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Logistics Operation

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As we approach the end of the first quarter of 2001, the question is: "How linear is your production profile?"

In our last two Competitive Knowledge Newsletter we presented a case for focusing your improvement efforts on sequential production and production linearity. Our position was that these processes are crucial to improving a 
company's speed, quality and profits. Have you implemented any of the ideas and practices presented? How are you doing? We'd like to hear from you and share your experiences with the rest of our readership. Email your 
comments and questions to CKN Subscriber@aol.com. If you want to review the relevant articles, simply click on or copy the below URLs to your browser and click on go:



Much has been written about supply chain management and e-commerce during the past year. Today, however, many practitioners are asking the question "Where's the meat?" While both processes offer opportunities for 
reducing the cost of sales, many companies have yet to reap any gains. In our lead article, you'll be presented with what should be the ultimate objective of these processes. If you pursue this objective, you'll discover, where the meat really is!

Many of you were unable to attend our last seminar on Kaizen Based Lean Manufacturing. If getting away for a two-day seminar is a problem, don't overlook our effective alternative, the e-tutorial, "Kaizen Based Lean 
Manufacturing." For information copy this URL to your browser and click on go: 



Bill Gaw, President
Business Basics, LLC

Featured in This Month's Edition of the CKN

1. Point-of-Use Logistics Operations
2. Price Tracking
3. Turn Diversity to the Team's Advantage
4. How to Get the Department Budget You Need
5. What They Are Saying

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Logistics Operations for Winners 

1. Point-of-Use Logistics Operations
    By Bill Gaw

Companies will never achieve their full growth and profit potential, let alone gain the benefits of a point-of-use logistics manufacturing environment, as long as business leaders continue to talk about value-added supplier 
partnerships while continuing to treat their suppliers as adversaries.

Material handling and inventory storage are two of manufacturing's high cost, non-value-added activities. The elimination of the stock room, as it is known today, should be a strategic objective of all manufacturers. Moving materials to their point-of-use is not a new concept, the auto industry has done it from its beginning and all industries have had success with point-of-use, low cost hardware. Supply chain development is the key, and it's time to realize that there is much more to increasing supplier contribution to gross profits than simply placing purchase orders with the lowest price bidder. "Strategic Outsourcing" that focuses on getting the right materials to the right place at the right time must replace "beating-up" on suppliers for price reduction alone. 

A manufacturer of electronic component test equipment, in response to its need to increase factory floor space to build a new multifunction tester, decided to convert stockroom space into a production area. It was agreed 
that none of the new tester parts would enter the remaining stockroom and that all common parts would be relocated to their relevant production areas as "point-of-use" inventory. The key to making this project a success was the development of a powerful supplier support network that provided timely and innovative "point-of-use" logistical support. 

High communications integrity, scheduling flexibility/responsiveness, superior quality, special materials transportation/storage racks and a positive "continuous improvement" mind set were some of the characteristics 
of the developed relationship. Today, three years after the start of the project, this manufacturer is a market leader and most of the credit goes to their supplier development team and the powerful supplier support network that it 
helped develop.

In today's competitive business environment, many manufacturing companies are turning to value-added supplier partnerships to achieve the material availability performance that is a requisite to successful point-of-use logistics. When a company forms a partnership that performs one of the links in the supply chain, both stand to benefit from the other's success. The power of supplier partnerships is undeniable. To a great extent, they have 
the best of both worlds: the coordination and scale associated with large companies and the flexibility, creativity and low overhead usually found in small companies. 

Suppliers have knowledge and insight but aren't burdened with guidelines from a distant headquarters. They don't have long forms to fill out and weekly reports to render and can act promptly, without having to consult a thick manual of standard operating procedures. In an increasing number of industries, value-added suppliers are proving to be fiercely competitive -- delivering high quality, competitively priced materials to precise buyer schedule requirements. 

An excellent way of establishing the partnership relationship is to treat each other as an extension of one's business. The value-added supplier should look to his partner for services such as special procurement help on capital 
equipment and training needs and maybe some process engineering or quality engineering assistance. The buying partner, on the other hand, should look to the supplier partner for product development input, cost containment 
ideas and high quality parts/components/assemblies delivered to the right place at the right time. 

Most business leaders underestimate the depth and breadth of business skills that are required to initiate and nurture an effective supply chain program. Usually, these leaders hold suppliers at arm's length and struggle to keep any economic gains to themselves. In fact, organizations often try to weaken a supplier to ensure their own control of profits. This of course is ridiculous and is the first obstacle to be overcome if point-of-use logistics is to be successfully implemented-for without a strong supplier network there can be no point-of-use logistics.

Business people in pursuit of point-of-use logistics should be advocates of: 1) business integrity, 2) day-to-day supplier cooperation, 3) free exchange of information, 4) responsive decision-making and 5) supplier profit sharing. 

Supplier development and strategic outsourcing requires a "from the top down" commitment and a serious human resource investment. Only then can a company produce a "make-it-happen" supply chain development team that 
contributes significantly to a company's growth and profits. 

Logistics Operations for Winners 

II. Pricing Trends
    Courtesy of Bottom Line Business.


Autos: Good buys on midsize sport utility vehicles. Discount incentives now average near $4,000---up from about $800 just one year ago.
Computer screens: Flat-panel LCD types are beginning to edge lower--with some 15-inch models now selling for as little as $900.
Lumber: Slowing construction points to new price drops--with southern and western softwood quotes dipping more than 15% by year-end.
Microprocessors: More declines as Intel cuts some chip prices by more than 40% to spark lagging PC demand. It follows a similar move by Advanced Micro Devices.


Servers: Worth exploring: Sun Microsystems's new low-end computer servers (priced under $1,000). Sun is also introducing server  appliances dedicated to just on-server task.


Auto Rentals: No relief here--with all signs pointing to another 5% to 6% increase in the current year.
Office Space: Despite slower demand, center city rental rates should rise about 6% this year. Suburban markets should see a 4% advance.    Package deliveries: Both FedEx and UPS are boosting rates. Domestic FedEx rates are up 4.9%. UPS increases are in the 3.1 to 3.7 range.
Trucking: Less-then-truck-load rates are leading the 2001 freight advance. Some of the bigger carriers are posting increases in the 5.5% to 6% 

Logistics Operations for Winners 

III. Turn Diversity to the Team's Advantage
     By Price Pritchett

You have to question the wisdom of putting together a "cookie-cutter team" made up of look-alikes, think-alikes, and act-alikes. Differences can add depth. Create strength. Broaden the group and bring balance.

A dozen drummers couldn't create much of a musical group. A six-person team of people with the very same opinions, values, and viewpoints show less promise of crafting good solutions than a more diverse group could. 
Teams perform best when the teammates bring a variety of abilities, experiences, personalities, and problem solving approaches to the table.

But for diversity to bring value, you have to take advantage of it. You have to respect and use those individual differences to round out the team.

So don't sideline the person who is "different"---whether that person happens to be you, or somebody else. All too often people pull themselves out of play. Maybe because they feel like they don't fit in. Or maybe because they look, 
think, or act different from the rest of the bunch. Do your part to help the team identify, and benefit from, its full set of people resources.

Also, if you happen to be in the minority, don't use that as a crutch and hit your teammates over the head with it. Team play takes a beating when someone decides that being "different" means he or she deserves special treatment.

Diversity can make teamwork seem more difficult at first, but it produces a more powerful unit. So honor people's differences. Make a conscious effort to use the unique talents of everyone on the team.

Logistics Operations for Winners 

4. How to Get the Department Budget You Need
    From Supervisory Management

Getting a budget approved can be a difficult process, especially as companies try to cut back and reduce expenses. When you begin working on your budget proposal, resist the temptation to take an adversarial 
approach. Instead, concentrate on what your organization needs and how well your department can provide support for those necessitates. 

Step #1: Decide on your needs. Instead of demanding every cent available, take a good look at what your department really requires in order to function.

Step #2: Evaluate the company's needs. Justify each item according to your company's requirements. You'll be able to define your proposal in a meeting by saying, "Our goal this year is to do A, which means my department must do B and C, to do that, we need…."

Step #3: Consider the consequences. Describe the consequences to the company if your budget requirements aren't met. This will help you argue persuasively.

Step #4: Examine last year's budget process. Compare what you asked for last year to what you received. This will help you tailor your proposal to upper management's viewpoint. Also, take a look at what you could have accomplished if you'd gotten the budget you asked for.

Logistics Operations for Winners 

5. What They Are Saying
    From the Front Line Supervisor's Bulletin

Training may be a manager's most important task. Be sure you take the time to train your employees thoroughly. Whether they're new to the company or just learning a new process, keep these points in mind:

Be available: Trainees usually require lots of attention. Stay close by to answer question and check their progress. And be prepared to answer some questions more than once.

Be organized: Break complicated tasks into smaller steps.

Demonstrate each step: Then have the employee demonstrate it for you. If he or she makes a mistake, show the correct procedure and have the employee 
do it again.

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