domingo, 13 de abril de 2014

Push VS Pull flow

Terms like “Retail supply chain”, “Automotive supply chain” or “FMCG supply chain” have become widely popular, but there is not such a thing as a “specific” supply chain, there are basically two categories, and almost all supply chain processes fall into one of these two categories. All of the above industries fall under Pull or Push supply chain. In fairness, a hybrid new model called “Push-Pull” is being accepted as a third valid model but understanding the pull and the push models separately will make very intuitive the Push-Pull model.

What is Pull Supply Chain?

Under pull supply chain, products are manufactured based on specific customer requests, in fact, companies only make enough product to fulfill customer's orders. We also know it as “Make to Order” model (click here to learn more). We often see this model operating in High Tech Industries, where customization is the competitive advantage. Briefly, we have seen this model in automotive industry and it is being used in high end luxury market segment. The objective of this model is to minimize the Inventory and optimize supply. One advantage of the Pull system is that there will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods. However, one major disadvantage is that it is highly possible to run out of product and not being able to supply the merchandise on time, leaving the company unable to fulfill the order which contributes to customer dissatisfaction.

What is Push Supply Chain?

Under Push model, products are manufactured based on anticipated customer orders. Companies must predict which products customers will purchase and determine what quantity of goods will be purchased. This model is also known as Make to Sock. The core assumption of push programs is that demand can be anticipated and that it is more efficient and reliable to mobilize resources in pre-specified ways to serve this demand. Some disadvantages of the Push model could include high inventory costs and huge warehousing and distribution costs, plus the fact that forecast are often inaccurate and sales can be unpredictable. An advantage of the push system is that the company is fairly assured it will have enough product on hand to fulfill customer’s orders.

Retailers heavily use push model but for some time now the big names in the retail industry are trying to adopt the hybrid Push-Pull model which is a combination of pull and push models.

The Push-Pull System

Some companies have come up with a strategy they call the push-pull control system, which combines the best of both the push and pull strategies. Push-pull is also known as lean inventory strategy. The goal is the reduction of product shortages which can cause customers to go elsewhere to make their purchases.

jueves, 27 de marzo de 2014

The supply chain that really matters; Healthcare

From birth to death, we are all part of the healthcare system; we rely on hospitals, doctors, nurses etc to provide preventive care and to treat our illnesses. Healthcare is perhaps one of the most important indicators of quality of life and longevity in a society.

However healthcare consumes an increasing percentage of our economic product. This rising cost can be attributed in part to the increase of life expectancy and to the expense of new treatments, but also it can be attributed to inefficiencies in healthcare delivery.

Patient flow represents one of the most challenging aspects of the healthcare system. When the system works well, patients flow at a steady path, moving efficiently through the stages of care, and every stage is completed with minimal delay, however,  when the system is broken, patients accumulate meaning the patients suffer considerable queuing delays.

Healthcare has unique features that make queueing problems particularly difficult to solve:

-  Queues create additional work for clinicians. Patients must be monitored and served while waiting, and their conditions can deteriorate, necessitating additional work once they get to be treated. Thus, as queues become large, the workload increases and the capacity to serve patients deteriorate.

- It can be difficult to distinguish productive waiting from unproductive waiting. In a traditional queueing system the most desirable outcome is instantaneous service, however, in a hospital, it is undesirable to reduce the length of stay to zero, as patients need to be monitored and cared during recovery periods. This can result in conflicting objectives in managing hospital beds when trying to separate productive waiting (recovery) from unproductive waiting (waiting for tests).

At hospitals, care is provided through many specialized departments, therefore when a patient arrives at the emergency department encounters repeated waits as he or she progresses from stage to stage, waiting for rooms, equipment, physicians, nurses, technicians, beds, records, gurneys and so forth. When the system becomes overloaded, the patient may wait hours or even days from being seen in the emergency department until being given the ok.

We can summarize the three major causes of queues in hospitals:

- Idle capacity due to a failure to synchronize resources (ensuring that technicians, nurses, physicians, patients, etc are present at the same time).

- Inadequate communication to ensure the relevant departments are prepared to receive patients from other areas.

- Inefficient processes that require more work than necessary or un-needed repetition of work.

Some reasons that will lead to patients waiting for placement in a hospital are can be other patients waiting too long to complete the discharge process, beds remaining idle too long from when a patient departs until the bed is prepared for the next patient, poor communication between the emergency department and the ward, a shortage of technicians, or even because there is an inadequate number of gurneys to transport patients etc.

Working on improving patient flow at hospitals will not only save money but also will save lives.

sábado, 22 de marzo de 2014

Supply chain.......local supply chain!

Have you ever wondered how much of the money you pay for the bunch of bananas you just purchased at the supermarket is due to supply chain costs? Do you know where the food you eat come from? Are you aware of the plights small farmers and producers face to compete against the giant food corporations? These are some of the questions that Pete Russell dissect during his speech. 

Worth watching, to understand how local food businesses can actually work, and what´s even more important can be fair to every single link of the supply chain.


martes, 25 de febrero de 2014


No words needed, just watch it and agree with me on this; DHL did it in style!



sábado, 8 de febrero de 2014

Retail innovation

Moving away from the usual supply chain and logistics posts, today we will focus in what is supposed to be the final link on the supply chain, the outlet, and we will discover how cutting edge technology is being applied to make our shopping experience as pleasant, comfortable and convenient as possible....don´t you believe me? whatch out these two videos featuring the newest and most advanced applications that we shortly will be enjoying at our super markets!

In the first video, Mike McNamara, CIO at Tesco, explains how Tesco supermarkets are innovation by appliying new devices and technology to ensure we make the most of our grocery shopping. Not long before we see all these new gadgets at their stores.

In the second video, we zero in the new developed scanning devices that will help us to get rid of the check out hassle at the same time that make shopping a more pleasant experience.

These two videos are a glimpse of what to expect from the future, what else will we see any given day at the supermarket? Time will tell....

jueves, 2 de enero de 2014

Inventory methods

Inventory; What a topic to start this year 2014, but, for so many companies the last section of the year and the beginning of the new campaign is devoted to this tedious but essential task.

Inventory is a necessary evil in any organization, therefore we couldn´t let the year end without dedicating a post to thistask.

Every unit of inventory has an economic value and is considered an asset of the organization irrespective of where the inventory is located or in which form it is available. Primary focus should be placed in maintaining optimum levels avoiding lower lever but also the excess of wares.

After this brief introduction let’s skip the preambles and focus on the main objective of this post, to shed some light over the several existing inventory classification methods.

           ABC classification

In most of the organizations inventory is categorized according to ABC Classification Method, which is based on Pareto principle.

The ABC method provides a mechanism for identifying which items have the biggest impact on the overall inventory cost, implying this merchandise should be categorized and hence managed and controlled in a different way.

The ABC method group the merchandise in three different categories:

A – Items are very import for the organization due to their high value. This items requires tight control and frequent value analysis.

B – Items are important but less important that items A. These items should be controlled but not comprehensive control is needed.

C – Items are marginally important.
Based on the experience and the data collected in most cases the conclusion reached is that 20% of the inventory accounts for 80% of the annual activity. Following this reasoning the

Items A – Approx. 20% of the Items account for 80% of the consumption value
Items B – Approx. 30% of the Items account for 15% of the consumption value
Items C – Approx. 50% of the Items account for 5% of the consumption value

Whereas there are no fixed percentages, and they may vary depending on the company´s discretion, these are the most commonly applied.

XYZ classification

XYZ inventory system is very similar to the ABC but they differ in an essential point, whereas ABC method structures the wares in terms of value and quantity, the XYZ method is more used in relation with the consumer demand for finished goods.

Items X - Are highly demanded goods

Items Y - Medium demanded products

Items Z - Products with very low demand.

The company will again have to decide the number of items included in the clusters but the percentages used in the ABC method can be successfully applied in the XYZ method. 

HML classification

Again HML method is similar to the ABC and the XYZ analysis except that the items under this method are classified based on their unit prices. The goods are categorized in three groups:

Items H – High price items

Items M – Medium price items

Items L – Low price items
VED classification

While in ABC classification inventories are classified on the basis of their consumption value and in HML analysis the unit price is the basis, criticality of inventories is the basis for VED analysis.

Items Vital - Items critically needed. Production will come to halt unless they are available at all times.

Items Essential – Itemswith lower criticality but whose stock out is very high.

Items Desirable – Items with the lowest criticality which won´t cause immediate loss of production.

Overall, the VED analysis is used to determine the criticality of an item and its effect on production and other services.

                SDE classification

SDE inventory method is based on the purchasing availability of the items.

Items S – Scarce material; material that is hardly available or requires longer lead time, generally imported items.

Items D – Difficult items; goods that are difficult in sourcing, either because they have to come from distant places or because the unreliability of the supplier.

Items E – Easy material; material easily available.

Commonly, it´s the purchasing department which classifies the materials based on level of difficulty in sourcing.

FSN classification

This method classifies items on the basis of their movement from Inventory. Here the items are classified as:

Fast – Items that are frequently used

Slow – Items that are used less for certain period of time

Nonmoving – Items that are not used for more than certain duration

The higher the average-stay of an item in the warehouse, the slower is its movement from inventory.

This method helps to establish a proper warehouse layout by locating all the fast moving items near the picking area.
SOS classification

This inventory method has been conceived based on the nature of the items and period of their availability. It classifies all the items into two categories

Items S – Seasonal materials. Can be further classified into two groups:

-          Seasonal items available only for a short period of time during the year, (tropical fruits for example) the purchasing department will have to plan the requirements in advance.

-          Materials that are seasonal but are available throughout the year (grains for example). Despite this products are seasonal, they don´t behave as the common seasonal goods.

Items OF – Off seasonal materials, are available throughout the year without any significant price variation.

GOLF classification

This method classifies the items based on the nature of the purveyors. 

Items G – Government controlled supplies
Items O – Open market supplier
Items L – Local supplier
Items F – Foreign market supplies.

As we have seen, there are several methods used to control inventory and each method highlight a different aspect. The right method should be selected depending on the nature of the items and the purpose of the business.