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Interesting Quote

Interesting Quote.

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Interesting Quote

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  1. Interesting Quote • “With the storehouse of skills and knowledge contained in it millions of unemployed, and with the even more appalling underuse, misuse, and abuse of skills and knowledge in the army of employed people in all ranks of industries, the United States may be today the most underdeveloped nation in the world.” • W. Edwards Deming, Out of the Crisis, 1982

  2. Chapter 15 Just-In-Time and Lean Production

  3. What is JIT ? • Producing only what is needed, when it is needed • A philosophy • An integrated management system • JIT’s mandate: Eliminate all waste

  4. Basic Elements of JIT Flexible resources Cellular layouts Pull production system Kanban production control Small-lot production Quick setups Uniform production levels Quality at the source Total productive maintenance Supplier networks

  5. Toyota’s waste elimination in Operations 1. Overproduction 2. Waiting 3. Inessential handling 4. Non-value adding processing 5. Inventory in excess of immediate needs 6. Inessential motion 7. Correction necessitated by defects

  6. A Sample Kanban

  7. Kaizen • Continuous improvement • Requires total employment involvement • Essence of JIT is willingness of workers to • Spot quality problems • Halt production when necessary • Generate ideas for improvement • Analyze problems • Perform different functions

  8. Reverse Logistics: Important or Irritant? Estimated $100 billion industry in 2006

  9. “In an ideal world, reverse logistics would not exist.” Jim Whalen, “In Through the Out Door,” Warehousing Management, March 2001

  10. Reverse Logistics - What is it?The Army’s Definition The return of serviceable supplies that are surplus to the needs of the unit or are unserviceable and in need of rebuild or remanufacturing to return the item to a serviceable status

  11. Reverse Logistics - What is it?The Commercial Perspective • Reverse Logistics is the process of moving products from their typical final destination to another point, for the purpose of capturing value otherwise unavailable, or for the proper disposal of the products.

  12. Typical Reverse Logistics Activities • Processing returned merchandise - damaged, seasonal, restock, salvage, recall, or excess inventory • Recycling packaging materials/containers • Reconditioning, refurbishing, remanufacturing • Disposition of obsolete stuff • Hazmat recovery

  13. Why Reverse Logistics? • Competitive advantage • Customer service - Very Important: 57% - Important: 18% - Somewhat/unimportant:23% • Bottom line profits

  14. Reverse Logistics - New Problem? • Sherman • Montgomery Ward’s - 1894 • Recycling/remanufacturing in 1940s • World War II - 77,000,000 square feet of storage across Europe with over $6.3 billion in excess stuff • Salvage and reuse of clothing and shoes in the Pacific Theater World War II

  15. Key Dates in Reverse Logistics • World War II – the advent of refurbished automobile parts due to shortages • 1984 - Tylenol Scare - Johnson and Johnson • 1991 - German ordinance that put teeth in environmental reverse pipeline • Summer 1996 – UK Packaging and Packaging Waste Legislation • 1998 - first real study of reverse logistics in the US - University of Nevada, Reno • 2001 – EU goal of 50-65% recovering or recycling of packaging waste

  16. Reverse Logistics A US Army Perspective

  17. Operation Iraqi Freedom The US Army moved the equivalent of 150 Wal-Mart Supercenters to Kuwait in a matter of a few months

  18. Military Operations and Excess “In battle, troops get temperamental and ask for things which they really do not need. However, where humanly possible, their requests, no matter how unreasonable, should be answered.” George S. Patton, Jr.

  19. Jane’s Defence Weekly “Recent report (Aug 2003): There is a 40 hectare (~100 acres) area in Kuwait with items waiting to be retrograded back to the US.”

  20. Does this create a problem? From GAO Audit Report

  21. From GAO Audit Report

  22. Reverse Logistics The Commercial Perspective

  23. Reverse Logistics • Rate of returns? • Cost to process a return? • Time to get the item back on the shelf if resaleable?

  24. Costs - above the cost of the item • Merchandise credits to the customers. • The transportation costs of moving the items from the retail stores to the central returns distribution center. • The repackaging of the serviceable items for resale. • The cost of warehousing the items awaiting disposition. • The cost of disposing of items that are unserviceable, damaged, or obsolete.

  25. Costs • Process inbound shipment at a major distribution center = 1.1 days • Process inbound return shipment = 8.5 days • Cost of lost sales • Wal-Mart: Christmas 2003 - returns = 4 Days of Supply for all of Wal-Mart = 2000 Containers • PalmOne - 25% return rate on PDAs

  26. More Costs • Hoover - $40 Million per year • Cost of processing $85 per item • Unnamed Distribution Company - $700K items on reverse auction • 2001 - over $60 billion in returns; $52 billion excess to systems; $40 billion to process

  27. Is it a problem? • Estimate of 2004 holiday returns: $13.2 billion • % of estimated 2004/2005 holiday returns: 25% • Wal-Mart: $6 Billion in annual returns = 17,000 truck loads (>46 trucks a day) • Electronics: $10 Billion annually in returns • Personal Computers: $1.5 Billion annually = approximately $95 per PC sold • 79% of returned PCs have no defects • Home Depot ~ $10 million in returns in the stores alone • Local Wal-Mart ~ $1 million a month in returns

  28. Is it a Problem? • European influence – spread to US - Green Laws • Estee Lauder - $60 million a year into land fills • FORTUNE 500 Company - $200 million over their $300 million budget for returns • Same Provider - 40,000 products returned per month; 55% no faults noted • K-Mart - $980 million in returns 1999 • Warranty vice paid repairs

  29. More consequences • Increased Customer Wait Times • Loss of Confidence in the Supply System • Multiple orders for the same items • Excess supplies in the forward pipeline • Increase in “stuff” in the reverse pipeline • Constipated supply chain

  30. Impact? • Every resaleable item that is in the reverse supply chain results in a potential stock out or “zero balance” at the next level of supply. • Creates a “stockout” do-loop

  31. Results? • This potential for a stock out results in additional parts on the shelves at each location to prevent a stock out from occurring. • More stocks = “larger logistics footprint” = the need for larger distribution centers and returns centers.

  32. Six Symptoms (Continued) 5. The total cost of the returns process is unknown. 6. Customers lose confidence in the repair activities.

  33. Reverse Logistics • According to the Reverse Logistics Executive Council, the percent increase in costs for processing a return, as compared to a forward sale, is an astounding 200-300%. • “In the U.S. alone, the cost is an annual $100 billion.” Forbes, March 2005 • Typically, as many as 8-12 more steps per item in the reverse pipeline than items in the forward pipeline

  34. “The truth is, for one reason or another, materials do come back and it is up to those involved in the warehouse to effectively recover as much of the cost for these items as possible.” - Whalen, “In Through the Out Door”

  35. RFID and Returns • Visibility Tracking • Component tracking • Data Warehouse on what, why, when • Altered products • Not for every product

  36. Impacts of Reverse Logistics • Forecasting • Carrying costs • Processing costs • Warehousing • Distribution • Transportation • Personnel • Marketing

  37. Chapter 4 Quality Management Quality is a measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use

  38. Out of the Crisis • “Failure of management to plan for the future and to foresee problems has brought about waste of manpower, of materials, and of machine-time, all of which raise the manufacturer’s cost and price that the purchaser must pay.

  39. More Deming • The consumer is not always willing to subsidize this waste. The inevitable result is loss of market. Loss of market begets unemployment. Performance of management should be measured by potential to stay in business, to protect investment, to ensure future dividends and jobs through improvement of product and service for the future, not by the quarterly dividend….

  40. Deming’s solution • The basic cause of sickness in American industry and resulting unemployment is failure to top management to manage. He that sells not can buy not.” • The job of management is inseparable from the welfare of the company.

  41. What Is Quality? • “The degree of excellence of a thing” (Webster’s Dictionary) • “The totality of features and characteristics that satisfy needs” (ASQ) • Fitness for use • Quality of design

  42. Quality • Quality Management – not owned by any functional area – cross functional • Measure of goodness that is inherent to a product or service

  43. FedEx and Quality • Digitally Assisted Dispatch System – communicate with 30K couriers • 1-10-100 rule  1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix  10 – if caught later in different department or location = as much as 10X cost  100 – if mistake is caught by the customer = as much as 100X to fix

  44. Product Quality Dimensions • Product Based – found in the product attributes • User Based – if customer satisfied • Manufacturing Based – conform to specs • Value Based – perceived as providing good value for the price

  45. Dimensions of Quality (Garvin) • Performance • Basic operating characteristics • Features • “Extra” items added to basic features • Reliability • Probability product will operate over time

  46. Dimensions of Quality (Garvin) • Conformance • Meeting pre-established standards • Durability • Life span before replacement • Serviceability • Ease of getting repairs, speed & competence of repairs

  47. Dimensions of Quality (Garvin) • Aesthetics • Look, feel, sound, smell or taste • Safety • Freedom from injury or harm • Other perceptions • Subjective perceptions based on brand name, advertising, etc

  48. Service Quality • Time & Timeliness • Customer waiting time, completed on time • Completeness • Customer gets all they asked for • Courtesy • Treatment by employees

  49. Service Quality • Consistency • Same level of service for all customers • Accessibility & Convenience • Ease of obtaining service • Accuracy • Performed right every time • Responsiveness • Reactions to unusual situations

  50. Quality of Conformance • Ensuring product or service produced according to design • Depends on • Design of production process • Performance of machinery • Materials • Training

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