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SUPPLY CHAIN MANAGEMENT INSTITUTE

NE WSLE T TER

SAVE THE DATE!

28th Annual SCMI Career Fair

February 28, 2014 The Career Fair is open to all USD undergraduate and graduate business students and alumni, particularly those in supply chain management, information technology, accounting, or industrial engineering, who are seeking a job or internship in their respective fields.

Strategic Cost Management Workshop

February 4-5, 2014The Strategic Cost Management Workshop will provide companies with all the tools necessary to achieve and maintain a sustained competitive advantage at a cost lower than their competitors.

3rd Annual SCMISpring Symposium April 14-15, 2014

The Annual Spring Symposium features well-known industry speakers from leading organizations as well as interactive discussion forums facilitated by subject matter experts.

Comments? Interested in co-hosting or sponsoring an event? Ideas for future newsletter articles? Contact Joel Sutherland at 619-260-2794.

Director’s Column

Aligning Supply Chain Talent with Industry NeedsBy Joel Sutherland, Managing DirectorSupply Chain Management Institutejoelsutherland@sandiego.edu

Albert Einstein once said, “The only thing that interferes with my learning is my education.” This sums up the focus of education for the last century. Students were taught to be “book smart,” but they lacked the business savvy that real-world experience could provide. While times are changing, firms are still struggling to attract, retain and grow supply chain talent who provide the right mix of applicable knowledge and appropriate skills. Based on research the University of San Diego recently conducted, it is clear that universities must produce supply chain talent who are more aligned with industry needs. However, industry influencers must also identify which critical-to-success skills universities should provide to ensure students are prepared for real-world challenges. The USD research was straightforward. Nearly 100 executives in top companies were asked: 1. What essential skills and attributes do you seek when hiring top talent? 2. What skills will be essential to stay competitive 5-7 years into the future?Feedback from 360 additional respondents reinforced our findings.

What did industry executives tell us?• Undergraduate curricula should be broad, covering end-to-end supply chain,

including global issues. No “deep dive” into one particular area, as provided at the graduate-level.

• Talent should be able to grasp the “big picture,” understand how all the pieces fit together and what the impact is elsewhere in the supply chain.

• Talent needs to know how a company makes a profit, not only understand a function.

• Internships (multiple) are crucial in providing real-world experience.

• Supply chain talent should possess the essential “Building Block” skills & attributes as shown in Exhibit 1 (next page).

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Exhibit 1

How should universities respond?• Provide relevant, real-world experience for undergrad and graduate-level students through internships.• Develop close relationships with industry in order to understand current and evolving needs.• Establish end-to-end curricula that incorporates cross-functional course work.

• Deans, department heads, program directors and professors should all be engaged and supportive.• Support student SCM organizations and involvement in professional associations (e.g. CSCMP; ISM; APICS; WERC).

How can industry leaders provide support?• Actively recruit students (undergraduate and graduate) for internships and supply chain positions within their firm.• Support student projects to explore SCM issues within their firm.• Engage in various programs such as career fairs, educational conferences, networking events, and tours.• Provide advice on how to develop curriculum that aligns with industry’s needs.• Engage faculty to pursue innovative supply chain ideas.• Be a resource (e.g. guest lecturer) for better understanding industry trends and needs.

• Establish a clear career path for SC talent within their organization; to attract, retain and grow this valuable asset.

Universities and industry executives need to closely cooperate to identify necessary skills, develop a curriculum that aligns with these needs, and provide experiential learning opportunities to prepare the students to effectively address the challenges they will face as supply chain professionals. After all, as one HR Executive at Raytheon shared with us in the survey comments, “60% of our workforce is ready to retire in the next 5 to 10 years. We really need to step back and grow our talent.”

Research conducted on behalf of the University of San Diego’s School of Business Administration by Watz Productivity. ■

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The Next Wave of Strategic Procurement: Total Value OptimizationBy Mark Montanari, Executive Vice President of Strategic Procurement forMaine Pointe mmontanari@mainepointe.com

Procurement executives are in a unique position to orchestrate collaboration that drives exceptional value to their company and their supply partners. At no time has this opportunity been more evident. With increasing pressure for growth and a continuing need to reduce costs while enhancing the integrity of their supply chain, companies need a more strategic approach to their procurement practices. A new competitive order is evolving.

This new imperative involves facilitating dialogue and stewarding decisions to cultivate supply chain relationships that can deliver continuous innovation, financially-accountable sustainability practices, and tangible value to the end customer. It’s time to transition procurement from the traditional, often constraining, “Total Cost of Ownership” approach that focused on cost reduction to a new model of proactive value creation that delivers a differentiated experience to the end customer: Welcome to the era of Total Value Optimization (TVO).

The transformation of the procurement function can be illustrated by the three stages of its evolution, from “Price-Based” to “Total Cost of Ownership” (TCO), to TVO, as indicated in the table:

Price-Based Total Cost of Ownership Total Value OptimizationPurchase price is determining factor Price, quality, durability, and other

factors combine to determine lowest overall cost

More efficient external and internal supply chain; improved output increases value

Little communication to suppliers beyond pricing

Limited communications; based on reduction of raw materials and production costs

Integrated communications among multiple internal and external stakeholders

Reactive to internal requirements Limited proactive activities Comprehensive strategic planning and execution

Relationships mostly transactional Relationships oriented to year on year cost reductions

Relationships evolve to innovation, risk mitigation, and sustainability practices

TVO requires procurement professionals to lead the integration of communications between, and among, internal and supply chain interests. Such integration enables companies to derive the most return out of their assets in order to achieve more efficient operations, improved productivity, less downtime, increased revenue and, ultimately, better value to the end customer. In short, it’s a forward-thinking strategy that truly takes a holistic view to “optimize” the impact on the organization’s top and bottom line.

TVO requires a significant shift in mindset regarding the role of procurement and the supplier community. Suppliers are viewed as value providers rather than cost drivers, enablers rather than inhibitors. When suppliers function as strategic partners with your organization, they demonstrate that they are equipped to respond with a greater capacity for innovation and agility in order to deliver solutions to unforeseen challenges that may emerge.

A TVO approach has the potential to transform operations and business practices enterprise-wide. Let’s use a common situation to illustrate the point:

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A mining company is evaluating potential suppliers for grinding media. A new supplier is offering a product that costs more than twice as much as the incumbent’s product. Based upon purchase price alone, the decision seems a no-brainer. Operations is happy with the incumbent and its product’s performance, preferring to keep things as they are. But using the TVO lens and working collaboratively with the supplier and operations, the procurement leader determines that the new product offers 1) less frequent replacement, 2) less downtime and 3) higher throughput. The actual value of throughput produced will increase revenue, and with the associated margin, far outweighs the short-term perceived value of low purchase price.

This simple illustration underscores a key point: the purchase price is merely the tip of the iceberg in a much more complex ecosystem. Companies must consider many factors that will impact overall value to the business – including yield, throughput, risk, quality, customer demand, logistics, maintenance costs, inventory management, disposal practices, environmental issues and product sustainability, among others. The perceived value of lower purchase price must be weighed against the multiple upstream and downstream forces that affect the overall value of each purchase. Challenging the organization to make the right purchasing decisions will help you get more out of your assets. In turn, that will enhance operational efficiency and drive increased productivity – which results in real cost savings and increased revenue.

The real question should not be “What can I do to reduce the costs of the goods and services we are procuring?” but rather, “How can we develop and leverage a comprehensive knowledge of the supply network’s capabilities to drive the maximum value for our company?”

A New Role for Procurement: Strategic Value CreationThere are numerous factors involved in determining whether your company is ready for the implementation of a Total Value Optimization approach to its procurement function. These are questions worth posing to your colleagues:

• What can you do to help evolve your company’s culture to a truly collaborative way of working?

• What governance frameworks need to be established to allow conflict to be uncovered and resolved as appropriate?

• What metrics and incentives would help promote big-picture thinking?

• How can you engage your suppliers in dialog to inspire their support of your innovation?

• How do you cultivate the development of a supply base whose values align with yours – especially in corporate, environmental, and social responsibility?

• How do you ensure that your suppliers proactively manage total quality standards for their raw materials as well as those of their own suppliers throughout the value chain?

• What steps can you take now to personally transition your organization to where you are seen as a driver of value, versus a manager of costs?

Procurement professionals have historically been tasked with cost containment, plain and simple. However, when they use their unique perspective to push beyond the conventional boundaries and drive collaboration across the value chain, they can become an invaluable resource for innovation and value creation.

There is no quicker route to the laying of a foundation for improved profitability, cash flow, and customer loyalty than by embracing Total Value Optimization. ■

Maine Pointe is a Boston-based operations management and implementation firm focused on sustainable global supply chain transformation for Fortune 500 market leaders.

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A History of USD’s Evolving Supply Chain Management ProgramBy Dr. David Burt, the founder of USD’s Supply Chain Management programs. Dr. Burt was at USD from 1981 through 2003 and has left the proud legacy of this program for all who have followed him.

As I reflect on the events which led to the University of San Diego’s (USD) Supply Chain Management undergraduate and graduate programs, I am fascinated with the number of people who played key roles in creating these programs. The first was Dean James Burns, who provided the essential support and encouragement back in the 1980’s. When I was hired in 1981, one of the requirements was that I teach at least one undergraduate course in the

field of procurement each year. Dean Burns, a former industrial sales manager, was eager to upgrade the new undergraduate program with the addition of what became a very popular course in procurement. A graduate elective in procurement followed in short order to graduate standards.

Leading procurement authority, Dave Nelson, was the key practitioner resource in the creation of the USD Procurement Forum (later renamed Supply Chain Management Fall Forum) which launched in 1983. Once Dave agreed to the idea of bringing creative and innovative practitioners together to share their innovative supply approaches, it was possible to attract other practitioners to USD’s first Procurement Forum. The annual Forum has since played a key role in USD’s march to international recognition in the field.

Countless students have played and continue to play essential roles in becoming invaluable resources to their employers and champions of USD’s Supply Chain Management programs. I remember a former procurement executive at a Silicon Valley disc drive manufacturer telling his director in the late 1980’s, “Let’s stop wasting money recruiting at ASU and MSU when we can obtain recruits who excel from USD.”

Since then, dozens of USD interns and undergrads worked at that firm and some have since become founders and executives at various technology companies. One, who within a few months of being hired, became that firm’s in-country contract administrator with its most critical supplier in Japan. Another, a USD MBA student who was also a Lieutenant and helicopter pilot in the U.S. Navy, became the VP of Operations for a maker of innovative medical devices. Another, went on earn his MBA at Stanford and then founded a startup which evolved into a leading, online auction services company. These talented alumni serve as the living legacies of the USD Supply Chain Management Program.

During my 23 years at USD, I was blessed with great support from our wonderful accounting faculty. Each term, I was invited to make presentations to every accounting class about our evolving supply chain management programs and career opportunities. This opportunity to ‘market’ the program played an important role in ‘getting the word out’ and resulted in attracting many excellent young minds into this evolving profession.

When Curtis Cook became Dean of the School of Business Administration in the 1990’s, he realized that it would be difficult for USD to become a center of excellence in all areas of business and proposed five centers. I believed that our growing supply management program should become one of the school’s five centers of excellence and succeeded in persuading the Dean to do so. Today, the Supply Chain Management Institute (SCMI) is recognized internationally as a leading center of excellence in the field.

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This evolution to becoming a center of excellence was tightly interwoven with the creation of a graduate Master of Science in Supply Chain Management in 2001. Today, this hybrid program provides the many benefits of having five short residential sessions over two years combined with the flexibility provided by on-line assignments, discussions and submissions. During the residence sessions, students and faculty become acquainted, reinforcement is made of recently completed course work, and discussions are held. Today, this program is nationally ranked.

An invaluable component of this MS program was the inclusion of an industry project during the second year. This project was designed to have students learn by doing, while at the same time address a problem of concern to their sponsoring companies. Tapping into my extensive network of procurement executives who possessed appropriate academic credentials, allowed us to jump-start the program with an integrated faculty of USD and outside subject matter experts. One corporate sponsor, Raytheon, stands out as having made an incredible contribution to the success and sustainability of the MS program. During the first year, Raytheon provided 31 students and continued to be a key source of students for a number of years after.

In 2003, I retired to Northern California feeling confident the undergraduate and graduate programs would continue to flourish. Fortunately, for the well being of the many students who have benefited from a marvelous education in supply/supply chain management over the past 10 years, a number of good women and men combined their efforts to sustain and upgrade the programs, connect with industry, and spread the gospel of supply chain management around the world. I have tremendous admiration and appreciation for them! ■

The Emerging Middle Class: What’s the Big Deal?By Fred Gilbert, Global Vice President of Consumer & Retail at UTi Worldwidefgilbert@go2uti.com

You have, no doubt, heard all about the emerging markets, developing markets, the BRIC countries (Brazil, Russia, India, and China), the CIVETS countries (Columbia, Indonesia, Vietnam, Egypt, Turkey, and South Africa), latest acronyms for the hotbed of growth in the global economy. Increasingly, and more in this last year, there has been an intriguing shift in this discussion toward a group within these countries who is truly responsible for driving growth, expected to be growth unlike anything we have ever seen. The group being

discussed is the emerging middle class. In this article we will explore why the emerging middle class matters, and how you can ready your supply chain to take advantage of the growth this group is bound to create.

Since 1963 the global middle class has grown by 1.3 billion people, adding roughly 27 million new middle class people each year (see orange segment of bars in Figure 1, next page). The projected growth in this same group for just the next 18 years is staggering. From 2012 to 2030 the middle class is expected to swell to 4.9 billion people, a six-fold growth rate of 161 million people per year.

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Figure 1: Global Middle Class Population Growth

Generally defined as those who earn between 5,000 USD and 40,000 USD, the middle class earns enough to purchase products that the poor cannot afford. Economists know that when individuals begin to earn approximately 10,000 USD GDP per capita, their spending begins to accelerate (see Figure 2) significantly.

Figure 2: Product Spending vs. GDP Per Capita

And as you might expect, it’s in the aforementioned “emerging markets” where we expect to see the greatest growth. In some cases, the middle class has benefitted from years of low cost country sourcing which has given once agrarian communities the opportunity to labor for a better wage. In other cases, the government has intervened to provide small subsidies to low-income groups. Regardless, countries such as China, South Africa, Turkey, Brazil, Russia, India, Indonesia and Malaysia are well positioned to see significant growth in the near future due to the emerging middle class and the acceleration in spending they will create.

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From a regional perspective, Asia stands to grow the most with the OECD projecting over 571% growth in middle class consumer spending from 2009 to 2030. The Middle East and North Africa will see over 144% growth, while Central and South America will follow with 120% growth, and Sub-Saharan Africa 50% growth in middle class consumer spending. While many companies are sourcing in Asia or South America, they haven’t begun selling their products in these regions, where they might in fact, provide the greatest opportunity for growth.

What’s also interesting is the variety of products that the middle class will begin purchasing over the next few years as they emerge as a force to be reckoned with in the global economy. A recent Credit Suisse report projects the strength of certain categories and countries thru 2017 as can be seen in Figure 3 below.

Figure 3: Category Growth Heat Map by Country

Whether you sell household products, personal care items, education, or tourism services, it is clear - an opportunity awaits in the emerging markets. Suffice to say, doing business in South Africa, China, or Turkey is hardly similar to doing business in developed economies like the USA, Germany, or Japan. Companies are unlikely to succeed if they do not develop the right supply chains for these specific markets.

These four simple steps have been outlined to help you take advantage of these opportunities:

Step #1: Identify markets where you can create long-term valuePrioritize your entry strategy against a few key markets where you can realize the greatest market potential and where you can create sustainable competitive advantage over the long-haul.

Step #2: Identify specific supply chain challenges, develop a risk mitigation planCorruption is a legitimate concern when entering some of these emerging markets. Transparency International (www.transparency.org) publishes useful data on corruption by country and by topic. Make sure you fully understand infrastructure constraints, trade agreements, trade tariffs and barriers, all of which can add confusion and considerable costs to doing business.Once you identify the various supply chain challenges you need to prioritize them by assessing your company’s vulnerability to them vs. the potential impact and then simply plot on a 2 x 2 matrix. Figure 4 (next page) shows an example.

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Figure 4: Risk Prioritization Matrix

Develop a comprehensive approach to monitoring and mitigating the risks. This should include assigning a risk owner and instituting a regular process to re-evaluate to ensure you are appropriately prepared to respond in the event a risk comes to fruition.

Step #3: Understand of your supply chain requirementsWhether it be understanding what it will take to forecast inventory levels for the launch of a new product in a new market for the first time, where you need forward stocking locations to ensure you can reach your customers within the required lead-time, or an entirely new last-mile distribution model to cost-effectively deliver product to your customers, all of these factors need to be well understood to ensure you can then create an appropriate supply chain plan which you can then execute.

Step #4: Meet and exceed customer expectationsYou can’t expect to take the supply chain you operate in one country and simply replicate it for an emerging market. To truly succeed you have to understand your customer and ensure your supply chain is designed with this key stakeholder in mind. To do this, leverage experienced supply chain partners, like UTi, where it makes sense.

The emerging middle class is the driving force behind emerging market growth. These consumers will accelerate growth at a pace like at no other time in history. Be prepared to help your company succeed. With focus on the markets that offer the best return for your business, risk mitigation, requirements defined, and a supply chain configured to your customers, companies can and will grow along with the emerging middle class. ■

With operations in 59 countries around the globe, 21,000 experienced employees focused on client service, and dedicated teams of industry experts standing by ready to help, the people of UTi welcome the opportunity to discuss your supply chain challenges and how we might be able to help you design a supply chain that will help your company realize its full potential in the emerging markets.

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28th Annual Supply Chain Management Fall ForumBest Practices in Global Supply Chain Management and Strategic Sourcing

On November 6-7, SCMI held its 28th Annual Fall Forum. The event started with a student networking dinner attended by more than 100 leaders from industry and academia. Over 175 supply chain professionals from nearly 60 different companies attended the all-day Forum. Presenters came from a wide variety of industries including retail, CPG, technology, and manufacturing. Standout sessions included:

Harry Moser, Founder and President of Reshoring Initiative, explained through his session Offshoring: No Longer the Obvious Choice how the increasing advantages of producing in America for the North American market are driving companies to reshore. He noted that since January 2010, approximately 80,000 manufacturing jobs have been reshored by about 250 OEMs and thousands of their suppliers.

Jeff Border, Vice President, Perishables Sourcing and Quality, for Provide Commerce (ProFlowers.com) asked participants to consider the challenges of managing a global supply chain for fresh flowers in his session Managing a Blooming Global Supply Chain. He explained how ProFlowers.com manages their global supply chain with changing sources of supply, multiple risks factors, mandates on sustainability, and dramatic peaks in demand. Maria Thompson, President & CEO, Agile Sourcing Partners, moderated the Best Practices in Global Sourcing panel. Supply chain executives from TaylorMade Golf, WD-40, Charlotte Russe, and Targus, provided best practices and explained changing dynamics in managing global sourcing in their respective industries.

Rosemary Coates, President, Blue Silk Consulting, explained what is needed to bring manufacturing back to the U.S. in her session Innovation, Automation & Localization in Bringing Manufacturing Back. Beyond the cost comparisons of the rush to reshore, companies need to consider product innovation to take advantage of evolving markets, automation, and localization to make these products attractive to the U.S. consumer. 

The Combination of Off-shoring and In-shoring Production – A Fish Tale was presented by Jan Tharp, EVP & COO, Bumble Bee Foods. Albacore tuna, represents about 5% of the total global tuna catch, and is caught in three primary oceans around the world. With global demand increasing and international sustainability efforts limiting supply, she described how Bumble Bee is developing strategies to secure the fish resource and manufacture a competitive product. She also reviewed how social responsibility and compliance issues have influenced Bumble Bee’s overseas sourcing strategy. ■

APICS, CSCP Certification Training

SCMI is offering APICS, CSCP Certification Training. This course helps students prepare for the APICS Certified Supply Chain Professional (CSCP) exam. It consists of five, eight-hour classes, with each class covering one module of the CSCP Learning System plus a review session. Our next course starts January 25, 2014.

To register, CLICK HERE

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NEWS AND UPCOMING EVENTS

November 13, 2013National Supply Chain ForumCalgary, Alberta, CanadaPresentation: Global Trends, Best Practices, and Collaborating to Optimize SC Performancehttp://supplychainforum.ca/

February 6, 2014Ahlers Center for International Business - ABC's of International Trade programUniversity of San DiegoLean Workshop: The Seven Deadly Supply Chain Wastes- Real Lessons LearnedCLICK HERE for more information

February 23-25, 2014Food Shippers of America Annual ConferenceOrlando, FLWorkshop: New Age LogisticsCLICK HERE for more information

March 20, 25, 27, 2014Ahlers Center for International BusinessUniversity of San DiegoGlobal Business Strategy Certificate: Aligning your Supply Chain Strategy for Increased Efficiency, Effectiveness and Reduced CostCLICK HERE for more information

April 2-3, 2014Logistic Summit and Expo MexicoMexico City, MexicoPresentation: Industry and Universities Working Together to Produce, Grow and Retain the Right Supply Chain TalentCLICK HERE for more information

May 18-20, 2014Logistics & Supply Chain ForumPonte Vedra Beach, FLPresentation: Collaborating to Optimize Supply Chain Performancehttp://www.logisticsforum.com/

Recent and Upcoming Presentations by SCMI’s Managing Director, Joel Sutherland

Contact UsSupply Chain Management InstituteSchool of Business Administration University of San Diego5998 Alcalá ParkSan Diego, CA 92110-2492

For Maps & Directions CLICK HERE

Call UsSupply Chain Management Institute(619) 260-4894Master of Science in SCM Inquiries(619) 260-7901

Visit our WEBSITE

SCMI is pleased to welcome HD Supply Facilities Maintenance as an Advisory Board member. HD Supply Facilities Maintenance is a leading supplier of maintenance, repair and operations (MRO) products to owners and managers of multifamily, hospitality, educational and commercial properties; healthcare providers; and municipal and government facilities.

SCMI is pleased to welcome Bumble Bee Foods as an Advisory Board member. Bumble Bee Foods was founded by a handful of dedicated fishermen in 1899. Today, privately held and headquartered in the United States, Bumble Bee Foods, LLC is North America’s largest branded shelf-stable seafood company, offering a full line of canned and pouched tuna, salmon, sardines, and specialty seafood products.