The Effect of Material Management Technique on Production Planning Process

This article will talk about the effect of Material Management technique on production planning process.  Material management is an approach that is closely integrated with various processes such as purchasing, planning, warehousing or storage, stock-keeping and materials movement from point A to point B. In other words, it’s a management process of material involving purchasing, storage control and transportation.

Due to the rapid growth and industrial development that the 20th century has seen, the” Traditional 5M’s which are Machine, Material, Manpower, Money and Management” have been effectively managed.

The industrial revolution that took place made the material(s) the largest element of costs in any organization. Many firms in the 20th century started recognizing the importance of material and other material activities such as purchasing, warehousing or storage, stock control and the distribution process that is carried out by the organization.

Till the year 1950, organizations had identified the need for effective coordination or integration of such material activities (mentioned above) and material organization tools concept, which includes physical distribution movement, logistic movement and material management. This was a way to check, coordinate and control the organization’s activities related to materials.

At a global level, there is no definition that defines material management very clearly.

Here are a few points to keep in mind for material management:

  1. Identification, classification and stocks coordination
  2. Provision, controlling the inventory and stress accounting
  3. Organizing the warehouse and its layout
  4. Distributing and handling in house storage
  5. Materials in the store should be properly presented

As we have mentioned above that there are no global definition for material management, an organization has to use the most suitable or appropriate technique that works best for them. It has to be implemented in the most effective way to ensure the cost is consistent with the service provided.

As per the American Production and Inventory Control Society (APICS) material management technique and production is grouping of management function related to the complete cycle of material flow from the purchase and internal control of work in the latter term, traditionally is limited to internal control of production materials.

Upon looking at the above definition, we can easily see that they are not different from each other but there is some difference in their approach and terminology.

For a detailed understanding of the process, please contact iACT Global.

Building a smart phone application of your business! Challenges and Opportunities

56413Increasing number of companies are coming out with their mobile applications to reach to customers.  Creating a mobile application for your business is not difficult. What is more difficult is to integrate your operations and backend infrastructure with your application platform.

When a customer orders a product or service from your mobile application, the entire supply chain should get activated with that order. The IT infrastructure plays an important role in communicating information of this order across the supply chain. The operations team gets the order; packs it; transports it and gets it delivered to the address of the customer. The transportation and delivery part are nowadays being increasingly outsourced to third party logistics vendors.

While designing the application of your business, you should try that customer service is improved because of this application. You can do so by minimizing the number of steps that a customer has to go through for completing the purchase transaction. Smartphone applications can be successful in increasing market penetration of your business only if they increase customer convenience in some way.

When a customer places the order of a product through the smartphone application of your business then he/she expects faster delivery of the product. So the operations and supply chain of your business also need to become more agile to support your application channel distribution strategy.

The smartphone application should give customers the convenience to provide their feedback on the quality of product and customer service delivered. A dedicated customer service team should be there to readily address any grievance or issues that customers raise through the application.  This will go a long way in improving customer service and will encourage more customers to download the application of your business and use it for ordering your products or services.

According to data from eMarketer number of smartphone users in the world, by the end of 2014, were 1.75 billion. India has the third largest smartphone market in the world ,with 315 million users, by the end of third quarter of 2015. With the continuing decline in prices of smartphones, the penetration of smartphones in India will increase further. The penetration of smartphones in rural markets of India is increasing very fast. Therefore without a mobile application, a business may lose on huge opportunities of increasing revenue growth and market share.

A holistic smartphone application strategy can play a very important role in improving customer service and satisfaction. Such a holistic strategy is underpinned on integrating your mobile application with your operations and IT infrastructure

Zara – Unconventional wisdom and unique application of technology in operations & supply chain management

ima_SCMClothing retailer Zara is no ordinary company. It has changed the way in which fashion apparel are manufactured and sold. And it has done so by leveraging technology and by defying prevailing wisdom of experts. Zara, based in Spain, is owned by Inditex. Zara has stores in more than 68 countries, including India.

Zara takes just 15 days to complete the entire value chain from designing a set of clothes to manufacturing them to sending them in the stores for final sale. Its competitors take somewhere between 3 months and 6 months for doing the same thing. This shorter lead time and cycle time gives Zara unbeatable competitive advantage over rivals. Every 15 days customers get to see new style of clothes in Zara’s stores.

Zara achieves this superfast lead time by having vertical integration. It owns most of the factories in which its clothes are manufactured. These factories are located in Spain and use state-of-the-art technology in production.

The prevailing wisdom is to outsource manufacturing to contract manufacturers in low cost locations such as Bangladesh and China. Zara doesn’t believe in this wisdom. By owning its factories, Zara tends to have tighter control over its manufacturing processes. It is able to implement Just-in-Time (JIT) manufacturing. JIT enables it to manufacture clothes fast and to carry as little inventory as possible.

The vertical integration is not limited to owning manufacturing facilities. Much of the fiber and dyes that go into manufacturing of clothes are manufactured by Zara’s subsidiaries.

Zara uses sophisticated inventory optimization software to determine inventory needs of its stores around the world.  Managers in its stores use personal digital assistants (PDAs) to regularly get feedback from customers on the style of clothes that they like and those that they don’t. They then send these feedbacks to the team of 300 designers that sit in the company’s headquarters in Spain. On the basis of this feedback, the designers turn out somewhere between 3000 and 4000 new designs of clothes every year. They use computer-aided-designing and other designing software in the process of designing clothes.

Zara also has a unique distribution model. It owns just two large distribution centers. Both these distribution centers are located in Spain. From the manufacturing and sewing facilities the finished clothes are shipped to these two distribution centers. From the distribution centers they are then shipped to stores around the world. In order to minimize transportation time, Zara uses trucks for short distance transportation and chartered cargo flights for long distance transportation.

Big Data Analytics for solving transportation and logistics problems!

A recent report by consulting firm McKinsey & Company says that Big Data aConnected_Car_Brings_Intelligence_to_Transportationnalytics will be used more in future for resolving some of the problems in transportation that are currently being faced.  Big Data is the term used to denote analysis of large amount of data. This analysis can result in generation of important information and insights. This information can then be used for making better decisions.

The McKinsey report explains that big data analysis is being used for reducing road congestion in Israel.  On a major highway in Tel Aviv – the capital of Israel- data from toll tax receipts is constantly analyzed to identify peak hours of traffic. In turn the toll taxes are raised during peak hours in order to control traffic in these hours and discourage those from using the highway that do not have a need for it. Toll taxes are reduced during off-peak hours in order to shift more of traffic to these hours.

Brazil is using big data analytics for reducing air traffic congestion.  The country uses data from Global Positioning System (GPS) for optimizing air traffic, says the McKinsey report.

Other companies and institutions are likely to use more of big data analysis in order to solve transport related problems. Similarly private companies too will use more of big data analytics for solving issues related to logistics. For instance, a company can control logistics costs by analyzing data on transportation rates paid in the past and identifying periods when these rates are low. Then it can control some of its logistics costs by shifting more of its transportation needs to these periods.

The McKinsey report estimates that annual savings of $400 billion could be made globally if big data analysis is used for optimizing the usage of public infrastructure such as roads. . The use of big data analysis in the area of transportation and logistics is just one instance of how companies and institutions are using data analytical tools for optimizing their performance.

As companies and institutions use more of Big Data analytics for solving problems in the areas of transportation and logistics, the ability to operate big data analytical software will be an important skill for job candidates.  It is the availability of large number of business intelligence software that has made analysis of large amount of data in real time possible.

The Most Important Questions!

lean“LEAN” is nothing but following simplified processes to perform and to get desired output.
But …..
Does in real everyday manufacturing this concept really works and yield expected results??!!!!

Is it much easier to follow the specified techniques of Lean and The organization will achieve expected results by just following Lean concepts??!! Does Lean manufacturing implies only to people who works in production lines?? Lean manufacturing results in reduction of resources [Especially Man]?? How an automated manufacturing unit can implement lean manufacturing method??

When we use the word Lean manufacturing thousands of such questions will arises in receiver’s mind. Does as stated Lean Manufacturing is really simple?? No, the question will lead to the history and origin of Lean concept. Lean manufacturing derived from the concept of “Toyota Production System [TPS] “, during period of World War II. TPS was framed on the basis of two elements Standardized work and Kaizen [Continuous improvement] and supported by two pillars JIT [Just In Time] & JIDOKA [Self Reliance]. From this stage to today many improvements were made in lean manufacturing and at present days lean is not only considered just as a method, but it is considered as a Philosophy.

The primary purpose Lean manufacturing is to satisfy and exceed customer expectation. What does customer expects?? It is very tough question to answer. But many philosophers, Guru’s considered concept “Customer is King”. Customer problems can be co-related with ICE BERG [We can only look at the surface level problems but there’ll be several submerged or hidden problems which exists]. Lean manufacturing tries to answer actual customer problems.

Second purpose is to attain Quality of the product, any product which we produce should be free of defects and Lean manufacturing focuses on defect free production system to achieve continuous high level Quality as specified by customer. Third purpose is to reduce lead time of the process, it results in increase in cash flows and increases flexibility to respond varied customer demands.

Last but not least, Lean encompasses on saving on resources, it aides to differentiate between “Values” and “Non Values” in process. For E.g.: Think of collecting print out paper from the printer. Our main purpose is to collect paper [Value], but the process involves getting out of the seat, move to printer, collect required paper and return to seat [Non Value]. Lean manufacturing helps us to reduce/eliminate these Non value added activities and increases the output of the process.

Key elements of Lean Manufacturing include, PDCA technique [Plan – Do – Check – Act], Empowering people [No need to reduce people], Eliminate waste [Consider working smart than working hard], Make process as simple and as visible as possible [easy to understand and identify problems], focus on built in quality [Defects should be identified at base & must not go to next process] and finally follow one piece flow and Pull System [Customer focused].

Lean manufacturing is not an individual activity, it is the activity which is performed by complete organization. From company head to company employees everybody will be involved in the process to achieve defined objective of the organization. It is not employee driven or management driven activity but it is organization driven activity. Lean manufacturing utilizes special tools and techniques during implementation. Most of these techniques are derived from Japanese terms, which got very simple meaning [E.g. Kaizen- Change for Better, Kanban – Signal Card]. Some of tools such as 5S [Sort, Straighten, Shine, Standardize and Sustain], 5 Why’s, SMED, Takt Time, Value Stream Mapping[VSM], Hoshin Kanri[Policy Deployment], Poka-Yoke, Andon, Visual Control and Visual Management, Gemba etc.

During lean implementation, small focus groups (Called as Kaizen groups) are formed and they are trained to identify the wastes in the production line [Wastes include T: Transportation, I: Inventory, M: Motion, W: Waiting, O: Over production, O: Over Processing, D: Defects (TIMWOOD)]. This group flows through the process line Called as Gemba Activity, Later the group will analyze root cause for these wastes and develop action plan [Time line] for continuous improvement. These activities require continuous support and motivation from management. Lean manufacturing do not bring drastic changes in the production line but over the period one can look for better results. It is also depends on continuous involvement of people. In Lean process defects or mistakes are considered as golden opportunities for continuous improvement. This lean process is a continuous PDCA activity.

Lean manufacturing also have many road blocks. As stated earlier it required involvement of complete organization and co-ordination between several departments. Sometimes process is too busy, resources are not available, no budget for special activities, poor management policies, not our job we’ll outsource to others etc. But a strong understanding of lean processes and driven by values will always yield better results.

Risk Management in SCM?

Manage Your Risk Words Dice Reduce Costs LiabilitiesRisk management in supply chain management means identifying the risks in the supply chain and taking steps to mitigate those risks or eliminate them completely where it is possible. The risks in the supply chain should be identified and then prioritized. Prioritizing of risks helps in understanding which risks are more significant and which are less. The larger the supply chain of a business the more are the likely risks and vulnerabilities.

The risk identification process should cover every step of the supply chain, starting from the customers and going back to the suppliers of raw materials. What-if analysis is very helpful in identifying the contingent scenarios in supply chain management. Adequate response to scenarios that are likely to disrupt the supply chain should be devised.Transportation is an important aspect of supply chain management of a company. Back-up transportation should always be arranged. This ensures that if any type of disruption or breakdown in transportation takes place then it can be immediately replaced by the backup arrangement.

The evaluation of the risks and vulnerabilities of the supply chain should be done on a regular basis. This is necessary because the nature of risks can change due to factors like new suppliers or new government regulations or new contingent developments.The pursuit for supply chain efficiency through continuous cost control should not come at the cost of poor risk management. A business must not hesitate in incurring some extra costs in order to make risk management of supply chain more effective.

Continuous collaboration and communication with supply chain partners goes a long way in ensuring effective risk management of the supply chain. A diversified base of suppliers can help in a situation where one supplier is unable to make timely delivery of raw materials or components.It is to be remembered that any disruption in supply chain management can disrupt the entire operations of the business. It can cause a delay in delivery of goods to customers. This delay can result in customer dissatisfaction. Customer dissatisfaction can result in future loss of sales for the company. Therefore risk management is an important part of supply chain management. Good supply chain managers never ignore this aspect of supply chain management.

Lessons in Supply Chain Management from Coca-Cola Company

 

coca cola truckThe Coca-Cola Company is among the biggest corporations in the world. More than 1 billion bottles of Coke and other beverages of the company are sold every day. The company is present in most of the major countries of the world. Its success in serving its customers in the past 120 years rests heavily on its success in supply chain management.The company, in order to streamline its supply chain management, has tried to keep the number of its bottling plants limited. The bottling plants of the company in America and other markets are often owned by other companies, mainly local ones. By keeping the number of bottling plants limited, Coca-Cola is able to monitor its supply chain more effectively.

 

In 1960 there were around 1000 bottling plants of Coca-Cola globally; in 2015 this number has come down to around 700.The company continuously strives to integrate demand with supply. Demand forecasts are made on the basis of regular interactions with the sales & marketing teams. These interactions take place on a daily and weekly basis. The demand forecasts are immediately conveyed to suppliers.

 

The transport division and other external transporters involved in movement of outbound logistics are also kept in the loop with regard to demand forecasts, so that they have transportation and resources ready to arrange transportation for meeting the demand. On the basis of this forecast the company also plans its production and operations. Inventory management process is also informed by this forecast.

 

It is not possible for Coca-Cola to make 100 per cent accurate demand forecasts. So it remains content with a demand forecast accuracy of 80%-to-85%. Actually most of the times, the demand forecasts are only as accurate as 70%. The difference between actual demand and demand forecast is met by Coca-Cola through a flexible supply chain management. This enables it to meet unexpected demand or shortages in relatively less time.

 

Supply chain management in Coca-Cola is a highly dynamic process. The supply chain management team remains constantly on its toes. The company has made supply chain management one of its main sources of competitive advantage. The company also retains its ability to implement course corrections every day in its supply chain. So in spite of having highly systematic supply chain processes in place, the supply chain of Coca-Cola is also highly fluid and flexible. Almost as fluid as Coke itself!

Peak Season & Supply Chain Management

high-demand Peak seasons are those when the demand for the product of the business is at a high. Lean seasons are those when the demand is low. Many businesses are cyclical ones where the demand for the product or service is not constant throughout the year. It varies from season to season.Supply chain of a business should be capable of handling the excess demand during peak seasons.Many businesses suffer from order delays, inventory shortage and long waiting time for customers during peak seasons.

 

In peak season times supply chain management team should become more alert and proactive. Collaboration and coordination with supply chain partners should be enhanced. Bottlenecks in the supply chain should be identified and immediate steps should be taken for their elimination.Extra space should be created so that the excess inventory during peak seasons – to cater to the high demand – can be stored. More human resources may be required in managing supply chain processes during peak season. Human resource planning should be done beforehand and temporary employees can be hired to manage supply chain processes during peak season. When the peak season is over the temporary staff can be cut down.

 

It is important to properly train the temporary employees that are being hired for managing the supply chain processes. The effectiveness and efficiency of supply chain management will suffer if the temporary employees are inefficient in their work. The more challenging tasks of supply chain management should be entrusted with the permanent employees. The services of temporary staff should be used for simpler, routine work that requires little expertise.

 

During peak season supply chain can require 24 hour/ 7 days work. Scheduling of shifts should be done is such a way so that the employees are able to bear the extra workload. It should be take care of that extra workload doesn’t adversely affect the morale of employees. Supply chain efficiency and effectiveness will go down if the morale of employees, involved in supply chain management, is low.

 

In peak seasons the technological infrastructure and equipment used in supply chain management should be in good condition. Technology plays the most important role in handling customer orders and queries. Electronic Data Interchange can make coordination with supply chain partners very effective.Back-up facilities with regard to transportation should be arranged so that if any disruption occurs it can immediately be rectified. Inefficient and ineffective supply chain management during peak season often creates high customer dissatisfaction. This customer dissatisfaction results in loss of customers. Adequate planning, attention to detail and proper implementation of the plan can help a business tide over peak seasons and create high customer satisfaction.

Supply Chain Optimization – How to make supply chain more optimum?

supply-chain-optimization
Supply chain optimization means ensuring that the performance of the supply chain is at the optimal level. Optimal level of performance implies best level of performance possible. One of the initial steps in supply chain management is inventory management. Businesses can make their inventory management more efficient and effective by using tools like Six Sigma, Total Quality management, kaizen and lean manufacturing. There are many training consultancies in India that can help businesses in adopting and implementing these tools.

 

The supply chain extends right from the point of origin to the point of final destination. Every step of the supply chain should be monitored to identify points of inefficiencies. Improvement strategies should be devised and implemented so as to eliminate these inefficiencies. The improvement strategies should be shared with supply chain partners like suppliers and distributors. A mindset of continuous improvement is required for achieving supply chain optimization. This mindset of continuous improvement is characterized by high degree of flexibility.

 

Clear performance metrics should be established with regard to the supply chain. These performance metrics should be shared with supply chain partners. The workforce involved in supply chain management should be adequately trained and made aware of the key performance metrics of the supply chain management.

 

A lot of electronic data interchange takes place between the supply chain partners during the course of the supply chain. Those supply chain partners should be chosen who have the capability for electronic data interchange. Optimization of supply chain cannot be achieved without optimization of the information flow across the supply chain.

 

The implementation of Lean philosophy across the supply chain can make it compact. Businesses should try to keep supply chain as compact as possible because it is easier to monitor and manage such a supply chain. A compact supply chain is also more flexible and agile. Flexibility and agility in supply chain makes it possible for a business to reduce its inventory needs. Lower inventory results in cost savings for the business.

 

Implementation of Kanban philosophy makes supply chain agile and flexible. Kanban is a philosophy of managing logistics keeping in mind the production needs of the company. The implementation of Kanban in logistics management can help a business implement Just-in-Time (JIT) manufacturing. JIT ensures that raw material is received only when it is required in production and final products can be delivered as soon as customer demand comes. JIT minimizes the inventory requirement of the business and enhances operational efficiency.

Is outsourcing to 3PL risky?

supplychainmgt Logistics outsourcing is a trend that has strengthened lately. Increasing number of companies have outsourced their logistics management to third party logistics providers (3PL).There are many companies whose core competency is logistics management of other companies.

 

These companies leverage their core competency to achieve high efficiency and effectiveness. Outsourcing the logistics management function enables a company to focus more on its core activities. Many businesses outsource their logistics in order to achieve cost savings. Some companies also outsource their logistics management in order to improve effectiveness. Dedicated logistics management companies with their extensive network and infrastructure can improve delivery time of the business and lead to higher customer satisfaction.

 

In its Request For Proposal (RFP) for choosing the logistics provider a business should clearly explain its exact requirements and needs. Different logistics companies have different areas of core competency. Some logistics providers have their core competency in warehousing, others have in transportation, while others have in managing global logistics. When the RFP clearly specifies the requirements of the company and capabilities needed on the part of the logistics provider it becomes easier to get the bids from the right logistics companies.

 

The 3PL partner chosen by the company should be one who can meet the level of operational excellence required by the company. Performance objectives of the logistics management should be clearly explained in the RFP.It is important that that logistics partner company is chosen whose organizational culture is similar to the company outsourcing its logistics. When the organizational culture is similar, strategic collaboration is enhanced. The two companies are able to communicate effectively and the logistics partner is able to understand the expectations of the outsourcer in a better way.

 

Due diligence with regard to the service record and operational capabilities of the prospective logistics partner should be done before the contract is finally awarded. Transparency and honesty should be there in the communications between the company and its logistics partner. In order to ensure that no disruption takes place once the logistics management is outsourced, sometimes it can be helpful to also look into the financial history and financial health of the company to whom logistics management is being outsourced. Any disruption at a later stage due to financial problems at the 3PL provider can derail the operations of the company and lead to customer complaints and customer dissatisfaction.