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.
Sincerely,
Ron Althaus
Showing posts with label APICS. Show all posts
Showing posts with label APICS. Show all posts
Thursday, April 1, 2010
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.
Venue:
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.
Sincerely,
Ronald K Althaus CFPIM,CIRM,CSCP,C.P.M.
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.
Venue:
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.
Sincerely,
Ronald K Althaus CFPIM,CIRM,CSCP,C.P.M.
Monday, June 15, 2009
Staying Ahead of the Curve
Several years ago the XYZ Company burst on the market with a great new product. Times were good and profits were high. The only problem was making enough product to satisfy demand. The company grew and expanded their facility twice to keep pace with customer needs. Then things started to change. Slowly at first, but ever so certainly the company began to lose it’s grip on where things were going. Two competitors entered the market and began nibbling away at XYZ’s market share. The production process that had served them so well in the first year was straining at the seams to keep up and quality problems began to appear. Even the customers began to be a problem as they demanded more and more variations to their products. Forecasting became a nightmare and everyone was blaming everyone else for why there was not enough of what the customer actually wanted. Overhead was growing and margins were shrinking as facilities continued to expand. People in key positions were stressed to the max and felt “out of control”.
I could go on, but I believe you get the picture. I have seen this scenario over and over again in businesses. The solution is not to just call someone in to put a patch on this or that problem, but to educate your employees with the tools necessary to not just respond to changing conditions, but to be proactive and anticipate the necessary changes to “stay ahead of the curve” and on top of your business. A good start down the path to improvement, therefore, is education and the start of that education is “Basics of Supply Chain Management.” There are many ways to obtain this education and I will be happy to review any or all of them with you. Please contact me for further discussion.
Ron Althaus CFPIM, CSCP, CIRM, C.P.M.
Ralthaus44@hotmail.com
513-703-6412
http://www.althausconsulting.com/
I could go on, but I believe you get the picture. I have seen this scenario over and over again in businesses. The solution is not to just call someone in to put a patch on this or that problem, but to educate your employees with the tools necessary to not just respond to changing conditions, but to be proactive and anticipate the necessary changes to “stay ahead of the curve” and on top of your business. A good start down the path to improvement, therefore, is education and the start of that education is “Basics of Supply Chain Management.” There are many ways to obtain this education and I will be happy to review any or all of them with you. Please contact me for further discussion.
Ron Althaus CFPIM, CSCP, CIRM, C.P.M.
Ralthaus44@hotmail.com
513-703-6412
http://www.althausconsulting.com/
Friday, June 12, 2009
Silent Seasonality
Silent Seasonality
Ronald Althaus, CFPIM, CIRM, CSCP, CPM
My life in manufacturing has been plagued by silent seasonality. As a practitioner, it plagued me regularly and years later, as an instructor, I can tell from the nods and groans of my students that silent seasonality still stalks their factories. In a best case scenario, customer demand is beautifully uniform resulting in stabilized production schedules, uniform supplier requirements and a constant takt time. Capacity requirements and utilization are stable and waste is minimal. It is the production environment of our dreams. But, even in such an ideal manufacturing environment, short-sighted managers will destroy it with their desire to beat the monthly shipping targets. This is silent seasonality. Top managers can sense when the stress level of operations people is low. It usually means making the monthly shipping numbers is in the bag so, if some of next month’s orders can be shipped this month, we will exceed the monthly target, look good to our corporate parents and, perhaps, increase quarterly bonuses. But shipping orders early may mean giving the customer a break on payment terms or something similar. Expediting purchased components leads to expensive supplier overtime and premium inbound freight. Our internal scheduling is disrupted with overtime and capacity constraints.
We may succeed at shipping some orders early but that eats into next month’s shipping targets. And we can seldom trust sales people to understand the impact of silent seasonality. If customer demand is five million a month and last month we scrambled to ship seven million, then the following month’s target should be three million because customer demand did not change. But sales will still set next month’s target at five million and tell us we are lucky it isn’t seven million since we proved we can accomplish that. The only way to ship five million the next month is to again pull orders up from the following month. This foolishness continues month after month until, at the end of the year, we have shipped the same amount in eleven months that we would have shipped in twelve. Except now we have experienced hundreds of thousands of dollars in various expediting costs and have a month of factory capacity to fill. And we gained no additional business or customer good-will doing any of it. Years ago there was a cartoon strip titled “Pogo”. The main character was quoted saying “We have met the enemy and they is us!” How true this is with silent seasonality.
I used an example of steady customer demand to make my point but it really doesn’t matter what the demand pattern is. Actual customer demand will often be supplemented by silent seasonality demand when managers attempt to exceed shipping targets by trashing other numbers that their bosses do not examine as carefully. Some readers will observe that lean processes make silent seasonality less onerous. The production flexibility imparted by the lean approach (flexible capacity, cross training, pull processes) make a factory more able to cope with variation in demand. But lean theory is very clear about demand variation. It challenges supply chain professionals to modify lean processes as customer demand changes. Silent seasonality is not customer demand so attempting to accommodate it results in waste.
There are certainly organizations out there that think in the long term and do not create silent seasonality. There are not enough of them and I toast them with the greatest respect. They understand that profitability results from long term thinking. If silent seasonality is common behavior at your company then I suggest your organization review and understand the associated costs. Then eliminate those costs or change the behavior. Don’t let Pogo’s famous quote describe your company. And, if you succeed in eliminating the costs of silent seasonality, you have really succeeded in reducing the leadtimes to your customers. Passing a leadtime reduction to your customer is likely to generate more sales. Constantly pulling shipments up, without reducing leadtimes, will only make you look good internally and briefly.
Ron Althaus is and independent instructor who teaches all APICS classes following a 25 year career in various manufacturing environments. He can be reached at 513-351-5005 or 513-703-6412 or ralthaus44@hotmail.com or http://www.althausconsulting.com/.
Ronald Althaus, CFPIM, CIRM, CSCP, CPM
My life in manufacturing has been plagued by silent seasonality. As a practitioner, it plagued me regularly and years later, as an instructor, I can tell from the nods and groans of my students that silent seasonality still stalks their factories. In a best case scenario, customer demand is beautifully uniform resulting in stabilized production schedules, uniform supplier requirements and a constant takt time. Capacity requirements and utilization are stable and waste is minimal. It is the production environment of our dreams. But, even in such an ideal manufacturing environment, short-sighted managers will destroy it with their desire to beat the monthly shipping targets. This is silent seasonality. Top managers can sense when the stress level of operations people is low. It usually means making the monthly shipping numbers is in the bag so, if some of next month’s orders can be shipped this month, we will exceed the monthly target, look good to our corporate parents and, perhaps, increase quarterly bonuses. But shipping orders early may mean giving the customer a break on payment terms or something similar. Expediting purchased components leads to expensive supplier overtime and premium inbound freight. Our internal scheduling is disrupted with overtime and capacity constraints.
We may succeed at shipping some orders early but that eats into next month’s shipping targets. And we can seldom trust sales people to understand the impact of silent seasonality. If customer demand is five million a month and last month we scrambled to ship seven million, then the following month’s target should be three million because customer demand did not change. But sales will still set next month’s target at five million and tell us we are lucky it isn’t seven million since we proved we can accomplish that. The only way to ship five million the next month is to again pull orders up from the following month. This foolishness continues month after month until, at the end of the year, we have shipped the same amount in eleven months that we would have shipped in twelve. Except now we have experienced hundreds of thousands of dollars in various expediting costs and have a month of factory capacity to fill. And we gained no additional business or customer good-will doing any of it. Years ago there was a cartoon strip titled “Pogo”. The main character was quoted saying “We have met the enemy and they is us!” How true this is with silent seasonality.
I used an example of steady customer demand to make my point but it really doesn’t matter what the demand pattern is. Actual customer demand will often be supplemented by silent seasonality demand when managers attempt to exceed shipping targets by trashing other numbers that their bosses do not examine as carefully. Some readers will observe that lean processes make silent seasonality less onerous. The production flexibility imparted by the lean approach (flexible capacity, cross training, pull processes) make a factory more able to cope with variation in demand. But lean theory is very clear about demand variation. It challenges supply chain professionals to modify lean processes as customer demand changes. Silent seasonality is not customer demand so attempting to accommodate it results in waste.
There are certainly organizations out there that think in the long term and do not create silent seasonality. There are not enough of them and I toast them with the greatest respect. They understand that profitability results from long term thinking. If silent seasonality is common behavior at your company then I suggest your organization review and understand the associated costs. Then eliminate those costs or change the behavior. Don’t let Pogo’s famous quote describe your company. And, if you succeed in eliminating the costs of silent seasonality, you have really succeeded in reducing the leadtimes to your customers. Passing a leadtime reduction to your customer is likely to generate more sales. Constantly pulling shipments up, without reducing leadtimes, will only make you look good internally and briefly.
Ron Althaus is and independent instructor who teaches all APICS classes following a 25 year career in various manufacturing environments. He can be reached at 513-351-5005 or 513-703-6412 or ralthaus44@hotmail.com or http://www.althausconsulting.com/.
Thursday, March 26, 2009
Educator Awarded “Master Instructor” Status
Ron Althaus of Althaus Educational Services has been recognized by APICS, the Association of Operations Management as a “Master CPIM Instructor”. The Master status is awarded to APICS instructors who have attained the highest level of delivery quality as recognized by their peers as well as extensive hours of comprehensive presentation experience. Additionally, Ron is recognized as a “Lead CSCP Instructor” for the more recently released CSCP certification program of APICS.
Ron may be reached at 513-703-6412 , http://www.althausconsulting.com/ ,or ralthaus44@hotmail.com.
Ron provides local “in house” certification programs and workshops to businesses in the Midwest.
Ron may be reached at 513-703-6412 , http://www.althausconsulting.com/ ,or ralthaus44@hotmail.com.
Ron provides local “in house” certification programs and workshops to businesses in the Midwest.
Friday, July 18, 2008
Here is a very valuable website for understanding the value of CPIM certification in the marketplace. Go To: http://www.payscale.com/research/US/Certification=APICS_Certification_in_Production_and_Inventory_Management_(CPIM)/Salary/by_Job
Can you afford not to be CPIM certified? Best of luck to you. Let me know if I can help.
Ron www.althausconsulting.com
Can you afford not to be CPIM certified? Best of luck to you. Let me know if I can help.
Ron www.althausconsulting.com
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