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Supply Chain–Productivity 2

Today’s

Vocabulary

(1) Measure: As a verb, it’s to check the amount or level of something. As a noun, it’s a way of checking.

The measure of our success will be if we can break $200,000 in sales in the first quarter.

(2) Partial Productivity Measure: Comparing output with just one of many inputs

The total productivity measure is useless. The markets are too different. Find a partial measure that uses things that are constant between industries.

(3) Multifactor Measure: Comparing output with several inputs added together

Our factory uses multifactor measures comparing output with labor hours and capital expenses.

Today’s

Questions

1. Why might it be a bad idea to compare total productivity of two factories?

a. You won’t judge the factory on it’s own but only compared to competitors

b. Labor might work more in different countries

c. One input, such as a labor, might influence the results too much

2. Why are multifactor productivity measures used?

a. To compare the total effect of more than one thing

b. To compare the multiple effects of one thing

c. To remove labor from the measure

3. What might the output be for retail stores?

a. Sales

b. Labor

c. Output / (sales + labor)

7 ________________________

SUPPLY CHAIN WEDNESDAY

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productivity By Jeremy Schaar

In the last Supply Chain English lesson, you learned the basic definition of productivity. Today, we’ll go a little further. You’ll learn how companies actually use productivity and compare productivity measures in different industries.

A total measure of productivity should use all the inputs and outputs. But this isn’t always the most useful, so partial measures also exist. For instance, let’s say you have one factory in California and another in Mexico. The factory in Mexico appears much more productive, but you think this is due to labor being cheaper. You might check a partial productivity measure of Output / Labor.

A multifactor measure checks output over several things. For example, let’s say you want to check the productivity of each factory, but without labor. You might run Output / (Capital + Materials).

Depending on the industry, you might see a wide variety of productivity measures. Here are some:

Bar: Drinks served per labor hour

Car Factory: Cars per raw materials

Retail Store: Sales per square meter

Hotel: Rooms rented per rooms available

Television: Sales of commercials per program

Web Design: Online sales per time on site

These are just some ideas. How about your industry? How do you measure productivity? What partial measures do you use? What multifactor measures do you use?

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

C, A, A

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You Can Do It All Yourself But You Dont Have To

Supply Chain Lesson–Productivity

Today’s

Vocabulary

(1) Productivity: How well you use your resources

Productivity increased greatly after we moved to the new factory.

(2) Input: Something used in creation

The inputs into our bikes include steel frames, labor, and rubber tires.

(3) Output: The things you create

Our factory produces 20,000 units right now, but we want to increase the outputs to 30,000 during the holiday season.

Today’s

Questions

1. Why is it important to measure productivity?

a. To check your profits or losses

b. To check how well you’re using your resources

c. To check how many employees you need

2. What is an example of an input?

a. Sales

b. Labor

c. A hotdog

3. What is an example of an output?

a. Sales

b. Labor

c. A hotdog

7 ________________________

SUPPLY CHAIN WEDNESDAY

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productivity By Jeremy Schaar

Productivity is the most important thing for supply chain managers and business in general. Today on the blog, you’ll learn the basic definition of productivity. You’ll learn some useful vocabulary and think about how to decide if your productivity is good or bad.

Productivity is so important because it measures how well you’re producing things. It gives you a way to answers questions like:

How well am I using my resources?

How well am I using my labor?

Am I getting better or worse?

How do I compare to my competitors?

Simply said, productivity is a measure of outputs over inputs. (Outputs/Inputs)

For example, if you make hot dogs, your outputs are hot dogs. Your inputs are labor (your work) and materials (bread, meat). You need to think of a common measurement for these things. An easy one is dollars. Your work might cost $10 and the bread and meat could cost $20. Then, let’s say you sell the hotdogs for $60. What is your productivity?

$60/($10+$20) = 2

Is “2” good productivity? It’s impossible to know. You need to compare it with something else. You can compare productivity numbers across time or location. Said another way, you can see if your productivity was better or worse during a past time period. If you have more than one location, you can see which location has better productivity. You can also compare yourself with a competitor or industry numbers.

Today was a very simple overview. Next time, we’ll look at how companies actually use productivity and compare productivity measures in different industries.

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

B, B, C

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You Can Do It All Yourself But You Dont Have To

Supply Chain Wednesday–Six Sigma and DMAIC

Today’s

Vocabulary

(1) Defect: Something that is not what the customer wanted

We have one defect for every 1000 units. It’s much too high.

(2) Process: A way of doing things

Our processes are always improving. It means we do things quite differently now compared to 20 years ago.

(3) CTQ: Critical-to-quality characteristic

The CTQs for our pans include not being sticky and not having a loose handle.

Today’s

Questions

1. How can Six Sigma help your company?

a. Improving products and processes

b. Improving processes and job satisfaction

c. Improving customer satisfaction and customer service

2. What does the D in DMAIC stand for?

a. Delay

b. Define

c. Demand

3. Why are CTQs important?

a. They describe the whole product

b. They are where you find defects

c. You need to focus on the customer’s definition of quality

7 ________________________

SUPPLY CHAIN WEDNESDAY

________________________

By Jeremy Schaar

Six Sigma has been really amazing. It’s helped companies around the world improve their products and processes. How? It gives a company a system for finding and eliminating defects.

There’s lots of good vocabulary and ideas with Six Sigma, so I’ll spend the next few weeks talking about it. For today, you’ll learn about DMAIC. You’ll gain some great vocabulary and understand better how to improve products and processes at your job.

What’s DMAIC? It’s one of the most important ideas in supply chain management. And, actually, it can mean two things.

Dumb Managers Always Ignore Customers

OK. This isn’t the real meaning, but it’s an important joke. Customers should always be the most important part of any business. So only dumb (not smart) managers forget about customers.

Actually, DMAIC stands for:

Define Measure Analyze Improve Control

These are the things you should do in order to make products and processes better.

Define: I like to think of this step as getting organized. This can include many things. For example, you should choose a project and your goals, decide who will work on the project, and be very clear about what customers feel is most important. The things the customer feels are most important are called CTQs (critical-to-quality characteristics).

Measure: In this stage, you check how well you’re doing. This means learning what influences the CTQs and how to check them.

Analyze: Here, you look at the data from your measurements and figure out what’s causing defects. Another way to think of it is to learn what’s causing variation.

Improve: After analyzing, you should try and make things better. You need to remove the causes of the problems. You should also check how important different things are to the CTQs.

Control: Now that you’ve made things better, you should make sure they stay better.

That’s the basic process for Six Sigma. In the future, we’ll look at everything in much greater detail.

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

A, B, C

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You Can Do It All Yourself But You Dont Have To

Supply Chain Wednesday–Capacity

Today’s

Vocabulary

(1) Capacity: The amount that’s possible

Our capacity is 1000 units per month.

(2) Overhead: Fixed costs. The money you should pay even if you produce nothing.

When we added a third floor to our factory, overhead costs went up a lot.

(3) Lag: A delay

There’s a lag between when we find out about a problem and solve it.

Today’s

Questions

1. What should strategic capacity planning support?

a. Production

b. Long-term goals

c. The distribution center

2. When is it a good idea to use a lead strategy?

a. When you want to win in the market

b. When you want to be conservative

c. When you want to be aggressive

3. When is it a good idea to use a lag strategy?

a. When you want to win in the market

b. When you want to be conservative

c. When you want to be aggressive

7 ________________________

SUPPLY CHAIN WEDNESDAY

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factory By Jeremy Schaar

Strategic Capacity Planning

This concept is at the start of managing your factory. It’s about figuring out your goals and how much you can produce. Your different resources from money to space are limited. When designing your factory, and your business plan, you make the choices that support your long-term goals.

A big part of strategic capacity planning is determining how capacity will change over time.

Lead strategy means increasing production capacity before there is a great demand. In a very simple example, let’s say you have two workers. You might hire a third worker before you need him. The third worker will be great if demand does increase. If demand doesn’t increase, you can use the third worker to help the first two or on some other project.

Lag strategy is the opposite idea. Here, you would only hire the third worker when the first two workers are working overtime. That is, you hire him when you need him for sure. You definitely won’t waste money on a worker you don’t need, but you might also be slower than you want to be.

Match strategy means adding capacity when you know that there will be an increase in demand. You can think of it as between lead and lag strategy.

Strategic capacity planning is about choosing the best strategy. There are risks and rewards with all three strategies.

Imagine a company that makes housing supplies in California. The economy has been bad, but recently it is improving. Still, they remember that many of their competitors failed five years ago because their overhead was very large. When demand fell, their capacity was too big to maintain. This company survived because they had a lag strategy, but now they’re considering a lead strategy. What do you think? Is it a good idea?

How about your business? Which strategy is best for you?

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

B, C, B

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You Can Do It All Yourself But You Dont Have To

Supply Chain Wednesday

Watch

On YouTube

YouTubeLink

Today’s

Vocabulary

(1) Fulfilling: Satisfying

My work as a teacher is very fulfilling. I feel good because I can help people.

(2) Upstream: Earlier in a process.

They sent us too many items upstream so now we have a surplus.

(3) Downstream: Later in a process

Little errors here can become big problems downstream.

Today’s

Questions

1. What’s a DC?

a. Delayed Choice

b. Direct Current

c. Distribution Center

2. Which of these is an example of cross fertilization of ideas?

a. Psychology separating itself from philosophy

b. A physicist studying economics

c. Game theory being used to program computers

3. How do pick workers feel about the new system?

a. It’s better work

b. It’s worse work

c. It’s about the same

7 ________________________

SUPPLY CHAIN WEDNESDAY

________________________

By Jeremy Schaar

Mick Mountz–Let the Inventory Walk and Talk (Part 6)

This is the final lesson on this great Mick Mountz video. In general, he explains an awesome supply chain management idea and you can hear a large amount of useful vocabulary in a real-life situation. Today, I’ll review some final vocabulary from the video. Click here to see Part 1, Part 2, Part 3, Part 4, and Part 5.

From the 8:00 mark he says that the distribution center has become a parallel processing engine. This comparison is a cross fertilization of ideas because parallel processing is an idea used in supercomputer architecture (i.e. structure). It’s used in to make more powerful computers. Basically, an idea from one area (computer science) is used in another area (supply chain management).

He finishes his talk by explaining some results. First, the pick workers can leave their spot without affecting the whole warehouse. They’ve become independent because they’re not connected to anyone. And they’re autonomous, which means that they decide what to do, without someone telling them what to do. In the past, a factory or a warehouse might have a conveyer which automatically moved items. However, if one worker had to leave, the whole process would have to stop. He says things aren’t messed up downstream. Downstream means later in a process. Upstream means earlier in a process.

Another cool thing is that dynamic and adaptive algorithms change the position of products. This just means that the computer learns which products are most popular and moves them to the front. You can see this on the thermal map, which is a map organized by how hot areas are. In his map an area is hotter if the items are more popular.

The end result for the pick workers is a more fulfilling work environment because the work isn’t so hard as before. Amazing.

Got questions or comments? How about practicing some new vocabulary and posting your thoughts on the blog, Facebook, or Twitter?

CHECK YOUR ANSWERS!

Answers To Today’s Questions

C, C, A

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You Can Do It All Yourself But You Dont Have To

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