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 lean. Show all posts
Showing posts with label lean. Show all posts
Thursday, April 1, 2010
Sunday, November 22, 2009
Not Late, Not Long...On Time
What is the value of being “On Time”? In those areas of our lives where being prompt effects our activities as well as others, being “on time” is extremely important.
In business when we create wasteful waiting by others, we are not only wasting their time and money, we are showing disrespect for the value that others put on their time.
Let’s be perfectly clear, not all actions in our lives need to be precise. For example, if a party invitation says come around six then there is an intended flexibility for arrival. In contrast, if one chronically arrives late for a recurring business meeting, then he or she is doing a disservice to their peers and the organization. Chronic explanations like “traffic” and “family” are not legitimate justifications.
Additionally, this concept of being on time also applies to ending an event such as a meeting. Agendas should be timed and adhered to for the same reasons as given above for being tardy.
I was reminded recently of the importance of timeliness when attending a seminar delivered by an organization known for being very disciplined and time sensitive. With no apparent reason given to the audience, the activity started late. The subtle message to the audience was unmistakable. The organizers were clearly violating their own standards of timeliness and the cost of wasted time for the audience.
In conclusion, be aware and diligent in the preserving the value of starting and stopping scheduled events in an “on time” manner.
Thank You.
Ron Althaus
In business when we create wasteful waiting by others, we are not only wasting their time and money, we are showing disrespect for the value that others put on their time.
Let’s be perfectly clear, not all actions in our lives need to be precise. For example, if a party invitation says come around six then there is an intended flexibility for arrival. In contrast, if one chronically arrives late for a recurring business meeting, then he or she is doing a disservice to their peers and the organization. Chronic explanations like “traffic” and “family” are not legitimate justifications.
Additionally, this concept of being on time also applies to ending an event such as a meeting. Agendas should be timed and adhered to for the same reasons as given above for being tardy.
I was reminded recently of the importance of timeliness when attending a seminar delivered by an organization known for being very disciplined and time sensitive. With no apparent reason given to the audience, the activity started late. The subtle message to the audience was unmistakable. The organizers were clearly violating their own standards of timeliness and the cost of wasted time for the audience.
In conclusion, be aware and diligent in the preserving the value of starting and stopping scheduled events in an “on time” manner.
Thank You.
Ron Althaus
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