How long should the process take?

When a process owner receives comments about how long it takes, a good leader will undertake an examination of the process to see where, if necessary, how the process time can be decreased.

In business process language, the process flow time should be analysed to understand the make up of the process. Each activity in the process has an average time (and variability) to complete. In a sequential process, simply add up all the average activity times to obtain a total average process flow time. The total is also called the theoretical flow time – an idealized time.

However, a process may also have waiting time between activities. The waiting time is concerned with process inventory that is sitting in a ‘buffer’ between activities. We now have:

Average process flow time =  theoretical flow time + waiting time.

We can develop an efficiency measurement:

Efficiency = theoretical flow time/average flow time = %.

A leader can now investigate ways to improve the efficiency of the process and increase the efficiency.

SCM- Beyond Cost Cutting

In a recession or industry downturn, management will declare ‘la partie en danger” and begin a program of cost reduction and consolidation. For Supply Chain (SC) professionals, cost reduction is an ongoing process of continuous improvement. During a downturn, a spotlight is shone on the SC where further cuts are expected.

In most cases, the cuts are not strategic but tactical to meet a short term goal. The SC professional also sees the opportunity for a more efficient and agile SC.

A recent example is the reaction of oil shale producers in North Dakota. According to the Wall Street Journal (May 18, 2016), the most diversified operators “ are finding ways to make the Bakken Shale formation pay even at low oil prices by trimming budgets, improving field logistics and focusing on their best assets” (my emphasis).

This is the first downturn in 10 years the producers. Among the actions taken by the best producers is to improve rig logistics with “cash operating cost at less than $10 per barrel”. Seeking a perfect well, average well drilling and completion costs have come down by almost a third.

The company Hess, is “implementing lean manufacturing techniques…such at just-in-time supply chain logistics and greater use of standardized parts…”. Indeed, the productivity of each rig has increased substantially. Even though the number of rigs has declined, the number of wells per rig has increased. The time to frack a well is “one day from up to three days two years ago and boosted average initial well production by up to 20%.”

SC professionals can take the lessons from the oil shale producers into other organizations and industries to position their supply chains and overall operations to fit today’s reality and create a competitive position coming out of the downturn.

The Role of Inventory in Supply Chain

I was recently involved in a conversation about the role of inventory in a supply chain and, more generally, in business success. It was generally thought that a higher customer service level required more inventory. The higher level of inventory would make up for long lead times, poor supplier performance and customer demand volatility.
These comments are very common and are considered “laws” where operations management personnel are concerned. In fact, not only are the laws false – but the entire concept of service and inventory levels relationship is outdated. The advent of supply chain management (SCM) has created new dynamics in creating a customer value with ever lower levels of inventory in the supply chain (SC).
One of the most critical aspects of supply chain management is dealing with customer demand. Members of a supply chain must have visibility into the final customer or end user demand data. To meet ever increasing customer desires for product variety at low cost, the supply chain participants can use the data to plan production, transportation, storage and final delivery where and when the product is needed with the lowest possible inventory. Many of these decisions involve participants working together intensively with the aim of providing value to the final customer/end user. This cooperative nature of SCM is one of tradeoffs and core competencies among the SC participants and is thus very difficult to achieve.
Poor supplier performance has been magnified by the globalization of business and the use of outsourced business processes. The inputs provided by material and service suppliers are critical to supply chain performance. If one link in the chain fails all downstream participants and the final customer are affected. However, the role of the supplier in the SCM context is changing in the face of business demands and the role of the buying organization. It is no longer appropriate to treat all the suppliers in the same manner. Under the banner of strategic sourcing, a business uses different procurement tactics for different commodity groups. For example, procurement of office supplies does not use the same methodology as a key manufacturing input. Suppliers are grouped and measured on mutually agreed performance standards. The results are reported in a Supplier Scorecard available to authorized participants online. Better overall supplier performance can contribute to high service levels with lower inventory.
As previously mentioned, doing business around the world increases the complexity – including longer lead times – of SCM. Longer lead times also increase the variability in supply chain performance. A supply chain with long lead times (often called a “push” supply chain) is not flexible or responsive to changes in demand. Thus such supply chains will have a higher level of inventory along with substantial obsolescence. The redesign of a push supply chain to make it more responsive can assist in achieving the holy grail of lower inventory across the supply chain.
A number of industries can be said to lead in this area. High tech firms experience very short product life cycles which drives a generally pull-based supply chain that is agile and responsive. The automobile industry gives consumers billions of product configurations. Such complexity requires push-pull boundaries at different stages of order fulfillment combined with a postponement strategy.
If you wish to find out more about SCM and how higher service levels can be achieved with lower inventory, please contact glsconsulting.ca
Brian Graystone, MBA, CMC, P.Log
Vancouver, Canada
604-838-2940
Skype: bgraybgray1

Check your Process Knowledge

Welcome to a new blog post.

In many situations, process knowledge is essential to establish a baseline for issue resolution. Some questions follow to do a check on your process knowledge. See how many you can answer and let me know if you get stuck (info@www.glsconsulting.ca):

• What types of variability exist?

• What happens to throughput rate when the service rate is variable?

• We often work with ‘averages’ in processes: how does variability affect a process performance when the average is stable?

• What is buffer size? As buffer size grows, what happens to a process? Why?

• What role does ‘excess’ capacity play in a buffered process?

• ‘For variable systems, we must have utilization less than one’. Why is this so?

• But, every operations manager wants to run equipment at very high utilization to achieve maximum production! How is this statement actually counter-intuitive?

• In a manual-process driven warehouse, slot lock will occur when storage slots are filled over about 80-85%. Can you explain?

• Relate the following process terms when variability occurs: cycle time, WIP, utilization, wait time

• How can you identify a bottleneck in a process?

• What costs can buffers incur?

• Can you identify ways to manage buffers?

Thanks to UBC and past students!

COMMUNITY GIVE BACK

blog-003-bRecently Brian was the Chef Crew Lead at the Vancouver Friends for Life Society (FFL) kitchen in Vancouver. The lunch is served twice a week for FFL clients who are coping with critical illnesses. blog-003-a

The lunch is a chance to socialize as well as have a nutritious meal.
Brian wishes to thank the Crew for an amazing experience.blog-003-c

The Bottleneck that is the Port of Vancouver, BC

Good morning and welcome to a new bottleneck in your supply chain. This is, if you move goods through the Port of Vancouver, BC, Canada.

Unionized and non-unionized truck drivers have withdrawn services (“strike”) over pay and waiting time. It seems that the waiting time at the Port can be long and, for many of the drivers, rarely compensated.

The Retail Council of Canada (RCC) is also very concerned. The Port of Vancouver is the busiest in Canada and is a vital supply chain link in trans-Pacific operations. Any shut down creates a bottleneck in the RCC members’ supply chain. Retail goods must reach the store shelves to create value.

As any process improvement veteran knows, waiting time – whether it is drivers or containers on ships – constitutes waste and non-value added time.

Overcoming the bottleneck at the current time is basically limited to solving the drivers’ issues. In the medium – to long-term, supply chain process owners can apply risk management best practices to their supply chain strategies and models. The application of risk management to supply chain processes is a hot topic as any man-made or natural disaster can disrupt supply chain processes. Processes with long lead times, such as trans-Pacific maritime transportation, are especially vulnerable.

If you wish to find out more about this topic, please get in touch via our Contact page.

Welcome to GLS Consulting

Welcome to GLS Consulting’s very first blog entry.

Why is it so hard to match supply with demand? For supply chain and process veterans, the key word is VARIABILITY. Variability in demand, process variability and supply uncertainty all play into the equation.

If we know the exact demand (and some organizations do!), it is much easier to plan and execute supply chain processes to match the supply. However, this is rarely the case. Therefore, good supply chain professionals turn to various techniques to reduce the variability in demand such as: improved forecasting, creating flexible supply, and even profit maximization techniques (oversupply vs. undersupply). In most situations, the ideal is to minimize the variation of supply to estimated demand.

Process variability is a throughput killer. Process throughput losses decrease yield and create back orders. Further, process setups interrupt the flow of many processes. Waiting time increases – both within the process and for external customers. Reduction of process variability is present in many business improvement approaches such as Six-Sigma, Bottleneck analysis, JIT and Lean.

Supply uncertainty has to do with the firm supply network and service providers (such as customs brokers and transportation providers). Any single failure in the supply network and service providers can create havoc in downstream supply chain operations. For example, the lack of a single critical part can delay new product launches. Border delays and vehicle breakdowns increase the supply uncertainty. The reduction of such uncertainty is apparent in the creation of reactive capacity, local supply and the use of vendor improvement initiatives.

In many organizations, supply chain professionals want to reduce the variability in order to better match supply to estimated demand. Reduction of variability can result in better supply chain performance to support sales and marketing efforts.

Do not hesitate to contact GLS Consulting if you would like more information or even to provide a comment. Feedback is most welcome.