Ellery's Essays

How Maintenance Can Make the Difference Towards Victory or Defeat

https://weaponsandwarfare.com/2015/09/01/golan-heights-1973/

On October 6, 1973, Egyptian and Syrian military forces launched attacks on Israel. It was Yom Kippur, Israel’s holiest religious holiday and despite defensive contingencies, the Jewish state’s citizens were taken by surprise as thousands of tanks, artillery pieces, and soldiers invaded the Golan Heights at the north and at the Sinai Peninsula at the south.

While media attention focused on the Egyptian invasion at the Sinai, Israel’s survival hung on a balance from the Syrian offensive at the Golan Heights. The Syrians had brought 1,200 Soviet-made tanks backed by 1,000 artillery pieces and another 1,000 armoured personnel carriers (APCs). Israel had only up to 250 tanks going into battle. Syria’s Soviet-made surface-to-air (SAM) missile batteries shot down responding Israeli Air Force (IAF) jet fighters, effectively neutralising air support. It was a duel to be determined by two ground armies in which the odds were stacked in favour for the Syrians. It was a life-or-death struggle for Israel. [1]

Within 100 hours from start of the attack, however, Israel had beaten back the Syrians. Israeli professionalism, gallantry, coupled with advantages in terrain, had prevailed. Some would say it was a miracle.

The Syrians had hit all engaging Israeli tanks during the battle of the Golan Heights. Of the 250 Israeli tanks that Syria had knocked out, 150 of those tanks returned to battle after they were repaired within 24 hours. Some of the 150 Israeli tanks were even hit more than once but still returned to battle within hours.

At the height of the fighting, Israeli tank crews brought their damaged vehicles to repair centres behind front-lines. Soldiers would rescue tank crews and towed the tanks back. Logistics personnel made sure there were ample stocks of spare parts as mechanics and engineers quickly fixed the tanks and made them ready for service within hours. Tank crews meanwhile used the respite to rest and eat. [2]

The Syrians had no such system. Tank crews would simply abandon their damaged tanks. There was no replacement or repair for any Syrian tank that was hit. The Israeli tanks, meanwhile, returned to the field again and again to engage their enemies. Even at overwhelming odds of up to 10 Syrian tanks for each one from Israel, the Syrians could not keep up. After four (4) days of fighting, the Syrians withdrew. Israel emerged victorious.

The Yom Kippur war was a testament how the Israeli military valued its soldiers and equipment. While its Arab opponents relied on the Soviet military doctrine of unleashing large numbers of tanks and soldiers, Israel opted on the ability to rotate its weaponry on the battlefield. The Israel military’s system of maintaining their equipment and rotating them back to service undoubtedly contributed to its victory in the battle for the Golan Heights.

Maintenance of fixed assets is a commonly neglected area in enterprises. Buildings, trucks, material handling equipment, production machinery, and office hardware are part and parcel of most, if not all, enteprise operations. Yet, some enterprise executives don’t see the value of maintenance of such assets in good running working condition.

We hear the complaints all the time:

A purchasing assistant has to share her laptop with a colleague whose desktop personal computer is waiting to be fixed;
A quality control laboratory technician delays the release of a finished product because a replacement part for her broken-down testing machine hasn’t arrived yet;
Employees on a shipping dock can’t finish loading trucks because their forklifts constantly stall;
A building roof leaks when it rains and disrupts production on an assembly line.

Enterprise executives should not view maintenance as a burden. They should see it as an opportunity for competitive advantage.

Setting up a maintenance program does not require management re-invention. As with any management process, it involves setting goals, formulating strategies, and establishing policies.

Supply chain engineers (SCE’s) can help enterprises assess the system of managing the procurement and inventories of spare parts and marry it with the performance measurement of operations.

Maintenance may be daunting especially for supply chains that employ complicated processes and equipment. All the more reason for enterprises to engage the engineering prowess of SCE’s who can assess and untangle the myriad complexities of equipment set-ups and recommend solutions to optimise the balance between operational uptimes and maintenance downtimes.

The Israeli military in 1973 made sure their soldiers had the support of a superior maintenance system to defend their country. The repair centres behind the front-lines those fateful days at the Golan Heights had enough tools, well-trained crews, and a well-stocked inventory of parts to fix damaged tanks and equipment and bring them back to battle.

Maintenance made a difference to a country’s miraculous victory. What more can it do for enterprises in highly competitive arenas.

About Overtimers Anonymous

[1] Jerry Asher with Eric Hammel, Duel for the Golan, (New York, New York: William Morrow & Company, Inc., 1987) book jacket.

[2] Ibid, page 192.

The Three Capacity Types

How much can we make?

How much can we buy?

How much can we deliver?

These are typical questions executives ask their managers all the time. Executives often want straightforward answers; they’d rather be spared the complicated assumptions behind any of them.

Calculating capacities can be a headache. It’s never really as straightforward as a machine’s rate of production or how many items a person makes in a day. Operators sometimes slow machines down or speed them up. A shorter person may not make as much as a taller person. Raw materials from one vendor may lead to higher output than that from another supplier.

How executives view an enterprise’s supply chain capacity is also often different from that of employees. Executives usually prefer what’s the most that can be produced and delivered. Employees typically equate capacity with how much they have delivered in reality.

Answering the questions of capacity therefore requires knowing what assumptions to base on and what data and formulae to use.

I usually propose three types of capacities for enterprises:

Maximum Capacity
Operating Capacity
Demonstrated Capacity

Maximum capacity is how much an operation can make or deliver assuming it runs at its highest designed rate all the time, that is, 24 hours a day, seven days a week, 365 days a year (366 if it’s a leap year). No breaks, no shutdowns.

maximum capacity = design rate x 24 hours/day x 365 days/year

Note that it involves the highest designed rate, that is, what the operation is engineered to do. The design rate isn’t what it can actually do but what it’s supposed to be capable of.

Operating Capacity is how much an operation can make or deliver assuming it runs at its highest designed rate based on a schedule. Operating capacity computations are based on planned timetables but regardless of downtimes.

operating capacity = design rate x scheduled operating time

Note that operating capacity uses the highest design rate and 100% of the scheduled time. Operating capacity does not take into account planned or un-planned downtimes, such as break-times or time lost during an operation for whatever reason. For example, in a production process that has a design rate of 100 pcs per minute and is scheduled to run eight hours a day but with allowed breaks totalling 1-1/2 hours, the operating capacity would be:

operating capacity = 100 pcs/minute x 8 hours/day x 60 minutes/hour = 48,000 pcs/ day

Operating capacity does not factor in the break-time. It does not consider any slow-down from the design rate.

Demonstrated Capacity is based on the actual output of an operation. It is determined by multiplying the actual operating time with the actual operating rate:

demonstrated capacity = actual operating time x actual operating rate

The actual operating rate is the regular rate of output or what an operator or supervisor establishes as the equipment’s or workplace’s attainable output of items. The actual operating time is the total amount of time the operation was running after deducting planned and un-planned downtimes. For a production process that has a design rate of 100 pcs per minute, but an actual output of 5,000 pcs per hour that has a schedule of one eight-hour shift a day with 1-1/2 hour breaks, the demonstrated capacity would be:

demonstrated capacity = (8 – 1.5 hours) x 5,000 pcs/hr = 32,500 /day

Demonstrated capacity does not take into account the design rate or the total eight (8) hour scheduled shift. It only considers the actual operating time and actual rate of output. It does not, however, deduct any unacceptable output (e.g. scrap, rejects).

Executives, especially financial managers, prefer maximum capacity when it comes to assessing how well an enterprise is utilising its assets. If an enterprise’s supply chain schedules an operation at one (1) shift a day, it would be utilising at most one-third of an operations assets’ capability, which reduces the potential return on investment for the assets. For an enterprise’s owners, that would be tantamount as wasted opportunity.

Supply chain managers favour operating capacities in measuring efficiencies. Operating capacities would be the baselines to determine how reliable operations are.

Many operators and supervisors like demonstrated capacities for performance measurement. Some would see operating and maximum capacities as unreachable parameters. They’d instead measure their output against what they can attain, which would be demonstrated capacities.

When it comes to determining what the capacity of an operation is, one has to be aware of who’s asking and what is being looked for. Is it how much an operation is capable of? (Maximum Capacity). Is it how much can be achieved at full efficiency over a planned time frame? (Operating Capacity). Or is it how much can one realistically count on to attain? (Demonstrated Capacity).

Enterprise executives, managers, and engineers may have their own versions on capacities. It should be based on what one is after. An executive seeking the best return on investment would have a different perspective from an operator who wants to know how much can really be done.

Capacities apply to every operation. Variables such as design rates can be tricky to determine, especially if the design rate is to be determined from labourers or logistics. Supply chain engineers can help provide the data.

That’s what they’re there for.

About Overtimers Anonymous

The Nimble Supply Chain: Is It Even Possible?

https://www.jigidi.com/jigsaw-puzzle/jsb9j9vu/jack-be-nimble/

Managers like things to turn out elegant. A well-laid out factory that produces flawlessly. A warehouse with more than enough storage space and material-handling equipment. A complete fleet of trucks that delivers all the orders without delay. A smoothly running purchasing system in which supplies and materials are bought at the best price and arrive on time.

Nice to dream about but hardly the reality. All it takes is one disruption to mess everything up.

The COVID-19 pandemic of 2020 is the popular example. Many enterprises have closed thanks to sudden drops in demand and supply. What many executives thought would be a good year turned out the opposite.

But as much as the pandemic was the biggest whammy to business in recent memory, it is not the last and it certainly wasn’t the first. Disruptions happen all the time in different degrees and forms. There will always be uncertainties and resulting variabilities in supply and demand. Consumers will overstock or switch to other brands. Business customers will be fickle about buying new equipment. Vendors will speculate and change prices, terms, and the availabilities of items. Third-party providers will abruptly ask to renegotiate contracts.

Many consultants cite the need for supply chain flexibility and resilience in order to re-grow and survive. But that’s not the answer.

What we need are nimble supply chains. Nimble means having the prowess to adapt and respond quickly to changing circumstances without having to invest or spend too much in resources. It’s more than being synonymous to agile. It involves the ability and tendency to adapt rapidly to changing circumstances. Enterprises not only need to run fast but run fast and dodge unpredictable obstacles while aiming toward moving targets.

Hence, the challenge for supply chains: with all its differing functions and all the uncertainties, how does one become nimble from start to finish? Can it even be done?

The answer is yes but it would need changes in mindsets.

First, nimble is not a buzzword. Consultants and so-called experts have promoted buzzwords like agile, just-in-time (JIT), Six Sigma, ERP, Lean, and responsive. Many projects have ended up dead-on-arrival while consultants and so-called experts made money out of them. When we say we want to be nimble, it doesn’t mean uttering it in every meeting. (“we need to be nimble!”, why aren’t we nimble?”). We need to define it and make a strategy out of it.

Second, nimble does not mean a total change in how we operate. It’s more of finding and focusing what to improve and where. How fast can we switch to a different item? How do we shorten the set-up times between products? How do we adapt our order-to-delivery systems? How do we quickly source new materials?

Large consumer goods firms such as Unilever and P&G have bragged about their introduction of hand sanitizers and face masks in the wake of the COVID-19 pandemic but it took them several weeks to develop the items. Toyota has made it a routine to retool their assembly lines and make available a new vehicle model in a matter of hours, if not minutes.

Third, it is relevant to all functions in the supply chain. Nimble isn’t limited to manufacturing (where a lot of people think it does). And even if an enterprise thinks it can be nimble just on the production line, it is doubtful its supply chain will be if its logistics and purchasing functions aren’t geared up for it.

A large wholesaler excelled in the procurement and inventory management of merchandise but had room for improvement when it came to deliveries. The wholesaler hired a freight trucking company to deliver products to customers. The wholesaler insisted that the trucking company supply large 6-wheeler trucks to maximise loads and minimise freight costs. Trucks, however, often had to wait for hours till they were fully loaded and the wholesaler usually loaded the trucks with up to 10-15 customer orders each. Either way, deliveries were frequently delayed or trucks weren’t able to deliver all of the orders in a single day. Customers complained. The wholesaler finally relented to the trucker’s call to use smaller four (4) wheel vans which delivered to customers faster, sometimes within the same day orders were received. It turned out freight costs didn’t significantly increase as four (4) wheel vans could do several trips in a day.

Fourth, nimble applies in every industry. Whether it be consumer goods, industrial, or energy, going nimble can help enterprises of every sort.

For many years, a large cement company sold to a captured market. It had steady revenues and all it had to worry about was cost. Its factory was designed to mass produce cement bags by the hundreds in a day. One day, however, the government allowed foreign cement producers to enter the market. Suddenly, the cement company found itself at a pricing disadvantage. The cement company eventually closed down its factory. Imported cement was cheap and had better quality. The cement factory never bothered to improve its products or its operations. It thought it never had to.

Fifth, nimble isn’t limited to enterprises that sell tangible products; it works for service-oriented organisations too. Hospitals in Taiwan have long realised that fast turnaround of patients is crucial in keeping costs down and reducing wait times for sick people seeking treatment. Taiwan hospitals were well-prepared for the COVID-19 pandemic. They had an inventory management system that assured enough medicines, supplies and personal protective equipment (PPEs). They also set up a structure in which assigned medical teams, consisting of doctors, nurses, and staff, would be dedicated exclusively to the contagion. These teams would work separately from other medical practitioners dealing with patients with other ailments. The strategy worked and Taiwan was nimble enough to dodge the virus bullet.

Sixth, and finally, it needs an engineering approach. Leaders set directions, managers plan and implement, but engineers do the nitty-gritty design and development of structures and systems essential to the improvement of operations.

Enterprises don’t construct factories on their own. Enterprises hire engineers to do that. In the same way, they should engage supply chain engineers to build systems and structures that would enable an enterprise to become nimble.

Enterprises don’t have to start from scratch. And it would not need super large investments. Engineers can identify workplaces along the supply chains that would significantly contribute towards becoming nimble.

It can consist of re-designing production lines to quickly change over to different items, such as what Toyota did. Or it can involve having smaller trucks to deliver rapidly to customers, as what the wholesaler did. It can also just entail identifying areas to reduce costs and improve quality which the cement company failed to do.

Supply chains operate in a normally disruptive world. Enterprises need to be nimble; flexibility and resilience aren’t enough. Buzzwords are useless. For an enterprise to be nimble, it needs to define its strategy, focus on where to improve, and involve all functions. Enterprises have to believe that nimble applies to all industries, even service-oriented ones.

The best approach to nimble is via supply chain engineering. Supply chain engineers have the best qualifications to build the nimble enterprise.

About Overtimers Anonymous

DRP, Deployment and the Role of the Supply Chain Engineer

Distribution Resource Planning (DRP) was my first assignment as supply chain planner for a large consumer goods firm.

It was the late 1980’s and Manufacturing Resource Planning (MRP 2) was at the height of popularity in the corporate world. The company I was working for was embarking on integrating MRP 2 in an information technology upgrade of its operations and DRP was one module offered.

DRP is a planning tool in which one schedules the deployment of items, usually finished products, to distribution centres or depots at different geographical locations. It manifests itself in matrices such as the following for a depot and a central storage facility:

The matrices serve as templates in which the planner can see how much a depot needs at a point in time in the future. In the following example, it’s week three (3) in the future:

To anticipate the out-of-stock on Week 3, the planner simply schedules the shipment of product to the depot. Assuming a lot size of 800 and a two-week transit time, the planner schedules a shipment from the central facility at Week 1:

It’s simple enough for one item and for one depot. The work adds up when it includes several depots:

For multiple items and multiple depots, the work adds up even more:

As much as the planning is simple per item per depot, the work becomes more cumbersome and complicated with multiple depots and multiple items. Hence, DRP works best with the help of MRP 2 software that would automatically compute the schedules for all items for all depots.

It’s no wonder then that organizations look forward to artificial intelligence (AI) in planning the deployment of products. It’s just a lot of simple work that a machine can do instead.

If only it was that easy.

DRP deployments don’t take into account uncertainty and sudden disruptions. It assumes things will go as planned when in reality, they do not. Such as when a planned arrival is delayed:

Customer orders as a result are not served. And the disruption may even cause customers to speculate:

In such scenarios, automated planning is no longer useful. Human intervention is needed as the central facility would either rush stocks to the depot or the sales force served by the depot negotiate with customers to smoothen demand.

When it comes to uncertainties, planners tend to build up inventories to avoid situations like in the aforementioned example. It defeats what DRP is trying to do which is to keep inventories manageable and at the same time serve customers only when they would be needing their items.

Information technology (IT) software does not provide a fool-proof automated solution for planning inventories and deployment. Yet, many managers make the mistake expecting that computer programs will do so. DRP is no exception.

Deployment is a critical step in the supply chain, especially for enterprises that have markets in far-off places. It isn’t something that can easily be automated. It requires a framework founded on an overall strategy.

An overall strategy answers how the enterprise shall distribute its products:

Do we set up depots or distribution centers at different geographical regions?

Do we deliver directly to markets from a single central distribution facility?

Do we build manufacturing and distribution facilities at different locations?

Do we just rely on a 3^rd party logistics (3PL) provider to do all the sales and distribution of products?

The distribution strategy will need to align with how the enterprise wants to sell and deliver its products.

Will selling be via retail channels?

Do we negotiate contracts with distributors, wholesalers, and/or licensed dealers to sell at different markets?

Does the enterprise utilize e-commerce for customers to order and couriers to deliver?

The framework for deployment consists of both policy and structure derived from a distribution strategy.

Policy would cover such areas as:

Inventory: how much to keep, when to replenish, how items are handled (e.g. first-in first-out);
Service: how items are dispatched (e.g. minimum quantities, lot sizes, less-than-truckload [LTL] limits);
Quality: how merchandise is inspected, how damages are prevented;
Risk: how products are secured and accounted for.

Structure would involve the assets and people directly involved with deployment. These would consist of:

Facilities such as depots, warehouses, storage equipment (e.g. racks, tanks, vessels), & materials handling (e.g. forklifts, conveyors);
Transportation assets from trucks, vans, to shipping containers and air-freight;
Organizational structure and management set-up.

The effectiveness of a deployment framework depends on how well the enterprise develops its policies and structures. This is where supply chain engineers (SCE’s) can help.

SCE’s can assist executives in studying various scenarios for an enterprise’s deployment framework. These range from assessing the capacities and financial effects of product flows via different network options to determining optimal inventory levels taking into account the risks of stock-outs and overstocks.

SCE’s can also fine-tune options on how an enterprise can deploy its products efficiently and effectively. For example, SCE’s can help executives decide whether cross-docks would be a better option to rapidly move products from centralized locations to customers.

DRP is a good tool for supply chain planners. But like all good tools, it is most effective when it fits in with a framework founded on a well-developed distribution strategy.

Supply chain engineers have the expertise to help enterprises optimally spread their inventories to the markets they want to sell to, with the tools and software they are familiar with and can muster.

About Overtimers Anonymous

The Feasibility Study Ends with a Plan, Not A Solution

The feasibility study consists of the following steps:

Defining the Problem
Brainstorming Possible Solutions
Developing Criteria for the Solution
Evaluation and Selection of the Solution
Assessing the Solution’s Practicality and Benefits
Making a Plan

It starts with defining the problem. It ends with a plan.

A lot of people make the mistake of ending a feasibility study with a solution.

After they have the answer, many of them neglect to ask “what’s next?”

They rely on the stakeholders to figure that last step out. That’s a big mistake because most of the time, the stakeholders have no clue as to how to do so.

The process of finding a solution begins with brainstorming. This is already controversial as some would argue that one should first set criteria for whatever idea or answer is presented.

What inventory and procurement policy should we establish?

Brainstormed ideas:

Buy only when customer orders?
Eliminate all items except ten (10) fast-selling products?
Keep no stock of top 20 most expensive items to make?
Have a single exclusive vendor for each material item and make vendor accountable for inventory?
Have at least three (3) suppliers per material item purchased and keep at least one (1) month’s equivalent worth of sales per item?
Put all inventory on a huge container vessel that would constantly be at sea and move from one port to the next to load and unload merchandise?

Brainstorming comes first because it is a no-holds barred free-thinking exercise that allows minds to capture all the thoughts possible to address the problem. Nothing is filtered or evaluated. Every thought is acceptable and listed.

Criteria comes afterward but they should relate to values, principles, and strategic objectives.

Examples of Criteria:

Solution has to be easy to implement;
There should be minimal risk in running out-of-stock;
There should be minimal investment in training and education:
Material costs should not increase;
Working capital should decrease.

Brainstormed ideas are then filtered based on the criteria. Those that obviously wouldn’t fit are thrown out outright. The ideas that qualify would remain.

The remaining ideas then pass through an evaluation process.

The evaluation process is mostly an intuitive one. Whereas defining a problem depends a great deal on data gathering, analyses, and presentation of evidence, evaluating candidates in search for the best idea or answer to a problem is mostly done via perception and insight.

We weigh candidates against the criteria we developed earlier. The weighing is an attempt at rational calculation but most of how we do it is based on opinion. We predict benefits on what we think will happen, not really with any rationale.

A feasibility study is a contrast between the rational definition of a problem and the intuitive search for a solution. That’s why as soon as a solution is selected, we need to refine it and move forward to developing it into a plan on how to make it into a reality.

Refining the selected solution or idea is simply clarification of what we think needs to be done. Whereas a problem is best described in the form of a question, a solution should come out in the form of an action plan.

As an action plan, a solution or selected idea should follow a SMAC format. It should be Specific, Measurable, Attainable, but Challenging.

We will develop an ABC Inventory & Purchasing Policy.

A feasibility study ends with a plan, not a recommended solution. Solutions are intuitive but a plan brings it into reality.

With a plan, an organisation will know what to do next.

About Overtimers Anonymous

A Feasibility Study Starts with Defining the Problem

An employee has an idea and brings it to her boss. The boss says “good idea!” and forms a team to do a feasibility study. The team determines the idea feasible for a new product.

The boss authorises the introduction of the new product. The product, however, does not sell. Customers think it’s too expensive. The boss kills the product. The employee who suggested the idea is fired. He gets rich when he sells the product on his own.

There is a fine line between an idea and a solution. Both are not the same. An idea is a thought that develops into a concept. A solution is an answer to a problem or it’s a process or method to deal with a problem.

More often than not, we mix up the two and we do a feasibility study without really thinking through whether what we’re studying the feasibility of is an idea or a solution.

Why is it important to know if we’re studying an idea or a solution? Because the best approach to doing a feasibility study is knowing the purpose of what we’re studying in the first place.

If we’re studying the solution, we’d need to make sure what the problem the solution is answering.

If we’re studying an idea, we’d need to know what we’re developing from the idea. What is the idea’s purpose?

Feasibility studies typically consist of the following steps:

Defining the Problem
Brainstorming Possible Solutions
Developing Criteria for the Solution
Evaluation and Selection of the Solution
Assessing the Solution’s Practicality and Benefits
Making a Plan

If somebody is going to say I just laid out a problem-solving approach, I will say yes, I did.

A problem-solving approach is the core of a feasibility study. If it isn’t, it would make no sense to do a feasibility study. How can one judge the feasibility of something if one doesn’t know the purpose of that something or what problem it is solving?

In starting a feasibility study, it pays to know what the purpose is. Hence, the first step is problem definition.

A problem is not necessarily a disruption, a roadblock, or a painful symptom. A problem in the context of a feasibility study is what we’re trying to achieve. It typically comes in the form of a question that starts with “what” or “how.” And it should be as specific as possible.

What can we do to lower the cost of electricity in our factory?

How can we reduce our pending orders faster?

Please note that defining the problem is not as straightforward as it looks. Just asking a question does not mean we have defined the problem.

Defining the problem requires diagnosis. Diagnosis requires data and analysis.

A doctor does not simply define a patient’s problem just by the patient’s symptoms. The doctor would diagnose, that is, do tests, study the results, establish the cause, and prescribe a procedure to cure.

Likewise, with problem definition. We need to gather data, analyse the data, organise the evidence, identify root causes, and conclude what the problem is.

Inventories are high but we run out of stock every end of the quarter. We import in large lot sizes. Our stocks spike when the imports arrive. Arrivals of imported merchandise come in at the same time. Demand depletes our stock but some items run out faster than others. We order when we notice items nearing out-of-stock. It takes six (6) weeks for merchandise to arrive from the time we order and prepare the import documents.

What inventory policy should we develop for our imported merchandise?

We would also need to listen to what stakeholders are saying, especially what their ideas are. It may sharpen the problem definition further.

Our purchasing staff suggests we break up the imports into smaller quantities but that would mean foregoing bulk discounts from vendors. They suggest negotiating with vendors such that we can order in bulk but have the order shipped in staggered smaller quantities.

What inventory and purchasing policy should we develop for our imported merchandise?

Defining the problem is a significant step in the feasibility study. Once we know the problem clearly and specifically, it can be downhill from there in finding the solution or developing an idea.

About Overtimers Anonymous

Balancing Unstoppable Production and Benefiting from It

Float Glass Process https://www.glassonweb.com/news/hot-hold-operations-flat-glass-sector

I used to work in a flat glass factory.

The flat glass factory I worked at used float technology. It starts with a furnace that melts raw materials such as silica (sand), soda ash, dolomite, and limestone. Molten glass flows from the furnace to a tin bath, a chamber of molten tin, in which the liquid glass from the furnace floats on the molten tin to produce an almost flawless sheet of flat glass.

Float glass factories run continuously. Shutting down is out of the question because it risks damaging the furnace and tin bath which would result in lengthy cleaning and expensive rebuilding.

Re-starting a float glass facility is likewise very expensive. Restoring the flow of float glass requires tedious re-calibration operations and the difficult pulling of the liquid glass from furnace to tin bath.

I know because I participated in one such operational re-start. It was hot, time-consuming, and it cost the company I worked for a lot of money.

The economics of keeping a float glass hot and running outweighs any temporary shutdown regardless of whatever the demand for glass is. Unless it’s a permanent shutdown, flat glass companies will keep their float glass plants running no matter what.

Float glass plants typically produce a minimum of 450 tons of sheet glass a day. Glass companies, however, believe there is enough demand to absorb the daily unstoppable production. Never mind that glass demand fluctuates with the highs and lows of the construction and automotive industries.

Unstoppable production is a reality in several industries. Steel manufacturers have blast furnaces that cannot be shut down. Petroleum corporations cannot outright stop the output of oil wells. Farmers cannot reschedule harvests.

We are taught that the purpose of supply chain management is to fulfil demand. How does one then balance the management of unstoppable production with the swings of customer demand?

Unstoppable manufacturing dictates the need for efficiency. Ongoing production operations means ongoing supply of materials, supplies, and labour. There has to be enough storage space, materials handling, and transport to handle the continuous manufacture of products. At the same time, enterprise executives need to ensure that there is demand for what is continually produced. Sales and marketing managers would strive to find buyers or markets to sell whatever is made.

Continuous production, however, should not be the centre of attention. Selling products to keep manufacturing operations efficiently running should not be the sole purpose of supply chain professionals.

Customers and what they want should always be the focus. There should be a balance between supply and demand in which the supply chain operations aim to meet customer expectations at the same time reap the benefits of such for the enterprise’s stakeholders.

Flat glass companies market a variety of products. They sell custom-cut window glass for buildings. They produce coated glass window panes that insulate homes from the heat of the sun and thick glass sheets for furniture tables. They sell glass for car and truck windshields. They also sell glass that are used for solar panels and photoelectric cells. The variety of products sums up to a high demand which justifies the continuous production of flat glass.

Agricultural enterprises also allocate harvests in a variety of ways. Fruit companies sell outright to wholesalers and supermarkets and at the same time export to other countries. They also sell to fruit processing enterprises which manufacture canned and preserved items.

Supply chain engineers (SCE’s) can help unstoppable producing enterprises by focusing attention on distribution and inventories. They can help managers determine how much of what product to make, how and where to spread the items, and how much raw and packaging materials to buy and store.

Oil companies, for instance, invest in storage tanks and lease super-tanker vessels to temporarily store production when demand is low. The companies would dispatch the super-tankers to position their stock near to buyers who would be ready to purchase them when demand recovers.

SCE’s can also help find out what kind of product to make and keep. For example, SCE’s can determine how much work-in-process inventories to make instead of finished items. Steel and metals manufacturers produce heavy rolled-up coils and ingots which they later convert to items such as bars, parts, sheets, plates, and pipes. With the help of SCE’s, manufacturers can set inventory policies for work-in-process products and devise customised make-only-when-needed systems for finished items.

Manufacturing is not a quick on-and-off kind of operation. There is a cost when production facilities halt and re-start. As much as possible, production lines should operate continuously, for efficiency’s sake.

Efficient production, however, is not the end-goal of supply chain professionals. Fulfilling customer demand is. An unstoppable production process exists because of the confidence an enterprise has in selling all of what it would make. Balancing the flow of product from vendors to manufacturing to logistics to customers should always focus on delivering to customer expectations and in terms of what enterprise stakeholders seek in terms of their organisation’s strategic mission and goals.

An enterprise can make plenty, deliver plenty, and profit from plenty, with the help of supply chain engineering expertise.

About Overtimers Anonymous

Why Enterprises Need A Chief Supply Chain Officer

Gulf War air campaign - Wikipedia — https://en.wikipedia.org/wiki/Gulf_War_air_campaign

“Behind every great leader there was an even greater logistician.” -M. Cox

On a trip to Saudi Arabia in 1990 at the start of preparations preceding Desert Storm, the American-led military operation to take back Kuwait from invading Iraqi forces, United States Air Force General Chuck Horner was granted only one companion to accompany him. Some thought General Horner would bring his executive officer (XO).

General Horner chose to bring his logistician:

“If you’re going to a war, and you can only take one person, who would you take? ”

The answer was obvious—his logistician. There are three kinds of staff people who are never heroes, but without whom a commander is dead in wartime: his intelligence, communications, and logistics chiefs. He can limp along in peacetime with less than capable people in those slots, but he’s dead if there’s any weakness there when the shooting starts. There is great truth in that old adage that amateur warriors study tactics, and that professionals study logistics.” -Tom Clancy with Gen. Chuck Horner (Ret.), Every Man A Tiger (New York: G. P. Putnam’s Sons, 1999), p. 173

American military leaders have embraced supply chain logistics as a key component to victory in any conflict. Desert Storm was no exception and was an eye opener for future war plans. Logistics, notably the management of military supply chains, is still part and parcel of any country’s military doctrine in the present day.

Every American field commander has a logistics leader on his/her staff to run the day-to-day and long-term needs of their operations. Business leaders of private organizations, particularly those who market products and merchandise, would do well to do the same via a chief supply chain officer (CSCO).

Most of us know the supply chain is typically a pretty big and complicated operation made up of several sub-departments. It’s important there’s someone who should be in charge of it. Not many; not a few; just one person to rule it all.

The supply chain covers the flow of goods, services, and information through various operations and industries. In a typical organization that markets products, the supply chain’s scope covers purchasing to manufacturing to shipping. Included in that scope are support groups such as planning, engineering, maintenance, and quality control.

The supply chain encompasses a variety of activities such as but not limited to materials sourcing, inventory management, quality inspection & testing, production scheduling, demand management, storage & materials handling, orders management, transportation, maintenance, and after-sales services. Cost management from budgeting to operating expense (OPEX) and capital expenditures (CAPEX) is often within the bounds of supply chain management. Projects especially investments in facilities involve supply chain managers. And when it comes to discussion on topics such as product life-cycles, working capital, customer services, and organizational development, the supply chain manager would be a major participant.

Given the wide scope and the number of activities a supply chain executive’s job would entail, it comes to no surprise that some executives don’t entertain the idea of having one person managing all of an organization’s supply chain operations. Aside from seeing it as too big for one person to handle, it would be downright difficult to find a person who would qualify with the experience and skill-set. The CSCO would have vast authority over practically most, if not all, of an organization’s core operations. This is perceived as power that business leaders fear could be abused.

But even in very large organizations, such as the military branches of the United States armed forces, it makes sense to have one person running an organization’s entire supply chain.

The supply chain works best with a focused purpose and strategy. Whereas departments such as Finance, Sales, Marketing, Research & Development (R&D), and Human Resources have their specific supporting missions, so does the supply chain.

The supply chain’s role is to fulfil demand at the best value and best returns in investment for the organization’s stakeholders. In whatever way this purpose may be framed, the supply chain’s operations have a single end: fulfil demand. And one person should be on top of it, in leading it, and making sure it gets done.

Having one leader also gives recognition to the uniqueness of functions and the importance of contributions from each of those functions. With a united department under one executive, what each function does rises in importance in the overall organization. The function of a warehouse, for instance, would receive more recognition in how long items are stored and the costs that handle those items as a CSCO examines the total delivered cost of a product.

Just as functions would receive more recognition, so too would performance measures. A CSCO would rationalize all the key performance areas in all respective operations towards demand fulfilment consistent with corporate objectives. Quality measures, for example, would be focused towards the final outcome of a finished product. The Purchasing function would focus on materials quality in relation to Manufacturing’s consistency to produce within specifications. The Planning department would take into account inventory lead times in how they may affect product shelf lives. Logistics would consult Purchasing and Manufacturing on supply and production lot sizes to avoid overstocking and to mitigate risk of damages.

Having one supply chain leader means one decision-maker, one person to rally all of the supply chain functions in its day-to-day performance and long-term strategies. In unity come strength, and having a variety of unique functions working together requires a single leader who not only can make timely decisions but also provide guidance in consideration for all concerned.

The arguments against a single supply chain executive are more about finding the right person for the job than about the politics of one person having a lot of power. There really is no argument against the logic of having a single leader for the supply chain.

Fear prevents change in any organization. Fear in having one person running the supply chain is understandable considering the qualifications needed and the power that comes with it. But it should not be a deterrent but a means to understand and solve the issues that are causing such fear. Fear should be a motivation for change, not an obstacle.

High-ranking United States military field commanders have logistics experts as members of their staffs. Just one individual who runs the whole supply chain of any military operation. Private organizations should likewise have chief supply chain officers to singularly manage the supply chains that procure materials, manufacture products, and deliver them to customers. The unity of supply chain functions under one CSCO allows for more focus in strategy and performance. The fear that a CSCO would be unqualified or would have too much power does not argue against the need for a single leader. On the other hand, it should motivate business leaders to address the issues such that the benefits of having one supply chain leadership can be gained.

Originally released in LinkedIn: https://www.linkedin.com/pulse/why-organizations-need-chief-supply-chain-officer-ellery-samuel-lim

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Four (4) Supply Chain Scenarios and What to Do When They Change

We don’t know when it’s going to rain. So, we build dams. Dams are reservoirs, inventories of fresh water. Having a reservoir assures an adequate supply of water to meet the continuous demand of communities.

Magat Dam, Luzon Island, Philippines http://bagong.pagasa.dost.gov.ph/flood

Supply chain managers face a myriad of challenges in their operations. But one can categorise some of these challenges when it comes to inbound materials and outbound finished goods. The following are four (4) such categories or scenarios:

Unsure Supply, Sure Demand

Demand is known but supply is not. As in the example of the dam as water reservoir, demand (i.e. water consumption) is certain but supply (rainfall) is not. Supply chain professionals would put much time and resources in predicting supply or finding alternative means to maximise it (e.g. cloud seeding, drilling wells). They would also be investing in enough capacities for inventories (in this case, the reservoir) to assure demand is always met.

2. Sure Supply, Unsure Demand

Supply is assured but demand is unknown. People who have new products talk about this scenario a lot. But this also applies to products with not-so-long life-cycles such as attire and accessories from the fashion industry. In such cases, supply chain managers tend to stock up on finished products to ensure availability. But because finished products are the most expensive type of inventory, supply chain managers spend a great deal of time and money in policies and systems to make sure they only have enough—not too much and definitely not too few.

3. Sure Supply, Sure Demand

Supply and demand are certain and predictable. This can sound like an enterprise’s idea of a business dream come true but there would still be work to do for the supply chain manager. In such a scenario, the focus would be on reliability, that is, making sure that the enterprise’s processes are operating efficiently and delivering to the satisfaction of customers. This can be easier said than done especially for enterprises that have complicated manufacturing operations (e.g. chemical refineries).

4. Unsure Supply, Unsure Demand

The nightmare opposite of number 3? It’s a reality for many enterprises who market products such as consumer goods, machinery & parts, and household appliances. Enterprise sales managers would constantly be guessing demand (what they would call forecasting), while supply chain executives would be unendingly negotiating long-term contracts with vendors, at the same time managing inventories of materials and merchandise. There would be pressure not only to minimise working capital but also to ensure availability of items to customers. One key take-away strategy for this scenario is collaboration—working with vendors and customers.

These four (4) scenarios may sound over-simplified given the reality of issues that surround supply chains (how expensive materials are, where they originate, the shelf lives of materials and products, number of products the enterprise sells, etc.).

But they provide a starting point for Supply Chain Engineers (SCE’s) to devise systems that synchronise the flow of merchandise through supply chains to generate productivity and competitive advantage.

SCE’s can help managers calculate capacities and set inventory policies for unsure supply and/or unsure demand scenarios. SCE’s can also work out manufacturing reliability improvements, labour work-place settings, and equipment maintenance methodologies that would cover sure-supply / sure-demand scenarios.

As 21^st century business becomes more dynamic, SCE’s can help enterprises anticipate changing scenarios. SCE’s, for instance, can study the feasibilities of outsourcing production versus building in-house capacity given any of the different supply and demand scenarios. SCE’s can also plan contingencies for logistics such as determining how many trucks an enterprise should buy for itself versus how many should be outsourced to 3^rd party providers. SCE’s can also offer ideas for flexible production systems such as cellular manufacturing and fast-changeover assembly lines.

Enterprises face different scenarios depending on their business environment. Supply and demand of what they buy and sell may be certain or they may not. Whereas enterprise managers resort to inventories and capacities to make up for any uncertainty, supply chain engineers offer help not only in optimising for whatever scenario but also in anticipating to whatever changes that may come.

Supply chains can be complicated; supply chain engineers make it less so.

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What Is the Right Supply Chain Model for New Products?

A lot has to get done when it comes to launching a new product. Aside from marketing and selling, enterprise executives need to know how much to make, how much to stock, and how they’ll spread that stock.

If the new product is replacing an older one, the enterprise would need to figure out what to do with the older product’s inventories and its raw and packaging materials. If the new product will involve purchase of new specialized manufacturing equipment, what will happen to the machines used for the older one?

New products also would have new characteristics. They may have more limited shelf lives. They may use materials that require special handling.

Many enterprise executives often plan very well the manufacturing and distribution of new products. Many, however, don’t have immediate plans how to respond to the actual demand as soon as the new product is launched. Higher than expected demand would wipe out inventories quickly and strain production and transportation capabilities. Lower than expected demand would result in inventories occupying precious floor space and idle machines and workers costing the enterprise money.

Every product has a life cycle. A new product may start slow or move fast but would eventually reach a plateau and decline. Some enterprises try to prolong the lives of their products especially if the products have profitable margins. Enterprise executives, on the other hand, won’t hesitate replacing maturing products in exchange for potentially more beneficial ones.

Joffrey Colignon & Joannes Vermorel, Product Life-Cyle (Supply Chain), April 2012, https://www.lokad.com/product-life-cycle-(inventory-planning)

Supply chain managers and engineers play a key role in the management of product life cycles. And it starts not when a product is launched but before. Many enterprise executives have the habit of telling supply chain managers to plan only when the product is just about to be introduced. And when the demand becomes reality, more often than not it comes out much different than expected; the supply chain manager ends up scrambling for more materials, more storage space, more production capacity, or the opposite.

Supply chain managers and engineers can contribute a great deal in the conception of a new product. The supply chain engineer (SCE) in particular can compute estimated needed capacities for production, transportation and storage. SCE’s can devise deployment plans and simulate various demand scenarios. They can also work out the quality assurance protocols not only for manufacturing but also for procurement and logistics.

In other words, SCE’s can develop a supply chain model for a new product. It wouldn’t just be a production plan or a distribution plan. It would be a comprehensive supply chain road-map that would synchronise the procurement of materials, production of goods, and inbound & outbound logistics. Such a road-map would even cover after-sales services such as warranty responses and retrieval of damaged or rejected items.

An enterprise would stand to benefit a great deal from a supply chain model for a new product. It would offer the enterprise’s finance team a better forecast of cost and working capital and give enterprise executives a clear crystal ball of how a product would do once it is in the market.

Making a supply chain model for a new product is not easy but it wouldn’t require re-invention.

Hernán David Perez, supply chain professional and teacher, developed a “Supply Chain Roadmap” that would answer the question: “which supply chain strategy best fits my business?” (Hernán David Perez, “Supply Chain strategies: Which One Hits the Mark?”, CSSCMP’s Supply Chain Quarterly, https://www.supplychainquarterly.com/articles/720-supply-chain-strategies-which-one-hits-the-mark, 2013 March 06).

Mr. Perez outlined six (6) generic supply chain models enterprises can adopt depending on their industries and strategies. The six (6) models consist of continuous-flow, efficient, fast, custom-configured, agile, and flexible. Each has a different focus, from low-cost (efficient) to agile (responsive to uncertain demand). An enterprise may adopt more than one model, i.e., it may use different models catering to different products or to specific areas of operations.

The role of the SCE would be to find and propose the right model that would best fit an enterprise’s new product. Mr. Perez’s six (6) models can be a reference for the SCE to tailor a model for the new product.

Developing a supply chain model for a new product is similar to managing a project, such as construction of a building. It starts with the design or what one wants the model to look like and function. Next would be the detailed plans of the supporting structures such as materials requirements, transportation, storage & handling methods, work crews, procedures & standards, quality assurance methods, and equipment.

Design and detailed plans are the end objectives, what we want the supply chain model to look like and how it will operate when the new product is launched. To achieve the end objectives, the supply chain professionals would need to draft the road map, the series of activities to build the structures that make up the supply chain model. It’s again similar to what project managers do: a critical path schedule that includes a timeline and the timing of investments in resources.

Implementing a supply chain model involves a lot of uncertainty. Demand, for starters, would be based on forecast and would no doubt come out much different than expected. The model should take into account various scenarios. To put it another way, the supply chain model should be ready to adapt. It should be quick to react to fluctuating demand such as preparing a customer order & shipping system that quickly notifies supply chain planners to position inventories immediately where they’re needed.

Costs, quality, and other issues would also likely crop up when a new product goes on line. Some people would blame it on the “learning curve,” that period of getting accustomed to a new set of activities. The longer the learning curve, however, the greater the expense and enterprises don’t want to spend too much time and capital for it. The supply chain model, hence, should also be prepared for changing situations on the ground. For example, the model should include training of machine operators and warehouse material handlers in regard to a new product’s characteristics and storage requirements. The model may also include facility designs that allow swift change-overs between product variants (e.g. sizes, colours).

The ideal supply chain model is one that does not only cover for the introduction of a product but it’s future life cycle stages as well. The supply chain model should incorporate monitoring systems that watch out for trends not only in demand but also in external factors such as commodity prices, freight rates, exchange rates, labour wages, taxes, and trade tariffs. It should also watch out for disruptions and opportunities which it should be ready to respectively mitigate or take advantage of.

It isn’t easy to launch a new product. It’s not simply just having stock ready when it’s time to sell the product. There are many things to consider if one wants to attain long-term success.

Every product has its life-cycle. One has to understand it and make a supply chain model for it in order to ensure its marketing success.

The best kind of supply chain model is one that is ready to meet the challenges of inevitable change.

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