customers from production breakdowns, supplier failures, or unusually long shipment times. Safety stock helps increase sales, reduce late shipments to your customers (keeping them happy or avoiding contractual penalties), and reduce the cost of expediting by minimizing the times you are short on stock.

In the end, you may not be able to control variability, but you can control what you do about it.  The blog takes an idea from Hopp and Spearman’s book, Factory Physics:

In this book, they mention that you can either choose how you will buffer against variability or it will be “chosen” for you. When it is “chosen” for you, it shows up as lost sales, late shipment penalties, expediting, and a more chaotic supply chain.

In 2010, the Wall Street Journal reported on foldable shipping containers (you may need to subscribe to WSJ to access this) and I posted a blog entry on IBM’s site on this topic.

As a quick summary, the main benefit of a foldable container is in more efficiently moving empty containers.  The empty containers must be moved around because their is not an exact match of supply and demand.  The ports that collect the empty containers are not necessarily the ones the have demand for empty containers.

Without a folding container, the empty containers use as much space as a full one (but weigh less).  The quote from the article is telling:

“It’s a huge expense, a huge headache for the industry,” says Neil Davidson of London-based Drewry Shipping Consultants. The net cost of moving empties is around $7 billion a year, say analysts.

This is a nice case of using design and optimization together to solve a problem.   The foldable container designs away some of the $7 billion cost.

With or without the foldable containers, firms use optimization to help minimize the cost of getting the containers to where they need to be.

This problem pops up in anywhere where you have a closed-loop supply chain.  You need to be able to get the empty or used product back where it is needed.