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.