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  • APICS Coach 3:37 am on January 3, 2020 Permalink | Reply  

    Sustainability: If you do things right, you’ll make all the money that you need: A discussion with Norman Bodek, the Godfather of Lean (PART 3) 

    Norman Bodek3

    This is part three of the three-part interview with Norman Bodek, the Godfather of Lean.

    Listen to part three…

    Key learning points from part 3 include:

    Listen to part 1

    Listen to part 2

     
  • APICS Coach 12:13 pm on December 29, 2019 Permalink | Reply  

    The Harada Method: A discussion with Norman Bodek, the Godfather of Lean (PART 2) 

    Norman Bodek2

    This is part two of the three-part interview with Norman Bodek, the Godfather of Lean.

    Listen to part 2 on Supply Chain Now Radio

    Key learning points from part 2 include:

     
  • APICS Coach 2:26 am on December 23, 2019 Permalink | Reply  

    A prophet is never known into our own house: A discussion with Norman Bodek, the Godfather of Lean (Part 1). 

    Norman Bodek1

    In the early 90’s I was involved with the implementation of a Kanban materials management system for a company converting to a JIT environment. A key part of my role was educating over 300 employees on the concepts of JIT.

    At the time, I didn’t know what I didn’t know. But I invested many hours reading and learning about JIT and what is now commonly referred to as lean.

    After 20 plus years of teaching the APICS Body of Knowledge I decided to try and interview some of the great thinkers I have been learning from for so many years. After a little research I realized two things. One, many of the people are deceased, and two, many had one person in common, Norman Bodek, the Godfather of lean.

    We recently sat down with Norman Bodek to get a better understanding of his impact on lean and current thoughts.

    Take a listen to this three part interview with Norman. I hope you enjoy listening as much as we did getting to know the Godfather of Lean…And you gotta love his laugh.

    Listen to part 1 on Supply Chain Now Radio

    Key learning points from part 1 include:

    • Becoming socially responsible (3:00)
    • Learn about the triple bottom line (6:37)
    • Gratitude to APICS (8:28)
    • The basis of JIT and the Toyota Production System (9:38)
    • A magnet for greatness (10:58)
    • The tortoise and the hare (11:39)
    • Pay attention to your Jiminy Cricket (12:29)
    • Learn everyday (13:38)
    • Have a clear goal; what do you want to be the best in the world at (13:43)
    • The cleanest airport in the world (14:46)
    • Getting fired (15:28)I heart NY
    • Productivity (16:30)
    • Milton Glaser “I love New York” (17:10)
    • The start of “Productivity Press” (18:40)
    • You will figure it out (19:00)
    • Industry Week (19:27)
    • They improved (21:00)
    • The Fear of Failure (21:35)
    • Quality control circle (21:52)
    • Deming (22:09)
    • General MacArthur (23:23)
    • JUSE (23:45)
    • Statistical process control and stable processes (24:19)
    • Ishikawa and total quality management (25:06)
    • The Deming Prize (25:24)
    • The Shingo Prize (25:36)
    • A prophet is never known into our own house (26:47)
     
  • APICS Coach 9:32 pm on December 16, 2019 Permalink | Reply  

    WERC DC Metrics 2019 Study; A review with Joe Tillman, T Squared Logistics 

    WERC DC Measures Photo 2

    Any student of the APICS body of knowledge should be familiar with the Perfect Order. The Perfect Order, Seven R’s, Seven Rights of Logistics and/or Seven Rights of Customer Service are a must know for CLTD and a nice to know for CSCP and CPIM2.

    A few months ago, we blogged about the topic and developed and acronym to help remember the 7 Rs (PPPCCTQ). The right…

    • Product
    • Price (Cost)
    • Place
    • Customer
    • Condition
    • Time
    • Quantity

    We came across the Perfect Order metric in the WERC DC Metrics study and sat down with one of the study authors, Joe Tillman, to gain learn more about the study and get his insights on 2019 results.

    Take  a listen…

     
  • APICS Coach 10:04 pm on October 10, 2019 Permalink | Reply  

    Success Tips for Passing the APICS CSCP Exam. An interview with Russell Sorrow 

    The APICS Coach sat down with Russell Sorrow, a professional in career transition, to learn more about his recent journey in pursuit of the APICS CSCP certification.

    In summary…

    1. Russell’s 4 step methodology
    2. Learn from others
    3. Take a class

    Listen to the full interview here

     
  • APICS Coach 10:03 pm on July 1, 2019 Permalink | Reply  

    Inventory-Carrying-Cost

    In a recent workshop a student challenged me on inventory being taxed. We were discussing carrying cost calculation when I slipped in ‘carrying cost calculations can include taxes.’ It was an interesting challenge given I have never analyzed or calculated carrying costs outside of the APICS Body of Knowledge (BOK). All three BOKs discuss the core components of:

    • Capital costs
    • Storage costs
    • and Risk costs

    Capital costs are the cost of financing and opportunity costs of using the money. In many organizations this can be as simple as the interest rate on a loan or a more advanced hurdle rate.

    Storage costs are generally the variable component of space, materials handling, utilities, maintenance and security based on the quantity of stored inventory.

    Risk costs are associated to inventory becoming unusable or salable due to damage, spoilage, obsolescence, theft, etc. Risk costs can vary significantly from industry to industry depending on inventory. For example, diamonds are highly prone to shrinkage, food can be highly perishable, and fashion items may go out of style quickly, all will have a high risk cost. Alternatively, daily use consumables including toilet paper and toothpaste will have a low risk cost.

    An astute CLTD BOK student will notice two additional carrying cost components called out, taxes and insurance.

    Insurance is just that, the cost of transferring the risk of the inventory asset. Note, CPIM and CSCP both reference insurance as a part of risk costs.

    Taxes are briefly discussed and tend to be on a US state by state basis. These inventory taxes (tangible personal property tax) tend to be assessed annually and are currently only found in 6 states. https://taxfoundation.org/states-moving-away-taxes-tangible-personal-property/

    The APICS Dictionary, 15th edition states carrying cost as:

    ‘the cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year). Carrying cost depends mainly on the cost of capital invested as well as costs of maintaining the inventory such as taxes and insurance, obsolescence, spoilage, and space occupied. Such costs vary from 10-35 percent annually based on industry.’

    A further comparison of the BOKs reveals carrying cost can range is 13-44% (CLTD) and 15-40% (CSCP).

    I encourage every APICS Coach student to understand what carrying cost is, the carrying cost fundamentals, and how to calculate either a total carrying cost percent or the total carrying cost dollars based on an average inventory.

    Example 1:

    Which inventory cost is figured as a percentage of the inventory value per unit of time?

    A. Acquisition cost
    B. Landed cost
    C. Carrying cost
    D. Ordering cost

    Answer: C. Carrying cost

    Example 2:
    A company carries an average annual inventory of $4,000,000. They estimate the cost of capital is 10%, storage costs are 7%, risk costs are 6%, and cost of goods sold is 5%. What is the annual carrying cost percent?

    A. 13%
    B. 17%
    C. 23%
    D. 28%

    Answer: C. 23%

    Example 3:

    A company carries an average annual inventory of $4,000,000. They estimate the cost of capital is 10%, storage costs are 7%, risk costs are 6%, and cost of goods sold is 5%. What is the annual carrying cost?

    A. $520,000
    B. $680,000
    C. $920,000
    D. $1,120,000

    Answer: C. $920,000

    Carry on…

     
  • APICS Coach 8:12 pm on April 17, 2019 Permalink | Reply  

    Inventory Exists at Every Point in the Supply Chain 

    One premise of anything APICS is understanding inventory and inventory management fundamentals. Any student of CPIM, CSCP or CLTD should be familiar with inventory and inventory management concepts. For this I refer to the APICS essential ‘Introduction to Inventory Management’ by Arnold & Chapman.

    Inventories are materials and supplies in a supply chain either for sale or to provide inputs/supplies to the product processes. All business and institutions require inventories unless customers are content with waiting days or weeks for deliveries. Often inventory values are a substantial part of total assets.

    Financially, on the balance sheet, inventories can represent form 20-60% of total assets. As inventories are used their value is converted into cash, improving cash flow and return on investments. There is also a cost of carrying inventories, which increases operating costs and decreases profits. If product is lost, expires or becomes unusable, overall company profitability suffers. Good inventory management is essential to an efficient and responsive supply chain.

    In a prior blog we discussed the functions of inventory

     

    The APICS CLTD 2019 CLTD learning system provides a good visual of inventory types:

    CLTD Ex 4-2

    The APICS Dictionary, 15th edition, defines the following:

    Raw Materials:

    ‘Purchased items or extracted materials that are converted via the manufacturing process into components and products.’

     Raw materials can be in the traditional sense something in ‘raw’ form for example, iron ore, grains, or crude oil. Raw materials can also be something converted into a semi-usable form by your suppliers but will be used in your production/kitting process to create a usable finished good you can provide to your customers.

    Work in process (WIP):

    ‘a good or goods in various stages of completion throughout the plant, including all (inventory) from raw material released for initial processing up to completely processed material awaiting final inspection and acceptance as finished goods inventory.’

    WIP inventory is typically unsalable and consumes valuable space in the operations. Minimizing WIP is a core objective of JIT management. See CLTD Learning System ‘Exhibit 4-3 Inventory and Time’ for a great example inventory value added to queue time in the pipeline.

    Pipeline Stock (aka in-transit or distribution):

    ‘Inventory in the transportation network and the distribution system, including the flow through intermediate stocking points.’

    The function is rather null. The driver is getting product delivered from point A or point B. Think about this as the amount if inventory ‘in transit’. Until 3D printing is a cost effective and viable solution, product will need to be delivered and exist in the ‘pipeline’.

    Finished Goods:

    ‘Those items on which all manufacturing operations, including final test, have been completed. These products are available for shipment to the customer as either end items or repair parts.’

    Maintenance, Repair, and Operating (MRO):

    ‘Items used in support of general operations and maintenance such as maintenance supplies, spare parts, and consumables…’

    While inventory types and functions are a must know for any CPIM, CSCP or CLTD student I found it interesting the topic is covered in 4, 4, and 12 pages respectively. CLTD put more emphasis on inventory than CPIM.

     

     
  • APICS Coach 10:56 pm on March 31, 2019 Permalink | Reply  

    Advanced Planning and Scheduling is a Key Supply Chain Management Optimization Concept 

    APS Logos

    Advanced Planning and Scheduling (APS) is a key concept in both CSCP and CLTD addressing the techniques (and systems) supporting planning across the supply chain.

    The CLTD body of knowledge (BOK) provides a brief introduction (1 page) of APS through simply defining what APS is…

    APICS Dictionary, 15th edition:

    ‘Techniques dealing with analysis and planning of logistics and manufacturing during short, intermediate, and long-term periods. APS describes any computer program using advanced mathematical algorithms or logic to perform optimization or simulation of finite capacity scheduling, sourcing, capital planning, resource planning, forecasting, demand management and others.’

    Comparatively, the more strategic CSCP BOK goes into more detail (3.5 pages) around how APS work with ERP systems, the four primary modules (Demand Management, Resource Management, Requirements Optimization and Resource Allocation), introduces the sales/customer service decision support concepts of Available-to-Promise (also referenced in CLTD), Capable-to-Promise, and Profitable-to-Promise, and ends with a APS benefits summary.

    In summary, APS establishes a ‘single version of the truth’ by driving planning at the Strategic (Long-term), Tactical (Medium-term/Aggregate) and Operational (Short-term) levels in more complex supply chains (i.e. supply chains with multiple ERPS and/or multiple sourcing/production streams.

    Planning Level

    Scope

    Strategic (Long-term) Logistics supply chain network design. Facility locations and capabilities, and ownership models.
    Tactical (Medium-term/Aggregate) Cross supply chain inventory levels and associated labor, equipment and materials resources.
    Operational (Short-term) Demand forecasts, demand plans, inventory plans, transportation plans and optimized daily production schedules. Guidance on transportation routing and schedule, labor shifts, etc. These plans serve as input into master scheduling solutions for detailed production and fulfillment execution.

    Example APS solutions from the Gartner Supply Chain Magic Quadrant include, Demand Solutions, Logility, OM Partners, JDA, Quintiq, Dynasys, and Adexa. Additionally, many ERP systems will have a built in APS module. For more information, check out the Gartner Supply Chain Planning Magic Quardrant here.

     

     
  • APICS Coach 3:04 am on March 25, 2019 Permalink | Reply  

    If I had 6 hours to chop down a tree, I would spend the first 4 hours sharpening the ax. 

    For fans of APICS CLTD Coach, we re-branded to APICS.Coach to reflect our new focus on both the APICS CSCP and CLTD Body of Knowledge (BOK). Our goal is to help students better understand both the CSCP and CLTD BOK and prepare for sitting for the certifications. We hope this new format is informative and inspirational.

    Additionally, we finally focused on updating the Mind Maps to 2019 for both CSCP and CLTD. A mind map is a diagram used to visually organize information. A mind map is hierarchical and shows relationships among pieces of the whole. It is often created around a single concept, drawn as an image in the center of a blank page, to which associated representations of ideas such as images, words and parts of words are added. Major ideas are connected directly to the central concept, and other ideas branch out from those.

    Mind maps can serve as a quick reference to support your learning plan. More importantly, the process of developing the mind maps helps ingrain the core learning concepts.

    CSCP_2019_2019_v4_3

    Click here to for more information developing a mind map and the free tool we used.

    A more traditional tool to help associate learning concepts is a traditional outline. An outline can be developed using Excel which should minimize the learning curve of adopting a new tool (like Mind Mapping).

    Here is an example of a CLTD outline showing the first few lines. The total outline has about 1,850 lines.

    CLTD Outline Snip

    Sure it takes time to develop these tools. Valuable time you could use reading or reviewing practice questions. But I tend to think of it like the Abe Lincoln adage. “If I had 6 hours to chop down a tree I would spend the first 4 hours sharpening the ax.”

     
  • APICS Coach 10:59 pm on November 26, 2018 Permalink | Reply  

    The ‘Make-or-Buy Decision’ Tool for Supply Chain Managers 

    Kraljic Matrix

    APICS CLTD Version 1.1, 2018 Edition, page 2-92

    When designing your supply chain you will benefit by understanding the Make-or-Buy Decision concept.

    The APICS Dictionary, 15th edition, defines make-or-buy decision as:

    ‘The act of deciding whether to produce an item internally or buy it from an outside supplier.’

    Typically, a make-or-by decision involves a make-or-buy cost analysis defined in the APICS Dictionary, 15th edition as:

    ‘Comparison of all costs associated with making an item versus the cost of buying the item.’

    The make-or-buy concept is important to know for anyone pursuing CSCP and CLTD certification, although the specific definitions are not on the top terms list. CSCP approaches the concept from a strategic perspective; where does supply chain fit in the strategic plan, how should contracts be used, and what are the risks involved. CLTD takes a tactical view; contracting processes, break-even analysis, and sourcing materials.

    Fundamentally, make-or-buy considerations will factor in the possible consequences of giving the activity in question to another company, including:

    • Is the activity a core competency?
    • What are the consequences of losing related skills or knowledge?
    • What is the landed cost (total cost of ownership)?

    Given the potential large capital investment resulting from these decisions, CLTD goes one-step further to perform a break-even analysis.

    The APICS Dictionary, 15th edition, defines break-even analysis as:

    ‘A study of the number of units, or amounts of time, required to recoup an investment.’

    The APICS Dictionary, 15th edition, defines core competency(ies) as:

    ‘Bundles of skills or knowledge sets enabling a firm to provide the greatest level of value to its customers providing growth in a way it is difficult for competitors to emulate.’

    Core competencies are those activities/processes a company should (will) insource assuming all things being equal (i.e. available capacity and skill supply).

    The APICS Dictionary, 15th edition, defines insourcing as:

    ‘Using the firm’s internal resources to provide goods and services.’

    A key tool a supply chain manager has is ‘contracting’. If you are using a third-party logistics provider for your warehousing needs, a temp agency for seasonal labor or advanced telephony services for your call center, there are various forms these relationships can take, including outsourcing, and offshoring.

    The APICS Dictionary, 15th edition, defines outsourcing and offshoring respectively as:

    ‘The process of having suppliers provide goods and services previously provided internally.’

    Note; Subcontracting is a synonym for outsourcing and a top term to know for anyone pursuing CSCP certification.

    and

    ‘Outsourcing to a company in a different country.’

    Note; While offshoring implies something done in a far-away country, across an ocean, the concept can apply to neighboring countries on the same continent (i.e. Mexico, USA and Canada). Often referred to as ‘near-sourcing’ (undefined by APICS).

    The CLTD Body of Knowledge further discusses leveraging make-or-buy decisions for raw materials and/or finished goods inventory. When considering materials sourcing options the supply chain manger can use the Kraljic or Purchasing Portfolio Matrix, a method developed by Peter Kraljic in 1983. The matrix is used to create a purchasing portfolio by segmenting items (products or services) into 4 dimensions. The result is supply chain managers can prioritize buying activities based on profit impact and level of risks involved.

     
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