Sunday, October 19, 2014

WonkaVision - Much like 3D printing!

As Prof. Z introduced us to 3D printing, I couldn't help but be taken back to childhood.

Grade 4, Library room. The librarian is reading to us Roald Dahl's Charlie and the Chocolate Factory. One of the rooms within the gigantic factory of Mr. Willy Wonka, the Television Room, houses his latest invention, WonkaVision. A giant chocolate bar, when placed in the contraption, is transmitted through the air in microscopic bits, only to appear in a television. This bar can be taken from the TV and even be eaten!

I think this comes really close to the idea of 3D printing.

3D printing or additive manufacturing transforms digital files to an actual solid three dimensional object by laying down successive layers of material until the entire object is created. This process allows customization of products, alleviates complexity involved in the traditional manufacturing process, is cost-, time-, and labor-efficient, and sustainable, too!

Roald Dahl was surely way ahead of his time! When he penned down the story in 1964, little did he know about 3D printing and how it would prove beneficial in the future.



Coming back to the story, Mike Teavee lets sloth get to him. His obsession with television makes him amazed at this new discovery and he attempts to send himself through television resulting in him being shrunk down to be no more than an inch high. Talk about invention, innovation and a moral for kids - all bundled in one book! :)



Inventory Management at Walmart

In class, we discussed how inventory management - good or bad - can significantly impact a company's supply chain. Through the Scientific Glass, Inc. case study, we saw that having too much inventory can decrease the liquidity of assets and affect how quickly a company can adapt to changes in consumer demand. Most importantly, however, having the improper level of inventory can impact profitability, which is really all companies care about at the end of the day.

In scouring the Internet for something that applies to this topic, I found an article discussing Walmart's inventory struggles that occurred last fall. It claims that Walmart's inventory levels increased partially because they did not predict sales accurately (going back to our lecture on forecasting). Further in the commentary, though, the author begins talking about seasonal items - decorations for Halloween and Christmas, in particular - and their impact on Walmart's inventory. According to Walmart CEO Bill Simon, the increase in inventory is due to "timing shifts in the receipt of merchandise for [...] the upcoming holiday season." But the big question remains: why change it?

Employees interviewed for this article say that usually, the bulk of Christmas items arrive in shipments a couple weeks before Black Friday, in line with the "just-in-time" delivery system we learned about in class. However, last year, Walmart began sending mass amounts of holiday products way before then, which impacted how Walmart prioritized its space on the floor. The company had to heavily discount certain items (the article mentions sweatpants) to make room for prematurely delivered holiday merchandise. The organization of products in stores is haphazard, since Halloween jack-o-lanterns and Christmas trees sit next to each other in the seasonal items section. And since the back rooms of most Walmart stores are already stocked heavily with day-to-day merchandise to meet consumer demand, the Christmas products that arrive early are forced onto the floor out of necessity.

Does Walmart honestly think that consumers are ready to buy Christmas items before Halloween? Why drastically increase inventory levels at stores all around the country just for holiday products? Honestly, it does't make much sense to me! What do you think?

Here's the article: http://www.bloomberg.com/news/2013-09-25/wal-mart-cutting-orders-as-unsold-merchandise-piles-up.html






Friday, October 10, 2014

Exception in Supply Chain Management – ZARA(INDITEX)

Generally, when we speak of supply chain, it always involves the division of various companies in assorted departments at different stages of supply chain. Under certain circumstances, like IKEA, consumers even perform in the supply chain. In addition, the defect of any link would have a ripple effect on the whole supply chain.

However, ZARA survives and thrives in the competitive market through a unique pattern of supply chain management. From 1996 to 2013, Inditex's sales, of which about 80% is from Zara, has increased from 1 billion euros to 16.7 billion euros. And between 2000 and 2006, Inditex achieved sales growth of 30% a year, a net margin of 11%, and a return on average equity of 29%—well ahead of Gap, H&M, or Mango.[1]
Through a responsive supply chain, it only takes ZARA 15 days to manufacture from scratch, which is unprecedented in the fashion industry. Since designers usually spend several months in designing clothing of the next quarter, ZARA’s sales profit could be higher among rivals. Contrary to competitors in apparel industry who are scrambling to adopt outsourcing strategy, Zara keeps almost half of its production to himself. And rather than maximize production capacity like peers, ZARA deliberately keeps some extra capacity; 
 
To unravel the secrets of ZARA’s supply chain management, there are three principles we should pay attention to.

1Establish a closed-loop communication
This "fast" system relies heavily on continuous exchange of information between various parts of the supply chain. Weekly computer communication or telephone conversations prompt each store transfer information in a timely manner to La Coruna, the headquarters of ZARA(INDITEX).
Once the team has selected a prototype for production, the designers will adjust the color and materials via computers. The continuous flow of real-time data alleviates the Bullwhip Effect, avoiding the malignant effect of excessive production. On the other side, small-lot production prompts customers to patronize Zara shops more frequently, so reduce the need for advertising.

2) Keep the whole supply chain in a single rhythm
Zara takes complete control over the supply chain. It is ZARA who is responsible for the design and distribution of all their products, enjoys a low proportion of outsourcing, and possess almost all of the stores.
The control over the supply chain enables ZARA to set speed for products and information, so that the entire supply chain could operate in a fast and predictable rhythm. Take retail stores for instance, store managers order twice a week. Store managers could know exactly when will the goods arrive after the goods have been shipped. After the trucks arrive at the shops, fast-paced still maintain. Since the clothes have already been hung on the racks, you can put them into the stores directly.

3) Use capital to improve the flexibility of supply chain
Zara has invested a lot in production and distribution to improve the response speed of the supply chain so as to satisfy needs in the market.  ZARA always produces complex products while leaves the simple ones outsourced.
On the one hand, many ZARA’s factories only arrange one shift, on the other hand, all the products are concentrated in La Coruna by central distribution center processing. Since plant capacity and processing capacity of the distribution center are all maintained at a low level, it guarantees a quicker response in the season or when sudden demand comes. Meanwhile, thanks to the fast response of plants and distribution center, the working capital is significantly reduced. Under that circumstance, the liberated capital could offset the investment in extra production and processing.

Even though we know that ZARA operates quite well, but does this works for all companies?

The application of B2B Exchange in Alibaba

B2B describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer[1]. As the largest B2B platform in China, Alibaba performs as an information infomediary in the supply chain, integrating large amounts of information on both buyers’ and sellers’ sides, involving different industries from electronics, machinery, clothing to finance and so forth.

Specifically speaking, the B2B exchange of Alibaba operates in the following ways:  

First and foremost, the core concept of Alibaba is information flow, that is to aggregate voluminous market information in a single platform to benefit businesses.

Secondly, for the convenience of companies in different countries, Alibaba runs its website by adopting local languages. The convenience and affinity of the website somehow smoothly integrates markets among nations and correspondingly provides an integrated platform for international trade.

Apart from that, in the initial stage, Alibaba attracts companies in virtue of lowering the threshold of entry and offering free membership. The result is remarkable -- companies join together and contribute to an active market via the Internet, which consequently generates infinite opportunities for members meanwhile.

At the end of August 2010, membership of Alibaba has arrived at 53.4 million from 202 countries and regions, and daily registration goes beyond 1500. Affected by free membership, the majority of its membership is SMEs. And there are about 45 million page views per month, 3000 new trading information per day and more than 300,000 inquiries per month. 
Distribution of Overseas Members
Last but not the least, through value-added services, Alibaba provides an exceptional marketing service to its members, which not only creates service function on the online trading market, but also makes profit for Alibaba. The profit gained mainly comes from China suppliers (they offer Chinese businesses special inquiries for international buyers in various countries), designing of companies’ websites, online marketing programs and Trustpass.
From the above discussion about Alibaba’s B2B Exchange, we can see that B2B Exchanges create value in at least four ways,
1)  expand everyone’s market reach, so it is more approachable for buyers to find suppliers with the right parts and prices;
2)  generate lower prices for buyers, and thusly buyers can reach more suppliers or the most efficient supplier and benefit from increased price competition and access to excess inventory stocks;
3)  cut the cost of the buyer’s operations;
4)  identify industry best practices.
In conclusion, B2B serves as the “glue” to create a coordinated supply chain and is of great significance in today’s supply chain. However, do you think B2B will wane with the rise of B2C and C2C?

[1] http://en.wikipedia.org/wiki/Business-to-business

Boeing’s Long-term of Airplane Demand

Forecasting demand is the prediction of future performance based on available information about past performance, political as well as economic condition, competitors’ behavior and so forth. Devoting resources to demand forecasting allows companies to shape the supply chain strategy and guide long-term business planning, which contributes to their performance in the competitive markets and increases the likelihood of success. Therefore, forecasting demand can be applied to any industries, from petty retail trade to large chains, from business to manufacturing industry. The following discussion will be on the “Current Market Outlook(2014-2033)”, a long-term forecast of air traffic volumes and airplane demand of Boeing.

Given the significance of forecasting demand, it embraces numerous influential factors like economic growth, fuel prices, different modes of transport, competitors, and so forth.


Economic growth, as measured by GDP, is a crucial element in forecasting demand. An ascending economic condition indicates that the government could invest extra capital in the aviation industry, and customer spending will also increase due to robust income growth.
 As the major component of airline cost, fuel is an influential factor as well. The rise of fuel price together with technology development stimulates the manufacture of aircrafts with low energy, such as the 787 and the 737 MAX, which are more in line with market demand and thusly be highly consumed.

Moreover, different modes of transportation could also influence the future demand of Boeing.

The tremendous expansion of low-cost airlines spurs demand of airlines such as Boeing. Low-cost airlines typically means “operating at secondary airports, flying a single airplane type, increasing airplane utilization, relying on direct sales, offering a single-class product, avoiding frequent-flyer programs, and keeping labor costs low”. Compared to traditional carries, low-cost airlines reduce fares significantly and correspondingly stimulate traffic.

Air freighter is the other mode of transportation which is commonly used for shipments of high-value, time-sensitive, or perishable goods. As international trade has intensified and business scale has enlarged, demand for air freighter becomes more intensive and thusly request more airlines.
And for network carries, the primary mode of transportation, like American Airlines or ANA, the order is always constant without dramatic fluctuation to some extend.
Apart from the above, there are few other elements that have impact on forecasting demand, including competitors, short-term effects like political issue and so forth. Under the combined effect of these factors, Boeing arrives at the conclusion that demand for 36,770 new airplanes, valued at $5.2 trillion. “15,500 of these airplanes will replace the older, less efficient airplanes. And the remaining 21,270 airplanes will be for fleet growth, which stimulates expansion in emerging markets and development of innovative airline business models. Single-aisle airplanes continue to command the largest share of the market. Approximately 25,680 new single-aisle airplanes will be needed over the next 20 years.”[1]

Question: Will Boeing and Airbus, the world's two largest aircraft manufacturing companies, share the same forecasting process and outcome?

Strategic Sourcing of the Siemens

    As companies nowadays are in a highly competitive and rapidly changing environment, it becomes increasingly difficult for firms to rely on the competitive advantages gained from sales and production processes. Yet the long-neglected purchasing department is still of great potential. Companies can gain sustainable competitive advantages through strategic sourcing by reducing the cost of investment and integrating suppliers’ ability.
        
    Siemens AG, a global powerhouse in the fields of electrification, automation and digitalization and for healthcare solutions[1], has achieved great success in the market of China. Looking into it, there are 4 principles of strategic sourcing inherent in Siemens.

1  Total cost consideration 
    Rather than merely consider price during procurement, Siemens makes strategic sourcing decision after combining different situations of suppliers and the demand of the company. That is to say, the amount of order depends on the total cost which embraces the price, quality as well as logistics. The lower the total cost, the smaller the share of orders. According to TCO model[2], price is not the ultimate payment, quantity, profit sharing, payment and even shipping should be included in the calculation of total cost as well.

2  Negotiation via fact and data
The success of strategic sourcing is partially based on negotiation via fact and data. To achieve this, the procurement department of Siemens sets up a marketing team to attract potential suppliers so as to recognize comparative advantages of the suppliers. In the process, they always look for new suppliers and evaluate them while cooperating with existing suppliers on brand-new areas.

3)  Supplier relationship management 
Improvements under supply chain management are established by the cooperation of purchasers and the suppliers. In addition, the investment of capital, resource, time and the introduction of new supply chain management thinking could also improve the efficiency of the supply chain and make direct economic benefits.
Implementation of supplier relationship management could be divided into three stages: at the very beginning, the company determines purchasing categories and savings target under certain suppliers. After that, a detailed flow of information should be established for answering questions related to performance. Finally, suppliers and purchasers should arrive at an agreement on the procedure in order for targeting desired consequence.

4)  Counterbalance
The relation between company and supplier is a mutual selection process. Therefore, fully understand the supplier and its business strategy, operational model, competitive advantage, operating conditions and stuff could create opportunities for company to find a balance point in mutual cooperation.
First, the audition of pre-production process could testify whether the supplier can produce to meet the quality requirements of Siemens. And then followed by a large-scale trial production, Siemens attempts to ensure the suppliers meet the six sigma quality standard and safeguard the stability of the manufacturing process. If it works, measurement systems could be established; but if not, Siemens will conduct an internal re-education for the suppliers.

In conclusion, Siemens are experiencing an efficient strategic sourcing management. But on the other hand, the prosperity of rivals does post a threat to the company. Is there any other strategic souring management measure to handle that? 


The Secret to Nordstrom’s Success: Inventory Management

During the U.S. recession, Nordstrom was outperforming its rivals like Macy’s and Saks. Shortly after the recession in 2009, its overall sales reached $8.26 billion[1]and its gain outpaced the 13 percent advance of the Standard & Poor’s 500 Retailing Index, while Saks had dropped 50 percent and Macy’s has lost 0.3 percent[2].

How could Nordstrom survive and thrive the recession? The secret is not involved a piercing insight into customers. Rather, it is inventory management that contributes to success.

Nordstrom introduces a single view of goods, which combines its in-store and online inventory systems, and displays stock from both the Web warehouse and its stores all at once. Say that if a customer is looking for a CK coat via Nordstrom.com, she can see whether the coat is available at nearby stores and reserve it for pickup the same day. More significant, ithe coat is out of stock on the web warehouse, you can still order it from any other regular stores.

By comparison, Wal-Mart can ship online items to nearby stores, and Target just displays items in different stores without selling them in advance.

However, inventory itself is a problem. Since there always exist incongruity among customer service, inventory-related costs and operation, maximizing customer service somewhat indicates expand inventory, and correspondingly increase cost. Therefore, Nordstrom make a trade-off between inventory and customers’ need by confining inventories to a stage where orders are well correspond with recent sales trends. If the sales of certain merchandise fell 4 percent in the previous 2 months, for instance, the order must be limited in the coming quarter.
The inventory management has significant impact on Nordstrom. The inventory turnover of Nordstrom shifted from 4.84 in 2005 to 5.41 in 2009, indicating that very little markdown should be performed late in the season. Under that circumstance, the company does not need to figure out an approach to maximize the profit by calculating relativity and relationship between the original one and the discounted one. Compared with the sale before the implementation of inventory management, Nordstrom sales have increased by 8 percent[3].







Therefore, the inventory management of Nordstrom is of great significance since it reduces costs as well as increases the efficiency.

But there comes a question, why other peers like Saks do not operate this way?


Lean Manufacturing and Toyota's Philosophy

Just-in-time (JIT) and lean manufacturing are vital concepts to modern manufacturing theories.  The goal of JIT is to save money in storage costs and produce and deliver products "just in time" to be sold (1).  The customer, rather than completing the sales cycle by buying the product, starts the cycle by ordering it and therefore creating the demand for manufacturing.

Toyota's lean approach to vehicle manufacturing has been adopted by almost every major car maker in the world.  The goal of the lean factories is to eliminate waste wherever possible (2).  Machines are not up and running if there is not a direct demand.  This saves money on raw materials, storage, labor, and overhead costs.  Everything that is in production has a direct demand associated.  By staying lean, Toyota has fewer inventories to worry about, and can focus on building quality vehicles.


http://www.gallus-group.com/ru/desktopdefault.aspx/tabid-318/473_read-910/


The lean philosophy has direct implications on their supply chains as well.  Keeping inventory levels low is central to the approach (3).  It reduces carrying costs, and by not overstocking, the company is able to get rid of cars that get outdated with minimal costs.  Embracing technology can also improve processes and reduce waste.  Technology will help monitor levels of inventory and shorten lead time by getting products to their destinations in the fastest time.  Technology can be used to better schedule and coordinate labor efforts as well.  It can diagnose and problems in lead times or low inventory levels, and help to correct the issues.

Lean philosophies can be applied to many other industries and settings, as many industries use similar processes and supply chain management systems.  One such setting is hospitals.  Hospitals have to coordinate spaces, people, and medical equipment and inventory to efficiently meet demand.  Many health systems are using lean approaches for their inventory management and improving processes.  Retailers with perishable goods benefit heavily from lean manufacturing and supply chain management also.  Grocery stores have to manage inventory of produce and meat to not overstock and sell the food before it goes bad.  Pharmacies have to sell their medications before they expire.  Lean manufacturing will help manage inventory levels to appropriately match customer demand.

Questions for further discussion:

What industries may NOT benefit much from lean approaches?
Is lean manufacturing sustainable for all car manufacturers?
How does a work or societal culture affect lean implementation?




Works consulted:
1) http://businesscasestudies.co.uk/exel/managing-the-supply-chain-for-globally-integrated-products/just-in-time-and-lean-production.html#axzz3Fm2zhgUi

2) http://scm.ncsu.edu/scm-articles/article/the-road-to-lean-manufacturing

3) http://www.beckershospitalreview.com/news-analysis/5-key-principles-for-hospitals-from-toyotas-lean-production-system.html

Forecasting Grocery Stores

Inventory management is the central and recurring theme for a successful supply chain.  By controlling inventory levels, supply chains are able to keep the appropriate amount of goods in stock and fulfill a customer's orders immediately as they come in.  Good inventory management hinges heavily on knowing the demand of customers and timeline of such expected orders.  This introduces the importance of forecasting in supply chains.

Forecasting is especially important in an industry with goods with a short shelf life, such as the grocery industry (1).  Grocers have to figure out how much of a product a customer will want at a specific time, make sure they will have it in stock, and not over-order to a point where they have to throw out a lot of the product if it goes bad.  Many fresh foods have a very limited shelf life; breads, meats, and produce all fall into this category (2).  Accurately forecasting customer demand of these products will ensure that customers will get the amount they are looking for, and that groceries won't have to throw out a large amount of excess stock.

The best way for a grocery store to forecast is to go on historical data (3).  As a food store is in business for a longer time, it can better assess what kinds of products people that shop there are likely to buy.  For instance, in a neighborhood that has a strong Asian community, traditional Chinese cooking ingredients will sell much more strongly than the ingredients would sell in a neighborhood that has a strong Indian heritage.  The store can adapt to the tastes of the surrounding community, analyze what quantities of what products will sell better, align their shelf space accordingly, and manage their subsequent inventory and orders based on sales.

Historical data can also come into play in seasonal forecasting.  Apple and pumpkin baked goods sell exponentially more in the months of September and October than any other time of year.  In being able to forecast customer demands, grocery stores are able to keep the right amount of stock for varying demands throughout the course of the year.

By accurately forecasting customer demand, grocery stores will be able to allot the appropriate shelf space to certain products.  They will save money on not throwing out expired products, be able to order the right amount of products from farmers, distributors, and manufacturers, and save money on shipping and shelving costs.  A grocery store that can forecast customer demand will be able to save money on inventory, and ultimately become much more profitable.

Questions for further thinking:

What types of products are harder to forecast demand?
How do you keep up with a neighborhood's changing tastes?
How do you extend the shelf life of products that can go bad?
What's more costly: to not order enough of a product, or to order too much?


Works consulted:

1) http://www.manh.com/industries/retail/grocery

2) http://www.choicesmagazine.org/2005-4/supplychain/2005-4-14.htm

3) http://smallbusiness.chron.com/demand-forecasting-estimation-32783.html


Wednesday, October 8, 2014

It is not just a toy maker—3D Printer

It is not just a toy maker—3D Printer

Post for Week 7Yvonne Zhang

The video “Make Your Own Products: 3D Printing Reaches Consumers” shows the fascinate implementation of 3D printers to build models and toys. One model, which traditionally needs to be built for days, will only take hours by 3D printing technology. However, the usage of 3D printing technology is not only limited to build toys. Being developed in 1980s, the 3D printing technology just got people’s attention in recently years due to the lower cost and improvement of technology. There are several kinds of product can be built by 3D printers.

  • Body Parts. Ears, Kidneys, Blood Vessels, Skin Grafts and Bones can be printed by using high-density gel or powder. Hundreds and thousands people need to replace parts of their body each year. Traditional replacement of body parts are hard to successfully incorporate into the body. The new technology will build the body parts with human cells and avoid the rejection.
  • Food. NASA has founded $125,000 grant on 3D printers to make food for astronauts and started with pizza. Multiple materials will be put on the plant by sequence and heated when printing. The creator of this 3D food printer aims to solve the problem of increasing food shortages and cutting down waste.
  • Cars. GM has already used 3D printing technology to build and test the parts of the car. They even use this technology to scan broken parts of the car in the catastrophe and quickly build the parts to replace them. 3D printing can also be used to create all the parts they need and build an entire car. Urbee 2 is the first car which is built by 3D printing technology. It is relatively cheaper and more energy efficiency than traditional cars.
  • Guns. Firearms can also be built in 3D technology if you have a printer and download the model from the internet. Recently, a computer controlled 3D gun printer, which can build aluminum body of gun without regulation and serial numbers, were sold out in 36 hours. Each of them is worth $1,200. It has raised a new issue about gun control, because each one can build their own gun in home and without tracking from government. People worried that this this technology and machine would be misused by criminals.

It is obvious that 3D printing technology has found its position in the industrial sector, especially for manufacturing. It could significantly reduce the time to make product because there is no need to wait for weeks or months for modeling, which would shorten the supply chain and product life cycle. However, there is another question, how about the implementation of 3D printer in daily life? Do people really need it currently? Some people would say they can make their own materials and furniture in home. But if I can order the product from Amazon or IKEA by two-day delivery, why I need to purchase this expensive machine and make it myself? Maybe it is still a fiction for people to widely use 3D printers. The question left for producers is that how could they motive people and make them believe they really need it and want to use it?




References:
Carney, Dan 2013, 3D Printing Can Now Re-create an Entire Classic Car, Popular Mechanics, http://www.popularmechanics.com/cars/news/vintage-speed/3d-printing-can-now-re-create-an-entire-classic-car-15566080
Leckart, Steven 2013, 5 Body Parts Scientists Can 3-D Print, Popular Science, http://www.popsci.com/science/gallery/2013-07/5-body-parts-scientists-can-3-d-print/?image=0
Orsini, Lauren 2014, 10 Crazy Things 3D Printers Can Make Today, ReadWrite, http://readwrite.com/2014/02/14/3d-printing-printers-projects-applications-prints
Souppouris, Aaron 2013, NASA is funding a 3D food printer, and it'll start with pizza, The Verge, http://www.theverge.com/2013/5/21/4350948/nasa-funding-3d-food-printer-pizza

Tea Party 2014, $1,200 Machine for 3D-Printing Guns Sells Out, Tea Party, http://www.teaparty.org/1200-machine-3d-printing-guns-sells-59467/