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November 19, 2007

Inventory Record Accuracy

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An acceptable level of inventory record accuracy across the supply chain is a necessity for making Flowcasting (or any automated ordering practice) work properly.

But IRA is a lot like breathing. Doing it may not be very exciting – but NOT doing it has disastrous consequences!

Inventory Record Accuracy: Unleashing the Power of Cycle Counting by Roger Brooks has long been regarded as the seminal book on the topic since it was first published in 1995. Recently, Brooks teamed up with Larry Wilson to write the second edition, which updates the practice of IRA with the advent new topics such as RFID, VMI and lean environments.

Although many of the discussions are geared for manufacturers, the principles are universal. Every business that manages inventory should have multiple copies of this book!

You can get it on all the online booksellers like Amazon and Barnes & Noble, but if you’d like a copy that’s been signed by the authors, you have to buy it from the Oliver Wight Library. That's where I got mine!

November 07, 2007

Of Mice and Men

“So, let us not be blind to our differences - but let us also direct attention to our common interests and to the means by which those differences can be resolved.” - John F. Kennedy (1917-1963)

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Picture a white lab mouse.

Now picture a fully grown man.

If someone asked you to describe each of those images, what would you say?

You’d probably talk about the relative size, shape and colour of each. Pressed further, you may talk about things such as intelligence, diet and habitat. Indeed, the differences between these species is irrefutable – at the merest glance, one would never confuse a man with a mouse.

But what if you were instead asked to list all of the things that mice and humans have in common?

- two eyes
- two ears
- two forelimbs and two hind limbs
- two lungs and two kidneys
- one heart
- one liver
- one pancreas
- digestive system with stomach, intestines, bowel
- ingests water and organic matter for survival
- processes oxygen into carbon dioxide through respiration
- two possible genders
- etc.

This list could go on for quite awhile. In point of fact, according to a 2002 research project that compared the genomes of mice and humans:

“Among the findings are that mice and human beings both carry about 30,000 genes. Differences within these individual genes -- the precise sequences of the four-letter DNA code -- spell out the obvious differences between the two mammalian species. On a letter-by-letter basis, the genes are 85 percent the same.”

Obviously there’s a good reason for using mice in medical experiments!

The point here is that the similarities are as plain to see as the differences. But the superficial differences are fewer, so we choose to attach greater importance to them and take the “hum drum” (but much deeper) similarities for granted.

In supply chain planning, this tendency to focus on the superficial differences is widespread. Here are some of the examples that we hear all the time:

- “sure that works for light bulbs, but not perishable produce”
- “we sell electronics, not chicken noodle soup”
- “we’re in the apparel business – our supply chain needs to be managed totally differently”

All of these statements are correct – if you only look at the superficial differences, such as the predictability of the demand or the length of the product lifecycle.

But from an end-to-end supply chain management point of view, is there really that much difference between a pack of light bulbs, a head of lettuce, a cell phone and a sweater?

Like mice and men, do they not have “85% of their DNA” in common?

- they are all produced and move through a logistics and inventory network from the point of manufacture to consumers’ hands
- they all experience transformations and consume resources along the way
- they all experience consumer demand and have finite supply
- they all have weight, cube and value

It’s true that we must document and deal with the superficial differences as necessary, but we must also have a planning environment that’s manageable and not unduly complicated.

When setting up a supply chain planning infrastructure (processes and systems) we must resist the temptation to develop separate processes and tools every time we have an imperfect fit. For the sake of simplicity, manageability nd efficiency, maybe we should first try to “bend” the 15% so that it can be managed with the other 85% and focus on the rule, not the exception!

November 04, 2007

Seeing

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Think about how you drive your car. You don’t wait until your wheels are on the shoulder or halfway into the oncoming lane before you react. You constantly make small, incremental adjustments based on what’s ahead to stay between the lines.

The Flowcasting process is really all about looking ahead and taking corrective action to solve potential problems before they become actual problems, versus constantly dealing with the aftermath of crises that have already happened. Time spent on fire prevention (improving forecasts, working to relieve constraints and reduce lead-times) is far more valuable than time spent firefighting.

The Titanic struck an iceberg in the middle of the night - at 11:40PM on April 14th, 1912. If she had approached that same iceberg at the same rate of speed with the same man at the helm a mere 8 hours earlier, she never would have sunk. Sometimes the difference between a simple course correction and utter disaster is the ability to see it coming.

Flow

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Supply chain professionals are beginning to talk a lot about a concept called Flow. In short, Flow aims to move products from manufacturer to consumer in as little time as possible. For many products in a retail supply chain, Flow can happen in a matter of hours, or within a day or two.

But to ultimately achieve Flow, the information from consumer to supplier must be timely and actionable. Our prediction is that Flow will only be achieved (on any scale) by using Flowcasting – that is, timely, accurate, up-to-date projections of inventory movements from source to store throughout the entire retail supply chain.

After all, why’d you think we called it Flowcasting?

November 02, 2007

Synchronizing the Retail Supply Chain

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Admittedly, Pieter van der Vlist's thesis (published in June of 2007) was a bit of a shock to my system. After all, he's suggesting a retail supply chain where:

1) Retailers synchronize their buying to match the manufacturing schedule.
2) Retailers hold ALL of the supply chain inventory and manufacturers hold NONE.
3) Retailers forward position the lion's share of their inventory to the store.

While this approach seems to fly in the face of ECR principles, according to Dr. van der Vlist, the real savings in the retail supply chain will be achieved by minimizing handling, reducing time pressure and greatly increasing consolidation - not by reducing individual inventory pools.

Obviously, a model of this nature would require a complete rethink of the financial relationships between retailers and their suppliers (he devotes an entire chapter to this topic alone) and would require a critical mass of large retailers to adopt it in order to achieve the economies of scale - but if he's right the savings could be well worth it.

Particularly interesting is his discussion of a new transportation network called "The Carousel".

Click here to read the abstract - the link to the download is at the bottom of the page.