Thursday, December 24, 2009

The fastest way to reduce on-hand inventory balances is to ship it

Seeing more supply chain writers commenting on how JIT and Lean don't coexist well in a world where supply chains are growing increasingly longer geographically, and they do a better job than I did 2 years when I wrote that Cycle time is undervalued in offshore manufacturing decisions. I started noticing this a couple weeks ago when I noted more commentary on total cost of ownership in outsourced manufacturing.

In the last week or so, a couple more articles popped up thanks to the magic elves in the Twitter Box.

From DemandCaster: Whatever happened to JIT?
...The dominant term was JIT. But, JIT and Lean were bandied about interchangeably. There was no different save for the marketing spin of one author or consulting firm over another. But that has changed. The change resulted because the manufacturing base moved, mostly, to Asia. This was contrary to the principle of reducing lead times so central to JIT. The lead time for goods from Asia dramatically increased to four, five, six, or more weeks. Just-in-Time simply did not fit.No matter what the lead times, one could be “lean” by taking the slack out of the lead times. But as the overall lead times increased so much that planning was once again based on forecasts.

Not to mention the additional inventory in the supply chain pipeline thanks to the longer lead times.

From @chrischip: Just in Time Just Isn’t
...But don’t pull your hair out over inventory. Your customers won’t wait for you to ramp up to fulfill their order, and your forecast won’t save you because it isn’t correct. The answer is a buffer. What I hear time and time again is that the cost of a buffer is well worth eating when you can promise delivery from stock. Without that assurance, you may well lose the order, and that’s a heavier price to pay in terms of dollars and reputation.

Buffers are consistent with, and I would argue REQUIRED, to lower inventory investment. Several weeks ago I revealed my personal view with regard to maximizing inventory turnover:
The secret: The fastest way to reduce  on-hand inventory balances is to ship it.
Many supply chain professionals are penny-wise and pound-foolish: They focus on reducing inventory investment by slowing the delivery of component inventory and insist on sticking to corporate strategies, goals, and metrics with regard to ordering and stocking policies. This is the domain of ivory tower academics and corporate theorists. I work in a Manufacturing Plant, where we Build Things Customers Pay For.
It is far better to grasp the universe as it really is than to persist in delusion, however satisfying and reassuring.
~ Carl Sagan

If the sales exist to consume the finished goods, the proper strategy is to ensure 100% order fulfillment. Unless your forecast is perfect (it's not), your inventory accuracy is 100% (it's not), your suppliers deliver exactly what you need exactly when you need it with no quality rejects (they don't), your machines have 100% up-time (they don't), and you have 100% yield (you don't), then you have to be honest with yourself as a material planning professional and do the right thing: Buffer.
Better never than late.
~ George Bernard Shaw

That doesn't mean you start writing blank checks, however. At the risk of sounding arrogant (too late, I know! ;-) ), this is the domain of Smart People. Data-oriented decision-making. Bounded risk. Iterative modeling. Yeah, I can spew the buzzwords with the best corporate policy wonk. If you don't have robust simulation tools, buy them. If you can't buy them, build them. They won't be perfect starting out. Probably won't be right, either. But the second iteration will be better than the first. You'll do it faster, too. Same with the third, fourth, fifth, sixth... Models will never be perfect, but like a good spouse they get better with age.

When strategies, tactics, and actions are set, execute in the real world using proven, time-tested material management techniques.


Use inventory stratification and manage by exception. Remember ABCs? Remember Exception Reports? Classical stuff. Material Planning 101. APICS Basics of Supply Chain Management.

I don't worry about C-items. Period. I want tons of C-items. If I go line-down because a penny-part wasn't in stock, that's not the cost of doing business - that's a DISASTER: Shipments are missed, Revenue goals aren't met, and all of the on-hand inventory associated with the assemblies that now can't be built will just sit on your books, festering. I watch B-items to the extent that I don't buy excess but I try to buffer with time; instead of coming in just-in-time, I try to pick up extra days/weeks whenever I can. Finally, I focus completely on A-items. I have a number of homegrown tools I developed to track the supply/demand of A-items over time and any volatility is ruthlessly drilled to root cause and strategies developed to balance the supply with the demand.
Better three hours too soon than a minute too late.
~ William Shakespeare

Most importantly, I am disciplined about reviewing data versus plan and taking action with a sense of urgency. You can't set up your plans and walk away expecting your great plan will be executed flawlessly. You have to constantly check, double-check, triple-check. Plan and re-plan. This is where Exception Reports are worth their weight in gold. In most companies where bills-of-material are complex and just plain LONG, it's impossible to do a top-down or bottom-up material analysis on any kind of cycle that permits rapid decision-making. Exception reports separate the wheat from the chaff. By definition, the A-items consist of ~80-90% of your inventory investment dollars. Planning and re-planning ~5-10% of your components offers an increased likelihood of successfully managing 80% of the dollars, rather than attempting to manage 100% of the component investment with no likelihood of success.
A good plan violently executed now is better than a perfect plan executed next week.
~ George S. Patton

Sunday, December 20, 2009

Dashboarding the program in #Excel well underway

Down to 2 Excel worksheet tabs, from well over a dozen. Goal is to get to a single sheet, but the volume of data, screen real estate, and the fact that it is reviewed in a conference room rather than printed all factor it. I'll get there, but I like the progress so far.

I have a tab with a dynamic chart to review planned orders by assy (over 50 assemblies). Another tab to review upcoming total production volumes by type/workcenter. Need to add demand management and WIP data, then scale it all down to a single sheet.

Monday, December 14, 2009

More commentary on total cost of ownership in outsourced manufacturing

Eric Miscoll wrote about how the analysis of Total Cost of Ownership of outsourced electronics manufacturing has changed in recent years at EMSNow: EMSNow - Is the Migration of Electronics Manufacturing to Asia Slowing?
In a proper Total Cost of Ownership analysis, direct labor rates are one of many issues considered, and the cost improvement it can offer can be quickly eliminated when considering other important issues like transportation, support, and inventory costs.

More than 2 years ago (pre-my current job), I wrote something similar while arguing that the impact of cycle time in offshore manufacturing is undervalued:
Unless enlighted managers “dollar-ize” the effect of the integrated cycle time – and there are hard- and soft-dollar impacts associated with going from one week to four weeks, or one month to three months – manufacturing will continue to be performed where wages are lowest. It is the challenge of the regional contract manufacturer to educate and inform the customer, and develop financial models to highlight the true bottom-line impact of offshore manufacturing. Global contract manufacturers provide geographic migration plans as a standard piece of their proposals. Regional contract manufacturers must not be afraid to aggressively present these models and make the case for domestic manufacturing.

Lest anyone think I have an opinion one way or the other and that my represents the opinion of my employer (and, allow me to say right now, NOTHING I write here represents the opinion or policy of my employer! ;-) ), I will say that I am in agreement with Miscoll's final paragraph:
CBA's recommendation has been and continues to be that no two engagements are alike, and lemming-like behavior in search of 'low cost labor' can lead to expensive mistakes in outsourcing. OEMs should consider a proper 'FIT' – flexibility, integration, and timing – when designing a supply solution for their electronic products.

Finally, be sure to read the feedback I received from my father, a retired EMS CEO: Good piece, as far as it goes.

Thursday, December 10, 2009

Please God, make the productivity "experts" stop promoting "to-do apps"

Seriously, if all it does it make a list of tasks then what's the point? Let's face it, I can do that right here, or in a notebook, or on a post-it for crying out loud!

Wednesday, December 9, 2009

Simple MRP Model Using OFFSET Function in Excel

While I do quite a bit of data analysis and manipulation in Excel using pivot tables, logical functions, lookup functions, and statistical functions, I haven't spent much time learning Reference Functions in Excel.

Given that my day job is centered around production schedules and materials requirements planning (MRP), I wanted to try to create a simple MRP model that utilized reference functions. The new function for me is the OFFSET function. After using it I can certainly recommend it, although if anyone knows a better way to accomplish the same thing in a more elegant fashion please leave a comment below and I'll give it a shot in the next iteration. No matter how much I already know, I'm always trying to improve my Excel skills.

I am assuming you have an idea how MRP works in materials management or you wouldn't have read this far, but if you need a tutorial Wikipedia is a decent place to start. In simplest terms, it is the recipe for building a product; it calculates how many components it takes to build a quantity of end-items, and when the components need to be ordered.

Download the [download id="3"]

Tuesday, December 8, 2009

The 21st Century Supply Chain » Six tips for supply chain job seekers from @Kinaxis

  • I think it is important for candidates to list specific business accomplishments at each job and not just general job duties.

  • I also find it helpful to have the candidates list which business problems/processes they have been working on. It is easy to say inventory reduction of X, but how did you accomplish it (VMI, supplier visibility, etc.)?

I already do the first, and I think I do it well. Judge for yourself. As for the second, I "sort of" do it in my blog posts, but I should probably look at a way to link my resume to supporting blog posts that go into depth. For the HTML resume, at least.

Check out the rest of the tips at The 21st Century Supply Chain » Blog Archive » Six tips for supply chain job seekers.

Monday, December 7, 2009

Created a LinkedIn landing page

Created the landing page above thanks to a suggestion I discussed over the weekend.

I placed the link prominently on my LinkedIn profile, using the anchor text "LinkedIn Recruiters Click Here"

I would appreciate hearing your impressions and suggestions for improvement.

Saturday, December 5, 2009 ranks Huntsville AL #9 on World's Smartest Cities List

So says Forbes in ranking Huntsville, AL (where I live and work) #9 on their list of World's Smartest Cities:
Huntsville, Ala., has long had a "smart" core to its economy--a legacy of its critical role in the NASA ballistic missile program. Today the area's traditional emphasis on aerospace has been joined by bold moves into such fields as biotechnology. Kiplinger recently ranked the area's economy No. 1 in the nation.

As if I don't already have enough to do this weekend

I could say "pssshhhhhhh!", but this is a really good idea for any social networking site where you're looking to either grow the network or convert visitors from that site. My Linkedin profile currently links to the home page of this blog, and a .pdf of my resume. I can probably eliminate both links with a landing page and reduce confusion for visitors:

Develop a Twitter Landing Page « Social networking let me help you.

Tuesday, December 1, 2009

I state in my resume that I have a strong bias for data-oriented decision-making. A perfect opportunity arose to prove it-

Resumes of Tim Lovelock | Supply Chain Management, Master Scheduling, Materials Management. | Tim Lovelock.

-again. No, I can't go into it publicly. But most supply chain professionals will understand when I say it has to do with achieving the balance between what management says they want and what they say they need.

Yeah, that.