E-Business as part of Supply Chain Strategy

E-business is certainly a hot topic of discussion these days, and rightly so. E-business is essentially doing business over the internet, and can provide significant business advantages. However, E-business has significantly different applicability in different industries. It is easier to sell small high-value products like books, or delver electronic content like music over the Internet than, for example - industrial chemicals.

That does not mean that those of us in the process manufacturing industry cannot exploit E-business. If we just look at opportunities for top line growth - revenue enhancement, the process industry can exploit E-business to:

- Provide 24/7 customer service for customers from any location.
- Personalize and customize information to customers and suppliers.
- Implement flexible pricing schemes.
- Implement very efficient funds transfers.
- Aggregating information from various sources.

These are some ideas for enhancing revenues by implementing E-business. There are additional possibilities on the cost reduction side of the business. More to come later...

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Maintenance Stores - How Do We Optimize?

In the process industry, most manufacturing plants have a maintenance storeroom. In some plants this is a large centralized, highly planned and managed function. In smaller plants it can take the form of a smaller localized collection of "stuff" we think we may need in the near future. No matter the scale of your maintenance storeroom, there should be some basic and documented procedures developed jointly by maintenance, engineering, and purchasing to ensure consistency and quality of operations. Procedures like:

- Inventory classification, including provisions for obsolescence.
- Vendor managed inventory programs.
- Use and modification of the catalog system.
- Matching major spare parts with the plant critical equipment list.
- An effort to minimize the number of suppliers, and number of parts in inventory.
- An inventory record accuracy program.

Well planned maintenance stores can be a competitive advantage to process industry manufacturing plants. If stores is viewed as a "cost" or "bureaucracy" the advantages will not flow to the financial bottom line.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Making Teams Effective

Virtually every organization uses teams to solve complex problems, or to implement large scale, complicated projects. With the integration and globalization of organizations, it is becomingly increasingly common for team members to live on different continents, and may never have met their teammates in person. With this environment, some suggestions for insuring that teams are effective can be as simple as:

- Make sure the objective is appropriate for a team solution. Teams are appropriate where creativity is required. Teams are less effective when a situation with tight "cast in stone" deadlines are necessary.

- Make sure a reasonable definition of consensus is agreed upon and applied.

- Not all of the team's activities need to be performed by the entire team; nothing works better for a team than the approach of "divide and conquer."

- Some time should be spent, especially early on, to socialize and harmonize the team. A good team needs strong relationships, and a keen understanding of the strengths and limitations of other team members.

- Apply 21st century collaboration tools; video conferences, document and drawing editing programs that can be used by multiple team members and manage all changes simultaneously.

- Match people and personalities to specific team roles. The leader guides the process and helps build consensus. An administrator updates the project schedule, maintains the action lists, keeps meeting minutes etc. The facilitator leads the team discussions and make sure they stay on track; many teams use the leader as the facilitator. A writer develops team reports, and presentations; many teams combine the writer and administrator roles. The remaining two roles are those of analyzer - somebody has to evaluate options and run the numbers; and at least one idea generator - someone creative and capable of stimulating the team's thought process.

Sometimes the human interaction side of establishing a team gets minimized or ignored so we can "get right to results." A little effort up front to ensure a team will be effective goes a long way to getting those results.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Lean Implementation - Maintaining Focus

Many manufacturing firms in the process industry have difficulty maintaining a long-term ongoing focus on lean improvement efforts. To keep a lean effort productive we suggest the following:

- Focus on the big picture.
- Develop goals that focus on long term throughput improvement.
- Exploit the constraints that limit throughput.
- Avoid wasting resources improving non-constraint areas.
- Focus on activities that increase value to the customer.
- Eliminate organizational barriers and policies that inhibit growth.
- Facilitate the creativity and enthusiasm of the workforce.

Improvements in throughput can, and should continue year after year, without proportional increases in costs.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Why Should We Offer Quantity Discounts?

Quantity discounts can be a helpful pricing strategy in the process industry because they result in improved coordination in the supply chain, and lead to extraction of surplus through price discrimination. Consideration should be given to:

- For commodity products for which prices is set by the market, manufacturers can use lot size based quantity discounts to achieve coordination in the supply chain and decrease supply chain cost. Lot size based discounts, however, increase cycle inventory in the supply chain.

- The overall supply chain profit is lower if each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit. A coordinated solution results in a higher overall profit.

- For products for which the firm has market power, two part tariffs or volume based quantity discounts can be used to achieve coordination in the supply chain and maximize profits.

- For products for which a firm has market power, lot size based discounts are not optimal for the supply chain even in the presence of inventory costs. In this environment, either a two part tariff or a volume based discount, with the supplier passing on some of its fixed costs to the customer, is needed for the supply chain to be coordinated and maximize profits.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Transportation - Delivery in the Supply Chain

We like to focus on the overall supply chain in process industry companies. Transportation moves the product between different stages in the supply chain. Transportation responsiveness has the same effect as other supply chain segments - responsiveness comes at the expense of cost efficiency. Really?

The preferred mode of transportation also affects the inventory and facility locations in the overall supply chain. The role of transportation in a company's competitive strategy figures prominently in consideration of customer needs. If a customer demands a high level of responsiveness, a supplier can use transportation as a competitive driver - assuming the customer will pay for the premium. If a customers primary decision making is focused on cost, a supplier will make decisions based on lowering transportation cost at the expense of responsiveness.

A company should use both inventory and transportation to increase responsiveness, or efficiency, the optimal decision for the process industry firm should find the optimal balance between the two.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Managing Safety Inventory in the Real World

Safety inventory - "safety stock" is used in most process industry firms to optimize supply chain performance in view of demand uncertainty. In the real world, what do we need to consider to estimate quantities and manage safety stock levels? At a minimum, our view is:

- Adjust inventory policies if demand is seasonal. Reorder points should be much shorter in peak season than the off season.

- Plan for the fact that demand is "lumpy." Customers tend to order in "economical quantities" so this adds significantly to the variability of demand.

- Use advanced computer simulations to model and test inventory policies. Simulations should consider seasonality and "lumpiness."

- Start the safety inventory planning process with a pilot. Rome was not built in a day - simulations cannot identify every problem and determine an accurate safety stock plan.

- Monitor service levels. An optimal inventory policy is great, but it should not detract from customer service metrics - on time delivery, percent perfect orders, first pass quality, etc.

Considering the factors listed above, and many more, the focus should remain tightly focused on reducing safety inventories. Safety inventories are typically a big percentage of the investment and value of total inventory in a supply chain.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Obstacles to Strategic Supply Chain Performance

Most companies that implement a supply chain view of their operations struggle to find an optimum balance between responsiveness to customers - and cost efficiency. Wasn't it Henry Ford that said his customers can "... have any color they want, as long as it is black." The responsiveness/efficiency balance can depend on a number of factors. Some of the obstacles that supply chain managers must consider as they develop strategy include:

- Increasing Product Variety; product proliferation is rampant in today's markets.

- Shorter Product Life Cycles; many product life cycles now are measured in months, not years, as has been common is earlier days. This is true for not just niche products - commodities too.

- Increasingly Demanding Customers; delivery lead times, costs, product performance, inability to pass through cost increases. Customers today (who evaluate their own supply chains) are demanding faster fulfillment, better quality, and better performing products for the same price.

- Fragmentation of Supply Chain Ownership; many firms are less vertically integrated than they were in previous decades, and many have outsourced "non-core" functions and activities.

- Globalization; supply chains are increasingly global which can have cost benefits, but coordination across distant elements and time zones can make management more complex.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Plant Maintenance: the Cost/Risk Confusion

In the process industry, our manufacturing plants are often capital intensive. Maintenance of these physical assets can be a significant part of the operating budget leading to the inevitable question of "how much do we really need to spend on maintenance?" There is a widespread belief that there is an optimum level of maintenance spending that balances cost and a company's risk. We believe there is no such thing as a generic cost/risk trade off for all industries. The level of maintenance spending is more a function of the level of consequences of failure.

Industries, or even individual manufacturing sites, with an extremely high consequence of failure need to manage risk to the lowest practicable level - maintenance costs may not even be a subject for discussion - ie nuclear power, etc. In the chemical industry the consequences of failure can be extreme when plants are close to highly populated areas. In the general process industry the risk of failure can be managed by plant design initiatives such as redundancy, and surge capacity.

There is not always a direct link between the cost of plant maintenance and the level of risk. There is almost always an opportunity to reduce maintenance costs while increasing the level of risk management. This effort depends on the sophistication of the maintenance effort when this initiative commences.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

A Strategic View of Plant Maintenance

Winston Churchill once observed that "However beautiful the strategy, you should occasionally look at the results." Developing strategy is good, but it the implementation of strategy that separates successful organizations from average or failing organizations. The process industry, which is frequently capital intensive, can achieve strategic advantages through effective management of their physical asset base. The core process to managing that asset base is plant maintenance. Done well, maintenance is a reliability effort, not a repair focused effort. Maintenance performance can, and should be measured, and appropriate metrics should be used to benchmark the organization and develop improvement objectives.

A good structure for deploying metrics is to focus on metrics at three levels:

- The Corporate Level - Safety, maintenance costs/replacement asset value, etc
- The Strategic Level - Percent planned work, downtime due to maintenance, etc
- The Functional Level - Length of time to perform a routine task, rework, etc

We are comfortable with managing a business via a balanced score card. We should approach our maintenance and reliability efforts with the same perspective.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Working Together - Sales & Operational Planning (S&OP)

Implementing sales and operational planning (S&OP) will help your organization function well as an overall whole. It may not directly benefit any specific function, or guarantee a profit increase, but as we always say - we assure you that an overall supply chain perspective, and a disciplined effort to do a regular sales and operational planning process will absolutely help sales, and the top line.

- The general manager needs to get everybody working together and exercise leadership.
- S&OP deals with families of products, and requires a planning horizon, and monthly reviews.
- S&OP links the business plan with the operations of each department.
- The Sales & Operational Planning process yields realistic plans.
- Sales and Operational Planning eliminates surprises, and hidden decisions...

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Logistics Planning vs. Logistics Strategy

Many firms in the process industry consider logistics as part of their overall supply chain, but fail to differentiate between logistics strategy and logistics planning. Firms that explicitly distinguish between these activities benefit in at least three ways:

-Opportunities for differentiation based on operational, logistics, or customer service excellence are more likely to be exploited.

- Logistics tends to have a more visible and important role in the company.

- Investments in the logistics function or infrastructure are more likely to be approved.

In firms that do not differentiate between logistics strategy and logistics planning, logistics tends to become just a budgeting exercise, and seen as a "cost" rather than value added activity.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Best Practices: Condition Monitoring of Belt Conveyors

I am sure my friends and colleagues in an unnamed agricultural chemical manufacturing, formulation, and packaging company will indulge me in an observation of best practices for belt conveyors - just like the ones we use to package bottles, 4X2.5 packages etc for our products. If you agree or disagree, please add your comments to this posting - but we do not accept anonymous comments, please give us your direct feedback...

Belt conveyors are very reliable. When performing preventive maintenance on belt conveyors we highly suggest condition monitoring and maintenance versus interval maintenance. Best practice includes:

- Lock out / tag out before maintenance begins.
- Check overall condition of the belt.
- Check that rollers are rotating freely, if not repair or replace.
- Check belt cleaning device for proper operation, adjust if necessary.
- Check belt tension, tighten or adjust to repair for sagging, jerky, or slipping movements.
- Check frame solidity, check for cracks, physical damage, and loose bolts.
- Belt Guide, check belt guides for loose fasteners, and proper function.
- Hatches and Doors, check for leakage, condition of sealing rings, and inspect locking devices.

During plant shutdowns there are a number of other activities that are required to properly maintain belt conveyors. Lubricate bearings, inspect and adjust alignment, check for vibration induced changes - loose nuts and bolts, bearing play, fittings, zero speed switches, etc.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Operational Excellence - Safety Performance

There are many priorities in manufacturing plants in the process industry. Our fundamental priority is safety management - with a focus on preventing all injuries. The key elements of an excellent safety system are:

- Management commitment - at the highest levels.
- First line, and progressive ownership of safety performance.
- Universal involvement in safety activities and training.
- Comprehensive corporate safety procedures, standards, and practices.
- Fully staffed, trained, and professional safety specialists with a supporting organization.

All of these elements are important, if not critical to an organizations safety performance. If we had to pick the most critical, important, or fundamental - it would be management commitment. Executive leadership must understand safety, believe in it, and have a passion for it.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Process Excellence: Information Management

Everyone tells us that we live in the "information age." For those of us in the process industry, our operational and supply chain excellence efforts depend heavily on managers making decisions over a very broad scope that crosses many functions - and frequently across companies. We need good information on which to base those decisions. We also try to optimize decisions across the entire supply chain, not by individual function.

When looking at the overall scope of the supply chain, there are some basic "buckets" that we can categorize the information that is necessary to make good operational and supply chain decisions:

- Supplier information: where can we get materials and services, at what price, with what lead time? Implementing e-business requires information on order status, delivery, and payment.
- Manufacturing information: What do we make, how much, where, in which facilities, with what lead time, at what costs, and at what other trade offs?
- Distribution information: what do we need to move, to where, what quantities, what mode will we use, where do we want intermediate storage, and what lead time do we need?
- Demand information: (I know, here we go again...) who is buying what, at what price, where, what quantity, and where is it to be delivered?

OK, we know what type of information we need - what characteristics of this information do we need to make good decisions?

- Information must be accurate: Information will never be totally accurate, but we cant make good decisions unless the information is accurate enough to be directionally correct.
- Information must be timely: We cant wait until the numbers are 100% accurate - we argue that they never will be. Information must be timely - even at the limited expense of accuracy.
- Information must be appropriate: More data is not always better - data has be be appropriate for managers to make correct decisions. Don't waste resources collecting irrelevant information.

Information is critical to an effort to implement operational excellence strategies, and doubly so for supply chain optimization.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Demand Uncertainty in a Supply Chain

We talk about demand forecasting - a lot. Demand forecasts are always wrong - but any serious effort to carefully forecast demand results in commensurate savings in inventory levels, carrying costs, and customer service performance. The range of demand uncertainty depends on the maturity of the market and the level of competition. We see four typical levels of demand uncertainty:

- Low demand uncertainty - purely functional products: milk, gasoline
- Somewhat certain demand - established goods: Gillette shaving razors, Huggies diapers
- Somewhat uncertain demand - new models of existing goods: colored Razer cell phones
- High demand uncertainty - entirely new products: the Apple iPhone

Of course, forecasting demand is more accurate with mature products with low uncertainty. On the flip side, new products tend to have less competition and higher profit margins. Increased demand uncertainty leads to difficulty matching supply and demand - resulting in stock outs, or oversupply situations forcing price markdowns that can be very unpleasant.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Operator Performed Maintenance

Yesterday we wrote about the importance of operator basic care or "operator performed maintenance" (OPM). Today we hope to provide some insight into how to begin to implement a world-class effort. Any implementation will be shaped by the plants history, culture, union work rules, etc. Communication with everyone involved about the goals, and getting by-in from operators, mechanics, union leaders will lay a good foundation. The OPM effort must ensure that no safety hazards are created, training should be provided for any new skills required, should not have a negative impact on existing job requirements, should resolve any union work rule issues, and should be a team effort by all employees. With this backdrop what sort of maintenance can be assigned to operators? A starting point can be:

- Lubricating equipment; checking levels, frequency, types.
- Minor adjustments; checking and tightening parts, belts, conveyors, etc.
- Cleaning equipment.
- Minor preventive maintenance; changing filters, tightening packing, etc.
- Minor instrument calibrations.
- Preparatory work for maintenance on the following shift; draining, inerting, disassembly.
- Log sheets for unusual noises, pressures, temperatures, steam/air leaks.
- Activities that the joint maintenance-operator team develops.

The goal of an OPM program should not be a reduction in maintenance staffing. The focus should be on transitioning the operators to owner-operators, and the maintainers to maintainer-improvers.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Basic Care/Maintenance by Operators

Operator performed maintenance (OPM) is one of the simplest, most powerful, but vastly underused tools in most process industry manufacturing plants. If we operated our manufacturing plants with the same care that we operate our cars, the benefits in reliability, uptime, operating costs, etc would be tremendous.

What sane car driver would ignore basic maintenance - fuel, lubrication, water, routine preventive maintenance, listening for odd noises, observing changes in performance, etc -until they experience a catastrophic failure? We approach operator performed maintenance from the perspective of "This is the place where you make your living. If you don't take care of the place where you make your living, it may not be here to take care of you."

Establishing a solid operator performed maintenance program can start small and grow over time. As with anything, the approach must be based on the culture and history of the individual plant. We never preach a "one size fits all" approach. More on implementation suggestions tomorrow.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Transportation Modes in a Supply Chain

We always couch operational excellence in the context of overall supply chain design. Why suboptimize on transportation, manufacturing, purchasing or any other elements of the supply chain? Lets look at the entire supply chain - across the enterprise and look at optimization. Operational excellence is not limited to just the manufacturing area. Lets take a look at the transportation or logistics function, which applies to both in-bound raw materials and out-bound finished products. There are essentially only six modes of transportation:

* Air- fast, but very expensive.
* Truck - quick, inexpensive, but very flexible.
* Railroad - inexpensive but slow, best used for large quantities of materials.
* Ship - the least expensive, very slow, often the only choice for transcontinental shipments.
* Pipeline - very cheap and reliable, primarily used for oil and gas, and chemical products.
* Electronic - the latest mode that delivers "content" like music, books, etc via the Internet.

Another major decision that supply chain managers must confront is the route and network by which finished products are shipped. A route is the specific path along which a product is shipped. A network is the collection of locations and routes along which products can be shipped. Decisions like "do we ship direct or do we use distribution" have a significant effect on supply chain costs, and customer service metrics.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Process Industry - "E-Business"?

E-Business is the execution of business transactions over the Internet - sorry, it is no more complicated than that. Supply chain transactions that involve e-business include the flow of information, product, and of course - funds. Companies that conduct e-business can perform some or all of these functions on-line:

- Provide all information across the supply chain - MSDS's or labels anyone?
- Contract bidding, reverse auctions, negotiating prices and contracts with both customers and suppliers. Procurement and accounts receivable.
- Accepting customer orders directly into our ERP systems.
- Allowing customers to track order progress.
- Filling and delivering orders to customers - not great for the process industry, but pretty effective when the "product" can be delivered via the Internet (books, music, etc)
- Receiving payment from customers - faster is always better.

All of these types of transactions have been completed in the past via different "channels" real world speak - brochures, customer service calls, electronic data interchange (EDI) etc. The Internet has allowed the transfer of this information quickly and very broadly - to anyone who has an Internet connection. E-business is working in both of the main supply channels B2B (business to business) and B2C (business to consumer). Amazon.com transformed multiple industries when they went live and then expanded their product lines.

How can the process industry expand their markets, and implement operational excellence through e-business? The possibilities are as endless as the Internet itself!

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Operational Excellence: Process Reliability

We like first-pass quality as a measure of process reliability (as opposed to equipment reliability). Any loss from 100% first-pass quality obviously involves rework, adjustments, or other costly countermeasures. There are some excellent statistical tools that QC departments can use to analyze first-pass quality on a run of the mill desktop PC in real time, right on the shop floor. These tools easily determine CpK, control limits, trend analysis, out of control results, and various other methods to determine statistical process capability vs specifications.

To drive improvement in process capability, engineers must understand the critical process variables, their upper and lower control limits, the plants performance of operating within these limits, and have regular and frequent reviews of conformance to these operating limits. A straightforward method to address critical process variables that are not in conformance is to categorize exceptions in four broad categories:

- Standard operating procedures - did we do the right things?
- Quality methods, and properly calibrated instrumentation.
- Incoming raw material quality.
- Equipment reliability.

Non-conformances should be rated as to magnitude and duration, but these four categories can give a plant a quick start on the path to operational excellence via process conformance.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Best Practice: Information Exchange at Shift Change

The exchange of information between incoming and outgoing shifts is crucial to effective and safe plant operation. Unfortunately, information exchange at shift change is frequently poorly done. Shift change or turnover should not be a hello/goodbye exchange, nor should it be done in the hallway, change room, or parking lot. In pursuit of operational excellence, significant attention should be placed on making sue that shift changes include an effective transfer of information relating to plant and equipment performance. A good shift change process should:

- It must be conducted face-to-face.
- It must follow specific procedures, based on an analysis of needs. The need for a specific procedure is especially important when there is a big difference in experience between shifts, when personnel have had an extended absence ie vacation, and after significant capital projects or plant turnarounds.
- It must allow as much time as necessary for communication, especially when there have been problems during the departing shift.
- Both shifts must be responsible for communication, teamwork, and joint ownership.
- Discussions should include equipment and process conditions, maintenance activity, equipment that has been locked out, personnel issues, and any new product or process.

We always advocate that any work permit - safe work, hot work, confined space, elevated work, etc automatically expire at the end of each shift with the incoming shift being responsible for reissuing the permit as they take over.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Operational Excellence - Rotating Equipment

In process plants we typically have a significant investment in rotating equipment - pumps, compressors, fans, machine tools, and motors of every description. Synchronous principals always talk about maintenance as a reliability function rather than a repair function, so we are always interested in best practices for rotating equipment. To keep a rotating equipment reliability program manageable we recommend it include all equipment larger than 10 horsepower, unless a smaller motor is on your tier 1 critical equipment list. Best practices to base your reliability program include:

Vibration Standards:
- General Motors Specification V1.0-1993 sets maximum vibration standards for particular types of equipment at specific rotational frequencies.
- Hewlett Packard Application Note 243-1 "Effective Machinery Measurements Using Dynamic Signal Analyzers" specifies acceptable vibration levels for rotating equipment.
More references and materials are available from the Vibration Institute at www.vibinst.org .

Balancing Specifications:
- ISO DR1940 Grades 1.0, 2.5, 6.3, and 16 are the gold standards. Grade 6.3 is the industry standard; best practice for critical equipment is Grade 2.5; and Grade 6.3 is appropriate for non-critical equipment.

Resonance Standards:
- Motor manufacturers have reduced the mass of their equipment in an effort to reduce costs. This, of course, leads to an increase in resonance problems - especially in high efficiency motors. Best practice dictates that when purchasing a motor or other rotating equipment, the resonance frequency of any component or frame be at least 30% higher than the maximum attainable speed of the machine.

A solid reliability plan for rotating equipment should also consider specifications for bearing installation, machinery alignment, and motors. More on these subjects to come.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

The Role of "Safety Stock" in a Supply Chain

Safety stock is inventory carried for the purpose of satisfying demand that exceeds forecasted demand for any given planning period. Firms carry safety stock because demand forecasts are always uncertain (read - wrong) and shortage or stockouts can occur if demand exceeds forecast demand. The balance that a supply chain manager must consider is the actual quantity of safety stock - a higher level increases product availability and revenues from sales, but increases inventory holding costs in the supply chain. Holding costs of safety stock are increased significantly when product obsolescence, or product shelf life factors are involved.

When determining levels of safety stock, consideration should be given to not only the level of safety inventory- by SKU, to carry but what actions can we take to improve product availability while minimizing safety stock. Levels of safety stock are typically determined by the uncertainty of demand - or supply, and the desired level of product availability to hit customer service targets. We find that every and all efforts to improve demand forecasting are typically worthwhile financially.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

On Line Research Tools - All Free!

A great operational excellence effort inevitably involves conducting some research. Be it benchmarking, best practices, or specific inquiries on general subjects like lean manufacturing – good general research can yield a surprising amount of information. There are a number of fee-based research tools, but we feel that there are a number of excellent research tools available – free to disciplined researchers. These include:

- Search Engines, the well known majors such as www.Google.com or www.Yahoo.com
- Meta Search engines, sites that send your information request to multiple search engines simultaneously – like www.Dogpile.com or www.Science.gov
- Public Databases, such as Reference USA and Business Source Premier can be accessed via public libraries, and typically from the comfort of your own home if you have a library card.
- Government Databases, good sites for research include the US Department of Labor Bureau of Labor Statistics, US Census Bureau, and SEC Filings & Forms (EDGAR). The US government is a prolific data collector and best of all it is free – your tax dollars at work.
- Company Research Websites: www.Hoovers.com and www.annualreports.com are good for finding information on specific companies, or www.thomasnet.com to find goods and service providers.
- Research on specific people or contacts (scary, no?) www.zoominfo.com or www.LinkedIn.com. We feel every professional should join and post a profile on LinkedIn.
- Information Portals like www.ceoexpress.com consolidate content from multiple sources and many can be user customized.

These are only a few, but we feel are good sources to start a research project. Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Best Practices - Pump Reliability

Synchronous is all about operational excellence for the process industry. In the process industry, we tend to have a large investment in pumps of all sizes, shapes and types. Pumps are a big component of our maintenance budget as well. Are there best practices to help us protect our capital investment in pumps, and to optimize our pump maintenance cost? You bet, and we would propose the following as a starting point:

- Establish operator tours on each shift to inspect and log pressure gauges, leaks, lubrication levels, unusual noises (ie cavitation) and report this information.

- Develop a detailed pump start up and operation procedure. Operators need to have an understanding of pump operating principles to help maintenance keep them in service.

- Develop an in-line spare pump policy. Critical pumps need to have installed, in-line spares. Considerations include effect on production downtime, ease of changeover, ease of of access and detecting operating problems, local environmental conditions, and historical records of pump reliability. When in-line spare pumps are used, consideration should be given to ensure their reliability when needed - preventive maintenance servicing, etc.

- Maintenance and the pump repair shop has a big role to play as well. Work flows and tools should be highly organized, and clean. Instill better repair standards, craftsmanship, and dedicate a "clean" room for precision repairs.

- Establish precision standards for balancing, lubrication, seals, vibration isolators, foundations, installation and start-up, shaft precision, and alignment. Have a written checklist for each pump and keep excellent records.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

The Role of Forecasting in a Supply Chain

The role of forecasting in a supply chain cannot be underestimated. Forecasting (and demand planning in general) is tough to do; and yes - forecasting is always wrong. If you take a push-pull view of a firms supply chain, all push processes are performed in anticipation of customer demand, and all pull processes are performed in response to customer demand. For all push processes, a manager must plan the level of production. For all pull processes, a manager needs to plan the amount of capacity to make available. In either case, a supply chain manager must start with a forecast of what future customer demand will be.

In addition to production and distribution decisions, firms also use forecasts of future demand as the basis for other critical decisions in an overall supply chain including:

- Production: scheduling, inventory control, aggregate planning
- Marketing: sales force allocation, promotions, new product introduction
- Finance: plant and equipment investment, budgetary planning
- Personnel: workforce planning, hiring, layoffs

Ideally, decisions throughout the supply chain should not be taken in isolation by function, as they all have an influence on each other, and are best made jointly - with an overall supply chain perspective. All of these decisions are ultimately based on a future forecast of customer demand. Just because forecasting is tough to do does not diminish its importance, nor should it detract from a firms commitment to developing and maintaining the best possible forecasting methodology. The role of forecasting in a supply chain cannot be underestimated.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence and best practices for the process manufacturing industry. To pose a question, contribute a best practice, or otherwise add to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Supply Chain Decisions - The Financial Impact

Designing a supply chain for a manufacturing company involves making decisions like how many plants will we have and how large should they be? How should we handle logistics - in house, use common carriers, or 3PL providers? Do we build warehouses, should we own them or should we lease space? Any many, many more...

When decisions are made in the areas of supply chain design, they have a long term impact as they cannot be easily changed in the short term. This has a significant impact on defining the limits within which a company's supply chain can be competitive. So we feel that supply chain design needs to take the long term view. Factors like supply and demand uncertainty, financial factors, and customer service metrics must be taken into account for a successful supply chain design. Synchronous LLC has extensive experience in supply chain design in the context of strategic business planning, manufacturing planning, and financial optimization - on the bottom line.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices for the process manufacturing industry. To pose a question, post a best practice, or otherwise contribute to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.65

Importance and Impact of Product Availability

The level of product availability is usually measured using the cycle service level or the order fill rate, and measures the fraction of customer demand that is satisfied from available inventory. Some firms refer to this as "customer service level" but we don't like that terminology - there are many, many metrics beyond product availability that can measure customer service (on time delivery, perfect order, etc). A supply chain can use a high level of product availability to improve responsiveness and attract or please customers, but that could require large inventories and the corresponding carrying costs. We believe an optimum level of product availability is one that maximizes a firms profitability.

The optimum level of product availability depends on the type of business, and where a particular company believes it can maximize profits. A grocery store will only have a few days of supply of any given product, and stock-outs occur frequently. Some high-end retailers focus on a very high level of product availability to focus on responsiveness - but they charge higher prices than competing retailers. In the e-commerce channel a customer can search the web and instantly switch to a different supplier if products are out of stock - which provides a huge incentive to maximize product availability; but competitive pricing is fierce on web channels.

Firms in different industries, and even firms within the same industry have different strategies and levels of product availability. Great firms must identify the factors that influence the optimal level of product availability. Once identified, this information can be used to determine the optimal level of product availability to optimize financial results.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices for the process manufacturing industry. To pose a question, post a best practice, or otherwise contribute to the dialogue, send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Marketing - Strategic Fit...

What does a company need to do to achieve a strategic fit between the supply chain and competitive strategies? A competitive strategy will specify either one or more customer segments that a company hopes to satisfy. To achieve a strategic fit, an established firm must ensure that its supply chain capabilities support its abilities to satisfy the targeted customer segments. The three basic steps to achieving this strategic fit are:

- Understanding the customer.
- Understanding the Supply Chain
- Achieving Strategic Fit.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Aggregate Planning

We like to talk frequently about demand forecasting - especially because that is the subject that most clients say "can't be done." In our view, demand forecasting can not only be "done" successfully, but the financial impact on a manufacturing firms supply chain can be huge...

Thinking through a great demand planning process inevitably goes to consideration of aggregate planning. Aggregate planning is a process by which a company determines levels of capacity, production, subcontracting, inventory, stock outs, and even pricing decisions over a specified time horizon. Aggregate planning, as the name designates - solves problems involving aggregate decisions, rather than at the SKU level decision.

Aggregate planning will typically determine the total level of production in a plant for a given month, but it will do so without determining the quantity of each individual SKU. This level of detail makes aggregate planning a useful tool for thinking about decisions with an intermediate time frame of roughly between 3 and 18 months. This time frame is much too short to determine SKU level production, but is generally (as always) too late to build new production manufacturing facilities.

Aggregate planning is best served by answering the question - "How can we best utilize our current facilities."

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Optimizing a Preventive Maintenance Program

Performing preventive maintenance (PM) on an interval basis (time, cycles, etc) is widely recognized as fundamental to improving maintenance effectiveness, and a path to improving equipment reliability. We believe that maintenance should be considered a reliability function, rather than a repair function. The need for improved reliability has received increasing priority in light of recent US regulations such as OSHA 1910, section 119j, which requires a mechanical integrity program at plants that deal with hazardous materials.

Optimizing the PM process presumes that you have PMs to optimize. Therefore, you should have completed your computer based maintenance management database including:

- All critical equipment: items that constrain or stop production, or create a safety hazard.
- All appropriate PMs and related procedures, overhaul, or turnaround procedures.
- A complete equipment database, including a bill of materials for spares for critical equipment.
- A process for managing work orders, including planning and scheduling, Pareto and cost analysis, equipment specific histories, etc.

If not, or even if not fully developed, you can still get a preventive maintenance program started - more on that to come.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Product Mix Optimization

It seems that in every manufacturing enterprise the focus - sooner or later - comes to rationalizing the product line. "We have too many SKUs!" Sometimes SKUs are only slightly different, and the more products in a company the more complex accounting, warehousing, and even manufacturing can be. When it is time to assess your product line, we propose the following possibilities:

- Consolidate products with similar characteristics, with a focus on offering the higher value product.

- Subcontracting or otherwise outsourcing production for some small orders to companies that are more suited to small quantities, then increase product pricing such that the product remains profitable. This gives an indication of true market prices and production costs.

- Another way to optimize small-order production products is to set up a dedicated in-house production line that makes nothing other than make small-order products.

- Very selectively take products that have no margin or strategic value, and transferring those products to a competitor - with the cooperation of the customer - to maintain the relationship with the customer.

- Press to develop better forecasts for small-order products, then make large quantities of those products in anticipation of future orders. Since these products are generally small orders, even making a 10x historical quantity, may not have a significant impact on inventory costs or turns. This may not be practical for products with shelf-life or obsolescence concerns.

- Negotiate longer lead times with customers for small-order products so orders can be consolidated, allowing for better production planning.

- Explore faster changeover methods, and train operators to implement them. For all equipment, develop a commissioning and reliability work process.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Plant Design and Capital Project Best Practices

We have written on this subject, many times. For this entry let's focus on design objectives. Every great project engineer will tell you that any project begins with defining your design objectives. In our view, a great design objective list includes reliability and maintainability objectives. We also think that a great installation effort includes a process for verifying the quality of the installation - much more and beyond typical verification of process capability at start up.


There is much, much more to plant design and world-class manufacturing than process flows, process chemistry, and standard design methods. These are all important, but a project manager must stay focused on the fact that all of these issues are equally important.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Production Planning - Can we really do it?

Production planning (in a non class A environment) can be chaotic, and subject to the whims of marketing - or more accurately sales. Integrating sales and manufacturing strategies, and we always advocate rationalizing product mix can help a lot. There are some actions manufacturing plants can take to facilitate the manufacturing-sales-marketing integration process:

- Document a sales and production planning procedure, including forecasting, supply/demand balancing, verification of production forecast vs demonstrated plant performance, conformance to production plan, etc.
- Refinement of a sales and production forecasting system.
- Balancing of supply, demand, and inventory levels.
- Planning raw material demand as a result of these reviews.
- Linking current performance to business financials.
- Creation of a longer term logistics requirements plan.
- Creation of a process for resolving conflicts in the supply chain.
- Linking to supplier and customer information systems for planning purposes.
- Fully integrating production planning, and maintenance planning functions.
- Comprehensive training of production planners in planning systems, integrated logistics, and supply chain issues.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Leadership Model - The Very Best!

Some business school references say that the most effective leaders build enduring greatness through a combination of personal humility and fierce professional resolve. Great leaders attend to people first, and manufacturing strategy second. Great leaders recognize that the good to great transformation takes time.

Another characteristic of a great leader is that they expect a very disciplined operating culture: disciplined people who require less hierarchy; disciplined thought which requires less bureaucracy; and disciplined actions, which requires fewer controls.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Tailored Transportation

Tailored transportation is the use of different transportation modes and networks based on product and customer characteristics. Most firms sell a variety of products and serve many different customer segments. A firm that sells office supplies and furniture will have a very different tailored transportation strategy than a firm that sells bulk oil products.

A firm can meet customer needs at a lower cost by using tailored transportation to provide the appropriate transportation choice based on customer and product characteristics. There are numerous forms of tailored transportation in supply chains, including tailored transportation by customer density and distance, tailored transportation by size of customer, and tailored transportation by product demand and value. For example, tailored transportation based on customer density and distance can look like this:

Short Distance:
High density - private fleet with milk runs
Medium density - third party milk runs
Low density - third party milk runs or LTL carrier

Medium distance:
High density - cross dock with milk runs
Medium density - LTL carrier
Low density - LTL or package carrier

Long distance:
High density - cross dock with milk runs
Medium density - LTL or package carrier
Low density - package carrier

The key point is that tailoring transportation based on customer density and distance, customer size, or product demand and value allows a supply chain to achieve appropriate responsiveness and cost.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to RobBaldwin@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Webmaster@SynchronousLLC.com with SUBSCRIBE in the subject line.

Demand Forecasting Methods

There are as many demand forecasting methods as there are companies doing demand forecasting. We think that is great, a company that is working to develop and implement an effective demand planning work process should take on an appropriate demand forecasting methodology and "tweak" it to make it effective for them. Different companies have different factors that influence demand - seasonality, interest rates, demographics, etc. There are however, four basic methods of forecasting customer demand:

- Qualitative forecasts, which are subjective and typically rely on human judgement and opinions to make a forecast. This method is appropriate when there is little or no historical data available, or when experts have market intelligence that is critical to making a forecast.

- Time series forecasting methods use historical demand to make a forecast. These are typically based on the assumption that past demand history is a good indicator of future demand. Time series forecasts are appropriate when the economic environment is stable, and the pattern of basic demand does not vary significantly from one year to the next. This is the simplest method to implement and can serve as a good starting point for a demand forecast.

- Casual forecasting methods involve assuming demand patterns correlate highly with certain factors in the economic environment, the state of the economy, interest rates, etc. For example, if product pricing is strongly correlated with demand, a company can use casual methods to determine the impact of price promotions on demand.

- Simulation forecasting methods attempt to imitate the customer choices that give rise to demand to arrive at an accurate demand forecast. Using simulation methods, a company can combine time series and casual methods, as well as specific customer input from sales and marketing.

A company may find it difficult to decide which method is most appropriate for forecasting demand. In fact, using multiple forecasting methods, and then using the combination of their forecasts as the actual forecast is usually the best method. That is why we advocate customizing a demand planning process to fit every unique client.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Components of a Great Demand Forecast

We like to frequently talk about demand forecasting; why? - because many, many people say that it cannot be done. Of course it can be done, and done well. Perfectly? No, all demand forecasts are wrong, but having a disciplined demand forecasting process can have a significant impact on the bottom line - reduced inventories, efficient capacity utilization, and improved customer service. Demand forecasting is not magic or "art" and usually begins with interpreting past demand correctly.

The information that a firm knows about customers past behaviour sheds light on their future behaviour, as well as the responses they will have based on the firms actions. Good demand forecasting involves a firm identifying the factors that influence future demand and then determine the relationship between these factors and future demand. Developing a good demand planning process requires a firm to be knowledgeable about numerous factors that relate to the demand process, including components like:

- Past demand
- Planned advertising or marketing efforts
- Planned price changes
- Expected changes in supply of raw materials, components, labor and logistics
- State of the local, regional, and national economy
- Actions by competitors

A firm must take into account these and other factors, and clearly understand past actions and customer demand, before it can select an appropriate forecasting methodology.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to engage new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Demand Forecasting - Part 2

There are certain characteristics of demand forecasting that supply chain managers should keep in mind:

- Forecasts are always wrong. Forecasts should include both the expected value and a measure of forecast error. If we forecast sales of a certain SKU to be between 100 and 1900 units, and another forecaster estimates sales to be between 900 and 1100, both forecasts expect average sales of 1000, but the sourcing strategies for the two scenarios would be very different.

- Long term forecasts are usually much less accurate than short term forecasts. This is why like to "tweak" longer term forecasts with monthly and/or weekly planning as we develop sourcing and production schedules.

- Aggregate forecasts are usually much more accurate than disaggregated forecasts. It is usually much easier to forecast the annual sales of a company than it is to forecast demand for a given product, or even annual demand at the SKU level. The greater degree of aggregation, the more accurate the forecasts.

Tomorrow we will review how to deal with forecast error, components of a good forecast, and the benefits/limitations of various forecasting methods.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Demand Forecasting in a Supply Chain - Part 1

Forecasting future demand is critical to a supply chain managers decision making and planning processes. There are numerous ways of predicting future demand based on historical demand information. More importantly, there are also many ways to forecast demand AND estimate a forecasts accuracy.

Production and distribution decisions are critical for a company's supply chain, but world class firms use forecasts of future demand as the basis for many other decisions made in the "push pull" phase of their supply chain. Important decisions by functional area that depend on demand forecasts include:

- Production: Scheduling, inventory control, aggregate planning.
- Marketing: Sales force allocation, promotions, new product introduction.
- Finance: Plant and equipment investment, budgetary planning.
- Personnel: Workforce planning, hiring, reductions in work force.

Ideally, supply chain decisions should not be segregated by function, as they are highly interrelated - and should be made jointly. Mature products with stable demand are the easiest to forecast. Forecasting and the corresponding management decisions are much more (if not extremely) difficult when either the supply of raw materials or the demand of finished products is highly variable. In highly variable, or seasonal demand environments forecasting demand is critical to make sure a manufacturing firm does not over or under produce, since there is little chance to recover. Ideally supply exactly matches demand.

More on this complex subject tomorrow - Characteristics of great forecasts...

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Can we REALLY Develop a Strategic Training Plan?

You bet! The journey toward operational excellence involves, and is heavily reliant on a pervasive and effective training effort at all levels - in all disciplines. As you plan your operational excellence effort, a great training framework, or "strategic training plan" should include the following elements:

- Establish Corporate objectives: return on assets, unplanned downtime less than 10% etc.
- Analyze the skills necessary to achieve these objectives, given your current state.
- Identify your current skills inventory - types and quantities.
- Review anticipated attrition, focusing especially on workforce demographics.
- Review planned changes to processes and equipment and the resulting training needs.
- Do not forget to include "soft skills" training: team building, conflict resolution, etc.
- Review regulatory and legal training requirements.
- Perform a gap analysis of the shortfall between skills -quantities, as well as specific regulatory requirements. Focus training on losses from ideal.
- Develop a strategic training plan including budgets, timing, metrics, priorities, etc.
- Establish clear expectations and outcomes from the training effort, and measure them.
- Recognize that a great training effort involves exposing people to principles, methods, techniques, etc and the real learning does not occur until they actually practice the training.
- Repeat the above steps - at least annually!

These steps, and others as determined by your specific plant culture, can help you develop a strategic training plan. This means developing a strategic training plan vs a reactive, or "what do we have to train on to prevent the errors we are seeing" type culture.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Scheduled and Unscheduled Downtime

Downtime, both scheduled and unscheduled, are frequently -but incorrectly - viewed as the responsibility of the maintenance department. Unscheduled downtime is typically for reactive maintenance - breakdowns or "emergencies." Scheduled downtime is usually for preventive maintenance, project work, or planned maintenance. Operational excellence has us working to minimize or eliminate unscheduled downtime, and optimize scheduled downtime by minimizing downtime for any given goal.

In our experience, a great deal of unscheduled downtime for equipment maintenance has a root cause associated with poor operating practice - running pumps dry, operating conveyors without routinely adjusting tracking, or even poor operator preventive maintenance practices (lubrication etc). Operational excellence requires operations and maintenance work together as a team to properly identify the root causes of unscheduled downtime and work together to eliminate it.

Properly done, losses due to equipment downtime can be minimized and support costs in manufacturing costs, delivery performance, time delays, and inventory planning can be reduced through increased reliability.

Synchronous LLC is committed to maintaining a continuing dialogue on operational excellence best practices. We are no longer providing on-site consultations, and are unable to take on new clients. To pose a question, post a best practice, or otherwise contribute to the dialogue send a note to webmaster@SynchronousLLC.com . To subscribe to our weekly newsletter send your preferred email contact address to Sales@SynchronousLLC.com with SUBSCRIBE in the subject line.

Communicating Performance Expectations

Implementing an operational excellence effort always includes communicating goals, objectives, and new standards for performance. Developing goals is great, but f they are in a drawer in the office they probably wont see much progress! Some suggestions for effectively communicating performance expectations include:

- Prominent graphical display of current plant key performance indicators, including trends and targets.
- Job profiles defined and reviewed quarterly. These profiles should include some flexibility to encourage teamwork and allow for skill cross training.
- Daily and shift plant performance reviews and immediate corrective action. This should focus on teamwork and planning - not reactive behaviour.
- Regular personal development and performance review process. This should occur quarterly and ideally be a positive experience - no surprises!
- Regular communications from the plant leadership team regarding company performance, expectations, and major developments. Be positive!

This is not meant to be a comprehensive list. Every plant has their own culture and history - a great performance improvement and communication plan needs to tap into that. Synchronous is unable to accept new clients or conduct on-site consultations. We are committed to maintaining a dialogue on operational excellence best practices and maintaining state of the art. Suggestions for topics can be directed to our web site at General@SynchronousLLC.com Many thanks to our clients who have allowed us to be part of their transformation efforts, we are honored to share in your successes.

How Can We Implement Operational Excellence Without Alienating Our Work Force?

Implementing operational excellence frequently equates with reducing operating costs. In most manufacturing environments reducing costs means reducing labor costs since "people" costs are typically a significant percentage of overall plant costs. We think a great effort to reduce "people" costs includes the following elements:

- Terminate poor and marginal performing employees.
- Do not replace workers lost through resignations, retirement, etc.
- Reduce or eliminate contract labor. Use current employees even when retraining s required.
- Reduce or eliminate overtime - a smaller paycheck s better than no job!
- Accept and incent voluntary reductions in work force.
- Aggressively reallocate employees for new or different jobs, even if retraining is required.

Please be advised that Synchronous has transformed our service offering to providing industry and operational excellence concepts and advice, but we are currently unable to provide on-site consultations or engage new clients. Current clients can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

The Bullwhip Effect

The "bullwhip" effect is an extreme change in the supply position upstream in a supply chain generated by a small change in demand downstream in the supply chain. Inventory can quickly move from being back ordered to being in excess. This is usually caused by the serial nature of communicating orders up the chain with the inherent transportation delays of moving products down the chain.

The bullwhip effect can be avoided by carefully synchronizing the supply chain. This is the primary reason we advocate integrating your internal company supply chain with your suppliers supply chain and your customers supply chain. The benefits are many including better planning and scheduling, smarter inventory management, and preventing the bullwhip effect.

Please be advised that Synchronous has transformed our service offering to providing industry and operational excellence concepts and advice, but we are currently unable to provide on-site consultations or engage new clients. Current clients can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

The Workplace of the Future

Many great organizations - both big and small are pioneering the workplace of the future - a combination of traditional and nontraditional work practices, settings, and locations. The evolution in the nature of the US economy is drastically changing where and how people work. It is currently estimated that between 30 and 40 million people are either telecommuters or home based workers.

Potential benefits of alternative workplaces for employers can be reduced costs, increased productivity, and a competitive advantage is recruiting and retaining top talent. Alternative workplaces are certainly not for everybody, or for every job, and can be difficult to implement even in organizations that are well suited to them. Ingrained behaviors, practical hurdles, and the challenges of managing both the cultural and system "improvements" can make the transition difficult.

Executives considering alternative workplace strategies should consider the following issues:
- Are you committed to new ways of operating?
- Is your organization informational rather than industrial?
- Do you have an open culture and proactive managers?
- Can you establish clear links between staff, functions, and time?
- Are you prepared for some push-back?
- Can you overcome external barriers to a new workplace strategies (ie small homes and/or apartments)?
- Are you prepared to invest in the tools, training, and techniques to make the initiative work?
- Can you really eliminate office and other "fixed" costs?

Please be advised that Synchronous has transformed our service offering to providing industry and operational excellence concepts and advice, but we are currently unable to provide on-site consultations or engage new clients. Current clients can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

Vendor Managed Inventory - VMI

Many manufacturing companies in the process industry are optimizing their supply chain by using vendor managed inventory (VMI) programs, sometimes referred to as continuous replenishment. VMI is exactly what is implies, a supplier has access to the customers inventory data and is responsible for maintaining the required inventory desired by the customer. This activity can be accomplished by the vendor conducting regularly scheduled reviews of on-site inventory, or increasingly in the process industry by remote monitoring of storage tanks. If on site reviews of inventory are required, a good supplier will count stock, remove damaged or outdated goods, and restock inventory to predefined levels. The vendor obtains a receipt from the customer and subsequently invoices the customer.

Please be advised that effective 1 September 2007 Synchronous will transform our service offering to providing industry and operational excellence concepts and advice, but we will no longer provide on-site consultations or engage new clients. Current customers can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

Sustainability - The Triple Bottom Line

Every day we hear more and more about sustainability and sustainable development. For those of us in the operating and manufacturing business units, we frequently have to ask - what does this mean to us? Well, first of all, the triple bottom line refers to economic prosperity, social justice, and environmental quality. Fuzzy? I know... but ignore at your own peril.

There are lots of resources to learn more about how to integrate sustainability into your manufacturing strategic plans (operational excellence too...) Here are a few starters:

The International Organization for Standardization, ie ISO 14000 describes an environmental management system www.iso.org

The World Business Council for Sustainable Development offers information at www.wbcsd.org

The Business for Corporate Responsibility provides socially responsible business solutions at www.bsr.org

The global reporting initiative provides structure for corporate social responsibility at: www.globalreporting.org

Please be advised that effective 1 September 2007 Synchronous will transform our service offering to providing industry and operational excellence concepts and advice, but we will no longer provide on-site consultations or engage new clients. Current customers can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

Best Practice: Proactive Maintenance

Proactive maintenance is the ultimate goal of a best practice reliability effort. Plants that have good proactive maintenance programs have progressed beyond routine preventive maintenance, and beyond predictive methods to estimate when failures will occur. Proactive programs aggressively pursue root cause analysis, and encourage communications between operating departments to understand and eliminate failures. The constant focus is to identify and deploy comprehensive efforts to extend equipment life. Predictive maintenance techniques are a critical part of a proactive maintenance program, because they provide the diagnostic capability, and the vision to understand machinery behavior and conditions.

Proactive maintenance is more of a state of mind rather than a specific methodology. A great example is when a plant staff has realized that alignment and balancing of rotating equipment can dramatically extend machinery life and reduce failure rates. They have also realized that no matter how well they perform these functions, they must maintain high standards from their equipment suppliers for reliability and validation testing. Proactive maintenance cultures continuously seek to improve they way they design, buy, store, install, and operate their plants so they avoid the need for future maintenance.

Synchronous experts are committed to extending the state of the art in operational excellence for the process industry. Whilst we are unable to continue to offer on site consulting, we are dedicated to continuing the dialogue. Send us your best practice operating procedures to General@SynchronousLLC.com

Capital Projects - Do We Minimize Initial Outlay?

Frequently when a capital investment or other large modification project is proposed in a manufacturing plant, discussions focus on how to minimize the cost of a capital project. This makes a lot of sense - why spend more than we have to? The typical tension is the plant wants to "gold plate" everything, install redundancy, capitalize spare parts and so on - the project managers only worry about "on time and on budget" and they walk away after start up - the financial types think about time value of money DCF-ROI and see any lower cost option as a better project based on the financials.

We agree with all of these perspectives, but believe the best solution is to take a step back and look beyond the cost of the project. I have frequently said that I don't care how much a capital project costs! After people recover, and assuming they have not thrown me out of the room; I make the point that what I think is important is the total life cycle cost of a project vs just the initial capital outlay. Which would you prefer - a project that costs $200 with an annual operating cost of $20, or a project that costs $150 with an annual operating cost of $75? Hmm... The initial cost of a capital project is only one part of the overall evaluation.

Synchronous LLC has discontinued on site consultations, and we regret that we are currently unable to accept new clients. We are however, strongly committed to maintaining a dialogue on operational excellence for the process industry - so check this space! Please send us an information request at Sales@SynchronousLLC or send us a note to our web site www.SynchronousLLC.com and we will be happy to recommend a highly competent practitioner to assist you. We do not recommend or refer anyone that we do not know well, and any referral of ours meets our standards for excellence.

Supplier Partnerships - part 2!

Yesterday we wrote about "supplier selection to support reliability." Suppliers have a key role to play in your plants reliability efforts - but beyond reliability, what criteria should we use to select and manage supplier partnerships? Consistent with our philosophy of "keep it simple" here are eight key performance indicators and objectives:

- Partnership agreements should be documented and should detail the basis for the agreement.
- Supplier stocking and consignment terms and methods for reducing physical inventory and costs should be in place.
- Use blanket orders to the maximum extent possible.
- Maintainability and reliability requirements should be specified (see yesterday!)
- A feedback process for resolving problems should be documented. I know this seems obvious, but this can be easily overlooked.
- Use electronic communications, data transfer, order entry, etc to the maximum extent possible.
- Measurement- with the goal of minimizing emergency, spot, or "out of agreement" orders.
- Measurement of stock items and types.

We also think that "partner" suppliers should routinely provide spare part recommendations, and the frequency of preventive maintenance requirements (PM, PdM, CBM, etc). Synchronous experts are prepared to assist you in developing your key, and critical supplier partnership relationships. For additional information send us an information request to Sales@SynchronousLLC.com, or review our complete portfolio of service offerings at our web site www.SynchronousLLC.com .

Please be advised that effective 1 September 2007 we will transform our service offering to providing industry and operational excellence concepts and advice, but we will no longer provide on-site consultations or engage new clients. Current customers can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

Thanks my friends, Rob Baldwin, Managing Principal

Supplier Selection to Support Reliability

A typical approach for manufacturing companies to control expenses and help assure reliability is supplier consolidation, and equipment standardization. Any strategic supplier selection should include key metrics like equipment life - mean time between repairs (MTBR) and overall life; monetary losses from equipment failures; production losses and repair costs; and annual maintenance costs including preventive maintenance, overhaul, and repair costs.

Best practice is to factor these elements into a RCA/FMEA analysis for defining spare parts and preventive maintenance efforts. Frequently you can tie your operating and maintenance efforts to a supplier commitment for equipment life. If you operate and maintain equipment properly - they will warranty a certain life cycle. A great agreement can include the supplier keeping (owning) critical, and expensive spare parts in a readily available warehouse location close to your plant. Once confidence in the relationship is established, you can even move critical spares to be available on consignment in your stores warehouse.

Synchronous experts are deeply experienced in optimizing the intersection of supplier selection, standardization, reliability, and plant performance. Send us an information request to Sales@SynchronousLLC.com, or review our complete portfolio of service offerings at our web site at www.SynchronousLLC.com