Supply Chain Continues to Change

Courtesy of LPM Loss Prevention Magazine by Rod Fulenwider

Much more attention is now being paid to supply chain than ever before. That is evidenced in the pages of this magazine where the editors are focusing more and more articles related to supply chain security and on-shelf availability. Today, supply chain is a different animal than it was just a few years ago. Below are my observations on how supply chain continues to evolve in our industry.

Analytics

A number of us have been using analytics in the supply chain for many years. Here’s the difference: on the standard retail model (store side), vendors have produced software packages for years. Those packages were developed strictly for store-side use, and they have done a good job with the product mix over the years. Having said that, those same software producers have not produced workable products for the supply chain, which has forced those of us on the supply chain side to get creative.

Many of us have worked with our individual IT and operations departments to create our own in-house analytical platforms. For instance, when I was at Blockbuster (as it was growing and at its peak), we created our several very specific data drives to earmark potential issues. We knew that internally the highest likelihood of internal losses occurred in the consolidation area of our distribution center (DC) in McKinney, Texas. This area of the DC consisted of fifty-two aisles where employees consolidated product (such as videos, DVDs, games, and so forth) that would be shipped to 4,800 US-based stores as well as some stores in Mexico and Canada.

We created our own exception reports that pinpointed loss ratios and the highest days of the week for losses. We worked with Sensormatic and installed the first wireless track camera system in the US. Between the exception reports and the use of the new camera technology, we were able to eliminate the loss in consolidation by 82 percent. While our exception system was good, it was by no means great.

I have known Glenn Master for over twenty-five years and can say firsthand that he has continually created analytical systems at various companies. I would say that he is one of the best if not the best in implementing these systems within the supply chain.

When we discuss supply chain, we are most certainly looking at an enormous animal with not only lots of moving parts but also a significant number of companies/vendors in a given system. Using Blockbuster as an example, we found that from the time a product was shipped to us (for example, a specific movie title, say Batman) for distribution, it would be touched by multiple companies just getting to us. Then we would have to handle and prepare the product for delivery to thousands of stores, which meant the product had to be touched by multiple delivery companies.

“We recently finished a case at a DC where the company had a system in place. The system showed losses totaling just over $200,000. Our investigation revealed losses in excess of $2,000,000 and resulted in the arrests of nineteen employees”.

We cannot forget that all of the companies involved either did not utilize scanning equipment or the equipment involved was from various platforms. In the end we created a multiuse scan tag that was equipped on the doorframe of every US store in the system so that we could verify all packages were scanned for receipt at store level. The technology was important, but the ongoing relationship and teamwork with operations and IT was critical.

Language and System

Today the supply chain faces issues that many people just do not understand or cannot keep track of. Recently I was performing a security vulnerability assessment at a distribution center. The DC had experienced a series of significant losses, and they had not been able to resolve these losses internally. Their biggest problem turned out to be language and attitude. It turns out that their policy (which is like many companies) dictates that once the product is placed on the trailer, then it no longer belongs to the company; the product is now the responsibility of the carrier.

In this case, the carrier would take the product back to their own central DC where they would break the product down for delivery to twenty-five other DCs around the country. They would use multiple carriers to transport the product to these twenty-five DCs, and each DC would break the product down into quantities for delivery to smaller regional DCs to be handled and redistributed to the final-mile carriers, which in this case meant an additional number of people handling the product. By the way, the product was pharmaceutical drugs.

Language-wise the company had serious losses that they needed to explain internally as well as to the Drug Enforcement Administration, yet they had not even attempted to create a system for clear tracking within their own four walls nor a system for tracking once the product hit the first outbound trailer.

When I was at Exel Logistics, we had to create our own system to track goods from cradle to grave. I do not know what that system looks like today, but companies like Exel have been dealing with these issues for years. I know that Pitney Bowes is expanding their system and language around this subject.

The Challenge

Finding a software or hardware company that has the knowledge and depth to create intricate tracking and exception-based reporting systems for the supply chain and to create those systems that can be purchased at a reasonable rate is challenging. There may be systems out there that address the real issues, but I am still seeing systems with lots of holes in them.

We recently finished a case at a DC where the company had a system in place. The system showed losses totaling just over $200,000. Our investigation revealed losses in excess of $2,000,000 and resulted in the arrests of nineteen employees. Additionally, we identified two primary locations where the stolen products were being delivered to, both of which were customers. The exception system failed to flag this as a problem, and employees used the hole to exploit the company.

No system is perfect, and there are good loss prevention and asset protection professionals working aggressively to make the systems better. The LP and AP folks making the biggest improvements are like the system—they must be smart and able to change and respond to new technology immediately.

It is a new day for LP and AP people in supply chain. It is also these very issues that drove us to start the International Supply Chain Protection Organization with a focus on advancing supply chain loss prevention professionals and their teams.