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Letter From the Chairman

W elcome to the Distribution Business Management Associations’ fifth annualSupply Chain Leaders in Action busi-

ness forum being held in Arizona at the ScottsdaleResort and Conference Center. On behalf of theBoard of Directors of DBMA, the CorporateAdvisory Board and the Executive Committee ofthe SCLA we thank you for your support and con-tinued interest in this outstanding business venue.We are glad to report that the SCLA continues togrow in membership. New corporate members for2010 include BJs, Gap, Medline, Safeway,ServiceMaster, Starbucks, Toys R Us and Werner.

DBMA is dedicated to offering strong value to ourmembers. New for 2010 is a three part corporatepackage that is included with the three year SCLAcorporate membership. (1) As most of you know,we have turned our January Executive Committeemeeting into a special program for the top repre-sentative from each of our member companiesmainly EVP’S, SVP’S & COO’S. This power-packedprogram features key speakers, extensive executiveinteraction and high level discussions of the mostpressing supply chain issues and trends. It is at thismeeting that the agenda for our annual SCLABusiness Forum is finalized. (2) In our second pro-gram, our annual SCLA May business forum, topexecutives join their executive staffs in peer groupinteraction in a teambuilding environment that pro-vides much needed life lines giving both insightand education. (3) New for 2010 is a third programcalled the Supply Chain of the Future.

On September 26th to the 29th in San Diego CA,we are joining forces with CSCMP in presenting theSupply Chain of the Future Lab. This is a 100,000sq ft display that tells the story of supply chainfrom product inception to order fulfillment and fea-tures twenty four informative conference sessions.We start off the program with a grand reception onSunday night in the Lab, with drinks and food aswell as an opportunity to meet thousands of supplychain professionals. Monday and Tuesday arepacked with sessions and activities focused on thesupply chain story followed by another receptionMonday night. This third offering for the SCLA isfocused on training and education for mid-levelmanagement. The third event is distinctly differentfrom the January and May programs which are forexecutives only.

Several members of the SCLA have helped us putthis Lab together, members such as Don Ralph andDon Walker and their teams from Staples &McKesson. Their help along with others like DeverlMaserang with Chiquita, was not in vain, becauseover the next three years 2010- 2012, all membercorporations of the SCLA will have the opportunity

to send their company members to thisSeptember educational activity as part of yourSCLA membership. SCLA members will get a spe-cial Lab admittance badge that will entitle you tothe Sunday grand reception and the Monday andTuesday night networking receptions. In addition,our SCLA members can walk through the Lab, aswell as attend any sessions in the Lab that interestthem on Monday and Tuesday. Some of your midlevel staff might want to attend for one day or thewhole time, the choice is up to you. If they wish toattend the entire CSCMP conference which is out-side the Lab, then they will have to join CSCMP, aswell as pay their conference fee. CSCMP offersyearly membership with local chapters to your staffthat will give them the opportunity to grow profes-sionally. We hope that this joint project betweenDBMA, SCLA & CSCMP will increase the aware-ness of both groups to the professionals in the fieldof supply chain. This third addition to the SCLAmembership package completes a full range ofofferings for our SCLA members.

The three-in-one SCLA package is an example ofwhat companies can accomplish professionally byworking together. There is sure to be many greatthings ahead for the SCLA as it continues to beinnovative, adaptive and a proven source of insight.For more information on the Supply Chain of theFuture lab go to www.dcenter.com, www.cscmp-conference.org , www.supplychainlab.org or callAmy Marie Yoder at DBMA 717-295-0033.

Finally, I would like to thank Don Walker, SVPDistribution and Operations, McKesson, this year’sChairman, Bill Leonard, Director of Supply ChainStrategy, The Hershey Company, EducationalSubcommittee Chair, and Amy Thorn, DBM’sExecutive Director for putting this excellent pro-gram together. In addition, our new Director ofAdministration Amy Marie Yoder, who has joinedthe small but mighty staff at DBMA/ SCLA, and thehelp of countless loyal members and our incomingChairman for 2011, Jim Malvaso, CEO, ToyotaNorth America material handling division. We, atDBMA/SCLA join together to thank each of youattending for your support, enthusiasm and con-structive participation. We are glad you have joinedwith us in exploring great ideas in supply chain.

John T. Thorn, Ph.D. Chairman of the Board, DBM AssociationVice Chair, SCLA Membership

Value forToday’s New

Normal

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In This Issue The Game Has Changed

Editor’s Letter

Achieving the Next Level-Depite the recent near-depressionexperience logistics management isstill one of the fastest growing indus-tries in the U.S. This article addressesfour structural factors that are influ-encing this growth.

Rethinking Leadership: Adiverse formulafor successSupply chains: Learn how the nextevolution in supply chain networkswill enable your company to adaptand succeed in the increasingly com-plex and turbulent global businessenvironment.

The IndelibleMark Of ARed-Hot BrandSupply chain thought leaders sharetheir strategies and insights on howto create flexible long term supplychain plans that can survive crisesand prosper in the new normal.

Moving The U.S. At TheSpeed Of BusinessTaking a look at your total logisticscosts of transportation, sourcing,logistics networks and manufacturingis more important now than ever.Learn how to waste less money bygetting back to the basics.

The Trend Toward NearSourcing... Is it a Key toaSuccessfulSupply Chain?Comprehensive speaker & faculty reference guide for the SCLAExecutive Forum.

2012 Circle ofExcellenceAward Recipient: Kimberly-ClarkKimberly-Clark Earns the 2012 DBMACircle of Excellence Award for itsImpressive Track Record andComprehensive Sustainability 2015Strategy

A Case for aNewDefinitionof SupplyChainSustainability Doing well and making a profit goeshand in hand at The HersheyCompany. Corporate-social responsi-bility is a cornerstone of Hershey’sgoverning philosophy, and the firmdemands not just profit, but benefi-cence. Learn how this winning phi-losophy has been a secret ingredientto Hershey’s success.

Eliminating ‘LogisticsInventory’ To Benefit YourBottomLine Is your company obsessed with beingrich and thin? The answer is yes ifthe top two steps your company istaking to manage through the globaleconomic turmoil is reducing operat-ing costs and increasing productivity.

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Distribution Business Management Journal

DBMJDistributionBusinessManagementJournalAmy Z. ThornEditorial Director

John T. ThornExecutive Publisher

Ron MalecDirector Creative Services

Amy Marie YoderDirector of Administration

Contributing Columnists

Jack BuffingtonGarland Chow, Ph.D. O. Keith Helferich, Ph.D. Walter Kemmsies, Ph.D. Deborah MillerJim MooreMichael SchwartzTimothy M. Stratman

Published annually by:

Distribution BusinessManagement Association

2938 Columbia Ave., Suite 1102Lancaster, PA 17603Phone: 717-295-0033Fax: 717-299-2154e-mail: athorn@dbm-assoc.comwww.DCenter.com

Distribution Business Management JournalA DBM Publication2938 Columbia Avenue, Suite 1102Lancaster, PA 17603Internet: http://www.DCenter.comJournal Reprints: 717-295-0033

Distribution Business Management Journal (ISSN 1535-1254) is published annually by DBM, Inc., 2938Columbia Avenue, Suite 1102, Lancaster, PA 17603,phone 717-295-0033, fax, 717-299-2154, internethttp://www.DCenter.com. Periodicals postage paid atLancaster, PA and at additional mailing offices.Postmaster send address changes to DBM Journal,2938 Columbia Avenue, Suite 1102, Lancaster, PA17603. Subscriptions in the U.S. $20.00 for one year,$35.00 for two years, single copies $5.00. Subscriptionsin Canada $25.00 for one year, $45.00 for two years, sin-gle copies $7.00. Outside the U.S. and Canada, $30.00for one year, $55.00 for two years. International singlecopy $9.00. Send remittance in advance to DBM, 2938Columbia Avenue, Suite 1102, Lancaster, PA 17603.

Printed in the USA copyright ©2010 by DBM, Inc.

No part of this publication may be reproduced or trans-mitted by any means without permission from the pub-lisher. Permission to photocopy for internet use or theinternal use of specific clients is granted by DBM Inc.for libraries and other users registered with theCopyright Clearance Center, CCC provided that a basefee of $1.25 per copy of the article plus 60 cents perpage is paid directly to CCC, 222 Rosewood Dr.,Danvers, MA 01923

5DBMJ

Plato was wrong. That is, if Plato hadtalked about the nature of supply chains,he would have been wrong. Change, not

permanence, is the rule. What is today was notyesterday and will not be tomorrow.

The largest economic downturn since the GreatDepression has forced consumers to demandgreater value. This demand forces producers torevisit every aspect of their operation, eliminatingwaste, improving services, and remaining prof-itable as their market assumes ever-new shapes.

This issue of the DBM Journal presents severalstrategies for perceiving, and thriving in, this his-toric and fluid environment. We hope the Journalhelps you and your company navigate these tur-bulent times. If not, pick up a copy of “TheRepublic,” we hear there’s a new translationthat’s quite good.

The GameHas Changed

In This Issue:

4

Letter From the Editorial Director

Prospering InThe New Normal:

A BlueprintFor Success

T his issue of the DBMJournal features the 2010Supply Chain Leaders in

Action (SCLA) business forum andthought leadership articles thatwill help you and your companyprosper in the new normal econo-my. Regardless of your companysize, stage or industry everyonehas felt some impact from therecent years’ economic turmoil.In the article, “Leading in the NewNormal” supply chain thoughtleaders share their insights onhow to create long term supplychain plans that provide the flexi-bility needed to survive crises andthrive.

Supply chain success storiesfrom the most resilient compa-nies are referenced in the article“Chain Gangs and Boardrooms:How Working Together CanBenefit Everyone.” Real world col-laborations are sited proving thattrading partners can operate theirsupply chains as if they were onecompany.

What is your company doingdifferently to take advantage ofthe opportunity to change?

One thing is certain you’re notgoing to move ahead using out-dated models and obsolete strate-gies. Jack Buffington’s article,“Designing 21st Supply ChainsUsing Complex Adaptive System(CAS) Strategies” offers a freshperspective on how to achievesupply chain transformation overthe next decade.

No matter how you look at itleading companies continuouslyimprove their performancethrough best practice strategyand operational efficiency. Agrowing trend discussed in thisissue is how sustainability isimpacting strategy and opera-tions. In 2010 the SCLA launcheda longitudinal study in this areaand the initial findings of thestudy are highlighted in the article“Sustainability -The Long View: The Importance for Your Company,Your Children, Their Children and Our Planet.”

Today every executive is underpressure to perform. To be suc-cessful it is not enough to havethe right strategy you also needthe right mix of people, processesand technologies to execute thatstrategy. So whether you find ablueprint for success in the pagesof this issue of the DBM Journalor by attending the 2010 SCLAExecutive Forum we hope you,like this year’s Circle ofExcellence recipient, Hershey Co.,experience the sweetness of success.

Amy Thorn,Editorial Director

DBMJ

in each of these areas, as indicated inFigure 1. Supply management should,for example, take a leadership role increating a more responsive supplychain, thereby helping the company towin more business (and increase rev-enues) from customers. Supply man-agement should also take the lead inapplying good processes to bettermanage all areas of cost and externalspending, not just those typicallyassigned to procurement.

So far so good, but how do wereduce capital intensity? Again, thereare two ways: working capitalimprovements and capital expendi-ture improvements. Supply manage-ment can play an important role ineach of these areas too. In manycompanies, for example, there is noone clearly tasked with analyzing andcoordinating supplier payment terms.This area is ideally suited for supplymanagement to take a lead role. Withregard to capital expenditures, experi-ence demonstrates that the soonerprocurement is involved in new pro-jects (even at the concept stage), thebetter the overall project economicsand ramp-up time will be.

A thorough opportunity assessmentfor supply management requires a

Industry Article

Achieving the Next Level

E very discipline has its own body of knowledge that encom-

passes all we know about it andthereby defines excellence today.This knowledge changes, sometimesdramatically, as we discover new andbetter ways of doing things. Today’sstandard of excellence becomestomorrow’s average performance. Ifknowledge does not advance, theinevitable result is stagnant growthand a lower standard of living.

Next-level supply organizations havethe capability to look at where theyhave been, understand the currentstate of knowledge and practices,and project what they need to do tobe successful over the next fiveyears. It was not that long ago whensupply-base reduction and craftinglonger-term supply agreements werenew, exciting, and even a bit frighten-ing to supply managers. Now, thesepractices barely elicit a yawn. Butwhat comes next? Instead of a strictfocus on material cost reductions,why not think about revenueenhancement and better manage-ment of capital projects, and workingcapital? Instead of thinking aboutdirect materials, why not think abouthow to manage every good and ser-vice that an organization requires?

Toward this end, every CPO or chiefsupply chain officer needs to be flu-ent in the performance improvementframework shown in Figure 1. This isone of our favorite charts, and it cap-tures the essence of relating supplymanagement to improved corporateperformance. Let’s walk through thisframework briefly.

Performance ImprovementFramework

Two important measures of corpo-rate performance are return on invest-ed capital (ROIC) and cash flow. ROICis calculated by taking the annual earn-ings of a business and dividing by the

By Robert A. Rudzki

total capital invested in that business(long term debt and stockholder’s equi-ty). ROIC is important because it is anindicator of the current health of a busi-ness. For a firm to deliver value to itsshareholders, ROIC needs to exceedthe corporate cost of capital. A compa-ny that operates where is ROIC islower than its cost of capital is essen-tially liquidating itself.

Improving profits helps improve bothROIC and cash flow. Reducing the cap-ital intensity of your business alsohelps to improve ROIC and cash flow.Improving profits while also reducingthe capital needed to run the businesshas a powerful compounding effect onROIC and cash flow.

So how do we go about improvingprofits? There are two fundamentalways: revenue enhancements and costreductions. Supply management can— and should — play an important role

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Figure 1 – Global Manufactured Goods Trade, Real GDP and Ports Reporting Container Volumes

DBMJ 88

careful evaluation of the improvementopportunities in each of the four cate-gories shown in Figure 1. Then, to tieit together for the executive audience,you relate those improvement oppor-tunities to the company’s incomestatement and balance sheet. Goingthat extra step allows you to demon-strate the impact of supply manage-ment on net income, earnings pershare, ROIC and cash flow — all keyareas of interest for senior executives.It’s a powerful way to communicatethe enormous potential of a trans-formed supply management organiza-tion in the language of senior execu-tives and in a manner relevant to yourcompany.

While no two firms are exactly thesame, our experience has oftenshown that thorough opportunityassessments demonstrate that acompany’s ROIC has the potential todouble or triple from its pre-transfor-mation levels. The next logical ques-tion is, “If that’s the case, why aren’tthere many 20 percent ROIC super-performers in the business world?”The answer is painfully simple.Achieving that step-change in perfor-mance doesn’t just happen by itself. Ittakes leadership and a well-designed,well-planned transformation roadmap.

Dimensions of aSuccessful Transformation

Supply management transformationrefers to the successful metamorpho-sis of supply management from atransaction-based, reactive function toan active, strategic driver of businessperformance, whose input is regularlysought by other areas of the company.

Companies that have successfullytransformed their supply managementactivities into world-class performershave paid attention to six key dimen-sions of transformation. As shown inFigure 2, those dimensions are pro-curement’s role, objectives, leader-ship, organization, best practices, andinnovation and technology. Underlyingthese six dimensions are more than30 specific initiatives that ultimatelymake up a comprehensive transforma-tion plan.

Before you even start thinking aboutwhich initiatives to focus on, you needa strong leader in place to sponsor the

transformation process. The logicalplace to look is the head of procure-ment or supply chain management. Ifthat person is not comfortable in aleadership role, then you’ll need tolook elsewhere. It’s a sad fact that notenough people are comfortable inleadership roles.

Simply stated, the transformationleader has to be willing to advocatechange, which often means putting hisor her neck on the line. Here’s whatwe mean: First, he or she will need todevelop a broad vision with objectivesthat speak to the interests of seniormanagement. And again, these objec-tives must be communicated in thelanguage of the executive suite. Thetransformation leader must be willingto lay out a specific plan and roadmap,with concrete milestones of achieve-ment rather than just activities.

Perhaps most importantly, the trans-formation leader must be willing toconstruct a business case that offers aperformance commitment (that is, $Xmillion of new cost reductions to thebottom line in each of the next fewyears) in exchange for the executivesupport (budget, people, outside sup-port, tools, and systems) needed tomake it happen. Without that show of

confidence and dedication from thetransformation leader, why would therest of the executive team be willing tocommit people and budget to theeffort?

When I was a corporate CPO, I didexactly what is described above —and it made a huge difference inobtaining executive support, and inachieving bottom line results. Thisapproach helped create the excite-ment and commitment within theorganization necessary to effect thetransformation. Believe it or not, onceyou’re willing to go down this path,and once you’re comfortable with theleadership imperative, the rest is easi-er than it might seem.

The transformation to the next levelof supply management excellencewill bring higher-level visibility,accountability, risk, and hopefullyreward. But no matter how far wetravel, or how much we change, therewill always be another destinationbeyond the one we just reached. AsZig Ziglar once said, “Go as far as youcan see and when you get there, youwill always be able to see farther.” Itis time to see and go farther, alwayskeeping in mind that the horizon willnever look the same for long.

Figure 2 – Percentage of Population Over 55 Years of Age in NorthAmerica and Europe

DBMJ

Being a great leader doesn’tdemand harshness, coldness, andcertainly not a Y-chromosome. Thebest leaders get people behindthem by inspiring trust, loyalty, andself-confidence. These best leadersdraw the best followers, eager todo their part for the greater good,because they understand their partdoes indeed make the goodgreater. Anyone can find a thou-sand followers: Just get nobodiesbehind you. If, however, you careabout what you’re doing and careabout the people you’re doing itwith, then let’s find our inner Joanof Arc and lead our troops towardperfection.

Servant LeadershipLeaders’ styles generally empha-

size one of two key traits: A naturaldesire to serve with a consciousdecision to lead, or an unconsciousneed to take charge, often drivenby an individual’s will to power. Thefirst type we’ll call Servant Leaders.Besides being an effective andoften beloved type, this group dif-fers from their power-driven peersin that Servant Leaders value theneeds of group members as muchas the results produced by thatgroup.

In fact, for Servant Leaders, agroup’s needs and results areinseparable, directly correlated vari-ables. If the members of a teambelieve their contributions matterand their voices are heard, the workthey produce will be vastly superiorto a team with similar talents domi-neered to feel like so many worker

bees following rules they didn’tmake to achieve goals they don’tunderstand.

Servant Leaders tend to seethemselves as part of the groupthey’re leading, using first-personphrases like “let’s go” rather than“get going.” Servant Leadersaccentuate the positive, helpingtheir team achieve great things byfirst making individuals believe theycan — and will — achieve greatthings.

In addition to these traits, ServantLeaders also tend to trust theirintuition more than “objective”data, and often set their sights onthe big, perhaps abstract, picture,rather than getting bogged down inthe details of a particular problem.

Pragmatic and kind in their deal-ings with others, Servant Leadersvalue laughter as an indispensableand natural corollary to seriousnessand hard work. Open-minded self-starters, these leaders look to tack-le a task the best way, even if thatisn’t necessarily their own way. Ofcourse, accomplishing this kind ofrapport is impossible withoutanother defining characteristic ofServant Leaders: trust.

Quality Qualities“The dramatic globalization of

markets and technology has creat-ed more competition than ever inhistory.… You’ve got to producemore for less and with greaterspeed than ever before. The onlyway you can do that in a sustainedway is through the empowermentof people. And the only way you

get empowerment is through hightrust cultures and through theempowerment philosophy thatturns bosses into servants andcoaches”

— Stephen Covey, “Insights on Leadership”

Any foundation of trust begins,paradoxically for a foundation, atthe top. A group’s leader must pos-sess unequivocal credibility andintegrity. Only someone with deepinner faith and strength see thesame in others. But the leader whocan see these qualities in theirteam is freed from the undermin-ing tedium of micromanagement,thereby fostering trust and self-reliance throughout the organiza-tion.

Treating others with respect goeshand-in-hand with cultivating trust,and one cannot emphasize enoughthe practical (and Karmic) benefits oftreating people with dignity.Effective leaders will also prize trans-parency. Anyone who deals in anopen and forthright manner will notonly reinforce a culture of trust andrespect, but will also avoid the need-less hassle of correcting mistakesmade by those acting in good faith,but without all the necessary infor-mation.

Mistakes, however, will happen.When they do, the prudent ServantLeader will fix the mistake ratherthan fixing attention on blaming theperpetrator. Likewise, serendipitousbreakthroughs will happen. Just asloyalty should preclude a witch-hunt when things go wrong, itshould also demand proper creditbe given to the person who madethem go right.

No leader will long remain in aposition of leadership if he doesn’tconsistently deliver results, findways to improve, and see that histroops do the same. This requireseveryone to confront challengeswith their eyes open, recognizingand acknowledging pitfalls insteadof pretending they’re not there,even as you tumble down one.

Everyone must understand exact-ly what’s expected of them, and noone should assume that something

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Industry Article

RethinkingLeadership: A diverse formulafor successBy Tom DeCaro

left unsaid has been tacitly under-stood. From this clarity, account-ability follows. If everyone graspshis or her role, everyone can takeresponsibility for ensuring their jobgets done properly.

Servant Leaders must avail them-selves of all five senses, thoughhearing might be the most impor-tant one. A leader who listens tohis group will better understandthem both personally and profes-sionally. He will also learn whatmatters to the team, what ques-tions to ask and what questionsdon’t need asking.

Men And Women AreDifferent (and other pro-found observations)

In a subject as the complex asgender dynamics, generalizationswill necessarily fail to cover all (oreven most) cases. However,clichés are clichés for a reason,and these broad observationsshould give you a working knowl-edge of the relevant factors at playin the majority of instances.

From the standpoint of perceiv-ing and processing the outsideworld, one notices several signifi-cant differences between the gen-ders. Women tend to favor intuitionover data, and are more adept atreading and interpreting subtleemotional cues than men. Men, onthe other hand, tend toward the“objective,” placing a high value onconcrete facts and readily ascer-tainable and quantifiable informa-tion.

Often, women will seek to mini-mize status differences, while menfavor stratification, especially iftheirs is a position atop the hierar-chy. Women tend to talk moreopenly about their hopes and fearsthan their male counterparts, whowill often bond over neutral sub-jects, such as business or sports.

Women generally derive a senseof power and satisfaction fromhelping others while men typicallyfind this satisfaction from havingothers in their charge.Collaboration is an arena wherewomen are often more skilled play-ers than men, who, by and large,

prefer competition and its thrill ofvictory.

And The Winner Is…Using the aforementioned met-

rics, we can use our sample datato assign each of the 13 leadershipcategories a 0-10 score, with zeroindicating complete male domi-nance, and 10 showing femalesuperiority.

1) Talk Straight — 5.5Though women tend to articulate

their feelings better than their malecounterparts, both groups can tellit like it is.

2) Demonstrate Respect — 8.5More sensitive and adept to oth-

ers emotions, women are clearlystronger here.

3) Create Transparency — 6.5Helped by their efficacy at com-

munication as well as their willing-ness to share and hear informationin a collaborative manner, womenhave an advantage when consider-ing openness

4) Right Wrongs — 8.5Here too, women’s tendency to

foster cooperation rather thanassigning blame for errors givesthem a clear edge.

5) Show Loyalty — 7.5More concerned about collective

success than individual glory,women outperform men by a widemargin.

6) Deliver Results — 4.5Less concerned with stepping on

toes or hurting feelings if it meansaccomplishing a goal more com-pletely, men rate slightly betterthan women.

7) Get Better — 8.5Natural nurturers, women

encourage, and tend not to bethreatened by, constant improve-ment of their peers.

8) Confront Reality — 2.5Sometimes the truth hurts, so it

should come as little surprise that

men dramatically outshine womenwhen it comes to assessing mat-ters with a brutal honesty somemight prefer not to hear.

9) Clarify Expectations — 7.5Using essentially the same mech-

anisms to show loyalty more effec-tively than men, women heredemonstrate that communication iskey.

10) Practice Accountability — 5.0Whether from Mars or Venus, vis-

itors from both planets are equallyadept at knowing where the buckshould stop.

11) Listen First — 9.5All I can add here is, aren’t you

surprised it wasn’t a 10?

12) Keep Commitments — 5.0Regardless of differences in per-

sonality, both men and women in aprofessional setting understandthis category offers no room fordiverging approaches.

13) Extend Trust — 5.0One might expect women’s high-

er scores on questions of commu-nication and loyalty to swing thisnumber in their favor as well, butwhile men’s methods might differ,they’re just as able as women toinstill trust in their groups.

FINAL SCORE: 6.5The number speaks for itself: If

you’re a man in a leadership role,fire yourself right after you find theright woman for your job.

Joking aside, the data indicatewomen perform better than men ina statistically significant wayaccording to our metrics. Does thismean all women are natural lead-ers? Not necessarily. (At least, nomore than it suggests all men con-verse solely in a stunted languageof stock indices and foul balls.)However, it does mean we shouldrevisit our idea of what a goodleader looks like. And if we stillbelieve only men can be leaders ofmen, let’s hope Joan of Arc is onour side if our dreams should takeus to war.

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DBMJ

When you hear Apple, youthink “innovation.” With BWM,you think “superior engineering.”These brands have a powerfulpsychological cachet equal to, ifnot greater than, that of the com-panies’ actual physical products.Designing products and devisingmarketing strategies to cultivatethese positive associations in theconsumer’s mind: This how abrand becomes a brand.Consider other great consumerbrands: What images do theyconjure up? What feelings andphrases do they evoke?“Superior,” “elegant,” “unique” —these are the adjectives thatdescribe the greatest brands.Substitute your name for thebrand; now what comes tomind? What is your brand?

Supply chain leaders alreadyhave a general brand, oftensummed up in terms like “effi-ciency expert” or “cost-cutter.”They present an admirable, if notterribly sexy, image of high tech-nical expertise, fondness fordata, and an unwavering eye onthe bottom line. But each supplychain leader has more behindtheir individual brands than someset of stable, dry attributes.These men and women don’t justoversee data, supplies and logis-tics; they lead people, ensuring asmooth interaction between pro-ducer and consumer by ably con-ducting the orchestra of person-nel that move goods from pointsA to B. The supply chain profes-sional’s brand must encompassnot just command of informa-

tion, but leadership of people. Supply chain leaders must

thoughtfully develop their profes-sional brands. To do so, youmust become your own market-ing department because,whether you’re aware of it or not,you’ve already got a brand. Whenco-workers, clients and yourboard think of you, they all havetheir own established sets ofassociations and opinions. If youoverheard their descriptions ofyou, would you agree with thatassessment (assuming thedescriber in question doesn’thappen to be a mortal enemy oran in-law)? What traits do othersassociate with you? More impor-tantly, how do these traits differfrom you want your brand to be?

Strong brands are described ashaving “pull” — they draw con-sumers in. These brands spark adesire in the consumer, whilecreating high expectations aswell. Regardless of product, suc-cessful brands share the samemarketing fundamentals. Firstand most important, the brandmust have distinct and desirablecharacteristics that raise its valueabove its peers. For example,Apple and Motorola both makesmartphones, but people aren’tcamping out in front of stores bythe thousands waiting for thenewest Motorola device. In somecases however, marketing aloneis enough to give a brand thatspecial something. Perhaps thebest example of this is DeBeersdiamonds. Odds are, the averagediamond consumer comparing

stones side-by-side would haveabout a 50-50 chance of pickingthe gem mined by DeBeers.Assuming the diamonds sharethe same size, cut and clarity, theonly thing that differentiatesthem is one of the most effectiveslogans in the history of advertis-ing, “A diamond is forever.” Withthat motto, DeBeers has createda brand that equates their dia-monds with investment, love,and eternity. Those key associa-tions continue to earn De Beersa hefty premium.

For a brand to have distinctiveand compelling value, it mustembody four core principles:

Positioning — Positioning is theunique space the brand occupiesin your mind. Earlier, we men-tioned Apple as conjuring upnotions of innovation. Positioningis the concept that links the twoso closely that not only doesApple make you think “innova-tion,” but hearing “innovation”might well make you think ofApple too.

Relevance — Relevance ishaving an association that ismeaningful. In the DeBeersexample, the brand promises“forever.” The romantic takes“forever” to mean love and thepragmatist takes it to mean“value” or “investment.” Eitherway, DeBeers has made itself rel-evant to two disparate groups bymaking a meaningful connectionwith a single, well chosen word.

Consistency — Consistencyensures that each interactionwith the brand reinforces theseassociations. We know Avis“tries harder,” so we expectexceptional service every time.With McDonalds, you get thesame meal regardless of whichrestaurant you’re in, or what con-tinent you’re on. The brandbecomes a self-fulfilling proph-esy for the client.

Support — Attention needs tobe paid to the brand’s underlyingproduct. The product needs tomaintain the brand’s promise.

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Industry Article

The IndelibleMark Of A Red-Hot BrandBy Tim Stratman

DBMJ 0

People weren’t associating Applewith innovation in 1995, and theywon’t in 2025 if the companyloses its way again and rests onits laurels. Supporting the brandrequires time, attention and con-stant cultivation.

It is time to develop and culti-vate a professional brand foryou. In supply chain, you controlevery variable as efficiently andeffective as possible. Why leaveyour brand to chance?

Building a brand marketing

plan consists of strategies andtactics that address the key prin-ciples of value, positioning, rele-vance, consistency, and support(see Exhibit 1). It begins withanalyzing your current profes-sional brand. Discovering the cur-rent associations with your brandis not always easy. The higheryou are in the organization, thefewer your opportunities for hon-est feedback and constructivecriticism. Getting people to tellyou what your brand means to

them may be difficult. As anexecutive coach, I have conduct-ed confidential interviews withkey associates in every areaaround my client as a method ofobtaining accurate brandresearch. To get an even widerresponse, a confidential surveycan be used to determine brandassociations in areas such asstrategic thinking, vision, values,style, and leadership.

The brand profile that othersassociate with you can be an

DBMJ 14

eye-opener. The person whothinks he is the standard bearerof the firm may be seen by oth-ers as a devil’s advocate in strat-egy sessions. The person whothinks she’s an extrovert mayonly be chatty with close friendsand confidantes.

Once you’ve learned whereyour brand stands, figure outwhere you want to take it. Thefirst step in taking control is hon-estly assessing what you want toassociate with your name. Thereis no “right” brand, though thereare certainly wrong ones. But aslong as you make your brandgenuine, distinctive and com-pelling, you’ll be able to deliveron the brand using your naturalstrengths as a leader. This pre-sents a tantalizing possibility, tocultivate “pull” by deepening tra-ditional supply chain tendencies,like being process-driven, analyti-cal, and decisive. Or, taking theother route and broadening youraspirations with action that’sstrategic, and shows company-wide focus and strong leader-ship.

Your ideal brand associationscannot be pulled from the ether.It must be built on a foundationof traits already in you. Theymust be genuine. Determining

your brand traits requires honestself-reflection. In other words,you must be willing and able todeliver on the high expectationthat your brand creates.

The head of supply chain for alarge manufacturer wanted adimension of his brand to res-onate with inspirational leader-ship. He wanted to be seen as afocused visionary who inspiredpeople to achieve big things. Thecompany was downsizing due toeconomic straits and he wantedto assuage the fear permeatinghis organization. While his inten-sions were right, his brandingstrategy hit some speed bumps.For years his style was one ofquiet leadership. He was seen as steady and consistent, so hisrousing, but earnest attempts topump up his team came acrossas insincere. In branding terms,he was working against his“type” and people weren’t buying it.

This executive unintentionallyviolated the Consistency princi-pal: His desired brand was notmeshing with his establishedbrand. Think of Mercedes Benz.What would happen if Mercedesdecided to build small cars onthe cheap for quick cash? Theywould destroy the luxury brand

they spent more than a centurybuilding. It wouldn’t be pretty.

When creating and cultivatingyour brand, keep in mind the oldadage “know thyself.” Your brandmust genuinely reflect your per-sonality and values.

The difference between yourcurrent professional brand andyour brand aspirations is thechange dimensions, the areasyou need to work hardest on toshift perceptions. Obviously, thewider the divide between peo-ple’s current perception and youraspirations, the more difficultand the less successful it willlikely be.

With your brand associationsfirmly in mind, set about develop-ing the strategies and tactics ofyour marketing plan. Refine yourassociations into a concise branddescription. Though he failed atbeing the outgoing cheerleader,the supply chain executive men-tioned above finally achieved hisgoal of building morale and earn-ing a brand of “thoughtful men-tor through good times and bad.”He communicates his brand byacknowledging the difficultiesfacing the company and theteam, and helping everyone over-come them. He established team“check-in meetings” where hekeeps groups up to date onwhat’s happening within thecompany and the teams recipro-cate by sharing their internalgoings on. The executive alsochecks in on each team memberprivately and encourages them tocheck in on their direct reports inturn.

The tactics of personal brandmarketing are in constant flux.The strategies tend to changeless, but since your brand aspira-tions will likely change over timetoo, it’s probably not wise toexpect too much constancy here.Nevertheless, the most impor-tant change is, and will alwaysbe, seeing the gulf between yourdesired brand and your realizedbrand narrow until it disappears.

17

In particular, natural gas is plen-tiful in the United States, and itworks well for short-haul trucking(compressed natural gas) andlong haul trucking (liquid naturalgas). But we need to expand therefueling infrastructure to speedadoption of this clean fuel tech-nology. Heavy tractor trailers con-sume about three quarters of thediesel fuel used by all commer-cial trucks. Imagine the amountof imported oil we’d save —along with improving the air quali-ty — by converting our nation’slong haul fleet of heavy tractorsfrom diesel to natural gas. But,leveraging natural gas and otheralternatives is just one part of anational strategy that wouldstrengthen our economy.

Second, fix the transporta-tion infrastructure.

We need a more strategicapproach to planning and fundingour nation’s transportation infra-structure for the future.

Today, we address critical trans-portation needs in isolation. Wego from one appropriation to thenext, often with politics guidingpriorities. As a result, our invest-ments are not targeted at alleviat-ing bottlenecks in our road, rail,maritime, and air networks.

The cost of congestion in theUnited States in 2010 was about$101 billion — up from $79 billionin 2000. Across our UPS network,a five-minute delay each day foreach of our vehicles costs us$100 million per year. Extrapolatethat across the whole economy,and you get a sense of the hugeeconomic burden of congestion.

Third, simplify the taxcode and lower businesstaxes.

Congress should act quickly onlegislation to reform our corpo-rate tax structure. The current taxrate paid by U.S. businesses is35 percent. Within a month thiswill be the highest rate for anydeveloped country. I have saidthat if Congress could reduce thecorporate rate, then UPS wouldsupport the elimination of currentdeductions. By lowering and sim-plifying the tax code, the U.S. willbe better positioned to competefor capital investments in theglobal economy.

Fourth, focus on trade policy.

Finally, trade must remain anational priority. I was heartenedby the passage last year of thethree free trade agreements withSouth Korea, Panama, andColombia. They will help create380,000 jobs in this country.Trade is the most powerfulengine of job growth and pros-perity. A long-term strategy forexpanding exports is vital to oureconomic future and our globalcompetitiveness.

The United States is theworld’s largest market, and busi-ness leaders want to expand inthis country. If our leaders canmake the necessary decisionsthat begin to reduce the budgetdeficit, while acting on smartstrategies for energy, infrastruc-ture, trade and tax reform, confi-dence will return to the privatesector. Companies will createjobs by investing in their busi-nesses. Growth will becomerobust and the United States will once again lead the globaleconomy.

“Moving the U.S. at the Speed ofBusiness” was originally publishedFeb. 28, 2012 by the HarvardBusiness Review Insight Center onAmerican Competitiveness. For moreinformation, visit http://hbr.org/special-collections/insight/american-competi-tiveness

The U.S. economy is improving,but the recovery’s been slowerthan expected. Why? The busi-ness leaders I talk to lack the con-fidence to increase investmentsand expand hiring. They’re con-cerned with growing budgetdeficits, uncertain tax policy, risingenergy costs, and crumbling infra-structure. Four key changes couldreassure them — and ignite pri-vate-sector growth.

First, develop a strategyfor energy security — thenstick to it.

We need a plan that will lead toenergy independence so that wecan stop moving from one ener-gy crisis to another.

As we increase domestic ener-gy production, we’ll reduce ourdependence on foreign oil. Thatwill improve our nation’s energysecurity and help our economyby creating new jobs and invest-ment in this country — instead ofoverseas.

Clean energy technologies holdgreat promise for the future. Butto reap the benefits, the publicand private sectors need to worktogether and make a sustainedcommitment to testing and devel-oping the most effective alterna-tive fuel technologies.

For decades, UPS has beenexperimenting with our “rollinglaboratory” of more than 2,600alternative fuel vehicles. Thealternative fuel technologiesinclude natural gas, propane,hydrogen, hydraulic hybrids, and electric. If it works, we try it— and then build upon the suc-cesses.

Special Report:

Moving The U.S.At The Speed OfBusinessBy Scott Davis

16

Waste Management ad

source locally and take advan-tage of new production trends,so that product distribution andeven design can be managed ina shorter cycle while enablingmore sell through of productsat full price as retailers get thething their customers want onthe shelf exactly when theywant to buy.

Ronald M. Marotta is the VicePresident of Yusen Logistics(Americas) Inc., InternationalDivision, an NYK GroupCompany, responsible for theOrigin Cargo ManagementGroup and is based inSecaucus, N.J.

18

Today, retail and logisticsexecutives face challengesunlike any of their predeces-sors, and complicated by thebreakneck speed with whichtoday’s hurdles arise. We oftenhear that change is good andthat the challenges that weovercome make us all stronger,wiser, and better equipped toraise our organizations up tooperate more efficiently anddeliver a bottom line. In theseturbulent times however, therate of change increases dailyand succeeding and leading inyour industry requires leaderswith have vision, fortitude, andan internal compass to shep-herd an organization to suc-cess.

With the skyrocketing price offuel, we see the long belea-guered consumer in an alreadyfragile economy worrying ifrecent signs of improvementwere just statistical anomalies.Will we fall into another, deeperrecession, or will we merelyendure a more mild double-dipvariety? Perhaps neither willcome to pass, but, no matterhow we characterize our pro-tracted economic malaise, isseems to have sapped some ofthe heart and confidence out ofmany consumers here in theUnited States.

The perfect storm of thesharp spikes in the price offuel, the daily catastropheupdates from broke EuropeanUnion nations, our four-yearconstruction downturn, and theoverarching financial and creditcrunch have all contributedunemployment numbers farhigher then we like to say outloud, in turn sending consumerconfidence back from whenceit came in late 2008.

On a brighter note, we haveseen recently that retail mar-kets in Asia currently appear tohave the best growth prospectsfor global retailers. China hasrecently started to impose mini-mum wage regulations, whichwe can assume is part of theplan to lift blue collar incomesto help cultivate its domesticconsumer market, and setChina on a course to build a(uniquely Chinese) middleclass.

Along with rising blue collarincomes in China, white collartake home will also increase,further bolstering sales of mid-level discretionary products andcreating opportunities for thosewilling to take the leap into theChinese retail market. We will,of course, expect continueddevelopment of the higher-endconsumer product market,

including the marketing of glob-al branded fashion items. Inmajor Asian cities, we havealready seen dramatic increas-es in the number of consumerswith ready appetites for luxurygoods and services. This trendof increasing wages and bene-fits for Chinese workers willnecessarily increase the cost ofsourcing in China, long the pri-mary beneficiary of Americanoutsourcing.

The duty of producers andmanufacturers in our globalsupply chain is to try to reducecosts while building a strongerand more resilient source ofsupply.

For the first time in our mod-ern economy, companies andexecutives are looking to movesourcing of their products, andeven services such as call cen-ters, back to the western hemi-sphere, if not the United Statesitself.

The critical factors pressingus to find alternative sourcinglocations closer our retail salespoints are:•The lean inventory mode in

which we operate demandsan increased speed to market.

•Facing shortages of labor, andinstability of labor costs in tra-ditionally consistent sourcingdestinations.

•Overtaxed infrastructure andinsufficient capacity to man-age increased manufacturingrequirements in traditionalsourcing areas.

•Ocean carriers service capaci-ty and seasonal restraints forthese critical global tradelanes.

•Asian countries’ new invest-ment, manufacturing develop-ment, and planning in LatinAmerica and Africa.

•Free-trade agreementsbetween the U.S. and LatinAmerica.

The Trend TowardNear Sourcing… Is it a Key to aSuccessful SupplyChain?

•Recent shifts from far- tonear-sourcing, especially in IT,call centers, and general man-ufacturing.

•The impact of the 2012Japanese earthquake onindustries and supply chainsfar removed from the directimpact of the disaster.A retailer or importer with

vision and a commitment tosucceed in their market needsto minimize their risk by havinga diversified plan to sourcetheir merchandise in reliableareas close to market to maxi-mize transport efficiency andmitigate the impact of rising

fuel costs.Any executive in our industry

needs to consider the very dif-ferent facets of commercetoday; that is, commerce in achallenging market with costsin constant flux, and a supplychain potentially burdened byrapidly rising fuel prices, laborconflicts, infrastructure prob-lems, or interruption of productflow from causes both naturaland man-made.

As this near-sourcing trendhas started, we can see theincreased speed to market offashion products by sourcingclose to that market. It seems aperfect fit for the retailer to

By Ronald M. Marotta

Refereed Article:

21

2012Supply ChainLeadersIn ActionAnnual ExecutiveBusiness Forum

19

ERNST & YOUNG

2012 Chair,SCLAExecutiveCommitteeWaheedZamanSenior VicePresidentChiquitaBrandsInternational

Air Products & ChemicalsCorning PainterSVP Corporate Strategy, Technology &Supply Chain

Airgas Ken McDowellVP Supply Chain Management

Automatic Data ProcessingVito GiulianiVP Supply Chain Operations

BJ’s Wholesale ClubJeff DesrochesSVP Logistics

BNSF RailwayRichard MillerGeneral Director Intermodal Solutions

Cabela’s Doug MeansEVP & CSC Officer

CarMaxMark AdamsAVP Logistics

The Charmer Sunbelt GroupBill Healey Chief Supply Chain Officer

Chiquita Brands InternationalWaheed ZamanSenior Vice President

CintasDavid WheelerSVP Global Supply Chain & Corporate Six Sigma

ConAgra FoodsKen SmithVP Transportation & Warehousing

ConocoPhillipsAlastair DonaldChief Procurement Officer

Darden RestaurantsJim ThomasVP Supply Management

GapShawn CurranVP Logistics

General CableJerry ZurovchakVP Sourcing & Supply Chain NorthAmerica

General MotorsBill HurlesExecutive Director - GPSC

GraingerD.G. MacphersonSVP Supply Chain

The Hershey CompanyAndy PaladinoDirector Global Strategic Sourcing

IBMFran O’SullivanGM Integrated Supply Chain

International PaperFred TowlerVP Supply Chain Operations

Jarden CorporationJosh ScofieldSenior Director Supply Chain Strategy

Johnson & JohnsonMike ThalakerExecutive Director Office of Strategy &Execution

Kansas City SouthernPat Ottensmeyer EVP and Chief Marketing Officer

Kellogg CompanyDaniel TurneyVP Global Supply Chain NetworkStrategy

Kimberly-Clark CorporationRick SatherVP Customer Supply Chain

Kraft FoodsDoug EvansArea Vice President Logistics

Lexmark InternationalLinda HollembaekVP Global Supply Chain Operations

McKessonDon WalkerSVP Distribution Operations

MedlineBill AbingtonCFO & President Operations

MedtronicMitch ParrishVP Global Supply Chain Operations

Merck Consumer CareJim PleimanVP Supply Chain

Michaels Stores, Inc. Tom DeCaroEVP Supply Chain

Supply Chain Leaders in Action 2012 Executive Committee

Table of Contents

Welcome Letter .............. 26

General Information ........ 27

Conference Room Maps ................................ 30

Conference Schedules ........................ 34

Educational Resource Members ........................ 39

Session Abstracts ............ 40

Speaker/Facilitator Biographies .................... 54

24 25

MillerCoorsJack BuffingtonDirector Logistics

Norfolk SouthernMike McClellanVP Intermodal & AutomotiveMarketing

Oshkosh CorporationGreg FredericksenEVP & Chief Procurement Officer

Owens & MinorCharlie ColpoEVP & Chief Operation Officer

PepsiCo, Inc. John PhillipsSVP Customer Supply Chain &Logistics

PetSmartJeff HillaryVP Supply Chain Solutions

Philips Consumer LifestyleDanny GarstVP Supply Chain Management

Pinnacle Technical ResourcesJim HumrichousePresident

Procter & Gamble Rahquel PurcellDirector Product Supply Operations – NA

The Raymond CorporationChuck PascarelliPresident Sales & Marketing

Ryder System, Inc. Jim MooreVice President

SafewayCarl GrazianiSVP Supply Chain Services & Strategies

ServiceMasterCarter TateDirector Supply Chain

Southwest AirlinesDaryl KrauseSVP Procurement

Spectra EnergyJohn AdamsVP Supply Chain & Chief Procurement Officer

Staples, Inc. Don RalphSVP Supply Chain & Logistics

Starbucks Coffee CompanyPeter GibbonsEVP Global Supply Chain Operations

Tiffany & Co.John PettersonSVP Operations & Manufacturing

Toys R UsMichael JacobsSVP Logistics

United StationersCody PhippsPresident

United Vision LogisticsKurt AntkiewiczSVP Sales & Marketing

VerizonMariano LegazVP Sourcing

The Walt Disney CompanySteven MillerSVP Strategic Sourcing & Procurementand Facility Services & Support

Werner EnterprisesJim SchelbleEVP Sales & Marketing

YRC, Inc. Rick MathewsSVP Sales & Marketing

Yusen Logistics (Americas), Inc. Ron MarottaVice President

Zale CorporationJohn LeggSVP Supply Chain

2012 SCLA Education Committee

2012 Education Committee ChairJohn PhillipsSVP Customer Supply Chain &LogisticsPepsiCo, Inc.

2012 Education CommitteeMembersTim CarrollVP Global Execution, Integrated Supply ChainIBM

Doug EvansArea Vice President LogisticsKraft Foods

Tom Goldsby, PhDProfessor LogisticsThe Ohio State University

O. Keith Helferich, PhDProfessor Marketing & LogisticsCentral Michigan University

Jeff HillaryVP Supply Chain SolutionsPetSmart

Bill HurlesExecutive Director – GPSCGeneral Motors

Bill LeonardDirector Supply Chain Strategy(retired)The Hershey Company

Deverl MaserangSVP Global Product SupplyChiquita Brands International

Jim MooreVice President Ryder System, Inc.

Terry Pohlen, PhD Associate Professor Logistics andDirector Center for Logistics Education& ResearchUniversity of North Texas

Dale ProwsVP Enterprise Procurement ServicesServiceMaster

Rick SatherVP Customer Supply ChainKimberly-Clark Corporation

Jim ThomasVP Supply ManagementDarden Restaurants

Amy ThornExecutive DirectorDBM Association

Dan TurneyVP Global Supply Chain NetworkStrategyKellogg Company

2012 SCLA SustainabilitySub-Committee

O. Keith Helferich, Ph.D. Professor, Marketing & Logistics, Central Michigan University

Jim MooreVP, Supply Chain Solutions,Ryder Systems, Inc.

Amy ThornExecutive Director,DBM Association

M. Doug Voss, Ph.D.Assistant Professor of Marketing,University of Central Arkansas

Zachary Williams, Ph.D.Assistant Professor,Marketing and Logistics Central Michigan University

University Facilitators

Central Michigan UniversityO. Keith Helferich, PhD Professor of Marketing & Logistics

Indiana UniversityBob Jacobs, PhD Chase Faculty Fellow and Professor ofOperations Management

Indiana UniversityRhonda Lummus, PhD Clinical Professor of Operations &Supply Chain Management

Lehigh UniversityNada Sanders, PhD Iacocca Chair in Supply ChainManagement

Michigan State UniversityPatricia Daugherty, PhD Professor and Donald J. BowersoxChair in Logistics and Supply ChainManagement

The Ohio State UniversityThomas Goldsby, PhDProfessor of Logistics

The Ohio State UniversityDouglas Lambert, PhD Raymond E. Mason Chair inTransportation and Logistics; Professorof Marketing & Logistics

Pennsylvania State UniversityRichard Young, PhD Professor of Supply ChainManagementRutgers UniversityDon Klock, PhDClinical Associate Professor of SupplyChain Management & MarketingSciences

University of British ColumbiaGarland Chow, PhDAssociate Professor of Operations &Logistics

University of HullDavid Menachof, PhDPeter Thompson Chair in Port Logistics

University of North TexasTerry Pohlen, PhDAssociate Professor of Logistics

University of San DiegoJoel SutherlandManaging Director, Supply ChainManagement Institute (SCMI)

2010 Educational ResourceMembersAccentureBill Read, Managing Director, NorthAmerican Supply Chain Service Line

ChainalyticsMike Kilgore, President & CEO

Descartes Chris Jones, EVP Solutions & Services

Global 360, Inc.Deb Miller, Director, MarketDevelopment

Spherion CorporationDeb Dean, SVP Strategic Accounts &Supplier Diversity

Supply Chain Leaders in Action 2012 Executive Committee

2012 SCLA Supply ChainWomen in Action

Ana Lucia AlonzoDirector Product Supply PlanningChiquita Brands International

Kay FrancisDirector Foodservice DistributionDarden Restaurants

Lori HallVP Inventory ControlBJ’s Wholesale Club

Heidi HemmerExecutive Director Supply ChainServices - SourcingVerizon

Louise HerfelDirector Purchasing, Customs &TransportationZale Corporation

Debbie MagersSVP Customer Logistics ServicesKellogg Company

Liz NeumanDirector Customer Supply ChainSolutionsKimberly-Clark Corporation

Susan PellechioVP Transportation & SupplierCollaborationStaples, Inc.

Rahquel PurcellDirector Product Supply Operations -NAProcter & Gamble

Natalie PutnamVice President Sales Ryder System, Inc.

Mercedes RomeroVP Global ProcurementStarbucks Coffee Company

Amy ThornExecutive DirectorDBM Association

Joanne Wright VP Global Materials & SupplyAssuranceIBM

24 25

2012 SCLA CorporateAdvisory Board

Corporate Advisory BoardChairmanDon RalphSVP Supply Chain & LogisticsStaples, Inc.

Corporate Advisory BoardMembersJim MalvasoPresident and CEO (retired)Toyota Material Handling NorthAmerica

John PhillipsSVP Customer Supply Chain &LogisticsPepsiCo, Inc.

Kevin SmithPresident SSCC

Amy ThornExecutive DirectorDBM Association

Jack Thorn, PhDChairman and Vice Chair, SCLAMembership DBM Association

Donald WalkerSVP Distribution OperationsMcKesson

Waheed ZamanSenior Vice President Chiquita Brands International

2012 SCLA Startegic Growth Committee

Bill LeonardDirector Supply Chain Strategy(retired)The Hershey Company

Jim MalvasoPresident and CEO (retired)Toyota Material Handling NorthAmerica

Deverl MaserangSVP Global Product SupplyChiquita Brands International

John PhillipsSVP Customer Supply Chain &LogisticsPepsiCo, Inc.

Don RalphSVP Supply Chain & LogisticsStaples, Inc.

Kevin SmithPresident SSCC

Jack Thorn, PhDChairman and Vice Chair, SCLAMembership DBM Association

Don WalkerSVP Distribution OperationsMcKesson

Dave WheelerSVP Global Supply Chain & CorporateSix SigmaCintas

Waheed ZamanSenior Vice President Chiquita Brands International

26

WelcomeAttendees

27

W elcome to the fifth Supply Chain Leaders in

Action annual conference.For those who are returning attendees,welcome back. For our new attendees,a very special welcome. I appreciateyou being here in Scottsdale, joiningsupply chain colleagues as we focuson this year’s theme, “Prospering inthe New Normal Economy.” I hopethat you’re all excited and ready totalk. If not, the conference sessionsmight get a bit dull. But I’m sure we’llbe fine.

Economists continue to report thatthe recession is not over, but there isevidence of a slow turn-around.Maybe you see light on the horizon,but these same economists insist it willbe another year before we will seereal, solid economic growth. The mainmessage the experts keep repeating is,“Things will not be the same.” Therewill be a “new normal.”

Maybe I’m blinded by the old-nor-mal way I see things, but there doesn’tseem to be too much agreement onwhat exactly this “new normal” willlook like and the exact changes it willdemand. The past 18-24 months haveshown that innovative, operationallyexcellent companies will continue tothrive. Innovation and OperationalExcellence are core competencies ofgreat Supply Chain Leaders, so weshould expect our companies to leanon us to lead the charge in creatingprosperous new ways to conduct busi-ness. The pressure is on for supplychain leaders to be at the top of ourgame, a daunting challenge for us all.

Supply Chain Leaders in Action andthis conference is focused on helpingyou meet this challenge. We havegathered industry practitioners andacademic thought leaders to provide aforum of collaboration, debate andexchange on key topics common tomultiple industries. Conference ses-sions have been designed and devel-oped to provide you an opportunity toengage. Come prepared to challengeyour assumptions and explore newideas to apply to your business. Beprepared to share your successes andfailures, and to step out and seek solid,practical advice from those who havebeen down the path before.

This is a unique opportunity for allus to grab control of our own destiniesand create and define this NewNormal. Let’s use this gathering tohelp us toward that end.

I hope you enjoy yourselves and Ilook forward to seeing you around theconference.

Sincerely,

Waheed Zaman2012 Chairman, SCLA Executive Committee

Conference Hours:Monday, May 7, 2012 ................1:00 PM to 8:30 PM Tuesday, May 8, 201 ..................7:00 AM to 5:00 PMWednesday, May 9, 2012............7:00 AM to 5:00 PMThursday, May 10, 2012 ............7:00 AM to 1:30 PM

Registration Hours:Monday, May 7, 2012 ................11:00 AM to 6:30 PMTuesday, May 8, 2012 ................7:00 AM to 5:30 PMWednesday, May 9, 2012............7:00 AM to 5:30 PMThursday, May 10, 2012 ............7:00 AM to 1:30 PM

The registration desk will be located in Vista Sol.

General Information

Keynote Sessions

All keynote sessions will be held in Grand Coronado.

Super Sessions & Breakouts

Innovating the Supply Chain through Collaboration Super Session track will be held in Arizona II & III.Leading the Supply Chain in the New Normal Super Session track will be held in Pueblo.Macroeconomic Factors Affecting the New Normal Super Session track will be held in Arizona I. Research & Benchmarking track will be held in Grand Coronado on Tuesday & Wednesday and Pima on Thursday.

Peer Group Locations

Customer Relationships – Papago I Process Improvement – Papago IIDemand Planning Responsiveness – Apache I Senior Executive – Maricopa IDistribution Design, Material Handling & Support – Yuma Sourcing, Procurement & Manufacturing – Apache III & IVHuman Resources – Hopi Supplier Collaboration – CouncilInventory Management & Information Technology - Treaty Sustainability, Risk & Security – Board RoomLogistics Strategy – Maricopa II & III Transportation & Carrier Management – PimaOrder Fulfillment & Distribution – Apache IIPeer group sessions will be held Tuesday, May 8th and Wednesday, May 9th from 3:30 p.m. to 5:00 p.m. andThursday, May 10th from 11:00 a.m. to 11:45 a.m.

Social Function Location

Monday, May 7th 1:00 PM to 3:30 PM - Supply Chain Women in Action – Pueblo3:30 PM to 4:00 PM - Peer group facilitator meeting – Council4:15 PM to 5:15 PM - New member reception – Vista Sol & Sun Patio6:30 PM to 8:30 PM - Welcome reception – The Courtyard (Weather back-up: Pueblo)

Tuesday, May 8th 5:30 PM to 6:30 PM - Peer group cocktail receptions – Grand Coronado & Sunset Plaza5:30 PM to 6:30 PM - Executive Committee peer group cocktail reception – Casita 45/506:30 PM – Team dinners with executives

Wednesday, May 9th 5:30 PM to 6:30 PM - Peer group cocktail receptions – Alameda (Weather back-up: Pueblo)6:30 PM – Optional dine around at various local restaurants6:30 PM to 7:30 PM – Executive Committee Circle of Excellence cocktail reception – Grand Coronado7:30 PM to 10:30PM – Executive Committee Circle of Excellence awards dinner – Grand Coronado

Thursday, May 10th 7:00 AM to 7:45 AM – Education Committee Meeting – Council

General Session, Keynotes, Breakfast & Lunch Location

All general and keynote sessions, breakfasts and lunches will be held in Grand Coronado. Sunset Plaza will be availablefor outdoor dining if weather permits.

DBMJ

Supply Chain Management MajorThe Supply Chain Management major

equips students with the knowledge, skillsand abilities necessary for success in today’scomplex business environment. This innova-tive program: • Provides solid exposure to supply manage-ment, logistics, business-to-business market-ing, and operations management topics. • Develops cross-functional team skills by inte-grating Supply Chain Management studentswith engineering students. • Emphasizes advanced cost analysis, negoti-ation, product development, and e-business. • Integrates core business courses with sup-ply chain major courses.

• Provides field study and experiential learningopportunities.

Part-Time MBAThe part-time Lehigh MBA, ranked by

Bloomberg BusinessWeek as one of the top fivein the Mid-Atlantic region, features a rigoroussupply chain concentration that relies heavily onindustry professionals and extensive student col-laboration on real projects. The MBA programalso provides for a popular supply chain certifi-cate program focused on global operations.

MBA Supply Chain ManagementConcentration and Certificate

The Lehigh MBA program offers supply chain

management as an area of concentration aswell as a certificate option. Through in-depthstudy of an organization’s value chain, theSupply Chain Management concentrationdemonstrates how these activities are linkedboth internally and externally. In a creative,hands-on environment that uses case studiesand industry experts, students explore the multi-ple factors that have impact on a company’ssupply chain.

For More InformationFor more information regarding the Center for

Value Chain Research, as well as supply chainmanagement education at Lehigh University,contact Joel Sutherland(joel.sutherland@lehigh.edu).

DBMJ

S ince its founding in 1865, Lehigh University has fostered a rigorous academic culture that seamlessly

blends science discovery with a well-roundedliberal arts education. An entrepreneurial spiritand inspired thinking have long been hallmarksof a Lehigh community that is 70,000 alumnistrong.

Among those alumni are pioneers andvisionaries, individuals who have left indeliblemarks on communities in over 130 countriesand whose ingenuity has lead to the the cre-ation of the first escalator, the construction ofthe Golden Gate Bridge and the firstimplantable working artificial heart. Lehighgraduates ambitiously helped mold America’sindustrial heritage and have become WallStreet legends and CEO executives of Fortune500 companies.

The inquisitive nature of the Lehigh commu-nity is reflected in the spirit of nearly 6,500 stu-dents. The university boasts a highly integratedresearch infrastructure in which 21 researchcenters work in partnership with each otherand national agencies.

Located in Bethlehem, Pa.—a historically richand ethnically diverse city that continues a strik-ing renaissance—Lehigh is strategically locatedjust 75 miles west of New York City, theworld’s financial and cultural hub, and 60 milesnorth of cosmopolitan Philadelphia, Pa.Lehigh’s regional neighbors both have left theirmark on a 1,600 acre campus widely regardedas one of the most beautiful in the UnitedStates.

The Center for Value ChainResearch (CVCR)

While Lehigh strives to leave its intellectualfootprint in the global business arena, its cross-disciplinary approach to globalization and, in par-ticular, international supply chain issues has alsogarnered industry attention. The university’sCenter for Value Chain Research (CVCR) has dis-tinguished itself as a thought-leader in bridgingthe economic and engineering divide so oftenfound in academia.

Lehigh offers access to notable scholarsand researchers who are widely recognizedthroughout the industry. In the past few years,business and engineering faculty associatedwith the Center for Value Chain Research haveregularly been cited in such leading media out-lets as the Wall Street Journal, The Economist,Industry Week, Forbes, Inbound Logistics,Supply Chain Quarterly, and Supply ChainManagement Review.

CVCR ObjectivesThe CVCR’s objective is to provide a multi-

disciplinary approach to value chain researchand education, creating opportunities for inno-vation by integrating analytical and quantitativeengineering approaches with process-drivenand field-based business research. The CVCRis committed to pursuing a broad range ofknowledge creation and dissemination activi-ties, with the aim of providing an umbrellaunder which researchers and practitioners canboth understand and advance the cuttingedge of knowledge in value- and supply-chainmanagement.

Research ActivitiesThe CVCR’s research activities fall into three

categories: faculty-led research, empiricalresearch, and student projects. There arestrong synergies among the research activitieslisted below. For example, student projectsmay lead to full-scale company-sponsoredresearch projects; company-sponsoredresearch projects may lead to independent fac-ulty research; and mini-surveys may lead tosupplier satisfaction surveys.

Faculty-Led Research• Company-Sponsored Research. The CVCRconducts customized research projects for itsResearch Member companies. These pro-jects typically last one or more years and areconducted by a faculty member and one ormore students. • Research Incubator Sessions. CVCR sympo-siums include “research incubator” sessions in

which faculty members provide a briefoverview of their research and companies canprovide a brief overview of the problems theyare currently facing. The objective is to fosterresearch collaborations between faculty andindustry.

Empirical Research• Supplier Satisfaction Research Surveys. TheCVCR conducts supplier-satisfaction surveysfor companies. These surveys provide a widerange of measures that describe the level ofsatisfaction that the company’s suppliers havewhen doing business with the company. • Mini Surveys. These surveys are conductedprior to seminars held at companies. They col-lect data on the company’s current practices,and the results are reported to the attendeesat the seminar. They provide valuable feed-back for the company and valuable researchexperience for students, who will be involvedin the survey.

Student ProjectsThe CVCR provides supply chain related

projects from both member and non-membercompanies that are suitable for student teams,supervised by faculty members or researchstaff. These are experiential projects, for cred-it, and are organized and managed by theCVCR.

Lehigh’s Supply ChainManagement Programs

As a relatively small university with a pow-erful research infrastructure, Lehigh boasts avibrant academic culture. The university wasrecently cited by The New York Times as “anew Ivy,” so named because of its rapidlyincreasing student selectivity. That’s becauseof its highly collaborative approach to educa-tion and research—an approach that workswell in the study of the global value chain.

The transparent integration of the two dis-ciplines was the reason Inbound Logisticsmagazine recognized Lehigh’s supply chainprogram as one of the top 25 smart choicesin the nation, describing the program as a“creative, hands-on environment that usescase studies and industry experts.” AMRResearch also highlighted the supply chainmanagement program as one of the nation’stop 19 programs that are best preparing stu-dents for work in global supply chain organi-zations. Lehigh was one of only two privateuniversities to have been included in the sur-vey, and was also the smallest of the 19 par-ticipating institutions.

Lehigh’s robust supply chain programbegins with the supply chain managementmajor, which emphasizes advanced costanalysis, negotiation, product development,and e-business.

28 29

Continuing Education

Lehigh University andthe Center for ValueChain ResearchLehigh University has been chosen to award the2010 Certificate of Advanced Education for theSupply Chain Leaders in Action Business ForumBy Joel Sutherland, Managing Director, Center forValue Chain Research, Lehigh University

In appreciation of Lehigh University and the Center for Value Chain Researchfor awarding the 2010 Certificate of Advanced Education and continuing education credits.

Is there a new story to go here?

Is there a new story to go here?

31

FloorPlans

30

Peer Groups Meetings

Sourcing, Procurement & ManufacturingApache III & IVOrder Fulfillment & DistributionApache IIDemand Planning ResponsivenessApache ISupplier Collaboration - CouncilHuman Resources - HopiInventory Management & Information Technology - TreatyCustomer Relationships – Papago IProcess Improvement – Papago IILogistics Strategy – Maricopa II & IIISenior Executive – Maricopa I

The Welcome Reception on Monday –The Courtyard Breakfast/Lunches/Circle of Excellence Awards LuncheonGrand Coronado

Keynote Sessions – Grand Coronado

Super Sessions & BreakoutsInnovating the Supply Chain through CollaborationArizona II & III.Leading the Supply Chain in the New Normal – PuebloMacroeconomic Factors Affecting the New NormalArizona I. Research & Benchmarking – Tuesday & Wednesday – Grand Coronado Thursday – Pima

Peer Groups MeetingsTransportation & Carrier Management – PimaDistribution Design, Material Handling & Support – YumaSustainability – Board Room

Ground Level

RegistrationDesk

New room assignments

New room assignments

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Employee health and wellnesstraining, as well as robust safety pro-grams form the keystone of K-C’sgoal of limiting workplace fatalities toan acceptable number: zero. Thefirm’s focus on its workers doesn’tend when the whistle blows, howev-er. K-C has begun teaching a numberof informal seminars that offer clearpractical — and environmentallyresponsible — advice for reducingdomestic energy use, creating back-yard habitats for wildlife, and sug-gesting simple home improvementsthat can dramatically cut heatingcosts and energy consumption inwinter.

PlanetHelping ensure that our children

inherit a world healthy enough tosustain their own children, grandchil-dren, and etc. is a priority for K-C.Kimberly-Clark’s Sustainability 2015initiative introduces an array of eco-friendly measures, but with fourmain goals of paramount impor-tance:• 25 percent reduction in manufac-

turing water use

• 100 percent wood fiber from certi-fied suppliers

• 5 percent absolute reduction ingreenhouse gases

• Zero waste to landfills

Kimberly-Clark acknowledges thatreducing energy use and cost aretwo of its most difficult and complexproblems, but the firm remainsunwavering in its dedication to solv-ing them. K-C has in place its GlobalEnergy Services Team, made up ofengineers and experts across abroad spectrum of disciplines andtasked with making the company asenergy-efficient as possible.

The company is also a member ofENERGY STAR, a joint program ofthe Environmental Protection Agencyand the U.S. Department of Energythat helps U.S. companies measureenergy use, set goals, track savingsand recognize improvements. In2008 and 2009, Kimberly-Clarkearned the EPA’s ENERGY STARPartner of The Year award in recogni-tion of the company’s broad andthorough commitment to energy

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regards to social, environmental andeconomic responsibility. Because ofthis resolute and responsible vision,supported by its long history of con-sistently doing the right things, theDistribution Business ManagementAssociation is proud to honorKimberly-Clark with the 2012 Circleof Excellence Award.

Each year, DBMA’s expert panelsurveys the corporate landscape formember companies whose dedica-tion to environmentally responsibleoperation and CSR demonstratesnot just a desire to avoid EPA finesand NGO campaigns, but to fostera culture that recognizes that sus-tainability and profit must coexistfor a company’s long-term success.After all, if investors and customersfear that the air they breathe andthe water they drink is unhealthy,then buying quality paper productsbecomes a decidedly minor priority.

“What Kimberly-Clark has doneand is committed to do is reallyquite impressive,” said DMBAExecutive Director Amy Thorn. “AtDBM, we’ve always thought of theCircle of Excellence as a kind of aclub whose members set a sustain-ability standard that all companiesshould aspire to. Companies likeKimberly-Clark understand thattoday companies have only oneresponsible choice. They mustchoose to meet the needs of thisgeneration without compromisingthe future generations’ ability to dothe same by creating communities,policies and practices that continu-ously improve the quality of life.Kimberly–Clark is a company thathas chosen to encourage and cre-ate sustainable lifestyles with thenearly quarter of the world’s popu-lation that trust K-C's brands andthe solutions they provide toenhance their health, hygiene andwell-being; instead of being content

with business as usual.“The multi-faceted ‘People, Planet

and Products’ framework ofKimberly – Clark’s Sustainability2015 initiative illustrates their con-tinued commitment to responsiblebusiness practices and policies andhas earned them the title of thisyear’s Circle of Excellence Award,”Thorn said.

Kimberly-Clark’s distilled mantraof “People, Planet and Products”refers to the broader set of sustain-ability commitments the companyhas made to improve its social,environmental and economic prax-es. K-C says its approach will “sus-tain and build healthy working envi-ronments; develop programs toaddress United Nations MillenniumDevelopment goals; innovate prod-ucts and business models to reachemerging customers; focus oursocial programs on global issuesand K-C communities; and imple-ment programs to reduce energy,greenhouse gas, water and waste.”

“Sustainability is no longer only inthe realm of operations, it hasgrown to include virtually everyfunction, every brand and everybusiness at K-C,” said Suhas Apte,vice president of global sustainabili-ty. “Sustainability 2015 is a newway of operating; we now haveclear sustainability metrics that willmeasure our progress and hold usall accountable.”

PeopleOn the people front, K-C’s focus

on involves attaining the followinggoals:• Social programs in all K-C com-

munities• 100% of Key Suppliers participate

in KC’s program to implementsocial standards

• Zero workplace fatalities

Profiles of Excellence:

Chiquita Brands Honored with2009 Circle of Excellence AwardChiquita Recognized for Global Supply Chain Managementand Carbon Foot Printing by International University Panel

Chiquita was honored with the 2009Circle of Excellence Award for theirmulti-year collaboration with the MITCenter for Transportation & Logistics(CTL) to recognize the challenges ofcarbon footprint measurement and todetermine the correct information andmethodology needed from supplychains to support ongoing corporateresponsibility and sustainability efforts.The award was accepted by ManuelRodriguez, senior vice president andcorporate responsibility officer atChiquita, at last year’s SCLA annualbusiness forum. “It was my pleasureto accept this award on behalf of theChiquita global organization,” saidRodriguez. “Our focus on practicalaccomplishments in sustainability overthe past 10 years has helped trans-form the company into a CSR leader.We’re excited about the future as wecollaborate with top organizations anduniversities on the challenges ahead insustaining our natural resources andcaring for our environment.” Chiquitahas continued its ongoing effort to col-laborate with top organizations and

universities on the challenges in sus-taining natural resources and caringfor the environment.

Additionally, Congresswoman JeanSchmidt congratulated Chiquita forreceiving the 2009 Circle of ExcellenceAward, presenting a copy of theCongressional Record statement shemade on the floor of the U.S. House ofRepresentative honoring Chiquita’sachievement. “This award shows whatI already knew about Chiquita – theyare a model corporate citizen – always.

K-C Steps Up to the PlateKimberly-Clark Earns the 2012 DBMA Circle of ExcellenceAward for its Impressive Track Record and ComprehensiveSustainability 2015 Strategy By Michael Schwartz

Pictured from right to left is RepresentativeSchmidt presenting Congressional Record toChiquita CEO, Fernando Aguirre, ManuelRodriquez and Deverl Masserang.

management. In addition, the EPAranked K-C 12th in its most recentlist of the top Fortune 500 GreenPower Users in the United States.

ProductsAs with their Planet approach,

Kimberly-Clark’s Sustainability 2015plan has a great many tactics, all ofwhich help them toward achievingthree key goals:• 25% of sales from environmentally

innovative products

• 20% reduction in packaging envi-ronmental impact

• 250 million new consumerstouched

One elegant example of the inter-play between People and Productsand life-cycle thinking comes in theform of K-C’s Smart Flush bag.According to the company, “TheScott Naturals Smart Flush bagoffers a safe and easy way to save

water at home. When placed in thetoilet tank, the material in the bagabsorbs water and expands, reduc-ing the amount of water consumedin each flush by up to one liter. Afamily of four could save 2,000 gal-lons of water per year by using theSmart Flush bag.”

Past Circle of Excellence winnerssuch as Hershey and PepsiCo allexemplify the best combinations ofcorporate environmental and socialresponsibility, that powerful rightstuff this year’s winner has is abun-dance as well. As Kimberly-Clarkthemselves say, “We believe thatthe way we do our business is asimportant as the business we do.Simply stated, operating withintegrity and with high ethical stan-dards is the Kimberly-Clark way ofdoing business.”

And awarding that integrity is simply the DBMA way of doingbusiness. Congratulations, Kimberly-Clark.

A140-year-old multinational corporation employing more

than 57,000 workers and earningnorth of $20 billion annually mightbe forgiven for putting its resourcessolely into making all those numbersrise. Kimberly-Clark needs no suchforgiveness, as its aggressive andcomprehensive Sustainability 2015strategy sets it firmly on a leadershipcourse amongst its peers with

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Industry Article:

lthe current state, generally accept-ed practices of Supply ChainSustainability 1.0, the emergingtrends of the future (Supply ChainSustainability 2.0), and that of themost efficient, sustainable supplychain, that of the natural ecosystem(Supply Chain Sustainability 0). Forthe remainder of the paper, I willcompare sustainability commit-ments (as shown in the WasteHierarchy Model) for each of thesethree models.

Option 0: The NaturalEcosystem “Supply Chain”

In business, a supply chain sys-tem is defined as a system of peo-ple (people, organizations), process-es (activities, information) and tech-nologies involved to move a prod-uct or service from a supplier to acustomer. In a natural ecosystem(such as a forest, desert or ocean),the same general associationsapply, but the intricacies of relation-ships between these “organisms,processes, and technologies” haveoften been formed and perfectedover millions, if not billions of years.For instance, oxygen as an elementhas been on Earth for roughly 2.5billion years [5], which means that itwas absent from the Earth for thefirst couple of billions of years of itsexistence. Earth without oxygenmeans that there was no animal life,and no photosynthesis enabling thesymbiotic relationship of life.Perfected over millions of years,photosynthesis has created a home-ostatic relationship in which plantsuse the sun’s energy to split water,

combining hydrogen with theCO2 received from the atmos-

phere to make energy inten-sive sugars and freeing oxy-

gen, enabling animals tolive. Either directly or

indirectly, photosynthe-sis is the source of

energy for nearly alllife on Earth.

The Amazonrainforest is an

impressiveexample of a

natural sup-ply chain

A Case for aNew Definitionof Supply ChainSustainability

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By Jack Buffington

S cientific evidence of an anthropogenic impact on the

environment is indisputable. CO2emissions are climbing rapidly,increasing by 31% from 280 partsper million (ppm) to 380 ppm from1850 to 2005 [8]. At the presentrate of growth, emissions will reach560 ppm by the end of the nextcentury, which is double the pre-industrial era level [7]. From a pointof reference, the 100 ppm increasethat has occurred over the past cen-tury is equal to that which had previ-ously occurred within a 100,000year glacial cycle [2]. Of thisimpact, scientists have attributed75% of CO2 emissions to anthro-pogenic activity, largely driven byfossil fuel combustion, and cementmanufacturing, with the remainderdue to land-use changes of defor-estation, associated biomass burn-ing, and agricultural practices [4].With regard to the economic impactof climate change, scientists haveestimated the future cost to miti-gate this damage will cost over 22%of the U.S. G.D.P. [7], and a reversalof this trend would take a 60%reduction of CO2 to stabilize,assuming no world economicgrowth, and 75% given currentworld economic growth trends.

While almost every study hasfound that “a growing number ofexecutives view sustainability asimportant to competing in thefuture” (e.g., GreenBiz, “The State ofGreen Business 2011”), few, if any,company’s eco-commitments aresufficient relative to the problem, as

noted above. To further exacerbatethe problem, the consumer’s inter-est appears to be waning: a 2011Gallup poll showed Americans giv-ing priority to economic growth overenvironmental protection by thelargest margin in the last 30 years(54% to 36%) [3]. With most com-panies struggling to achieve short-term financial benefits from supplychain sustainability, and consumersgenerally apathetic toward thecause, most present day (that I amcalling Supply Chain Sustainability1.0) programs have been of limitedsuccess relative to its objectives.

In this paper, I will explore thepossibility of a supply chain sustain-ability program that enables a com-pany to address the real scientific,ecological challenge while at thesame time, improving the compa-ny’s bottom line. To measure theviability of a sustainability program, Iwill use the Waste HierarchyModel, as is illustrated in Figure 1,to measure the materiality of awaste mitigation effort: activi-ties in the higher levels of the hierarchy will have agreater positive impacton the environment/com-panies financials thanthose on the bottom.I will present threemodels for com-parison:

Figure 1 – Waste HierarchyModel

Alliance

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system: 25% of the Amazon’swater is recycled by the forest itself,and about half of its water isreturned to the air via leaves, withthe rest being distributed through anetwork of rivers and lakes. Theclouds that are developed throughthe forest are planet cooling,enabling the whole supply chainsystem to not only support and self-regulate itself, but the entire Earthas well. In a definition of arrange-ments and relationships that is infi-nitely more complex than the mostsophisticated global manufacturingand fulfillment supply chain, a rela-tionship of bacteria, plants, and ani-mals within a natural environmentcreates the most formidable exam-ple of waste management; the pre-vention of resource use if not opti-mal, then the optimization ofresource use through minimization,and finally reuse. Very few naturalresources within a natural ecosys-tem have to be recycled, as wedefine the term, and almost nothinggoes to waste (having to be dis-posed). Through the refined rela-tionships of an ecological supplychain, the waste product of onebecomes the food for another, per-haps with an intermediary (such asa bacterium) breaking elementsdown along the way. A dead, rot-ting animal does not needed to berecycled or disposed of, rather itdecomposes through bacteria, lead-ing to becoming a food source foranother. Over time, a supply chainsystem has emerged to a perfectcombination of resources, process-es and technologies (per se), lead-ing to the optimal use of allresources within the system.

Option 1: Supply ChainSustainability 1.0

Obviously, a comparison betweenSupply Chain Sustainability 0 andour current state efforts (SupplyChain Sustainability 1.0) is no com-parison at all. While waste manage-ment efforts have occurred duringthe Industrial Era (resource manage-ment during World War II as anexample), widespread private com-pany programs legitimately startedto appear in the 1970s, with the

advent of rising fossil fuel costs,and rampant industrial environmen-tal damage. To combat these cir-cumstances, environmental clean-up and energy efficiency programsappeared, making a significantimpact to the problem, but offset byburgeoning global economic growthrates, which offset any gains. Thedriver of economic activity is anenergy that is a non-renewablesource (fossil fuels, produced onlythrough millions of years of decom-posing plant/animal life beingshielded from oxygen) in compari-son to that of our natural ecosys-tem (photosynthesis), which is100% renewable and the driver of asymbiotic supply chain system.Therefore, scientists are only begin-ning to learn of the wastes (botheconomic and environmental) asso-ciated with our economies energysource versus that of the naturalecosystem.

Therefore, while today’s supplychain sustainability programs are intheir infancy, the challenges thatcompanies are facing (both eco-nomic and environmental relative towaste) are of high urgency, leadingto present day efforts in being insuf-ficient. Initial efforts to regulate use(through federal fuel standard andenergy efficiency guidelines) haveled to benefits that have been offsetby greater automobile/deviceusages, leading to higher CO2 emis-sions. Efforts to replace our non-renewable fossil fuels with morerenewable ener-gies (mainlyplant basedbio fuels) hasbeen limited inbenefit, due tolower thanexpected ener-gy balance(energyacquired/ener-gy expended)rates due tohigher energyutilization inthe production(fermentation)process andemission stan-

dard benefits. Table 1 [1] provides acalculation of the energy balancefrom different biofuel types/tech-niques. While companies havesought to use more biofuels as aneffort in their sustainability pro-grams, this has not led to significantimprovements in cost/efficiency orenvironmental sustainability, as wasoriginally anticipated.Table 1 – Energy Balance

Nation of Origin Type of FuelEnergy Balance

United StatesCorn Ethanol 1.3Brazil Sugar Cane Ethanol 8Germany Bio Diesel 2.5United StatesCellulosic Ethanol

2-36Recycling, which is a lower tiered

initiative in the Waste HierarchyModel, has also led to limited suc-cess thus far in results for U.S. com-panies. While almost every compa-ny in the U.S. has touted their recy-cling program, these efforts haveoften led to a result of downcycling,which is the reuse of a product, butnot in the same available use. Forexample, a food manufacturer whorecycles its organic residuals fromthe manufacturing process willoften downcycle the materials out-side of its own supply chain (suchas for cat or dog food) rather thanreusing it themselves. PET plasticbottles can be 100% recycled, butnot in its original use (soft drink, forexample), but rather is gainingadoption as a carpet fiber. In alu-

Figure 2 – U.S. Exports of Nonferrous Scrap

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minum can recycling, which is high-ly viable as a material, only 55% ofall cans in the U.S. are recycled,which includes a significant growthin export markets (shown in Figure2) where secondary supply reusabil-ity is more viable [6].

In comparison to foreign markets,U.S. companies have been ham-pered by consumer apathy in per-sonal use recycling, or perhaps thebusiness case of doing so. Whilethe U.S. has a 55% collection ratefor aluminum cans, other developednations have rates in the 90%+range, such as Switzerland,Sweden, Norway, Japan, andGermany. This appears to be anindication of a lack of a symbioticsupply chain, as well as a culture ofcivic responsibility, to improve thereusability of its materials.

Option 2: Supply ChainSustainability 2.0

From Option 0, which is the mostperfect sustainability program thathas evolved over millions, if not bil-lions of years, to Option 1, which isin its infancy, and largely insufficientto the task, we find a need forSupply Chain Sustainability 2.0 thatbridges the gap, both environmen-tally and economically. If we learnfrom nature, we realize that thegreatest act of sustainability is toprevent or minimize use, which iswhat waste reduction programs(like Six Sigma) have addressedsince W. Edwards Deming in theearly 20th century. Quite surprising-ly, many companies have undertak-en supply chain sustainability pro-grams that are discretely uniquefrom a Six Sigma program, leadingto questions whether they under-stand the nature of waste/sustain-ability. Therefore, a company thatwishes to implement a SupplyChain Sustainability 2.0 programshould understand that a preventionand minimization of waste is thebest result, therefore, combiningthese programs, or starting a wastereduction program as the first step.Manufacturing companies thatreduce or prevent the use of rawmaterials, gain a greater yield fromthese raw materials, lower inventory

levels, energy use, improve productdesign, and eliminate/minimizeproduct packaging, can take a bigstep forward in achieving sustain-ability.

A company that wants to take thenext step toward Supply ChainSustainability 2.0 must think of itscompany and its supply chain as anatural ecosystem. It must not useresources it can avoid, minimize theresources it must use, reuseresources within its own supplychain (rather than downcycling), andnever use a resource that mustinevitably be disposed of at somepoint. Renewable forms ofresources (petroleum energy orpetroleum based products) arefinite, difficult to reuse and dis-posed of in a sustainable manner.Many of today’s consumer prod-ucts are either made of, encased in,and/or packaged in plastic, whichcan be recycled (often downcycled),but not renewable. Due to a lowcost of production and design flexi-bility/strength, plastics and otherpetroleum based products havedominated our supply chains, givenour perspectives of cost, and otherfactors. If we change our perspec-tives, can we create thermoplasticproducts derived from a plantstarch (such as corn, sugarcane,grains, or other carbohydrates), andeven better, these starches afterthey have been used for other pur-poses? Can a company that manu-factures and has an organic wastestream as a residual, find a processto reintroduce these materials backinto its supply chain, as doesnature?

Not only can companies findopportunities to act as a naturalecosystem within its own supplychain, it can also repurpose itselfgeographically to be surrounded byother companies (not necessarily inits supply chain) that can lead to animprovement in the use ofresources. The concept of “indus-trial symbiosis” is one in whichcompanies create a “geographicalecosystem” of collocation wherethe wastes of one company canbecome a resource of another. AnEco-industrial park (EIP) may be

planned as a systems approach toefficiency/environmentalism, wheregoals are integrated to improveresults. Studies have found thesesites (such as the most noted EIP inKalunborg, Denmark) to lead to sig-nificant economic and environmen-tal benefits as a result.

Summary: The Future ofSupply Chain

When companies begin to look attheir supply chains from an ecologi-cal standpoint (Supply ChainSustainability 2.0), they not onlybegin to improve their sustainabilityefforts, and they also begin to rede-fine their supply chains and compa-nies as a result. The pressures thatproducers and consumers facerelated to our natural environmentare enormous, and will only grow inimportance with time. Perhaps weshould reflect upon Jim Collins’2001 book, Good to Great whenthinking of our present day effortsin supply chain sustainability, con-cluding that “good is the enemy ofgreat”. While your companies’efforts thus far in sustainability maybe good indeed, and perhaps betterthan your competitors, your compa-ny and its supply chain is reliantupon you, as a supply chain profes-sional, to arrive at great!

FOOTNOTES

[1] Bourne, J.K., Clark, J.R., Green Dreams,National Geographic Magazine October 2007p. 41

[2] Erkman, S. (1997). Industrial Ecology: anhistorical review. Journal of CleanerProduction, 5 (1-2), 1-10.

[3] Gallup Study, Sustainability, April 22, 2011.

[4] IPCC Working Group II. IPCC, Geneva,Switzerland: 2007. Climate change impacts,adaptation and vulnerability.

[5] NASA Research Indicates Oxygen onEarth 2.5 Billion Years Ago (press release –NASA)

[6] U.S. Commence Department, 2011.

[7] Vandenbergh, M., and Steinemann, A.(2007). The Carbon Neutral Individual. NewYork University Law Review.

[8] WMO. World MeteorologicalOrganization; Geneva Switzerland: 2006.Greenhouse gas bulletin: the state ofgreenhouse gases in the atmosphere usingglobal observations up to December 2004.

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In this example, if the MerchantWholesalers-Durable Goods indus-try segment as a whole couldreduce its average lead time by 2percent and reduce the standarddeviation of lead time by 3 per-cent, average total inventorieswould be reduced by 2.4 percent,representing $5.7 billion in poten-tial annual cash savings. ($239,221* 2.4 percent = $5,741 ($5.7 bil-lion) in working capital. Assuminga holding cost of 20 percent forestimation purposes, the actualpotential savings equals $1.148billion.)

Using this framework, itbecomes apparent that industriesoperating with large average leadtimes have a higher potential ofinventory savings from a reductionin lead time variability versusindustries with lower average leadtimes. This implies that in an envi-ronment where increasingly moreproduct is being sourced interna-tionally with longer lead times,companies would be well servedto focus their time and energy onreducing transit time variabilitythrough logistics design and oper-ational excellence.

Eliminating Logistics InventoryYou may be thinking, “I know

that reducing transit time and itsvariability will reduce inventories,

but how do I do it?” This is thequestion that all supply chain pro-fessionals ask themselves as theywork to meet the financial objec-tives set forth by their leadership.Below are some examples ofhow you can reduce your invento-ry through logistics design andoperational excellence.

Supply Chain Visibility —Visibility is the basic buildingblock necessary to (1) gain con-trol of your lead times and (2)decrease variability. After all, howcan you solve a problem if you donot know where it is happening?Supply chain visibility in and ofitself does not improve the aver-age lead time or its variability, butit does improve the supply chaindecision making that can impactoperations.

Exception Management —Once you have visibility, what canyou do with it? At the core of visi-bility is understanding when asupply chain disruption hasoccurred, at which time you havethe opportunity to respond in atimely manner to eliminate thedownstream effects — or at thevery least, mitigate them. This iswhere effective exception man-agement procedures can be use-ful. Differentiating between nec-essary information and random

“noise” is critical to this process.For example, customer servicerepresentatives may log into a visi-bility system to find that a ship-ment has not yet arrived at its finaldestination and initially interpretthis to be a problem. However,upon further investigation, theyrealize it wasn’t due to arrive foranother two days anyway, sospending time managing it wouldbe an imprudent use of their time.Effective supply chain visibilityrequires not only access to thedata, but also an exception man-agement platform that can be pro-grammed to elevate informationto varying levels of scrutiny basedon its likelihood to cause supplychain failures. This then canensure that supply chain man-agers are focusing their limitedresources on monitoring and solv-ing the problems that are mostcritical.

Coordination of TradeTransactions — One area wheresignificant improvements can bemade to the average lead timeand its variability is in the coordi-nation of trade (import/export)transactions, specifically wheremultiple parties are involved. Tradetransactions often involve severalservice providers — such as cus-toms brokers both in the countryof export and import, a freight for-warder, sometimes many trans-portation providers, and even dis-parate companies performingconsolidation and deconsolidationservices. As you can imagine,every time a transaction takesplace between two parties whooperate independently from oneanother, there is potential forincreased dwell or processingtime. Take, for example, a ship-ment crossing the Mexican borderinto the United States. A Mexicancarrier transports the load to theborder crossing, at which pointthe customs broker receives it andworks to process its exit fromMexico. This probably will includeengaging a separate carrier tomove the load physically acrossthe border. If the initial carrier and

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As companies today findthemselves grappling to

strengthen their competitivenesswhile operating within a volatileeconomic environment, the needfor inventory control is greaterthan ever. Yet, for many compa-nies economic uncertaintyrequires more inventory, not less,and thus they are faced with aninteresting dilemma: How dothey reduce inventory — andthereby costs — in the face ofwildly fluctuating customerdemand? One solution is to identi-fy and improve the portion ofinventory that can be controlled bylogistics execution — or what weat Ryder call logistics inventory.Logistics inventory is a form ofwaste. Essentially invisible to theundiscerning eye, logistics inven-tory can be deadly to balancesheets and toxic to effective oper-ations. It requires the right exper-tise to measure it, and excellenceand precision to eliminate it.

Cycle Inventory, Safety Inventoryand Logistics Inventory

Most supply chain managersthink of total inventory as eithercycle or safety inventory, butwhatever they call it, in the end,having more inventory than youneed = waste.

Cycle inventory is the amount ofinventory needed to satisfy the

average demand for a productduring the replenishment cycle, orlead time. In a perfect world, thisis the only inventory that wouldever be needed, because demandwould never change and the leadtime to replenish the productwould never deviate from theplan. However, we all know this israrely the case, and thus the needfor safety inventory is born. Safetyinventory is what is required toaccount for variability in demandand lead time. However, if a sup-ply chain operates at maximumefficiency, and customer demandis very mature and consistent,there should be no need for safetyinventory.

Logistics inventory is how Ryderdescribes those components oftotal inventory that are driven bypoor logistics design and/or exe-cution of the supply chain.Logistics inventory can be elimi-nated by looking at its two primarycauses — lead time and variabilityof logistics execution. While leadtime is determined in part by fac-tors that are not generally relatedto logistics design and execution— for instance, manufacturinglead time — it also is determinedby factors that are directly relatedto the supply chain’s logisticsdesign, i.e., transit time. For exam-ple, time spent crossing a border

between two countries or duringan import/export transaction ispart of the transit time and overalllead time, and it drives the level ofcycle inventory. Using alternativelogistics designs and operatingmodels can reduce this transittime and consequently, cycleinventory.

The second important compo-nent of logistics inventory is vari-ability in logistics execution, caus-ing the need for safety inventory.Variability affects transit time andtherefore lead time. By standardiz-ing logistics management process-es and achieving operational excel-lence and precision, variability andlead time can be reduced, therebyreducing the need for safety inven-tory. The predictability that resultsfrom performing standard workprocesses reliably and consistentlymitigates the need to hold invento-ry "just in case.”

Calculating LogisticsInventory

To illustrate the potential thatlogistics design and operationalexcellence can have in reducingan industry’s overall inventory lev-els, Ryder has developed theLogistics Inventory Index. By lever-aging published Monthly Salesand Total Inventory figures byNAICS Code, Ryder engineers candetermine the estimated savings— by industry — that can beexpected through improvementsin a supply chain’s lead time andvariability.

Ryder’s Logistics InventoryIndex quantifies the potentialinventory reductions of: 1. Reducing Lead Time Variability

in 1 percent increments

2. Reducing Average Lead Time in1 percent incrementsOn the right is an example,

using the industry segmentMerchant Wholesalers-DurableGoods, which demonstrates thepotential reduction in averageinventory associated with makingimprovements in lead times andvariability.

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Refereed Article:

Exhibit 2: Description of Survey by Section

Eliminating‘LogisticsInventory’ ToBenefit YourBottom LineBy James W. Moore and Mario Rivera