3. FALL 2015 Supply Chain World 1
Jet Setting
One of the most interesting aspects of
putting together the fall 2015 issue of SCW
was learning more about the travel spend
category. One of our features in this issue
takes a peek into the upcoming ProcureCon
Travel show October 26-28 in Fort Worth,
Texas. Corporate travel has been a source of
waste for years.
Andrew Greissman writes in the piece:
“As procurement’s ability to create savings
and serve as the architects of global policy
around sourcing continues to be extended
across organizations, jurisdiction is being
broadened to cover some historically diffi-
cult-to-control areas of spend. These areas
include IT, contingent labor and travel.”
The timing of this feature story coincides
fairly well with the recent release of the
2015 GBTA BTI Outlook – Annual Global
Report and Forecast, which looks at business
travel spending and growth in 75 countries
across 48 industries. The report says China
business travel will increase by 61 percent
over the next five years from $261 billion in
2014 to $420 billion in 2019. Sponsored by
Visa, the GBTA BTI Outlook report found
that global business travel spending will hit a
record $1.25 trillion in 2015 and that growth
will remain strong through 2019.
“Despite recent economic speedbumps,
China will pull away as the global leader in
business travel over the next five years,”
said GBTA Executive Director and COO
Michael W. McCormick. “On the horizon,
we’ve identified five nations that are also
seeing extraordinary growth and could very
well turn into the business travel markets
of the future. Another market to watch is
India, which is statistically where China was
15 years ago.”
More than two-thirds of total business
travel spending continues to occur in the
United States, China and western Europe.
Asia Pacific owns the largest share of the
business travel market with 39 percent
followed by North America with 27 percent
and western Europe with 24 percent. GBTA
expects that Asia Pacific will have gained an-
other 3.5 percentage points in marketshare,
while the United States and western Europe
will respectively lose 2.7 percentage points
and 0.6 percentage points by 2019.
Travel truly is an area where procurement
teams can have a massive impact on con-
trolling spend. Given these projections, the
inaugural ProcureCon Travel event may be
a great place to learn how to understand,
analyze and manage travel spend.
FALL 2015
SCW-MAG.COM
EDITORIAL DIRECTOR
JohnKrukowski
john.krukowski@phoenixmediacorp.com
SUPPLY CHAIN WORLD EDITOR
EricSlack
MANAGING EDITOR
StaciDavidson
SPECIAL PROJECTS EDITOR
ChrisPetersen
SENIOR EDITORS
StephanieCrets,AlanDorich,RussGager,
JimHarris,JaniceHoppe
ASSOCIATE EDITORS
TimO’Connor,RobertRakow
CONTRIBUTING WRITERS
GavinDavidson,AndrewGreissman,
WayneKakuda,EvanPuzey,Jack
Rosenberg,Jean-ClaudeSaghbini,Dave
Schnitt,MichaelSoave,BrandonStallard,
DavidTelford,BarrettThompson
CREATIVE DIRECTOR
ErinHein
GRAPHIC DESIGNERS
MeganGreen,JonathanLyzun,
VidaSoriano
PRODUCTION COORDINATOR
MichelleDeCeault
VP OF SALES
StephenPasterello
PROJECT COORDINATORS
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RockyPisa,JayPurcell
SENIOR VPS, EDITORIAL RESEARCH
JonHouston, AdamNeidhardt
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Sharpe,DebYoung
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LETTER FROM THE EDITOR
8. 6 Supply Chain World FALL 2015
Intersection Point
The trends in logistics are changing. Fulfillment centers around the globe
areadaptingtobettersuitcustomerdemands.We’reseeingmoreautomation
and robotics, more office improvements, more levels of complexity, more
security and more employee workplace amenities among others. In short,
businesses are expecting more. And they want more now.
BY JACK ROSENBERG
Leasing new property is an important
part of expanding or streamlining oper-
ations. Whether it’s done to expand into
a new market or make business easier
for staff members or external custom-
ers, leasing decisions have always been
an important logistics challenge. But
while a landlord’s main customer is the
tenant, the capital structure of distribu-
tion buildings is critically important.
Lenders, equity investors, Real Estate
Investment Trusts (REITs) and pen-
sion funds are also a major part of the
picture. The days of individuals owning
buildings for income and appreciation
are over. Commercial real estate owner-
ship is now dominated by institutional
real estate investors. The investors
raise capital from insurance compa-
nies, pension fund advisors, university
endowments, private individuals, real
estate private equity firms and sovereign
wealth funds. In fact, the Top 100 global
institutional real estate investors firms
own more than $2.1 trillion of valued
real estate with nearly 47 percent of that
total being invested in U.S. properties.
So what does this change to institu-
tional real estate ownership mean to the
tenant? And how does that compare to
what it means to the landlord?
Selection Process
The typical real estate process starts
with the corporate occupier identifying
land sites that suit the operational needs
of the project.
Once properties are selected, the
competing real estate developers will
work with a potential tenant to create
a proposal to build a facility that meets
the operational goals of the tenant.
These developers will then make a lease
proposal based on their costs and what
they think a market rent is. Typically
the tenant goes through a process to
determine the right combination of site,
building features and rent. Corporate
occupiers then choose the developer
MANAGEMENT
Making the right real estate
choices can have a significant
impact on a company’s long-term
logistics strategy.
When real estate intersects with logistics.
9. MANAGEMENT
and sign a lease and eventually occupy
the building.
Before we discuss the changes in this
process, we will define “cap rate,” a basic
term measuring return on investment. A
cap rate is defined as the annual net rent
divided by the cost or value of the prop-
erty. For example, an income of $100 in
a building valued at $1,000 yields a cap
rate of 10 percent.
When real estate investors held prop-
erties long term, the most important
variable was the difference between the
rent and the mortgage payment. Now
that developers sell their property, the
most important variable is the differ-
ence between the cap rate on the cost
of the property and the cap rate that an
investor will pay for the property.
In the simple example above, if an
investor can live with a five percent
return, then the $100 of rent yields a
value of $2,000 and the owner can sell
the property for a big profit.
This concept is known as the cap
rate on cost versus the cap rate on sale.
When the cap rate on cost is greater
than the cap rate on sale, the investor
can flip the property to an investor and
make a profit.
Intoday’smarketinvestorsarelooking
fora fivepercentcaprate. Developers
wanttoleasea property fora sixpercent
caprateandrealizea profitwhenthey
sell thebuilding. Inthe$100annual
rentexampleabove,theinvestorhas a
sixpercentcapratemeaning his costis
$1,667.Whenhesellsatafivepercentcap
rateor$2,000,theprofitis $337.
Most companies only think about the
rent. We think it’s critically important
that the corporation understand the
landlord’s capital structure.
Logistical Issues
From a logistics perspective, these real
estate markets are perpetually ineffi-
cient. And these inefficiencies create
opportunities for those looking to use
that space. While some portions of real
estate information may be transparent,
some very important data points are
not. Those include:
+ The landlord’s business plan;
+ Whether the landlord plans to hold
or sell the property;
+ The nature of the landlord’s capital
stock in the property; and
+ The development yield spreads and
how those affect short and long-
term costs.
Understanding these “hidden” data as-
pects is the key to tenants establishing
a better rental rate. By understanding
the capital markets side of the equation
and understanding the owner’s per-
spective, potential tenants can deter-
mine rates that satisfy both parties and
eliminate obscurity.
First off, tenants should look to use
an “open book” process for construc-
tion budgets and profit spreads. This
allows both sides to have access to the
same information, leading to more
consistent costs and establishes trust
between parties for a successful long-
term business relationship.
Using detailed numbers related to the
property, tenants should look to negoti-
ate the spread between cap and cost and
cap and sale to ensure the final amount
are within those parameters with less
cost uncertainty.
Tenants should also look to negotiate
a share of sale profits so that if the prop-
erty changes hands, the tenant will still
be vested in the future of that property.
Quite simply, if you control the land,
you control the process and can ensure
that the management of the property
remains in a place that favors the tenant.
By negotiating a suitablerentprice
using thesestrategies,tenantsnotonly
areestablishing a costsavings,butare
creating a solutionthatfreesuprevenue
forotheraspects ofbusiness,butcreates
certainty inthefutureofapropertyand
establishes a positiverelationshipwith
thelandlordandtheirinterestsaswell.
FALL 2015 Supply Chain World 7
Jack Rosenbergisnationaldirectorofthelogistics
andtransportationgroupwithColliersInternational.
Understanding the real estate
market is critical to producing
sustainable benefits for both
landlord and tenant.
10. 8 Supply Chain World FALL 2015
Dashboard Delivery
Inanindustrywhereefficiencyandattentiontodetailrule,successfulsup-
plychaincompanieshavebecomeincreasinglysophisticatedaboutways
inwhichtoleveragedatatomakebetter-informedbusinessdecisions,
streamlinetheirlogisticsandimprovetheiroperationalperformance.
BY MICHAEL SOAVE
But, with the immense amount of (in-
creasingly granular) data available for
supply chain companies to work with,
identifying, understanding and uti-
lizing essential information becomes
more of a challenge. More information
leads to more complexity. In such a
data-rich environment, the difficulty
is separating the signal from the noise.
Increasingly, new technologies are
being used to successfully leverage data
and transform raw information into
meaningful insights.
TECHNOLOGY
Use dashboard technology to leverage data and
make better-informed business decisions.
The best dashboards provide a
clear and comprehensive view
of multiple streams of critical
information.
11. TECHNOLOGY
For many, dashboard solutions pro-
vide the ideal combination of flexibility,
transparency and power to simplify
complexity and provide a clear and com-
prehensive operational overview. Dash-
board technology not only illustrates
visually appealing and easy-to-read data,
it also makes it possible for supply chain
companies to easily identify where and
when problems occur, to improve the
clarity of data, to increase efficiency, and
to allow executives to drill down into
specific data sets to gain a more detailed
understanding of metrics and mea-
surable results – ultimately leading to
improved decision-making capabilities.
In that context, supply chain deci-
sion-makers should make it a priority to
ensure that they understand the power
and potential of an effective dashboard
solution, and are familiar with the best
practices associated with vetting and
implementing such a solution.
The Dashboard Difference
A dashboard is essentially a visual
display. The best dashboards provide
a clear and comprehensive view of
multiple streams of critical information
– all in a single place and all in real-time.
With a dashboard, essential data from
a wide variety of sources can be moni-
tored in one place, with a single screen
acting like a window into the heart of a
large and complex organization.
The best dashboards are visually
appealing, effective and engaging.
Dynamic displays of critical information
provide unmatched accessibility and
transparency – all through an intuitive
interface that is easy to use and under-
stand. The real value of dashboards
stems from bridging the gap between
information and meaning: contributing
the requisite clarity, context and conti-
nuity to make intelligence actionable.
High quality dashboard solutions can
also be programmed to automatically
key in on specific variables to identi-
fy relationships between events and
information that might not otherwise
be obvious. These connections can be
important in making strategic business
decisions. Because decision-makers can
access data in real time, progress toward
objectives and predetermined metrics
can be monitored and evaluated.
Supply chain professionals are aware
of the details involved in maintaining an
efficient and effective supply chain – as
well as the costs and consequences of
failing. With a premium placed on mini-
mizing wasted resources and maintain-
ing tight timelines, the ability to track
critical information is especially valu-
able. Dashboards can present a detailed
breakdown of logistical, financial and
operational dynamics, and can simplify
complexities into clear patterns.
Best Practices
While the right dashboard solution can
make a defining difference in monitor-
ing and optimizing supply chain logis-
tics, industry decision-makers should be
familiar with the best practices involved
in system selection implementation.
The metric system
A dashboard is only as powerful as the
information it has access to. Conse-
quently, the first step toward making
a dashboard solution work for you is
to ascertain the specific metrics that
impact your organization and should
be included in your dashboard. Make a
point to pull in essential information
and focus in on the critical metrics that
drive your operation.
Personnel and priorities
The second piece of the puzzle is to de-
termine who can access the information
presented through your dashboard. One
of the appealing aspects of a high quality
dashboard solution is the flexibility to
design one portal for certain personnel
and another for others. Executives and
high-level decision-makers will likely be
more interested in big-picture metrics,
while operational professionals and
those on the ground will almost cer-
tainly benefit from a more practical and
tactical set of information.
Presentation and clarity
Another priority should be to conceive
and deploy a set of metrics and informa-
tion that are both sufficiently detailed
and easily understood. While it is a mis-
take to sacrifice nuance and detail for
simplistic presentation, straightforward
data and clearly comprehensible visuals
are important. The best analytics tools
should be valuable to more than just
specialists and trained data analysts.
Executives and management personnel
at all levels should be able to understand
a dashboard with a single glance – and
should subsequently be able to use
that information to make timely and
informed strategic decisions.
Flexibility and customization
The most effective dashboard solutions
are the most flexible. They can be com-
pletely customized for the needs and
variables of a company. While generic
options are available, they tend to lack
the complexity and personalization that
distinguishes the best solutions. Ensure
that the dashboard solution you select is
capable of connecting to and integrating
with all of your data sources, and that it
presents you with a sufficiently dynamic
range of customizable options to allow
you to visualize the data you need to see
in the manner you wish to see it.
In a landscape where organizations
are striving to do more with less, lever-
aging dashboard technology can provide
insight that enriches decision-making
capabilities leading to enhanced effi-
ciency and an improved bottom line.
FALL 2015 Supply Chain World 9
Michael Soaveservesassalesmanagerfor
iDashboards.
12. 10 Supply Chain World FALL 2015
The Future Factory
The word “factory” conjures up a set of particular images – typically of a
dedicated facility or a group of buildings with a slightly rundown exte-
rior, located on the outskirts of a town or a city, with a shop floor that’s
noisy, none too clean or well lit, and full of heavy machinery and endless
conveyor belts where workers are engaged in repetitive manual tasks.
BY GAVIN DAVIDSON But factories focused on enabling mass
production are fading into obscurity
as manufacturers look for more use of
current and emerging technologies to
facilitate mass customization. Instead,
we’ll see a variety of factories emerge in
a range of locations, which may be fully
automated or employ a mix of robots
and human staff.
Will we still have or need factories in
the future? Some manufacturers may
no longer need a physical location to
make products. For instance, should
3-D printers become commodity items?
Perhaps then each home will become
its own mini factory. Manufacturers
will concentrate on product design and
INDUSTRY FOCUS
Tomorrow’s factories will be data-rich physical
or virtual spaces that enable collaboration.
Tomorrow’s factories will emerge
in a range of locations and may be
fully automated or employ a mix
of robots and human staff.
13. INDUSTRY FOCUS
how to incorporate customer requests
into their designs. Instead of deriving
revenue from finished products, their
primary way of making money will be
through licensing their designs to con-
sumer households around the world.
When building prototypes and testing
products, more manufacturers will use
3-D virtual reality technologies. They
can remotely monitor their facilities or
those of their partners via smartphones,
tablets or wearables like smart watches.
Subscription-basedbusinesseshavebe-
guntodisrupttraditionalmanufacturers
wheretheirprimaryproductisnowless
ofaone-timesaleandmoreofarental
model.Theknock-oneffectisthere’sless
needtoproduceasmanyproductsand
morefocusonhowtoproduceasmaller
numberofhighlyrobustproductsthat
willlastaslongaspossible.
Into the Fold
With the increasing digitalization of
manufacturing, there’s less need to site
a manufacturing facility in a particular
location to take advantage of particu-
lar natural resources. In fact, it seems
strange for a manufacturer to have their
primary factory at arm’s length from the
rest of the business, particularly with a
push to have more input from across the
organization, its partners and its cus-
tomers into products right from their
initial development and first prototypes.
I anticipate more companies will
adopt the approach of SpaceX, Elon
Musk’s space transport services com-
pany, where a three-story glass corpo-
rate office sits in the center of the plant
in Hawthorne, Calif. “It looks and feels
bizarre to have a see-through office
inside this hive of industry,” notes
author Ashlee Vance in his recent book
‘Elon Musk: Tesla, SpaceX, and the Quest
for a Fantastic Future’ (p.226). He adds,
“Musk, though, wanted his engineers
to watch what was going on with the
machines at all times and to make sure
they could walk through the factory
and talk to the technicians.”
Human/Machine Collaboration
We’re already used to seeing robots in
factories. The factory of the future will
feature a broader range of sophisticat-
ed and lightweight robots, which can
easily move around the shop floor. At
the same time, humans will make more
use of larger wearable devices, which
may at times mean they start to resem-
ble robots as they put on lightweight
exoskeletons so they can work well in
uncomfortable conditions and lift heavy
weights. The goal will be to have robots
and humans work in close collaboration
with each community able to take ad-
vantage of their skill sets to identify and
resolve any issues on the shop floor.
Powering the Future
For factories to function efficiently,
they need to run on adaptive, flexi-
ble and scalable technologies. Cloud
computing will power the factories of
the future. As more communities seek
input into design and manufacturing,
the importance of establishing, main-
taining and sharing a single unified
source of information cannot be over-
stated. Cloud-based business manage-
ment suites that support all business
processes including manufacturing and
supply chain management can provide
a manufacturer with control over and
real-time insight into its operations.
At the same time, another key emerg-
ing community will be contributing
massive amounts of data to manufac-
turers – components and finished prod-
ucts ‘talking’ to their makers via the
Internet of Things. As more products
include embedded intelligent sensors,
components and finished products can
start communicating their status and a
mass of other data points to manufac-
turers and other interested parties.
Gartner estimates “the IoT will in-
clude 26 billion units installed by 2020,
and by that time, IoT product and ser-
vice suppliers will generate incremental
revenue exceeding $300 billion.”(Gart-
ner, ‘Cool Vendors in Italy, 2015, Pub-
lished: 31 March 2015’ Regina Casonato,
Monica Basso, Massimo Pezzini, Brian
Manusama, March 31, 2015)
Those services will be based on the
massive amounts of data created by
IoT devices. For some manufacturers,
opportunities will focus on packaging
services around relevant data sets, then
purchased by customers or partners.
More manufacturers will need to har-
ness that data via the cloud to meet de-
mands from customers and legislators
to track the entire lifecycles of products.
More customers are starting to use how
‘green’ and sustainable a company’s
entire manufacturing and supply chain
operations are when making a purchase
decision. Whole new businesses may be
built on remaking the waste materials of
various manufacturing processes.
Key Building Block
Thefoundationforallfuturefactories
willbeharnessing cloudcomputingto
ensurereal-timecontrolanddatavisibil-
ity across manufacturers’facilitiesand
theirpartners. Nolongerwillanyfactory
operateinisolation.Instead,itwillbe
a data-rich physicalorvirtualspaceto
enablecollaborationonallaspectsof
bringing products tomarket.
FALL 2015 Supply Chain World 11
“Factories focused on enabling
mass production are fading
into obscurity as manufactur-
ers look for more use of current
and emerging technologies.”
_________
Gavin Davidsonismanufacturingverticalleadat
NetSuite.
14. 12 Supply Chain World FALL 2015
CONTINUOUS IMPROVEMENT
Take the Blinders Off
Between rising competition and the tightening of budgets, today’s supply
chain and procurement managers face more challenges than ever, espe-
cially when it comes to visibility. In fact, a recent Transport Intelligence
survey indicated that lack of supply chain visibility was the number one
challenge for logistics stakeholders in the past year, with only 16.9 percent
of respondents reporting that they have end-to-end visibility into their
supply chain, including insight into partners.
One of the top ways logistics leaders can
alleviate some of these pain points is
to focus on proper execution of supply
chain activities – from global trade and
the movement of goods to storage –
through the use of information and data
to provide visibility and collaboration.
This process is referred to as supply
chain execution convergence (SCEC).
What is SCEC?
SCEC is a growing trend in the logistics
world. Bringing together enterprise
departments managing end-to-end
supply chain systems, SCEC breaks
down silos among warehousing, man-
ufacturing, transportation and other
Gain visibility with supply chain
execution convergence.
BY EVAN PUZEY
Supply chain execution convergence
utilizesinformationanddatatoprovide
visibility and foster collaboration.
15. CONTINUOUS IMPROVEMENT
logistics elements to ultimately foster
meaningful collaboration.
While SCEC adoption has grown,
particularly in large enterprises, it has
not been implemented and applied
throughout the entire business within
many of these organizations. This is
often because departments only have
the resources to hit individual objectives
– not the broader enterprise goals. De-
spite these challenges, the conversation
around addressing visibility across silos
has been elevated in today’s logistics
community thanks to major firms like
Gartner raising the need for greater
collaboration. Here’s how supply chain
leaders can turn the conversation into
action and achieve SCEC:
+ Consider deploying cloud technol-
ogy that helps capture, report and
leverage important benchmarking
data and provides insight into
supply chain performance. These
cloud solutions must have analytics
platforms that allow users to assess
partners, be informed on risk man-
agement and analyze the system’s
effects on profit margins. As more
and more technology moves into
the cloud, organizations can reap
the benefits of anytime, anyplace,
anywhere access to data. An added
benefit of cloud technology is that
it allows organizations to reduce
upfront costs and save on onsite
maintenance down the line.
+ Integrate data and supply chain
activities across the entire chain to
provide visibility into all parts of the
system. Businesses must be able to
have insight into partner activity
to ensure they meet delivery and
contractual deadlines. This process
begins by taking stock of in-house
data flow and capabilities and then
determining how much is trans-
mitted electronically. The more
organizations can easily share with
partners, the more the communi-
cation will benefit the performance
of the entire supply chain. In turn,
businesses should figure out what
data those partners house that they
may not have access to – supply
chain professionals need visibility
into external data whenever pos-
sible to help monitor the partners’
activities and overall performance.
+ Share data in real-time. Consider
portals or cloud-based methods
to get those important data points
even faster. Are employees creating
manual reports, or perhaps systems
are delayed in sending alerts to
exceptions within the supply chain?
Those reports and notifications
keep an organization’s supply chain
on track and let shippers, LSPs or
retailers know when something has
gone wrong or needs immediate at-
tention. Fortunately, today’s supply
chain execution technology can help
automate those processes, avoid
human error and reduce delays.
Once an organization takes these
actions, driving transportation owner-
ship over the visibility team, suppliers
and customers are the next piece of
the strategy. Transportation connects
each group to reaching SCEC – from
the manufacturer’s floor, to packaging,
to final end customer delivery. Ulti-
mately, transportation teams are the
ones responsible for driving execution
convergence and making sure it is
embraced throughout the company and
beyond.
SCEC is the future of the logistics
industry. While gaining visibility and
increasing collaboration are two of
the key benefits of SCEC, it also gives
logistics companies a competitive
edge; having a SCEC strategy in place is
already becoming a key differentiator.
So, get ahead and gain visibility with
supply chain execution convergence
before the competition.
FALL 2015 Supply Chain World 13
Evan Puzey ischiefmarketingofficeratKewill.
Supply chain execution
convergence gives logistics
companies a competitive edge
they can use to stay ahead of
the competition.
16. 14 Supply Chain World FALL 2015
Into the Light
Long regarded as a center of wasteful spending, reducing waste around
corporate travel is a tough task since it is so directly linked to the personal
tastes of individual travelers. Launching this year, ProcureCon Travel
will assemble industry leaders from Oct. 26-28 in Fort Worth, Texas, to
troubleshoot how choice can be preserved while making a meaningful
impact on spend.
BY ANDREW GREISSMAN As procurement’s ability to create sav-
ings and serve as the architects of glob-
al policy around sourcing continues
to be extended across organizations,
jurisdiction is being broadened to cov-
er some historically difficult to control
areas of spend. These areas include IT,
contingent labor and travel, all catego-
ries that have been growing in terms of
spend as well as relative importance to
companies in the modern globalized
business environment. Out of these
three categories, travel is by far the
most subject to personal and cultural
differences, and the intimate nature
of an individual’s travel preferences
places an undeniably human challenge
in front of procurement teams who
may be more used to managing and
PROCURECON TRAVEL
ProcureCon Travel puts the spotlight on the
contentious category of corporate trips.
ProcureCon Travel from Oct.
26-28 in Fort Worth, Texas, will
address how to make a meaningful
impact on spend.
17. PROCURECON TRAVEL
controlling costs around purely tactical
spending categories.
Eliminating Waste
High degrees of flexibility and easily
manageable global policy are not neces-
sarily complementary concepts on the
base level, which is one of the reasons
why procurement has been called in
to tackle the strategic management of
the travel category. Long considered to
be one of the areas most susceptible to
“rogue spend,” the elimination of what
a department would assume to be frivo-
lous must be carefully examined in order
to avoid curtailing what travelers may
consider to be essential to a pleasant
travel experience. More than any other
category, aside from perhaps contin-
gent labor, a close relationship with HR
will be important to taking the cultural
temperature of an organization so that
boundaries may be drawn in a manner
that preserves the largest amount of
choice and comfort for travelers being
asked to comply with policy.
Reducing Risk
Global travel in the current geopoliti-
cal climate requires a scrutinizing eye
for safety and reliability, as well as the
creation of visibility around spend that
is at the crux of what procurement
departments require for effectiveness.
Education around safety protocols and
standards will be a major part of build-
ing safety and a culture of compliance
around corporate travel. Accounting for
when things do go wrong during travel,
there is a high premium on an effective
chain of command internally that can
work to coordinate a response, neces-
sitating the creation of global policies
that are clearly understood and flexible
enough to be adopted in an internation-
al business environment.
Creating Value
As with IT, consolidation on the part
of major service providers in the travel
space has made it tough to negotiate
around the creation of value for pro-
curement teams. Both air travel and
lodgings are experiencing resurgence
in demand as the American economy
moves towards a more permanent
state of recovery. In this environment,
procurement needs to come to the table
armed with best practices, as well as
the talent that can execute them, if they
seek to create the greatest amount of
value possible for their organizations.
Even as teams work towards building
value, they must still not forget about
the fact that they are sourcing for a
category that is highly personal and
subject to tastes which vary both indi-
vidually and culturally. This adds the
extra variable of preserving choice to
the already complex equation present
around sourcing.
Troubleshooting Travel
Inresponsetotheseemergingchalleng-
es,ProcureConTravelisinitsinaugural
year. Whileinthepast,travelhasbeen
addressedattheotherannualProcu-
reConconferencesontheEastandWest
coasts,this new eventspecificallyfocus-
es onsomeofthemorespecificchal-
lenges facing thosewhohavebothspent
years managing thecategory,ormay
haveonly recently beenaskedtostepup
anattempttounderstand,analyze,and
managethespend. Industryleaderswill
cometogetherinroundtablestopresent
theirsuccesses andchallenges,andgain
bestpractices fromcasestudiespresent-
edby theirpeers makingupaseasoned
speaking faculty atthedirectorleveland
above. As thechallengesofmanaging
sourcing forcorporatetravelcontinueto
evolveandpush thestrategiccapability
ofprocurementtoitslimit,theProcu-
reConTravelconferencepromisesto
serveas a collaborativeforumforthe
bestandbrightestintheindustry,where
bestpractices canbepresented,refined,
andadopted.
FALL 2015 Supply Chain World 15
Andrew Greissmanisdigitalcontentmanagerat
WorldwideBusinessResearch(WBR).
ProcureCon Travel will help
attendees learn about managing
sourcing for corporate travel in a
collaborative forum.
18. Strategic Sourcing Decisions
After China’s recent devaluation of
the yuan, companies need to be more
strategic than ever in their manufac-
turing-sourcing decision-making,
focusing on clear-headed, case-
by-case analysis and tight project
management. That’s according to
an AlixPartners study, including a
survey of almost 250 senior-level
executives in North America and
Western Europe from manufacturing
and distribution companies across 15
broad industry groups.
The AlixPartners study finds a con-
tinued appetite for “nearshoring.” A
total of 32 percent of the executives in
the U.S., Canada and Western Europe
say their companies have recently
nearshored manufacturing production
or are in the process of doing so, with
40 percent of North American busi-
ness leaders saying so.
AmongNorthAmericanrespondents,
55percentcitetheU.S.asthemost
attractivenearshoringdestination,up
from42percentinlastyear’ssurvey.
Mexicocameinsecondat31percent,up
fromlastyear’ssurvey(28percent),but
downfrom49percentintheAlixPart-
nerssurveyofthreeyearsago.
SUPPLY CHAIN NEWS
MANUFACTURING
FOOD & BEVERAGE
Software AG Helps Americold
Software AG announced that Ameri-
cold, the global leader in tempera-
ture-controlled warehousing and
supply chain solutions to the food
industry, has enhanced its supply
chain capabilities. It has given custom-
ers visibility and access to their orders
at every stage, from time of customer
creation to final delivery, through its
proprietary i-3PL supply chain control
system in conjunction with Software
AG’s webMethods portfolio.
At the core of Americold’s digital
transformation is Software AG’s web-
Methods Integration Server, which
connects the company’s Warehouse
Management System to its B2B Gate-
way. Software AG’s Optimize provides
the monitoring of customer orders
and shipment processes to ensure that
any issues are noted and appropriate
alerts are generated. Software AG’s
MashZone serves as the user interface
from where information is gathered.
DIRECTSALES
Amway Selects
Amber Road
AmberRoadannouncedthatAmwaywillbe
usingAmberRoad’sSupplyChainVisibilitytool
toincreaseitsvisibilityintoitsairandoceanship-
mentsandimproveitssupplychaindatareliability.
AmberRoadisaleadingproviderofglobaltrade
management(GTM)solutions.Amwaysellsa
varietyofproducts,primarilyinthehealth,beauty
andhomecaremarkets.
“WeselectedAmberRoadbecauseofthe
flexibilityandcustomizabilityofitsweb-based
solution.Inaddition,thearchitectureplatformof
AmberRoad’ssolutionsuiteallowsAmwaytoeas-
ilyintegrateadditionalmodulesofAmberRoad’s
suite,suchasitsTradeAutomationsolution,”said
DavidKahn,Amwaysourcingmanager.
16 Supply Chain World FALL 2015
19. UPCOMING EVENTS
FALL 2015 Supply Chain World 17
Links in the Chain
FALL 2015
OCTOBER5-7
APICS 2015
Las Vegas
+ APICS2015istheleadinglearningeventforsupplychainand
operationsmanagementprofessionals.Eachyear,theAPICSconfer-
enceoffersrelevanteducation,bestpracticesandthoughtleader-
shiptohelpattendeesleadtheirorganizationsandreachthesegoals.
www.apics.org/sites/conference/apics-2015
NOVEMBER1-3
TheLogistics&SupplyChain
ForumWest
Scottsdale, Ariz.
+ For senior executives only, The Logistics & Supply Chain Forum
is designed to help attendees become more effective executives.
www.logisticsforum.com
OCTOBER18-21
Business Planning & Forecasting:
Best Practices Conference
Orlando
+ Meet the game changers in planning and forecasting. IBF’s
fourth annual business forecasting and planning recognition
awards ceremony. Advance demand planning, forecasting, analyt-
ics and S&OP at your company.
ibf.org
NOVEMBER16-17
Connected Fleets USA
Atlanta
+ Covering hot topics from data to driver management, Con-
nected Fleets USA Conference & Exhibition returns to Atlanta
this November. The event will uncover how to integrate, analyze
and secure data from the vehicle, driver and infrastructure for
fleet efficiency.
www.tu-auto.com/fleet
OCTOBER26-28
Global Business Services Executive
Roundtable 2015
Chicago
+ With dozens of global companies making the decision to cen-
tralize their shared services and outsourcing operations within a
single global business services (GBS) organization each year, this
is a can’t miss opportunity to stay one step ahead.
www.gbsexecutiveroundtable.com
OCTOBER26-28
ProcureCon Travel
Fort Worth, Texas
+ ProcureCon Travel provides you with best practice strategies
for procurement transformation and evolution from a straight
sourcing and purchasing role of travel goods and services to deliv-
ering strategic cost savings and value creation.
procurecontravel.wbresearch.com
NOVEMBER16-18
ProcureCon for Digital & Marketing
Services 2015
Nashville
+ ProcureCon for Digital & Marketing Services has content
geared toward all maturity and experience levels. This is North
America’s only event specifically dedicated to issues pertinent
to marketing procurement. You will learn how to better manage
internal as well as external agency relationships, find out which
tools will create efficiencies and deliver savings your CPO craves,
and how you can gain more influence.
procurecondm.wbresearch.com
DECEMBER2-3
RFID in Health Care 2015
San Francisco
+ Radio frequency identification is a valuable tool for improving
asset-utilization rates, reducing the incidence of lost or stolen
equipment, dramatically cutting the time nurses waste looking for
equipment, improving patient outcomes and much more. RFID
in Health Care, RFID Journal’s 10th conference focused on this
sector, is designed for executives at hospital or clinics considering
using RFID technology within their facilities.
www.rfidjournalevents.com/healthcare/
DECEMBER2-3
CargoLogisticsAmericaExpoand
Conference
San Diego
+ America’s only multimodal show, Cargo Logistics America
(CLA) will bring the entire supply chain under one roof. CLA
connects freight owners with freight movers – fostering multi-
modal synergy between diverse stakeholders in import, export
and domestic supply chains.
cargologisticsamerica.com
20. Few retailers have
the size and scope that
Walmart does, and that
means few retailers have
as complete of an under-
standing of the consumer
as Walmart does. As the
world’s largest retailer,
Walmart has a bird’s eye
view of virtually every signifi-
cant market on the planet, so it’s
safe to say that if there’s a trend
happening somewhere in the
world, Walmart knows about it. As
divisional vice president, supply
chain, Sherry Harriman is respon-
sible for ensuring that Walmart’s
supply chain is up to the task of
staying in front of those emerging
trends. According to Harriman, all
of Walmart’s leadership under-
stands how important the supply
chain is for changing along with
the trends.
“You have to keep adapting,” she
says. “Our customer is changing
and has changed significantly, and
the companies that aren’t chang-
ing their supply chains are getting
left behind.”
With the advent of ecommerce,
consumers’ expectations for re-
tailers are changing substantially,
and Walmart is working hard
to ensure that it not only lives
up to those expectations now
Winds of Change
Walmart continues to leverage its size and scope to improve its
supply chain operations for the present and future. By Chris Petersen
SHERRY
HARRIMAN
DivisionalVP,
SupplyChain
As consumers’ expectations
for retailers change, Walmart is
working to ensure it can meet and
exceed them in the future.
COVER STORY | WALMART
www.walmart.com / 2014 revenue: $482billion / Headquarters: Bentonville,Ark. / Employees: 2.2million / Specialty: Retailer / Sherry Harriman, divisional
vice president, supply chain: “Ifyou’rereactingtothechanges,you’reonestepbehind.”
18 Supply Chain World FALL 2015
21. but exceeds them in the future.
Harriman says the company’s
size and scope give it exceptional
efficiencies when compared to
other retailers, but the company
always is looking for more and
better ways to leverage those
efficiencies to improve its sup-
ply chain operations. Through
technology, new business models
and the willingness to change,
Walmart is staying out in front
of the rolling wave of changes
sweeping through the American
marketplace.
Witness to Change
Harriman has been in good posi-
tion to witness many of the most
recent changes to the American
consumer, having spent more than
25 years with Walmart. Her career
with the company started in 1989,
working as an order filler while she
worked her way through college.
Later, she was transferred to help
open a distribution center in Cal-
ifornia, and with that experience
she moved on to open another
distribution center for Sam’s Club
in Wisconsin.
After receiving her degree,
Harriman was promoted to man-
agement and oversaw the estab-
lishment of another distribution
center in Kansas. From there, she
moved to the transportation side
of the business, working to open
a regional dispatching division
in Arkansas. In 2007, Harriman
was promoted to her current
position, where she oversees all of
Walmart’s logistics for Florida and
Puerto Rico.
Leveraging Size
In all the time Harriman has spent
at Walmart, the expectations of
the consumer have undergone
a significant evolution. It isn’t
enough for a retailer like Walmart
to have a wide selection of prod-
ucts at highly competitive prices
anymore – they want to receive
their goods without delay and
from a variety of channels. “The
customer wants it now, they want
it right and they want it timely,”
Harriman says. “We’re finding
ourselves making sure we leverage
all our stores and all the options
we have available to us.”
In Florida, many of Walmart’s
top competitors are driven by
Technology,newbusinessmodelsand
a willingness to change are helping
Walmart leverage efficiencies in its
supply chain operations.
WALMART | COVER STORY
FALL 2015 Supply Chain World 19
“We’re finding ourselves
making sure we leverage
all our stores and all the
options we have available
to us.”
_________
22. ecommerce, spurring the company
to test and develop new supply
chain processes. “The thing that’s
driving us a lot now is just the
changing customer,” she says. “We
might not be able to get them into
the store, so how do you make sure
you’re the retailer of choice?”
Although many consumers have
latched onto online retailers such
as Amazon because of their prom-
ises to have goods shipped directly
to their homes, Harriman says
there remains a significant portion
of the customer base that prefers
not to have products delivered to
their homes because they don’t
want to be stuck waiting for the de-
livery. Walmart is looking into de-
veloping an option where they can
make purchases online and pick
them up at a local store. With the
direct-to-store option, customers
would be able to save the time they
would have spent shopping in the
store, Harriman says.
Unique Situation
The region of the country that
Harriman oversees is unusual not
only because it includes Puerto
Rico, but also because Florida has
a large number of smaller-format
Walmart stores. These locations
occupy a smaller footprint than
the typical Walmart store, so they
utilize the company’s distribu-
tion center network in a different
way. While Walmart’s traditional
supply chain is built around econo-
mies of scale, Harriman says, these
smaller stores allow the company
to leverage its distribution centers
for smaller cases and smaller
quantities of items.
Servicing Puerto Rico is anoth-
er unique aspect of Harriman’s
responsibilities, and she says the
company is working hard to lever-
age the best practices of its U.S.
operations to take the added costs
Its size helps it to gain efficiencies
in the supply chain, but Walmart
also uses its size to benefit the
communities in which its stores
are located.
COVER STORY | WALMART
20 Supply Chain World FALL 2015
“The thing that’s driving us
a lot now is the changing
customer. How do you
make sure you’re the
retailer of choice?”
_________
23. of transporting goods to the territory out of the equation.
She says the company has a multifaceted distribution
center for grocery and general merchandise on the island
in addition to the three grocery distribution centers and
three general merchandise distribution centers Walmart
has in Florida.
No matter how the company utilizes its distribution
centers, Harriman says the key to Walmart’s success
in that regard is rooted in the ground rule founder Sam
Walton established in the company’s early days.
“His goal was to always keep that distance between a
distribution center and the store at 100 miles or less,”
she says.
Staying Nimble
Although the nature of the consumer base continues to
change and the expectations of consumers change along
with it, Harriman says Walmart knows it can’t afford to
remain static, even with its dominant position in the
global marketplace. By being proactive and finding new
ways to leverage its scale and drive greater efficiencies,
Walmart is maintaining its position as a global leader
because out in front is the only place the company can af-
ford to be. “At some point we’ve got to get in front of it,”
Harriman says. “If you’re reacting to the changes, you’re
one step behind.”
In the near future, Harriman says Walmart can see a
world in which the traditional distribution center model
may not be the most efficient or effective way to serve its
customers. With ecommerce becoming a much larger
portion of the business, she says, Walmart’s supply
chain of the future may not look anything like the supply
chain it has in place today, with a network of distribution
points rather than distribution centers.
No matter what form the supply chain of the future
takes, she adds, Walmart and its supplier partners will
need to be sure they are ready to make the changes nec-
essary to succeed in that future. “We’ve got to make sure
our network is nimble,” she says.
WALMART | COVER STORY
FALL 2015 Supply Chain World 21
Sherry Harriman wants
Walmart’s supply chain to remain
nimble so it can react to the
ever-changing marketplace.
24. ENERGY & MINING
IN THIS SECTION
24 DETOUR GOLD | 29 S & B ENGINEERS AND CONSTRUCTORS | 32 OGE ENERGY CORP. | 36 SUNPOWER CORP. | 39 WHITING PETROLEUM
22 Supply Chain World FALL 2015
25. ENERGY & MINING SECTION
But decision makers must be familiar
with the costs, considerations and con-
sequences of implementation. Utilizing
and optimizing transportation manage-
ment technology begins with under-
standing the best practices associated
with successfully making that technolo-
gy part of an efficient platform.
The What
A high-quality system should be able to
track and manage large volumes of data,
from freight status and fleet locations to
custom metrics. It should provide a view
of supply chain resource deployment
and a breakdown of granular data.
A high-quality system should inte-
grate with carrier tracking and customer
shipping systems, providing transpar-
ency from warehouse to destination. It
needs power and flexibility, displaying
a level of customization that makes it
effective for different users and circum-
stances. Ease of use is important. Even
powerful tools will have a difficult time
if users find it cumbersome or unwieldy.
The How
One obstacle to logistics and supply
chain technology implementation is
a lack of flexibility. The right tools en-
hance existing policies and procedures.
That adaptive capacity has been key to
making these new tools an increasingly
ubiquitous presence on the transporta-
tion management landscape. Perhaps
the most important piece of that puzzle
is integrating with client ERP systems.
Given the diversity of transportation
providers, that connectivity is essential.
Once integration is no longer an issue,
the power and potential of new tools can
be deployed. Among the key features is
unprecedented precision in mapping
and geo-tracking. GPS technology
makes location data more accurate. This
new technology makes it possible to per-
form sophisticated data analyses, as the
highest quality systems can now calcu-
late and present the exact freight burden
of an item in real time. Users have access
to the transportation cost as a percent-
age of the overall costs of a product, and
can better access that information.
Powerful new tools also can opti-
mize scheduling and calculate efficient
shipping details. Users can use these
tools to identify and leverage backhaul
opportunities and take advantage of
freight optimization efficiencies. A wide
range of variables can be monitored
and integrated into decision making,
including things like mileage and travel
times, carbon emissions and delivery
windows. Customized alerts, receipt
notification and confirmation and finan-
cial analyses are now commonplace. A
new generation of mobile applications is
making these tools even more accessible
and convenient. Using sophisticated
tracking and logistics functionality all
through a simple interface on a person-
al mobile device is making these tools
more available and driving down costs.
Industry professionals who want to
take full advantage of these powerful
new technologies should be focused on
the best practices associated with lever-
aging the features of these systems:
Experience and perspective
Your high-quality tech platform should
be equipped with modern website devel-
opment technology that allows users to
design and deploy a highly customized
data interface. The best systems are
also easy to use and readily available.
They have a level of mobility and ease of
access that is a big part of their appeal.
Remember that different users are fo-
cused on different metrics. Your system
should deliver different information to
different people. Your technology needs
dashboards or custom displays that
provide role-specific information.
Rely on the pros
Avoid designing your own solution.
Systems become outdated rapidly. Users
who have invested in their own solu-
tions become overly invested in aging
technology. The right system can make a
difference for a logistics and transporta-
tion management organization. Access
to new and detailed real time data con-
fers an enormous strategic advantage,
facilitates analytical sophistication and
unlocks supply chain benefits. These
new technologies are an investment
with potentially staggering returns.
Co-authored by Brandon Stallardand Wayne
Kakuda of TPS Logistics, a non-asset-based,
full-service logistics management provider based in
Troy, Mich. For more information, please visit www.
tpslogistics.com.
Tech Knowledge
As exciting new technologies become available with the potential to
streamline supply chain processes and introduce new efficiencies, indus-
try decisionmakers are eagerly integrating these tools into their existing
processes. These tools can make a meaningful impact.
BY BRANDON STALLARD AND WAYNE KAKUDA
FALL 2015 Supply Chain World 23
Leverage technology tools to enhance
transportation management efficiencies.
26. A Canadian intermedi-
ate gold producer, Detour
Gold owns and operates
the Detour Lake mine in
northern Ontario. A long-
life, large-scale open pit op-
eration, Detour Lake is the
second-largest gold-pro-
ducing mine in Canada
with the largest gold reserves.
“This is a large-scale mine
with a long lifespan of 20-plus
years,” Supply Chain Superinten-
dent Stuart Gilray says. “It is the
largest gold mine in Canada not
controlled by a senior produc-
er, located in a mining-friendly
jurisdiction and with promising
exploration opportunities.”
Excellent Potential
Thanks to a growing cash flow pro-
file, organic growth initiatives and
significant potential for further
exploration discoveries, Detour
Gold is well positioned to deliver
superior returns. Supporting those
efforts is a robust supply chain
operation focused on providing
excellent sourcing and logistics
services in a remote location.
Therearemany reasons for
DetourGoldtobebullishaboutthe
future. This year,DetourLakemine
willpourits one-millionthounce
ofgoldjusttwoyearsafteritsfirst
goldpourin2013. Inthenearterm,
thecompany is focusedonpursu-
ing internalgrowth opportunities
toenhancethemine’sproduction
profileandreducecosts.
Over the long haul, Detour Gold
is a looking to bring its entire
Detour Lake gold mine to full
production levels. Detour Gold has
the largest gold reserves among
producing Canadian gold mines
with 15 million ounces of gold,
www.detourgold.com / Headquarters: Toronto / Specialty: Goldmining /
Stuart Gilray, supply chain superintendent: “Wehavetotakeclosestockofthesuppliesthattheminecan’tfunctionwithout.”
Golden Opportunity
Robust supply chain operations are helping Detour Gold realize the
potential of its remote Ontario mine. By Eric Slack
STUART GILRAY
SupplyChain
Superintendent
energy & mining detour gold
Detour Lake is the second-largest
gold-producing mine in Canada
with the largest gold reserves.
24 Supply Chain World FALL 2015
27. and the possibility of exploration
discoveries could provide even more
growth opportunities.
When Detour Gold decided to
proceed with the mine’s develop-
ment, it believed that long-term suc-
cess relied on local service providers
and stakeholders, including First
Nation populations. The company
strives to be transparent about its
plans while bringing in key vendors
and suppliers.
All of this is critical to everything
from logistics, warehousing and
access to local services and supplies
to entering into larger contracts with
suppliers and gaining access to fuel.
Detour Gold’s mine is located in a
remote part of northern Ontario, so
engaging the local supply and service
industries was essential to success.
“Because we are so remote, we
have to take close stock of the sup-
plies that the mine can’t function
without,” Gilray says. “We look at
our inventory requirements and
maintenance programs regularly, as
our inventory stock is managed on
a daily and weekly basis. We have to
give ourselves a little bit of a margin
for error.”
FALL 2015 Supply Chain World 25
detour gold energy & mining
The Kal Tire Mining Tire Group,oneof
theworld’sleadingminingtirespecialists,hasbeen
deliveringbest-in-class‘TotalTireSolutions’forover
40years.Operatingonmorethan150minesitesacross
fivecontinents,thecompanyhasoneconstantgoal;to
deliverservicesandproductsofmeasurablevalueto
miningcustomers.
“Our mine can provide
extensive economic oppor-
tunities ... and we want our
communities to be better off
because of our presence.”
_________
28. Detour Gold has moved from the con-
struction phase to production during
the last few years. In both phases, the
company has looked to build ties to
service providers that it could partner
with over the long term.
“We have assessed the commodities
we’ll consume over the life of the mine,
26 Supply Chain World FALL 2015
energy & mining detour gold
Chemoursimplementedacustomsupplychain
solutiontoserviceDetourGold.Chemours’totaloffering,
includingadvancedplants,technicalsupportand
360-degree,world-classproductstewardshipisessential
tothesuccessofourcustomers.Chemourswouldliketo
thankDetourGoldfortheircontinuedsupportandlooks
forwardtoalonglastingpartnership.
Univaristhedistributionpartnerthatistransform-
ingthewaychemicalsarebought,soldandmanaged
intheminingindustry.Wesupplyacomprehensivese-
lectionofcoreandspecialtychemicalsforeverystage
ofminedevelopment.Thebreadthofourproductline
isunsurpassed.Ourextensivedistributionnetwork,
globalreachandunparalleledlogisticalexpertisepro-
videourcustomersaconsistentandreliablesourceof
supply.Contactustodayat1-855-888-8648orvisitus
atwww.univar.com.
Manitoulin Transportishonouredtorecog-
nizeDetourGold.Since2010,wehavebuiltastrong
partnershipwithDetourGoldthroughthedevelop-
mentofcustomizedtransportationsolutions.Our
expeditedservice,fromcitiesacrossNorthAmerica,
allowsDetourGoldtoimprovetheirsupplychainby
deliveringequipmentandpartson-time,resulting
infasterrepairs,reduceddowntimeandincreased
costsavings.
The company’s Detour Lake
property will pour its 1 millionth
ounce of gold this year, just two
years after the mine completed
its first gold pour.
30. as we are 185 kilometers from the nearest town and need
to be as self-sufficient as we can,” Gilray says.
“We have two camps, which are in many ways like a
giant hotel,” Gilray continues. “We need food and fuel
provisions, so we have established many larger con-
tracts that will be around for the life of mine.”
As the company has moved from construction to pro-
duction, it has worked to create a world-class facility. It
has also established an SAP-based ERP system, bringing
data from all of the departments working at the site into
the ERP so it can better analyze operations and find
improvement opportunities.
“One of our goals is to always find ways to get better,”
according to Gilray. “We have put a business improve-
ment framework in place and every part of the company
is involved.”
Supporting Growth
DetourGold’ssupplychainorganizationwillcontinueto
playacriticalroleinsupportingthecompany’sgrowthbe-
causeitisactivelyinvolvedinestablishingthecompany’s
growthgoals.DetourGoldwillcontinuetolookforwaysto
provideeconomicbenefitsforlocalsuppliersandFirstNa-
tionpartners,soitmaintainsconsistentrulesandprocess-
esonprocurement,lookingforlocalsupplierswhenever
possible,aswellasvendorcapacityandcompetitivebids.
A challenge for Detour Gold’s supply chain will be to
continuously seek ongoing improvement and leaner
operations. The company is constantly looking for ways
to improve freight management, and it is in the process
of investing in a transportation management system that
will provide better visibility. In addition, the company
is looking to see how it can utilize its SAP system to im-
prove warehouse management.
“We are working with suppliers to get a better look
at data on shipments from shipping and production
perspectives,” Gilray says. “Working with vendors and
effectively mining data as our business progresses will
help us to make the best possible decisions based against
risk analysis and our remote location.”
Working with First Nation populations and hiring
locally are other areas of focus for Detour Gold. The
company understands the need to be a good corporate
citizen and that ultimately what’s good for the communi-
ty is good for business.
“We want to empower our people so they can grow
and succeed here,” Gilray says. “Our mine can provide
extensive economic opportunities for the community
around here because of its long life, and we want our
communities to be stronger and better off because of
our presence.”
28 Supply Chain World FALL 2015
energy & mining detour gold
Located 185 kilometers from the
nearest town, supplying Detour
Lake requires Detour Gold to
establish some large contracts
with suppliers.
31. For S & B Engineers
and Constructors Ltd.,
having an alliance with
suppliers means more
than just giving them an
opportunity to bid on
projects the company
works on. “On lump-
sum projects, we will always utilize
our alliance suppliers.
“We’ve had many long-term
partnerships, some for more than
15 years and many for at least
the past six to seven years,” says
Kent Malone, vice president of
procurement and materials for
the Houston-based engineering,
procurement and construction
(EPC) contractor. “Over time with
our suppliers, we’ve developed an
innate ability to sense each other’s
needs and act proactively rather
than reactively as needs arise. We
know that utilizing our alliance
suppliers brings exceptional value
to our projects.”
S & B aligns its engineering
designs around the manufactur-
ing practices of its suppliers, and
has standardized the designs of
the gas fractionation plants it
builds for clients in the natural gas
processing industry. The company
has completed more than 15 of
these plants – in which natural gas
liquids are separated into ethane,
propane, butane and other gas
liquids – during the past six years.
The gas fractionation plants
differ in size and name plate
design, but are basically the same
when it comes to the process the
company and its suppliers use to
construct them.
“We have a model that works
well for us and our suppliers,”
Malone says. “Our suppliers in-
herently know what we’re looking
www.sbec.com / Revenues: $1.5billion / Headquarters: Houston / Employees: 6,000 / Specialty: Engineering,procurementandconstruction /
Kent Malone, vice president of procurement and materials: “AsfarasI’mconcerned,S&Bisthesafestcontractorinourindustry.”
‘Managing With Certainty’
S & B Engineers and Constructors Ltd. aligns the design of its EPC
projects to allow close coordination with its suppliers. By Jim Harris
KENT MALONE
Vice President
s & b engineers and constructors ltd.
S & B leverages its partnerships
with alliance suppliers as well as
its exemplary safety record on its
EPC projects, which include gas
fractionation plants.
FALL 2015 Supply Chain World 29
energy & mining
32. for when we call them for a project. They know roughly
how much production space to allot in their facilities for
this work, so they can plan around it in their production
schedules several months in advance.”
The company’s procurement and supply chain de-
partment is responsible for acquiring and shipping the
materials needed for its projects. “S & B, more so than
any other EPC I’ve been involved with, has the mentality
that construction is the end-customer, and we have to
do everything we can to make sure they are successful,”
Malone says. “Our procurement team works closely
with the construction side of our business to make sure
we have the right products at the right time and in the
right order.”
Under One Roof
Thestandardization ofplantdesignsis oneway the
company has improved itssupplychain operations in
recentyears.Additionally, the company combinedseveral
formerly fragmenteddepartments includingmaterials
management,purchasing,expediting,sourceinspection,
trafficandsubcontracts underonesupplychainumbrella.
The “under one roof” model has significantly im-
proved communication and alignment between the
departments. “We ensure all stakeholders are fully en-
gaged, with our primary customer being the construction
department,” Malone says.
Another improvement was the shift to an all-elec-
tronic document transmittal and approval system. The
company’s computer system also enables it to track all
items through material management, purchasing, expe-
diting, inspection, traffic and receiving. “We continue to
streamline our processes to be able to take advantage of
the quantum leap in computer capabilities over the last
decade,” he adds.
New Offerings
S & B’s alliance suppliers enable it to live up to its
corporate motto of “Managing with Certainty®” on not
only gas fractionation plants, but other facilities the
company completes for the refining, petrochemical,
chemical, midstream, power, infrastructure and pulp
and paper industries.
Midstream natural gas-related projects in particular
are a significant growth area for the company, which per-
forms the majority of its work along the Gulf Coast, in-
cluding in Texas and Louisiana. “All of the shale gas that
has been coming out of places like the Eagle Ford, Bakken
and Marcellus shales has created opportunities for us,”
Malone says. “We happened to be in the right place at the
right time to take advantage of these developments and
have done very well in this market.”
The natural gas market has remained steady for the
company in recent years, as natural gas is relatively
unaffected by changes in oil prices. Within the past two
years, the company has further increased its number of
natural gas liquid projects as a result of the United States
allowing exports of natural gas products. The company
last year built a propane and butane export facility in
Nederland, Texas, and is currently working on an ethane
export facility along the Houston ship channel. “That is a
brand-new product line for us that we hadn’t had previ-
ously,” Malone says.
Thecompany furtherexpandedits capabilitiesin
June,2014,whenitcompleteda new module-fabrication
facility ona 54-acresiteinBaytown,Texas.S&BModu-
30 Supply Chain World FALL 2015
energy & mining s & b engineers and constructors ltd.
33. larOperations providesmodularized
equipmentand processmodulesfor
gasandotherpetrochemical and power
facilities.Thefacility islocated adja-
centtoCedar Bayou and the modules
canshipviabarge, truck and rail.S &B
usesthesemodules in itsown projects
andthefacility has proven tobe an at-
tractiveoption toother clients, aswell.
Safety First
The packages made in the modular
facility enable the company and its
clients to be more efficient in their
projects and also reduce field time. “As
far as I’m concerned, S & B is the safest
contractor in our industry,” Malone
says. “This is a way to take man hours
out of the field and put them into a
more controlled environment.”
S & B’s safety record is a major point
of pride for Malone, who says the com-
pany has not had a lost-time accident
in more than two-and-a-half years.
“We want to ensure everyone goes
home in the same manner in which
they showed up to work,” he adds.
Malone attributes the company’s
outstanding safety record and com-
prehensive safety policies to its family
ownership. “Our owners feel everyone
in the company is a part of the family,
and they don’t want any of their family
members to be hurt,” he adds.
In addition to safety training and
meetings during each project, the com-
pany maintains an internal “Zero to
Sixty” program that requires employ-
ees to report any unexpected incident
within an hour of its occurrence.
“We don’t do this for punitive rea-
sons,” Malone says of the policy. “We
do this so everyone can be aware of
the situation and learn from it. We’re
trying to get ahead of any accident that
we possibly can and put preventative
measures into place before something
serious happens. Keeping everyone
safe is just another phase of ‘Managing
with Certainty®.’”
FALL 2015 Supply Chain World 31
s & b engineers and constructors ltd. energy & mining
S & B’s newly established Modular
Operations division provides
modularized equipment and
process modules to customers in
several industries.
“We continue to streamline
our processes to be able to
take advantage of the quan-
tum leap in computer capa-
bilities over the last decade.”
_________
34. Like many other
utilities, OGE Energy
Corp. believes strongly
in customer service. For
the Oklahoma City-based
energy company’s supply
chain organization, this
service goes beyond pro-
viding energy and timely
maintenance to its residential,
business, commercial and institu-
tional customers.
“When I joined the company six-
and-a-half years ago, the one thing
I learned was you have to partner
with internal customers, which
are the other business functions
supported by supply chain, so you
can align goals and objectives and
get moving in the same direction,”
Enterprise Supply Chain Director
Sherryl Love says.
The parent company of utility
Oklahoma Gas & Electric, OGE
serves approximately 819,000
accounts in a 30,000-square-
mile territory in Oklahoma and
western Arkansas. The supply
chain organization is responsi-
ble for procuring materials and
equipment used by utility crews
and other segments of OGE’s
operations. “Our goal is to get the
right material to our people at the
right time, at the right price and
at the right location safely,” Love
says, noting that this includes
ensuring equipment and materials
are ready on a timely basis in the
event of an outage.
www.oge.com / 2014 Revenues: $2.45billion / Headquarters: OklahomaCity / Employees: 2,350 / Specialty: Energyandpowergeneration,transmissionanddistribution/
Sherryl Love, enterprise supply chain director: “Everymemberofourcompanyisresponsibleforthesafetyofourselvesandothers.”
An Electrifying Culture
OGE Energy Corp. realigned its supply chain to better meet the
needs of its internal departments and customers. By Jim Harris
SHERRYL LOVE
enterprisesupply
chaindirector
OGE Energy Corp.’s central
warehouse in Oklahoma City
distributes supplies and equipment
to 22 district/generation locations
throughout its service area.
32 Supply Chain World FALL 2015
energy & mining oge energy corp.
35. The supply chain organization
distributes supplies and equip-
ment to 22 district/generation
locations from a central ware-
house in Oklahoma City managed
by industrial product distributor
HD Supply Power Solution, which
rents space from OGE. “This
allows us access to more than
$12 million of vendor-managed
inventory [VMI] that we don’t
pay for until we use it,” Love says.
Additional VMI items include steel
structures, wood poles, transform-
ers and automotive parts.
Realignment Success
OGE in recent years has great-
ly improved its ability to serve
its outside customers by first
focusing on aligning its internal
teams. Last year the company
reorganized the supply chain
department to better align it with
the company’s business functions
of power generation, power trans-
mission and distribution, and
corporate services. “The realign-
ment helped the supply chain or-
ganization get early involvement
in the utility’s business strategy,
planning and budget processes,”
Love says. “It also allows us to
build a strategy around strategic
sourcing initiatives.”
The company also blended the
tactical functions of its supply
chain such as procurement with
its strategic functions – which
include contracts, purchasing,
and supplier relationship man-
agement – into a single more
cohesive team. “We’d had a
centralized operation for a while,
but learned that while both of
these functions were under the
same leadership, they still weren’t
communicating effectively,” Love
FALL 2015 Supply Chain World 33
energy & miningoge energy corp.
“The realignment helped
the supply chain organiza-
tion get early involvement
in the utility’s business
strategy.”
_________
36. says. Strategic and tactical supply chain employees are
now seated near each other, which encourages inter-
activity between the groups. “We’ve had wonderful
success with this,” she adds. “When a strategic person
is not available, an internal customer can call a buyer,
who is now also quite familiar with the terms of our
supplier contracts. This level of constant engagement
has served us well.”
The blending of strategic and tactical functions
to support OGE’s business functions has led to an
increase in the amount of total spend the company
has under formal contract and an optimization in the
number of suppliers the company retains. This stream-
lining has realized savings of roughly $35 million a
year on its supply chain spend, and reduced suppliers
from 11,000 to 2,600. The majority of OGE’s spending
– roughly 95 percent – is now handled by the supply
chain organization.
The supply chain organization meets monthly with
its business function partners to discuss team progress
and future opportunities. The organization also meets
quarterly and semi-annually with its top 20 suppliers to
review their performance.
The company recently enhanced its technology to
communicate with vendors. OGE is in the final stages of
implementing SMART by GEP, a cloud-based sourcing
and procurement platform. This relationship manage-
ment software incorporates supplier management,
sourcing, contracts, spend analytics and P2P activities
under one umbrella.
Focused on Safety
OGE’s supply chain team members and vendors serve an
important role in preserving the company’s culture and
values. Safety is chief among these values. “Every mem-
ber of our company is responsible for safety,” Love says.
Every employee goes through three days of standard
safety training. In addition, monthly training sessions
focus on various potential hazards team members might
encounter on a daily basis.
Safety is one of the topics covered through the compa-
ny’s online training program, which notifies employees
when training is needed or when commercial drivers
licenses are up for renewal. Employees and managers are
also notified when they need to review and acknowledge
the company’s ethics policy.
Suppliers arealsoexpectedtoconformtoOGE’ssafety
andethics policies. Suppliers arerequiredtoregisterwith
ISNetworld,a serviceproviderthatmaintainsOGE’s
requiredsafety records andinsurancecertification.
34 Supply Chain World FALL 2015
energy & mining oge energy corp.
OGE Energy Corp.’s spending is now
handled mainly by the company’s
supply chain organization, which has
streamlined the purchasing process.
37. Training programs supporting sup-
ply chain members and initiatives are
maintained and developed by OGE’s
Supply Chain’s Center of Excellence
group, which partners with its cor-
porate training team to train on new
technology, policy and procedures.
An Industry Leader
In addition to constant emphasis
on safety in its operations, OGE’s
members regularly discuss values
and culture. The company has several
accountability and culture initia-
tives that influence its actions. Every
member has gone through two stages
of accountability training, and the
company continues to develop its cul-
ture training, which includes emphasis
on OGE’s newest company belief of
diversity and inclusion.
“One of the things that makes us
special is that we are a company that
spends a lot of time developing our
members and our culture,” Love says.
“It is exciting to work for a company
that does that.”
OGE’s emphasis on safety and main-
taining a positive culture has earned
it recognition from its industry peers,
who named it “Utility of the Year” in
2012 Electric Light & Power Magazine.
OGE also was awarded the electric
utility industry’s most prestigious
honor, the Edison Award, from The
Edison Electric Institute, for “distin-
guished leadership, innovation and
advancement of the electric industry.”
The company in 2013 was ranked No. 1
in J.D. Power and Associates residen-
tial customer satisfaction survey in
2012, 2013 and 2014.
“OGE is a leader in the industry,”
Love says. “We are considered among
the top ranked smart grid initiatives in
the country. Our Smart Grid platform
serves as a launching pad for new
future products and services.” The
company offers programs that help
customers manage their energy costs
including rate plans, weatherization
and various billing options. “Our use
of these programs really sets the com-
pany apart,” adds Jesse Langston, vice
president retail energy, which includes
supply chain.
FALL 2015 Supply Chain World 35
energy & miningoge energy corp.
Formorethanacentury,GEhasbeenofferinginnovative
meteringsolutionstoutilitiesworldwide.Thesesolutions
includeafulllineofsinglephaseandpolyphasemetersthat
meetutilityrequirementsforformfactorandfunctional-
ity,includingembeddedsupportforthelatestincommu-
nicationstechnologies,remoteserviceswitch,loadprofile,
demand,andTOUtariff,toenableamoderngrid.
The company emphasizes safety as one
of the most important elements of its
success, and provides employees with
extensive safety training.
38. Some companies keep
their focus strictly on their
own operations, but not
SunPower Corp. This past
spring, the company began
partnering with its suppli-
ers to find better ways to
deliver their services, re-
sulting in better products.
Together,“There’sabetter
understandingofhowourproduct
qualityimpactstheend-custom-
ers,”ChiefProcurementOfficer
andVicePresidentofSupplyChain
MikeKienitzsays.“Bothpartiesare
focusedonhowwesupplysustain-
ableimprovementsinquality.”
Based in San Jose, Calif., Sun-
Power designs and manufactures
high-efficiency solar panels and
systems for the residential, com-
mercial and utility markets. Dr.
Richard Swanson co-founded the
company in 1985.
Since then, SunPower has
earned more than 500 patents
for solar technology and as of the
end of 2014 generated 25 million
megawatt hours of electricity. The
company has grown, Kienitz notes,
with an emphasis on technology
and quality leadership.
Aspartofthisfocus,SunPower
us.sunpower.com / 2014 revenues: $2.62billion(non-GAAP) / Headquarters: SanJose,Calif. / Employees: 7,000globally / Specialty: Completesolarsolutionsandservices /
Mike Kienitz, chief procurement officer and vice president of supply chain: “Weseeourselvesasaninnovativeleaderincustomerfocusandcustomerengagement.”
Partners in Power
SunPower aims to improve quality through its supplier
engagement program. By Alan Dorich
MIKE KIENITZ
VicePresidentof
SupplyChain
energy & mining sunpower corp.
SunPower designs and manufactures
high-efficiency solar panel systems for
residential, commercial and utility customers.
36 Supply Chain World FALL 2015
PHOTOCREDIT:SunPowerCorp.
39. takesitspanelstoindependentlabs
totesttheirefficiency.“Allofthose
labs[found]asignificantdifference
betweenSunPowerandour[competi-
tion’sproducts],”hestates.
“We are the technology leader
and the leader in terms of quality as
defined by how the module performs
over time,” Kienitz says. “We see
ourselves as a leader in customer focus
and customer engagement as well.”
Elevating Engagements
SunPower recently implemented its
supplier engagement program, which
focuses on elevating its interactions
with its suppliers. “We’ve tried to
focus on aligning with suppliers,
especially in terms of quality, tech-
nology, having the right locations and
the ability to scale with our business,”
Kienitz describes.
The company also objectively as-
sesses its suppliers’ performance so it
can help them continuously improve.
“We’re mutually developing an A3, a
problem solving approach with our
suppliers that looks at where strategi-
cally both companies want to take the
business,” Kienitz describes.
If SunPower wants to implement
statistical project controls throughout
its process, it helps the supplier do the
same. “We’d work with the supplier
[on the timing of implementing] those
improvements,” he says.
The company also has implemented
three ranks for its suppliers: a certified
supplier, a strategic supplier and a
partner supplier. “As you progress up
that chain, the expectations progress
substantially,” he says.
Ifthecompany achieves thestatus
ofa certifiedsupplierforSunPower,
“You’reanapprovedsupplierandyou
meetall ofourstandards,”Kienitzsays.
“Abovethatarestrategicsuppliers.
“We have quarterly business reviews
with them,” he continues. “At the stra-
tegic supplier level is also a portion of
preference for business allocation and
new business awards, as well.
FALL 2015 Supply Chain World 37
sunpower corp. energy & mining
Dedicated to Sustainability
SunPowerCorp.isproudofitscontributionstosustainability.ThecompanyisamemberoftheCircular
Economy100andisCradletoCradleCertified™Silvercertificationforitspanelsmanufacturedin
FranceandMexicali,Mexico.
Thestandardevaluatesproductdesign,manufacturing,corporatecitizenshipandethicsprinciples.
ThecompanyisthefirstandonlycompanyintheworldtoofferCradletoCradle®Certifiedsolar
panels.“WiththreeSunPowerfacilitiesnowmanufacturingCradletoCradle®Certifiedsolarpanels,
wecontinuetohelpresidentialandcommercialcustomersreachtheirlong-termsustainabilitygoals,
whetherbyachievingLEEDcertificationorhavingapositiveimpactonsocietyandtheenvironment,”
SunPowerCOOMartyNeesesaidinastatement.“Wearecommittedtomakingallofoursolarpanels
moresustainable,inlinewithourdedicatedfocustosupportingthetransitiontowardsacircularecon-
omythatisrestorativeandregenerativebydesign.”
“EnvironmentalandsocialsustainabilityareatthecoreofSunPower’sbusiness,affectingevery
design,manufacturingandsourcingdecisionthecompanymakes,”commentedBridgettLuther,
presidentoftheCradletoCradleProductsInnovationInstitute.“Thiscomprehensive,innovativeap-
proachisunmatchedinthesolarindustry,andisdeservingofCradletoCradleCertifiedrecognition.
WelookforwardtoSunPower’scontinuedsuccessinofferingsustainableandsociallyresponsible
solarproducts.”
Dalsin IndustriesisastrategicpartnerforSun-
Power,supplyingmountingsystems/componentsfor
solarutility,residentialandcommercialprojects.Unique
servicesincludeproactiveengineeringsupport,richman-
ufacturingcapabilitiesinroboticwelding,metalstamping,
andfabrication.Servicesincludedesignsupportforbest
costsolutions.Servingrenewableenergy,appliance,med-
icalequipment,electronics,andconstructionbusinesses
acrosstheU.S.withfacilitiesinArizonaandMinnesota.
40. Well-Received
SunPower started the program this
April. So far, “The suppliers’ response
has been fantastic,” Kienitz says.
“They’re very excited that there’s a
clear set of expectations and strategy.
“Secondly, they’re very interested
and excited about the fact that we are
really creating a closed-loop process
for performance and rewards,” he
continues. “We’re now able to talk
to them about what they’re able to
provide in terms of a total solution
to SunPower, versus negotiation on
a traditional set of metrics. They’re
reinforcing our leading approach and
customer service.”
Eliminating Waste
The supplier engagement program has
led to the formation of a group where
suppliers are bringing their technol-
ogy solutions to SunPower’s engi-
neering, product development and
customer development organizations,
Kienitz says. One recent example, he
notes, was when it had delivery issues
with a supplier.
That vendor then implemented a
stocking program to address the con-
cern. “Now, we have a partner supplier
that will stock this material closer to
our customers,” Kienitz says.
SunPower’s implementation of the
program also required training for its
own employees.
“We’ve had to deploy training on the
lean tools, A3s and value stream map-
ping,” according to Kienitz. “We’re in
the process of taking that same train-
ing and deploying it to the supply base
as well.”
Adding Value
Kienitz is proud of the supplier en-
gagement program. “It’s the elevation
of our supply chain and our suppliers
from really a transactional relation-
ship to one that’s mutually adding
value to both of our businesses and our
customers,” he states.
SunPower plans to continue using
the program. “We’ll reap the rewards
and see how they flow through to our
customers,” Kienitz says.
38 Supply Chain World FALL 2015
energy & mining sunpower corp.
Improving Lives
InApril,theU.S.CommerceDepartment’s
UnitedStatesPatentandTrademarkOffice
(USPTO)announcedSunPowerwasawinner
ofthe2015PatentsforHumanityProgram.
“Asinnovationandeconomicprogresshave
madetheworldincreasinglyconnected,
moreandmoreindustriesarerealizingtheir
technologiescanimproveliveseverywhere,”
saidMichelleK.Lee,undersecretaryforcom-
merceforintellectualpropertyanddirector
oftheUSPTO.
SunPowerwashonoredforitsstandard
shippingcontainerwithsolarpanelsand
equipmenttopowerhundredsofrecharge-
ablelanterns.Thesearebeneficialinimpover-
ishedcommunitieswheretraditional,com-
bustion-basedformsoflightingcontributeto
deathsfromhealthimpactsandhousefires.
“Localsrenttheselanternsforasmall
fee,whichisthenreinvestedtoexpandand
improvetheprogram,”SunPowersays.“Sun-
Powerdonatesthecontainerandsupplies
topartnerorganizations,alongwithongoing
technicalsupport.”
Al-TechFoundedin1994,Al-Techhasbeenbuildingand
deliveringhighlyprécisedautomationtoolsandproducts,
meetingtoday’sdemandsforprogressivelygrowing
technologies.Al-Techhasbeensteadilyprovidingquality
automationsolutionstoSunPowerforoveradecade.
Al-Tech’ssoleobjectiveistoprovidehighlyreliableand
robusttoolswithcutting-edgetechnologies,whichare
vitalfortheSolarIndustriesworldwide.
“[Suppliers are] very inter-
ested and excited about the
fact that we are really creat-
ing a closed-loop process for
performance and rewards.”
_________
41. In changing the nature of its
relationship with steel mills and
distributors, Whiting Petroleum
has improved how it procures
steel pipe casing and eliminated
inventory costs while streamlining
the supply chain. “Being able to ac-
quire [pipe casing] in the simplest,
most consistent manner at a very
competitive price is real beneficial
to an end-user such as Whiting,”
says Materials Manager Ross
Weaver, the man behind the com-
pany’s fundamental supply chain
shift. Oil producers have utilized
distributor stocking programs for
years. Whiting was growing fast
enough to justify changing the
procurement process.
Whiting is an independent oil
and gas company that explores,
acquires and develops land for
crude oil, natural gas and liquid
natural gas. The company operates
mainly in North Dakota’s Bakken
Shale and northern Colorado,
where it runs drilling rigs on leased
land. It’s proved reserves were 780
million barrels of oil equivalent
(Mmboe) at the end of 2014 – a 78
percent increase over 2013 – and
it produced 167,000 barrels of oil
equivalent per day (BOE/D) in
first-quarter 2015.
Weaverhasbeenwiththecom-
panyforfouryears,overseeingthe
procurementofthesteelcasing
pipethatgoesintofreshlydrilled
wells.Thejobisacombinationof
purchasingandsupplychainman-
agement,butitrepresentedade-
www.whiting.com / HQ: Denver / Employees: 800 / Specialty: Oildrilling /
Ross Weaver, materials manager: “Customerserviceisoneofthebigsellingpointsforanydistributor–thefactthattheycangetitthereontimewithoutanydelays.”
Relinking the Supply Chain
Whiting Petroleum is more efficient in procurement by relying on
distributors for inventory and transportation. By Tim O’Connor Whiting Petroleum primarily
operates in the Bakken Shale and
in northern Colorado, where it
runs drilling rigs.
FALL 2015 Supply Chain World 39
whiting petroleum energy & mining
42. parturefromWeaver’spreviousrolesin
theindustry.Thefirsthalfofhiscareer
wasspentinapipemillwhereOCTG
productsareproduced.Heeventually
switchedovertosalesforthenext15
years.Thatbackgroundknowledgeand
understandingofthetechnicalsides
ofcasingpipehashelpedhimtotakea
largerviewofthesupplychain.
“It helps to know OCTG (oil country
tubular goods) distributors and the
people in some of the mills because I
used to sell pipe,” he says.
Managing Inventory
The casing is a steel tube inserted into
a drilled well to prevent the hole from
collapsing and to protect the well pipe
and surrounding environment. Each
well uses about 250 tons of casing
tubes: 45 tons of surface casing, 150
tons of intermediate casing and 50
tons of production casing. Because
casing pipe plays a critical role in the
creation of a new well, Weaver says
Whiting treats the tubes like a com-
modity. Like any commodity, Whiting
must ensure a steady and reliable
supply of high quality casing to keep
production flowing.
Weaver’s mission since joining
Whiting has been to improve that
casing supply through better invento-
ry control. Like many oil companies,
Whiting used to order and purchase
large quantities of pipe from mills
based on its estimated need for the
next six months. Orders would be
placed in one quarter and delivered
two quarters later, regardless of
whether the demand had changed, and
pipes were stored at Whiting inventory
yards until a new well was drilled.
But beginning three years ago,
Whiting adopted a new supply chain
philosophy that relied more heavily
on distributors. Now, the company
provides distributors with estimates
on how many wells will be drilled and
how much pipe will be needed and
it’s up to each distributor to order
enough casing inventory to meet that
future demand. Instead of ordering
six months in advance, the new setup
allows Whiting’s drill supervisors to
determine when the casing is actually
needed and inform Whiting’s procure-
ment office. The order is then placed
with the distributor and the pipe is de-
livered directly to the well soon after.
Only then is Whiting billed and does it
take ownership.
Previously, Whiting had millions of
dollars tied up in casing at pipe yards,
Weaver says. But with distributors tak-
ing over responsibility for inventory in
the new model, Whiting has been able
to eliminate many of those pipe yards.
Whiting has reduced the man-hours
it spends on logistics, as distribu-
tors are responsible for inspection,
maintenance, rail service and trucking.
“Customer service is one of the big
selling points for any distributor – the
fact that they can get it there on time
without any delays,” Weaver says.
Supporting Relationships
The reworking of the supply chain
required buy in from Whiting’s Drill-
ing Engineers, Drilling Supervisors,
Management, distributors, and other
partners. Whiting is determined to
continue supporting those relation-
ships during the downturn in the oil
market. Production has decreased
from 20 rigs to nine in the past year,
which has impacted the distributors
the company relies on and dropped
casing prices. “When we had 20 rigs
40 Supply Chain World FALL 2015
energy & mining whiting petroleum
R&D Pipe Company isaproudlongtermsupporter
ofWhitingPetroleumCorporationprovidingOilCountry
TubularGoods(OCTG)andrelatedservices.
43. running, distributors were all over
us,” Weaver says. Whiting worked
with four distributors to supply
casing pipe to five rigs each. But
with oil prices hovering between
$40 and $50 per barrel this sum-
mer, Whiting has stuck with one
distributor to maintain volume
and secure the best price.
The company honors its com-
mitments to partners. When the
oil industry was strong in 2014, oil
companies projected robust activ-
ity to continue in 2015. Oil prices
began to dip at the end of last year,
and Whiting adjusted by cutting
projections in half. However,
distributors had already ordered
millions of dollars’ worth of pipe
based on those earlier estimates
and were suddenly stuck with un-
movable inventory. Further, Whit-
ing purchased Kodiak, another
oil company, on Dec. 8, 2014, and
inherited the business’s purchase
obligations. Whiting did not want
to abandon those distributors and
damage relationships so it contin-
ued to purchase casing despite low
demand. “To try to ease the burden
on some of our distributors, we
ended up buying some inventory
this year,” Weaver says. “You help
them out when you can.”
Having redefined its relation-
ships with distributors and steel
mills, Whiting is looking at ways
to standardize its casing pipes
and further streamline the supply
chain. “You get a pipe design that
works, then use it on all the wells
and try to make it uniform,” Weav-
er says. If each rig used the same
pipe the supply would be easier to
manager, he explains. “It’s more
consistent. You’re actually making
the drilling of the wells much more
like an assembly line rather than
an individual effort.”
FALL 2015 Supply Chain World 41
whiting petroleum energy & mining
EVRAZ North Americahasover60yearsofexperience
inoilandgasmarkets. Strategicallylocatedintheheartofthe
energysector,wemanufactureAPI-compliantERWcasingand
tubing,seamlesscasing,couplingstock,andEVRlockpremium
andsemi-premiumconnections.CustomerscountonEVRAZ
toprovidehighqualityOCTGproductsforthemostdemanding
drillingapplications.TheEVRAZadvantagealsoincludesproduct
developmentandtestingatourstate-of-the-arttechnology
centersinPueblo,ColoradoandRegina,Saskatchewan.Formore
information,visitwww.evrazna.com.
44. FOOD & BEVERAGE
IN THIS SECTION
44 VITERRA INC. | 48 ANDREW PELLER LTD. | 52 BATORY FOODS INC. | 56 MARCO’S FRANCHISING
42 Supply Chain World FALL 2015
