Tag Archives: gestión cadena suministro

The challenge of invisibility

Why Supply Chain innovation is unlikely to be appreciated

Alejandro Serrano – . Jun 2012 | Spain

When faced with the question “What is the name of the most innovative company in the world?”, people will most likely answer “Apple, of course”. The answer seems undeniable, and there are good reasons for that: iPhone, iPad, and iWhatever are synonyms of great innovative products these days.

However, there is a bias there; when people think about innovation, the first idea that comes to mind is product innovation. However, a company can gain a huge competitive advantage trough process or supply chain innovation. I am referring to notorious cases of companies who have completely redefined the way of doing business in their industries. Some examples include Benetton, which changed the sequence of operations by delaying the time where pieces of garment were dyed (postponement), or Barilla, one of the first firms to adopt VMI (Vendor managed inventory) by managing its customers’ inventory so as to reduce order variability amplification. These changes had a large impact on the bottom line and gave these firms a clear competitive advantage in front of their competitors.

The good thing about process innovation is that it may be hard for competitors to copy: there is no “product reverse engineering” to be performed. Competitors can and will try to emulate, but success is not by any means guaranteed. Think for instance about the well-known Toyota Production System (TPS). It has been around for about 40 years and still firms are trying to adopt it with bittersweet results. Why? It is simply that most of the changes cannot be seen, they are embedded in firms’ DNA, as pointed out by Spear and Bowen*, and followers just copy the visible part of it, such as Kanban systems in the case of TPS. A more recent example is Inditex, whose flagship Zara defined a new paradigm in a mature industry by betting on speed rather than cost. With more than 5,500 stores around the world, Inditex’s founder Amancio Ortega, is today the richest man in Europe, right before Ikea’s founder, Ingvar Kamprad, another visionary who also completely changed the rules of his industry.

This may not be the case for firms launching innovative products: Samsung’s Galaxy  Tab is closely following Apple’s iPad and even introducing features which go beyond what the Apple product offers. It is true that patents help sometimes, but the fact remains that a burden of expensive legal work is usually triggered as soon as competitors start copying or including almost identical products in their portfolios. The legal battle triggered when Windows 95 was launched by Microsoft or the generic drug business in India may be good examples of this.

All in all, supply chain innovation is likely not to be appreciated as much as product innovation, but its impact on the financials and the value of firms may be larger and last longer. Also, given the relatively small efforts exerted so far on supply chain innovation, there must be indeed great opportunities available to explore, low hanging fruit to be taken by those smart people who are able to identify those opportunities.

(*) Spear, Steven and H. Kent Bowen. Decoding the DNA of Toyota. Harvard Business Review

 To learn more about Supply Chain www.zlc.edu.es

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Bizi-Zaragoza: A Supply Chain View

How to mitigate the “rush hour effect” using Supply Chain Tools

Alejandro Serrano – . Apr 19, 2012 | Spain

Bizi-Zaragoza rents bikes to users who need to ride for short periods of time within the city. Bikes are located in 130+ stations in the city, mainly downtown. To get a bike, a user goes to a station and unlock the desired bike with his or her user card. To return it, he or she has to find a station with an empty slot and identify him or herself again.

Bizi Station. Source: http://www.heraldo.es

The idea is very interesting, and has been proved successful in several cities. The system in place, however, is far from perfect, since users face two major challenges. On the one hand, a user looking for a bike may find the nearest station empty (see black dots in the picture below). On the other hand, a user looking for a slot to leave a bike may find the nearest station full (see purple dots). Furthermore, stations downtown tend to fill quickly in the morning and empty in the afternoon/evening. Good on-line information may be helpful to find a bike or a spot, but still the bottom line is that the typical user my find the service unreliable when his meeting with her boss starts at 9am, and he has to plan for extra 20 minutes of safety time to park his bike so as not to be late.

To mitigate this situation, and according to today’s Heraldo de Aragón(*), a local newspaper, Bizi managers constantly check on-line those stations with no bikes, and send vans with additional bikes to “replenish” those empty stations in no more than 10 minutes. Here is some anecdotal evidence that this may not be the case. The following picture (borrowed from the company web site) shows the map of all stations at 10:02:45 am today. There were 13 empty stations (marked in black in the map), mainly in the periphery.

Ten minutes later, the picture was the following

As it can be observed, 12 of those 13 stations were still empty. Twenty minutes later, there was a new picture.

In this case, 8 of 13 stations were still empty. Thirty minutes later (picture not reported) still 8 of 13 stations were still empty. A similar problem can be observed with full stations (purple dots in the maps).

The question that arises next is how to mitigate this problem. A feasible option is to place stock (i.e. bikes) according to demand patterns to obtain a given service level. For instance, let us say that for the last 50 Mondays, between 7:30 am and 9:00 am, station#77 has observed a demand pattern that can be considered normally distributed, with mean 10 and standard deviation 2 (that implies that roughly 2/3 of the days demand is between 8 and 12 bikes). How many bikes are needed to guarantee an average service level of, say, 99%? The answer is

ROUNDUP(10+2*NORMSINV(0.99),0)=15 bikes

Therefore, rather that being reactive, Bizi managers could be proactive by replenishing inventory at night before users go to work early in the morning. The previous analysis is quite simple and can be easily extended for all stations and for full stations. The good news is that the company should have a lot of data, given that users sign in every time they take or leave a bike. To improve forecasting methods, individual patterns can be studied, since the system knows the ID of the user that takes or leaves a bike.

Finally, there is the problem of devoting workforce to move bikes from one station to the other. A potential solution may be to charge more to those users who do not make “return trips” within a day. If so, users have incentives to return bikes to where they were in the evening, significantly reducing the amount of bikes to be moved at night.

To know more about Supply Chain www.zlc.edu.es

(*) The piece of news is here (in Spanish)

The web page of Bizi Zaragoza is here

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When too much is as bad as too little

Why your firm should not aim at achieving 99% service level for all products (most likely)

Alejandro Serrano – . Mar 2012 | Spain

Last week I attended a nice talk given by the head of logistics of an e-commerce retailer. His firm holds roughly 10,000 SKUs and serves daily demand to end users from a central distribution center. A characteristic of the industry in which this firm operates is that orders should be satisfied in less than 24 hours. Since suppliers’ lead-times are on the weeks or even months (some are based in Asia), the firm is forced to hold large amounts of inventory to cope with uncertain demand.

The firm has a customer service level goal as high as 99% for all products. This figure, 99%, may be judged as appropriate by some people, but rises at least two questions: 1) why 99% and not, for instance, 90% or 99.9%, and 2) why 99% for all 10,000 products.

The answer to the first question might have to do with the fact that achieving 100% service level is virtually impossible. Therefore (put yourself in the CEO’s shoes,) if you want to provide your customers with an excellent service level, a feasible, close-enough-to-100%, easy-to-remember, and popular figure is 99%. And why not, you want to keep that figure high for all 10,000 SKUs in your warehouse.

Picture: directindustry.com

A key point that is missed here is the fact that service level that maximizes expected profit should at least depend on the price and the cost of each particular item. In fact, inventory theory (or common sense) says that one should increase service level until the marginal benefit of adding an additional unit be exactly as high as the marginal cost of adding that additional unit. Note why this makes sense: given the cost of an specific item, if its market price goes up, the firm should increase the service level for that item. Why? a higher price implies a higher unit margin, and you want to capture that additional margin with higher probability, thus inventory should go up. Likewise, if given a price, the cost of an item increases, service level should be reduced to avoid a higher probability of holding too much inventory (as measured in moneys,) which is mainly driven by obsolescence, insurance, spoilage, and financial costs.

There are other factors that have an impact on service level above and beyond price and cost, such as the so-called salvage cost or goodwill cost. But as a conclusion,  and without entering into details on how to compute optimal service levels, it should be apparent that 1) There is an optimal service level that depends on the margin of the product, which may be below or above 99%; and 2) service level should be computed for each SKU, or type of SKUs, thus defining it for all items in a firm does not make by and large much economic sense.

 To know more about Supply Chain www.zlc.edu.es

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Conocimiento y experiencias logísticas innovadoras

Sesión organizada por el IAF y las Cámaras de comercio en Zaragoza

Alejandro Serrano – Mar 2012 | España

“Conocimiento y Experiencias logísticas innovadoras”

El 19 de marzo participo en esta sesión para hablar de la “Supply Chain and Finance Initiative“, puesta en marcha desde el Zaragoza Logistics Center. Haré una breve introducción de qué es ZLC y en qué consiste esta iniciativa. Después ilustraré con un ejemplo cómo cambia el comportamiento de un comprador cuando tiene que preocuparse por el impacto de sus decisiones no sólo en la cuenta de resultados, sino también en el balance de la empresa.

Más información e inscripciones en este enlace.


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Do not call it Logistics if you mean Supply Chain

The messy shift from Logistics to Supply Chain Management

Alejandro Serrano – . Feb 2012 | Spain

The word Logistics, initially borrowed from a military context, has had to do with the ability to move materials and personnel in an efficient way from one place to another. In a business context, according to the APICS dictionary, its meaning has changed to include additional activities, such as procurement and production. Sure enough, in this context, Logistics is defined as

“The art and science of obtaining, producing, and distributing material and product in the proper place and in proper quantities.” (APICS dictionary on line, accessed in Feb 2012)

However, the CSCMP dictionary does not include production activities, but specifically mentions storage and refers also to services and information:

“The process of planning, implementing, and controlling procedures for the […] transportation and storage of goods, including services, and related information from the point of origin to the point of consumption […] This definition includes inbound, outbound, internal, and external movements.” (CSCMP. Terms and Glossary. Feb 2010)

which is closer to its original meaning, i.e., “just” transportation and storage. it seems that, as the realm of the discipline was increasing an attempt was done to adjust the word logistics to the broader context of application, what explains the broader scope of logistics according to APICS.

Enter Supply Chain

In the early eighties, logistics was not enough to refer to all the increasing types of activities performed by  “logistics” managers, and a new term was coined: “Supply Chain Management”. A strategic flavor was added and the scope was enlarged both longitudinally (from “end to end,” or E2E) and transversely (not only material flows, but also information and cash was considered.) The two aforementioned dictionaries agree on this scope, except for the CSCMP dictionary, which does not mention cash.

“The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.” (APICS dictionary on line, accessed in Feb 2012)

“The material and informational interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are links in the supply chain.” (CSCMP. Terms and Glossary. Feb 2010)

Since then, the two terms have coexisted, but the evolution of the word Logistics towards Supply Chain (as it can be seen in the definition of Logistics according to APICS) still creates a lot of confusion in industry and academia. In my opinion, the relationship between the two could be defined as follows: “Logistics is the portion of Supply Chain that is concerned with the activities of transportation and storage of parts,” which is line with the CSCMP definition.

Supply Chain, however, is concerned not only with transportation and storage, but with many other key processes, such as demand forecasting, planning, purchasing, collaboration (contracts), outsourcing, facility location (network design), or inventory management (how much and where to hold inventory.)

To learn more about Supply Chain www.zlc.edu.es

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Un estudiante de ZLC vence en el Vestas Winnovation Challenge

Casi la mitad de los estudiantes finalistas en Supply Chain eran estudiantes del Zaragoza Logistics Center

Alejandro Serrano – Feb 2012 | España

Un total de 27 participantes de las mejores escuelas del mundo participaron el pasado fin de semana en el  Vestas Winnovation Challenge en Dinamarca. En este encuentro, Vivek Radhakrishnan, estudiante del máster internacional de supply chain en el Zaragoza Logistics Center, obtuvo el premio en la categoría de supply chain. Por segunda vez consecutiva los estudiantes de este programa logran llegar a la final del Vestas Winnovation Challenge en esta categoría.

Además del ganador, otros estudiantes del mismo programa, Kristin Bautista, Sergio Tovar y Andrés Vadillo (en la foto), también llegaron a la final de esta competición internacional organizada por Vestas. El mérito es enorme, dados la variedad y el nivel de las universidades presentes en la competición.

Foto: Andrés Vadillo

Este éxito no sino el síntoma de que se están haciendo muy bien las cosas en este programa máster: selección muy cuidada y exigente de estudiantes de cuatro continentes, adaptación de contenidos a la demanda de las empresas multinacionales que buscan profesionales altamente cualificados en supply chain y profesores de primer nivel venidos de todo el mundo.

El resultado es que las empresas se disputan a los estudiantes incluso antes de terminar el programa. El año pasado el 100% de los estudiantes del programa (unos 25 en media de 5 años a esta parte) tenían al menos una oferta 3 meses después de la graduación. El salario medio de los trabajos aceptados subió hasta 99.000$. Un éxito mayor si cabe que la obtención del galardón de Vestas este año.

Ver más información del programa máster ZLOG en supply chain aquí: http://mastersupplychain.edu.es/

Ver la noticia en la página de Vestas aquí: http://www.vestas.com/winnovation


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Gestión de la Cadena de Suministro, motor de crecimiento ante la crisis

La innovación en el área de Cadena de Suministro, un filón sin explotar

Alejandro Serrano – Diario Negocio. Oct 2011 | España

La economía española se encuentra ante una encrucijada. El modelo económico de las últimas décadas, basado principalmente en la inversión extranjera directa y la construcción, ha dejado de ser válido. Existe un consenso generalizado sobre la necesidad de encontrar un nuevo modelo, basado en la innovación, para revitalizar nuestra economía. Pero las ideas felices normalmente no llueven del cielo. Es preciso enfocar, canalizar y acompasar el talento, crear el caldo de cultivo adecuado, para que florezcan las propuestas innovadoras que son tan necesarias. Entre otras cosas, es preciso decidir en qué ámbitos vamos a competir. Es una decisión grave, porque de ella depende en gran medida la sostenibilidad de nuestro modelo de bienestar a largo plazo.

Dentro de estas posibles propuestas innovadoras, una opción que se adivina muy interesante es la innovación en el ámbito de la gestión de la cadena de suministro. La relevancia de esta disciplina, hasta hace un par de décadas desconocida, no hace más que crecer. Las razones hay que buscarlas, por un lado, en la deslocalización de empresas, que complica enormemente la previsión de la demanda y aumenta considerablemente la necesidad de transporte y almacenaje, y por otro en el incremento del coste del petróleo, que ha hecho que el porcentaje de costes logísticos de muchas empresas haya aumentado extraordinariamente.

Las técnicas existentes en este ámbito permiten cuantificar conceptos  como el nivel de servicio al cliente o el intercambio de información con los proveedores, lo que permite tomar decisiones basadas en números y no en hechos sólo cualitativos, algo que los departamentos financieros critican enconadamente. Además, la cadena de suministro analiza los procesos de principio a fin, permitiendo adentrarse en ámbitos que hasta hace poco eran exclusivos de los departamentos de marketing o finanzas, lo que facilita una visión global de la empresa y, por tanto, unas decisiones menos sesgadas.

Pero para habilitar la innovación en este ámbito hay que superar dos barreras. Por una parte, el escepticismo de muchas empresas, que no terminan de creerse que innovar en este ámbito sea posible o adecuado, y prefieren apostar por métodos de mejora marginales, que tienen menos riesgo y son más fáciles de justificar. Por otra, no hay ejecutivos suficientemente formados en cadena de suministro, equipados con las técnicas cuantitativas requeridas y con la visión global antes referida.

Como excepción, algunas empresas españolas, como Inditex o Mercadona, han explotado estas características hasta el punto de haber cambiado los paradigmas de sus sectores maduros con una estrategia de cadena de suministro radicalmente innovadora. Es un hecho que resulta sorprendente si tenemos en cuenta que sus sectores están dominados normalmente por las áreas de marketing o ventas. Por ejemplo, prescindir de las promociones o reducir drásticamente el número de artículos (como ha hecho Mercadona) era hace unos años simplemente implanteable. Y enviar colecciones nuevas a las tiendas casi cada semana era sencillamente imposible. Hoy Inditex lo hace a sus más de 5000 tiendas en todo el mundo. Y es que estas empresas han introducido un cambio sustancial en el modo de enfocar las mejoras: la cadena de suministro es ahora el motor de ideas para competir.

En conclusión, la innovación en el ámbito de la gestión de la cadena de suministro tiene una importancia creciente y es un filón sin explotar, por lo que tiene mucho sentido apostar, como país, por estar a la vanguardia de la innovación en esta área. Esto implica  desplazar el poder de decisión desde otras áreas y formar en este ámbito a los profesionales de alto nivel. ¿Difícil? Quizás, pero no imposible, y merece la pena intentarlo, cuando la economía de todo el país está en juego.

Para saber más sobre cadena de suministro www.zlc.edu.es

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