Thursday, April 1, 2010

Lean vs Green

It occurred to me quite suddenly the other day while reading an article on “Green” warehousing, that we must always be aware that there is a total cost and value picture which transcends the focus of looking at inventory from a pure ordering and carrying cost basis. In addition, our attention must now also be on the likes of carbon footprints and other ecological issues.
To give this idea some tangibility, I dreamed up a scenario to demonstrate my point. Let’s assume we run Manufacturing Company X and one of our main raw materials is available a mere 20 miles from our plant. We have no quality issues with the supplier and our demand is totally stable. The rate of usage is ten units a day (no waste or scrap), and the company operates five days a week (If you find such a place, I want to work there). Additionally, we release material from a blanket order and pay against a monthly statement. The material costs $10/unit and our carrying cost is 20% of our average inventory. We pick up the raw material with our truck which costs us $.50/ mile to operate. I have summarized this data in the table below. Out big decision is how much and how frequently do we pick up this material? Let’s compare a weekly pickup to a daily pickup as shown below.

Cost Factors Five Trips/wk vs One trip/wk

Transport Cost. 5X 20 miles X $.50/mi = $50.00/wk vs 1X 20 miles X.50/mi = $10.00/wk

Inventory Cost 5=avg inv X $10/unit X 20% = $10 vs 25 =avg inv X $10/unit X 20%= $50

Total Cost $60.00 in both cases

Of course, I have left out the flexibility and visibility of a lower inventory and a few other possible qualitative factors, that would support the daily pickup suggested by Lean, but I counter that my daily delivery truck may introduce serious carbon footprint issues over time. I for one have had my “evaluation horizon’ expanded by the article on greening the warehouse. I just wanted to pass these thoughts along to you.
Ron Althaus

Monday, March 22, 2010

Creative Education

Working with APICS education as I have for many years and exclusively for the last ten years, I have come to learn and experience all sorts of value added activities as well as some not so “value added”. Since my focus has been on “in house”, I will limit my comments to that mode of delivery.
Basically, the success of in house educational efforts, in my opinion, are based on several critical factors. These would be :
· Management support,
· student selection,
· venue,
· and the percent of “application discussion” time or “How does this apply here?”

You might say this is intuitive, but the results may surprise you. Here are my observations for each of these areas. Perhaps they may be of benefit to you in selecting and/or organizing classes.

· Management Support Observations:
o Respect the scheduled training time and encourage participation (minimal rescheduling)
o On site is better than off site.
o Encourage/require course completion and certification testing
o Split class time between normal work time and student personal time
o Reward success with recognition

· Student Selection:
o The more variety of functional areas involved, the more successful the group will be.
o Class size (e.g. from 2 to 20) does not influence success.
o Give students the option to recover from a missed class
o Encourage students to offer example from past experience.

On site better than offsite
If applicable, lunch permitted during training
Ten minute break every hour ( utilization)
“U” seating arrangement
Lots of examples
2 to 3 hrs per session maximum

Application Discussion Time:
Host company environment is a dynamic case study. Always relate topic to the current environment, as applicable.*
Use positions present to reinforce cross functional effect of topic on the business.
Application discussion is not in the text, it is spontaneously generate by the students or planted by myself as the instructor.
A real application is 10 times more likely to be remembered and used in the company.

Without a doubt, the best example of this was in a small company involved in CPIM training where IT, Purchasing, Production Scheduling and Customer Service were in the class. We spent at least 50% of our total time on application discussions. Sometimes they were heated, but always results oriented.

Hopefully this can be of assistance to any company, student, or trainer in promoting successful (APICS) operations and supply chain training.


Ronald K Althaus CFPIM,CIRM,CSCP,C.P.M.