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.
Sincerely,
Ron Althaus

Five Key Operations Concepts for the Small Business Person

Presentation Rationale:

To the best of my knowledge, the two worlds of corporate operations and small business operations are almost completely separate. Small business owners struggle with trying to run the whole business with little or no help in the operations area unless they happen to find small business coaches or consultants with some operational background. Even if this happens, it is a costly proposition at best and perhaps some misguided advice at worst. Even government supported activities such as SCORE, run by the General Services Administration do not focus on key operations skills except for financial tools like a business plan. A look at Amazon (for example) yields no better results. There are big company “how to” books on inventory management for example but nada for the small business.
My risk is that small businesses will not realize the need exists or that there are tools and concepts available. My presentations are designed to fill that void in a non-technical easy to understand manner.


The Presentations:
Five Key Concepts of Operations Management

Executive Summary:
An expert in Operations Management with a variety of industry experience shows you how to make key operational concepts work for you in your small business. Tested daily in the running of Corporate America, now you can learn how to apply this knowledge to running your own successful company. The techniques are easy to grasp and apply to your individual situation.

Expanded Description:
In the area of corporate operations management there are five key disciplines that companies use to insure they are supporting the overall growth, profitability, and success of the business. Briefly stated these are:

1. Good Inventory Management & Control
2. Being a Smart Buyer of Goods and Services
3. Partnering with Suppliers and Customers
4. Matching Resources to Demand
5. Understanding Value

Although the details vary from business to business, the common concepts are fundamental to success. This set of presentations will devote a discussion to each of these concepts using different business types to demonstrate the concept. The session will have an introduction of the concept, an example of how the concept can improve growth, profitability and success, and some suggestions on other ways to apply the concept. A partial speech topic follows.



Partial Presentation: Being a Smart Buyer of Goods and Services


What do I mean when I say you should be a smart buyer? Some would be tempted to say “buy cheap” some would say “take volume discounts”, and still others would have other criteria. Being smart means looking at the true bottom line and how you’re buying choices affect it. There is more to the cost of services or materials than what you pay a supplier. For example, is delivery timely and consistent, is quality always good, and are your suppliers flexible if the need arises? Do they value me as a customer (more about that later in presentation# 3)? Here is an example of smart and not so smart buying. I will use a typical hair styling salon as my example.

The Salon owner’s choices:
As a beauty salon owner you need to buy supplies for your operators, or to sell to your operators if that is your model. Thanks to business to business (B2B) e-commerce, you now have multiple channels of supply. At a minimum you now have the local supply distributor who calls on you regularly as well as direct purchase internet source(s). Which should you choose? The internet source is available 24/7, ships quickly, and is possibly cheaper. It’s a done deal, right? Has to be the right choice…..or is it? What does the local ‘bricks and mortar” distributor have going for his or her channel? They know your business, they call on you frequently, they could hold stock for you in their facility, and they could even do your ordering! How about co-operative advertising? How about special terms of payment? How about friendly and prompt returns? To be sure there is no obvious one answer for you, but there certainly are a lot of tangible and intangible factors to consider, and this is how you will become that “smart” buyer that you need to be for your business. It should be obvious by now that the lowest purchase price is not the goal, it’s the best value for your efforts.
I used the beauty salon example because of some past secondhand experience in that industry, but many small independents would have similar choices like veterinarians, barber shops, shoe repair shops, exercise studios, tax preparers, CPA’s , handymen, and so on.



Layout:

Five Presentations:
1. Good Inventory management and Control
2. Being a Smart Buyer of Goods and Services
3. Partnering with Suppliers and Customers
4. Matching Resources to Demand
5. Understanding Value

Future Series?

I do not see this as the first of a linear series of topics. I do envision that there may well be subsequent updated “presentations” in the future.
Contact me if the concept of presenting this type of material to your organization is of interest to you. ralthaus44@hotmail.com

Thank you for your Consideration!