w w w . s c e m a g a z i n e . c o m - Supply Chain Europe

www.scemagazine.com 

May/June 2009 

www.scemagazine.com ISSN 1742-447X 

the 

enemY 

Within 

The Impact of Supply Chain Fraud 

Defence 

Procurement 

A means to an end 

Air trAnsPort 

Lessons from Terminal 5 

After the recession 

Protect, survive and prepare for the upturn 

mobile solutions 

Latest thinking from Dexterra and Honeywell 

Make it … Store it … Ship it … Make it … Store it … Ship it … Make it … Store it … Ship it

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Transparency and surveillance ensure stable processes 

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chain as a whole through the use of efficient code reading systems based on laser, RFID 

and camera technologies. 

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contents 

Supply Chain Europe gives its readers in-depth news and views on the ideas 

and solutions that are helping European businesses improve their supply chains 

Vol. 18 no. 03 

20 

22 

Guest eDitoriAl 

06 Recession Raises Recruitment 

Bar to New Levels 

Steve Kaim-Caudle 

inDustrY insiDer 

14 Transforming your Supply Chain 

Jochen Grosspietsch and Daniel Swan 

Air trAnsPort 

16 Going Live: Lessons from Terminal 5 

Peter Baker 

Defence 

Procurement 

20 A Means to an End 

Jamil Rashid 

After the 

recession 

22 Protect and Survive 

Simon Butcher 

retAil focus 

28 DCs Find a Voice 

James Hannay 

16 


30 How Can Mobility Solutions 

Best Serve the Supply Chain? 

Rikke Helms 

32 Hand in Hand 

Kevin Robinson with Andrew Donn 

risk mAnAGement 

36 Focus on Corruption 

Charles Carr 

suPPlier 

relAtionshiPs 

38 Identifying the Cost of Mistrust 

Mike Robinson 

WArehousinG 

40 Putting Stock in Worldwide 

Warehousing 

lccs 

42 Low-Cost Country Sourcing: 

The Past, the Present 

and the Future? 

Nader Sabbaghian 

38 

contents strap 

Distribution 

44 Crossing the Pond with TMS 

Andrew Austin 

cAse stuDY 

46 Supply Chain Optimization at 

Western Digital 

Thomas Wöhrle 

lAst WorD 

50 Making Your Mark 

Jean Louis-Evans 

reGulArs 

08 News and Analysis 

48 Calendar 

2009 may/June www.scemagazine.com 

30 

40 

44

4 

follow our lead 

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Two of the leading companies in the automatic 

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recently combined to form Honeywell Scanning 

& Mobility. Together, we are pleased to deliver 

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Our innovative bar code scanners and rugged 

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For additional information, please visit www.honeywell.com/aidc/SCE, 

or call +31 40 2901 600 / +44 (0) 1 925 240055. 

© 2009 Honeywell International Inc. All rights reserved. 

Editorial 

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guest editorial 

You want your 

solutions to 

have the 

best of both, 

right? 

2009 may/June www.scemagazine.com 5

guest editorial 

recession rAises 

recruitment bAr 

to neW leVels 

As casualties of the most serious business downturn of the last decade continue to mount, the issue of 

recruitment presents challenges and opportunities in almost equal measure. 

With victims of redundancy 

being in abundance after 

years of severe skills 

shortages in the industry, those in a 

position to recruit have the unaccustomed 

luxury of being able to be choosy and face 

a fantastic opportunity to bag high calibre 

candidates at affordable prices. For those 

logistics service providers (LSPs) who are 

themselves feeling the squeeze, getting 

the right person into a vacant role is not 

a luxury … but a necessity. Recruitment 

is expensive and getting it right first time 

has never been more important, leading 

some to invest more time and effort into 

the recruitment process and include 

online testing, presentations and extra 

stages of interviews. By contrast, some 

are delaying filling vacant positions to 

gain a few months of budgetary benefits 

— but whether this proves to be a false 

economy remains to be seen. Either way, 

the need to wring maximum value out of 

their investment in human resources is 

pressing. To fill the gaps created by leaner 

management structures, both new and 

existing managers need a broader skill 

set to cover more ground; for example, 

operations managers are now often 

expected to have client facing skills, 

whereas a shift manager may also be 

required to produce personnel plans. On 

a similar basis, major LSPs are developing 

techniques to better flex their existing 

management talent around their sites. For 

example, intranets are increasingly being 

utilized to allow managers looking for their 

next role to ‘peddle their wares’ within 

the business and to allow vacancies to be 

advertised internally. Better co-ordination 

between HR managers across sites/ 

divisions is also assisting more effective 

redeployment and, in one case, a major 

LSP has recently appointed a dedicated 

‘Redeployment Manager.’ Training is 

6 


also playing a part: for example, first 

line managers are receiving ‘leadership’ 

training to broaden their skills, whilst 

high achievers are being identified and 

given intensive training to accelerate their 

capabilities. For candidates, competition 

for management level positions is fierce; 

we recently received 70 applications 

in response to an advertisement for a 

London-based transport manager with an 

annual salary of £35,000. Amongst these 

applicants, a large number were either 

vastly over or under qualified. We and our 

clients have also seen a sharp increase in 

speculative CVs. 

To compete, managers are prepared 

to commute further (although high fuel 

prices during 2008 curbed this to some 

extent), in many cases staying away from 

home with family/friends or in cheap B&B 

accommodation during the week. They 

are also more willing to take on interim 

contracts to broaden their experience 

and keep the money coming in. And it is 

not just those from the logistics industry 

itself who are competing for the jobs — it 

is also the victims of the recession, both 

in manufacturing and on the high street. 

Whilst industry experience remains a key 

consideration for employers, many major 

LSPs are also looking for those skills 

more typically found within customer 

organizations, such as lean manufacturing, 

and are increasingly prepared to forego 

experience to obtain them. 

However, whilst times are undoubtedly 

tough for managers both working and 

seeking employment in the logistics 

industry, those with the right skills, 

attributes and attitude have a fantastic 

opportunity. Never has there been a better 

time for them to show their employer 

what they can do. Out of the recession 

will emerge a new breed of logistics 

professional — not managers but leaders 

who have not only survived but seized the 

opportunity to make their mark. Both for 

them and their employers, the adage that 

what doesn’t kill you makes you stronger 

will hold true. • 

For more information 


Managing Director 

Momentum Logistics Recruitment 

Tel. +44 1923 680 680 

steve@momentumlogistics.co.uk 

About the Company 

Momentum Logistics specializes in recruiting logistics 

professionals for management level positions, both 

permanent and interim, within the logistics and supply 

chain sector. Its consultants have first-hand experience 

of running operations in third party and in-house logistics 

functions serving retail, food, fashion, manufacturing 

and the public sector throughout the UK. The company 

provides a professional and tailored approach to the 

individual recruitment needs of its clients, which includes 

site visits to assess job responsibilities. All candidates 

undergo face-to-face interviews to establish suitability 

before short-listing. Clients include DHL Exel, Wincanton, 

Unipart, Bosch, Homebase and IKEA. 


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news 

NYK Logistics Secures Pharmaceutical License 

NYK Logistics (UK) Ltd has successfully obtained a Manufacturers’ Import 

Authorization from the Medicines and Healthcare Regulatory Authority (MHRA) 

at its pharmaceutical centre of excellence in Northampton, UK. Supporting 

NYK’s activities on behalf of a number of major pharmaceutical customers, the 

175,000 sq ft facility provides temperature-controlled, high security storage in 

line with the latest Good Distribution Practice. In addition to the existing MHRA 

Wholesalers Licence at the site for the storage of product manufactured in 

Europe, the new license also now enables NYK to store product imported from 

outside the EU. NYK sought the license to enable the facility to be used as a 

“landing site” to support the release of new products, the first time the UK has 

been used for this activity by the company (www.nyklogistics.com). 

8 

Slimstock Offers 1,000,000 sku 

Inventory Management Tool 

Inventory management software capable of processing 1,000,000 skus in 

less than an hour is now available. Its developers, Dutch-owned Slimstock, 

say that the new-look tool, Slim4, has the potential to revolutionize the way 

retailers handle forecasting, demand planning, inventory control and purchase 

support. Dubbed ‘the complete inventory planning solution’ and already ranked 

as Europe’s front-running specialist supply chain software, Slim4 combines 

incredible processing power and versatility with ‘clinically crisp’ interface and 

overall ease-of-use, consistently effecting 25–30% reductions in inventory 

levels and investment, allied to measurable improvements in service levels. 

Says Slimstock’s Tim Murphy: “We’re saying that Slim4 will, not might, 

deliver better and more efficient inventory planning, increased service levels 

and lower inventory levels alongside higher margins, faster turnaround 

times, increased productivity and return on investment.” Slim4’s aggressively 

ramped-up processing power enables calculations involving more than a 

million skus in less than an hour – making it perfectly tuned to the specific 

demands of the retail industry. The capability is up to 20 times greater 

than most of the inventory management tools currently available. Yet, says 

Slimstock, developers are already working on 6 million sku capability for 

the next release. In use, Slim4 continually analyses sales of all items and 

determines boundaries in which the demand of each item fluctuates — 

with simulations clearly illustrating the impact of defined service levels on 

inventory. Implementation time is remarkably short with ‘go live’ guaranteed 

within 25 days. Taking sales forecast, required service levels, minimum order 

quantities and lead times as the starting point, Slim4 calculates safety stock 

levels and ‘up to order’ levels in a 12-month purchase plan. By establishing 

demand patterns, the tool automatically delivers the best ordering method, 

resulting in faster turnaround times (www.slimstock.com). 

Premier Foods Awards IT Contract to Capgemini 

Premier Foods has awarded a 5-year project for data centre and technical 

support of all its core business systems to Capgemini UK plc (www.uk.capgemini. 

com). The contract covers the 2009–2014 period and is expected to be worth 

approximately £9 million in total. In addition, for the first time, the scope of 

the contract has been extended to include the hosting of Premier Foods’ new 

SAP systems. Capgemini UK, which won the contract against bids from other 

leading multinationals, will deploy its Rightshore strategy, which makes its global 

resources available to UK customers, on behalf of Premier Foods and their 

famous brands, which include Hovis, Ambrosia, Mr Kipling, Sharwood, Batchelors, 

Quorn, Loyd Grossman, Oxo, Bisto and many others. Capgemini teams in the 

UK, Poland and India will work in collaboration to maximize service levels and 

cost-effectiveness for Premier Foods. Systems will run on hardware at Capgemini 

secure data centres in Rotherham and Bristol, with additional support from the 

company’s infrastructure management command centre in Krakow, Poland, and 

from a Capgemini development centre in Mumbai, India. 

Phil McCallum, Director of IT and Infrastructure at Premier Foods, said: “We 

have had a successful relationship with Capgemini for a number of years. By 

extending this to cover the hosting of all of our environments, both legacy and 

SAP, we are able to simplify and increase the resilience of services. Capgemini 

won the business with a flexible and effective bid allowing Premier Foods to 

evolve during the coming years in line with business need. Since selecting 

Capgemini, a well executed transition from previous data centres has been 

undertaken.” Capgemini is also working with Premier Foods on other business 

projects, including a new business intelligence system based on SAP, and a supply 

chain track-and-trace project for the company’s Hovis division. Anthoula Madden 

Vice President at Capgemini UK plc, said: “It is a privilege to work with a customer 

whose products are part of every British family’s daily life, and I am naturally 

delighted to see our long-term relationship with Premier Foods not only continuing 

but expanding in a number of exciting new directions.” 


TDG Achieves AEO Accreditation 

TDG (www.tdg.eu.com) has just been awarded Authorized Economic Operator 

(AEO) status, an internationally recognized quality mark that confirms that its 

role within the international supply chain is secure. It is one of only about 60 

companies in the UK that is fully registered to AEO. “We are delighted that we 

are formally considered to be a secure trader and a reliable trading partner,” says 

Dave Barron, TDG director of international services. “This AEO certification gives 

security to existing and potential clients that we are a reputable company, and 

is confirmation that we have customs controls and procedures in place that are 

both efficient and compliant.” The company’s year-long audit by HM Revenue and 

Customs (HMRC) not only included assurance that it has a satisfactory system of 

managing commercial and transport records, but also details of what elements 

it has in place to protect its business and supply chain against potential risks — 

whether human, physical or economic. Dave Barron continued: “TDG now has 

the opportunity to “fast-track” our shipments through certain HMRC safety and 

security procedures, as we have demonstrated the integrity and security of our 

operations. It is recognition of our knowledge and efficiency.” 

New Security and Consolidation 

Centre at Manchester Airport 

Norbert Dentressangle (www.norbert-dentressangle.co.uk) has successfully 

extended its contract with Manchester Airport Group (MAG). In 2006, MAG 

outsourced its logistics to Norbert Dentressangle. After 3 years of high service 

levels, MAG and airside retailers have decided to extend the contract. The 

consistently high service standards and flexibility have continued to nurture the 

support of the airport retailers. Volumes year-on-year continue to rise, which 

has created the need for a new larger facility. Norbert Dentressangle now 

consolidates deliveries from more than 20 retailers and caterers at its offsite 

warehouse. All goods are security screened using x-ray machines, which have 

been installed at the new site. Once the goods have been security checked, 

they are delivered directly to the retailer or to a secure storage area by security 

cleared drivers. Dan Myers, Business Unit Director at Norbert Dentressangle 

Logistics said: “We are delighted that MAG has decided to extend our contract. 

The decision reflects the high service levels of a heavily regulated solution 

to MAG’s logistic requirements. MAG requires a high level of security. There 

is no room for error. We have delivered an efficient and secure service that 

MAG has been happy to continue with.” Andrew Harrison, Manchester Airport’s 

Commercial Director said: “The move from the Bury site was seamless, 

and a great credit to the planning and operational ability of Peter Leigh, 

Contract Manager, and his team. We are thrilled with the new consolidation 

centre, which represents a real step forward in our partnership with Norbert 

Dentressangle and we’re looking forward to driving the volumes through the 

new centre in line with our strategy.” 

P&O Ferrymasters to Acquire Mov’on Logistics 

Leading European logistics service provider, P&O Ferrymasters (www. 

poferrymasters.com), has reached an agreement to acquire Mov’on Logistics. 

The deal will strengthen Ferrymasters’ growing business in Central and 

Eastern Europe (CEE). Mov’on Logistics specializes in logistics, transportation, 

warehousing and general forwarding on routes to CEE. It has four offices, 

employing operational and sales staff in Poland (Gorzow), Ukraine (Kiev), 

Russia (Moscow) and Hellevoetsluis (the Netherlands). P&O Ferrymasters will 

retain 18 full-time equivalent jobs and the Mov’on Logistics operations will 

be integrated into the company’s European office network. The Hellevoetsluis 

office will be combined with Ferrymasters’ Europoort operation. Bas Belder, P&O 

Ferrymasters’ Managing Director, said: “This is an investment in our company’s 

future. Opening up a gateway to Asia through Central and Eastern Europe, 

Russia and Ukraine is key to our future success and fits with our long-term 

objective to expand our service offering in this area. We have already opened 

new offices in Poland (May 2008) and Romania (February 2008) as part of 

this plan, and this deal will further strengthen our position in the next big 

battleground for business. Mov’on Logistics is an established and experienced 

company and will provide us with a solid platform on which to build our 

intermodal transport solutions and logistics services offering for our existing and 

potential customer base.” 

SeaZone Launches Marine Data Management Software 

SeaZone has launched an 

innovative software solution 

designed to greatly simplify 

the management of marine 

information. SeaZone’s 

GeoTemporal software allows 

easy import, processing and 

presentation of marine data 

from multiple sources. It then 

creates standard formatted 

data so that the information 

can be used in different Geographic Information Systems (GIS). Previously, only 

high-end specialist software programs had existed and offered limited data 

interchange capability. SeaZone GeoTemporal represents a second generation of 

software, allowing the management of a wide diversity of data with greatly improved 

levels of interoperability. This ensures that marine information can be made 

widely available for further use in GIS and other systems, such as 3D modelling. 

SeaZone GeoTemporal is aimed at marine surveyors, engineers, data managers 

and consultants and the software will replace ADPC Processing Suite, SeaZone’s 

current data management system. SeaZone GeoTemporal manages tidal datasets 

and other oceanographic information including data from instruments such as 

Acoustic Doppler Current Profilers (ACDPs) and datasets from modelling systems. 

The added flexibility allows users to quality control, analyse and present complex 

survey and environmental monitoring data and the software allows users to add 

custom tidal data and links to external databases. With accessibility extended to the 

GIS environment, the data will benefit from further processing, manipulation and 

dissemination (www.SeaZone.com). 


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news strap 

Swisslog Awarded Major Order by Wärtsilä 

Wärtsilä, a leading provider 

of complete lifecycle power 

solutions to the marine 

and energy industries, has 

commissioned Swisslog 

to design and implement 

a new Central Distribution 

Centre (CDC) in Kampen, the 

Netherlands. The new CDC will 

allow Wärtsilä to centralize the 

logistics from its nine productspecific 

spare parts warehouses to a single, global distribution centre. “The CDC will 

enable Wärtsilä’s to improve its 24/7 customer service and realize cost savings,“ 

said Tage Blomberg, Group Vice President, Wärtsilä Services. As general contractor, 

Swisslog will provide a turnkey CDC solution that covers design, realization and startup, 

including building construction and all material handling equipment. Swisslog will 

implement its own software products and warehouse control system, and will also 

be responsible for overall system integration. “This order for a greenfield distribution 

centre reflects Swisslog’s approach to integrated logistics solutions, which ranges 

from consultancy to general contracting, to realization and service. We thereby create 

clear benefits for the customer in terms of cost cuts and more efficient operations,” 

says Daniel Fink, President of Swisslog’s Warehouse and Distribution Solutions 

division. The CDC will comprise inbound and outbound logistics, technical quality 

control and heavy goods storage, as well as automated miniload and pallet highbay 

storages. Construction work, which accounts for a sizeable part of the project 

volume, is scheduled to start in August 2009. The spare parts from Wärtsilä’s nine 

warehouses will be moved to the CDC during 2011 (www.swisslog.com). 

DSV Enters the Latin American Market 

In co-operation with the LOS INKAS group of companies, headquartered in 

Santiago, Chile, DSV Air & Sea (www.dsv.com) has paved the way for its 

expansion into the Central and South American markets. Both partners have 

decided to enter into a joint venture (JV) to become a major player in this area, 

defined as LATAM. The initial milestone is to own and operate offices in all the 

important LATAM countries within a 2 year timeframe. The JV will be branded 

under the name DSV-GL and became operational on 1 April 2009 in Argentina, 

Chile and Peru. The JV will offer integrated forwarding and logistics services to 

its customers in the region, with special emphasis on airfreight, ocean freight 

and project forwarding. Jorgen Moller, CEO of DSV Air & Sea said: “Combining 

the overseas network of DSV with the in-depth know-how of our partner in 

LATAM significantly strengthens our position and capabilities in that region.” 

Peter Buerger, CEO of LOS INKAS, confirmed: “This JV with the prestigious 

DSV offers our LATAM customers global opportunities and is an ideal strategic 

fit to the LOS INKAS group of companies.” Christian Ryser, Regional CEO 

for DSV-GL LATAM added: “The Joint Venture will leverage the strengths of 

both organizations and provides a compelling platform from which to deliver 

world-class logistics solutions and a tremendous opportunity to better serve our 

customer base in the region.” 

12 

Food Safety: From Farm to Fork 

The certification body, NQA, is now positioned to provide the food industry — often 

a complex global network of supply chains — with a food safety solution that 

transcends international borders. NQA has received UKAS accreditation to provide 

certification against the internationally recognized food management system standard, 

ISO 22000:2005, which ideally places the global company in a position to assist 

organizations operating in international food chains. Head of NQA, Catherine Golds, 

commented: “Food safety is a critical issue that must be managed throughout the 

food chain, especially when a single food item can include multiple ingredients from 

several source countries. NQA’s global presence simplifies the certification process 

for food sector organizations operating internationally, as all food safety certification 

can be obtained from a single body.” The consequences of food-borne illness can 

be catastrophic, not only for the consumer and health services but also for retailers 

and other organizations in the supply chain. “The benefits of using an international 

certification body can be seen throughout the food chain,” explained Catherine. “An 

ISO 22000 certification from NQA provides retailers with the assurance of a standard 

assessed and verified by a well established and trusted organization rather than 

having to rely on a certificate from an unknown local company,” said Catherine. 

An important step in safeguarding food safety is the implementation of a structured 

Food Safety Management System (FSMS) that is incorporated into the overall 

management activities of the organization. The FSMS should address quality and 

legal requirements in addition to safety from contamination from physical, chemical, 

biological hazards. ISO 22000 provides an effective framework for the development, 

implementation and continual improvement of FSMS. The standard can be used by 

any organization that is directly or indirectly involved in the food chain, including farms, 

fisheries and dairies, processors of meats, fish and feed, manufacturers of bread and 

cereals, beverages and canned and frozen food. It also applies to supporting services 

such as food storage and distribution and suppliers of food processing equipment, 

additives, raw materials, cleaning and sanitizing products and packaging. Food service 

providers such as restaurants, fast food chains, hospitals, hotels and mobile caterers 

will also benefit from gaining certification and assuring customers of safe food 

preparation (www.nqa.com). 

Navman Wireless Wins Innovation Award 

Navman Wireless has 

been named as the 

winner of the prestigious 

Business Innovation 

accolade at the Sentinel 

Business Awards for its 

vehicle tracking software 

system. The UK-leader 

in telematics technology, 

based in Keele, is at 

the forefront of the 

current growth in vehicle 

tracking and mobile data 

development. “The company is at the very edge in its field and its latest 

Online AVL2 high tech product, launched last year, is yet another chapter in 

its long line of technological success stories,” said Central Tonight presenter, 

Bob Warman, who handed the BIC-backed award to Navman Wireless 

at a glittering ceremony. “The new development takes vehicle tracking 

technology to a new level, and was produced following in-depth client 

research to establish customers’ true business requirements.” OnlineAVL2 

has been described as “the next generation of vehicle tracking software” 

and provides companies that are managing fleets with radical and dynamic 

new ways of viewing driver locations. It integrates full aerial photographic 

images with traditional street level mapping to display, at a glance from any 

PC, the position of vehicles in relation to neighbourhood buildings, depots, 

car parks, etc. Its advanced functionality and improved user interface has 

also been the springboard for a raft of new telematics developments (www. 

navmanwireless.co.uk). 


agilitylogistics.com 

KRAFT FOODS HAS RUEDI SAEGESSER. 

When the demand for Milka chocolate soared in Kraft Foods’ (MEA) 

Algerian market, Agility’s Ruedi Saegesser answered the craving. Working 

closely with his customer to streamline distribution, Ruedi optimized 

order preparation, customs procedures, and supply chain solutions from 

their centrally located, energy-effi cient Bartenheim warehouse. With 

processes expedited from end to end, handling capacity tripled in one 

season, satisfying Kraft’s expectation and the market’s sweet tooth. 

KRAFT FOODS HAS AGILITY. 

Ruedi Saegesser 

Key Accounts Manager, Kraft Foods (MEA) 

Agility, Basel

industry insider 

trAnsforminG 

Your suPPlY chAin 

Some supply chains consistently achieve better results. How do these companies achieve superior performance? 

A 

supply chain executive has a difficult 

challenge to face: not only do they 

manage a complex topic that requires 

the ability to deal with probabilities rather than 

facts, they also need to co-ordinate activities 

across functions, often in the face of conflicting 

metrics, incentives and priorities. With the 

pressure in today’s environment — increased 

complexity, cash requirements, competition 

and customer demands — it is even more 

important to have a supply chain that delivers. 

Given this challenge, we embarked on a 

major research project last year, interviewing 

and analysing the supply chain practices 

of more than 60 companies in Europe and 

Better cost performance 

North America. The research assessed the Figure 1: There are true winners in all 

performance of the respondents’ companies 

dimensions - cost, service and inventory - in every sector. 

in more than 50 aspects of supply 

Zara, which has driven a competitive advantage tool. They leverage formal training, intensive 

chain management, including business through its responsiveness with short, reliable mentoring relationships and thorough 

processes, corporate culture, network replenishment periods. With this strategy, the performance evaluations to attract and retain the 

configurations, organizational structures, relatively high logistics costs are offset by lower talent to run a successful supply chain. 

strategy, supporting infrastructure and the 

capabilities of personnel. After interviewers 

plotted the executives’ responses on a 

scale of one to five (five was the highest), 

the results were organized into tertiles and 

compared with supply chain performance 

metrics provided by the respondents on 

cost inventory and service levels. Our aim 

was to answer two fundamental questions 

about supply chain performance: 

• What separates the best from the rest? 

• How does a company become one of the best? 

Does it Really Matter? 

In a word: yes. Across industries, we have 

consistently found that the front-runners offer 

significantly better service than the industry 

average — with noticeably lower logistics and 

inventory costs (Figure 1). 

What Separates the Best? 

When we examined the relationship 

between companies’ survey scores and their 

performance, six broad practices emerged as 

being significant. 

Strategic focus: Winners make supply 

chain strategy an explicit part of their business 

objectives. One example is fashion retailer, 

14 

Better service performance 

inventory and fewer markdowns. 

Segmentation: Leading companies reduce 

complexity by segmenting the supply chain to 

avoid “one size fits all” execution. For example, 

one consumer goods producer leveraged 

differentiated planning to concentrate on key 

accounts with high fluctuations to increase 

forecast accuracy while reducing costs by 20%. 

Optimized network: A high-performing 

supply chain regularly reviews its entire network 

— including production facilities and warehouses 

— to ensure that it delivers required service 

performance at the minimum possible cost. 

Lean value chain: Winners use standard 

methodologies, including lean manufacturing, 

to produce efficiently and effectively. However, 

“lean” is not purely a production topic, many 

successful companies are applying it across the 

supply chain. Lean warehousing, lean planning, 

and lean retailing all reduce waste, variability and 

rigidity in the supply chain. 

Integrated planning: Even flexible supply 

chains require systematic planning with clear 

allocation of responsibilities (who is responsible 

for what) and quality process inputs (historical 

data, market knowledge, etc). 

Talent management: Market leaders 

consider talent management to be a strategic 

Getting There From Here 

No single company in our survey could claim 

to have mastered all six of these differentiating 

practices. Many companies, however, have 

managed to achieve dramatic improvements 

in their own supply chain performance. Not 

surprisingly, both the programme design 

and its execution are critical for a successful 

transformation. When driving a supply chain 

transformation, winners do two things: they 

identify pain points and improvement levers 

that will close the gap between them and the 

“best;” then they design and execute an effective 

transformation programme. The reward is an 

optimal supply chain in terms of service, costs 

and inventory — and a sustainable competitive 

advantage. In the next articles in this series, 

we will look in more detail at the methods that 

successful companies have used to transform, 

sustain and enhance their supply chains. • 


Jochen Grosspietsch is an associate principal in the 

Barcelona office of McKinsey & Company, and Daniel 

Swan is an associate principal in the Chicago office 

(www.mckinsey.com). For more detailed survey results 

or to do supply chain benchmarking for your company, 

please e-mail jochen_grosspietsch@mckinsey.com. 


AUSTRIA | BELGIUM | CZECH REPUBLIC | DENMARK | FRANCE 

GERMANY | HUNGARY | ITALY | LUXEMBOURG | POLAND | ROMANIA 

SPAIN | SWEDEN | THE NETHERLANDS | UK 

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looking for 

space? 

these companies 

already have 

Since entering Europe in 1997, ProLogis has expanded 

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Whether distributing goods around the corner or across 

the world, customers rely on ProLogis’ ability to deliver.

air transport 

GoinG liVe: 

lessons from terminAl 5 

A key measure of success for any project must be what customers experience immediately after the ‘go live’ 

date. When projects become fully operational, how often is there a negative impact on customer service? 

When it comes to large projects, 

there is a strong tendency for 

top management to focus on 

the state-of-the-art infrastructure that is being 

introduced, whether it is a new distribution 

centre, computer system or airport terminal. 

Although the long-term benefits of the new 

infrastructure may be unquestionable, this 

‘management focus’ can often deflect 

attention away from the customer, who, 

as the Terminal 5 opening showed, may 

be severely affected by the transfer of the 

ongoing operation. Sadly, the importance of 

the ‘go live’ period is a frequently neglected 

area of project implementations. In today’s 

rapidly changing markets, managers are 

increasingly focused on multidisciplinary 

projects to re-engineer their business to 

provide a competitive advantage. In fact, 

many managers may spend more time 

on project work than on traditional line 

management responsibilities. By their very 

nature, new projects tend to be exciting — 

at least in the first few months or years of 

their life. However, key project personnel 

are often seeking to move on before the 

project finishes. Whereas the initial design 

may be exciting, the operational detail of the 

go live phase may seem rather mundane by 

comparison, and is often passed to day-today 

managers near the end of the project. 

Unless the operational management has 

been the key driving force behind the project 

from its initiation, then there is a real danger 

that the go live phase will not receive the 

attention it deserves. 

While this decrease in interest may be 

happening at the project management 

level, senior management is obviously very 

interested in a new project reaching the 

commissioning stage, and looks forward 

to the benefits that this will bring. Again, 

however, the focus is likely to be on the 

overall design of the infrastructure and how 

this will eventually benefit customer service 

and profitability. The transfer of the ongoing 

16 

We compromised 

on the testing of the 

building as a result 

of delays in the 

building programme. if 

i was to pick on one 

issue that i would do 

differently ... it is that 

particular issue.” 

Willie Walsh, Chief Executive, British Airways 

Source: Minutes of evidence taken before the House of 

Commons Transport Committee (7 May 2008). 

operation is frequently regarded as a detail, 

not worthy of the same attention. Should this 

‘detail’ of transferring the ongoing operation 

be regarded more seriously by senior and 

project management teams? The experience 

of the opening of Terminal 5 would suggest 

that this should be the case and, in fact, 

this is supported by previous research 

at Cranfield School of Management into 

warehouse automation projects — many of 

which happened to involve similar sortation 

technology as the baggage handling systems 

at Terminal 5. 

Terminal 5: Success or Failure? 

It can be argued that Heathrow Terminal 5 

was an outstanding success, with the 

project reportedly completed on time and 

within budget. Awards have been given 

for its architectural design and the new 

terminal provides a platform for delivering 

higher customer service levels than 

were previously possible at Terminals 1 

and 4. Similarly, it could be argued that 

the planning for the go live phase was 

extensive and thorough with preparations 

including the following: 

• a 6 year construction programme 

• 400,000 hours of software engineering for 

the 17 kilometres of conveyors 

• 6 months of training staff and testing 

systems 

• 15,000 volunteers conducting 66 trials 

• 32 aircraft trials 

• baggage system tested (fully loaded) 20 

times prior to opening. 

Nevertheless, the go live was a customer 

and public relations disaster. As reported 

in the media, there were long queues and 

delays at the terminal, thousands of bags 

went missing (28,000 were not with owners 

4 days after opening) and many flights were 

cancelled (about 500 in the first 2 weeks). 

The backlog of baggage was so severe that 

many were forwarded to Milan and the USA 

for sorting and despatch to the last known 


addresses of customers. In addition, some 

insurance companies declared Terminal 5 

as a “known risk” and would therefore not 

compensate travellers for lost baggage. 

The corporate consequences were 

severe, with British Airways suffering a loss of 

reputation. The financial cost to the company 

was reported to be £16 million in the final 

5 days of March 2008 alone and traffic 

volumes in March/April 2008 were down 

from 5.6 million to 5.3 million passengers 

year-on-year (although, as always, this could 

be due to a mix of factors). As for the British 

Airports Authority, the bad publicity has 

stimulated debate concerning their control of 

the three major London airports. In addition, 

affected airlines and retailers have sought 

compensation. For example, passenger 

throughput at Terminal 5 was down from the 

projected 70,000 to 40,000 per day (owing to 

the postponement of the transfer of longhaul 

flights), resulting in a loss of business 

and some closures of airport shops. While 

the go live difficulties appeared to come as 

a surprise to all concerned, there have been 

plenty of warnings of this danger, not only 

from other airport openings (such as Denver 

and Hong Kong, which also had significant 

baggage handling problems) but also from 

many other large-scale projects. Some of 

these, such as the new distribution centres 

for Sainsbury’s were also well publicized, with 

the availability of goods in the shops being 

disrupted, their market share falling and their 

share price being affected. 

Cranfield Research 

Prior to the Terminal 5 debacle, a research 

study was conducted by Cranfield School of 

Management and facilitated by The Chartered 

Institute of Logistics and Transport (UK). A 

survey of 27 automation implementation 

projects was conducted to answer the 

following questions: 

• How often is customer service disrupted 

during the ‘go live’ phase of such projects? 

• What are the main reasons for disruption? 

• What lessons can be learned? 

The projects were all based at distribution 

centres that had implemented automated 

equipment, such as storage and retrieval 

systems (that is; computer controlled cranes 

for pallet or case storage), conveyors and 

sortation systems (similar technology to the 

baggage handling system at Terminal 5), 

order picking systems (such as automated 

dispensers) and unloading/loading equipment. 

Approximately half of these automation 

projects were in new buildings, as at Terminal 5, 

and about half in existing buildings. The results 

showed that almost 80% of implementations 

involved some disruption to the ongoing 

operation, with 33% experiencing moderate or 

extensive disruption (Figure 1). 

Minimal 

Disruption (46%) 

No 


Extensive 


Moderate 


Figure 1: Extent of disruption to the ongoing operation. 

Placed in this context, it should therefore 

not have been surprising that Terminal 5 

experienced difficulties at the time of opening. 

The survey also found that the sites that 

suffered from major disruptions tended to 

have much shorter ‘ramp up’ times, with only 

1 month being allowed on average for the 

full operation being transferred, whereas the 

other sites allowed an average of 3 months. 

Interestingly, the plan at Terminal 5 was for 

an initial 350 flights per day, followed by a 

further 120 long-haul flights within a month. 

The long-haul flights were later staged during 

a 7 month period, after the initial opening 

difficulties. The reasons for the disruptions, as 

quoted by the survey sites, were wide ranging 

(Figure 2), including the information technology 


air transport 

Factors Respondents (%) 

IT system 32 

Equipment installation 27 

Consolidation of sites 11 

Building construction 6 

Impact of new technology on people 6 

Failure of people to work on time 6 

Equipment not performing to specification 6 

Extended handover time 6 

Figure 2: Reasons for disruption to the ongoing operation. 

Service Level 

system, the equipment installation, the building 

construction and the impact of new technology 

on people. This range of reasons indicates the 

multidisciplinary nature of such projects. 

Operational Planning 

The key question that remains is whether 

company management is fully aware of 

the importance of operational planning and 

preparations for the go live period. In our 

survey, only one company mentioned they had 

a detailed plan for the ongoing operation and 

this company experienced no service level dip. 

In the case of Terminal 5, the Chief Executive 

of British Airways advised the Transport Select 

Committee that the building programme was, in 

fact, not 100% complete and this compromised 

testing. At the same hearing, the Chief Executive 

of the British Airports Authority advised that 28 

of the terminal’s 275 lifts were not operational 

on day one. It was reported that a discussion 

took place as to whether to scale down or 

postpone the opening but, presumably, it was 

18 

‘Go Live’ 

Implentation Date 

Figure 3: Service levels dip, potentially arising from warehouse automation projects. 

Desired Level 

Original Level 

Time 

decided that the risk of a significant disruption 

was very low. With hindsight, the Chief Executive 

of British Airways stated that he regretted that 

decision and the one major lesson learned was 

that the planned 6 month testing period should 

not have been compromised. This should act 

as a valuable lesson for all management teams 

involved in major projects. 

Potential Risk to Customer Service 

The potential effect of automation projects on 

customer service levels can be depicted by 

a ‘service level dip’ (Figure 3). The intention 

of the project is often to improve customer 

service levels but, in the short-term, it needs 

to be recognized that there is a significant 

risk of a reduction in those service levels — 

unless the go live period receives the senior 

management attention that it deserves. 

Success Factors 

A key measure of success for any project 

must be what customers experience 

immediately after the go live date. There are 

three important lessons from our research 

and from the experience at Terminal 5. 

First, a key component of any project 

should be a detailed plan of exactly how 

the operation will continue through the 

go live period. This should include risk 

assessments of what could go wrong in 

this critical period and contingency plans 

for every potential eventuality. Secondly, 

the testing, training and commissioning 

programme should be seen as an essential 

part of the project. It is not something that 

can be ‘squeezed’ if other elements of the 

project overrun. Finally, the ramp-up of the 

operations should be realistic. ‘Teething 

problems’ and ‘snagging’ are normal in all 

large infrastructure projects and, therefore, 

the scale of the operation should be 

increased gradually so that these problems 

can be rectified without affecting customer 

service. Managers are frequently bullish 

about projects and, often, it is regarded as 

being negative to add a word of caution or 

realism to the discussions. A letter by Alan 

Braithwaite, visiting professor at Cranfield 

School of Management, to the Financial 

Times stated that: “T5 shows a troubling 

lack of corporate memory and learning,” 

as there have been many prior instances of 

such events. All managers need to consider 

how to incorporate these important lessons 

from the past into their projects. • 


Dr Peter Baker 

Senior Lecturer in Logistics and Supply 

Chain Management 

Cranfield School of Management 

Cranfield, Bedford MK43 0AL, UK. 

T. +44 1234 751 122 

peter.baker@cranfield.ac.uk 

www.som.cranfield.ac.uk 


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defence procurement 

A meAns 

to An enD 

Jamil Rashid explains why supply chain change programmes could be key to transforming how 

the whole defence and aerospace industry works. 

The UK aerospace and defence industry is working hard 

to raise the performance of its supply chains and, in so 

doing, accelerate its competitiveness within the global 

marketplace. Reduced auditing via recognized supply chain 

accreditation, a consistent approach to supply chain development 

and performance measurement, and improved supply chain 

relationships are all in the mix. A significant number of industry 

suppliers are now being consistently measured and assessed 

by most of the primes. This means that they are likely to have 

to undergo fewer audits, saving time through duplicated effort. 

For the same reason, the primes save resources … because the 

lower tiers of the supply chain are doing some of these audits 

on behalf of the industry. Although the primes are now working 

more closely together to reduce confusion in the supply chain, 

there is a much greater prize: changing how the industry works — 

how it is managed and how it communicates — transforming all 

business-to-business transactions, not just the supply chain. 

Focus on Leaders 

To fulfil this potential, the industry needs to focus far more 

time and energy on supply chain business leaders. One of 

the reasons why long-term improvements sometimes fail to 

materialize is that improvement plans between companies tend 

to be one-offs: once these initial plans have been implemented, 

it is unusual for further plans to be created that follow through 

to further improvements. Success will be truly demonstrated 

when the process owners are really working together, regardless 

of the involvement of improvement teams. And only then will 

businesses in the supply chain really talk the same language, 

which is so vital to creating sustainable improvement plans that 

will become a way of working. 

How to achieve this common language? Leaders need to 

sit down, clarify and document how the strategies of their 

organizations fit together and drive through supply chain 

initiatives, from the top down. Failure to take this critical step is 

why supply chain partners who are trying to do the same thing 

in their efforts to improve performance are, in reality, often poles 

apart in terms of their understanding and communication of 

strategy, planning and measurement. What you get is people 

talking very different languages — suppliers saying “but you don’t 

pay on time” and customers complaining that “you don’t deliver 

on time” — instead of having a consistent structure within which 

both parties are happy to operate to understand the real problem. 

Unstructured arguments just create barriers ... and the result is 

massive waste. 

20 

Develop Improvement Structures 

Improvement plans need to become a part of how businesses 

routinely communicate and will only be truly effective when 

they are central to the behaviour of managers at all levels of the 

organization. Again, this is where leaders have a critical role to 

play. They need to be involved, to ensure that all key continuous 

Case study 

A tier one UK aerospace manufacturer was experiencing longstanding poor delivery 

performance, despite several internal improvement initiatives focusing on manufacturing 

processes. An organization-wide business improvement process identified the supply of 

PCBs as the key factor influencing on-time delivery. Three critical suppliers were invited 

to join the project team, which created improvement actions focusing on the deployment 

of strategic stock, better forecasting and demand pull on high volume parts. Work orders 

launched on time increased from 50% to 80%; on time delivery improved by 10%; and 

communication (plus relationships) was improved. These are good results, but a closer 

look at the leadership behaviours of the three businesses concerned points to missed 

opportunities: 

• The three managing directors had very little contact after the initial improvement 

initiative. This is not untypical, because many business leaders see supply chain 

initiatives as a means to short-term improvements and industry recognition rather than 

a way of changing how the business works. 

• The improvement plans were not linked to the strategy of the businesses concerned, 

so actions were not given the necessary priority and there was poor understanding of 

the potential benefits to be gained. 

• The plans were not detailed enough, so people were not always clear on what they 

had to do, actions were assumed to have been completed when in fact they were not 

and the reasons why were not fully understood. 

• People seemed to be doing things because they were part of the ‘supply chain 

initiative,’ rather than something that the business really needed to do. 

• The leaders of the businesses seemed to have little detailed knowledge of how 

activities were progressing and it was evident that they did not review them on a 

regular basis. 

• The companies were clearly not convinced by each other’s knowledge of improvement 

techniques, purchasing methods, etc. Consequently, they did not focus their energies 

on working together to implement the most effective solutions. Although this is quite 

normal in many team environments, the teams never moved past the ‘storming stage,’ 

which a true long-term relationship would demonstrate. 

Overall, none of the businesses or their leaders truly changed their behaviours in the longterm 

from a ‘supply chain perspective.’ Also, most of the improvements gained from the 

initial workshop programme were not rolled out as a way of working, because they were 

not embedded into the minds of the leadership as a way of working. Although those more 

actively involved in the project saw the need to cascade the programme throughout the 

organization, it was only seen as ‘the supply chain initiative.’ 

Interestingly, in common with the vast majority of supply chain activities, the initiative 

was focused heavily on manufacturing, even though the assessments demonstrated 

many opportunities across the organization, some even more important to implement 

than the manufacturing element. How much more effective might it have been if, for 

example, the sales and development project teams had been involved, working together 

to develop long-term improvements? 


improvement plans need to become 

a part of how businesses routinely 

communicate and will only be truly effective 

when they are central to the behaviour of 

managers at all levels of the organization. 

improvement activities show clear links to strategy, that all 

key improvement suggestions are based on hard data and 

analysis (not assumption and gut feel) and that all key activities 

are planned in detail. Senior management needs to be there, 

imposing consistency, structure and detail to ensure on-time task 

completion. And the individual teams responsible for the lower 

level improvements need to develop highly visible plans that really 

demonstrate what needs to be done to achieve key milestones. 

The key indicators that demonstrate if a business is really 

serious — if it is really going to make this become part of 

the ‘way of working’ — is how well improvement plans are 

incorporated into the overall business plan and, crucially, how 

often the milestones are truly reviewed and pushed at a high 

level. The reality is that most organizations could do much more 

in both of these areas. 

Ask the Right Questions 

So, leaders need to create the management structure in which 

strict rules are applied and an environment in which teams 

understand the issues and can be helped to manage the 

implementation of the solution. And they need to ask the right 

questions. Are people clear on why they are doing what they 

are doing? Are managers really involving their teams? How 

are you measuring your activities? How are you linking these 

to your goals? Only when leaders get the right answers to the 

right questions will supply chain improvement partnerships 

truly work. The aerospace and defence industry is creating 

a strong platform to build on and is certainly heading in the 

right direction. But there are further challenges to embrace: 

above all, as the industry strives towards increasing global 

competitiveness in a very challenging market, supply chain 

improvements need to be seen as a way of making businesses 

as a whole work better — in a more structured and disciplined 

way. If it can rise to this challenge, the entire industry will benefit 

and the drive for a more effective supply chain will truly become 

a means to an end, not an end in itself. • 

About the Author 

Jamil Rashid is the founder of JARA, a consultancy that has delivered performance 

improvement programmes to FTSE 250 companies in the aerospace and defence 

sectors, and has close relationships with a number of significant industry bodies and 

academic institutions, including WEAF (West of England Aerospace Forum), SBAC 

(Society of British Aerospace Companies) and the Lean Aerospace Initiative led by the 

Universities of Bath, Cranfield, Nottingham and Warwick. For more information, visit 

www.jara-management.com or contact Jamil Rashid on +44 208 261 4591. 


after the recession 

Protect 

AnD surViVe 

Long supply chains may seem a liability in the current climate; but, warns Simon Butcher, we must not 

throw the baby of recovery out with the bathwater of recession. 

It is generally agreed that we are living in 

unprecedented times. Despite rumours 

of ‘green shoots,’ almost every index 

has been moving against commerce 

and business (see Figure 1). Sales are 

down, costs are generally up, risks — from 

defaulting partners to piracy on the high 

seas — have increased and while the 

nominal costs of working capital may have 

declined, finding a reliable source of funds 

is much akin to looking for hen’s teeth. For 

businesses with long supply chains — and 

‘long’ here is not just about geographical 

distance, it is also about time, although the 

former usually implies the latter — current 

adverse trends are exacerbated: long 

lead times, long transit times, large batch 

sizes and relatively inflexible manufacturing 

systems lead to high stock commitments, 

high inventories and strains on the physical 

and financial resources of all the partners in 

a supply chain. 

“Action this day,” as Churchill would 

have put it, is vital; yet, many business 

responses, such as attempting to change 

payment terms around the transport 

element, really amount to moving the deck 

chairs on the Titanic. Logistics cost is very 

rarely the crucial element of total supply 

chain cost. But if we are looking at more 

fundamental changes to our supply chains 

to survive the recession, we also need to 

consider how we will survive and succeed 

in the upturn that, at some unknown 

date, will follow. Recessions equalize us; 

we all face much the same pressure: in 

the upturn, the surviving firms or supply 

chains that can turn their businesses 

around quickly will be those that survive 

and prosper. In Figure 2, I’ve suggested 

how we can understand our current 

22 

supply chains, in terms of immediate and 

longer-term responses. 

If, for example, we have a lot of orders 

that have not yet been despatched, or 

even manufactured, by our partner in 

China (or any other Low Cost Country), 

there are several options. In order of 

magnitude, these range from the relatively 

trivial (changing payment terms, for 

example), through reducing order quantities 

or deferring orders up to the outright 

cancellation of orders. Assuming you can 

do this contractually, reduction, deferral or 

cancellation will have the most immediate 

impact on a business that is facing 

declining demand. But, what does this say 

about your positioning in the upturn? If the 

item is a ‘commodity,’ perhaps not very 

Figure 1: Most measures are moving against business in the recession. 

much! But, if you have nurtured a supplier 

and helped them to become in some sense 

dependent on your custom, whether in East 

China or West Bromwich, then the adverse 

impact on supplier relations may become 

a significant issue when you next wish to 

ramp up production. 

This scenario assumes that you can even 

spot the demand downturn sufficiently in 

advance. Suppose that your products or 

components have already been made or 

are even now in transit. Again, there are 

options. You could choose a slower transit 

route. Why airfreight when the need is no 

longer urgent? You could arrange to store 

finished parts or goods in the country of 

manufacture. You still have storage costs, 

but they are likely to be lower than those 


the model that appears to have just failed is predicted 

on demand that is predictable and steady or increasing. 

for storage in Western Europe. You might 

consider selling the now surplus finished 

goods in their country or region of origin, 

rather than bringing them to the West at 

all. Or, of course, seek another market; 

even in a recession, some countries are 

better placed than others and it may be 

possible, for example, to divert shipments 

to Latin America rather than Iberia. Of 

course, your downturn may have happened 

after your shipments have arrived. You can 

store these goods (with all the relevant 

charges and the risk of damage, decay and 

obsolescence) or sell on, perhaps at little or 

no profit, into secondary markets. (That, of 

course, carries its own risks; if consumers 

get used to finding your branded goods in 

low cost outlets, they may not be happy, 

come the upturn, when you try to reimpose 

your normal cost margins.) 

Figure 2: The biggest benefits are from actions early in the cycle. 

Given the above strategic choices, it 

should be obvious that small things such 

as changing your IncoTerms are not really 

relevant in the greater scheme of things. 

But perhaps more importantly, the figure 

works in reverse; whereas in a downturn, 

you want to be at the left hand side of 

the graph where the earliest and least 

damaging actions can be taken, to take 

advantage of an upturn you need to be at 

the right hand side — where goods are 

instantly available to meet new demand. 

If your strategy to meet demand involves 

ordering from a distant supplier, with whom 

you did not keep faith during the recession, 

you are unlikely to succeed. 

Planning for Recovery 

So, how do we avoid the extended (in 

time or distance) supply chain becoming 

an issue as sales and demand recover? 

First, we have to understand the problem. 

If the ‘cost’ (in inverted commas because 

this won’t show up on the typical balance 

sheet) of lost sales and the very real costs 

of shipping, repackaging/remarketing, 

obsolescence and so on are included, it 

may be that ‘low cost sourcing’ from, for 

example, Asia, isn’t so low cost any more. 

The model that appears just to have failed 

us is predicated on the idea that demand 

is predictable and steady or increasing. 

For several years of the next upturn, that is 

not going to be true — demand and sales 

patterns will be febrile, unreliable — yes, 

the ‘fashion’ element of demand may still 

be there, but not perhaps in the predictable 

volumes that we have become used to. 

And whatever patterns emerge, there will 

be a significant time lag between noticing 



Figure 3: Long supply chains increase the risk of lost sales. 

an upturn in demand and being able to 

respond. This is likely to be exacerbated by 

the damaging effects of the downturn. For 

example, many of your ‘cheap and cheerful’ 

suppliers may have gone bust — precisely 

because they were cheap and cheerful: 

doubtless highly competent in meeting your 

current needs, but without the investment, 

in capital or intellect to match rapidly 

changing times. 

Logistically, this also applies. Shipping 

capacity, come the upturn, may be seriously 

shorted — carriers are postponing or 

cancelling new build commissions and 

scrapping older vessels (in itself not 

perhaps a bad thing). And even if ships 

are merely ‘laid up,’ it takes a long time to 

recommission and recrew. There will be 

under-capacity, which will drive up market 

rates. Domestically, much the same applies. 

UK figures in April suggested that HGV 

drivers were one of the largest classes of 

trade seeking to ‘sign on’ to unemployment 

benefit, and that is probably true across 

Europe. As the trade or profession has had a 

long-standing recruitment problem, many of 

those now out of work are towards the end 

of their careers, and may not re-enter the 

transport market even when things improve. 

Again, under-capacity will drive up rates. 

Figure 3 attempts to compare unit cost 

distributions between UK/EU supply chains 

24 

and those from China or similar countries. 

There are, of course, massive differences 

in many factors — cheap labour in China, 

lower inventory costs in Europe (because 

of the shorter supply chain time scales 

possible). Material costs are similar, as 

you would expect with most commodities 

traded globally (although China, particularly, 

appears to be using sovereign wealth to buy 

up, or at least pre-empt, future flows: who 

can blame them? It’s exactly what the UK 

did when we were top dog a hundred years 

ago!). The interesting bit is in ‘lost sales.’ 

The expansion on the right of Figure 3 shows 

where this submerged rock of loss lies — 

generalized, obviously. Different businesses 

will have different patterns or orders, sales, 

manufacturing and inventory — but the point 

is that we can predict, with fair certainty, 

that just when companies believe they 

have clawed their way out of the current 

morass, they are going to find that they 

can’t capitalize on this because they have, 

in simple terms, failed to get the stock on 

the shelf. How do you avoid this schoolroom 

error? Essentially, by taking a holistic supply 


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Figure 4: Look at the whole chain – procurement process has much more impact than logistics technique. 

chain view that understands where both 

costs and delays build up, what causes them 

and how they may be overcome. 

The Agile Supply Chain 

Agility has been a staple of supply chain 

preaching for a while, but I am unsure that 

it has been properly recognized. Typically, 

at least for supply chain professionals, this 

has meant using often-expensive resources 

(airfreight, for example) to maximize the ability 

to get merchandise into the market in which 

the demand exists. But, actually, as we can 

see in Figure 4, classical logistics activities 

have but a trivial impact on overall lead times, 

and are in many cases about as slick as it is 

reasonable to expect. Instead, we need to 

focus on procurement and manufacturing. 

This is where the gap between an emergent 

demand and the ability to supply that 

demand really lies. Of course, in an ideal 

world, procurement, manufacturing and 

logistics would all be part of an holistic 

supply chain ‘view.’ But, as we all know, that 

situation is still fairly rare. So, my advice is 

necessarily aimed at logisticians, and can be 

summarized as follows: 

• Your own logistical actions aren’t going to 

save the company: you need a co-ordinated 

response across the supply chain. 

• Take action now. 

• Don’t ship to market until the market is there. 

26 

classical logistics 

activities have but 

a trivial impact on 

overall lead times, 

or are as slick as 

it is reasonable 

• While you are managing for survival, plan 

for the upturn: if the notorious ‘green 

shoots of recovery’ appear, have you 

got stock in manufacture, in transit or 

in store, that can fertilize those shoots, 

and are the lead times such that you 

can capitalize on the upturn? Your 

competitors may have. 

• That suggests that it may be worth 

paying more (or at least not cutting back) 

on agility: look at the right areas of your 

supply chain, particularly suppliers and 

procurement; how do you commission 

suppliers, deal with them, pay them and 

keep them on your side. 

• Retaining future logistics capacity (even, 

perhaps, if payments seem excessive against 

current rates and activity) may be critical. 

And, finally, I am certainly not advocating 

that we abandon Far Eastern (or other 

LCC) supply sources; but we do need to 

drastically improve, with the suppliers’ cooperation, 

lead times, and this is absolutely 

the right time to be doing it. • 

Simon Butcher 


Simon Butcher is a Principal at Crimson & Co., 

supply chain consulting (www.crimsonandco.com). 


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strap 

2009 may/June www.scemagazine.com 27 

PM4i

etail focus 

Dcs finD A Voice 

Voice picking technology gives high returns for music and food distributors 

Zetes, the Auto-ID solution provider, 

has implemented a voice picking 

solution at Faber Music Distribution, 

one of Europe’s largest music distributors and 

a subsidiary of music publishers, Faber Music 

Ltd. The voice solution is the final element of 

a Warehouse Management System, provided 

by Solarsoft Business Systems, that also 

includes installing a wireless network, handheld 

terminals and truck-mounted terminals within the 

company’s distribution centre, in Harlow, Essex. 

Faber Music prints under its own imprint 

and also controls the European print rights to 

Warner Brothers Publications and EMI music 

publishing, as well as distributing other music 

catalogues such as Alfred Publishing, Alfred 

Lengnick, Barenreiter, Josef Weinberger, 

Trinity College London, Peters Edition and 

the Hungarian publisher, EMB. Faber Music 

Distribution stocks in excess of 100,000 titles 

— each with its own unique Sku — and ships 

more than 3500 orders for sheet music and 

related products, generating in excess of 

46,000 order lines per month. The company 

sells to both music retailers and wholesalers 

worldwide, together with sales to the end-user 

through its website (www.expressprintmusic. 

com). Owing to ever increasing costs and 

a competitive market, Faber needed to 

examine ways of cutting costs and making 

the distribution centre more efficient. Voice 

picking, with its relatively short-term return on 

investment, provides a high impact solution by 

cutting pick times by at least 25% and virtually 

eliminating picking errors. 

John Hepworth, Managing Director of 

Faber Music Distribution, says: “The new voice 

system has had to be very flexible to make 

our rather complex business work, with orders 

being split into three parts — general stock 

orders, bulk picking and archive items — which 

are manufactured on demand. But, after careful 

design, implementation and testing, the system 

really works well for us. The other important 

issue in the current climate is efficiency — and 

switching to voice is even more significant, 

helping us to create a leaner machine. It means 

that we can get orders out to customers more 

quickly, ship stock faster into stores and be in 

a position to take re-orders more quickly too. 

Looking ahead, the voice system will also make 

28 

the warehouse more efficient, enabling us to 

reduce overtime costs during the year and 

operate a more flexible workforce to meet our 

busiest trading periods.” 

Faber’s picking system illustrates the 

benefits of voice-directed picking as a 

warehouse optimization solution for small to 

medium sized businesses (SMEs). After its 

eight pickers had used the Zetes/Vocollect 

voice system for just one week, Faber Music 

Distribution was able to see an instant increase 

in picking rates compared with its previous 

paper-based system. Now, a single picker 

can complete anything up to 200 order lines 

per hour compared with a previous average of 

50–70 order lines per hour. In addition, owing to 

a multipick solution, pickers can simultaneously 

pick 10 orders at a time, providing further 

productivity improvements. From the onset 

of the project, Faber’s warehouse operators 

were involved in the migration to voice and are 

equally enthusiastic about their new picking 

system, which has been customized to identify 

order lines according to their format: ‘copy’ for 

printed music, ‘CD’, ‘DVD’ or ‘Set’ for music 

sets and orchestral scores. The system also 

switches from descriptive identifiers — such 

as the abbreviated title for the majority of 

mainstream and English language publications 

— to item number identifiers that are used 

for foreign language publications and more 

obscure, international composers. 

“The users really love the new system 

and were very keen to start using it,” adds 

Hepworth. “It is human nature to avoid change 

and at the start we had a few, mainly older 

members of staff, within the team who were 

quite apprehensive. But once they started 

working with voice, all their concerns were 

allayed straight away — and they have said 

they wouldn’t want to go back to a paperbased 

system.” 

James Hannay, Managing Director UK 

and Ireland for Zetes, says: “Voice picking 

has traditionally been seen as the preserve of 

large companies running very high throughput 

warehouse operations. This implementation 

for Faber demonstrates the flexibility of voicedirected 

working, and proves that SMEs 

too can see an immediate efficiency and 

productivity return when they make the switch.” 

Faber Music Distribution is using Vocollect 

Talkman wireless headset and belt pack 

devices with the 3iV voice recognition 

software, supplied by Zetes. The voice 

system is integrated directly into Solarsoft’s 

integrated ERP solution and Warehouse 

Management System. 

The Co-operative Group, the UK’s largest 

mutual retailer — and its fifth largest food 


the co-op has seen 

much higher than 

anticipated returns, 

particularly for Zetes’ 

voice system, with 

pick errors down by 

as much as 70% 

and picking rates 

improved beyond 

original business case 

estimations. 

retailer — is also expanding its use of voice 

picking technology. Zetes’ British subsidiary 

is a longstanding supplier to Co-op, and its 

voice solution will soon be supporting 1200 

warehouse users across six distribution 

centres (DCs) serving more than 4400 

retail stores. The Co-operative Group first 

implemented a voice picking system in its 

West Thurrock DC, in 2006. Since then, 

Zetes has implemented voice at three more 

Co-operative sites, with plans to extend usage 

to a further two DCs, by mid-2009, at the 

Thetford, Norfolk DC and a new site, due to 

be opening at Birtley, Gateshead, which will 

replace two older DCs. 

Zetes has worked with The Co-operative 

Group throughout the project, which included 

a complete overhaul of the organization’s 

WMS system and migration to a wireless, 

real-time infrastructure at each DC. Voice 

was selected as the right technology to 

enable faster picking because of the speed 

and complexity of their warehouse operation 

and high numbers of product lines stocked. 

Although The Co-operative’s business 

case for its WMS overhaul and voice 

implementation was built around a 3–4 year 

payback, the organization has seen much 

higher than anticipated returns, particularly for 

Zetes’ voice system, with pick errors down by 

as much as 70% and picking rates improved 

beyond original business case estimations. 

Operational and management performance 

targets are also being continually improved 

upon — beyond expectations — at live ‘voice’ 

sites, and training of new users can now be 

completed in less than 4 hours. Zetes was 

selected as The Co-operative’s preferred 

voice technology partner because of its 

reputation as the Auto-ID system integrator 

with the most extensive voice expertise and 

pan-European experience. 

Tim Edwards, Retail Logistics Business 

Projects Manager at The Co-operative, says: 

“Zetes not only matched our requirements 

regarding availability, cost and other critical 

criteria, it also understood our issues from the 

beginning and we were impressed by its proactive 

approach.” The Group is using Vocollect 

Talkman hardware and the 3iV Solution, 

implemented by Zetes. The voice system is used 

for all picking and marshalling activities across 

multiple warehouse environments, including 

ambient, produce, chilled and frozen areas. 

Alain Wirtz, CEO of Zetes, comments: “We 

are very pleased that such a highly reputed 

organization as The Co-operative Group 

recognizes the added value of our experience 

and ability to deliver large projects to major 

European retailers. This project was an 

important rollout, which perfectly illustrates 

the advantages a company can get from 3iV 

Crystal as a voice solution — in particular 

that our voice solutions are adaptable for 

use within most warehouse environments. 

Pickers working in frozen areas will be very 

appreciative of the positive benefits of using 

a voice interface.” In addition, the voice 

system has proved very popular with The Cooperative’s 

multilingual workforce, who found 

it both easy to use and convenient to work 

with, in their native tongues. Edwards adds: 

“Voice technology allows us to ensure that 

our customers receive a timely and accurate 

service, and that’s what is most important to 

the business.” • 

More information 

Zetes Industries is a leading pan-European company 

in Auto-ID, using both emerging and mature 

technologies (barcode, voice recognition, RFID, 

smartcards, biometrics). The Zetes group has its 

headquarters in Brussels, with subsidiaries in Belgium, 

Germany, France, Ireland, Israel, Italy, Ivory Coast, the 

Netherlands, Portugal, Spain, Switzerland and the UK 

(www.zetes.com). 


strap mobile solutions 

hoW cAn mobilitY 

solutions best serVe 

the suPPlY chAin? 

Rikke Helms looks at how mobile applications can help, not hinder. 

Throughout Europe, the recession is 

forcing companies across almost 

every sector to cut their workforces 

to compensate for lost revenues. Yet, at the 

same time, the onus on these companies to 

provide high quality customer service has 

never been greater. Greater competition 

and greater awareness have made 

customers more adept at migrating their 

business to the supplier that best meets 

their demands — whether it’s providing the 

cheapest product or delivering the highest 

standard of service. Customer relationships 

can now be made or broken by issues such 

as company response times, the speed 

of a sale — from order placement through 

to delivery — or the ability of couriers to 

answer questions or solve problems on the 

spot. And, of course, there’s also the fact 

that an inefficient supply chain will generally 

make a company less able to compete on 

price in the first place. 

Given these circumstances, businesses 

must look to examine their operations 

and identify any processes that could be 

streamlined to reduce costs and overall 

timeframes, with a view to passing on 

these benefits directly to the customer. 

Furthermore, field workers often play 

customer-facing roles, acting as sales 

representatives and ambassadors for their 

organization’s overall brand, making it crucial 

for such customer contact experiences to 

be made as satisfying as possible. 

Having the right staff is one key factor; 

yet, providing these employees with the 

best possible tools with which to do their 

jobs is just as vital. Businesses need to 

find new technologies that can make their 

services quicker and more consistent. With 

consumers being more tech-savvy than 

ever before, the days of the clipboard are 

numbered and the importance of conveying 

the impression of a modern, efficient 

organization cannot be underestimated. 

Consequently, in this environment of 

reduced workforces and increased 

30 

Rikke Helms 

low cost, 

customizable, user 

friendly mobile 

applications 

impact on many 

aspects of supply 

chain operations 

competition, many companies are now 

looking to mobile business applications as a 

means of improving employee efficiency and 

customer satisfaction, as well as delivering 

additional business benefits to optimize the 

supply chain as a whole. 

Examining the Apps 

Whereas, in the past, mobile applications 

were typically confined to industries such 

as manufacturing and energy, enterprise 

mobility is now being seen as a competitive 

differentiator across all sectors. Indeed, a 

raft of low-cost, customizable, user-friendly 

mobile applications can impact on many 

different aspects of supply chain operations 

by gleaning additional efficiencies from 

all field sales and field service workers. 

Furthermore, successful field working is 

naturally task-centric and event driven, and 

is dependent on the interaction between 

data from a wide range of sources. Through 

the use of these applications, delivered 

to a wide variety of handheld devices 

ranging from mobile phones to PDAs and 

BlackBerries, field workers are now able 

to perform processes such as invoicing, 

ordering stock and sending or receiving job 

updates and cancellations electronically, as 

opposed to the manual methods previously 

adopted. It’s all about following the flow of 

paper through an organization; wherever 

paperwork is currently required, a mobile 

application can be deployed in its place. 

Considering the amount of supply chain 

tasks that involve at least some timeconsuming 

paperwork — such as sourcing 

goods, deliveries or even compliance with 

regulatory measures — this represents 

potentially massive time and cost savings. 

It also translates to speedier product 

dispatching, more responsive customer 

service (thanks to improved internal 

information flow) and lower costs, in general, 

for customers. Management teams can use 

mobile applications to dynamically route 

their field workers to new jobs, based on 

location and service priority, as well as the 

skill set of the worker and the inventory or 

parts they possess. Updates can be rolled 

out on a group or individual basis, cutting 

out the need for a succession of phone 

calls, or the reliance on a prearranged, 

haphazard schedule. 

The use of mobile applications can also 

assist businesses in tracking the flow of 

finances throughout the supply chain. 

Field workers can now accurately track 

travel time and expenses, and payment 

cycles can be accelerated thanks to 

faster billing processes. This is possible 

through the automated documentation of 

services performed and products sold — 

invaluable to large companies previously 

reliant on the collective calculations of a 

large mobile workforce. 


Overcoming Mobility Hurdles 

One of the traditional drawbacks to mobility 

projects was the upheaval and disruption 

to workers that was experienced during 

deployment. Fortunately, the latest breed 

of mobile applications has been designed 

specifically with this in mind, reducing initial 

rollout time from months or years to weeks 

or days. The significant upfront investment 

required has also caused problems. However, 

there’s now a growing trend towards delivering 

mobile applications as managed services, 

allowing organizations to pay on a per-user 

per-month basis, meaning that if something 

isn’t working, it can very quickly be changed or 

modified — a much more palatable model for 

most companies, particularly given the current 

economic climate. 

Ensuring the end-user acceptance of 

new technologies is vital. Employees will be 

used to working to certain procedures, and 

so newly introduced mobility solutions that 

challenge the status quo can be viewed 

negatively. This is particularly true of field 

workers; their jobs are reliant on the use 

of devices whereby factors such as screen 

and keyboard size can create additional 

challenges. As a result, mobile devices 

and the applications running on them 

need to be as intuitive and easy to use as 

possible. Furthermore, many office-based 

employees already struggle to handle 

the quantity of information that they’re 

Virgin Media Case Study 

Virgin Media is the UK’s largest residential broadband provider, the largest virtual mobile network operator and 

the second-largest provider of pay TV and home phone. Formed by the merger of NTL and Telewest, and the 

acquisition of Virgin Mobile, the company has more than 14,000 employees and almost 10 million customers. 

The NTL and Telewest merger created a vast supply chain involving 2500 mobile technicians and engineers using 

different technologies and field processes, some of which were manual and paper-based. This presented the new 

company with the challenge of standardizing operations, to improve efficiency and remove the unnecessary costs 

of maintaining duplicate systems. 

As Virgin Media offers a host of different service packages to its customers, it is vital for its mobile workforce 

to be able to install, configure and activate the correct equipment at each customer’s home, as well as identifying 

and rectifying any problems on-site first time round. Virgin Media reviewed its existing application and platform 

solutions, and selected the Dexterra Concert platform as it offered the necessary security and flexibility to deliver 

mobile applications to its entire UK field staff. Based on the Dexterra platform, Virgin Media has developed its own 

application and deployed it on the field force’s semi-ruggedized Motorola Symbol MC70 handsets. The platform 

provides field technicians with the tools needed to perform all customer installations and on-premise maintenance 

automatically, achieving greater supply chain efficiency and increased customer satisfaction. 

All field staff are trained to provide telephone, broadband and digital television support from a single device, 

making real-time back-end integration a necessity to resolve customer problems on the spot. The application 

specifically enables employees to perform diagnostic tests and activate services. This information is fed into Virgin 

Media’s in-house customer management system, ICOMS, through the Dexterra platform, with the relevant data or 

diagnostics results then relayed back to the mobile devices. From a management perspective, the new solution 

provides Virgin Media with far greater insight into the status of current and outstanding tasks, as well as enabling 

the company to send out scheduling updates and job notifications … as and when they occur. “Using Dexterra’s 

platform, our technicians are now equipped with the necessary applications to complete each job on the first 

visit,” says Paul Buttery, Managing Director of the access division at Virgin Media. “This not only greatly increases 

internal efficiency and cost savings but, most importantly, it ensures ongoing customer satisfaction, which is key 

to our company’s continued success.” 

presented with each 

day; this is magnified 

on mobile devices. Instead of attempting 

to force-fit entire desktop applications 

onto these devices, bespoke applications 

can be developed that cherry pick data 

from multiple back-end systems, providing 

mobile staff with only the data required 

to complete their day-to-day tasks, 

leaving their devices as user-friendly and 

uncluttered as possible. 

Satisfied Workers, 

Optimized Supply Chains 

By prioritizing employee buy-in and 

acceptance as a key issue at the outset, 

companies can take huge steps to ensure 

the smooth uptake of mobility solutions. After 

all, an important benchmark for success in 

mobilizing business processes is that the 

field worker believes that the solution is 

genuinely helping them do their job better. 

As technological improvements and reduced 

costs have helped to overcome traditional 

hurdles, the last few years have seen a 

significant increase in supply chain mobility 

rollouts, with more businesses than ever 

before looking to harness the benefits of 

mobile applications. Now, however, perhaps 

the biggest case for mobility is that with 

customer choice continuing to expand — 

against a backdrop of European economic 

turmoil — improving supply chain processes, 

customer service and overall agility is not 

just competitively advantageous, it is now a 

competitive necessity. • 


Rikke Helms is Managing Director of global sales, 

Dexterra (www.dexterra.com). 



hAnD in hAnD 

Following the acquisition by Honeywell of both Hand Held Products and Metrologic, the company is 

launching new scanning and mobile computing technology. Kevin Robinson spoke with Andrew Donn, 

Director, Northern Europe, at Honeywell Scanning and Mobility. 

AD: We’ve had two major acquisitions in the Honeywell Scanning and 

Mobility sector, which focuses on the Auto-ID industry, and this is very 

exciting for us. We’re merging two quite substantial companies, product 

portfolios and verticals, which will give us greater breadth and depth in 

the marketplace. Hand Held was acquired in December 2007 and was 

brought into the company’s Automation and Control Solutions (ACS) 

unit. Now, however, we’re positioned under the Security Group within 

Honeywell ACS. 

KSR: What inspired the acquisition? 

AD: Hand Held went out to market to look at who was interested 

and, at the time, Honeywell was looking closely at the Auto-ID sector, 

and had been doing so for several years. A lot of due diligence had 

been done on a number of companies before Honeywell acquired 

Hand Held. So, it was simply a matter of time before the decision was 

made to purchase one, and when Hand Held put itself up for sale, 

the timing was perfect. There were also a number of key elements 

that Honeywell was interested in, which positively influenced the 

acquisition decision: Hand Held had some very solid IP and owned 

its own manufacturing processes. And, in essence, the same factors 

applied to the Metrologic acquisition. 

KSR: This is quite a bold move during a recession. Is this part of 

Honeywell’s overall strategy? 

AD: Definitely, but I should point out that that the due diligence was 

done before the downturn. They see it as a long-term development 

and weren’t necessarily focusing on the short-term; they don’t see the 

recession as being a negative thing, they see it as a positive opportunity. 

They’re a very cash-rich company; they purchased several companies 

last year and are still involved in acquiring a number of organizations 

32 


eAr’s the GooD neWs 

More than 500 team members develop, produce and market the high-technology ear 

implant hearing devices of Tyrol-based manufacturer, MED-EL, and the subsidiary Vibrant- 

Medel. These medical devices are subject to the strict regulations of the US Food and Drug 

Administration (FDA) and EN 13485, which include seamless product documentation and 

traceability of every individual part throughout the lifecycle of the product. This process is 

now supported by a system, integrated by B&M, that uses DATAKEY ERP middleware and 

smart Honeywell Dolphin wireless mobile computers. The system reduces manual errors, 

eliminates paper documentation and increases the security of all logistics processes. 

FDA-Compliant Quality Assurance 

“The Medical Devices Act requires us to document every single implantable part from 

production through the entire lifecycle of the implant, as well as the patient’s life,” 

explains Dr Walter Fimml, IT Manager at MED-EL. “As more than 25 digits needed to 

be entered manually in some instances (5 or 6-digit S/N), errors were unfortunately 

introduced during the input of serial numbers. We must be certified according to ISO 

EN 13485, which is a lot of work.” An ear implant system consists of implantable and 

external parts. Implantable parts require sterile packaging, which is a challenging base 

for printing barcodes. The miniature component groups and parts must bear the serial 

number and be labelled in the appropriate local language to enable the patient to identify 

the package contents. The systems are shipped to hospitals and physicians in handy 

cases along with software and documentation. 

The components are transferred from the incoming goods department to the 

main warehouse, where they are either directly selected for production or for 

external partners. The products are prepared for dispatch in the warehouse. “Unlike 

conventional warehouses, the requirements for our warehouse are very high,” adds 

Fimml. “An advanced degree of responsibility and precision is vital for our shipping 

outside of the security business. They understand the financial climate 

and have learnt well from the recessions of the past; they know what’s 

needed to drive businesses forward and apply best practice throughout 

all their markets. It’s very different from the way that Hand Held and 

Metrologic have traded in the past, now having this meaty corporate 

entity behind them. 

KSR: Do you think that these acquisitions represent the 

resurgence of barcode scanning? 

AD: We’re looking at both barcoding and RFID applications, and 

consider them both to be good opportunities. Barcoding has always 

been a core focus for Honeywell Scanning and Mobility. The fact that 

we’re seeing more applications emerging from different verticals and 

different sectors means that that’s where we’re focusing our attention. 

We’ve got main areas that we’re focusing on — transportation and 

logistics from the Hand Held group of customers and products, and 

retail, with the Metrologic side of the business. We also see opportunities 

that we’re concentrating on in other verticals and we’ll always look — 

under the remit of Honeywell’s business practice, Voice of the Customer 

— to go out there and find out what’s happening in a particular market 

and see what the demands of our partners (new and old) are for new 

products. So, if it’s heading towards RFID, then we’ll further develop our 

product range to meet that demand. The acquisitions have given us that 

extra flexibility, because Honeywell has huge manufacturing expertise, to 

be a bit more diversified than we have been in the past. 

KSR: RFID seemed to be wandering in the wilderness for some 

time. Has anything changed? 

AD: In some verticals, there will always be applications for RFID out 

there; but, we don’t see it taking off quite as well as we — or, indeed, 

staff. Our warehouse team is made up of specialists, who conduct customer-specific 

configuration, assembly and electronic adjustment tasks for each order. In this 

context, they now benefit from the support of the B&M wireless data system.” B&M 

delivered Honeywell Dolphin 7850 wireless computers and connected them to the 

Navision Enterprise Resource Planning (ERP) system via DATAKEY middleware. From 

the DATAKEY control station, the warehouse manager can selectively issue picking 

orders, such as releasing specific orders to particular individuals, depending on the 

qualification of the team members. 

Serial Number Tracking 

The mobile data collection begins with incoming goods. Most of the supplied parts arrive 

in cardboard boxes that are already marked with barcodes or are labelled at the company 

upon arrival. MED-EL uses code 39 for box labelling. Boxes that are not already labelled 

are equipped with barcode labels after registration. The label printing is triggered directly 

from the mobile computer. One of the most outstanding features of the MED-EL warehouse 

is the great variety of products, most of which are stored in Rotomat systems. Currently, 

more than 6000 different products are kept in stock. There is also a storage area for 

auxiliary supplies and one for packaging and marketing material. When the implant leaves 

production, it already has a serial number and a documented manufacturing history. Before 

an ear implant customer set is assembled, the serial number is scanned. The scanning 

of the serial number plays a significant role in minimizing documentation errors. Except 

for China and Turkey, no other country explicitly demands barcodes on medical devices 

— even in the USA, no standard is expected to be adopted before 2015. “Naturally, we 

want to have a system that is sustainable and internationally recognized,” says Dr Fimml. 

“Therefore, we currently use the datamatrix code for all small parts. Should this code not be 

adopted as the standard in 2015, we will have to change it. Nevertheless, we will be able to 

draw on our long-standing experience and get started on the basis of an operable system.” 

CONSULT 

Design & Plan 

Your Partner 

for Warehouse & Distributions 

solutions 

Swisslog (UK) Ltd 

2 Brooklands 

Moons Moat Drive 

Redditch 

B98 9DW 

Tel. +44 (0)1527 551 600 

wds.uk@swisslog.com 

www.swisslog.com 

BUILD 

Implement & Integrate 

SUPPORT 

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At Swisslog, our experts for the retail industry 

continuously analyse market trends to develop 

state-of-the-art logistics solutions. 

Thus, your requirements for having the right 

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the diversity of applications 

is becoming so vast and 

is more in-depth than ever 

as all manufacturers — would have liked. Regarding the wilderness 

years, I think it’s really just a case of driving ROI and getting a good 

return on the investment from each user application. If the ROI isn’t 

there, or if there are technical limitations, then we certainly won’t be 

making an investment. But we’re talking to a number of RFID resellers 

who are concentrating on the core issues and helping us to understand 

how we can diversify with them. 

KSR: What can Honeywell do for the struggling 

automotive industry? 

AD: We see the current economic climate as an opportunity. Some 

of our resellers are targeting the automotive industry and pushing 

them to approach the manufacturers and encourage them to step 

back and take a look at their own internal processes, and assess 

where we can apply 2D digital barcoding, tracking barcoding or 

datamatrix pin dot marking and coding onto the products to make 

those processes more cost-effective and streamlined. We’re trying 

to engage the vehicle manufacturers to say: where are the “holes” 

and where can we apply our expertise to provide solutions and 

reduce costs. They probably don’t hold as much stock as they used 

to, as cash is in short supply, so we can help them to have better 

accessibility to all their stock controls. The resellers are becoming 

more aggressive and taking a more proactive approach to finding 

out how they can help automotive manufacturers. 

KSR: And does the healthcare sector have its own particular set 

of hurdles to overcome? 

AD: Healthcare is one of our core focus areas, mainly because of the 

Hand Held Welch Allyn legacy. We have some good relationships with 

a lot of big system integrators, such as Mackenzie, and have products 

that are specific to the healthcare market that we’ve designed to 

address its very exacting demands: we have healthcare plastics on our 

mobility products and scanners so they can withstand the rigours of 

cleaning agents. We can apply these for applications within a hospital 

or to track surgical instruments in an operating theatre or for bedside 

management. It’s a key area for us to supply 2D digital barcode 

technology to pharmacies, throughout the healthcare supply chain, right 

up to the patient’s bed. 

KSR: What has Honeywell done to restructure its 

partner programme? 

AD: What we’ve done is taken the voice of our customers into 

consideration and examined what our current partners are looking 

for in the programme. We want to understand what the demands of 

large manufacturers are. As such, we’re taking a whole lot of best 

34 

Andrew Donn 

practices from both sides of the company and combining them into 

one programme. We’re currently rolling that out to all of our partners, 

who are very excited about what we’re showing them and what we’ve 

done so far. We’ve taken a very strong stance on our channel; we 

only supply through the channel and we’ve catered for a lot of the 

smaller scanning-only distributors by categorizing them under one 

level. This level is very clear to the market, to the distributors and 

the resellers and we are in frequent communication with a number 

of direct integrators and vertical leaders. We’re very excited with the 

programme; it’s taken a while to thrash the process out, but we feel 

that we now have a very positive programme that combines both 

companies and offers a huge product range to the partner base that 

we’re managing. 

KSR: How will these Auto-ID developments benefit the overall 

supply chain? 

AD: The diversity of the applications is becoming so vast and is 

more in-depth than it ever has been before. When we look at field 

force automation and delivery — of applications that require putting 

demands on the manufacturers to produce the right product for 

software houses and end-users — in terms of internal technology, force 

factor and reliability, Honeywell is concentrating on producing very high 

quality goods that will also represent what the customer wants So, I 

think the Auto-ID industry, especially on the mobility side, is increasing 

at a pleasing rate and will enable us to take a greater stake of the 

market share in this sector. • 


isk management 

36 

As the global economy slides further into 

recession and new fraud cases break 

in the news every week, cross-border 

supply chains face their greatest threat 

from fraud and corruption. Charles Carr 

discusses the red flags to watch out 

for and how putting thorough controls 

in place can give companies better 

protection from fraudsters. 

We live in a global marketplace. Many of the 

everyday products that we buy — including 

furniture, clothing and groceries — come from 

the other side of the world. More often than 

not, they come from emerging economies such as China and 

India. The complexity of the supply chains that allow us to order 

and receive products online, in the space of a few days, exposes 

many manufacturers and retailers to a host of corrupt practices. 

Recognizing the Threat 

Fraud and corruption proliferate in financial downturns. 

Individuals can take advantage of new opportunities for fraud 

whilst all the attention is focused on righting the economy. 

Often, it is employees who may feel concerned about their 

jobs, disgruntled at their remuneration or fearing redundancy. 

We refer to these types of fraudsters as seekers of personal 

gain — individuals who line their own pockets and believe that 

a company employing tens or hundreds of thousands won’t 

miss the relatively small amount of stock or revenue that they are 

siphoning off. By contrast, there are corporate “saviours” who are 

often the hardest to predict. They may be ‘cooking the books,’ 

believing that they are acting in the best interests of the company 

or its employees. 

Increased business with emerging markets is positive for the 

world economy; however, there is a downside: transactions 

and operations with organizations in foreign markets can pose 

a greater risk of fraud. The kind of advice that businesses 

are seeking when entering foreign markets typically relates 

to fictitious transactions by local vendors, embezzlement by 

expatriate employees and the fraudulent use of confidential 

information and intellectual property. The type of corruption that 

we are seeing in this market includes bribes, bid-rigging, slush 

funds and kick-backs. Rather than companies becoming too 

cautious to take advantage of foreign opportunities, they should 

ensure that appropriate risk mitigation strategies are in place. 

Countries around the world plan how best to combat the 

financial crisis, with fiscal stimulus thought to be the way ahead 

for many economies; however, it seems that as fast as we may 

be trying to fix the global economy and ensure that this kind of 

downturn doesn’t happen again, we are plagued by the actions 

of corrupt individuals. Of the fiscal stimulus funds to be injected 

into global economies, it is estimated that as much as 10% or 

more may be lost to fraud and corruption without the use of 

appropriate policies and procedures. 

www.scemagazine.com May/June 2009

Focus on corruption: 

the iMpact oF Fraud on 

cross-Border supply chains 

Discovery and Recovery 

Preventing the transfer of the global proceeds of corruption should be the 

focus for all involved in investigating and preventing fraud and corruption. 

Legislation, including the 2005 UN Convention against Corruption and 

other measures has made a difference, but there is much more that 

needs to be done to address this problem. Today’s global financial 

system, particularly its speed, makes concealing money extremely easy. 

In particular, the vast sums of money often involved lets perpetrators 

engage in highly advanced money laundering. Corruption often comes 

from a high level — usually from powerful government officials who have 

allowed it to infiltrate domestic institutions. In asset freezing situations, 

many of these officials are allowed to preside over investigations — 

sustaining and harbouring corrupt practices. 

The investigative and legal processes necessary to recover funds 

deposited in foreign accounts are complex, requiring highly technical 

skills for those pursuing them; fraud perpetrators are often very clever 

individuals with specialist knowledge of the technological and financial 

systems they use to conduct their fraudulent activity. They can pose a 

significant challenge to those trying to outwit them. 

Blowing the Whistle 

It is often costly and time-consuming to investigate fraud and corruption; 

many cases take years to complete. Success may well depend on the 

funds available for the case. In countries where corruption is widespread, 

companies simply do not have the resources to fund comprehensive 

investigations of this scale. In fact, it is probably the absence of resource 

that allowed corrupt practices to infiltrate the organization in the first 

place. As with any crime, restitution is good … but prevention is better. 

From our recent work with clients, we expect to see an increase 

in whistle-blowers coming forward to talk to managers about what 

is happening ‘on the ground.’ With cost reduction becoming more 

important than ever, buyers, exporters and distributors are continuing 

to demand high quality at low prices and are also concerned about the 

risks, such as product contamination, that could hurt customers and 

damage company reputation. As a result of this, companies are ramping 

up on-the-ground supervision and audits. As companies start to see the 

real picture of their supply chain operations, they should prepare to hear 

feedback from workers … and take it seriously. 

Prevention is Better Than Cure 

Of course, it would be unwise to rely solely on whistle-blowers when 

huge sums of money and corporate reputation are at stake. There are a 

number of other processes that companies should adopt to tackle fraud 

and corruption, including the following: 

• Improved internal control: Employee information is crucial in any 

investigation; however, it is important that companies allow channels of 

communication and, also, that they ensure that this method is legitimate 

and reliable. For example, in a case wherein the details of a competitive 

bid had been leaked to an opposing bidder, causing the company to 

lose out on the new contract to their opposition, the use of an efficient 

internal control mechanism could prevent this situation. The company 

could have won the new contract, generating a major revenue stream. 

• Understanding business operations: Although merger and 

acquisition activity has reduced markedly, there are still businesses that 

are in a position to take over competitors. It’s important that during this 

process the operations of both companies are examined. Working with 

a past client, Kroll discovered an overlap in distribution routes in two 

merged businesses in the gas market. This affected the company’s 

trading software, resulting in an accounting adjustment of $12 million. 

• Fraud auditing: Specialized audits are the most important, low-cost 

action to address the larger opportunities for fraud presented by 

weakened internal controls. Kroll was asked to investigate reports that 

an employee of a fuel distributor was embezzling money. A statistical 

analysis of the supplier payments system not only found that 65% of 

errors were down to data entry, but that the remainder were from the 

registration of a ghost supplier receiving fraudulent payments totalling 

$3.5 million. 

• Asset recovery: Tighter credit conditions can reveal the weakness of 

underlying collateral. One of Kroll’s former clients had granted credits 

to a large distributor for years. Because of financial difficulties, the 

supplier suspended payments on the debt. It was subsequently found 

that goods provided as collateral were of lower value than originally 

estimated, and some did not exist at all. 

It’s important to remember that the onus is not only on Western 

corporates to clean up corruption. Companies from developing markets 

are now multinational businesses and also have to look at their own 

levels of corporate governance, and apply these procedures to operate 

effectively in the global marketplace. 

Combating Corruption as the Recession Continues 

There is no doubt that we are all living in uncertain times, and changes 

in market conditions will always alter the shape of fraud. In addition to 

the general macro-economic issues, such as liquidity and currency risks, 

critical investment-specific risks need to be taken into account when 

investing in and building supply chains in unfamiliar, foreign markets. 

Corruption is a greater risk in this downturn. Although we cannot control 

the global economy, companies can implement measures to best protect 

themselves from risk. In addition, transparency is key to combating this 

problem. This extends to the funding of companies to support them 

through the recession. It’s vital that governments and businesses are 

transparent about who is receiving money and what is being done with 

it. Emerging economies may offer developed markets real prospects 

for growth and investment opportunities compared with the developed 

world; however, without due diligence and sensible risk management, the 

dangers may well outweigh the possible gains. • 


Charles Carr is Head of Fraud Prevention and Anti-Corruption at Kroll (www.kroll.com). 

2009 May/June www.scemagazine.com 37

supplier relationships 

identiFying the 

cost oF Mistrust 

Mike Robinson, director of Berkshire Consultancy, is a specialist in business process improvement 

and supplier management. In this article, he argues that businesses must resist the temptation to let 

today’s economic conditions create an environment of mistrust within the supply chain. 

Mike Robinson 

38 

Supplier relationships operate at their greatest level of 

efficiency when there is mutual trust between the service 

provider and the customer, but this confidence can be 

easily undermined. The tough economic conditions in which we find 

ourselves have created an extremely tense business environment 

and the pressure to demonstrate efficiency and a positive return 

on investment has never been greater. However, this pressure can 

manifest itself as an anxiety and nervousness that may be detrimental 

to the supplier contract, serving only to exacerbate existing problems. 

In a deepening recession, it is to be expected that customers will 

find themselves scrutinizing the value of contracts; but, as the pressure 

mounts, there may be a tendency for customers to slip into behaviours 

that can prove to be counterproductive. There is an understandable 

temptation to start ‘over’ monitoring the supplier’s progress to ensure 

that milestones are being met or to apply pressure to get improved 

services at lower costs. This can lead the supplier to feel that their work 

is being impeded as a result of reporting demands and being asked to 

justify their actions to an unnecessary extent. In addition, customers 

may be tempted to resort to an “I’m the boss” mentality and even use 

the knowledge that times are tight to ‘squeeze’ or even bully suppliers. 

This will lead to a lack of goodwill and, potentially, a breakdown in the 

relationship, with reduced trust and honesty between parties. The 

negative impact of this cannot be understated! 

Softly, Softly 

Trust is vital within the supplier relationship, as is the confidence 

to manage with a lighter touch. When trust exists, contractors are 

more innovative and better able to concentrate on getting the actual 

job done, rather than spending time ‘handling the client.’ If a lack of 

trust arises, parties will become dependent on time-consuming and 

unnecessary processes and reporting to ensure that their backs are 

covered, which ultimately means that the project will be less efficient 

and more costly. Moreover, by removing ‘the partnering’ nature of the 

relationship, a blame culture is more likely to arise; and, if problems 

do occur, they tend to escalate unnecessarily. As the understanding 

between parties deteriorates, objectives will diverge and the 

consequence will be a poorer, less efficient service. 

In the current environment, it is inevitable that contracts and service 

levels comes under increasing scrutiny, but if the pattern of behaviour 


described above sounds familiar, you should look carefully at both 

the cost and the cause of this mistrust. Why has this mistrust arisen? 

Is it really a consequence of the supplier’s behaviour or has your 

own anxiety resulted in a new, potentially damaging approach to the 

relationship? How much do you pay every day for monitoring the 

occasional inconsequential lapse? The value of a good relationship 

with your suppliers cannot be underestimated and most 

businesses work hard to ensure that this is in place at 

the outset. But partnering is most thoroughly tested 

only when the going gets tough, and it is imperative that 

customers resist the temptation to drift into a negative 

and detrimental style of supplier management. There 

is a perception that in a difficult economic climate, 

customers should ‘get tough’ with suppliers, 

and partnering principles can become a victim. 

It is entirely appropriate to remind the supplier 

that contracted obligations must be met, but 

this does include considering the customer’s 

obligations to the supplier. 

Contrary to popular opinion, it is rare 

that it is purely supplier failings that are 

responsible for a contract falling short of 

its promise. Both parties have a role to play 

in making the relationship work — and the 

more in tune with this obligation they are, the 

greater the end reward will be for all concerned. 

If companies wish to get maximum value out of their suppliers 

throughout this downturn, then it is essential that they continue to 

nurture the relationship and resist drifting into what are ultimately 

counterproductive behaviours. Organizations should keep faith 

with the approach developed during the good times and resist 

reactionary behaviours that will erode the trust that has been 

built. Taking a risk-based approach to contract monitoring 

can yield real benefits in terms of costs and performance. 

For instance, the customer and supplier agree to a new 

monitoring regime (what to check for, how often, to 

what tolerance) based on customer feedback (what 

matters) or statistics to date showing the ‘hot spots’ 

in service delivery. Modifying the process around the 

stakeholders’ new understanding of what matters 

and what doesn’t can save monitoring costs for 

both parties. The consequence will be a more 

efficient contract and a trusted partnership 

— which in current times is exactly what 

companies should be seeking. • 


Mike Robinson 

Director 

Berkshire Consultancy 

www.berkshire.co.uk 

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Warehousing 

Corporate Express Europe gains improved visibility and processes with JDA Software’s Advanced 

Warehouse Replenishment solution. 

Corporate Express is one of the world’s 

leading suppliers of office products to 

a variety of businesses and institutions, 

serving as a one-stop-shop for office essentials 

via its e-commerce and distribution businesses. 

Acquired by the $27 billion office-products 

powerhouse, Staples, Inc., in 2008, Corporate 

Express employs approximately 18,000 

associates in 21 countries throughout North 

and South America, Europe, Asia and Australia. 

Global companies such as Corporate Express 

typically operate as a series of independent, 

geographically dispersed divisions, often as 

a result of expanding their global presence 

and product portfolios through acquisitions 

and mergers. Corporate Express Europe, like 

its parent company, expanded its presence 

with a multitude of acquisitions, which 

resulted in fragmented business systems as 

each acquired company maintained its own 

Enterprise Resource Planning (ERP) system 

and warehouse management solutions. To 

optimize supply chain planning and business 

40 

performance, Corporate Express Europe 

sought technology that would enable it to 

improve global supply chain visibility and agility 

by taking a synchronized, cross-functional 

and strategic approach. “We recognized the 

need for a slick, uniform system to maintain 

and improve our customer service levels,” 

explained Jan van Noord, project manager 

Logistics, Corporate Express Europe. “With 

that understanding, our criteria consisted of 

finding a proven solution that could be rolled 

out across Europe and serve the needs of 

every country, as well as integrated with our 

enterprise-wide ERP systems.” 

Inventory Management Excellence 

To streamline its supply chain management 

processes, Corporate Express Europe turned 

to JDA Software’s Advanced Warehouse 

Replenishment (AWR) solution. The bestin-class 

solution provides accurate visibility 

into the warehouse, helping buyers to create 

accurate forecasted demand and order 

projections, as well as stable order patterns. 

AWR provides purchasing requirements for 

more stock by feeding a rich mix of data into 

Corporate Express’ ERP platform, which is 

then transferred to suppliers. By ensuring that 

the right product is delivered to the right place 

at the right time, Corporate Express Europe 

is driving top-line growth and bottom-line 

savings. According to Van Noord, the decision 

to implement AWR was a simple one given 

that Corporate Express’ United States division 

was using it. “After evaluating the system in 

use in the United States ourselves, we were 

very pleased with the robust functionality of 

JDA’s AWR solution. We were also fully aware 

that most of our competitors were using AWR, 

including Staples prior to its acquisition of 

Corporate Express,” Van Noord added. 

Corporate Express Europe established a 

phased project plan to implement AWR in 

12 warehouses across 10 countries during 

a 3-year period, which coincided with the 

company’s phased ERP implementation. 


To date, AWR has been installed at the 

distributor’s locations in the UK, France, 

Italy, Austria and Spain, while its locations in 

Benelux and Ireland are on track for imminent 

completion. Subsequently, the company 

kicked off its AWR rollout in the Nordic 

countries in late 2008 and, once completed, 

Corporate Express Europe will implement the 

solution at its Germany-based warehouses 

in 2009. “AWR is a useful solution that can 

control the flow of incoming goods, but it’s 

reliant on the quality of information being fed 

into it. The system needs reliable lead times 

if it’s to accurately predict how much product 

must be delivered to the warehouse at any 

given time,” explained Van Noord. 

Corporate Express Europe continues to 

benefit from operational efficiencies as AWR is 

implemented in each location. “The solution is 

fully installed at our European headquarters in 

the Netherlands. As a result, everyone across 

the business can now see what stock is 

available at that location,” explained Van Noord. 

“This has made the supply chain so much more 

transparent.” 

Realizing an ROI 

Once Corporate Express Europe completes 

the company wide implementation of AWR, 

it expects to benefit from improved supply 

chain visibility that will lead to an enterprisewide 

increase in productivity in each 

warehouse, a reduction in stock levels, better 

customer service and enhanced inventory 

management abilities. “Six months after AWR 

was implemented, our warehouse in France 

realized a 14% reduction in stock levels. 

There was also a 25% reduction in backorder 

lines owing to better product availability. In 

addition, availability has increased at our 

UK-based warehouses — although volumes 

remain the same, our stock levels are more 

balanced across the business,” Van Noord 

said. Corporate Express Europe’s associates 

have also commented on the solution’s ease 

of use. “Our buyers have found that placing 

orders now only takes a small percentage of 

their time,” Van Noord explained. “With AWR, 

they have more time to conduct analysis and 

manage supplier relations more effectively.” 

The company’s buyers now focus on 

improving the quality of data generated by 

AWR, as well as creating more accurate 

inventory plans. “It’s now a lot easier to check 

the number of products for any particular 

country and, when required, move stock 

from one warehouse to another for improved 

availability across Europe,” Van Noord 

commented. AWR produces suggested 

orders by calculating inventory quantities 

based on scientific forecasts that incorporate 

demand, lead time, profitability and service 

level goals. By utilizing information about 

supplier discounts when suggesting 

replenishment quantities, Corporate Express 

Europe is able to minimize ordering costs. 

The solution also evaluates and executes the 

purchasing needs of planned promotions 

and special events while automatically 

incorporating unique distribution centre needs 

and demands. 

“AWR optimizes costs and profit, not 

simply stock turn. For example, we have 

found that it can be beneficial to have more 

stock in the warehouse if it reduces overall 

costs from fewer deliveries or handling. The 

solution determines our ideal stock levels 

for optimizing profit by analysing data at the 

vendor level — instead of the item level — 

to create a best-case scenario,” said Van 

Noord. “We are very pleased with the results 

to date, and are looking forward to fully 

optimizing our business processes with the 

continued support of AWR.” • 


JDA Software 

Tel. +1 800 479 7382 

info@jda.com 

www.jda.com 


LCCS 

loW-cost country sourcing: 

the past, the present 

and the Future? 

For decades, low-cost country sourcing (LCCS) has been one of the most popular sourcing strategies. 

Employing suppliers that operate on leaner budgets than those found domestically has been an obvious 

choice for organizations wishing to reduce operational expenses and make greater returns on investment. 

In the UK, there doesn’t seem to be an industry that hasn’t benefited in some way: from labour-intensive 

manufactured products made using Chinese labour to call centres staffed with low-cost English-speaking 

workers in India and IT work performed by low-cost programmers in both India and Eastern Europe. 

However, according to a recent IDG report by Simon Ellis, LCCS 

should be thought of as a shortsighted strategy for the longterm. 

Ellis suggests that the focus shouldn’t be on LCCS, but 

on Profitable Proximity Sourcing (PPS), which encourages organizations 

to look at “balancing cost and service, with greenness or sustainability 

increasingly playing a role in the decision making process.” Examining 

the supply chain in this way certainly shows that the initial savings 

associated with LCCS — without considering whether there may be a 

more cost-effective and ethical alternative in the long-term — can blind 

organizations. But this fails to take into account the developments and 

innovations that the countries that provide LCCS are undertaking, and 

that still make them excellent options for organizations in the West. 

Problems with Production: Who’s to Blame? 

This is not to say that there aren’t problems with sourcing from LCCS 

suppliers, and there are instances when problems arise, particularly in 

terms of the quality control of materials. For example, in August 2007, 

Mattel’s Fisher-Price division announced that it was recalling 1.5 million 

suppliers from low-cost countries are 

evolving and should not be discounted 

when it comes to the global sourcing 

of higher-calibre products. 

preschool toys because lead paint was used in production by one of 

the company’s suppliers in China. But rather than damning the supplier, 

the question arises as to whether adequate checks were put in place 

by Mattel to ensure that its high production standards were met. And as 

Mattel found out, it, not the factories, became legally vulnerable when this 

came to light, and the scandal damaged its brand significantly. 

Following the Mattel scandal, President Bush went on to raise product 

safety issues when he met with the Chinese President, Hu Jin Tao, at the 

Asia-Pacific economic summit. Other countries also discussed the need 

for stronger safety standards, implying that the problem was rife in all lowcost 

countries. The US administration was swift to assure that it believes 

countries such as China understand the concerns of the US and other 

Western countries, yet some outside experts questioned whether they 

42 

really do understand the extent of US consumer worries and whether 

they actually adhere to the standards required. This type of high-profile 

scandal is extremely damaging to low-cost countries, even though in 

this case it was the responsibility of Mattel to stipulate what processes 

should be used and to regulate their suppliers. When selecting 

suppliers in low-cost countries, Western organizations can be guilty of 

perceiving Asian suppliers as having low standards, therefore opting 

to source from Eastern European countries. In fact, US imports from 

European low-cost countries have begun to outpace those from both 

Asia and the Western Hemisphere in the noughties (Journal of Supply 

Chain Management, September 2007). 

LCCS = Low Standards? 

However, this perception of low process standards in Asian low-cost 

countries is undeserved. Countries such as China are becoming 

evermore competitive as training schemes for labourers are now 

producing more highly skilled workers and factories that operate to EU 

and US standards, and all still at lower costs than Eastern European 

production can deliver. Even tasks such as high-tech laboratory work, 

which were previously perceived as being too technical for these 

countries, are increasingly being catered for. At the end of September 

2008, Huawei, a Chinese firm specializing in telecoms solutions, had 

more than 96,000 employees, of whom 44% were dedicated to research 

and development. This is just one example of a supplier from a low-cost 

country competing on an international level and driving innovation within 

its industry, but there are many others out there. 

Overcoming the Challenges of LCCS 

So, it is clear that suppliers from low-cost countries are evolving and that 

they should not be discounted when it comes to the global sourcing of 

higher-calibre products. But this is not to say that it is an easy process for 

organizations to assign suppliers within these countries. Indeed, a 2007 

report from AMR Research points out that low-cost country sourcing 

readiness includes “understanding and dealing with the additional risk 

of cultural differences, currency, time zones, connectivity, distance, 

logistics constraints, language and political instability. Doing low-cost 

country sourcing right involves more than just looking at costs … and 

companies must revisit the strategy regularly.” As such, many mediumto-large 

sized organizations can struggle to get their sourcing right if 

they decide to tackle all of these issues themselves. One way to avoid 

these obstacles is to work with a consultancy that specializes in working 


within these countries and advising on global sourcing strategies. These 

consultancies are typically employed directly by the organization 

and are used for their extensive experience and expertise in the 

marketplace, as well as fully understanding the culture of the chosen 

country. They work with the organization to develop a thorough 

understanding of its strategic needs, required standards and ethical 

considerations. Armed with this information, these consultancies are 

able to negotiate with suppliers and stipulate what is expected from 

a contract, helping to forge stronger and more beneficial working 

relationships, through greater transparency on both sides. 

Furthermore, these consultancies often offer a dual-based service, 

whereby they have offices in both the home country of the organization 

seeking a low-cost supplier, as well as the low-cost country itself. This 

provides substantial benefits, as the organization is able to work with a 

local consultant in the same time zone, speaking the same language, to 

finalize the brief, as well as working with a consultant based in the lowcost 

country to do the operational hands-on work. 

If an organization has a ‘mature’ procurement department that 

has experience in identifying and working with suppliers globally, 

then a consultancy can act as an adviser and provide the support 

both technically and based on the specific needs of the organization. 

The consultancy can also help to create the processes for supply 

management after the contract is signed. An ‘immature’ procurement 

department with little to no experience can use the consultancy in all 

aspects of global sourcing and the supply chain that is created as a 

result. This includes analysis of opportunities, financial asset analysis and 

risk analysis, as well as negotiating with suppliers and soothing cultural 

diversities and ongoing support once the contract is signed. 

The Challenges for LCCS in 2009 

Global concerns such as increasing energy prices, political alliances 

and the import legislation of bodies such as the EU can also 

significantly affect how an organization sources. It is with these 

concerns that organizations need to decide where LCCS fits into their 

overall global sourcing strategies. For example, high transportation 

costs could mean that although manufacturing a product in Taiwan 

is cheaper, production in Eastern Europe is a more viable choice for 

a European organization owing to the high cost of shipping. Other 

recent global changes have also affected sourcing. Increasingly, more 

consideration is being given by the EU and other governing bodies to 

issues such as green legislation, which can result in fines for the buyer 

if a product made using the wrong process is shipped into the region. 

As such, Ellis’ argument for ‘profitable proximity sourcing’ appears 

stronger but, again, many suppliers in low-cost countries are taking 

great strides to improve their green credentials. As such, opting for a 

low-cost provider can still meet these requirements. 

In 2009, as the credit crunch continues to bite, there will be an increase 

in this type of issues-based decision making. Sourcing from low-cost 

countries will be highly relevant as receiving a high return on investment 

is still a pertinent aspect of global sourcing. High-cost countries such as 

Japan who are looking to compete on a global level will find themselves 

threatened by their low-cost country neighbours and competitors 

whose production costs, particularly labour, are so low they make price 

wars almost unwinnable. Indeed, many organizations from higher-cost 

countries such as Japan will continue to shift their production to lowercost 

countries to stand a chance of competing on price. 

Up until now, these high-cost countries have always had various 

tactics in their armoury to fight off LCCS suppliers, such as relying on 

brand loyalty (which is hard to replicate for new entrants) and avoiding 

direct competition by moving into different market niches — again, to 

protect their margins from the ravages of competing on price alone. 

However, when there is an increasing global need to curb costs and 

the competing products are of increasingly high quality, producers in 

higher-cost countries are facing a headache. Indeed, many are relocating 

their own facilities to the low-cost countries. For example, Nike recently 

moved production from Britain to Eastern Europe. The logic is that if the 

workforce, capital equipment and infrastructure in that nation are good 

enough to produce high-quality products for the competition, then why 

not also source from there to take advantage of the cost savings and 

compete on a level playing field? 

Given that developing nations such as China and India are encouraging 

their larger enterprises to become global champions that are capable 

of moving higher in the value chain, these pressures will only intensify 

in coming years. As imports grow in both products and services 

and their quality rises, increasingly sourcing from these low-cost 

countries becomes the smart choice as part of an overall global 

sourcing strategy. Indeed, with China expected to produce half of the 

world’s chemical engineering graduates in the next 5 years and India 

producing more than 400,000 graduates in science and engineering 

each year, it will not just be basic manufacturing that is conducted 

by overseas organizations — driving high tech initiatives and R&D in 

these regions will be an increasingly attractive option as well. Highcost 

countries, especially those whose exports compete with low-cost 

countries, will be extremely threatened during the coming years, and 

with good reason. LCCS has been the focus for many organizations 

for many years and continues to do so. There is no reason that this 

will not be the case in the future as well. • 



CEO, BravoSolution 

www.bravosolution.com 


CEO, BravoSolution 


distribution 

crossing the pond With tMs 

Can European distribution models benefit from existing US transport management systems? Andrew Austin, 

Vice President, Schneider Logistics Europe, examines the possible application of a TMS designed for the US 

market, and proven to be successful there, to the freight distribution patterns that exist in Europe. 

Transport Management Systems 

(TMS) are software applications 

that are designed to manage and 

control the progress of cargo shipments 

through all stages of the supply chain. They 

enable all parties involved to co-ordinate 

their actions and ensure that the cargo is 

processed as quickly, efficiently and costeffectively 

as possible. TMS have been used 

effectively in the USA for some time, and they 

are increasingly becoming the norm in the 

American freight business; but do they work 

as well in Europe, and what would happen 

if European freight businesses adopted the 

American model? 

The basic principle of TMS is ensuring that 

information is used effectively to underpin 

supply chain operations. But simply passing 

information through a system is not going 

to be effective unless the people involved in 

the supply chain act upon that information. 

TMS provides fast and effective methods of 

data transfer designed to enable each link in 

the supply chain to communicate effectively, 

collaborate and thus improve efficiency. 

Another important aspect of TMS is that they 

meet the growing demand from customers 

for visibility. Businesses are demanding 

greater visibility to maintain competitiveness, 

and global trade has increased the need 

for technology to support international 

transportation. Distribution systems have 

to keep pace with fast-changing market 

conditions and the burgeoning information 

revolution; not only do these systems have to 

44 

show the current position of cargo, they must 

also be able to give planned arrival times, 

condition, value and so on. 

Trends in information technology, driven 

by market demand, will inevitably shape 

the supply chain models of the future, 

whether operators like it or not. Factors 

such as customers’ needs to reduce risk in 

procurement, and to limit or reduce growth 

in overheads, will all increase the pressure for 

change. It is becoming increasingly necessary 

to integrate all sources of information, to 

encourage the development of collaboration 

from each supplier in the process, which in 

turn will affect the behaviour of those further 

downstream — including the end customer. 

So, it would seem that a change to a more 

IT-based system of transport management is 

becoming inevitable; but there are differences 

between the American and European models 

that may mean that European operators will 

resist adopting American-style TMS. 

Europe, for a start, is a much larger 

and more complex market than the USA. 

Traditionally, European freight 

companies have competed 

with each other much 

more closely — on the 

doorstep, almost 

literally — and has a 

far greater number of 

small- to medium-sized 

operators than the 

USA. US companies 

are larger and have 

tended to invest heavily in technology, more 

successfully than their counterparts in Europe. 

TMS in the US have up to now been fairly 

straightforward, focusing on capacity planning 

and the flow of equipment; but now that it is 

competing in the global marketplace, TMS are 

becoming more complex and sophisticated, 

and therefore possibly more appropriate for 

the European market. Indeed, globalization 

is in any case bringing the regions far closer 

together in practical terms, and it seems likely 

and desirable that they should both adopt a 

common — or at least compatible — system 

of transport management. There can be 

little doubt that this would ultimately benefit 

manufacturers and customers in terms of 

increased visibility and effectiveness when 

managing their shipments. • 


Andrew Austin 

Vice President 

Schneider Logistics Europe 

www.schneider.com 


European magazine for supply chain 

professionals who are responsible for 

manufacturing, warehousing and logistics 

Each issue covers 

Supply Chain Leadership 

Logistics and 

Warehousing 

Manufacturing 

Supply Chain IT 

strap 


case study 

supply chain 

optiMization at 

Western digital 

Western Digital, the world’s second largest hard drive manufacturer, substantially increased customer 

satisfaction and reduced inventory by implementing a solution from ICON-SCM (Karlsruhe, Germany). 

Synchronizing supply and demand along the entire supply chain could reap additional benefits. 

To improve the planning process 

for its international supply chain 

and gain the ability to fulfil demand 

based on specific priorities, Western 

Digital decided to implement ICON- 

SCM’s planning solution. ICON’s solution 

replaced the largely manual process with 

an automatically generated plan that takes 

production capacities and demand priorities 

into account. “This capability is an extremely 

decisive success factor in a market that, 

although growing by approximately 15% 

per annum, has seen cutthroat competition 

during the last several years,” says 

Wolfgang Nickl, Vice President, Finance and 

Business Operations at Western Digital. 

Speed as a Decisive 

Success Factor 

The hard drive manufacturer now uses 

an integrated planning process across 

several factories. Throughput time was 

reduced by up to 2 days and the flexibility 

of price and production planning was 

significantly increased. “In our business, 

product prices drop by almost 25% yearly; 

at the same time, product performance 

doubles every 2 years. What matters most 

is speed, speed and more speed. What we 

absolutely don’t need in situations like this 

is excess inventory and to have our capital 

tied up,” explains Nickl. The only remedy 

is the efficient interaction of management 

processes, key performance indicators 

and system performance. Western Digital 

46 

Dr Michael Keppler, 

General Manager, 

ICON-SCM 

Wolfgang Nickl, 

VP, Finance & 

Business Operations, 

Western Digital 

had previously introduced two separate 

initiatives to implement a faster and more 

accurate planning process, aimed at higher 

profit margins in a market that’s becoming 

more and more complex. However, neither 

internal projects nor external software 

tools provided the anticipated results. The 

breakthrough came by teaming up with 

ICON-SCM. 

A High-Performance 

Planning Algorithm 

Implemented in April 2008, the ICON- 

SCP software now manages the supply 

of 250 customers across four different 

sales channels at Western Digital. By 

using this integrated planning process, 

the company receives a consistent and 

realistic plan that is based on capacity 

constraints and synchronizes all participants 

within the supply network. The material 

supply is based on demand priorities, 

Western Digital Corporation 

Western Digital, one of the storage industry’s pioneers 

and long-time leaders, provides products and services 

for people and organizations that collect, manage and 

use digital information. The company produces reliable, 

high-performance hard drives that keep users’ data 

accessible and secure from loss. WD applies its storage 

expertise to consumer products for external, portable 

and shared storage applications. WD was founded in 

1970. The company’s storage products are marketed 

to leading systems manufacturers, selected resellers 

and retailers under the Western Digital and WD brand 

names (www.westerndigital.com). 


taking into account various customers and 

sales channels and allowing for a flexible 

response to potential bottlenecks. Western 

Digital can now manage procurement, 

production and distribution to fulfil orders 

quickly, efficiently and reliably. The closedloop 

planning process ensures that 

customer orders can be fulfilled on the 

date promised and enables Western Digital 

to determine when new incoming orders 

can be fulfilled (Available-to-Promise, 

Capable-to-Promise). “The successful 

implementation of comparable solutions 

at other global leaders in the high tech 

industry made a very strong case for 

choosing ICON-SCM,” adds Nickl. “The 

unique planning algorithm ensures that 

during optimization there is almost no idle 

time.” A plan can be calculated in just 

minutes thanks to ICON-SCP’s extremely 

fast algorithm. “From the very beginning, we 

were extremely impressed with the speed of 

the ICON-SCM solution,” comments Nickl. 

A Positive Impact 

on the Bottom Line 

Within several months of implementing the 

automated supply chain planning process, 

Western Digital saw its profit margins rise. 

This can be attributed first to the forwardlooking 

planning logic that now enables 

more ship transportation than the typically 

necessary, yet expensive, express air 

transport. Second, the software allows 

Western Digital to favour those clients that 

result in higher profit margins. “Additional 

advantages can be gained through the 

optimal use of production capacities, 

the highest possible demand fulfillment 

and increased customer satisfaction 

resulting from setting accurate delivery 

expectations,” says Nickl. “We are achieving 

a considerably lower inventory at the end 

of the quarter and are able to adhere to 

maximum and minimum inventory targets.” 

Nickl also expects to achieve an increase in 

gross profit (the difference between revenue 

and production costs) by at least one 

per cent. With Western Digital’s quarterly 

revenue being almost $2 billion, one per 

cent represents enormous growth. 

ICON-SCM 

ICON-SCM provides high performance demand-supply 

planning and collaboration software that enables 

companies to drive profitability and unmatched 

flexibility across the supply chain. ICON-SCM’s 

innovative solutions combine unparalleled planning 

speed with optimization and collaboration with partners. 

Since 1992, ICON-SCM has created an outstanding 

competitive advantage for market-leading global 

technology and automotive companies who capture 

more revenue and increase inventory turns, service 

levels and productivity. Global market leaders such as 

Hewlett-Packard, Foxconn, Tellabs, Western Digital, 

Sanmina-SCI, 3M and Honeywell rely on ICON-SCM 

for quick what-if planning, closed-loop S&OP, supply 

liability management, order promising and fulfillment 

execution and supply chain collaboration. The company 

is headquartered in Karlsruhe, Germany, with offices 

in Campbell, California and Chennai, India (www. 

icon-scm.com). 

Integrating External 

Partners into the Supply 

Chain Planning Process 

Based on its positive experience with 

ICON-SCM’s solution, Western Digital 

is now considering expanding and 

accelerating the automated planning 

process. The goals are to further improve 

customer satisfaction and the quality of 

the results of the forward-looking planning 

process. Western Digital and ICON-SCM 

are also working on integrating additional 

partners into the system to further shorten 

planning cycle time. “For example, demand 

from customers such as HP, Apple or 

Dell should be synchronized more often, 

automatically and with improved quality 

with Western Digital’s delivery promises,” 

adds Dr Michael Keppler, General Manager 

of ICON-SCM. “But for this to work, it is 

mandatory that companies think crossfunctionally 

and gain the support of top 

management.” The biggest advantage of 

a demand-driven supply network is the 

improved efficiency of the whole supply 

chain and higher competitive advantage of 

all partners involved. • 


Thomas Wöhrle 

Journalist 

Baumeisterstraße 46i 

D-76137 Karlsruhe, Germany. 

Tel. +49 721 3504 076 

woehrle@logistik-presse.de 


calendar 

supply 

chain 

calendar 

oF eVents 

6–8 May 

World Retail Congress 

Barcelona, Spain 

Organized by Emap Ltd, UK 

T. +44 207 728 5000 

F. +44 207 728 5299 

ian.mcgarrigle@wordlretailcongress.com 

www.worldretailcongress.com 

12–15 May 

Transport Logistic 

Munich, Germany 

Organized by Messe München, Germany 

T. +49 899 492 0720 

F. +49 899 492 0729 

info@messe-muenchen.de 

www.transportlogistic.de 

13–15 May 

CSCMP Europe 2009 

Copenhagen, Denmark 

Organized by Council of Supply Chain 

Management Professionals, USA 

T. +1 630 574 0985 

F. +1 630 574 0989 

cscmpadmin@cscmp.org 

http://cscmp.org 

21–22 May 

The 2nd Plant Managers Forum 2009 

Shanghai, China 

Organized by Martin Linking Business 

Consulting Company Ltd, China 

T. +86 28 6653 7055 

F. +86 28 6653 7033 

www.linkingbiz.net 

31 May–2 June 

Materials Handling & Logistics 

Dubai, UAE 

Organized by Messe Frankfurt GmbH, Germany 

T. +49 69 757 50 

F. +49 69 7575 6433 

info@messefrankfurt.com 

www.messefrankfurt.com 

48 

2–5 June 

SIL 2009 

Organized by El Consorci de la Zona Franca de 

Barcelona, Spain 

T. +34 93 263 8150 

F. +34 93 263 8128 

sil@el-consorci.com 

www.silbcn.com/sil 

8–10 June 

SCL Europe 

Düsseldorf, Germany 

Organized by WTG Events, UK 

T. +44 207 202 7560 

F. +44 207 202 7600 

andrew.richards@wtgevents.com 

www.supplychain.eu.com 

9 June 

European Supply Chain 

Distinction Awards 2009 

Düsseldorf, Germany 

Organized by WTG Events, UK 

T. +44 207 202 7560 

F. +44 207 202 7600 

andrew.richards@wtgevents.com 

www.supplychainawards.com 

11–12 June 

Euro-Asian Road Transport Conference 

Almaty, Kazakhstan 

Organized by IRU, Switzerland 

T. +41 22 918 2700 

F. +41 22 918 2741 

iru@iru.org 

www.iru.org 

16–19 June 

Transporta 2009 

Poznan, Poland 

Organized by Poznan International Fair, Poland 

T. +48 61 869 2000 

F. +48 61 869 2999 

info@mtp.pl 

http://transporta.mtp.pl 

24–26 June 

Retail Asia Expo and Congress 

Hong Kong, China 

Organized by Beacon Events, 

Hong Kong, China 

T. +852 3105 3970 

F. +852 3105 3974 

info@retailasiaexpo.com 

www.retailasiaexpo.com 

5–6 August 

MATTECH 2009 

Miami, Florida, USA 

Organized by I.W. Enterprises, Inc., USA 

T. +1 941 320 3216 

F. +1 941 926 8193 

info@mattech.com 

www.mattech.us 

20–23 September 

CSCMP’s Annual Global Conference 

Chicago, Illinois, USA 

Organized by Council of Supply Chain 

Management Professionals, USA 

T. +1 630 574 0985 

F. +1 630 574 0989 

cscmpadmin@cscmp.org 

http://cscmp.org 


ITS World Congress and Exhibition 

Stockholm, Sweden 

Organized by Brintex Ltd, UK 

T. +44 207 973 6401 

F. +44 207 233 5054 

w.broadfoot@hgluk.com 

www.itsworldcongress.com 


RFID Europe 

Cambridge, UK 

Organized by IDTechEX, UK 

T. +44 1223 813 703 

F. +44 1223 812 400 

c.jennings@IDTechEx.com 

30 September–3 October 

Transport + Logistics 

Kiev, Ukraine 

Organized by Autoexpo, Ukraine 

T. +380 44 239 2704 

F. +380 44 239 2715 

office@autoexpo.ua 

www.autoexpo.ua/eng/ex/transport 

13–16 October 

SCM Logistics World 

Singapore 

Organized by Terrapinn Pte Ltd, Singapore 

T. +65 6322 2737 

F. +65 6226 3264 

stella.teo@terrapinn.com 

www.terrapinn.com/2009/scmlog 

14 October 

European Outsourcing Awards 

Madrid, Spain 

Organized by Via Media Ltd, UK 

T. +44 1372 471 542 

F. +44 1372 472 862 

miranda@via-medialtd.com 

www.europeanoutsourcingawards.com 

26–29 October 

CEMAT Asia 

Shanghai, China 

Organized by Deutsche Messe AG Hannover, 

Germany 

T. +49 511 890 

F. +49 511 893 2626 

info@messe.de 

www.cemat-asia.com 

1–3 November 

SITL Dubai 2009 

Dubai, UAE 

Organized by Reed Exhibitions Companies, UK 

T. +44 20 8271 2134 

F. +44 20 8910 7823 

Hasan.algharbawi@reedexpo.ae 

www.sitldubai.com 


Attend Supply Chain’s Premier Event 

20-23 September in Chicago. Take Home 

Ideas and Tools that will Help Drive 

Improvements Within Your Organization. 

This conference will provide you best 

practices and solutions from leading 

supply chain practitioners and thought 

leaders that your organization can use to 

drive improvements. 

Choose from over 100 professional 

education sessions in 20 tracks including: 

transportation, warehousing, inventory 

management and demand planning, third 

party logistics, supply chain integration, 

and global infrastructure management. 

Representatives from over 40 countries 

and leading FORTUNE 500 companies 

will be attending. 

This year’s conference is in Chicago, 

an international logistics center easily 

accessed from Europe. For best fares 

be sure to book your flight early. For 

more information on Chicago, go to 

www.choosechicago.com/cscmp. 

Register before June 30 and SAVE 

$280 US! Network with over 3,000 like 

professionals. To register and see who is 

attending, go to cscmpconference.org. 

Keynote SpeaKer: 

Gary Maxwell, Senior Vice 

President of International 

Supply Chain for Wal-Mart 

Stores, Inc. 

The World’s Leading Source for the Supply Chain Profession.

last word 

Making your Mark 

Particularly in the current economic climate, the push to meet consumer demand for value-for-money 

goods is having a ripple effect throughout the supply chain. This is especially so for those businesses 

involved in supplying high-street retailers. The “pile it high and sell it cheap” mentality means that retailers 

are increasingly cutting out the ‘middle man’ in the supply chain to source their own-brand products 

directly from manufacturers in countries with lower production costs. This change in the traditional supply 

chain is creating a financial headache for the businesses involved, and could result in damage to their 

reputation on the high street and increased costs to their business in the long-term. 

Falling Foul 

There is a widespread assumption that CE marking stamped on a 

product by the manufacturer is proof of its safety. Retailers, or indeed 

other businesses in the supply chain, that buy ‘own brand’ direct from 

non-EU manufacturers run the risk of falling foul of this misunderstanding. 

What many don’t realize is that cutting out parts of the traditional supply 

chain changes their responsibilities under EU law. As retailers import 

more products from abroad, they must realize that it is they, and not the 

manufacturer, that is responsible for ensuring product compliance under 

CE marking regulations. The danger is the assumption that CE marking 

stamped on an own-brand product by the manufacturer is proof of its 

safety and, as a result, unsafe goods make it onto the shelves. This of 

course raises the spectre of prosecution, as in the eyes of the law there 

is no excuse for misunderstanding where the legal responsibility lies for 

ensuring proof of compliance. 

Incompetence Breeds Danger 

What companies do not understand is that CE marking is simply a 

manufacturer’s or an importer’s declaration that its product complies with 

EU directives. Less scrupulous manufacturers may not bother to test 

products, simply affixing the CE marking and signing the declaration of 

conformity. Owing to language issues, other manufacturers that mean 

well are misunderstanding the requirements of a complex set of directives 

— giving products that fail to meet these requirements a CE marking. 

Incompetence could therefore breed a dangerous situation for both the 

consumer who ultimately buys the unsafe goods and for the business 

that is prosecuted for failing to comply 

This isn’t an issue for ‘known brands.’ The manufacturers of such goods 

generally have commercial premises representing them in the EU and 

import their products directly into EU markets, meaning that they assume 

legal responsibility for complying with CE marking legislation. However, for 

retailers that sell cheaper goods on the high street and are experiencing a 

boom, even in these tough financial times, importing directly may lead to 

bust. It is bad news for those companies that source directly from abroad 

and fail to invest in their own tests of goods to prove conformity with the CE 

marking directives and stay on the right side of the law. 

CE marking replaced the old system of individual country requirements 

to enable the free movement of goods across the EU. It now simply 

provides a common set of standards to bring down barriers to entry 

between EU member states; those in the supply chain must remember 

that it is not proof of product safety. Another problem is that the 

surveillance of CE marking is left to each country and there is a great 

diversity in the level of funding and the approach each country takes. 

For example, UK Trading Standards tend to take a reactive approach 

50 

Jean Louis-Evans 

to investigating complaints, whereas French and German authorities 

systematically take products off the shelves to test against the CE 

marking directives. So, while there is a standard European CE marking, 

there is still no single European consumer safety mark. This necessitates 

those in the supply chain, who don’t wish to rely on the CE marking, 

to do their own supplementary safety testing. This means that ‘safe’ 

products sold in Europe should carry both a CE and another safety mark 

such as the TÜV certification, German GS mark or French NF mark. In 

countries such as Germany or France, this actually helps retailers to sell 

goods as consumers look out for the mark. 

Further Frustrations 

However, this variety of safety marks bestowed by certified bodies is 

frustrating the European Commission, which is pushing to introduce 

a single, EU-wide consumer safety mark. On the surface, this makes 

perfect sense, but the concern is that the EU currently appears to be 

considering a ‘watered down’ safety mark that, like CE marking, allows 

manufacturers to self-declare conformity. This will make quality marks 

no more valuable than CE marking. It will ultimately lead to a situation 

of Caveat Emptor or “buyer beware,” create another headache for the 

supply chain and potentially life-threatening confusion for consumers. • 


Jean Louis-Evans is Managing Director of TÜV Product Service, one of the world’s leading 

experts on product testing, with 170,000 product certifications in circulation globally and 

13,000 employees worldwide. 

Octagon House, Concorde Way 

Segensworth North 

Fareham, Hampshire PO15 5RL, UK. 

Tel. +44 1489 558 100 

info@tuvps.co.uk 

www.tuvps.co.uk 


Extend the four walls of your warehouse 

to enable operational excellence 

and optimise efficiency 

across your supply chain. 

You want everything that happens in your warehouse – from receiving to shipping – to be 

as efficient as possible. But did you ever consider that efficiency outside of four walls of your 

warehouse is equally important to achieving operational excellence? That’s why it’s important to 

expand your thinking and focus not only on optimising key processes inside your warehouses, 

but also on optimising efficiency across your supply chain. 

As a leading provider of high-volume distribution and fulfillment solutions to retailers, manufacturers 

and transportation and logistics companies, Infor knows the inner-workings of warehouse 

management. No other vendor offers more advanced warehousing capabilities than we do – 

including wave planning, voice-directed picking, labour reporting, billing and added services. 

Think outside as well as inside the four walls of your warehouse - Think Infor. 

To learn more, please visit www.infor.co.uk/wms 

call +44 (0)121 6158000 and quote SCE 

email ukmarketing@infor.com 

Copyright © 2009 Infor. All rights reserved. The word and design marks set forth herein are trademarks and/or registered trademarks of Infor and/or related affiliates and subsidiaries. All rights reserved. All other trademarks listed herein are the property of their respective owners. www.infor.com.

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w w w . s c e m a g a z i n e . c o m - Supply Chain Europe

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