Tag Archives: supply chain

How to improve officers productivity by more than 20% at the Mexican border (at no cost)

Last month I flew from Madrid to Mexico City to participate as a speaker in the 2015 logistics summit. When I got to the customs area at the airport in Mexico City I had to wait some 45 minutes to clear customs. Admittedly, after a 12-hour flight, the last thing you want to do at the airport is to waste almost one hour doing nothing but keeping the line. So I decided to try to do something productive while waiting, and so I had a quick look at how operations are organized at the border facilities. Any Operations 101 course tells you to look for the bottleneck of the system first. That was easy, there was plenty of space, desks (around 20), but not enough officers, as you can see in the picture below.

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The corresponding scheme would be something like this, where the yellow represents the first passenger in the queue and he green (red) dots represents busy (idle) officers:Screen Shot 2015-04-29 at 13.26.09

This makes sense, as police officers are by far the most precious resources at the border. Of course, there were enough officers to cope with average passenger demand during the day, but given the huge variability of arrivals (in the form of large waves when international flights arrive), passengers in the line is the main buffer against demand variability, which leads to long waiting times.

The next step was to remember two simple rules to manage bottlenecks, namely 1) the quality of input must be guaranteed, and 2) the bottleneck input buffer must be full at all times. There is where I saw two interesting opportunities to improve.

In the case of quality of input, I observed that some passengers had not filled their customs forms, or, even if they had done so, they had not filled all the mandatory fields. Therefore, they had to do so while at the bottleneck, that is, when the officer told them to do so. That was time consuming (what was the code of my flight?) for both, the passenger and, more important, the officer. This is in contrast to customs in other airports, where non skilled workers filter out incorrect forms before passengers get to the bottleneck.

As for the input being full at all times, note in the picture above that the lady next to the officer has no other passenger/s right behind her. That means that when an officer finishes serving a passenger, the first passenger in the line (the girl in the light grey jumper in the picture) has to identify which officer is idle and go there to be “processed”. But passengers are not very agile at doing so, especially after a 12-hour flight. Therefore it was common to see officers waiving hands at passengers or even shouting things like “Next passenger please”. I measured “set-up time”, that is to say, how much time it took for passengers to go from the beginning of the line to the officer desks: 9 seconds on average. I also measured “service time”, how long it took officers to do their job once the passenger was at the desk: 40 seconds on average. The comparison of he two times struck me as surprising: 22% additional time because of set-up time!

That reminded me of another mantra of operations: “reduce set-up time”. How to do that in this case? A simple way to do it is to add a 1-person or a 2-person buffer right after the person being served. This is common in many airport lines, as shown in the picture below (see, e.g., the guy in the yellow jacket).

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The corresponding scheme would be something like this, a snake line followed by several small buffers, as many as bottleneck stations:

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But it is notable to me is the fact that that simple modification would reduce those 9 seconds of set-up time to only 2 (I guesstimated this figure).

What would be the impact of this set-up reduction in officers productivity? Some simple calculations lead to a surprising 18% increase in productivity, from current 73 to expected 86 passengers per hour and officer.

Screen Shot 2015-04-29 at 14.09.30

Combined this with the first change suggested, and you can expect productivity to boost by more than 20% at a very low or even no cost.

This example illustrates how the usual production techniques can be implemented into service environments, where there is a tremendous opportunity for improvement, mainly because managers in service operations have not realized yet about how much money they are leaving on the table. It also gives some evidence of how easily operations in a service environment can be observed and improved. In this case, 45 minutes of casual analysis may lead to significant annual savings for the same waiting time, or, even better (at least for passengers), dramatically reducing waiting unproductive time to cross the border.

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Logistics Summit. Mexico DF. March 18-19, 2015.

En marzo de 2015 participo como ponente en la Logistics Summit de Mexico DF.

Screen Shot 2014-12-17 at 10.19.08

El objetivo de la ponencia es entender cómo podemos crear valor desde la cadena de suministro y conocer cuál es el impacto de las decisiones operativas en la parte financiera de la empresa. Aquí dejo un enlace a un vídeo de 90 segundos donde doy algunos detalles más. ¡Nos vemos en el DF!

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El logista, reconocido como profesional por el Sepe

Entrevista concedida a El Vigía

Alejandro Serrano –  Apr 2014 | Spain

–       ¿Cómo valora que el Servicio Público de Empleo Estatal (Sepe) haya incluido en su Observatorio de las Ocupaciones una nueva categoría específica de logística. En concreto, la categoría “Empleados de logística y transporte de mercancías”?

–       Es la constatación de una tendencia irreversible en el medio plazo: las empresas siguen llevando su producción a países de bajo coste y la función logística es cada vez más relevante para competir. El peso del coste logístico ha crecido sustancialmente en las dos últimas décadas. A esto han contribuido primordialmente el precio al alza de los combustibles, el acortamiento del ciclo de vida de los productos y la proliferación de artículos ofrecidos a los clientes.

–       <>¿Cree que este paso permitirá una mayor profesionalización de los Recursos Humanos en el sector?

–       Sí, en la medida en que la inclusión del perfil logístico como categoría ayude a que las empresas tomen conciencia de la importancia de esta función.

–       ¿Cómo puede influir en el ámbito formativo del sector?

–       Dará sin duda más relevancia a la formación, que es esencial en este campo, más que en otros si cabe, dada la extrema complejidad de las cadenas de suministro globales, que deben tener en cuenta no sólo los costes de producción y transporte, sino también los costes aduaneros, de obsolescencia y financieros, por citar algunos.

–       Como experto en la materia, ¿qué es lo que más le llama la atención de los datos aportados en esta categoría por el observatorio (adjunto el documento)?

–       Por un lado, echo de menos la inclusión de perfiles de mayor calado, como directores de logística o de cadena de suministro, una función que cobra relevancia día a día y que, cada vez más, depende directamente del director general de una empresa. Por otro, me resulta llamativo que todavía en España se tenga una percepción limitada de la logística que hace referencia únicamente a las funciones de transporte y almacenaje. Desde hace años las empresas vienen hablando de la gestión de la cadena de suministro para incluir un buen número de funciones adicionales, desde el pronóstico de la demanda hasta el diseño de contratos para compartir el riesgo con los proveedores.

–       ¿Necesita el sector logístico abrir un debate sobre las categorías, perfiles y profesionalización de sus distintos puestos de trabajo?

–       Pienso que, en este caso, la taxonomía no es tan importante como la necesidad de profesionalizar el sector en general.

–       ¿Cuáles son las últimas tendencias en cuanto a perfiles y profesionalización dentro del sector?

–       Observo tres tendencias principales: primero, la creación de departamentos de supply chain, aunando bajo una única batuta un número creciente de eslabones de la cadena de valor; segundo, la importancia de la función financiera: un mando que hoy no comprenda el impacto de sus decisiones en el balance o en el estado de flujos de caja de su empresa no puede ser un profesional de la logística; y por último, el auge de la función conjunta de planificación entre ventas y operaciones, comúnmente llamado S&OP (por sus siglas en inglés).

–       ¿Y en cuanto a formación?

–       Por la naturaleza de su trabajo, el logista convive estrechamente con muchos departamentos de la compañía, como el marketing o las finanzas. Por tanto, aparte de los conocimientos técnicos, la tendencia es enseñar lo suficiente de todo para poder entender los puntos de vista de las funciones anejas, desde gestión de equipos hasta finanzas. Para eso, la formación tiene que ser sólida en el ámbito técnico y extremadamente eficiente en el resto, para aprender muy bien lo básico en un tiempo limitado.

–       La gran mayoría (66%) de las ofertas recogidas por SEPE para hacer su análisis procede de los portales de empleo privados y el 25% de portales del servicio público de empleo y el 9% de páginas web de las propias empresas, ¿son los portales privados la principal fuente para la búsqueda y oferta de este tipo de empleos? ¿cómo interpreta los datos ofrecidos por el observatorio en este sentido?

–       Para perfiles medios me parecen realistas los datos; para perfiles más altos, yo observo que se utilizan mucho más las redes de contactos, al igual que en otros ámbitos.

–       ¿En qué aspectos debería avanzar la gestión de los Recursos Humanos en el sector logístico?

–       En mi opinión, recursos humanos debe hacer mucho mayor hincapié en la formación. Este cambio de prioridades debe nacer del convencimiento de que un profesional bien formado en cadena de suministro confiere a la empresa empleadora una ventaja competitiva formidable.

–       ¿Y la formación logística, en qué aspectos debería avanzar?

–       Con algunas excepciones y en contraste con Estados Unidos, el país más avanzado en cuanto a formación logística, en España hay una carencia grande de programas de grado y posgrado de primer nivel. En nuestro caso, los contenidos de los programas de posgrado del Zaragoza Logistics Center están definidos de acuerdo con el centro de transporte y logística del MIT, la universidad número 1 del mundo en este ámbito.

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From Teaching to Learning: The Case of Supply Chain Tools

Why teaching Supply Chain tools is so challenging

Alejandro Serrano –  Aug 2013 | Spain

Last week I had a very enlightening conversation with the person in charge of logistics at a medium-size company ($200m turnover). He argued that analytical-tool teaching, such as linear programming, should be removed from supply chain and MBA programs. He claimed that the only important “analytical” tools to be taught at such programs should be Excel. In addition, a number of management tools such as change management, team building, project management, and the like should be included in the teaching curriculum.

I have to admit that I was a bit surprised by his categorical opinion of the uselessness of analytical tools in this field. But he is not alone: I have found a number of managers who either neglect or underestimate the value of analytical tools at work, judging them as too theoretical, non-implementable, and totally disconnected from reality, the routine of a normal company working day.

This evidence clearly shows a disconnection between what is taught at graduate supply chain and MBA programs and what is perceived as needed in the industry. From the academic perspective, it is easy to argue that the problem is that, more often than not, these managers do not have the solid background that is usually needed to understand and carry out a decent analytical analysis followed by a successful implementation. And I agree that this might be the case.

source: inboundlogistics.com

source: inboundlogistics.com

But having said that, consider another plausible explanation: supply chain or MBA students may well understand those tools, and grasp a number of concepts, while being unaware of how useful they may be within a business context. Let me use an example from my own experience. As an MBA student, I was taught the “newsboy logic” to be applied in settings where  1)  demand is uncertain and 2) there are underage and overage costs depending on the decisions made. But I was never challenged to find business contents where this logic could be applied, so I did not. Years later, as a supply chain masters student, I was presented with the same logic, again in a specific context, where a purchasing manager had to decide on how much inventory to buy under the same conditions of random demand and under- and overage costs. But again, I was not pushed to think further and extrapolate the interesting insights of the model from the inventory sphere to others. Only several years later, did I realise the potential of the model and how it could be applied in different realms. For instance, as the COO in a 3PL in a seasonal industry, I should have used the logic model to calculate how many people to train several months ahead of the uncertain season peak. Unfortunately for my previous company, I did not.

All in all, I am convinced of the usefulness of analytical tools and know that they can be a great source of competitive advantage. As an instructor, the takeaway is that I should constantly remind my students why those tools that we teach are useful (they’d better be!)  and how and where they should be applied in practice. It may seem like an easy recipe to follow, but too many instructors fail at using it, either because they do not consider it important (unfortunately many instructors lack industry experience) or they overestimate students’ ability to retain classroom concepts and immediately convert them into ready-to-use managerial tools.

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Counting the Cost of Liquidity in the Euro Zone

Finance and Supply Chain execs need to collaborate on ways to release cash locked into supply chains

Alejandro Serrano – Feb 6, 2012 – CFO.com | US

The liquidity crisis in Europe has cast a spotlight on the need to bridge the divide between finance and supply chain management (SCM). More than ever, executives in these two key disciplines need to collaborate on ways to release some of the cash that is locked into supply chains.

Reducing inventory is probably the most obvious strategy for liberating these financial resources, particularly for companies that maintain high stock levels. In addition to tying up large sums of money in the products stored, inventory adds cost in others forms, such as insurance premiums, investments in storage facilities and related transportation budgets, and obsolescence costs.

Large companies in Europe have become very concerned about this cash-equivalent mountain, as it has become more difficult to meet their working capital requirements (WCR). But addressing the problem requires a concerted effort to understand the financial implications of SCM decisions.

When firms resolve to outsource production to low-cost manufacturing centers in countries such as China, for example, the move may enhance their profit and loss (P&L) statements. But the overall impact on the balance sheet could be much less favorable. The longer pipeline and corresponding increase in uncertainty require higher inventory volumes, which eats up precious cash reserves.

Transferring production to remote suppliers also is likely to involve larger lot sizes. These vendors often need to sell big batches of product to make the business profitable. Again, this consumes the buyer’s WCR when it purchases 1,000 units even though the enterprise only needs, say, 30 units. Sourcing domestically might be a better option because it is easier to work with local producers to reduce lot sizes.

Stock-keeping unit (SKU) proliferation is another supply chain issue that can have far-reaching financial implications, and a number of multinational companies are striving to rationalize their product assortments. In positive economic times, the inventory holding and ordering costs associated with multiple SKUs tend to be underestimated.

In April 2012, sports apparel company Adidas announced plans to cut its 46,897 SKUs by 25%. Other successful companies have followed a similar path. Apple’s iPhone offers only 10 SKUs worldwide for the product’s color and memory variants, for example. Compare this to Nokia, which sells 37 different models in Germany alone. Spanish supermarket chain Mercadona boasted a net profit of more than 19% at its 1,500 supermarkets in 2011. The retailer has about 4,000 SKUs per store compared to a typical U.S. supermarket, which sells around 40,000 SKUs.

Assorted Products
The product-assortment issue is a good illustration of how the lack of a holistic view of the supply chain can rob a company of working capital. Often, the marketing department believes that introducing more SKUs delivers more buying opportunities and hence boosts sales. But the marketers may fail to consider how the wider product selection both decentralizes and increases inventory, and has an adverse effect on the company’s balance sheet. Many senior executives also suffer from this myopic view of operations.

Extending payment periods or shifting inventory to suppliers are tactics that many financial departments adopt in a tight economy. Again, understanding how such actions ripple through the supply chain – working capital is more expensive for small suppliers so their performance declines, for instance – may not be a high priority.

SCM leaders are just as culpable. They might take an outsourcing decision without giving much thought to how such a move constrains WCR. Basic financial concepts, such as “WCR equals cash plus receivables plus inventories minus payables,” need to be an integral part of the SCM decision-making process. Supply chain professionals should appreciate that inventory levels directly affect financial risk.

Firms that understand the impact of SCM decisions on their financial statements can capture huge competitive advantage. That holds true in any commercial environment, but especially in one where there is a scarcity of working capital.

Alejandro Serrano (aserrano@zlc.edu.es) is a professor of supply chain management at the Zaragoza Logistics Center, Zaragoza, Spain. He teaches “Finance for Supply Chain Management” as part of ZLC’s masters and executive education programs. This article will be published in the MIT Supply Chain and Logistics Excellence Network newsletter, “Supply Chain Frontiers.”
www.zlc.edu.es

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La maldición del perro

Una amplia gama de colores para cada prenda. Prestaciones y diseños combinables en cada producto tecnológico. Mil y un tipos de yogures o de panes… Comprar es elegir. El estudio del comportamiento humano lleva a entender por qué no se deben creer ciegamente las teorías del márquetin cuando se trata de definir el número de variantes de los productos que se ofrecen al público

Alejandro Serrano – Heraldo de Aragón, Nov 9, 2012| Spain

«Cuanto más, mejor». Esta parece ser la idea dominante cuando se trata de definir el número de variantes de un producto que se ponen a la venta.

El razonamiento habitual del márquetin parece impecable: cuantas más opciones tenga el cliente para elegir, mayor es la probabilidad de que se produzca una venta y más satisfecho quedará. Sin embargo, según Barry Schwartz, autor del libro ‘The paradox of choice’ (’La paradoja de la elección’), esto no es siempre cierto: no siempre es deseable ofrecer más variedad de productos a los clientes.

En una interesante charla TED, Schwartz expone que ofrecer al cliente demasiadas variantes es  incluso contraproducente.

Hay cinco razones principales para esto, que por cierto forman el acrónimo PERRO. Son las siguientes:

PARÁLISIS La existencia de demasiadas variantes pueden llevar al cliente a realizar un estudio exhaustivo sobre cuál le conviene más. Este análisis  puede hacerse tan complejo que le lleve a posponer su decisión o incluso a abandonar la compra al verse desbordado por tanta complejidad. Nos podemos referir a este fenómeno como ‘la parálisis por el análisis’.

EXPECTATIVAS A mayor número de variantes, mayor es la expectativa de encontrar el producto que se ajuste exactamente a las necesidades del cliente. Si este no es el caso, el producto elegido puede crear frustración, incluso si es mejor que el que habríamos comprado si no hubiera habido variantes.

REMORDIMIENTO Si la variante adquirida no satisface completamente al cliente, éste puede pensar que dejó en la tienda aquélla que era mejor que la adquirida. Este sentimiento de remordimiento será mayor cuanto mayor sea el número de variantes.

RESPONSABILIDAD Si el cliente compra la única variante existente y después comprueba que no le satisface plenamente, se justificará pensando que, al fin y al cabo, era la única opción disponible. Sin embargo, en el caso de disponer de muchas variantes, puede que se sienta culpable por haber elegido mal, ya que ha sido él el responsable de la elección, lo que aumentará su frustración.

OPORTUNIDAD El valor de una compra depende de que el comprador perciba el ‘gap’ existente entre lo que se lleva a casa y la mejor alternativa no comprada. Si el número de variantes es grande, es fácil imaginar las buenas características de aquellas variantes que no compramos, haciendo al cliente sentirse menos satisfecho con la elección realizada.

Así las cosas, puede ser que, para algunas empresas, haya llegado el momento de plantearse una reducción en el número de variantes de los productos ofrecidos a los clientes.

Quizá sea esta la razón por la que Herbert Heiner, el consejero delegado de Adidas, anunció el pasado abril que iba a eliminar el 25 por ciento de los casi 50.000 artículos ofrecidos por la compañía.

Quizá también por esto, por citar un ejemplo más cercano, Mercadona ofrece en su lineal ‘sólo’ unos pocos miles de artículos, un orden de magnitud por debajo de lo ofrecido por muchos de sus homólogos americanos.

Desde el mundo de la gestión de la cadena de suministro se viene haciendo hincapié desde hace tiempo en la importancia de reducir el número de artículos para contener los costes de mantenimiento del inventario, no sólo por el coste financiero inherente a las necesidades operativas de fondos, sino también por los costes no financieros como la obsolescencia, los seguros, los robos o el coste de almacenamiento.

Ahora se suma el no poner en riesgo la satisfacción del cliente. Un argumento de peso.

Alejandro Serrano Valenzuela Profesor del Zaragoza Logistics Center

To know more about supply chain follow the link www.zlc.edu.es

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The Dog Curse – When More is Less

Why you should not blindly trust the Marketing wisdom when it comes to defining assortment

Alejandro Serrano – Sep 27, 2012| Spain

Last week I watched a very interesting talk TED talk by Barry Schwartz based on his book “The paradox of choice” . He argued that having more options to choose from does not necessarily imply having more freedom. This is despite the usual approach from Marketing, which claims that “more is better” when it comes to definition of assortment. His argument stems from some findings which show that having many SKUs to choose from may actually be counterproductive, as it could lower the customer’s utility.

I have summarized the five main findings and packed them under the acronym “PERRO” (thus the title of this piece) for me to easily remember them. Here they are:

  • Paralysis. Too many SKUs force customers to try to analyze each option with respect to the others, pondering pros and cons, until a decision is made. The process can become so messy that customers simply postpone their decisions for later. Put differently, we could say that “too much analysis drives paralysis”.
  • Expectation. If assortment is large, customers usually significantly raise their expectations about the quality of the product they are going to buy. Since utility can be measured with respect to expectations, rising expectations leads to decreasing utility.
  • Regret. If a bought product does not completely satisfy a customer, she may ask herself, what if I had bought an alternative? Therefore, the higher the number of alternatives, the higher degree of regret she will have as she becomes more convinced that one of the others was better.
  • Responsibility. If there is just one variant, and that one does not satisfy the customer, he will think “What can I do?”, with no blame. However, if there are many alternatives and the one chosen does not satisfy the customer, he will blame himself, as he was the one who chose the “wrong” product.
  • Opportunity. As variety increases, the opportunity cost decreases, as the alternatives are closer in value (not necessarily in price) to the product considered. The more SKUs available, the lower the incremental value of the product chosen with respect to the second-best choice.

Given these, it is maybe time to reconsider your marketing strategy, and start reducing the number of variants so as to increase your customers’ utility (aka happiness).

The TED talk is here. The book “Paradox of choice” can be seen here.

To know more about supply chain follow the link www.zlc.edu.es

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