Archives for category: Operations

I recently came across this article and was quite surprised. Not surprised that Wal-Mart is pushing suppliers to improve performance, but surprised that this is a new initiative.  The supply chain group at American Airlines, one of the best I have come across, was forcing their suppliers to improve in the areas of On Time Delivery, Early Deliveries, and On Time In Full back in 1999 / 2000.  As a supplier at the time to American, we learned a lot, and improved quite a bit.  If you happen to be a supplier to Wal-Mart, do not despair.  Improving these metrics in short order is very much achievable, without breaking the bank.

Source: Wal-Mart Will Punish Its Suppliers for Delivering Early – Bloomberg

Rindge Leaphart

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Not the longest article, so take the time and give it a read.  While focused on manufacturing in the state of Indiana, the article points out that while low cost manufacturing has moved overseas, there continues to be a need in the US for companies engaged in manufacturing.  Especially those who can get product to market quickly and handle high tolerance manufacturing within highly regulated markets.  I hope everyone enjoys.

 

Source: Manufacturing in America – The Atlantic

Regards,

Rindge Leaphart

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Source: The story of the invention that could revolutionize batteries—and maybe American manufacturing as well – Quartz

Interesting article regarding innovation in an area that has stifled many a people for many a year.

 

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How Steinway (Still) Makes Pianos | Mental Floss.

For those of you who have the time (8 minutes), watch the video of how Steinway manufactures pianos in NY.  Great video describing the craftsmanship that goes into each piano.  I’m not sure how many new pianos they manufacture each year (as you will see they are a job shop with very manual processes), but the process described and captured in the video is very impressive.   What they do at Steinway is clearly a work of art.

Rindge Leaphart

and instead start talking with them.  When I make presentations I always remind myself (and others) not to talk to the crowd, but instead talk with them.  Engage them in the presentation and you might find yourself participating in a robust discussion instead of another ho-hum presentation.  I know, easier said than done.

The same holds true in interacting with your customers.  The more you talk with them, the more engaged they are,  and the more likely they will be to share your product / service with others.  I recently read a couple of books that prompted this post.  They are “Contagious” by Jonah Berger who teaches at Wharton and “Highly Recommended” by Paul Rand.  A quick side note, the book written by the professor (Berger) is well done and does not come across in a professorial manner.  Reads more like a general strategy book.  On the other hand, the non-professor’s book (Rand) definitely reads like a professorial tome.  Somewhat didactic in nature as well.  But I digress.  In general, both of these books are good and focus on the same end goal, which is how products and services catch on with the masses.  They are also both somewhat critical of Gladwell’s Tipping Point and I must admit more insightful.

I am not going to bore you with passages from each book, but focus on what I think is the most important aspect, which also happens to jibe with my experience.  There are clearly a number of offline and online methods (Berger and Rand do a good job of describing) that a company can use to facilitate customer interaction.  Whether you are soliciting ideas from customers or engaging them in contests of some sort, you may find yourself 2-3 steps ahead of the competition.  Many companies have facebook pages, twitter accounts, etc.  Many companies do a fine job of pushing information to customers via these channels, but how many provide a meaningful mechanism for feedback?  More importantly, how many provide a meaningful mechanism for interaction?  Take a step back from your day-to-day responsibilities and consider what activities you can influence so that your organization can better engage customers.  What things can you do to influence “word of mouth” about the product or service you provide? Advertising has been around for quite some time, but an endorsement from another customer (an engaged customer) is much more powerful than a paid advertisement.

So, Stop Talking to Your Customers…And Instead Start Talking With Them

 

Rindge Leaphart

http://www.linkedin.com/in/rindgeleaphart
https://rindgeleaphart.wordpress.com/

 

Brief, but good article geared for small / medium sized business owners.  One of the areas the article touched on was firing customers who may be late payers or have low margins.  This is a concept I often see referred to in the business press, but I have not yet come across a situation where I “fired” a customer.  Enjoy the article and let me know if you have ever fired a customer.

Are You Growing Too Fast? – Sandeep Dahiya – Harvard Business Review.

Rindge Leaphart

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http://www.quora.com/Business/What-are-the-top-5-questions-every-accountant-should-care-about-when-it-comes-to-the-books-of-a-small-privatly-held-business

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Brief article about the rise of machines (automation) in China.  Some of the suppliers I have dealt with in China could benefit / participate in this  trend if they consolidated their operations.  I’m not sure how this trend might apply to the apparel industry.

Credit Suisse Chinese Automation Boom – Business Insider.

 

Rindge Leaphart

A brief but good article.  I never thought hardware ever died, though.

In Silicon Valley, Hardware Is Hot Again – Businessweek.

 

Rindge Leaphart

Many people have heard of the term Just in Time (JIT) as it relates to manufacturing, production scheduling, or delivery.  But have you heard of Just in Case (JIC) manufacturing? It is a term I coined years ago.  I coined the term one day while walking through a plant that only produced finished goods to order.  The business did not actively stock finished goods.  They stocked raw material and some sub-assemblies in order to produce with relatively short lead times, but in general they did not stock finished goods.  During the walk through, I looked at a work order for a part that was being machined.  The operator was machining lets say 30 parts, yet the sales order associated with the work order only called for 15 or 20 parts.  I asked the machine operator and his supervisor why they were machining more parts than were called for by the sales order.  The response I received was quite curious: “this is a really tough part to machine and we have many rejects, thus we produce extra parts just in case (italics added) we have to scrap a part.”  At that point a new term was born: Just in Case (JIC) manufacturing.  I asked the operator how often they actually had to scrap a part.  Neither he nor his supervisor could answer the question.

I told the supervisor that I suspected that they were overproducing and tying up unneeded cash in inventory.  Additionally, this was a plant that was trying to improve on-time delivery.  I explained to the supervisor that if they were tying up capacity by producing excess and unneeded parts, that they were impeding their ability to produce on-time with short lead-times.  The supervisor assured me that this didn’t happen often.  I then asked the supervisor to take a walk with me to the warehouse.  I asked the supervisor if he was sure they didn’t overproduce on a regular basis.  He assured me they didn’t.  I then asked one of the warehouse employees to pull up several recently completed work orders for parts that had been delivered to inventory.  When we checked several of the recently completed work orders, we found that a large percentage of them were completed for quantities that were larger than what the sales order called for.  At this point the supervisor was a little embarrassed, but there is more to come.  Employees on the floor ALWAYS and I mean ALWAYS know more about what is going on in a plant than supervisors and managers.  Knowing this, I engaged the warehouse employees in a conversation on this subject and they assured us that this happened on a regular basis.  Once again, the supervisor was embarrassed.  At this point the employees told me about the T location.  Being an inquisitive lad, I asked what is the T location.  Their response: “oh that the is the trailer we have outside where we store all of the production overruns.”  At this point the supervisor was quite embarrassed.

As you might imagine the supervisor was besides himself.  But being a smart guy he put a stop to the overproduction and eventually eliminated the T location.  With several other changes we were able to improve the plant’s on time delivery performance as well as their financial performance.

Key takeaways  / reminders from that day: 1. I learned on that day that Inventory is the Root of All Evil.  If you want to know if you have a problem in manufacturing, check your inventory levels to make sure you don’t have an issue with JIC manufacturing.  2. I learned about JIC manufacturing. It is more endemic than you might imagine. Walk the floor and check your work orders to see if you have a case of JIC. 3. Always talk to the hourly employees, because they know what is really taking place on the floor.

Has anyone else encountered similar issues?

Rindge Leaphart

http://www.linkedin.com/in/rindgeleaphart

What type of business are you responsible for managing?  Is it a distribution center (DC)?  Is it an assembly facility?  Is it a machine shop with assembly and DC characteristics?  Is it a chemical plant? No matter what type of business you manage, you should have a solid set of metrics that measure whether your business is:  A.Meeting customer expectations, and B. Performing in an efficient and profitable manner.  I’m not going to spend time discussing measures of profit.  Instead, I will focus on operational metrics that have served me well in the past.  Many of these metrics may seem like common sense, but you would be surprised by how often they are overlooked and in some cases not even tracked.  Also, I hope not to bore you with an never-ending list of metrics.  Sometimes you  can get buried in the metrics and lose track of how the business is really doing.  There is always a balance that one must strive for.

Below are a list of metrics that I always like to have in my tool bag:

  • On-time delivery (OTD): Based on my previous posts, this metric may not be surprising.  You have to measure your ability to deliver products on-time: whether to customer expectations or to promise dates that have been provided to the customer.  There are many different methods to measure customer satisfaction.  And by no means is OTD the holy grail, but for a business that is delivering a product (and maybe even a service) to a customer, this is one of the best operational metrics that you can have in place.
  • Percentage of orders past due: What percent of your backlog is past due?  A high percentage of past due orders is typically correlated with a low percentage of OTD.  Both of these metrics must be looked at hand-in hand.  It is very possible to have high OTD and a high percentage of your orders past due.  Look at both these metrics to make sure the system is not being gamed.
  • Lead Time: How long does it take you to ship an order from the day of order receipt?  This is another key metric that I always want to view.  You might have an excellent OTD rate, but lead times of 90+ days.  In many industries 90 days is not acceptable.
  • Vendor OTD.  Without decent performance from your vendors, it is tough (not impossible) to perform well for your customers.
  • Purchase Price Variance (PPV): This metric allows me to tell how the purchasing team is performing. It also provides good insight on material prices (are they going up or down).
  • Capacity Utilization:  Are you overstaffed? Understaffed? Do you have enough equipment? How do you tell if you don’t don’t measure?  There seems to be an acceptable rule of thumb that capacity utilization of 85%  and above requires additional capacity.  I like that rule of thumb. Many companies don’t heed this metric.  This is one of many reasons you need a detailed sales forecast by product line.  Without it, it becomes hard to determine how much additional capacity you might need to add.
  • Cycle count accuracy: I always joke that inventory is the root of all evil.  Well if we have to keep inventory, lets make sure we know what we actually have on hand.  The importance of cycle counts cannot be underestimated.
  • Gross Margin by Product – specifically I look for low margin products: typically below 35% to identify if I have:  1. A sales price issue, 2. A bill of material issue, or  3. A purchasing issue.
  • DSO: What good is it to ship a product on-time (or deliver a service) if you can’t get paid in a timely basis?
  • Dock to Stock: How long does it take from the day you receive a product to the time you actually put it on the shelves?  You might be understaffed in your warehouse if it takes you 5+ days to put inventory away.

Different businesses use different metrics.  The ones above are ones that I have always found useful. What metrics do you track in your business?

Rindge Leaphart

http://www.linkedin.com/in/rindgeleaphart