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Posts Tagged ‘APICS’

As we began in our prior post to look at a new technology called “blockchain,” we posed the question: What if you could document and preserve all the data associated with a product’s life cycle from the origin of the raw materials to the final sale of the finished good as it travels along the supply chain, with 100% certainty?

In today’s concluding post, we start with a supply chain counterpoint: Even if you could, is it worth it?

An analyst at Aberdeen Group, Bryan Hall, is quoted in a recent article in the Mar/Apr 2017 issue of APICS Magazine pointing out that supply chains are full of unexpected events and disruptions, ranging from damaged goods to carrier capacity issues, not to mention customs delays, clogged ports, theft and other issues.  The key to adjusting and correcting often lies in what Hall calls the “occasional heroics” that keep plans on track – and none of these actions are possible without visibility.

According to Aberdeen, fewer than 60% of companies had online visibility into in-transit shipment status.  The percentages were even lower for visibility into data to make decisions, or to view supplier quality and manufacturing processes – in other words, traceability.

Other studies have generally confirmed that most companies lack full visibility into their supply chains, and most experience supply chain disruptions periodically.  Often, the source is not even analyzed, and all come at a cost.

And as Business Insider reports, according to APICS, the growth of IoT (Internet of Things – i.e., internet connected devices and machines) will generate yet more massive amounts of data.  Writes Crandall, “Blockchains have the potential to provide security and accountability that traditional databases don’t.”

As examples he cites IBM using a blockchain in the diamond industry… PwC using blockchain to deliver on-stop solution for financial service firms… Wal-Mart testing blockchain’s abilities to track the flow of certain food items to quickly identify items that may be tainted and subject to recall.  The downstream implications of that one – the ability to possibly prevent foodborne illnesses which cause 3,000 people per year and hospitalize more than 100,000 – quickly become clear.

TechCrunch contributor Ben Dickson has written of how blockchains will “enable companies to register information about a product transfer and the product’s price, location, quality and any other information that is relevant to managing it.”

And by its very nature, a public blockchain will ensure that all users have equal and common visibility into everyone’s supply chain.  The decentralized and open nature of blockchains inherently restricts withholding or manipulating information to gain advantage, while built-in encryption will help to ensure data integrity.

In the end, blockchains in the supply chain will eventually assure better regulation compliance, product integrity, customer satisfaction and confidence in product knowledge and movement for the entire family of producers, distributors and consumers.  According to APICS, The World Economic Forum has said that 10 percent of all global domestic product will be stored in a blockchain by 2025.

While still in its infancy, this new technology will present supply chain professionals with both opportunities and challenges.  But as noted business guru Peter Drucker observed long ago, the best executives focus on opportunities, not problems.

 

In our next post, we’ll take one final look (for now) at the newest wrinkle in blockchain, called Ethereum.  A lot of very big companies are getting on board with it as you’ll see.  We’ll tell you more in our very next post.  Stay tuned…

 

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What if you could document and preserve all the data associated with a product’s life cycle from the origin of the raw materials to the final sale of the finished good as it travels along the supply chain, with 100% certainty?

That could be a reality in the not too distant future, thanks to a fast-growing technology we’ve written about several times here before, called “blockchain.”  We thought today we’d take you through a few of the basics of this important new technology, which you’ll be hearing more about in the future.

Some of our source material here comes from APICS and APICS Magazine (Mar/Arp 2017 issue, and others), and other publications.  APICS is an organization devoted to improving the skills of supply chain professionals everywhere through teaching and training in principles of supply chain excellence.  We are a long-time supporter of the organization and its efforts, and recommend their programs often to our clients.  As disclaimer, we are in no way affiliated with APICS other than as longstanding members, benefiting over the years from their training programs, most notably the CPIM (Certified in Production and Inventory Management) certification program.  PSSI also holds multiple “Company of the Year” award designations from our local chapter.  Learn more about the local chapter here.

Blockchain is basically a ledger system built on a peer-to-peer network (think: database) used to record and track transactions on computers.  The first blockchain was developed by Satoshi Nakamoto in 2008 and was implemented in 2009 as a ledger for a new kind of currency called “bitcoin.”

One of block chain’s appealing characteristics is that it does not require a “central authority” or a trusted third party, such as a bank.  Instead, a blockchain relies on three components: a transaction, a record of that transaction, and a system that verifies and stores the record.  Once stored, it is said to be difficult (though as the remedy to a recent Ethereum blockchain hack has demonstrated, not necessarily impossible) to delete.

According to an APICS Magazine article by Dr. Richard Crandall of Appalachian State University (referencing an article in The Economist in 2015), blockchain has “… a mixture of mechanical subtlety and computational brute force built into its ‘consensus mechanism,’ the process by which the parties involved agree on how to update the blockchain to reflect the transfer of [records or] bitcoins from one person to another.”

When someone wants to add to a blockchain, the other participants run an algorithm to evaluate and verify the proposed transaction.  If approved (a process too complex to describe here), the new transaction is added to the blockchain.  Or, in the case of the bitcoin currency, a new coin is added.

Marc Andreessen, a highly successful venture capitalist and inventor of the first popular web browser, Mosaic, describes the importance: “The practical consequence is that for the first time… one internet user can transfer a unique piece of digital property to another [that] is guaranteed safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer.  The consequences of this breakthrough are hard to overstate.”

Ultimately, say blockchain advocates, if chains can be used to transfer and track bitcoins, companies can use blockchains as public ledgers to track product attributes including ingredients and history of production.

And that will usher in the next generation of supply chain innovation.  We’ll take a look at some of the implication of blockchains on supply chains in our concluding post next.  Stay tuned…

 

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Recently, in an article for APICS Magazine, Jonathan Thatcher, director of research for APICS (an organization long dedicated to supply chain operational excellence), listed a few tips for companies challenged by an ever-increasing number of SKUs (stock-keeping units, or inventory items) they are required to manage.  We thought we’d reprise a few key highlights here today.

Thatcher recommends starting at the top of the cycle: by developing greater “systemic visibility” in your organization using hard numbers and data to support a “systems concept,” which the APICS dictionary defines as “an attempt to create the most efficient complete system as opposed to the most efficient individual parts.”

To begin with then, you must identify the flow of many individual components while also reviewing the performance of the overall supply chain.  Each new SKU increases cost and complexity to the entire system.  As these costs grow, it gets harder to maintain an accurate “cause-and-effect vision” of expense and value for the entire system.  “Even if a new SKU does deliver some new net value,” he writes, “is it enough to profitably pay for the cost of the increasingly complex stocking options?”

Next, he advises, talk to your customers to figure out where to draw the line for SKU proliferation.  Ask them to identify the point where more SKUs become a burden instead of an asset.  This can help determine a potential SKU limit.

To gain executive support for your SKU reduction endeavor, Thatcher says you then need to explain a few things:

  • SKU innovation may be at war with Pareto’s 80/20 law that states that 20% of inventory items make up 80% of inventory value.
  • The right number of SKUs likely reflects the amount of variation and complexity sought by your customers.
  • The wrong number of SKUs squeezes resources and can divert them away from the products that deserve them.
  • Realize that it’s a complicated and often nuanced topic that requires ongoing, shared management effort to overcome these complexity costs.

And finally, Thatcher suggests, “develop a policy prohibiting a net increase in SKUs.  As new ones appear, retire old and low value SKUs to make room.”  Just be sure that these efforts form a part of your overall supply chain strategy that prioritizes innovation, customers service levels and reduced costs.

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We like highlighting and learning from stories about companies getting “lean” because helping manufacturing and distribution companies become more competitive through lean processes supported by good software is exactly where we live.

A recent article in the Mar/Apr issue of APICS Magazine about a lean transformation of an Agilent Technologies spinoff called Keysight Technologies highlights the efforts of that firm to transform its supply chain into a more responsive, flexible and efficient one.  The goal was nothing less than to adopt a “holistic approach to develop a comprehensive lean transformation strategy.”

We found a few key takeaways from APICS Magazine’s review of Keysight’s challenges, most notably what they called the three key pillars of their lean transformation.  It’s worth noting by the way that Keysight earned the 2016 APICS Corporate Award of Excellence in Innovation as a result of its lean transformation.  Those three key pillars:

  1. Develop Competency: Ensure all employees across all sites are well equipped with the necessary lean competencies.
  2. Deliver Value: Use lean methodologies to achieve breakthrough results in the areas of cost savings, lead-time reduction and customer satisfaction.
  3. Sustain a lean culture: To derive long-term value from the lean initiative, foster ongoing improvements through a shift in mind-set and the adoption of lean throughout the organization.

While the full article is too lengthy to detail here, we believe that the points above and the anecdote that follows provide some good “thinking points” as you consider your own lean initiatives.  Quoting directly from the APICS article…

“To achieve world-class manufacturing at Keysight, a program was launched that encompasses cycle-time, inventory reduction, greater efficiency and enhanced flexibility.  Entire product lines were scanned in order to identify stock keeping units that had high inventories and were not meeting customer-requested lead times.  These items were then examined based on revenue and cause-codes, and constraints and bottlenecks were identified.  Innovative solutions were implemented one by one to break the constraints.  For example, the component-washing process at Keysight had been a cycle time issue because the activity was shared among many different product lines and could only be conducted in batches.  However, contract manufacturers did not face such constraints, so component washing was moved to that site.”

We cite the above only to illustrate the style of lean thinking, and the measured steps, that we’ve found over time lead to the virtuous cycle of continuous improvement.  Redesigning work centers, optimizing vertical spaces and assembly motion, and implementing other modular concepts are among other efficiency improvements brought about through lean thinking.

Want to hear more?  You can learn more about APICS locally here.  Want to learn more about how to lean out your operation?  At the risk of being commercial here, as we always like to say: We’re here to help!  Contact us (reply to this post).

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cycle-countIn our prior article we discussed the method behind inventory cycle counting as a way to improve your company’s inventory accuracy.  There we briefly touched upon the most common cycle counting method, known as the “ABC” method.

But it’s worth noting that these cycle counts can be performed in several different ways, depending on things like location preferences or special criteria, as we are reminded in the Sep/Oct 2016 issue of APICS Magazine.  We’ll offer some of their other cycle counting method examples here today:

  1. The Zone Method: Particularly good for items with fixed locations. The count schedule starts with the first location in a zone and continues daily until the last location is reached.  Then, the count begins again at the first location.
  2. The Location-Audit Method: Best used when items are stored randomly. Here, a set number of locations is counted and their inventory counts are validated each day.
  3. The Special-Counts Method: Items are selected to be counted based on criteria such as negative or zero balances, shipment or receipt of items, fill shortages, etc.

These methods are among those suggested by David F. Ross in his article for APICS Magazine entitled Cycle Counting by the Probabilities, in the Sep/Oct 2016 issue now available to APICS members.

Inventory is one of the costliest items a business possesses.  We present this information as a service to our many manufacturing and distribution ERP clients because we know that inventory cost saved is ROI regained.  We’re happy to help others with inventory dilemmas, and are strong believers in the principles espoused by APICS in helping to improve our clients’ inventory and production capabilities, methods, profitability and overall success.

 

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tech investThe editors of APICS Magazine recently provided some sound advice worth heeding when it comes to your technology investments, and we thought the outside affirmation worth sharing.

As the article states at the outset: “The task of evaluating and selecting the right technology for your business can be daunting.”  To ensure you’re approaching your mission properly, doing your due diligence and “considering the right aspects of the problem and available solutions” they make the following basic and simple, but critical, suggestions.

  • Start my mapping out your processes.
  • Look at your current state, and what your future state is going to be, and figure out how you’re going to get there.
  • At a high level, consider your company’s environment – how your industry is changing, what competitors are doing, and how the economy (here and abroad) is changing – and how these will influence your processes.
  • During evaluation, consider the ROI of your purchase. Some tech investments (like ERP) can take years to deliver returns, depending on your economies of scale.  Make sure the ROI is reasonable for your purposes.
  • Be sure your new technology “speaks the same language” as the other solutions your company uses. Sometimes a new piece of technology may be very attractive based on its performance, but you have to know that you can integrate it into all your other systems.  If you have to rewrite routines or add operations to what you’re doing, then maybe you’re not accomplishing the efficiencies you envisioned.

The steps are simple and should be intuitive, but you’d be surprised at how many companies neglect to pay attention to these cautions, or skip some steps, when looking to implement new technology solutions.  Don’t burn yourself.

 

 

 

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keysThe May/June issue of APICS Magazine features an article by Gary Smith, a VP with New York City Transit with over 35 years of supply chain, process improvement consulting and team-management experience.  Smith’s insights about what makes a successful project – and the challenges that brings – are worth reprising here today.

First, to quote him directly from his APICS Magazine article (“Change from All Sides”):

“A successful project implementation demands that the people who are affected by it understand the benefits, are full owners, and participate from the beginning.  When the benefits of a project are clearly seen by all in terms of how these advantages align with the organization’s vision, mission and purpose, then acceptance, buy-in and ownership are possible.”

He goes on however to note the most important consideration, too often missed in projects:

“When a company implements projects both large and small, it is introducing change.  The nature of global competition requires businesses to adapt and transform in order for it to remain relevant… There are two types of change – mechanistic and organic.”

Smith describes how the two types of change differ.  Mechanistic change is often revolutionary, coming in the form of new ideas from management or consultants.  He gives the example of a new receiving process which is put in place, with employees trained – but in some cases receiving department staff were not involved and, even though all agreed a past system was outdated, the ideas they had for improvement were seemingly ignored.  Or worse still, they were done without giving proper credit.  When the consultant leaves, it’s no surprised if the new process is abandoned quickly.

Then there is the organic form of change, which is more evolutionary in nature.  It’s a change that becomes a part of an organization’s culture.  It tends to permeate from the bottom up.  Often, it’s taught by experienced employees to new hires.

And therein, emphasizes Smith, lies the secret:  “In order for change to become permanent, it must successfully transition from mechanistic to organic.  That is quite literally the only way to create sustainable change within an organization.”

How does this happen?  The key, in a word notes Smith, is ownership.  People have an innate desire to succeed.  They desire a stake in providing solution to problems.  Intrinsic motivation – the internal gratification derived from solving a problem – can be more satisfying and lead to better results than any external reward.  And, those intrinsic motivators can provide lasting change.  When intrinsic change is recognized by leaders who inspire action through change, people feel like part of the process.  It takes time and patience, but it is possible, and the results can be, as Smith puts it, “staggeringly successful.”

True ownership, then, is the “surest way to build a successful project, avoid failure, and create lasting organizational change.”

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