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

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.

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/

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.