Libro Extracto 1

R
RightCh
hain™
M
Maximizing Financcial and Service Performancce with Su
upply Chaain Strate
egy

EEdward H. Fraazelle, Ph.D.

PPresident andd CEO
LLogistics Reso
ources International

FFounding Direector
TThe Supply Chhain Logisticss Institute at G
Georgia Tech

Copyright © Edward H.. Frazelle, Ph.D. and Logistics Resources International – ALL RIIGHTS RESERVED
Chapter 1: RightChain™ 2
Chapter 1 ‐ RightChain™

I begin all our seminars with a discussion on the motivation for the executives and managers to attend. In the
case of our RightChain™ Supply Chain Strategy seminar, the foundation for this book, it’s easy. Based on formal
and informal research with our clients and seminar attendees, less than 30% of all supply chain logistics projects
are successful. In harsher terms, approximately 70% of supply chain logistics projects fail! If the project involves
software, the failure rate climbs to 85%. It’s hard to imagine embarking on any project if the probability of
success is only 15%. With all the research that has been conducted, all the software tools that have been
developed, all the education programs that have been offered, all the books that have been written, and all the
conferences that have been conducted – the probability of success for supply chain projects is unacceptably low
and has not improved. The reasons and excuses are many and various.

 The complexity and scope of decision making required in supply chain logistics is increasing much faster
than decision support resources ‐ models, metrics, education, methodology, management, and software
tools – are developing.
 Though improved, the coordination and communication between marketing, sales, manufacturing,
procurement, and distribution is still lacking and sometimes dysfunctional.
 Metrics used in supply chain logistics often work against one another and many times exacerbate the very
problems they are designed to solve.
 Benchmark targets used in supply chain logistics are often unreliable, one‐sided, and de‐motivating.
 The few key resources (a depersonalized reference to the most important individuals in the company) who
are candidates for supply chain logistics projects are stretched so thin on dizzying arrays of projects that
they have no capacity to handle the true requirements of supply chain strategy initiative.
RightChain™: Maximizing Financial and Service Performance with Supply Chain Strategy – Edward H. Frazelle, Ph.D. – All Rights Reserved
 Consultants retained as supply chain guides are often young and inexperienced; follow regimented
problem solving approaches; and are often more interested in and financially motivated by selling or
integrating large, expensive software systems.
 Third‐party logistics firms who are looked to for supply chain strategic advice are really only qualified to
provide advice pertaining to their supply chain niche, and even that may be biased towards their products
and services.
 The decision support tools used to help supply chain professionals often do not properly reflect financial
objectives and service constraints, are often only operable by the software developers themselves, and are
currently operated by harried professionals with little or no training.
 Less than 10% of supply chain professionals have any formal education or training in supply chain logistics,
and that education is often outdated and/or impractical.
 Competing, short‐term executives grasp for supply chain silver bullets, shortcuts, and get rich quick
schemes leading to impatience and unreasonable expectations.
 Procurement is still looking for the cheapest first price, boasting about “cost avoidance”, and costing
double the claimed savings in hidden inventory carrying, lost sales, transportation, supplier resentment,
and poor quality costs.

These are observations I have made while consulting with our supply chain strategy clients and teaching our
executive education students for the last twenty years. THERE HAS TO BE A BETTER WAY! We developed and
have been quietly working with that better way for many years. We call that way, RightChain™, LRI’s proprietary
supply chain strategy development program (Figure 1).


FFigure 1. The RightChain™ Program Con nverts Businesss Conditions tto Supply Chaain Strategy

BBased on morre than two decades of sup pply chain straategy consultting, executivee education, aand research,, the
RRightChain™ p program usess proprietary d definitions, m
methodology, tools, curricuulum, principlees, metrics, processes,
aand delivery m
mechanism to o confront the e major decisiions in supplyy chain strateggy developmeent. The program
cconsiders eacch company’s unique busin ness and logisttics conditions and leads thhem to the suupply chain sttrategy
tthat maximize es their financcial and servicce performan nce. The RightChain™ is succcessfully guidding the suppply chains
oof large, medium, and smaall companies in nearly every major indu ustry around tthe world and d is responsible for
mmore than $2 2 billion in botttom line impact. Through optimized co ombinations oof increased ssales, reduced d
eexpenses, andd higher capittal utilization, the RightChaain™ typically increases thee annual botttom line by beetween
R
RightChain™: Maximizin
ng Financial and Service pply Chain Strategy – Ed
e Performance with Sup dward H. Frazelle, Ph.D. – All Rights Reserved
1% and 5% of sales. The RightChain™ has been taught to more than 10,000 supply chain professionals in seven
languages around the world.

RightChain™ Outline

This book presents the RightChain™ program and the lessons learned from RightChain™ implementations in
various industries around the globe. An overview of the book’s contents and the ten RightChain™ principles
follow.

 This first chapter presents RightChain™ definitions, models, methodology, principles, and processes.

 Chapter 2 presents RightServe™, customer service optimization through customer valuation, segmentation
and optimization (RightSales™); SKU valuation, segmentation, and optimization (RightSKUs™); pricing
optimization (RightPrice™); customer satisfaction optimization (RightSat™); and customer service policy
optimization (RightTerms™).

 Chapter 3 presents RightStock™, inventory optimization through forecast optimization (RightCast™); lot
size optimization (RightLots™); fill rate optimization (RightFill™); inventory planning optimization
(RightPlan™); and inventory deployment optimization (RightPloy™).

 Chapter 4 presents RightBuys™, supply optimization through supplier valuation (RightCard™); supplier
optimization (RightCore™); supplier service policy optimization (RightTerms™); allocation optimization
(RightSource™); and supplier integration (RightLinks™).

 Chapter 5 presents RightTrips™, transportation optimization through network optimization (RightMaps™),
shipment optimization (RightShip™), fleet optimization (RightFleet™), carrier optimization (RightLines™),
and freight optimization (RightFreight™).

 Chapter 6 presents RightHouse™, warehouse optimization through receiving optimization (RightIns™);
putaway optimization (RightPuts™); storage optimization (RightStore™); order picking optimization
(RightPicks™); and packing optimization (RightPack™).

 Chapter 7 presents RightScores™, metrics optimization through metrics design (RightMix™); target
optimization (RightGoals™); spanning (RightSpan™); process optimization (RightWay™); and presentation
optimization (RightGraphs™).

 Chapter 8 presents RightSource™, logistics outsourcing optimization through ROI optimization (RightROI™);
vender selection (RightSource™); contract optimization (RIghtTerms™); start‐up optimization (RightStart™);
and relationship optimization (RightTrust™).

 Chapter 9 presents RightTools™, supply chain information technology optimization through data mining
(RightViews™); technology optimization (RightTech™); hosting optimization (RightHost™); integration
optimization (RightLinks™); and breed optimization (RightBreed™).

 Chapter 10 presents RightGuards™, supply chain security optimization through risk optimization
(RightRisk™); barrier optimization (RightWalls™); compliance optimization (RightDocs™); path optimization
(RightPath™); and recovery optimization (RightBack™).

 Chapter 11 presents RightTeam™, supply chain organization optimization through role definition
(RightRoles™); skills definition (RightSkills™); casting optimization (RightCast™); compensation optimization
(RightPay™); and training optimization (RightTrain™).

 Chapter 12 presents a series of RightChain™ case studies, lessons learned from large, medium, and small
companies in a variety of industries around the world.

RightChain™ Definitions: The Language of Logistics

Nearly 20 years ago we helped a large food company develop a supply chain strategy. One of the
recommendations we made to the company was that they create a supply chain steering committee. The
company accepted our recommendation and asked if I would facilitate the first meeting.

The meeting began at 8:00 am on a Tuesday morning. The meeting went very well for the first six or seven
MINUTES. It then started to sound like our minivan used to sound about five hours into a long trip with our kids.
There was something about that five hour mark. (Maybe it was that two DVDs had finished playing.) Whatever it
was, it was bad, whiny, and loud.

That’s what it sounded like in the conference room with eight, six figure executives and a bewildered facilitator. I
remember thinking, “I may have to refund our consulting fees because I’m doing such a poor job facilitating this
meeting.” To be candid, I would have been delighted to return the fees and exit stage left. By the Grace of God
there was a scheduled break at 9:00 am. During the break I remember thinking, “Lord, why am I having such a
hard time facilitating this meeting?” Then it dawned on me what the problem was.

The executives in the meeting that day included the heads of manufacturing, transportation, warehousing,
materials management, finance, marketing, I/T, and the nephew of the chairman of the board. Of those, none
had worked for another company and none had worked outside the areas they were currently in. So, if an “expert
facilitator” starts talking about supply chain logistics, and you’ve only worked in transportation (fill in the blank
with any other area), guess what you think he’s talking about? One of two things... Either you think he’s talking
about transportation or some other strange world that you can only conceive of through the perspective of
transportation. Once I had that revelation (Ah‐Ha or Duh!), I realized they (and most other companies) really had
no idea what supply chain logistics was. I changed my meeting strategy.

When we reconvened I told the group our meeting was over. They were taken aback and asked if they had done
anything to offend me. I assured them they had not done anything to offend me, and that I may have done
something to offend them. I apologized for doing such a poor job with the facilitation, and I asked them if they
would give me another chance. They were gracious to do so and we then restarted with a half‐day seminar on
supply chain logistics. Once that ground work and common language had been established, the meeting and the
project went smoothly. From that day forward we have commenced every RightChain™ supply chain strategy
project with a seminar workshop introducing the client’s executive and management team to the RightChain™
definitions, models, principles, and tradeoffs of supply chain logistics. Our ConsulCation™ (consulting blended
with education) approach has been so successful that we now integrate the RightChain™ curriculum with all our
consulting engagements.

The Supply Chain Tower of Babel

The real issue in the aforementioned story is more memorably gleaned from a much older story. Remember
Adam and Eve? Despite their transgressions, they had a lot going for them. One thing going for them was that
they could speak the same language. Their children, children’s children, and several generations spoke that same
language. What happens to the creative, economic, and industrial development of a society or organization when
everyone communicates with the same language? Real, rapid, sustainable progress happens!

We think we are highly sophisticated with our modern entertainment, 3DTV, wireless technology, and medical
advancements. Those early generations weren’t too shabby themselves. They had music, art, metallurgy, urban
planning, and architecture. Eventually they became so successful in their own minds that they decided to build a
monument to themselves. That’s when the trouble started.

One day I was reading this story and two things jumped off the page at me. The first thing that jumped out was a
quote. God is looking down observing what is happening and says, “If they can speak the same language, there’s
not anything they can’t accomplish.” My first thought was, “That comes from a highly reliable source.” My
second thought was, “That will work! That will work in a business organization, a sports team, or in a family.” I
was so inspired that I wrote what may be the most boring book ever written, The Language of Logistics, to help
develop and teach a common language for supply chain logistics professionals. (If you are interested and having
trouble sleeping at night, the book is now a web site – www.logisticsvillage.com/language_of_logistics.htm.). I
also got started on a plan to develop a series of seminars on supply chain logistics to teach a common language of
logistics. That series of seminars, the Supply Chain Management Series, has run for nearly twenty years. More
than 10,000 professionals from more than 1,000 companies from more than 20 countries have been in the series
on‐campus, on‐site, or on‐line.

Another thing that jumped off the page at me was the sad end of the story. Unfortunately, the society forgot who
gave them the ability to accomplish so many great things. The Lord knew that rapid and massive progress with
evil and prideful intent would ultimately be harmful. God compassionately intervened by scrambling their
language. They got half way up with the tower, the project stopped, and the people scattered. That is not unlike
what happens with many supply chain logistics projects that can’t overcome thresholds of political infighting,
prideful turf wars, and/or the inertia and apathy of human nature.

The point of the contemporary and ancient stories is that we need a common language to communicate and to
make real, sustainable progress. The inability to communicate naturally breeds frustration, blocks trust, and
creates barriers to progress and creativity. RightChain™ is a common logistics language and supply chain
development program that connects supply chain metrics, methodology, models, and managers. It starts with a
common definition of the field – supply chain logistics.

What is Supply Chain Logistics?

To develop the definition of supply chain logistics, let’s break it into its component parts. We start with logistics
as the foundation.

There are many definitions of logistics floating around out there. We developed a simple one nearly 20 years ago.
Logistics is the flow of material, information and money between consumers and suppliers.

A lot can be learned from the three phrases in that simple sentence. First, logistics is “flow”. Flow is a good thing!
What happens to water when it stops flowing? Stagnation, scum, insects, and possibly death. What happens to
blood when it stops flowing? The nerds in the group always say, “collagulation”. The non‐nerds usually just say,
“somebody dies.” The point is, when things stop flowing, something or someone dies (or loses their job,
customers, and/or shareholders). Second, in logistics three things need to flow, “material, information, and
money”. Ideally those three flow simultaneously, in real‐time and without paper. Third, logistics flow is “between
consumers and suppliers”. That’s the span of the activity, and it is bi‐directional. (I never really got the reverse
logistics thing. That’s just forward logistics from another perspective.)

We can also learn a lot about “logistics” from the origin of the word itself. The root word for logistics is “logic”.
According to Webster, logic means “reason or sound judgment”. RightChain™ leans heavily on reason and sound
judgment in walking through the decisions that make up a supply chain strategy. The root word for logic is
“logos”, a Greek word meaning, “Word of God, divine reasoning, wisdom, balance”. The RightChain™ program
leans heavily on Heavenly resources and Wisdom for working through complex supply chain tradeoffs. (Our
Japanese team, a joint venture of LRI Japan and Mitsubishi, is called the LogOS™ Team in honor of this approach.)

If that’s “logistics”, what is a “supply chain”? There seems to be just as much confusion about the definition of
“supply chain” as there is about the definition of “logistics”. Everyone seems to have their own. Here’s ours. A
supply chain is the infrastructure of factories, warehouses, ports, information systems, highways, railways,
terminals, and modes of transportation connecting a company’s consumers and suppliers.

Putting the two together, supply chain logistics is the flow of material, information and money in the
infrastructure of factories, warehouses, ports, information systems, highways, railways, terminals, and modes of
transportation connecting consumers and suppliers. To use a sports analogy, the supply chain is the stadium and
logistics is the game.

RIghtChain™ Models and Frameworks

According to Webster, a model is “a simplified representation of a system”. A framework is a synonym for a
model meaning “a structure composed of parts fitted and joined together, a structure for supporting or enclosing
something else, a set of assumptions, concepts, values and practices that constitutes a way of viewing reality.”
Models and frameworks represent things. They are helpful in explaining complex phenomenon. To help explain
the complex phenomenon of supply chain logistics decision making I developed a variety of RightChain™ models
and frameworks. Those high level models and frameworks include (1) the Star Model of Supply Chain Logistics
(the RightChain™ Star), (2) Frazelle’s Framework of Supply Chain Logistics, (3) the Wrong Chain Model of Supply
Chain Sub‐Optimization, Dysfunction and Conflict, (4) the RightChain™ Supply Chain Integration Model, and (5)
the RightChain™ Value Creation Model. (I stopped at five because any more would have required a model to
explain the models and a framework to explain the frameworks.)

The RightChain™ Star: A Five‐Pointed Model of Supply Chain Logistics

Our star model of supply chain logistics (Figure 2) is an answer to a desperate prayer for a means to explain to a
mean‐spirited, cynical CEO of a very large chemical company why he did not need the $15 million warehouse and
hundreds of jobs he had just gone on TV promising to a downtrodden local economy. I had to have something to
explain that a physical warehouse was not a substitute for a customer service policy, inventory plan,
transportation network design, or any other element of a supply chain strategy. The solution for them was to
eliminate or minimize the need for physical warehousing by developing (1) a customer service policy, (2)
optimizing the inventory required to support that service policy, (3) optimizing and coordinating their
manufacturing schedules, and (4) optimizing the transportation operations. Whatever role remained for physical
inventory defined the requirements for the (5) warehouse. Once that supply chain strategy was developed, the
excess inventory and need for additional warehousing were eliminated, customer service was improved, and
profits increased.

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FFigure 2. The RightChain™ Star Model off Supply Chain n Logistics – D
Descriptive annd Prescriptivee

OOur RightChain™ Star repre esents two im
mportant features of supplyy chain logistiics. First, therre is a formal scope to
ssupply chain llogistics. We iinclude customer service, iinventory management, suupply, transpo ortation, and
wwarehousing. In the absence of a scope, scope creep p, a potential ccancer for all projects (and
d what we call people
wwho want to pile on to pro ojects), can ovverwhelm a suupply chain loogistics projecct. Second, there is a correct
ssequence to cconsider the ssupply chain d decisions wheen developingg a supply chaain strategy. FFacing myriad decision
iinterdepende encies, in the aabsence of th
he correct seq
quence, supplyy chain logistiics decision m making becom mes like a
ccat chasing itss tail.

TThe RightChain™ Star Mod del begins with h customer se
ervice (RightSServe™) for mmany reasons. First, a humb ble
aattitude of ho
ospitably serving customers is the found dation for supply chain succcess. If you evver have a question
R
concerning the right customer service policy, the answer comes from a simple rule, the Golden Rule. Treat people
(customers) the way you would want to be treated. Second, the constraints developed as a part of customer
service policy are the foundation for supply chain optimization. It is fascinating to observe the faces and body
language of the managers and executives in RightChain™ project kickoff meetings. When the CEO, COO, or CSCO
makes his or her remarks to kickoff the project you can see the slumped, downtrodden body language of the
marketing and sales group. They assume that the project will be all about “cutting heads” and heavy expense
reductions through declining service offerings. That’s not what RightChain™ is about. It’s about determining the
most profitable way to service customers and to take the burden of worry about supply chain logistics off the
sales and marketing team, so they can focus on sales and marketing. In the end, the strongest proponents for
our RightChain™ programs are often the sales and marketing teams, the dealer support groups in automotive
service parts, the chefs in our restaurant programs, the doctors in our healthcare programs, etc. The RightChain™
begins with service!

The second consideration in RightChain™ supply chain strategy development is inventory optimization
(RightStock™). Most assume that the inventory goal is to minimize the amount of inventory in the supply chain.
That’s not the goal. The goal is to determine the amount and mix of inventory that satisfies the requirements of
the customer service policy and maximizes the financial performance of the inventory. We will have a lot more
to say about this when we address RightStock™ inventory optimization in Chapter 3.

The third set of RightChain™ decisions are in the area of supply optimization (RightBuys™). The RIghtChain™
needs suppliers and purchasing decisions with those suppliers whose performance meets the requirements of the
customer service policy, provides the RightStock™ inventory level, and maximizes the financial performance of
the buying transactions. In addition, since we have to make up the gap between supplier service and customer
service with excess inventory and/or excess transportation costs, we need highly reliable suppliers who have the
same passion for customer service that we do.

The fourth set of RightChain™ decisions await in transportation optimization (RightTrips™). Notice that we are
describing the world of supply chain logistics and are just now getting to transportation, what many consider to
be supply chain logistics. The goal of transportation is to connect sources of supply with customers within the
guidelines of the customer service policy while maximizing the financial performance of the supply chain. In that
way, transportation is a part of a supply chain strategy. It is not merely a non‐value added, inconsequential
expense line item who’s manager’s sole focus is to reduce expenses to the bare bones via hard core carrier
negotiations, reducing delivery frequencies, and using slow modes of transportation.

The fifth and last set of RightChain™ supply chain strategy decisions are in warehouse optimization
(RightHouse™). Warehousing is my personal favorite. But, I have to admit, based on a variety of reasons, it’s the
last thing that should be considered when developing a supply chain strategy. First, a clever trip through the first
four RightChain™ initiatives may eliminate, should minimize, and will correctly determine the need for
warehousing. Second, the warehouse is like a goalie in a soccer game. Like it or not, it’s the last line of defense. If
something goes wrong with a customer delivery, regardless of fault, the warehouse typically gets blamed. Third,
we need the service, inventory, and distribution mission requirements from the supply chain to properly plan and
operate the warehouse. Finally, in careful consideration of the total supply chain, we may learn that a third‐party
should be operating the warehouse. Unfortunately warehouses often play the role of being the physical
manifestation of the lack of coordination, integration, and planning in the supply chain. Many times they are the
physical substitute for and symptom of the absence of a supply chain strategy.

We call these five RightChain™ elements the RightChain™ initiatives. In sequence they are to optimize customer
service (RightServe™), optimize inventory (RightStock™), optimize supply (RightBuys™), optimize transportation
(RightTrips™), and optimize warehousing (RightHouse™). The five enablers of these initiatives we call the
RightChain™ enablers. In order they are to optimize the supply chain metrics (RightScores™), optimize logistics
outsourcing (RightSource™), optimize supply chain technology (RightTools™), optimize supply chain security and
compliance (RightGuards™), and optimize the supply chain organization (RightTeam™). These ten elements make
up the outline for this book.

Frazelle’s Framework of Supply Chain Logistics

To further help our clients understand the scope and order of supply chain logistics, I developed a framework
(Figure 3) that expands on each of the five RightChain™ initiatives. The framework takes each of the initiatives
and decomposes them into their elements in order of consideration. Our definition of customer service includes
customer valuation (RightSales™), SKU valuation (RightSKUs™), order valuation (RightPrice™), customer service
policy (RightTerms™), and customer satisfaction (RightSat™). Our definition of inventory management includes
forecasting (RightCast™), lot size optimization (RightLots™), fill rate optimization (RightFill™), inventory planning
optimization (RightPlan™), and inventory deployment (RightPloy™). Our definition of supply includes supplier
valuation (RightCard™), supplier optimization (RightCore™), supplier service policy (RightTerms™), sourcing
optimization (RightSource™), and supplier integration (RightLinks™). Our definition of transportation includes
network optimization (RightMaps™), shipment optimization (RightShip™), fleet optimization (RightFleet™), carrier
optimization (RightLines™), and freight optimization (RightFreight™). Our definition of warehousing includes
receiving (RightIns™), putaway (RightPuts™), storage (RightStore™), order picking (RightPicks™), and packing
(RightPack™).

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FFigure 3a. Fra
azelle’s Frameework of Supp
ply Chain Logisstics – Descrip
ptive

R
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FFigure 3b. Fra
azelle’s Frameework of Supp ply Chain Logisstics – Prescriiptive

RRightChain™ Value Creatio on Wiring Diaagram

IIt was a gray d
day in the mid ddle of winter in a dull meeeting (Are theere other kindds?) at a client site in Minnneapolis.
TThe subject of the meetingg that day wass the contribu ution (or lack there of) of s upply chain loogistics to thee
sshareholder vvalue of the co ompany. The client was haaving a very diifficult time mmaking a stron ng case for the supply
cchain strategyy project that we were pro oposing and thhat the supplyy chain organ ization wanteed to embark on. The
ddebate started me thinkingg, “I wonder if there is a waay to formallyy link the foreecast of shareeholder value to the
ddecisions mad de in supply cchain logistics?”
R
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UUsing the notion that share eholder valuee increases wh hen revenue iincreases, exppenses decreaase, and capittal
ccharges decreease, I createdd a wiring diagram connectting the mostt important faactors in supp ply chain strategy
ddevelopment to the eleme ents of sharehholder value. FFollowing ourr RightChain™ ™ Star, I also categorized thhe supply
cchain factors into their prin
ncipal decision making areas – Customeer Service, Invventory Management, Supp ply,
TTransportatio
on, and Wareh housing. The rresulting diaggram is in Figu
ure 4. If you evver wondered d why supply chain
pplanning and managementt is so comple ex, wonder no o longer. It’s right there in m
many shades of gray.

R

Figure 4. RightChain™ Value Creation Wiring Diagram

If it’s so complex, what’s the purpose in illustrating and decomposing the connections? Once the tradeoffs have
been documented and decomposed, cause and effect models and tools can be developed to capture and quantify
the ramifications of different decision directions. The wiring diagram helps us to formally link the most important
decisions in supply chain strategy development to their impact on shareholder value. We use the diagram in our
teaching to help explain the fundamental tradeoffs in supply chain decision making and in developing our
RightChain™ decision support ToolSuite™.

The Wrong Chain Model of Supply Chain Sub‐Optimization, Dysfunction and Conflict:
Get off the Wrong Chain!

At the request of a client, we developed the Wrong Chain Model of Supply Chain Sub‐Optimization, Dysfunction,
and Conflict (Figure 5) to help them understand the sub‐optimization and internal conflict they had created in
their supply chain. It also happens to be the reason why there is sub‐optimization, dysfunction, frustration and
internal conflict in nearly every supply chain.

Think about a typical supply chain including sales, manufacturing, sourcing, transportation, and warehousing.

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FFigure 5. The Wrong Chain Model of Sup pply Chain Sub b‐Optimizatio on, Dysfunctioon and Conflicct

FFirst stop... saales. Let's assu
ume that the sales force crreates the forrecast and woorks on comm mission. What's the
wworst thing th hat could happen to a commission saless person? Run nning out of p roduct. So, guuess what kin
nd of
fforecast they will most like ely turn in? Yoou guessed it... an inflated forecast that will not run oout of producct. The
rresult... more e safety stock inventory thaan you know w what to do wiith.

SSecond stop... manufacturing. How are most plant m managers measured? The laarge majority of plant managers are
eevaluated bassed on the un nit cost, plant yield, and/or machine utilization withinn the four wallls of the plant. How
ddo you go abo out achieving those objectives? Long production runss creating lotss of inventoryy are the norm m.

TThird stop... ssourcing. How w are most buyers measure ed? The large majority of b uyers are meeasured based d on how
llow a price th hey can pay a vendor for th he product. Ho ow do you get a low price?? Large purchaase quantitiess creating
llots of invento ory are the no orm. (Is it anyy wonder it's ccalled a lot sizze?)

NNext stop... trransportation n. How are mo ost transportaation managers measured?? Most transp portation man nagers
aare evaluated d based on traansportation ccost as a perccent of sales, ccost per mile,, and/or vehiccle utilization. How do
R
you minimize transportation cost and maximize vehicle utilization? By making sure the outbound containers and
vehicles are as full as possible, in other words by maximizing the in‐transit inventory.

Last stop... warehousing. How are most warehouse managers measured? Most warehouse managers are
measured on space utilization and labor cost per unit. How do you maximize space utilization? By filling up the
warehouse. How do you minimize the labor cost per unit? By holding orders and releasing large batches of work
to the warehouse floor. Those two objectives work together to increase four‐wall inventory.

Is it any wonder there is excess inventory in nearly every supply chain?

One day I received a call from the Chief Operating Officer of a large food company. He said they were struggling
with the inventory levels in their supply chain. I asked him if he minded if I guessed what their problem was. I
took him through the illogic of what I just took you through. There was an awkward silence on the line and then
he burst out laughing. I asked him why he was laughing. He said it was because they had been struggling with
their excess inventory levels for years, had paid millions in unfruitful software licenses and consulting fees, and in
less than a minute I had diagnosed their inventory ills without ever stepping foot in one of their offices or
operations. He said, “You must be some kind of supply chain mastermind.”

I'm not a mastermind. What I shared with him and just shared with you is the root cause of the large majority of
inventory ills in every supply chain. The illness is the silo focus on unit cost minimization and resulting
misalignment of the metrics of the elements of the supply chain.

The RightChain™ Supply Chain Integration Model

There are many and various mistakes in the wrong chain model described above. Sometimes it’s helpful to learn
from mistakes in creating the correct model.

One mistake above is the silos of decision making. We correct that mistake in the RightChain™ Supply Chain
Integration Model (Figure 6) by having all the activities of the supply chain under one decision making roof.
Another major mistake in the wrong chain model is the focus on unit cost reduction achieved primarily by
independently maximizing the utilization of resources in the supply chain. The RightChain™ corrects that by
developing and implementing an overarching objective function to minimize total logistics cost while
simultaneously meeting the requirements of the customer service policy. Our RightChain™ definition of total
logistics cost includes inventory carrying cost, lost sales cost, total transportation costs, and total warehousing
costs. The RightChain™ Supply Chain Integration Model uses optimization to reflect the mission of the supply
chain overall and to determine the proper role and schedule for each SCL activity. The role of the contributing SCL
activities is to meet the supply chain schedule that maximizes financial performance of the supply chain as a
whole and to provide the quality and service performance required by the supply chain as a whole.

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FFigure 6. The RightChain™ Supply Chain Integration M Model

RRightChain™ Methodologyy: What’s Right?

TTwo weeks be efore 9‐11 I wwas in the Pen
ntagon briefing a general on the findingss of our RightChain™ assesssment of
tthe U.S. Armyy’s service parrts and mainteenance logistics. During a bbreak I was reesting in the hhallway, and II noticed
aa poster that had a major impact on the e choice of the e term RightC
Chain™. The pposter exhorteed in big, bold d letters,
““DO THE RIGH HT THING!” I remember thinking, “That sounds good, but what’s tthe definition of the right tthing, and
wwho wrote thhe definition?”” I asked the pproject manager the questtion. He said, “That’s easy. We have an honor
ccode of duty tthat is the fou
undation for aall our decisio
on making. Doon’t lie, cheat or steal or to
olerate those w
who do.
WWe use a series of question ns that determmine those.”

R
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Chapter 1: RightCh
WWhat follows is a series of questions we e use as filterss to help deteermine the RIGGHT recommeendations forr
pproposed chaanges to any aaspect of supp ply chain strattegy includingg service policcy changes, in
nventory strattegy
cchanges, suppply strategy, ttransportation
n strategy, waarehousing strategy, etc. FFor somethingg to be RIGHTT and
aadapted as a permanent ch hange or neww element to ssupply chain sstrategy it muust answer YES to the follow wing
qquestions. The questions aare organized according to our three‐phase decision m methodologyy ‐ investigate,,
iinnovate, imp
plement meth hodology (Figuure 7).

Figurre 7. RightCha
ain™ Decision Methodologyy
R
LRI’s RightChain™ Decision Methodology

1. Investigate
a. Mine.
i. Has the necessary and relevant data been collected, purified, analyzed, and mined?
ii. Is there a process in place to continue supply chain data mining?
b. Measure.
i. Are there balanced metrics and healthy targets in place that define success and progress?
ii. Is there a process in place to continue to support the metrics and targets?
c. Assess.
i. Has an assessment been made of practice and performance gaps and the value of closing
them?
ii. Is there a process in place to continue the assessments?
2. Innovate
a. Simplify.
i. Using valuation, segmentation and pruning, has as much complexity as possible been
removed?
ii. Is there an on‐going supply chain simplification process in place to continue removing
complexity?
b. Optimize.
i. Is it optimal?
ii. Is there a process to continue the optimization?
c. Simulate.
i. Has it been simulated, animated, and piloted through role playing in the field?
ii. Is there a process in place to continue simulation?
3. Implement
a. Source
i. Should the activity be performed internally or externally?
ii. Is there a process in place to continue to monitor whether or not the activity should be
performed internally or externally?
b. Select
i. Has the process, service, or activity been assigned to the proper party(s) ‐ internal or external.
ii. Is there a process in place to continue to monitor whether or not the activity is assigned to the
right party?
c. Sustain
i. Is the recommendation sustainable?
ii. Is there a process in place to keep the process in place?

1. Mine: Has the necessary and relevant data been collected, purified, analyzed, and mined?

Suppose you were sick and went to the doctor for a diagnosis and prescription. When you arrived at the doctor’s
office, he already had a prescription waiting for you, without even talking to you, let alone looking at you,
examining you, doing blood work, etc.. In effect, he diagnosed you with his eyes closed and a random
prescription generator, or was generating prescriptions for his favorite drugs. Needless to say, if you survived the
experience, you would not be going back to that doctor for treatment.

Unfortunately, the prescriptions for many sick supply chains are written and implemented without much
examination or testing. For lack of knowledge, lack of tools, lack of time, and/or lack of data mining
methodology, many supply chain projects commence without any understanding of the root cause of the
problems and without exploration of the real opportunities for improvement. A recent estimate suggested that
less than 10% of the information available to make a supply chain decision is used in making the decision.

RightViews™ supply chain data mining is the first step in the RightChain™ methodology because it is in the initial
stages of considering improvements to any activity that we have the greatest opportunity for improvement and
the lowest costs of making design changes (Figure 8). In the initial phases of a project, the cost of making a
design change is minimal, the cost of tearing up a piece of paper or erasing a white board. Later on, the cost to
make significant design changes are prohibitive since hardware and software may be installed and people may
have changed positions. In addition, in the initial phases of a project the opportunity for improvement is nearly
infinite since there are no set‐in‐stone commitments to ideas, procedures, or systems. That opportunity for
improvement declines rapidly as commitments are made. This is our best opportunity to substitute information
about the work for the work!

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Chapter 1: RightCh
FFigure 8. Costt of Design Ch
hanges and Op
pportunity forr Improvemen
nt during a Suupply Chain Lo
ogistics Projecct

UUnfortunatelyy, many organ nizations rush h through thiss phase of a project. Mediia hype, the p pace of changee, and
tthe increase in competition n make it more and more d difficult to be patient in th e planning ph
hase of major
iinitiatives. Th
he planning ph hase is a little
e bit like doingg homework b before a big eexam or practticing before aa big
ggame. The on nes who studyy the hardest and practice with the mosst diligence acce the exam aand win the game.
TThe planning phase of a prroject is where e we considerr the true cosst of a projectt. Christ reminnded us of thee
eembarrassme ent suffered b
by the builder of a castle who failed to co ount the costt before he staarted buildingg and was
lleft with a hallf‐finished pro
oject and pub blic humiliation.

TTo assist our cclients in the systematic prrocess of supp ply chain dataa mining, we ddeveloped ou ur RightViews™ ™ supply
cchain data mining process and ToolSuite e™. RightView ws™ is the sysstematic anallysis of custommers (RightVieews™
R
Customer Data Mining System), inventory (RightViews™ RightStock™ Inventory Data Mining System), supply
(RightViews™ RightBuys™ Supply Data Mining System), transportation (RightViews™ RightTrips™: Transportation
Data Mining System), and warehousing (RightViews™ RightHouse™ Warehouse Data Mining System). Our
RightViews™ data mining process is designed to quickly identify the root cause of material and information flow
problems, to pinpoint major opportunities for process improvements, and to provide an objective basis for
project‐team decision making. A screenshot from one of our RightViews™ Supply Chain Data Mining ToolSuite™
follows (Figure 9).

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FFigure 9. Screenshot from LLRI’s RightVieews™ Inventorry Data Minin ng Toolkit

WWe recently ccompleted a pproject with a large frozen foods company. We recom mmended to tthem that theey begin
tthe RightChain™ project wwith our RightV Views™ data m mining prograam. We were a little surpriised that theyy did not
rresist the reco
ommendation n, but insteadd spent nearlyy the first yearr of the projecct, in the facee of growing eexecutive
R
impatience, developing an internal supply chain data mining capability based on our RightViews™ template. The
perseverance paid off in the short few months after the completion of the RightViews™ phase of the project as
they were able to address every major decision issue in supply chain strategy in near real‐time in each
RightChain™ meeting for three business units simultaneously. The work has led to more than $100 million in
bottom line impact and their industry’s award as the top supply chain performer in frozen foods.

2. Measure: Are there healthy measures and targets in place that properly define success?

We have a variety of contests in our seminar programs. One that I particularly like is the Question of the Day
contest. The seminar students vote on the best question asked during the day. During our recent RightScores™
seminar on supply chain performance metrics, the vice president of supply chain for a large telecommunications
company won the contest. His question was, “What is the quickest, cheapest, and most effective way to get a
supply chain up to world‐class performance?” The first thing I thought was, “Only in America would someone
even ask such a question.” The second thing I thought was, “This mindset can only make things worse.” The third
thing I thought was, “I better come up with something.” The answer I gave him is what I passionately believe to
be true. Develop, implement, and maintain a world‐class set of performance metrics and targets. People for
the most part behave based on the way they are measured. If you give people the right definition of success
embedded in a healthy set of performance measures and targets, the right behaviors will normally follow.
Unfortunately, most metrics exacerbate the very problems they are meant to solve, often introduce new
problems, and go hand‐in‐hand with targets so aggressive as to be discouraging or so lame as to be irrelevant.

I have worked with supply chain performance measures for more than twenty years. There are few supply chain
enablers that have more potential yet are more under‐developed, over‐hyped, and often counterproductive than
supply chain performance metrics. When we conduct our RightScores™ supply chain performance metrics
assessments for our clients, most organizations receive a grade of C or lower.

I feel so strongly about the potential and importance of supply chain performance measurement programs that I
developed our four‐day RightScores™ seminar to address the topic, devote an entire chapter in this book to the
topic, and developed our RightScores™ supply chain performance measurement program including methodology,
tools, process, ToolSuite™ (see Figure 10) and training to help companies develop and implement performance
measurement programs for customer service, inventory, supply, transportation, warehousing, and the supply
chain as a whole.

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FFigure 10. Scrreenshot from
m LRI’s RightSccores™ Supplyy Chain Scoreb
board

33. ps, and the value of successs been assesssed?
Assesss: Have perforrmance gaps,, practice gap

R
An important series of questions to ask before embarking on any new initiative is, “What is the definition of
success, what is it worth, and how much time and money are required to achieve it?” Our RightChain™
Assessment Program is designed specifically to answer those three questions for supply chain strategy initiatives.
The program includes a RightChain™ Practices Assessment, a RightChain™ Performance Assessment, a
RightChain™ Financial Opportunities Assessment, and a RightChain™ Project Plan.

RightChain™ Practices Assessment

There is a saying in sports that a team performs based on the way they practice. It is the same in business. A
business or activity within a business performs based on the way they practice. Supply chains perform based on
their practices. Practices predict performance! That’s why the RightChain™ puts so much emphasis on practices.

Based on more than two decades of supply chain consulting and research in every major industry in many parts of
the world, we have developed a database of more than 1,000 RightChain™ practices in customer service,
inventory, supply, transportation, warehousing, metrics, outsourcing, technology, security, and organization. We
use those practices as a part of our RightChain™ Practices Assessment Program. Individual practices assessments
for each of the ten RightChain™ areas are conducted using our RightChain™ Practices Assessment System and
summarized into a RightChain™ Gap Chart (Figure 11). The RightChain™ Gap Chart essentially acts as a supply
chain report card. The size of the gaps combined with the overall sales of the company provides a high‐level
financial opportunities analysis (Figure 12).

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hain™ 37
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FFigure 11. Exa
ample RightCh
hain™ Practicces Summary A
Assessment

FFigure 12. Hig
gh‐Level RighttChain™ Practtices Assessm
ment and Finan
ncial Opportuunities Estimate

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RightChain™ Performance Assessment

The RightChain™ Performance Assessment compares a company’s current supply chain performance with
RightChain™ targets for each RightChain™ metric. The targets are developed using three inputs – current
performance, the % improvement available from the RightChain™ practices that have yet to be implemented, and
any reliable industry benchmarking information. An example RightChain™ Performance Assessment follows in
Figure 13 below.

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FFigure 13. Exa
ample RightCh
hain™ Perform
mance Gap An
nalysis

R
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Chapter 1: RightCh
RRightChain™ Financial Opp portunities Assessment

TThe RightChain™ Financial Opportunitie es Assessmentt converts thee RightChain™ ™ Performancce Gap Analyssis into
ffinancials by ccomputing the financial immpact of the gaap closures. A
An example iss provided in FFigure 14 belo
ow. Note
tthat there is aa column provvided for eachh RightChain™
™ performancce indicator. FFor each indicator a separaate
ffinancial oppo ortunity assesssment is madde. The assesssment is made as follows.

FFigure 14. Exa
ample RightCh hain™ Financiial Opportunities Assessmeent

AAn annual vollume resource e requiremen hosen for each RightChain™
nts driver is ch ™ performancce indicator. TThe
ddriver is multiplied by the ccurrent performance to givve the currentt resource reqquirements associated witth the
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indicator. The next line is the RightChain™ performance target for that indicator. That is multiplied by the annual
volume to give the RightChain™ resource requirement. The difference between the current resource requirement
and the RightChain™ resource requirement is the resource savings. Those savings are multiplied by an
annualization rate to give the annual savings associated with the gap closure. Those annual savings are summed
for all indicators to provide an estimate of the annual financial benefit of the RightChain™ initiative. In addition,
each annual savings figure is multiplied by a required payback period to provide an estimate of the justifiable
investment in gap closures in that area. Those justifiable investments are summed across all indicators to provide
an estimate of the justifiable investment available for the RightChain™ project.

RightChain™ Project Plan

The last deliverable of the RightChain™ Assessment Program is a RightChain™ Project Plan. The plan describes
and schedules the actions required to close the RightChain™ gaps and provides an estimate of the RightChain™
investment. Examples follow in Figures 15 and 16 below.

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FFigure 15. Rig
ghtChain™ Pro
oject Plan from
m a Major Au
utomotive Com
mpany

R
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FFigure 16. Rig
ghtChain™ Cassh Flow Plan ffor a Major E‐‐Fulfillment C Company

44. Simpliffication: Is it simple?

WWe have a larrge semi‐cond ductor client in the Silicon V
Valley. The firrst project theey retained us to conduct w was an
ooverall assesssment of theirr supply chain n. Their RightC
Chain™ score was 71%, a CC‐. When I shaared that with h their
CCOO, he was none too hap ppy. He said th
hat he didn’t like his grade. I told him thhat I didn’t like his grade eiither, but
tthat was his ggrade. He com mplained that I didn’t understand the co omplexity of hhis business. I agreed to red do the
R
assessment. I flew back to Atlanta, re‐ran the numbers, and computed the assessment grades. The overall grade
was the same, C‐. I flew back to San Jose, California and shared the result. The COO was just as upset,
complaining again that I did not understand how complex his business was. I shared with him that I had worked
with lots of clients, empathized with his complexity, but stood my ground with the assessment. He asked us and
paid us to redo the assessment one more time. I flew back to Atlanta, redid the assessment, and the grade came
out the same, a C‐. The next thing I knew I was flying back to San Jose worrying and praying about how to explain
the result to the COO. In what could either be described as an “Ah‐Ha” or “Duh” moment it dawned on me….

Some supply chains are inherently more complex than others. Some have heaped complexity on top of their
inherent complexity. Those are the underperformers. To help explain this phenomenon to the COO I created the
Supply Chain Complexity Index™, a quantification of supply chain complexity. The index uses ten factors that
contribute to the complexity of a supply chain (see Figure 17 below), and grades a supply chain from 1 to 5 in
each area, 5 being the highest level of complexity.

Supply Chain Complexity RightChain™ Simplification Initiatives
Factors
Number of SKUs and RightSKUs™: SKU Optimization
Commodities
Number of DCs RightMap™: Supply Chain Network
Optimization
Number of Carriers RightLines™: Carrier Optimization
Number of Suppliers RightCore™: Supplier Optimization
Number of Handling RightFlow™: Flow Path Optimization
Transactions
Demand Variability RightCast™: Forecast Optimization
Threats of Disruption RightGuards™: Security Optimization
Regulatory Requirements RightDocs™: Documentation Optimization
Response Time Requirements RightTerms™: Customer Service Policy
Optimization
Number of Software RightTools™: Technology Optimization
Applications

Figure 17. Supply Chain Complexity Factors and RightChain™ Simplification Initiatives

I used the index to compute the supply chain complexity of a wide variety of our clients. The highest scores on
our ranking so far are NASA (49 out of 50) and the U.S. Defense Logistics Agency (48 out of 50). He understood
and bought it. Then I showed him his RightChain™ score relative to logistically similar companies with comparable
supply chain complexities. Relative to his inherent complexity, he had created much more. He was beginning to
see the light.

Then I shared with him our complexity vs. performance graph (Figure 18).

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FFigure 18. Sup
pply Chain Complexity vs. P Performance G Graph

NNote in the figgure that supply chain perfformance deggrades as com mplexity incre ases. This deggradation of ssystem
pperformance with increasing system com mplexity holdds regardless oof the type off system (inclu
uding personaal life).
TThe phenome enon is related to the therm modynamic principle of entropy which sstates that an ny system runnning
wwithout interrvention will eeventually run n into chaos. All systems nneed interven tion. To help explain the
pphenomenon I often ask our seminar students to imaagine what would happen in their housees if they never did
SSpring cleanin
ng. One lady ggot it and stoood up and said d, “It would lo
ook like my hoouse.”

CComplexity iss the plaque inn supply chaiin arteries. It has to be rem
moved and it i s an on‐goingg battle to preevent it
aand remove itt once it build
ds up. In the ccase of our clie
ent, they had never interveened in the co omplexity. In fact,
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their culture rewarded overcoming complexity instead of reducing complexity. Once I got that point across, the
work with our client became one of our most successful engagements.

After the project I thought back to the COO’s complaint that I did not understand how complex his situation was.
In one way he was right, I didn’t understand how complex his supply chain was because I had rarely encountered
a culture that rewarded overcoming complexity and therefore not removing complexity as much as his.

5. Optimization: Is it optimal?

Since supply chain logistics is replete with complex tradeoffs, optimization, RightChain™’s tradeoff bunker buster,
is one of the most critical, yet elusive concepts for supply chain professionals. Let me take a stab at simplifying
the concept.

If I asked you to tell me the best way to travel from Atlanta, Georgia to Los Angeles, California, what would you
say? When I ask that question in our seminars, most say by plane. When they say that so quickly they are making
assumptions about the trip, that there is sufficient money available to buy a plane ticket, that time is of the
essence, and that air travel is preferred. (That says a lot about our culture.) The real answer is, “It depends.”

Suppose I add something to the question and ask you tell me the best way to go if you only have $100.00, what
would you say? Now the range of options may be limited to hitch hiking or stowaway. Suppose I add that money
is no object and that you have to be there within 12 hours, what would you say? Now the only option is to go by
plane and since money is no object, why not charter a jet? Suppose I say that you have to be there in 12 hours
and spend the least amount of money possible, what would you say? Now the range is even narrower and
probably means getting the cheapest possible coach plane ticket. In that example, the “12 hours” is a constraint
and the “least amount of money possible” is the objective function. In optimization terms it would look like this:

 Objective Function = Minimize the Total Money Spent
 Constraint(s) = Arrive within 12 Hours

In any decision making environment, without an objective function AND constraint(s), any answer is right and any
answer is wrong. If that’s the case, and since most business and supply chain decisions are not framed this way,
how are business or supply chain decisions made? Unfortunately, it often comes down to who can write the most
caustic email, who has the boss’s ear, who has the most political clout, etc. That’s what we’re trying to avoid.

Supply Chain Logistics Optimization

Every optimization statement has two elements ‐ an objective function and constraints. In supply chain logistics,
the objective function is usually to minimize total logistics cost or to maximize some aspect of financial
performance. The constraints should be the elements of `‐the customer service policy including fill rate, response
time, delivery frequency, and delivery quality requirements. In less formal terms, optimizing supply chain
logistics means maximizing the financial performance of the supply chain while satisfying the terms of the
customer service policy.

Supply chain logistics optimization is not possible if the supply chain financial performance and total logistics
costs are not defined and computed (and they rarely are) or if the customer service policy (CSP) is not defined
and computed (and it rarely is). A more detailed discussion of the SCL objective function and constraints follows.


The RightChain™ Objective Functions

The RightChain™ uses a menu of objective functions for supply chain decision optimization. They are all forms of
maximizing financial performance and include the impact of the decision on revenue, expense and capital. (This is
a major departure from most supply chain philosophies tools and metrics which typically only consider the impact
of decisions on expenses or operational performance indicators.) Examples of RightChain™ objective functions
include minimizing Total Logistics Cost (TLC), maximizing Supply Chain Value Added™ (SCVA), and maximizing
Gross Margin Return on Inventory (GMROI). Figures 19 and 20 show these objective functions in action in
screenshots from our RightBuys™ Sourcing Optimization System and our RightModes™ Mode Optimization
System. There will be a much more comprehensive explanation of these objective functions in the RightScores™
Chapter on Supply Chain Performance, Cost and Value Measures.

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FFigure 19. Rig
ghtBuys™ Sourcing Optimizzation System with RightCh
hain™ Objectivve Functions

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FFigure 20. RigghtTrips™ Mod de Optimizatiion System wiith RightChain n™ Objective Functions
AA few years ago I received a phone call ffrom the VP o of Distribution
n from one off the nation’s largest retailers. I was
ssurprised thatt he was callin
ng to ask for o
our assistance e with a new ssupply chain sstrategy becaause I knew frrom our
bbenchmarkingg work that th heir companyy was one of the country’s most efficientt retailers. When I got on ssite I
sstarted to undderstand their dilemma.

II asked the VPP of Distribution how he was compensatted. He said tthat his bonuss was based o on continuing to lower
tthe delivered cost per unit to their retaiil stores. I askked him how h he accomplishhed that. He ssaid that it is w
was by
cchoosing inexxpensive transsportation mo odes, inexpen nsive carriers w
within those modes, maxim mizing container
uutilization by holding contaainers at theirr warehouses until they weere completelly full, and byy maximizing
wwarehouse labor utilization n by holding aand releasing store replenishment orde rs in large battches. I told h him that I
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remembered from my benchmarking work that they were evidently doing a good job along those lines. He agreed
but said his problem was that their distribution was too efficient. I asked him to explain. He said that the VP of
Retail’s bonus was based on increasing sales per square foot in the stores and maximizing in‐store availability. He
said that their distribution program had resulted in $250 million in lost sales the prior year, and that they needed
a way to align the objectives of distribution and retail. That’s code for, “my business partner and I are ruining
each other’s lives.” I told him that aligning corporate objectives was what we do for a living and that we could
help. To make a six‐month long supply chain strategy story short, by incorporating lost sales cost, inventory
carrying cost, transportation cost, and warehousing cost in their RightChain™ objective function, we were able to
develop a supply chain strategy that put more than $50 million on their bottom line by cutting their lost sales by
$240 million and optimizing (not minimizing) their total logistics cost.

The RightChain™ Constraints

If all we had was an objective function, optimization would be easy. Admittedly facetious, but unfortunately
common, here’s a storyline that is played out in many companies. Let’s take each of the total logistics cost
components, one by one. First, transportation. Transportation has become so expensive and complex that we
may just decide to stop trying. Fuel costs. Regulatory hassles. Poorly performing carriers. The list goes on. Second,
warehousing. All the JIT, Lean, and Six Sigma books suggest that warehousing is non‐valued added, and just plain
bad for business. Let’s close the warehouses. Third, inventory carrying. Even though inventory is still an asset in
accounting, we all know it’s a liability (borderline illegal in some companies) and politically incorrect in the
current JIT, Lean, Six Sigma environment. We need to stop carrying inventory. Then, since there’s no inventory,
there will be no customers, so the lost sales cost is eliminated. These all work together to completely eliminate
total logistics cost. We win, right? Wrong!

What should stop a company from going down that path? A Customer Service Policy (CSP) which provides the
constraints for supply chain logistics optimization. If you don’t have one, supply chain trouble is brewing.

The RightChain™ Customer Service Policy is segmented by channel, ABC customer class within a channel,
commodity, and SKU class within a commodity. It establishes targets which must be met or exceeded for supply
chain fill rate, response time, delivery frequency, delivery quality, packaging, and any other element of the
customer service policy. Those requirements serve as the constraints in supply chain logistics optimization. An
example supply chain logistics optimization statement follows. An illustration of the optimization is in Figure 21.

Example RightChain™ Objective Function
 Minimize Total Logistics Cost
o Total Logistics Cost = Total Distribution Costs + Inventory Policy Costs™
o Total Distribution Costs = Total Transportation Costs + Total Warehousing Costs
o Inventory Policy Costs = Inventory Carrying Costs + Lost Sales Cost

Example RightChain™ Constraints
1. Fill Rate > 99.2%
2. Response Time > 48 Hours
3. Delivery Frequency > 3x per Week
4. Shipping Accuracy > 99.7%

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FFigure 21. Suppply Chain Loggistics Optimiization Surfacces – Optimiza
ation in Picturres

OOptimization is a facet of o
our RightChain n™ program tthat most cleaarly differentiiates it from oother quality,
ooperational, aand/or philosoophical approoaches to supply chain logistics includingg Lean, Six‐Siggma, Pull, Just‐in‐
TTime, Kanban n, and the Toyyota Productioon System (TP PS). Those ap
pproaches all have their roo ots in the Toyyota
PProduction Syystem – and immplicitly assume that all innventory is bad (or illegal), that 100% peerfect quality is always
tthe goal, and that moving tthings betwee en places more often is alwways better thhan carrying inventory.

TThrough optim mization, Righ
htChain™ take es into considderation each business’s unnique financiaal goals, custo omer
sservice requirrements, and business/logiistics conditioons to help deetermine the rright supply cchain strategyy. Though
iit may sound heretical, thee optimal soluution may invo olve carrying more inventoory. That was the case in th hree of
oour largest an
nd most succe essful supply cchain strategyy engagementts last year. Inn each case, tthe strategic increase
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in inventory led to higher profits, higher market share, and higher levels of customer satisfaction. Though it may
sound heretical, the optimal solution may not mean perfect quality, but optimal quality. We use a computation of
the cost (expense, capital, and lost revenue) of poor quality to help our clients determine the optimal level of
quality and the reasonable investment in quality improvements. Though it may sound heretical, the optimal
supply chain strategy may involve fewer, less frequent movements using less expensive transportation modes. It
is the cost of fuel and freight relative to the cost of carrying inventory and the customer service requirement that
should determine the frequency, length, and modes for supply chain moves – not the philosophical or operational
paradigms of supply chain mantras.

In the late 1980s I had the unique privilege to lead a major study for the U.S. government comparing U.S. and
Japanese logistics systems. As a part of that study I interviewed business and supply chain executives in many
large Japanese organizations. Not surprisingly, one of those was Toyota. I spent significant time with the
developers of the Toyota Production System and their professor. One of the stories they shared explains more
about the Toyota Production System than all the books I have ever read on the topic.

The Toyoda (the company name was created from the family name) family was a rice farming family. They
became wealthy when they invented mechanical harvesting equipment for rice. At some point they decided that
if they could make rice harvesting equipment so well, they could also make cars. Unfortunately the concepts did
not translate very well and the auto making venture almost bankrupted the family. The head of the family
decided to hire a new engineer from outside the family and to give him one year to develop a new way to make
cars. To make a long story short, that young man came up with a way to profitably make cars in an island nation
(self‐contained), with few natural resources (no waste), limited inhabitable land (no space), and locust‐like
industrial congestion (perfectly orderly). The Toyota Production System was born out of those unique
geographic, business, and cultural conditions. Those are not the same conditions that exist in the United States,
western Europe, eastern Europe, China, Brazil, etc. There are many good ideas and concepts in the Toyota
Production System and its paradigm children, but they are not all applicable and they are not all best practices.
They are for Toyota, but not for everyone. That’s why we coined the phrase, “Don’t philosophize, optimize!”

Optimization quantifies and translates unique marketplace objectives and constraints and determines a supply
chain decision solution for each element of supply chain strategy. We developed our RightChain™ Optimization
ToolSuite™ to assist our clients in the on‐going optimization of their supply chains. The RightChain™ Optimization
ToolSuite™ includes optimization tools that address the major decisions that make up supply chain strategy in
customer service, inventory, supply, transportation, warehousing, and the supply chain as a whole. Our
RightChain™ Optimization ToolSuite™ has its roots in our optimization tools developed as early as the mid 1980s
and it has been successfully used in nearly every major industry in nearly every part of the world.

6. Simulation: Has it been simulated on paper and piloted in the field?

The Proverbial author Solomon once said, “A fool sees danger and keeps going.” Simulation helps us “see” and
anticipate danger without experiencing it. Simulation is dynamic optimization. It is an inexpensive and low‐risk
means of gaining insights into the best way to implement recommendations. We have also found it extremely
helpful in RightChain™ meetings when questions arise about the impact of assumptions and variables on
proposed solutions. Instead of continuing to postpone major decisions and re‐scheduling important meetings, our
simulation tools allow us to resolve difficult issues in the course of a short meeting.

There are many forms of simulation (Figure 22) including role playing, storyboarding, spreadsheeting , visual
spreadsheeting, animation, and piloting. Each form and their role in RightChain™ projects are explained below.
The time, cost, and reliability of the results increase in the order of the presentation.

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FFigure 22. Forrms of Simula ation

RRole Playing a and Storyboa arding

RRole playing aand storyboarrding are type es of simulatioon. One of thee best uses off role playing in supply chaain
llogistics is at L.L. Bean, a faamous appare el cataloger an
nd one of ourr long‐term cl ients headqu uartered in Frreeport,
MMaine. I have e learned with h them the sevverity and critticality of their peak seaso n. That “peakk season” has
ccontinually be ecome more aand more con ncentrated an nd now climaxxes in a few hyyper critical ddays of shipping during
tthe second week of Decem mber. It is not unusual for them to proceess ten times ttheir averagee number of o orders
dduring those peak days. Th hose few dayss may make or break their entire year inn terms of pro ofitability and
R
customer satisfaction. Tens of millions of dollars in profitability and customer satisfaction hinge on the capacity
management at a few potential choke points in their order picking and sortation systems. To make sure those
days run smoothly, the L.L. Bean supply chain team begins role playing for the peak week 50 weeks prior to the
peak week. The role playing includes extensive post mortems on the prior year’s peak season, role exchanges,
contingency planning, floor walks, video reviews, computer hardware and software stress tests on key
components, labor reviews, and detailed action planning for the next year’s peak week.

Storyboarding (Figure 23) is role playing on paper; illustrating a process on “paper” before committing to code or
policy. It is a very effective form of simulation because it allows the storyboarding participants to visualize and
quickly and inexpensively modify the proposed process. It is also an underused tool in supply chain strategy
development. One of the first things I ask our clients for when we begin a supply chain strategy project is for any
supply chain visuals they have available including network maps, information system diagrams, process charts,
organization charts, and/or facility layouts. I am always amazed at how little visual documentation of supply
chains exists in our clients files. I am convinced that one of the most valuable deliverables we leave behind with a
client are the RightChain™ visuals including video, photos, maps, and drawings.

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FFigure 23. Exa
ample RightCh hain™ Supply Chain Storyboard for Reta ail Store Repleenishment

IIntelligent Sp
preadsheetingg

BBy permittingg variables to be modified o on the fly, sprreadsheeting is also a form m of simulationn. We have fo
ound that
tthe spreadshe eet version off our tools are
e more functio onal, easily trrainable, and much less exp
pensive than the hard
ccoded tools in
n the marketp place. Along those lines we e have developed an entiree suite of spreeadsheet solutions for
tthe major deccision tradeofffs in supply chain logistics.. An example from the spreeadsheet verssion of our
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RRightChain™ d
decision supp
port suite is prrovided in Figgure 24 below
w. It is a screennshot from ou
ur RightStock™ Multi‐
EEchelon Inven
ntory Optimization System.

m LRI’s RightSttock™ Multi‐EEchelon Inventtory Optimizaation Toolkit

VVisual Spreaddsheeting

VVisual spreadsheeting com mbines storybo oarding and spreadsheetinng. It was pionneered by an accountant w who
wwanted to maake his spread dsheets more appealing to his clients annd his son, a vvideo game deesigner. That father
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aand son collab
borated and d developed Xcelsius, one off the world’s m
most widely uused visual spreadsheetingg tools.
WWe have used d the tool exte
ensively to create visual sp
preadsheets o
of the most diifficult supply chain strateggy
ttradeoffs. An example is ouur RightStock™ Inventory SSimulation Sysstem in Figuree 25.

FFigure 25. LRII’s RightStock™ Inventory SSimulation Sysstem
AAnimation

AAnimation is vvisual simulattion. Two and three‐dimen nsional animattion are the nnext most exteensive forms of
ccomputer sim mulation. Thesse more sophisticated form ms of simulatio
on are requireed when therre is a high deegree of
vvariability in tthe activity levvels and the ccost and risk o
of bottlenecking is exceptioonally high. Examples of 2DD and 3D
aanimation follow in Figuress 26 and 27 below.

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FFigure 26. 2D Animation off a Mexican Su
upply Chain N
Network (Righ
htTrips™ Simuulation System
m)

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FFigure 27. 3D Animation off a CPGs Receeiving Operation (RightHouse™ Warehouuse Simulation n System)
PPiloting

PPiloting, physically experim
menting with aa new process or system in n a limited cappacity, is the most physical,
eexpensive, tim
me consumingg, yet reliable form of simu ulation. The lim
mitations couuld be the num mber of SKUs in the
ppilot, the num
mber of orderss, the number of suppliers, a small geoggraphy, a limitted time, etc.. At Disney wee have
ddeveloped a ssmall market basket of their SKUs that w work togetherr to representt their entire 100,000+ SKU U base.
WWe use those e SKUs to pilott everything ffrom new inve entory strateggies to new trransportation modes to neew global
ssupply chain nnetwork desiggns. At Schwaans we helped d them definee a small geoggraphy to pilot a new inven ntory
sstrategy. Thatt geography hhas remained in place as an n experimentaal geography for new supp ply chain conccepts.
NNutrisystem uuses a pilot orrder picking line (Figure 28) where new picking conceepts are consttantly being
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eevaluated. Th
hese test pilotts not only help avoid potential pitfalls, b
but are invaluuable learningg aids for perffecting
tthe implemennted process.

FFigure 28. Nutrisystem’s Piilot Picking Lin
ne

SSimulation in its various forms has playe ed a critical ro
ole in the succcess of our suupply chain strategy projeccts. Our
RRightChain™ mmethodologyy leans heavilyy on simulatio on in all formss to inexpensi vely avoid po
otential pitfalls and to
R
learn the best means of implementing new supply chain strategies. We developed our RightChain™ Simulation
ToolSuite™ including the RightServe™ Service Simulation Toolkit, RightStock™ Inventory Simulation Toolkit,
RightBuys™ Supply Simulation Toolkit, RightTrips™ Transportation Simulation Toolkit, and RightHouse™
Warehouse Simulation Toolkit to help our clients simulate the major tradeoffs and supply chain strategy solutions
in every aspect of supply chain logistics.

7. Source: Is the right source performing the work?

Once a new process has been simplified, optimized, and simulated, it’s time to determine whether the process
should be performed internally or externally. Since the number of services, capabilities, and level of
professionalism in logistics outsourcing is expanding rapidly; and the turnover of supply chain logistics
professionals is fairly high with each bringing their own perspective on outsourcing – it’s an on‐going choice. With
emotions running high, many jobs at stake, major financial impacts, and competing voices – it’s also a difficult
choice. Unfortunately, many have made the wrong choice. In fact, based on the failure rate of outsourcing
initiatives, it’s more likely that an organization today will make the wrong choice. There are a wide variety of
reasons.

First, there is an implicit assumption made in most organizations that any external entity with the word “logistics”
in their name must be better at logistics than the internal logistics organization. Second, with the proliferation of
aggressive advertising done by third‐party logistics firms, all claiming to offer the world’s best one‐stop‐do‐it‐all
service package in every industry, a lot of pro‐outsourcing momentum has been created. Third, no one wants to
talk about the outsourcing adventures that have gone awry. Forth, if you are on an internal team, who would
really want to help an outside entity come in and take over their job. Finally, and I believe most importantly, for
anyone other than an outsourcing provider or outsourcing consultant, the people working through the
outsourcing decisions may have little or no experience in making outsourcing decisions. These are the individuals
and teams we are most interested in helping.

The main resources those project teams lack are decision making methodology, training, tools, and expert
guidance to work through the decisions that have to be made in outsourcing optimization. That’s the focus of our
RightSource™ outsourcing optimization program. The program provides a formal methodology, toolkit, training,
and expert guidance for optimizing outsourcing decisions across the supply chain. Our RightSource™ program has
been used in nearly every major industry and is behind some of the world’s largest supply chain logistics
outsourcing projects including those at AT&T, Honda, Disney, Raytheon, Volkswagon, and United Technologies. In
Chapter 8 we walk through the RightSource™ program and share critical lessons learned through a wide variety of
outsourcing projects.

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FFigure 29. Scrreenshot from m the RightSou ure™ Outsourcing Optimiza ation Toolkit

88. Select:: Is the right p
party perform ming the workk?
""Blessings on all who play ffair and squarre." ‐ Solomon

IIf the decision
n has been maade to have the new proce ess or service performed exxternally, the right vendor must be
sselected. Unfo ortunately, th here’s no calculus for vendor selection; tthe motivatioons and financcial incentivess are
ooften hidden;; and the relattionships betw ween various parties are o
often suspect. As a result, this phase of ssupply
cchain strategyy can get a litttle squirly.
R

We have had the opportunity to be a part of some of the world’s largest supply chain vendor selections in
computer hardware, software, and 3PL services. Every time I think I’ve seen it all, some new form of selection
manipulation seems to jump out. One of the most naïve approaches to vendor selection is retaining a
hardware/software/3PL to help choose which hardware/software/3PL to use. Amazingly, when the choice winds
up being that company’s hardware/software/3PL users are surprised at the lack of objectivity. Sometimes
consulting firms with strong hardware/software/3PL “partnerships” are retained to help select which
hardware/software/3PL vendor to use. Amazingly, users are surprised when the hardware/software/3PL
selection happens to be one of those “partners”.

A few years ago we assisted a large supply chain technology company with their marketing strategy. They wanted
to pay clients to use their system and give them a kickback on all additional systems they were able to help sell to
other clients. I told them that if they were going to use that practice then we needed to part ways immediately.
Fortunately the vendor repented and has become one of the most successful supply chain vendors in their
market space. (I firmly believe their success was God blessing their repentance from an evil business practice.)

During one of our large material handling vendor selections there was a change in the Chief Supply Chain Officer.
The new officer was suspected of receiving kickbacks from one of the vendors that had been eliminated by the
selection team. He insisted that that vendor be reconsidered. Needless to say my partner and I were very
suspicious of the individual and the vendor who was being reconsidered. We had to monitor the process very
closely. Fortunately we had established credibility with the COO, CEO, and the project team, and the new CSCO
was not able to manipulate the selection.

In another supply chain disaster recovery case we worked on, the former VP of distribution had manipulated the
business case for fully automating their DC. Though unproven and with all financial projections pointing to a
business failure, the VP chose to be the guinea pig for a new vendor with a new type of automation. The project
was a complete failure and nearly bankrupted the company. However, in the middle of the project, the project
was pre‐maturely heralded as a success by the vendor, the VP, and in the trade press. The VP was featured on the
cover of one of the prominent supply chain trade journals and took a promotion into a higher paying job with
another company. I later ran into him and asked him what he had been trying to accomplish. He unapologetically
said that he wanted to get his picture on the cover of a major industry trade journal and get a promotion with a
higher paying job in another company. Amazing!

With these potential shenanigans lurking as possibilities, our two main purposes in vendor selection are (1)
objectivity in the selection and (2) long‐term success in the relationship between the parties.

To help insure that all vendor selections are completely objective, we refrain from any business affiliation with
software vendors, material handling equipment vendors, and third‐party logistics providers. In addition, we use
our proprietary RightChain™ Vendor Selection Suite and methodology to formalize the selection process, to
foster the participation of all project team members, and to make the process as transparent as possible to all
participants. The suite includes RightServe™ CRMS Vendor Selection System, RightStock™ IMS Vendor Selection
System, RightBuys™ SRMS Vendor Selection System, RightTrips™ TMS Vendor Selection System, RightHouse™
WMS Vendor Selection System, RightSource™ 3PL Vendor Selection System, RightHouse™ MHE Vendor Selection
System , RightSite™ DC Facility Selection System .

LRI vendor selections allow team members to participate in evaluations of each candidate's, functional solution,
technical solution, RFP, on‐site presentation, site visit(s), references, financial impact, and service impact
evaluation.

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FFigure 30. Scrreenshot fromm the RightCha ain™ Vendor SSelection Toolkit

99. Sustainn: Is there a p he process in place?
process in plaace to keep th

AAs I mentioneed earlier, only a small minority of supplly chain logisttics projects aare successful. Of the succeessful
oones, the succcess typically lasts only a year or two. Because human nature tugss toward old h habits, sustainned
ssupply chain ssuccess is exceedingly rare e. Some have crossed that tthreshold. As I thought bacck over successful
RRightChain™ iinitiatives, the
e following coommon denom minators emeerged.
R

 Supply Chain Leadership Stability
 Training
 User‐friendly Decision Support Tools
 RightChain™ Meetings
 Help

Supply Chain Leadership Stability

In each of the cases mentioned above, the key supply chain leaders and analysts have been in place for at least
three years. These individuals are normally excellent leaders, effective communicators, are highly respected
across the organization, work with integrity, maintain good rapport with internal and external customers and
suppliers, are good individual contributors and team players, and have an authentic desire to learn and apply new
and best practices in supply chain logistics. Without this stability and capability it is impossible to carry the
momentum of a RightChain™ project into sustained supply chain success.

Training

One of my favorite Solomonisms is the promise that if we train up a child in the way he should go, when he is
mature, he will not depart from it. The concepts of supply chain logistics are new. Any organization getting
started is a relative child in supply chain logistics. However, Solomon’s promise is that if we train the child, when
the child matures, the child will not depart from the training. That’s why it takes time for organizations to
breakthrough from the project stage to sustained supply chain success. That’s why it is important to incorporate
training early and often. That’s why we start each RightChain™ project with training and integrate training into
every consulting engagement. That’s why it typically takes between one and two years for all the RightChain™
principles and concepts to permeate corporate culture. That’s why we design the permeation into the
RightChain™ program with live and on‐line training of the RightChain™ curriculum (Figure 31).

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FFigure 31. Rig
ghtChain™ Currriclum

UUser‐Friendlyy Decision Sup
pport Tools
R

The decisions and tradeoffs that have to be worked through when developing a supply chain strategy are too
complex to address without decision support tools. Unfortunately, most of the decision support tools used in
supply chain logistics today are so complex that only the developers of the tools themselves can operate them
and/or the metrics used in the tools do not reflect the objective function or constraints of the supply chain. We
have taken a completely different approach to supply chain decision support tools. First, to make the tools user‐
friendly and accepted, we have developed our RightChain™ ToolSuite™ using the world’s most common decision
support programming language – Excel. Second, we have embedded the RightChain™ metrics, objective
functions, and constraints in each tool. Third, we have embedded training about the tool within the tool and/or
linked each tool to our RightChain™ Help System. Organized based on the RightChain™ Methodology, the
RightChain™ ToolSuite™ is illustrated in Figure 32 below.

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Chapter 1: RightCh

FFigure 32. LRII’s RightChain™ ToolSuite™
™

R
RightChain™ Meetings

Another key to sustained supply chain success are monthly and annual RightChain™ meetings attended by key
supply chain decision makers and analysts and supported by real‐time decision support tools. Akin to what S&OP
meetings were intended to be, RightChain™ meetings consist of reviews of the metrics and project initiatives in
customer service, inventory, supply, transportation, warehousing, and the supply chain as a whole. Monthly
RightChain™ meetings should be attended by all the members of the supply chain organization. Quarterly
meetings should be executive reviews with all the members of the executive team.

Help

The underlying motivation of RightChain™ is to help people make better supply chain decisions. Along those lines
we have developed an extensive RightChain™ Help System that explains each of the RightChain™ practices,
metrics, and concepts in words and pictures. An example help topic is in Figure 33 below.

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m LRI’s RightCh
hain™ HelpSu
uite™

RRightChain™ Principles: Soolomon Says

R
What follows (Figure 34) is a ten principle summary of the RightChain™. If you read them one after another, you
will have described the supply chains with the world’s highest financial and service performance. The
RightChain™ principles are based on a set of Proverbs written by Solomon. Solomon was the wisest man who
ever lived. He humbly chose wisdom over wealth and fame. He used his wisdom to ultimately become and one of
the wealthiest and most influential men who ever lived.
Solomon Says RightChain™ Principle
RightServe “Serve A quantified customer service policy
™ wholeheartedly, as if (CSP) segmented by channel, ABC
Customer you were serving the customer, and ABC SKU addressing fill
Service Lord, not men, rate, response time, returns policy,
Optimizatio because you know value added services, change orders,
n that the Lord will and minimum order quantities is in
RightChain™ Initiatives
reward everyone for place, is updated, and used to monitor
whatever good he customer satisfaction.
does.”
RightStock “In the house of the The financial performance of inventory
™ wise are stores of including GMROI, IVA™, and IPC™ is
Inventory choice food and oil, maximized by optimizing SKU turn and
Optimizatio but a foolish man fill rates and by minimizing forecast
n devours all he has.” errors, lead times, purchase order and
setup costs, supply chain blind spots,
and inventory carrying rates.
RightBuys “She considers a field Optimal purchase order and run
™ and buys it; From her quantities that minimize total logistics
Supply profits she plants a cost are executed with sources chosen
Optimizatio vineyard.” to minimize total acquisition cost and

n segmented to streamline supply chain
flows.
RightTrips “The guilty walk a The transportation network, routes,
™ crooked path; the delivery frequencies, schedules,
Transporta innocent travel a modes, and carriers are selected and
tion straight road.” managed to minimize total logistics
Optimizatio cost and meet the requirements of the
n customer service policy.
RightHous “Develop your Warehouses that meet customer
e™ business first before service policy requirements and
Warehouse building your house. minimize total logistics cost by
Optimizatio The building of a maximizing storage density, labor
n house is by wisdom, productivity, inventory accuracy,
and by reason it is shipping accuracy, and throughput
made strong.” rates are in place.
RightScore “The Lord wants Spanning, balanced, minimal,
RightChain™ Enablers
s™ weights and measures benchmarkable metrics AND

Metrics to be honest and ambitious, achievable, and
Optimizatio every sale to be fair. “ incremental targets are used in a fair
n performance measurement program
to impact decision making and assess
individual performance.
RightSourc “For by wise guidance Each of the supply chain logistics
e™ you wage your war; activities are currently right‐sourced,
Outsourcin And victory is in many are continually under review for right‐

g advisors.” sourcing, and the best possible
Optimizatio provider has been selected for
n outsourced activities.
RightTools “Buy truth, and do Data mining, decision support,
™ not sell it; buy planning, and execution systems
Technology wisdom, instruction, meeting required functionality are in
Optimizatio and understanding. “ place utilizing the right breed (ERP vs.
n BOB), host (in‐house vs. ASP), and
form (package vs. SAAS) for customer
service, inventory management,
supply, transportation, and
warehousing.
RightGuard “A prudent man sees Material, information, and money
s™ danger and takes flows in all supply chain links and
Security refuge, but the simple nodes are protected from internal and
Optimizatio keep going and suffer external threats and supply chain
n for it.” recovery plans are in place.
RightTeam “Do you see a man A Chief Supply Chain Officer is
™ skilled in his work? supported by directors of customer
Organizatio He will serve before service, inventory management,
n kings; he will not supply, transportation, warehousing,
Optimizatio serve before obscure planning, and security/compliance
n men.” whose staffs include professionals
trained in that area of expertise.

Figure 34. RightChain™ Principles
RightChain™ Delivery

One of the most common questions I am asked concerning RightChain™ is, “How and where do we start?” The
chasm between where most supply chains live and the RightChain™ ideal is often so great that few can envision
the starting line, let alone the finish line. It turns out they are one in the same.

The RightChain™ is envisioned and designed in a series of six, week‐long ConsulCation™ (consulting and
education ) workshops. The ConsulCation™ sessions are spaced approximately one month apart and are
preceded by weekly web meetings to support follow‐up and pre‐work. We have supported our clients in this
manner for nearly twenty years. The purpose of the sessions is to simultaneously educate the RightChain™ team
in RightChain™ principles, make progress toward each RightChain™ deliverable, provide practice in using the
RightChain™ ToolSuite™, and practice the on‐going decision making that will be required in the monthly,
quarterly, and annual RightChain™ meetings. The deliverables and project plan for a typical RightChain™
ConsulCation™ program follow in Figure 35 and 36 below.

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FFigure 35a. RiightChain™ D
Deliverables

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FFigure 35b. RiightChain™ D
Deliverables Co
ontinued

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Chapter 1: RightCh

FFigure 36. Typ
pical RightCha
ain™ Project P
Plan

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Optimizatio vineyard.” to minimize total acquisition cost and

s™ weights and measures benchmarkable metrics AND

Outsourcin And victory is in many are continually under review for right‐

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