That thought now leads us to the discussion of the changes that occur in the attitude of our people as we move from single-digit on up to double-digit turns. Most successful companies I have seen do in fact have an attitude that we can improve. Much has been said and written about how to foster this "can do" attitude amongst our people. However, those companies that are able to move from 20 up to 60 turns seem to have a slightly different attitude. It is more an attitude that says we will "never" stop improving. We should all understand that no matter how good we get, we must never stop trying to improve. Improving inventory turns is a never-ending process that can sometimes be called the continuous improvement process.
Now, you ask, what processes must we improve? We start with a focus on us, our company. We begin by looking at our own internal process and cycles. However, to go on and achieve the 20 to 60 turns, we will move our focus out to the customer. We begin to look at ourselves as the link between our suppliers and our customers.
Our process will bridge the gap between what our suppliers have and our customers want. This is what we call adding value for the customer.
All of this can be summarized in Figure 7. This quick throughput slide shows that manufacturing is made up of three cycles. The first cycle is called ordering or order entry and represents the customer sending us information from which we generate a delivery of material or services. If that reduces our finished goods inventory, we then initiate cycle number two, which is the replenishment cycle. As we use raw materials, we then start the third cycle, called procurement. All companies are always focused on reducing all three cycles. Some companies put all their efforts into figuring out the right place and amount of inventory to have. We can move
from three turns to nine by finding new and innovative ways of storing inventory and quickly replacing it. However, those companies who achieve 20 and more turns will rather focus their energies on creating quick cycles. They will focus most of their attention on replenishment out on the shop floor.
One can see from this diagram that companies that aspire to move their turns from three to nine tend to focus exclusively on the communication and improvements that are needed to make the cycles move faster internally—within their own plant. Those efforts do make good sense in that we must learn the techniques that will give our company quick throughput. However, the true professional in inventory control knows that we must apply those same techniques throughout the supply chain. Hence we will begin to look at how best to coordinate our efforts with both our customers and our suppliers.
To Be Continued
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