Dr. Martin Christopher, 4-5 April 2006 - Athens Hilton Hotel

“What’s the difference between DELL, ACER, SIEMENS or HP, which makes DELL today the number one computer manufacturer worldwide? “ With this rhetorical question Dr. Martin Christopher began his analysis, in the executive workshop “Gaining Competitive Advantage through Superior Logistics and Supply Chain Management” that was organised by Supply Chain Management Forum (SCMF) on the 4th and was repeated on the 5th of April 2006 at Athens Hilton Hotel. “Perhaps products’ differences are minimum. In the modern globalize business environment advantage comes from capabilities” Dr. Martin Christopher said.

“In DELL there are two (2) advantages: The lower end to end delivered cost (cost advantage), creating superior customer value through enhanced service (value advantage)”.

Why from the five (5) bigger USA car manufacturers, (General Motors, Ford, Daimler - Chrysler, Toyota and Honda), that operate in the same business environment, directed by executives which got their degrees from the same universities and developed in the same business environment and use the same suppliers, only Toyota and Honda are doing their business successfully while the others face serious problems?

Based on the Cranfield Centre for Logistics and Supply Chain Management - that operates under Dr. Martin Christopher direction – current research results, “The leading-edge companies have perfect supply chains” fact that confirmed by similar researches and studies around Europe and USA conducted by other institutions.

Dr. Martin Christopher, impressed and set his audience – composed of executives coming from Greek and International firms leader in their business field - thinking by presenting and analyzing series of contemporary indicative case studies.

Based on the data available in SCMF, over 90% of the participants had the feeling that this workshop met their expectations, and despite the rather high cost, over 85% considered it as money for value.

“ZARA maintains part of its production in Europe (Spain - Portugal) but is the world leader in apparel industry for years. The core element of ZARA’s strategy is the development and maintenance of an “Agile Supply Chain”. It makes ZARA capable to respond rapidly to unpredictable changes in demand. The basic characteristics of its strategy are: Substituting information for inventories, non-added-value time reduction, non-added-value activities removal, reduction of complexity and minimization of lead time”.

Dr. Martin Christopher was impressive. He borrows, as tools of analysis, philosophical notions and physics disciplines to presents topics and difficult concepts comprehensively, indication of speaker’s deep scientific and professional background and knowledge.

“Velocity = Distance/Time”. In ZARA is translated in “Agile Supply Chain = Supply Chain Length /Time”. Their success lies on the reduction of the non added value time.

According to the philosopher Francis Bacon “If we are to achieve results never before accomplished, we must expect to employ methods never before attempted”. If someone analyzes in-depth Dell’s strategy and methods will understand the importance of the above sentence.

Dr Martin Christopher focused particularly in the concepts of velocity and lead time reduction. He pointed out that the ratio Value Adding Time/Total Lead Time is the typical way to measure the supply chain management efficiency. The above ratio for leading companies is approximately 10% but for the most companies is fluctuated between 2% - 5%.

The above ratio can be improved only when operations are focused on the added value procedures. “An activity adds value if the customer cares about it. A value activity is one which creates a benefit for which the customer is prepared to pay”.

His opinions about forecasting tools to predict demand was subversive also. “Instead of spend time and money to develop and use advance forecasting models and tools with unreliable results as time prolongs, it is better to focus on the real demand chain”.

“Planning in business is the fulcrum. Demand is at one edge, inventories and capacity on the other. If planning not only depends on forecasting but on the supply chain visibility, it is possible to keep inventories and capacity low. As business planning is far away from the real demand, inventories and the cost are going up. This is not only a theoretical approach but the result of WALL MART and PROCTER & GAMBLE collaboration.

“Most opportunities for cost reduction and/or value enhancement lie at the interface between supply chain partners”. According to Warren Buffet, one of the biggest capital investor in the world, “The value of a company is determined by the discount value of the cash that can be taken out of the business during its remaining life”. In other words, “Profit is an opinion, cash is fact”.
“Practically, when we are talking about supply chain management, we are not talking simply about the flow of material from the point of origin up to the point of consumption. The length and the edges of the supply chain are defined by the Cash to Cash Time Cycle. The expenses and the revenues, the procurement and the sales. If the cycle is remaining smaller, the result which is determined by Receivable Accounts + Inventories - Payable Accounts is better. As the result is minimized, the supply chain becomes more effective. In the new economy, the majority of the payments are made by credit cards and the time of the Receivable Accounts is zero while in DELL the most inventories they keep are for five (5) days.

Dr. Martin Christopher by presenting the results of the last Council of Supply Chain Management Professionals (CSCMP) research, pointed out that leading edge companies have had formal logistics organizations longer, are more apt to have logistics headed by an officer-level executive and are becoming more centralized as they adapt organization structure to mission, while the usage of outsourcing is continuously increasing. Dr. Martin Christopher pointed out the fundamental principle: Outsource activities, Not control.

At the end of the workshop Dr Martin Christopher focused on the challenges that companies faced today in order to develop more responsive supply chains to customer’s demand. Responsive supply chains are by definition, highly integrated. Kraft’s Food supply chain presentation was really useful and helpful. Managing through cross functional teams, Kraft Food achievedinternal integration, that penetrates the operations, and external integration with upstream suppliers and downstream customers.

He marked also “Cross Functional Teams development means: Encourage flexibility by replacement of Job Descriptions by Task Descriptions, develop managers with T-Shaped Skill Profile and create Process Teams completely connected with the customers.

The answer in the question of how this can be achieved was “Following Toyota’s model. They develop “Brilliant Procedures for Ordinary People”.