Logistics Solutions

COMPETITIVE KNOWLEDGE NEWSLETTER 

Let's get to it,

INVENTORY MANIA! It's back and in spades. If a dramatic reduction, push-out and/or cancellation of orders has befallen your company, you're not alone. Most of our client companies are currently experiencing significant 
sales backlog erosion. If you're confused about the extensive drop off in orders, let me refresh your memory about the "lead-time syndrome." 

Olie Wight, the 1960s MRP guru, was the first to coin the phrase "lead-time syndrome," it was a term he used to described the affliction of industrial greed created by a growing shortage of critical parts, components and black 
boxes. He lectured that as companies become concerned about part shortages, they place additional safety purchase orders to ensure that their supply chain is not caught short as demand increases. 

Because supplier capacities for manufacturing these parts, components and black boxes have not been increased, suppliers have no choice but to extend their delivery lead-times. This in turn puts additional pressure on buyers to protect their supply chain and they respond by placing additional purchase orders. Now their suppliers scramble to buy additional capital equipment and hire more people to increase capacity. This is what I call the front-end of the 
lead-time syndrome.

This self-generating buildup of sales backlog continues until the demand for top level consumption starts to decline. This creates a devastating reversal of past ordering practice and out of nowhere come the order reschedules and cancellations. I call this the back-end of the lead-time syndrome.

What we're experiencing today is the back-end of the1999-2001 lead-time syndrome.

Because of the tremendous inventory problems that this syndrome creates, we decided to deviate from our normal newsletter format and bring you some ideas, techniques and methods on "HOW TO" aggressively control your inventory in the critical months that lie ahead. Inventory action that you take in the next few months will have a huge impact on your 2001 bottom line results. 

Bill Gaw, President
Business Basics, LLC

P.S. If your company is still struggling with a shop order "launch and expedite" system, your first move should be to have your manufacturing team study and understand Kaizen Based Lean Manufacturing (KBLM). To learn more about KBLM, copy the below URL to your browser and click on go: