Category Archives: Manufacturing

Will Factories in a Box Revolutionize Sustainability Initiatives?

Gizmodo just ran a very interesting, and vey insightful article on how “The Next Industrial Revolution Starts in this 20-foot Shipping Container” about Re-Char and their “Shop-in-a-Box” that can perform rapid fabrication of steel parts by way of software and a CNC plasma torch. With the Shop-in-a-Box described in the article, Re-Char can produce 600 lids for Climate Kilns. This is a specialized lid-and-chimney integration that adapts a 55-gallon drum to produce the soil amendment biochar. (In Kenya, farmers burn sugarcane debris in an open field and release tons of carbon. A Climate Kiln controls the burn to produce the carbon-rich charcoal biochar that, mixed into soil, reduces the fertilizer requirements for crops by half.) This required the precision cutting of 18-gauge metal, which, in East Africa, leaves you the option of using a guy with an oxy-acetylene torch on the side of the highway or importing a full production run out of China, one full shipping container at a time. But for 30,000, Re-Char was able to produce a Shop-in-a-Box metal cutting and joining setup that could be run by two two people and produce 600 lids as a time, when needed, where needed (as the shop in a box can be moved to a new community when the needs of the current community have been fulfilled).

From a sustainability perspective, this is incredible. It’s lean, green, and completely against the routine. Actually, lean is an understatement. The power requirements are limited to what is needed to produce the lids. The energy required just to light, cool, etc. an average factory typically takes a 600 V feed … or two … or three. It’s green in that it can be powered by sustainable energy, including wind power, water power, or solar power – whatever is available. (Transformers come with the standard kit, along with generators for [natural] gas power for stability. Just add batteries and a UPS and it’s 100% green power most of the time.) And it’s completely against the routine. When the industrial revolution started, you can be that the robber barrons never predicted a moveable factory.

To date, the most (wide-spread) innovative use of containers has been data center modules, with Google a leader in this technology. (But this has been taken to the next level. For example, Green Data Center has designs for completely self-contained data center modules that you can drop anywhere. Just hook-up a power feed and an internet feed, and you’re literally good to go. (And since you can easily put a generator, or two, in a second container, you don’t even need a power feed. Just a natural gas feed, split between a couple of generators if you don’t have a sustainable power feed, for a primary feed.)

But we don’t have to stop at data centers and steel-part fabrication shops. Especially when we are talking about the developing world (which still includes much of Africa, South America, and parts of Asia). Do we really need to refine cane sugar 2,200 kgs at a time, for example? Or how about water purification? If we’re talking about a small community of a couple of hundred people, and the primary focus is clean drinking water, we don’t need to purify 100,000 liters a day! Purifying 1,000 liters would do nicely! Both processes would fit nicely in a container system. (After all, the sugar refinement process is not radically different from micro-brewing in terms of what is needed, and you could fit that nicely in a container too — although we can’t necessarily bring the same humanitarian arguments if we did.)

And when we’ve insured that everyone has the absolute necessities of clean air, clean water, and healthy food — we could ship them clothing factories in a box. It doesn’t make sense to sew shirts in sweat-shops on another continent just to ship them to small communities in Africa, or South America, or Asia, where the living wage is $2 a day or less. Considering the shipping costs alone, you couldn’t set the price at a point where you’d make many sales. Just ship a container to the town, train a few locals on the cloth-cutting production lines and find a few budding seamstresses to do the stiching, and produce the clothing where it will be sold. A zero-mile supply chain that emits zero-carbon and has zero shipping costs. And since you don’t have time-sensitive fashion industries in developing economies, you could even rotate it between a few small communities in the beginning while the consumer base and local economy built up. (Hopefully you’d also move the employees too if they were willing, as you could outfit another container as temporary living quarters without much cost or effort.)

I think the physical manifestation of the Solution-in-a-Box approach has the potential to revolutionize manufacturing, distribution, and sustainability. And it’s not like we have a shortage of containers thanks to the outsourcing craze of the last fifteen years. They’re just sitting there waiting for a good use. And with all the super-panamax ships, and super-panamax capable ports, that we have at our disposal, we can get them from any continent to any other continent with ease, in bulk, and pretty close to where we want them. And then we just need a freightliner to haul them, and there’s no shortage of those.

What Does AmazonSupply Mean to the Business Supply Chain?

Rummaging through the Supply Management sites recently, looking for tidbits I might have missed, I came across this post over on Supply & Demand Chain Executive that asked what AmazonSupply means to the business supply chain. Given the force that Amazon is in the consumer world, it’s certainly a question worth asking, but is it a question worth answering?

If you check out the AmazonSupply beta web site, you see that they carry a wide range of products classified into thirteen categories which primarily focus on shop floor manufacturing, basic laboratory equipment, cleaning, and office supplies — which is only a sampling of the categories that are easily obtained through MFG.com or Alibaba.com. Plus, the prices on some of the products aren’t that great. For example, the LEGO Education DUPLO Playhouse Set in the Science Education Category, as I write this, is $99.58, while the same product on the legoeducation.us site is $104.95. Sure, that’s a savings of slightly over 5%, but no where near what you could get sourcing direct from the manufacturer in bulk (even at small volumes). And the DeWALT DCD940KX 18V 1/2″ Cordless XRP Drill/Driver Kit is 229.57, only 11% less than the same product on CPO PowerTools and more than what I’ve seen the same product on sale for at Home Depot – a consumer retail establishment.

In other words, it’s very convenient, and probably guaranteed not to charge you any more than the hardware / office supply / janitorial supply / laboratory supply store down the street / in your local industrial park for the vast majority of items carried, but certainly not revolutionary for anyone need to source more than one drill bit, or drill, when sourcing product. As far as I am concerned, it is NOT a threat to e-Procurement providers and, in its current form, no where near as revolutionary as Amazon was to the book distribution market a decade ago in its current form. Right now, the only people who have to worry are chains like Home Depot and Canadian Tire, Staples and Office Depot, Henry Schein and Sanplatec, and your local providers of cleaning supplies and machine parts. Basically, any store where someone would go for a one-off purchase risks losing business. But anyone who was selling in bulk, on negotiated contracts at discounted rates, hasn’t a thing to fear with AmazonSupply.

In fact, the only companies with anything to fear are e-Procurement solution providers who provide nothing more than catalogue and punch-out functionality, as AmazonSupply makes that irrelevant for many companies who will be able to use AmazonSupply as a one-stop one-off shop and the ability to easily track orders is a big plus for anyone having to deal with mounds of paper receipts. And while AmazonSupply could, with time, offer a more integrated supply management solution with financing, purchasing support, and even spend categorization and baseline analysis, I don’t see this maturing all that quickly. What good is advanced functionality that only works on a small portion of you one-off off-contract spend? In other words, for the foreseeable future, any e-Procurement platform with any level of sophistication has nothing to fear.

What Can be ‘Made in the USA’ – Counterpoint

Today’s guest post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement, and is a counterpoint to Derek Singleton‘s recent post on What Can be ‘Made in the USA’ over on Software Advice.

This is the kind of prediction I like to put in an envelope and promise to open in 5 years to see if it came true.

It’s great that Airbus came to the United States. There’s no doubt that many companies who tried China sourcing weren’t capable of doing it well. There was also a rush to put production in China that didn’t belong there. Those would be items that require flexible scheduling and for which air freight costs make China prohibitive for US consumption. No doubt some of that is in the $200B pie chart of products that are likely to move from China to the US. No doubt that Chinese labor costs are rising, but the 13% figure annual increase figure cited is for Chinese minimum wage, of questionable relevance to exports.

But $122B in computers and electronics? I really doubt that. That’s roughly 100% of the US imports from China of computers, phones, TVs and monitors, and parts for those items. Those aren’t being built in China for anything much to do with labor costs. It’s where the suppliers are. Foxconn has a million people assembling electronics. Why do manufacturers gravitate toward a particular location? Michael Porter, in “The Competitive Advantage of Nations” nailed it. It’s a combination of four factors.

  1. Factor conditions (this includes labor rates and a lot more)
  2. Related and supporting industries
  3. Demanding customers
  4. High degree of competition

China has three out of the four. They are especially strong in item 2. Nearly all the components are built there, except for a few high value parts.

Looking further, if companies pull out of China, where would they go? Phones, other than from Apple, largely come from Korean and Taiwanese companies.

Televisions are also largely from non-US companies. As they drop in price, shipping costs become a larger fraction of total costs, so many TVs for the North American market are being built in Mexico. (Mexican TV and monitor imports to the US passed China’s a few years ago.)

We’ll see how the prediction holds up. In the meantime, strategic sourcing professionals should make up their own minds, not just look at trends or predicted trends.

Thanks, Dick. (Global Supply Training)

Are All of Your Supply Management Planning Processes Aligned?

A recent article over on Supply Chain Brain from JDA software on Building the Supply Chain of the Future made a great point when it noted that in any supply chain there are … core business processes that must be closely synchronized in order to enable organizational agility and market responsiveness. Unless business processes are aligned in closed-loop planning processes, the organization will be unable to sense demand shits and … balance a number of priorities, including costs, customer service levels, supply risks, production constraints and environmental targets in its quest to achieve the best possible outcome.

The article from JDA indicated that six core planning processes must be synchronized in order to achieve agility, market responsiveness, and success. And they are right. The following six planning processes must be synchronized:

  • Sales & Operations Planning (S&OP)
    A good S&OP process provides a disciplined cadence for monitoring and synchronizing demand, production, supply, inventory, and financial plans via a rigorous Plan-Do-Check-Act process as a foundation for allowing the supply chain to share a common perspective on issues and potential resolutions.
  • Demand Planning
    Typically involves the utilization of advanced statistical and predictive modelling to ensure that sourcing, production, inventory, transportation, and distribution models are optimized on a shared forecast.
  • Inventory Planning
    Good inventory planning allows for tailored “designer” models for each category and commodity to minimize overstock, out-of-stock, and financial risks based upon key commodity and category attributes.
  • Master Planning
    That allows for S&OP, inventory, and demand-based supply plans to be analyzed and updated daily in response to demand and supply changes.
  • Factory Planning & Scheduling
    The creation of optimized production plans by plants by scheduling backward from the requirement date, with material and capacity constraints simultaneously considered for feasible plan creation.
  • Collaborative Supply Planning
    That allows manufacturers to monitor multiple tiers of the supply chain and each supplier that is supplying a raw material, component, or service necessary for the creation of each product being sourced from a tier 1 supplier and work with multiple suppliers simultaneously to identify minor hiccups before they become major issues to collaboratively resolve a problem before it becomes a major headache.

But this is not enough to ensure success in today’s fast-paced fickle global marketplace. Not only do we have extreme demand, supply, and cost volatility across materials, components, products, and markets, but we also have extreme competition on the sales side as penny pinching buyers, short on cash, are looking for the best deal possible. As a result, your organization not only has to be leaner and meaner than ever before, but it has to be more focussed on the value it can provide. As a result, your S&OP, demand, inventory, factory, master, and collaborative supply plans have to be linked to, and reinforce, your organizational strategy. As a result, each of these plans need to be aligned with organizational:

  • Strategic Planning
    which is the process of defining the organizational strategy and direction and the allocation of resources, financial and human capital, to pursue this strategy.

If these seven planning processes are aligned, your organization just might have what it takes to make it through this decade and emerge a supply management leader when the smoke clears.

Is Your Dumpster Full of Dollars?

And I’m not just talking about the significant savings opportunities that can come from optimizing your trash pick up with a good spend analysis, as discussed in SI’s recent post that asked [IF] You Know How Much Your Trash Costs You? An average retail chain will write of a lot of damaged inventory and discard it in the dumpster when, in fact, that inventory, if repaired, or, typically, returned in a timely manner, could result in significant dollars back in the retail chain’s pocket.

As pointed out in a recent post over on the Supply Chain View from the Field on “Reverse Logistics: What happens to all of those product returns you’ve been making, anyway?”, what typically happens with a return that could result in a credit to the retailer is that it ends up in many cases going into the dumpster even though, in many cases, the product is still good. This happens for a variety of reasons. The store manager doesn’t know that a return to the manufacturer will result in a credit. The store manager believes it will cost more to process the return than discard the item (or, if the store manager is lucky enough, sell it to a flea market). The store manager knows that there is money that is probably worth going after in the return, but has to use a new returns management / liquidation system that they don’t know how to use and can’t figure out on their own because it’s clumsy or ill-defined (like the SARS system that has been pushed down to individual stores by Home Depot and that could spell the beginning of the end). Or maybe they can figure out how to record the damage, get a pending credit, but lose the credit because they don’t process, and (bar)code the return properly.

Returns, which can often be refurbished, repaired, re-sold, or in the case of a NPI (New Product Introduction), returned to the producer/manufacturer within a certain timeframe for a full refund as per the contract, may not have the profit potential of a product that is not returned, but they still have profit potential and, most importantly, when properly managed, do not result in expense and loss. Proper reverse logistics and returns management, which is standardized, near real-time, and provides multi-channel visibility (as discussed in this post which brought you Reverse Logistics Tips from World Trade Magazine, significantly improves the bottom line and should be performed by every retailer and reseller.

For a few more tips, check out Rob Handfield’s tips from his post on “Reverse Logistics: What happens to all of those product returns you’ve been making, anyway?”.