I’ve been around long enough to remember the days when it took many hours to complete an MRP regeneration – sometimes 20 hours or more. In those circumstances, MRP could only be run once per week, on the weekend, and hopefully would complete successfully because there wouldn’t be another chance until the next weekend.

When faster and more affordable computing power brought that calculation time down to a few hours or less, companies began running MRP every night. This can be a great benefit in a dynamic environment where new orders are received every day, new priorities are developed and conditions are changing constantly. But the planning staff, who previously had a full week to work through the recommendations and actions that resulted from the MRP run, now got a whole new plan every day. For most, it was impossible to keep up with the deluge of changes and action messages. Many companies reverted to regular weekly runs with occasional updates in between when big changes hit, or daily “net change” runs and weekly regenerations.

A similar pattern became evident with Advanced Planning Systems (APS). In addition to speed, APS plans material and capacity at the same time, overcoming one of the perceived limits of traditional MRP. A typical APS can regenerate the plan in seconds, so many companies recreated the plan any time a new order or a noticeable change became evident. But the constantly changing plan was a nightmare on the plant floor. Efficiency nosedived when schedules and priorities were constantly in flux. Once again, the tool was most beneficial when its full capabilities were scaled back, with most companies regenerating the plan and schedule daily and only updating it during the work day when a significant change made it valuable to do so.

New technology and tools can be great competitive weapons when properly applied and where they help to enhance performance. But not all tools are of benefit in all situations. Lots of folks get excited about drum-buffer-rope, lean and kanban and other ideas and techniques but these, too, must be applied appropriately in order to deliver the expected improvements.

Push inventory management is based on a forecast.

Purchasing and production plans are built around that forecast, taking expected lead times and lot sizing into consideration. As long as the plan is carried out and demand meets expectations (the forecast is accurate), the result is efficient operations and a managed amount of inventory.

With the pull approach, nothing is made or purchased until it is needed.

On the surface, this sounds like a more logical and sensible approach and it does, indeed, usually result in much lower inventory levels. But it also relies on relatively stable demand and efficient (short lead time) operations to be effective. In other words, pull can be very beneficial where it fits, but it doesn’t fit everywhere.

In distribution, push and pull have a slightly different meaning.

A push distribution system is managed centrally — the supplier forecasts the needs of each warehouse and distribution center, usually based on a rolled-up consolidation of their individual forecasts, and maps out the most efficient replenishment plan for the entire network resulting in minimum inventory and distribution costs and stable production schedules at the plant.

Pull distribution management, as you might have guessed, allows the individual warehouses and distribution centers to pull inventory as they need it from their designated supplying warehouses on up the line to the factory or supplier. Pull provides the most effective inventory control at the bottom of the inventory chain, closest to the customer, but is less efficient overall and places the heaviest burden on the supplier and central warehouse because demand is unpredictable and can vary considerably due to the uncoordinated pulls from the outlying warehouses.

You can see that push and pull each has its place, and both techniques are being used effectively in manufacturing and distribution companies around the world. There is a continuing debate in the operations management community, however, over how best to manage inventory and replenishment. Each side has its advocates and each side is striving to improve the tools and the results of its approach. The strongest movement in recent years has been to develop hybrid approaches that can combine the efficiencies and stability of push with the considerable benefits and responsiveness of pull.

Which approach is best for your company? That will depend on the kind of business you are in, the lead times for making and shipping your products, predictability of demand, and customer expectations. Perhaps some elements of both approaches would provide the best results.

Reprinted from Portsmouth Herald / Seacoastonline.com – April 30, 2012

When the snow season has passed and it’s no longer painful to spend time outside in the open air, it’s time to drag out the patio furniture, put away the snow blower and shovels, and, while you’re at it, do some cleaning and organizing. You know, take care of all that stuff that accumulated during the winter months… old and broken household items, things you don’t really need anymore but it was convenient to just store them rather than dispose of them?

I suspect that your warehouse might also be suffering from a moderate to severe case of “accumulitis” and might benefit from some spring cleaning. And spring, in this case, is not necessarily April and May. Each new product release, any product retirement, or simply a change in the level or composition of inventory due to seasonal patterns or demand changes, offers an opportunity to do some cleaning and organizing.

One of the key principles of lean thinking is the identification of what has value, and another is being clean and organized (to avoid wasted effort). Applying these principles to the warehouse in a “spring cleaning” event qualifies as a lean initiative.

Every warehouse has some obsolete inventory tucked away somewhere – parts and products that have no real value and may even have been taken off the books but never disposed of. Get rid of them. If they are truly worthless, perhaps they can be sold for scrap or recycled in some manner. If not, bite the bullet and haul them to the landfill.

Are there other parts or products that have some value but not enough to justify the continued storage and handling? There are lots of outlets for outdated items with some residual value. Have you noticed the recent proliferation of surplus, job-lot, and salvage stores lately? There are also a number of web-based outlets for industrial parts and materials. You might also put your engineers and designers to work and maybe they can come up with a creating “outside of the box” way to reuse surplus parts and materials.

Whatever means you use to clear out useless or near-useless stuff, take the opportunity to reorganize the warehouse to make good use of the space you’ve freed up. Modern warehouse management systems optimize the use of space for higher utilization and/or convenience and reduced handling. Even without the benefit of such a system, you can likely improve the utility of the warehouse by rearranging stock location and improving put-away / picking processes.

Use each “spring cleaning” opportunity to take a fresh look at what’s in the warehouse and how it’s organized. Not only will you make better use of the space and make warehouse operations more efficient, you can also take credit for a successful lean initiative.

Since goods coming into an FTZ are still technically outside of the country, it is possible to bring in parts from another country, assemble them into products, then send them out to yet another country, and, legally, they have never been in the United States and are subject to no duties or tariffs. This can be a strategic advantage, lowering the cost of doing business for a company making products for foreign markets using parts and materials that are sourced overseas.

Sometimes, there are higher duties on parts than there are on a completed product. In that case, it is advantageous to bring the parts into an FTZ and assemble the product in the zone before crossing the fence into the United States. Once again, the company benefits from lower costs that allow a product using U.S. labor to be more competitive with products manufactured elsewhere.

Some products have import limits (quotas). A shipment received into an FTZ that is beyond the quota limit for that period of time may be held in the FTZ until the next cycle, when the quota refreshes.

First authorized in the United States in 1934, FTZs were created to promote employment and thereby generate economic benefits in the area around the zone. They are often set up in locations that are economically depressed or otherwise could benefit from more manufacturing in the area. The law was modified in 1950 to broaden the kinds of manufacturing activities that could be conducted in an FTZ, and yet another modification in 1980 redefined taxation for zone-produced goods coming into the U.S. market so labor value would not be subject to tariffs — just the imported raw materials. These changes greatly expanded the popularity and benefit of FTZs.

FTZs promote employment, especially manufacturing jobs, and level the playing field for products generated by U.S. labor that are exported to other countries.

Reprinted from Portsmouth Herald / Seacoastonline.com – April 02, 2012

Your customer’s experience with your company can drastically affect how they judge your product. The Internet has made it easier for your customer to compare products, price, service and more, and many companies remain competitive with less than superior products because they offer a higher level of service. Actually, it is believed that customer service will ultimately become the most substantial benefit offered by a company because global competition makes it more difficult for products alone to offer unique advantages.

Several recent experiences in my own life have brought this point home. I rented cars from two different companies, both offering essentially the same cars at competitive prices. In one case the agents were rude and incompetent, in the other, the experience was outstanding – the best I have experienced in 30 years of renting cars at airports. You can be sure that I will never do business again with the first company and will go out of my way to use the second one, even if they are not the cheapest alternative.

In another interesting example, the owner of a pet store we know notifies people who park in his reserved parking spaces that they can continue to park there as long as they come in and buy something.  If he had been aggressive with these parking violators, he would probably have made enemies. Instead, he has made a sale every time.

Here are five areas where you can improve the purchaser’s experience with your products:

1. Sales/Marketing – presenting a realistic description of what the purchaser can expect. Set expectations realistically then exceed those expectations.
2. Training/Education – assisting the customer in learning how to select and/or use your products
3. Accounting/Billing/Financial Assistance – help customers with their financial commitment, managing their account, securing credit, resolving payment problems
4. Delivery/Repair/Support – delivery people and service/repair technicians respond to questions or problems and handle damaged or malfunctioning products. Make sure that they have a customer service outlook and a cooperative rather than adversarial approach
5. Complaint Resolution – addressing customer problems immediately and efficiently. Empathize and act as an ally, not an enforcer

Provide multiple touch points tailored to customer preferences, needs and convenience:

1. In-Person – retail stores and other outlets or salespeople who visit the place of business
2. Telephone – many companies have a dedicated department or call center that handles customer inquiries or performs Telemarketing (making sales calls)
3. Company Websites – providing Help, FAQ or monitored discussion areas where customers can answer their own questions or seek advice from other users.  eCommerce modules can be used for certain types of products and provide a key area for customers to experience the company personality and service
4. Kiosks –standalone, interactive computers, sometimes equipped with touch-screens, offer customers different options to purchase products, review their accounts, check-in with airlines, apply for jobs, and do banking.
5. Apps – application software that runs on cell phones, tablets or computers provides another way to help customers perform different activities

The goal of your business in terms of its customer interactions is to generate loyalty and there’s no better way to do that than to offer quality products and services and be responsive to your customers. Bad customer service can negatively impact even outstanding products, but responding to your customer’s needs is critical and in the future will be demanded even more than it is today.  Whether your company uses technology or human resource or a combination, investing in customer service will pay off in the long run and positively affect the bottom line.

References:  KnowThis.com, Inc.com, 1to1Media.com

The EXECUTIVE Supply Chain Workshop is an intensive one-week seminar for executives offered  at the charming Snowy Owl Inn & Resort in the center of Waterville Valley New Hampshire on April 16 – 20, 2012.

During this intensive five day workshop attendees will be immersed in Supply Chain structure and issues and will explore:

– Supply Chain Overview – objectives, processes, logistics, methods

– Supply Chain strategies, planning, design, market segmentation

– Key considerations for planning, inventory, continuous improvement

– Customer Relationship Management and Supplier Relationship Management

– Sustainability and the supply chain

– Measurements, responsiveness, operations, communications

– Risk, its sources, impacts and mitigation methods

– Globalization and logistics

– Demand management, forecasting, marketing considerations

– Technologies that support Supply Chain Management

– Supply Chain dynamics

Hosted by APICS Granite State and using the APICS Certified Supply Chain Professional curriculum as a guide, seminar coordinators will lead executive-level discussions from 8:30 AM until approximately 5 PM.

For more information contact us.