Category Archives: Manufacturing

Is MRO Inventory Bogging You Down? Maybe You Need a Bit of Xtivity? Part I

Inventory optimization is tough, but maintenance, repair, and operations inventory management is even tougher because the parts just sit there until they are needed — and sometimes, either due to proper maintenance or just good luck, the critical part you are stockpiling for your production line sits on the shelf three times longer than expected while other times the critical part has to be replaced twice as often as the vendor who sold you the machine told you it would have to be.

The last thing you want to do is get the stock levels wrong because inventory is expensive. In addition to the capital that is tied up in the inventory, there are the facility storage costs (which include rent, overhead expenses for services like security, and property taxes) and the possession costs that include, but are not limited to, clerical costs (to track the inventory), insurance (to insure the inventory as a whole), theft (as the insurance policy will have a deductible and a maximum claim), taxes (when the organization takes possession), deterioration (as some inventory will get damaged or spoil), depreciation (as most components decrease in value over time), and obsolescence (if the inventory cannot be used in time). Having inventory sit idle is very costly.

To make matters worse, many of these parts are very expensive and often have no residual value if unused. Whereas unpopular consumer packaged goods can often be sold at fire-sale prices which will allow you to recover some of their cost, this is not always so with MRO. This is because the parts are typically only useable within a particular machine on your production line and by the time you shut it down, chances are that the supplier is no longer selling the machine and most of the suppliers’ other customers are no longer using the machine as well. In addition, many MRO parts and supplies, especially in the chemical, pharmaceutical, and high-tech industries, have specific storage requirements (cool, dry, etc.) and this makes the storage cost even pricier than for regular (consumer) goods.

With typical inventory carrying cost eating up approximately 25% to 40% of a company’s annual inventory investment, the last thing you want is too much inventory, especially since certain MRO categories with special storage requirements and a high risk of obsolescence can have amortized inventory carrying costs that are close to the total value of the inventory! Unless you like having millions tied up in inventory, you need to make sure that you optimize your MRO inventory to the best of your ability. If you can’t do that, don’t rely on creativity — that won’t be enough because just one wrong JIT (Just in Time) decision can bring your entire production line down for days and cost you Millions of dollars. If you don’t have a suitable platform and the expertise in house, don’t rely on creativity. Apply a little Xtivity instead.

Pre-Package vs. Post-Package? Or How About No Package?

Amazon wants to pre-package goods and ship them to a location near you in anticipation of your upcoming order (as per our recent post on how anticipatory demand planning is good, but anticipatory shipping?) It’s an interesting idea, but the shipping companies are going to have to upgrade their systems to make it work (as per our recent post).

However, if you’re talking about the Food & Beverage Industry, as per this recent article over on Inbound Logistics on Packaging Postponement: A Game Changer for F&B Companies, by positioning product packaging further downstream in the supply chain and closer to the consumer, food manufacturers can take advantage of different selling opportunities. If the product is selling better in a certain retail location, major restaurant chain, or even through a set of strategically-deployed vending machines, you want to get it where it’s selling best in the quantity that can sell. This will generally require the right packaging, since a vending machine portion will generally be smaller than a store portion which will be smaller than a restaurant portion as the restaurant will order in bulk to prepare in bulk.

Packaging is a conundrum. But do you even need packaging at all? (At least at the individual product level.)

Let’s consider the Amazon situation. Do they even have to package the products they are shipping in bulk at all? While it’s true that they are not a traditional store where you can walk in and pick up the item, this doesn’t mean that you can’t walk in to a “store” and pick up the item. Nor does it mean that you need packaging to affix a shipping label.

Consider Amazon’s expanding Locker service. If a good is placed in a locker, it doesn’t need a package. Neither does any good placed in any neighbouring locker. All of the goods going to the lockers can be shipped in a single “package”, and then put in the appropriate lockers. But the “package” doesn’t have to be a package — it can be a reusable shipping container. Then there’s no packaging, no waste, and shipping is on its way to becoming a sustainable business.

Basically, Amazon can re-invent the mail-order model developed by Sears, Roebuck & Co. where “mail-order” is replaced by “e-mail order” and “counter pickup” is replaced by “locker pickup” and bring back the “reusable crate”, only this time it’s probably a “eco-friendly heavy-duty plastic crate” that will last much longer.

And while you might think that this concept cannot be translated to Food & Beverage, challenge that notion. The Bulk Barn‘s entire business model is built on bulk, package-free, purchases. And all of the food and beverage products they sell can be shipped in reusable containers. (Now, I know it doesn’t work for liquids in the current business model*, but it works fine for most dry goods.)

What’s the point? You can package when, where, and how you want, but first think about whether you even have to package at all, and, if you do, if you can use re-usable shipping containers. Environmentally friendly and cost-effective, it will save you money and image points on an ongoing basis.

* But even then, we can bring back the classic milk delivery model where you return the reusable models, but update it such that you pay a high deposit each time you buy a reusable bottle, which is waived each time you return a reusable bottle, just like the eco-conscious micro-breweries are doing.

You Can Have Your Google Chauffeur. I’ll Choose Good Ol’ Alfred Every Day of the Week!

For those of you who thought the doctor was needlessly calling #badwolf last Sunday in response to the automotive industry’s push for autonomous automobiles, SI would like to point out this recent BBC News article stating that Toyota is to recall 1.9 Million Prius hybrids.

Why is Toyota recalling 1.9 Million Prius hybrids? A software fault that may cause the vehicle to slow down suddenly. To date it has identified more than 400 reports of the problem, with the bulk of them occurring in (the heavily congested streets and highways of) Japan and North America. According to Toyota in limited cases, the hybrid system might shut down and the vehicle will stop, perhaps while being driven.

In other words, all a hacker has to do to cause multiple fatal multi-car pileups is hack the OnStar network and send a signal to all Prius’ vehicles to execute that specific part of the code. They don’t even have to break the OS and figure out how to craft a small virus that will hijack the control system or execute a dangerous set of commands — the hacker just has to send a signal telling the OS to execute the set of commands already there.

Now, presumably, this would (hopefully) result in the brake lights being triggered and the outcome may not be as deadly as it would be otherwise, but what about the other 99 Million Plus lines of code. How many similarly dangerous, untested, and, as-yet, unexecuted code sequences are also in the Prius? And every other electronically controlled car on the road?

They’ve yet to release a personal OS that isn’t riddled with more holes than there are potholes in Canada’s winter roads*1! I’m all for technological advance, but until we figure out how to write more bullet-proof, and secure, operating systems, let’s keep the OS out of the car and on the desktop where it belongs.

Now if you’ll excuse me, I have to go help LOLCat tell some meddling kids to get off my lawn!


*1 A slice of swiss cheese is quite solid in comparison!

You CAN NOT Protect Your Supply Chain Against Disruption Without Visibility!

A recent article on protecting your supply chain against disruption had some very good ideas for protecting your supply chain against disruption, but all were useless without visibility as most of them could not be carried out effectively without visibility. How critical is good visibility? Let’s review the suggestions.

Perform a supply chain vulnerability audit.

How can you assess vulnerability without a good supply chain map? Without visibility, how can you see beyond the first tier to find sole-source arrangements in the sub-tiers that are putting your entire supply chain at risk.

Do a rigorous “what-if” analysis.

If you don’t have a good map, you can’t analyze what would happen if you changed a supplier, changed a distribution lane, shifted production, etc.

Implement a strategic supply chain plan.

How can you judge the value of the plan if you can’t fully analyze the effects of its implementation and the chances of the mitigations it contains succeeding in the effect of a disruption? And, as per above, you need visibility for a full and proper analysis.

Create a balance between supply chain network efficiency and operations resilience.

The only way to determine if a plan is balanced is to do extensive what-if analyses that consider various perturbations of, and disruptions to, the normal scenario and see if the chain remains operational. These models can only be built with extensive visibility.

Design long-term strategies.

This also requires significant what-if analysis and detailed supply chain data, which in turn requires extensive supply chain visibility.

However, if you have good supply chain visibility, you can do all of this, and more, and truly secure your supply chain against significant disruption. And then you will have resiliency too. To find out more about the ROI of Supply Chain Resiliency, download the SI Illumination, sponsored by Resilinc.

B2BConnex – Connecting Companies the World Over Part I

Since we first introduced you to B2BConnex, a solution for e-Document Management that was designed to automate the end-to-end purchasing process, they’ve been working hard to extend their platform and serve the global operations of their customer base. Even though, as we noted in our first post, their solution was targeted at small and mid-size manufacturing organizations that are still mired in the ERP and need better solutions for their purchasing function, B2BConnex has recently acquired some larger mid-sized companies with global operations and a global supply base. As a result, B2BConnex has been steadily expanding their solution capability and footprint to meet the needs of these larger clients.

As per our post on e-Document Management for Small & Mid-Size Manufacturers, they started out as an e-Document Management solution, implemented as a simple web-based portal solution that integrated with the back-end ERP and/or MRP system, that allowed purchasing and logistics personnel to efficiently manage RFQs, Purchase Orders, Kanban Orders, Shipment Notices, Payment Inquiries, and Invoices and sales to efficiently handle inbound RFQs, sales orders, and inbound shipment inquiries. On top of this, as per our post on automate the end-to-end purchasing process, they built m-way matching and reporting capabilities (and can tell you whether or not the invoice matches the purchase order and / or the goods receipt), scorecard capability, and customer branding capability as well as streamlined Excel integration and a shopping cart that runs on a customer catalog.

Since then they have been hard at work adding more and/or improved document types (including requisitions, specifications, surveys, etc.), scorecard corrective action reporting (SCAR), the ability to have multiple configurations of the software for different geographies/countries/divisions/departments/plants, an improved shopping cart solution, more integration options out-of-the-box, more usability features (such as the ability for a supplier to flip a PO, or line items, into an invoice or ASN and a buyer to flip an invoice, or line items, into a goods receipt), and more customization capability (which allows the entire look-and-feel to be custom skinned, including layout options, by the customer). In today’s post we will talk about the streamlining that B2BConnex has implemented since we last covered their application, the enhanced reporting, and the configuration capability. In tomorrow’s post, we will discuss their improved catalog and shopping cart capability, their B2B Direct solution, and the associated services that B2BConnex offers.

All of the relevant fields of the documents can be edited in-line in the application. For example, once a purchase order has been created, the supplier can request changes online to pricing, quantities, delivery date or other data which are updated in your ERP system once approved . All changes are tracked and a full audit trail is maintained, as well as any or all comments attached to the purchase order. The same holds for the shipment notice, which can be created by a supplier with access to the supplier portal. The shipment notice can be created from a single purchase order or from open line items from multiple orders. Similarly, Corrective Action Requests can be created manually and can reference invoices, shipment notices, or goods receipts and be associated with the requisite line items.

The UI has been streamlined so that when a user logs in, they can quickly view a list of all documents that have been assigned to them and how many of those documents require (immediate) attention. This allows the user — be it a buyer, logistics manager, or supplier — to focus their attention on those items that require immediate attention and prioritize their workday.

In addition, document creation has been streamlined so that a user only has to enter minimal meta-data information, as each document can have as many attachments as is required to create the specification, RFQ, or scorecard. In addition, all documents can be created from Excel sheets, and templates can be exported from the application.

Custom reports can be built on any data in the system, and the reporting capability allows the user to quickly retrieve only those documents that have been recently reviewed, changed, accepted, negotiated, approved, satisfied, etc. and restricted to a supplier, buyer, etc. based on the audit-trails and meta-data maintained by the system. Built-in reports, all of which are configurable, include performance summary, response time, negation detail, time to approval, received unapproved, delivery, price data, first pass yield, open document line, and transit days report — all designed to measure the performance of purchasing.

The configuration capability is quite extensive. The administrator can configure look and feel, fields displayed for view or update, status codes, currencies, languages, scheduling, expediting, user accounts, account policies, logging, file I/O, EDI, portal options, individual geography/department configurations, ERP integration (including users, data field mappings, etc.), partners, partner profiles, items, and catalogues, and other data items of relevance. The solution can be customized to fit the process of the buying organization and the workflow of the applications the personnel are used to.

Come back tomorrow for a review of additional capabilities added by B2BConnex since our last posts as well as a discussion of the services they offer.