Lean Supply Chain: Collected Practices and Cases

By Productivity Press Development Team

Productivity Press, 2006

$15; 136 pages

ISBN: 1-56327-330-6

To order: visit www. productivitypress.com

Although it began in the manufacturing plant, the concept of lean is now permeating all aspects of the supply chain. In fact, industry experts now assert that the only way to find success with lean is to extend the effort to your supply chain partners. Lean Supply Chain: Collected Practices and Cases provides readers with quick tips and real-life examples of how to accomplish this.

The book is a collection of articles that have appeared in the monthly newsletter, Lean Manufacturing Advisor. Each article comes in under ten pages and provides bite-sized advice on taking lean to your extended supply chain. The focus of these articles is practical ideas that can be implemented immediately.

The book is divided into three parts: supply chain strategies, lean partnerships, and improving distribution. The supply chain strategies section addresses the broad issues at play in creating a lean supply chain, such as reducing complexity, cutting time to market, and reducing customer wait time. The best article in this section may be the one that provides readers with a list of signs that it’s time to extend lean operations to their suppliers and/or customers.

The middle section on building lean partnerships with your suppliers is the strongest part of the book. These case studies provide insights into how lean leaders like John Deere, Lockheed Martin, and dj Orthopedics have overcome the challenges of improving their suppliers’ lean capabilities. The examples of their supplier training programs and metrics are particularly helpful.

The third part focuses specifically on the distribution portion of the supply chain, examining the application of lean to the warehouse and to trucking companies. The articles in this section are strongest when they get specific such as in the discussion of how to calculate takt time in the warehouse and how to error-proof warehouse picking. Less valuable are the more general descriptions of Amazon’s and General Motor’s lean warehouses.

Since it is a compilation of previously published articles, the book works less as a cohesive whole and more like a series of tips from peers. As can be expected, the articles are a mixed bag—some provide solid advice that will help spark ideas for improvement while others are too vague to provide value.

It would be a mistake to expect Lean Supply Chain to be the main reference work in your lean library. But it may provide a nice supplement to an already existing collection. Its distillation of practical hints and tips can serve to bolster the theories and strategies presented in other sources. At the same time, it succeeds in providing readers with glimpses of what lean can look like in real life.

APQC Web site: www.apqc.org

With the redesign of its Web site, APQC has made it easier for companies to locate the organization’s wealth of benchmarking data and knowledge.

APQC, an industry association focused on process and performance improvement, is particularly well-known for its Open Standards Benchmarking Collaborative (OSBC) Database. Drawing from the input of more than 3,300 participants, the database provides standardized processes and measures as well as a repository of performance benchmarks.

Through the new Web site, it is easy to find information about this database and the underlying Process Classification Framework. The Process Classification Framework outlines common definitions and works a little like the Supply-Chain Council’s Supply Chain Operations Reference (SCOR) Model. Visitors can also download an extensive listing of key supply chain metrics and a sample benchmarking report.

The Web site, of course, has information on how organizations can join APQC to gain full access to this information. But even nonmembers can customize their Web site experience by providing their profile information. Users that choose to do this will find that when they log in, the site only serves up resources pertinent to their specific area of interest.

The new Web site combines all APQC resources into one place, called the Knowledge Base. It is here that supply chain professionals can find recent articles on supply chain topics ranging from distribution to supplier selection.

Most of the articles listed are only available to APQC members. This restriction seems odd as the majority of these articles come from outside trade publications, such as Logistics Today, Purchasing, Logistics Management, and Supply Chain Management Review. All of these articles can be easily accessed for free at any one on these publications’ Web sites.

Supply Chain Saves the World

Edited by Kevin O’Marah

AMR Research, 2006

$19.95; 211 pages

ISBN: 0-9785928-0-8

To order: visit amresearch.com/Products/Publication.asp

When glancing at the title of the latest book from AMR Research, it’s tempting to think that perhaps the research firm’s analysts have been spending a little too much time listening to U2 on their iPods.

But Supply Chain Saves the World does point to something that most—if not all—of us accept to be true: A well-oiled supply chain can be a very powerful tool—and not just in the sense of keeping costs low and customers satisfied. Supply chains also play a key part in a company’s overall strategy—both in the sense of how it makes money and how it relates to the rest of society.

Supply Chain Saves the World begins by describing how AMR analysts are defining that well-oiled supply chain. For the past few years, AMR’s supply chain research has been centered on the concept of the “demand-driven supply network” or DDSN. The DDSN is composed of three interlocking elements: demand management, supply management, and product management.

According to Kevin O’Marah, the book’s editor and AMR’s senior vice president of strategic research, the demand-driven supply chain differs from traditional concepts of the supply chain in three key ways: 1) how it shapes market demand, 2) how it interweaves product innovation into operations, and 3) how it manages variability mathematically.

Working off this basis, the book advances a two-pronged agenda. First, it serves to effectively present AMR’s oft-repeated mantra that “leadership in demand-driven performance is related directly to a company’s overall financial performance.” Second, it seeks to argue that it is possible for companies “to do well by doing good.”

The book is fairly evenly divided between these two foci. Even when the articles do look at social responsibility issues, they do so within a hard business context. In other words, this book is not about how to turn GM into Ben & Jerry’s or how to get Dow Chemical to act like The Body Shop.

Instead, it looks at such things as the growth opportunities that lie in forming effective consumer supply chains that can better serve markets in developing countries. Or how companies can reap economic benefits from providing consumers in the developed world with “better stuff,” such as fuel-efficient vehicles or safe and affordable medical services. In this way, argue the analysts, companies can earn a profit and improve the quality of life at the same time.

Similarly a large part of the section on the “Greening of the Supply Chain” is not about why you should make your supply chain more environmentally friendly but about how companies can assess their level of preparedness for regulations such as Reduction of Hazardous Substances (RoHS) or Waste Electrical and Electronic Equipment (WEEE).

In its more traditional business book sections, Supply Chain Saves the World addresses such issues as how to reshape your company’s structure and organizational models to be a successful global organization and what sort of metrics are necessary in this new demand-driven environment.

In short, this book is suitable both for those executives looking for an update on AMR’s latest thinking on supply chain organizational trends as well as those interested in how they can meld their business and social responsibility concerns.

The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger

By Marc Levinson

Princeton University Press, 2006

$24.95; 376 pages

ISBN: 0-691-12324-1

To order: visit www.pupress.princeton.edu

In his new book The Box, economist Marc Levinson convincingly argues that the shipping container has had a profound impact on the world economy and has served as one of the key drivers of globalization.

According to Levinson, when 58 aluminum truck bodies were loaded on the Ideal-X tanker ship in April 1956, a revolution began. By “lying at the core of a highly automated system of moving goods,” the container has helped make shipping significantly cheaper and faster. As a result, competition in the business world became increasingly global in nature. The transformation was not immediate, but by the end of the 20th century, there were few markets for goods that were purely local. Appropriately, the publication of Levinson’s book coincides with the 50th anniversary of the start of this revolution.

Levinson clearly shows how before the container, the vast majority of ocean-shipping costs were made up by what took place at the dock as opposed to out at sea. He details how trucking company owner Malcom McLean went about popularizing the container. According to Levinson, McLean’s great accomplishment was not the idea of shipping goods in metal containers— there actually were several previous containerization efforts, dating back to the 1920s, but the concept just never caught on. Instead, McLean’s revolutionary insight was that “the shipping industry’s business was moving cargo, not sailing ships” and that containerization would require an entirely new way of handling freight.

The Box outlines those systematic changes and the inevitable rise of containerization (driven in part by the logistical needs of the Vietnam War). It then looks at what other century-defining business practices and concepts—such as the global supply chain, just-in-time inventory management, and outsourcing—were all made possible because of the existence of the container and the more efficient long-distance transportation of goods.

Levinson succeeds in providing a balanced and fair history. For example, he acknowledges the difficulties of proving his theory with cold, hard financial facts as data on freight costs from 1950 to 1970 is deficient. He also acknowledges that in some cases containerization and the global supply chain are a mixed blessing. For example, workers now have access to significantly cheaper consumer products but their bargaining power—which had become so strong after World War II—has slipped as it has become easier for companies to set up manufacturing sites where labor is cheaper. Containers have also made life more difficult for customs inspectors and security officials.

Levinson himself admits that the container has “all the romance of a tin can,” but he succeeds in turning this “soulless aluminum or steel box held together with welds and rivets” into a surprisingly compelling read. To get a taste, readers can download the first chapter, “The World the Box Made,” from publisher Princeton University Press’s Web site.

VICS Web site: www.vics.org

If you’re a retailer or a supplier to a retailer, you’ve got a terrific resource in the VICS Web site. VICS is short for the Voluntary Interindustry Commerce Solutions Association, an organization founded in 1986 to promote greater collaboration and use of business process standards in the retail industry.

VICS is often associated with a technique called CPFR, or collaborative planning, forecasting, and replenishment. The organization is still heavily involved in the development and implementation of this technique, but as the Web site makes clear, its scope of interest now expands to a number of other business process areas as well.

The VICS Web site is, first and foremost, the most comprehensive source of information on the CPFR approach. This includes white papers on the concept as well as a detailed roadmap for implementation. The site also includes case examples illustrating successful CPFR in action. The company case study currently featured on the site is Dillard’s department store. For any organization considering a CPFR program—and once you start reading the case studies and success stories you have to wonder who wouldn’t be considering it—the VICS Web site is the logical point of departure.

Beyond the information on CPFR, the VICS Web site offers a host of valuable guidelines for key retail processes. These include such things as the standard bill of lading, distribution center and store replenishment practices, standard routing guide, and more. Add to all of this the VICS library and a blog (“Joe’s Corner”) by VICS President and CEO and industry veteran Joseph Andraski, and you have one of the most informative sites in the supply chain space today.

Much of the information on the VICS Web site is free of charge to the general public. Some is available to members only. The list of members, by the way, is a Who’s Who of retailing including Wal-Mart, Target, Best Buy, and Home Depot as well as many of their suppliers. But as the Web site points out, membership is open to companies of all sizes. Complete information on membership is clearly presented on the site.

Production Spare Parts: Optimizing the MRO Inventory Asset

By Eugene C. Moncrief, Ronald M. Schroder, and Michael P. Reynolds

Industrial Press Inc., 2006

$44.95; 289 pages

ISBN: 0-8311-3228-0To order: Visit www.industrialpress.com

Effective inventory management is difficult, spare parts inventory management even more so.

This is because demand for the vast majority of maintenance, repair, and operating (MRO) inventory is infrequent, making forecasting extremely difficult if not impossible. Furthermore this rarely used inventory often has a high cost per unit and a high inventory value as well as long lead times. Yet at the same time, these parts are often critical to the operation—if they are not available when needed, production will grind to a halt.

Production Spare Parts: Optimizing the MRO Inventory Asset addresses this most difficult of inventory problems. It provides techniques, hints, and concepts that can help readers eliminate excess inventory, set initial spares levels, improve availability, and set and monitor goals.

Authors Eugene C. Moncrief, Ronald M. Schroder, and Michael Reynolds attack their subject matter in a straightforward fashion, providing clear introductory definitions and illustrating their points with real-life examples from their work with clients at more than 700 plants. Their advice is practical and full of common sense.

Two key themes that run throughout the book are that one strategy does not fit all inventory types and that it is important to prioritize effort and investment to those parts that are the most critical to production. Toward this end, the authors strongly recommend such techniques as employing an inventory tree method to classify inventory according to its characteristics and using an ABC analysis. As a result, readers will walk away from the book with effective rules of thumb that will help them focus on those inventories that need the most help.

When it comes to the tricky exercise of estimating demand for slow-moving, randomly failing parts, the authors offer a procedure that utilizes what is know as the chi-square statistic to predict the failure rate for the future. Inventory levels should then be set using a risk-based assessment. The goal of this assessment is to achieve a balanced inventory, or one without too much overstocking or too much understocking.

Readers will also gain a better understanding of how to set a reorder point, how to decide on the economic order quantity, and what steps they can take to achieve more balanced inventory. Other key topics include ways to avoid unnecessary purchases and to reduce replenishment lead times as well as key metrics such as the absolute variance ratio.

Why should you be concerned with this admittedly narrow subject field? As the authors point out in the introduction, significant corporate assets are tied up in spare parts inventory. By following the advice in this book and identifying excess inventory, companies can free up cash for more productive uses.

Supply Chain Management Review Web site: www.scmr.com

Supply Chain Management Review offers a variety of e-newsletters that provide monthly insight and analysis right to subscriber’s e-mail boxes. To subscribe, visit www.scmr.com.

• “Supply Chain Executive Briefing” provides top articles, selected conference listings, and links to reports from consultants and analysts.

“Supply Chain Technology Briefing” offers the latest news and developments in the supply chain technology space.

Supply Chain Executive Resources” compiles white papers, research reports, articles, Webcasts, and other educational resources around a specific topic of interest to supply chain managers.

• “Supply Chain Executive Advisor” covers sourcing and procurement in the global supply chain by summarizing the latest analysis, commentary, and research.

Also visit our Web site to peruse our new white paper section. This repository provides thought leadership and best practices from leading supply chain technology vendors, third parties, and consultants.