Don't Delete Your Old Forecasts and Actual Demand Information

Interesting models can be developed to compare forecasts and actual demand. We have talked about how to quantify and monetize better forecasts accuracy earlier. How about maximizing profit base on demand risks (again forecasts variance near or far from actual customer demand) and limited production capacity in multiple plants? especially one has high minimum order quantity (MOQ) and low cost, the other has low MOQ and high cost.

So our small businesses, you can show that your flexibility and quick changeovers improve profits for your customers.

Supermarket On Subway Wall

Do small businesses always need to rent space to sell? we all know we can have home offices, and sell stuff on the internet. How about setting up a supermarket on the wall of the train station for passengers to browse and buy food on their mobile phones?

Cost Modeling Partnership Between MNCs and SMEs/SOHOs

What is the use of cost modeling?

How do we develop a cost model?

After we have establish the relationship, what can I control to improve?

How do I compare whether the unit cost can be reduced with scale and utilization. Can I learn from countries/regions with higher labor cost, but are more productive? Yes! categorize cost into fixed and variable cost plot the below!

Method to Quantify Higher Profits From Better Forecasts

Much is being said about changing processes, reducing changeovers, setup times to reduce production lead times. But how do you quantify the change in profits through better forecast?

One way is to compare the standard deviation of forecast with actual sales when it was taking a long time. Use marginal contribution to allocate products as capacity, shelf space is always limited compare the profit using this approach with allocating products with more accurate forecast.

Don't forget that if you can aggregate purchasing, you can lock raw materials/supplies to speed up lead time dramatically. That's what Li and Fung do.

 

Relationship Between Utilization and Cycle Time for Multiple Product Processes

Small businesses thrive by moving faster than much bigger companies. They may not have scale in working on one product, so they probably work on more than one product, especially so in a transshipment hub like Singapore. The traditional approach is always to maximize utilization, but we all know increasing utilization to its limit always increases cycle time, or lead time dramatically. So how do we know where we stand for multiple products?

Below is an example of calculations to find utilization for 2 machines with multiple products.

Clearly from the plot below, we do not want full utilization.

How do we improve performance of a line/plant/process?

1. Relate operational performance like WIP, Cycle Time, throughput and customer service to business level metrics like profits, cost, ROA, inventory turns etc… ask questions like whether inventory reduction will result in significant cost savings? Would cycle time reduction result in significant competitive advantage? Would throughput increase help generate significantly more revenue? Would improve customer service generate business over the long run?
2. From a process point of view, always improve utilization first, then reduce variability, consider batching. The VUT spreadsheet mentioned earlier will help you understand its relationships and interdependencies.
3. Consider structural changes like layout, pull mechanisms, including shifting the push/pull boundary. Pull mechanisms can dampen fluctuations in WIP/cycle time and feed bottlenecks more smoothly.

Are Full Containers Always More Cost-Effective?

It is also usual practice now for each of say, ten factories to ship full containers of its products to a consolidator who will unpack and repack all ten containers before shipping the assortment to the distribution centers. Moving one container from factory to factory and get each factory to fill just one tenth of the container, and then shipping it directly to the distribution center may be cheaper and likely to be faster, as the consolidator is eliminated altogether.

Cost Effective, High Speed High-Mix, Low-Volume Manufacturing; In Warehouses and Distribution Centers too.

High-Mix, Low-Volume manufacturing is always interesting. In fact, factory physics concepts are also very relevant to value-added activities in warehoures and distribution centres as well. How do we reduce changover and setup times for kitting, packing, assembly, quality control operations for different kinds of products? This is especially critical to Singapore where 80% of its cargo are transhipped. We need high value add and high velocity in our manufacturing and distribution operations.

For small and medium sized enterprises, managing variability can be tricky. How many times do one need to counsel a slower staff, how do we set standards without letting the team find better ways of doing things?

What is more important then, is to understand how inventory, time, capacity buffers interact with variability to find the optimal portfolio for your company.

Variability flows through the process, and a spreadsheet to understand gather process times, process time variability, machine availability, machine repair, machine failure times, batch size, yield, setup time, setup time variation and the costs associated can help companies refine their operations using inventory, capacity and time levers. What's more, if you have high-mix, low volume operations, you can find out how much your machines are utilized from doing different mixes of products. You can see how high utilization interacts with process variability and effective process time (VUT)

Visibility systems for responsiveness often minimizes inventory. We have to be very careful with this though. To minimize inventory and still be very responsive, one must have high capacity buffer.

These fundamental relationships are even more important with the enterprise resource planning, warehouse management systems, transportation management systems implementation.

Get the spreadsheet template at: https://sites.google.com/site/fastsupplychains/templates

Price War?

What do we when a competitor reduces its price drastically? Will you go into a price war? We should always build our business on a speed, flexibility, cost, service level combination frontier right.  If not, one way is to try to buy from the supplier that is offering the drastically low price and resell it :)  Another approach is to look at the other costs involved even if the product or service is cheaper. Higher inventory holding cost due to longer lead time? Higher quality inspection cost? The total cost for the customer may be in your favour.

Backhaul

Making use of space in trucks during backhaul routes for companies is really interesting. To the company, it is sunk cost and any company that they make during the backhaul is a bonus. There are already websites in US that shares available backhaul routes. Example: http://www.123loadboard.com/backhaul-freight/West-Virginia/Exchange/

Shall we start something from Singapore-Malaysia-Thailand?

We do not need to be rigid in the pick up and drop off locations. As long as it is along the route, a deal can be made :)

Value Added Services Webportal?

Is a webportal to improve operations value added services like customization, light manufacturing, kitting, repackaging, returns handling, repair useful?

It will be a webportal with simple examples in spreadsheets for companies to customize for their operations to improve quickly, and is scalable. Ubiquitous MS excel is used for examples. This allows data to be pulled from and uploaded to different ERP, WMS, TMS, and DBMSs. Categorized capabilities to meet focused needs along the supply chain, or in focused areas.

Do you think the webportal is useful?