A Letter to the IE: More than Ever, We Need to Lead the World to Productivity

:

Dear Industrial Engineer*          

The year 2020 ended without a happy ending.  The SARS-CoV-2 virus had not gone away.  It continues to be a global threat going into 2021. 

Political and enterprise leaders have done all they can to defeat the virus. 

There was hope. 

Thanks to record-breaking world-class collaboration efforts, vaccines have become realities and are on their way to inoculate millions.  We are grateful to the scientists, engineers, health-care professionals, executives, and numerous support personnel who have done so much and continue to do so.

But there was frustration. 

The pandemic, however, had spread to every continent, including remote Antarctica.  It continues to infect and force governments to restrict movement and distance.

We have become more lonesome and insecure.  Some of us had pushed back but to no avail.  The virus retaliates without discrimination.  More had gone sick.  More tragically had passed away. 

Throughout the war against CoVID-19, we industrial engineers have been conspicuously left out.  We don’t really know if it’s because leaders are ignorant of what we can offer or if it’s because many executives think they have enough expertise.   Whatever the reason, we could have done more. 

Most of us industrial engineers are hard at work in different careers and jobs around the world.  Many of us have made big differences to the enterprises and organisations where we are employed or engaged. 

But for whatever we have done, whatever we continue to do, it hasn’t been enough. 

Long before the pandemic, productivity growth has been on a decline.  The gap in productivity year-to-year between advanced economies and developing nations has widened.  Disruptions ranging from natural disasters to socio-political upheavals had taken a toll on enterprises.  Growth has been curtailed.  Many enterprises, notably small businesses, have lost ground in competitiveness. 

The 2020 pandemic hit global productivity when it was already down.  It’s the culmination of its decline.  And we have felt the impact like a hammer driving down on the nail. 

We need to do better.  We need to make our world more productive.

Productivity is a misunderstood measure.  Unlike financials like profit, sales, costs, and cash-flow, it is not easy to describe productivity in one metric.  Economists try to do that by defining productivity as the output of a person; but doing so makes it incomplete and inaccurate. 

Productivity is delivery versus consumption; how much one delivers correctly to customers against how much resources and time are consumed in doing so.  Productivity requires direction.  What are we delivering, how many or how much, how close to what customers want, and when?  What are we going to use to make and deliver, how long it should take, how it will be conveyed, and with how much support?   It’s not efficiency which measures how fast we’re going; it’s more like velocity which measures how much nearer we are to our objectives given the resources we spent.

Productivity drives value.  It connects to the priorities of the enterprise.  It’s what gives us industrial engineers purpose because we’re in the best position to understand it and improve on it.  Productivity is our watchword. 

In an age where supply chains and operations are in the midst of crisis,

we find ourselves in an unprecedented position to make a significant difference. 

I don’t suggest a political campaign or a public relations drive.  We just need to demonstrate.  We don’t need to debate our proficiencies; we have the skills.  We know what we have and what we can contribute

How we can show what we got can be summarised in four approaches:

First, Point Out Problems and Volunteer to Fix Them

We shouldn’t wait to be assigned.  We should point about problems, make visible opportunities, and offer ideas and solutions.  In short, we should be proactive, i.e., act on our own without waiting for someone to tell us about problems.  We know more than a lot of people when there’s a problem. 

Second, Drive the PDCA Cycle

We should drive the Plan-Do-Check-Act (PDCA) cycle, the basic process of carrying out solutions.  What many people don’t realise is that it’s a cycle, not a model for a one-time project.  We don’t stop after implementing a solution; we seek opportunity for something even better.  It’s why we also call it continuous improvement.  PDCA is a wheel that we keep spinning to keep productivity moving and growing. 

Third, Stand Up and Be Heard on Strategy

Keeping the PDCA cycle spinning requires leadership.  We are those leaders.  Our superiors are our audience.  Feedback, justification, and assertion are therefore essential.  We should have a say on strategy because productivity depends on direction.  It doesn’t just ensure the PDCA cycle keeps spinning but  that we spin the right cycles; we address the problems that are most important. 

Fourth, Promote Productivity

As industrial engineers, we promote productivity.  No one else will.  Not the economists, not the post-graduate business administration executive, not other engineers.   It’s us because our education and experience have us focused on productivity more than anyone else. 

Productivity has become a forgotten term in the decade of 2010 to 2020.  Its growth has fallen by the wayside.  It is on us to remind everyone about it, show how important it is to the viabilities of enterprises and competitiveness of organisations, and reveal its potential in the fight against disruptions, especially versus seemingly insurmountable ones like the pandemic. 

The anchor of our IE vocation is productivity.  It’s our unwavering principle we base our accomplishments on.  It is the flag we wave amid disruptions and difficulties. 

Let’s get going. 

About Overtimers Anonymous

*I had suggested we change our titles to supply chain engineers.  😊

Acknowledgment:

Alistair Dieppe. 2020. Global Productivity: Trends, Drivers,
and Policies. Advance Edition. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO.

Logistics Solutions Can Be Simple

A medium sized retailer of health food items imports products from abroad.  The retailer prides itself with a very well organised warehouse and a crew of workers that swiftly repack the imported products and send them to the retailer’s stores all over the country. 

The retailer’s sales department, however, has constantly complained about lack of enough fast-moving products to stock store shelves.  They frequently request for more items which the retailer’s purchasing department promptly orders.  Yet, the sales people still complain.  Why are store shelves empty despite the inbound volume of imports?

A consulting team the retailer engaged found that the retailer’s warehouse was indeed quickly repacking and delivering needed fast-moving imported items to stores.  Once they arrive at the stores, the fast-moving products were sold within days. 

But the warehouse inventories showed almost no stock available of the fast-moving items at the beginning of every work week.  How can this be since imports via container vans were arriving every week?  The stocks have been arriving but the warehouse says they are not on inventory.  Where were the items? 

It turned out that when container vans of imports arrived, it would take as long as ten (10) days to completely unload, put away, and enter items into the warehouse inventory records.  Every container van would have a mix of as many as a hundred products totalling to as much as a thousand cases or packages.  Some items like paper products were bulky, some like food supplements were tiny.  The warehouse’s personnel would unload products from the container van into pallets, but it would take several days to sort the items, inspect them, and scan them into inventory.

Hence, even as the imported items had arrived, they were still “in-transit” on the retailer’s inventory system.  The warehouse didn’t repack and deliver products until they were entered into the system. 

To complicate things further, sales people would ask the warehouse to put priority in receiving items that were running low on stock at stores.  That resulted in warehouse staff in receiving some items from inbound container vans and putting others in a holding area, in which these latter items would sometimes sit there for as long as one (1) month before anyone sorts and scans them.  This resulted in a vicious cycle where products were alternating in out-of-stock as warehouse staff switched priorities in receiving one item to another. 

The solution to the problem was simple.  Management just had to re-enforce the retailer’s policy of unloading every container van completely before receiving another one.  Management also had to shorten the time to receive inbound imports.  More than a week was too long.  It turned out that the employees assigned to receive inbound container vans sometimes were pulled to do other jobs in the warehouse.  Management only had to put a stop to that and have the assigned employees work full-time in receiving the vans. 

The consulting team also suggested the management review the retailer’s purchasing and inventory policies.  It wasn’t that the purchasing department was buying enough; it was that they weren’t buying frequently enough. 

The purchasing management preferred to buy items in bulk to take advantage of pricing discounts.  They would order only once a month or even less so.  As inventories ran down, the next scheduled arrival of vans would sometimes be weeks away.  Planners and purchasers ended up rushing the dispatch of container vans which sometimes delayed the delivery of other items and again brought on a vicious merry-go-round of items running out of stock. 

Purchasing just needed to balance buying in bulk and scheduling shipments to arrive more frequently, such as weekly versus monthly.  Purchasers could negotiate contracts with vendors to commit to buy in bulk at competitive prices but ask that deliveries arrive in smaller quantities more frequently. 

Logistics is about ensuring a smooth supply of materials and products from one point of the supply chain to the next.  It’s about planning, buying, and transporting enough.  Not too much to cause pile-ups of stock that tie up space and cash.  And not too few that risk run-outs that interrupt production and compromise services.

Logistics is broad.  It covers what comes in, what comes out, where it goes, and where it leads to.  One may say it covers all the things that sales, marketing, and manufacturing do not. 

Logistics is not the supply chain.  It’s a big part of it but not the whole of it.  Logistics is the life-blood that courses through the supply chain but it isn’t the supply chain.  It works with counterparts such as planning, procurement, and production to make sure merchandise moves through suppliers and manufacturers to meet the demands of customers. 

Improving logistics is about improving the flow between points in the supply chain.  That means minimising bottlenecks and focusing resources to move things where they are slowest.  It means making sure stuff are put away and at least cost and risk of damage, at the same time making sure they don’t over-stay in one place.  Scrap and out-of-stock are what logistics practitioners avoid as much as they could.  For when there is scrap or out-of-stock, it’s a failing mark for logistics. 

As the case of the health food retailer illustrated, logistics solutions usually come back to basics.   Inbound receipts were moving too slow and caused stocks to run out at stores.  What was needed was re-enforcing policy and focusing on finishing every job of unloading the container van and putting away the items.  With items flowing with fewer delays, the warehouse would be able to repack and deliver to stores the items they sorely needed week to week. 

Logistics can look complicated but the solutions can often be simple. 

About Overtimers Anonymous

Six (6) Principles to Successful Flexibility

Flexible manufacturing was popular in the 1990’s.  Twenty years into the 21st century, we don’t hear much about it anymore.  Instead, we hear a lot more about digital and connectivity.  Amid a raging pandemic, people also talk about resilience.

Whatever the buzzword, what matters in the end is how well enterprises deliver versus customer demand.  It’s nice to have a robot that does twice the job of an ordinary person, but it’s another thing when an enterprise didn’t make available items when the customer needed them, which happens more often than not. 

Flexibility is the capability to change quickly and adapt to fickle demand.  It is the ability to switch from one product to another or the means to swiftly tweak a service to meet a customer’s unique needs.    

Flexibility does not happen by itself.  It’s the result of a strategy or a policy.  An enterprise becomes flexible because it decides to do so.

Flexibility is not agility and it isn’t responsiveness, although all three work well together.   Versatility is the combination of flexibility, agility, and responsiveness and is an ideal an enterprise wouldn’t mind having.  But we’re getting ahead of ourselves. 

Flexible systems are applied popularly in manufacturing.  They come in different forms.  The following are some examples:

  • Cells.  Groups of machines run by one to three operators.  For instance, a machine shop that has several groups in which each consists of a lathe, drill, and milling machine run by a single operator.  Each group does its own product from start to finish. 
  • Parallel Lines. Several identical production lines in which each makes a variant of an item.  For instance, three to four soap lines in which each produces a different colour of soap. 
  • Fast Change-Overs.  A production line in which operators can quickly change from one item to another.  For instance, a steel pipe manufacturer which is equipped with jigs and fixtures that are easily adjustable that allows operators to change from one diameter of pipe to another within minutes;
  • Common Core. A product line that has a common base or module to build varieties of items on to.  For instance, an auto assembly line that uses the same chassis for different models of cars and vans;
  • Modular Manufacturing. Using pre-assembled or pre-fabricated modules and assembling them into varieties of products.  For instance, suppliers to an aircraft manufacturer deliver pre-assembled portions such as the fuselage and wing such that the aircraft manufacturer can not only quickly put together an airplane but also mingle the parts differently to produce a different variant (such as a longer fuselage for one aircraft and a shorter one for another). 

Successfully implementing flexibility relies on a few principles:

Think Small

The larger the manufacturing group, the more complicated and rigid the operation.  The smaller the group, the more flexible it becomes.  Having multiple small groups such as cells allows more leeway to customise items of different specifications, at smaller lot quantities, and in shorter time.    

Balance Integration with Autonomy

Integration means connection toward a common goal of delivering value for the finished product or service. It is not centralisation. An enterprise would do well to give individual managers some freedom and authority to design their operations without sacrificing coordination with others. 

Innovate to Invest

Enterprises sometimes have it the other way around.  They invest to innovate.  They pour resources to consultants and outsiders to design the flexibilities.  The enterprise’s stakeholders are supposed to be the experts, so shouldn’t the innovation come from within and not without?  Wouldn’t it better to first tap home-grown expertise and then invest in the innovations that are brought forth?

Cultivate Talent, Not Acquire It

Likewise, with talent.  Enterprises sometimes try to hire the best talent outright.  But those in the organisation know its workings better than anyone else.  We don’t have to limit an operator to one machine; we can train her with another and reward her for the skills she gained on top of the performance she will contribute.  The enterprise reaps productivity as a result.    

Use Multiple Measures

Flexibility has that quirk that it’s not measurable by one metric.  We can measure capacity and service because they are singular.  Flexibility is multi-dimensional.  It requires several metrics and analytics to see. 

Everyone is a Member of the Team

We hear it again and again.  Top management support.  Commitment by everyone.  At the same time, we form task forces that include only a few and leave out the others.  When it comes to flexibility, that one cell, production line, or module does not perform alone.  It needs coordination and synchronisation as much as it needs the space and design to work freely within itself.  The operators in a group are a team, yes, but the group is part of a larger team that puts the groups together toward one goal.  It may have been difficult then, but modern day technology has allowed everyone to stay in touch and be a member of the overall enterprise team. 

Flexibility may be a bygone buzzword.  But it still is very much applicable for enterprises seeking to stay in business amid the challenges and disruptions of the present-day.  They are ways to be flexible, such as via cells, parallel lines, fast change-overs, common cores, and modular manufacturing.   Following some principles, enterprises can progress in productivity and remain on top of the heap.

About Overtimers Anonymous

Six Elements to Find in a Digital Roadmap

A large producer of canned fruit items installed a brand-new radio-frequency identification (RFID) system at its manufacturing facility.  The RFID system aimed to streamline the producer’s inventory management system. 

The canned fruit producer’s workers stuck RFID tags on every case of canned fruit and on the pallets where the cases were stacked.  As forklift operators picked up the pallets and brought them to the warehouse, RFID scanners tagged each pallet and automatically added the cases into the finished goods inventory.  When a warehouse worker picked a case of canned fruit to be staged for shipment, an RFID scanner at the door tagged it and immediately deducted it from inventory. 

The point of the RFID system was to update inventories accurately and in real time.  It would improve inventory record accuracy and information timeliness compared to the traditional system in which workers entered data manually via pen and paper and accountants computed the inventories which took time to do.

The accountants of the canned fruit producer, however, distrusted the RFID system and insisted the workers continue doing the manual system.  Hence, even as the RFID system tagged incoming and outgoing pallets and cases, the workers continued to fill out forms to record what they produced and what cases they brought in and out of the warehouse.  The RFID system ended up not delivering any tangible benefits and gradually, it became useless. 

The canned fruit producer’s executives liked RFID technology for its features but didn’t take into account the complexity of building it into its business.  The executives thought that installation of an RFID system was easy.  They didn’t realise that putting in RFID was more than just buying tags and installing transmitters, receivers, and additional computer hardware.  It required adoption of a system that involved acceptance not just by production and logistics but also by accounting and other functions as well. 

RFID is a digital technology, one of many hyped by The Fourth Industrial Revolution, also known as Industry 4.0.  Unlike a new computer system or a new machine, digital technology taps data for visibility and productivity improvement.  It’s what McKinsey cites as “creating value in the processes that execute a vision of customer experiences.”

Building in digital technology like an RFID system applies principles from project management but at a much wider scale.  It’s not as simple as constructing a new warehouse or installing a new machine.  It requires fitting in with functions that will be affected. 

It’s like a human organ transplant.  One cannot just outright replace a heart, liver, or kidney with another.  A transplant entails a multitude of diagnostic tests, procedures, and regimens pre- and post-transplant to ensure success. 

The canned fruit producer brought in an RFID system that was liked by supply chain managers but was rejected by accountants.  Like a failed organ transplant, the enterprise’s “body”, its organisation, did not accept the RFID system.    

Bringing in digital technology requires what one would call a Digital Roadmap, a plan that considers the unique characteristics of new technologies. 

A Digital Roadmap emphasises the following elements:

  • Terms of Reference (TOR)

TOR is a narrative of what an enterprise’s organisation envisions a new technology will contribute.  It isn’t a scope of work or detailed specifications.  Rather, it’s a set of features, functions, and criteria that the organisation wants.  A TOR is the foundation for decision-making when it comes to choosing from technological options. 

  • Dedicated Team of Qualified Individuals

There should be a team of dedicated individuals to plan, decide, and carry out any new technology.  The team should not only have skilled members but also members who are recognised as authorities in their fields.  Note that members need not be employees of the enterprise; they can be contractors, consultants, or just plain advisors.  It’s important that each member has the devotion and expertise to participate. 

  • Consensus

Consensus is a necessity for the organisation to be enrolled into the introduction of new digital technology.  Consensus will likely be tough to attain because digital technologies are new and will entail significant changes in the workplace.  Debates and disagreements are inevitable.  Executives will be expected to lead and enrol everyone to adopt and accept new roles and responsibilities.   The Digital Roadmap cannot progress without consensus and commitment. 

  • Useful Content

The Digital Roadmap should define the needed content from any new digital technology.  Content is the information gleaned from data and software that would be useful to apply for productivity improvement.  With an RFID system, for instance, the data gathered from scanned tags provide the content for real-time inventory visibility which leads to the opportunity to turn over inventories faster. 

  • A Cash-Flow Schedule

New digital technologies often need much investment in capital.  Other than time and human resources, the enterprise will be spending money to pay for software, hardware, and the expenses that come with implementation, including education for everyone in the organisation.  The Digital Roadmap should therefore include a schedule of cash outlays that tells how much and when budgets will be needed and spent.

  • Competitive Timeline

A Digital Roadmap shouldn’t have too long a timeline lest newer technologies render obsolete the digital technology the roadmap was aiming to achieve.  Digital technologies don’t have long life cycles.  What seems state-of-the-art today may be obsolete tomorrow.  Artificial intelligence (AI), for example, has grown in popularity versus RFID systems.  A Digital Roadmap should therefore be swift in rolling out a new digital technology that will ensure its applicability and competitive edge. 

Digital technologies marry data and operations for productivity improvement and have become popular thanks to Industry 4.0.  Yet, enterprises hesitate to delve into digital technologies and when they do, often encounter difficulties. 

A Digital Roadmap resolves this by providing a pathway that stresses a TOR, formation of a dedicated team, encourages consensus, clarifying useful content, a cash-flow schedule, and a competitive timeline. 

New technologies are always exciting but just like anything new, it requires acceptance by all. 

Ten (10) Examples Towards Building Better Supply Chains

For years, experts have cited the urgent need for supply chains to adapt and get better.  In 2005, Paul Michelman via the Harvard Business Review wrote:

“Threats to your supply chain, and therefore to your company, abound—natural disasters, accidents, and intentional disruptions—their likelihood and consequences heightened by long, global supply chains, ever-shrinking product lifecycles, and volatile and unpredictable markets.”

Fifteen (15) years later, amid a pandemic that has wreaked economic havoc, executives are hearing the need even louder.  Supply chains must become resilient and robust in a new normal of constant disruption.  Supply chains must change

Experts have urged enterprises to map their supply chains, identify risks, review their networks, and innovate via technologies such as robotics and automation.  But what does an enterprise do when it’s got the maps, identified the risks, and has the network review results? How does an enterprise innovate via technologies? 

We cannot just manage supply chains to make them better.  We need to build them. 

It’s like a house.  When we manage our houses, we do things like fix a leaky roof, replace lightbulbs, and unclog drain pipes.  But we can only do things ourselves up to a certain extent. 

When the job gets too big to handle, we seek experts.  Civil engineers help us replace the roofs and retrofit the foundations.  Electrical engineers help re-wire our electrical circuits. 

The analogy applies for supply chains as well.  We can manage supply chains only so much.  When we need to make significant improvements, when we can no longer just manage them, when we need to rebuild them, we’d seek engineering help.  The most qualified to do so are Industrial Engineers (IEs), or more specifically, Supply Chain Engineers (SCEs). 

How can SCEs help rebuild our supply chains? 

The following are examples:

  • Developing the Digital Supply Chain.   

With the advent of Industry 4.0, enterprises, more than ever, are investing in new technologies that marry data and process productivity.  SCE’s can help enterprises implement state-of-the-art technologies into their supply chains which will provide the means towards real-time operations visibility and automated process improvement. 

  • Setting Up Flexible Manufacturing Systems (FMS)

SCE’s can help integrate flexible manufacturing systems (FMS) into supply chains.  FMS is an alternative to traditional production systems in that it focuses on short-run small-lot-size manufacturing versus long continuous mass production.  SCE’s can build in flexible systems into supply chains via integration with logistics, production planning, and procurement. 

  • Improving Inbound & Outbound Logistics

Supply chain engineers can streamline the flow of goods coming into and out of storage facilities.  They can identify and ubblock bottlenecks, and recommend how manpower and facilities should be laid out such that merchandise can flow continuously and smoothly.  SCE’s can also study the economics of procurement and delivery practices that underlie their impacts on logistics flow. 

  • Simplifying Storage & Handling

Storage and handling are very high on the list of many supply chain managers’ preoccupations.  Enterprise executives don’t like them because they connote cost and they’re seen as not adding value.  But with the SCE’s help, enterprises can turn them into the assets they really are. 

  • Tuning Up Transportation’s Last-Mile Productivity

SCE’s can offer options that would boost the productivity of last-mile freight deliveries and services.  These include recommending changes in transportation structure, improving route planning & scheduling, and balancing loads maximisation with delivery turnarounds.

  • Perfecting Order Fulfilment

SCE’s can come up with order fulfilment systems that seamlessly connect anticipated customer demand with available-to-promise (ATP) inventories.  The goal is perfect orders: deliveries that meet 100% of customers’ service requirements 100% of the time.  

  • Factoring the Worker in the Workplace

Enterprises want efficiency but need to be mindful of the welfare of their workers.  Popularly known as ergonomics, SCE’s apply human factors engineering to improve labour productivity by adopting the workplace to the person, rather than adopting the person to the workplace. 

  • Re-Implementing Total Quality

It’s an old buzzword from a bygone era, but Total Quality still serves as an applicable approach to ensuring supply chains deliver what they’re supposed to.  SCE’s provide the in-depth tools and means to make sure processes work right the first time. 

  • Re-Defining Cost Engineering

To many enterprises, it’s a glorified clerical function that estimates job expenses and checks the billings from vendors and contractors.  But it’s more than that and SCE’s can show how cost engineering can not only tame the expenses but also provide competitive value for supply chains.

  • Pruning the Value Stream

Value-Stream Mapping (VSM) is the basic tool of Lean, and it tells us where the non-value added and value-added activities are.  SCE’s show how to optimise the value stream after we know the results of VSM. 

Enterprise executives have heard the need to reform their supply chains.  But they can do only so much managing them.  Enterprises would need the assistance of Supply Chain Engineers to build in better structures and systems. 

The ten (10) examples described above illustrate how SCE’s can help enterprises change their supply chains for the better.  And given the ever increasing clamour for change in these challenging times, we could use all the help we can get. 

About Overtimers Anonymous

Reducing Losses, Whatever the Type, Whatever the Scale

Material losses happen in every industry.  From the time a raw material is mined, extracted, or harvested, to the point where it finally is transformed and delivered as a finished product, there will be some loss along the way.  Not all merchandise that comes into an operation comes out 100% intact in the finished product. 

There are two (2) ways of looking at losses:

  • Loss in Quantity:  materials or items are destroyed, discarded or removed.  Examples include:
    1. machine scraps from milling, drilling, & cutting;
    2. discarded material left from painting & coatings;
    3. evaporation;
    4. spills;
    5. gas leaks;
    6. items that are thrown away such as soiled paper;
    7. over-usage of materials;
    8. pilferages.
  • Loss in Value:  otherwise known as degraded, these are materials that have deteriorated or have lost their primary utility.  Examples include:
    1. residues from chemical reactions such as refining;
    2. expired product;
    3. under-cooked or over-cooked ingredients;
    4. contaminated material;
    5. damaged goods during transport or from handling.

Enterprise managers use measures such as variances and yields to monitor losses. 

Variance is the difference between what is actually used versus what is supposed to be used.  It’s what some managers would call actual usage versus standard usage. 

Yield is the percentage ratio of output versus input in an operation or process.  Output is the quantity of quality-accepted product.  Input is amount of all of the material put into the process.   Operations managers always strive for the ideal of 100% but in most cases, they’d settle for 95% or greater. 

Variance and yield provide managers the yardsticks to how well their operations utilise the materials and product that pass through them.  The lower the variance or the higher the yield, the more efficient the operation is said to be. 

Manufacturing managers apply variance and yield in their operations but both can be useful to measure losses throughout the supply chain, at least from when an enterprise receives its materials to when the final finished product arrives at the customer’s doorstep. 

Manufacturing managers work to reduce variances and increase yields through improvements in production operating parameters.  Purchasing managers help improve yield and reduce variant losses via collaborations with vendors to improve materials’ conformities to desired specifications. 

Logistics managers work with their quality control counterparts together with vendors, logistics providers, and freight contractors in setting standards and methods that would improve merchandise shelf lives and at the same time mitigate risks in materials handling & transport. 

From another viewpoint, losses are either anticipated or un-anticipated.

In manufacturing, losses are generally anticipated, that is, they are expected to occur given the nature of an operation.  Losses usually happen during the transformation of materials into finished product.

Unanticipated losses are those that occur infrequently, unpredictably, and at scales much wider than that of anticipated losses.  Unanticipated losses tend to happen more often in logistics operations, as in materials handling and transportation, where there is an absence of direct monitoring. 

Amid the coronavirus pandemic of 2020, Philippine farmers threw away vegetables because they suddenly couldn’t find buyers for their produce.  Buyers didn’t show up at the trading post where they typically transact with farmers as people could not leave their homes due to mandated quarantine lockdowns.  Meanwhile, locked down Filipino households were complaining that they couldn’t buy food. 

Unanticipated losses can be catastrophic especially when it comes to the global supply chain trade. 

In early September 2020, a ship carrying 6,000 cattle and 43 crew sank amid bad weather as it approached the coast of Japan.  Only two crew members of the ship, the Gulf Livestock, were rescued. 

A crew member believed to be from Gulf Livestock 1 is rescued by Japan’s coastguard. Photograph: Japan coastguard/Reuters https://www.theguardian.com/world/2020/sep/03/typhoon-maysak-ship-with-43-crew-and-nearly-6000-cattle-missing-off-japan

An investigative article by the Guardian published on January 2020 speculated  significant losses of live animal livestock on sea transport.  The article’s writers observed that a number of ships have less than adequate facilities in transporting live animals but there was little in the way of data on the scale and frequency of losses.  Unanticipated losses can not only be disastrous but also could be happening more often than one thinks.

Whereas managers might find variance and yield applicable in reducing anticipated losses, they are quite less effective when it comes to unanticipated losses.  Enterprises fall back on insurance to offset unanticipated losses but they don’t solve the problem.  Losses would still hurt especially if lives are lost other than the loss in resources. 

This is where supply chain engineering can be helpful. 

Supply chain engineers can assess the storage facilities, material handling equipment, and transportation assets and seek improvements in how merchandise are worked through them. 

Supply chain engineers can be instrumental when enterprises accredit the 3rd party providers who take custody of products for deliveries to customers, especially those that require meticulous handling and long-distance travel.  Supply chain engineers can devise operating standards for the proper storage, handling, and transport of products.   SCE’s can reconcile manufacturing, procurement, and logistics protocols in the management of merchandise that would minimise variance, increase yields, and mitigate the risk of catastrophic losses.

Losses happen throughout the supply chain.  Some get lost in quantity and some lose in value during a process.  Managers use variance and yield measurements to mitigate anticipated losses but unanticipated losses represent a blind spot especially as they occur more often in the logistics realm where there is less visibility. 

Supply chain engineers have the skills and knowledge to combat unanticipated losses by auditing the assets and systems that store and deliver the goods of enterprises.  SCE’s can propose standards that would encompass the entire supply chain and put more productivity in the transformation and handling of merchandise. 

Losses can be heart-breaking especially when they are catastrophic such as when a vessel sinks in the high seas.  Executives might try to cover their losses via insurance or by simply taking a blind eye but it would still be worth the effort to ensure not only most of what is procured, produced, and shipped reach their final destinations in one piece but also that human lives are not wasted for nothing.   

About Overtimers Anonymous

Why and How Banks Should Improve their Services

In the late 1990’s, Asiatrust Development Bank, a relatively newcomer to the Philippine banking industry, expanded its banking hours from 8:30am to 6:00pm.  It was a break from the traditional 10:00am to 3:00pm schedule that was the mainstay of other Philippine banks.   Many small businesses and individuals particularly those who worked until evenings, flocked and opened accounts with Asiatrust. 

Asiatrust also offered pick-ups of deposits from customers and post-dated check warehousing, in which post-dated checks can be safe with banks until their deposit dates.  These added conveniences helped the bank snare more clients, notably small & medium-sized businesses

Some banks took notice of Asiatrust’s meteoric capture of market share and also expanded their hours and services.  Asia United Bank (AUB) absorbed Asiatrust in 2012 but its legacy of services for small businesses and entrepreneurs lived on in the Philippine banking industry.

Almost thirty (30) years later, amid the pandemic of 2020, Philippine banks have reversed these services.  Citing the risks to public health, banks have shortened hours; some have even closed branches.  Banks have reduced staff, resulting in long queues of clients at branches and long waits when calling customer service hotlines. Bank internet services have slowed thanks to surges in online transactions. 

Banks serve an important function in ensuring enterprises and their supply chains keep running well.  Cash-flow transactions between vendors and customers transpire mostly via banks.  Foreign exchange dealings, such as letters of credit (LC’s) and wire transfers, happen in most cases through banks.  Philippine bank executives repeatedly extol their commitment to customer service but they balance that priority with that of managing present-day risks in order to maintain the health of their finances. 

When banks downgrade services, enterprises’ supply chain activities may suffer. When a bank is closed or the waiting line leading into it is too long, for instance, clients may find themselves unable to consistently do routine financial transactions.  This can result in delays in payments to vendors and depositing collections from customers.  Receipts of materials and deliveries of merchandise would be negatively affected. 

Cutting back services, especially those dealing with foreign exchange transactions, can hamper the timelines of enterprises to import materials or export products.  

Banks have a golden opportunity to grow if they would just focus on service. 

In the Philippines, more than 65% of adult Filipino households don’t have bank accounts.  That’s 65% in potential market growth for banks.  Many Filipinos don’t deal with banks because either it’s a hassle for them (branches are inconveniently far from their homes or places of work) or because it’s simply discouraging to open accounts (e.g. too many forms to fill, minimum deposits, low interest rates, restrictions on loans). 

Small businesses make up 99% of commerce in the Philippines.  Which means they also likely make up 99% of supply chain transactions in the Philippines.  Even if the remaining 1% of enterprises that comprise big businesses may hold a large share of the commerce, the revenue and investment potential of small enterprises cannot be discounted. 

Banks aren’t just important to supply chains, they are much like them and can even be managed as such.

Banks purchase and deliver cash to and from branches and require the logistics of armoured cars.  They not only tap the talent of managers and staff to serve clients but also have work systems that can be optimised (e.g. tellers and customer services). 

The science of determining how many branches to have and where to locate them are not much different from that for storage depots for manufacturing firms.  And finding out how much capacity a branch should have (number of staff and how many operating hours) isn’t far from the capacity computations for assembly lines and logistics operations. 

The risk management for banking operations which encompass safety and occupational health aren’t really unlike that for the standards and practices for supply chain operations. 

Organisations with supply chains have been continually adapting to risk and improving customer service, pre-pandemic and amid the pandemic.  If they can do it, banks can too. 

The science of supply chain management and engineering can work for banks as much as it has in many industries.  It just perhaps needs the insight to get it started.  

About Overtimers Anonymous

What Collaboration Is and Is Not

Collaboration denotes a cooperative working relationship between parties which leads to mutual benefits.  It’s not commonly observed in industries and supply chains despite the potential benefits it can bring.  This is because it’s not easy to do and in the first place, many business executives don’t think it’s worth the trouble. 

Many enterprises, small businesses especially, don’t have the leverage to collaborate.  Big companies look down at small ones, for one thing, and see no worth in pursuing collaborative relationships with enterprises that contribute little to their revenue or cost. 

Even if a small business grows larger, it would still have trouble earning trust from suppliers and customers.  It’s just natural to be suspicious and wary when dealing with others outside of our own organisation, if we aren’t already to those within our own workplace.  Our parents did tell us not to talk to strangers when we were children.  We were taught not to trust just anyone.  

Collaboration has to start between individuals within an organisation before it can expand to those outside it.  An organisation has to establish internal collaboration before it can externally collaborate with other enterprises such as vendors and customers.[1]

Internal collaboration is when “sales, marketing, and operations find a way to align and focus on serving the customer in a way that maximises internal profit.”[2]

When internal collaboration is achieved, then an organisation can move to external collaboration.  External collaboration “consists of a supplier and a customer working together to achieve mutual improvement.”[3] 

We should know what collaboration is and what it is not. 

  1. It isn’t a meeting.  It’s not several representatives of one company meeting with those from another.  It’s not enough also that representatives draw up agreed action plans or sign a contract after a series of meetings.  Agreements and contracts aren’t collaborations; they’re just formalities to existing business arrangements that don’t outright lead to mutual improvement; 
  2. Collaboration isn’t an internet link.  When an enterprise can order materials from suppliers via email or customers can order merchandise via a dedicated electronic data processing (EDP) network, that is not collaboration.  That’s a connection.  Such a network that eliminates time-consuming documentation may be a manifestation of enterprises working together but it’s really nothing more than a wired conduit between information systems; 
  3. Collaboration is about multi-function cooperation, not just one department with another.   It’s about representatives from every relevant function of an organisation cooperating with counterparts from another.  Suppliers and clients in collaboration wouldn’t be limited to price and order issues; they’d be discussing inventories, payables, quality, and operations reliability;
  1. Collaboration is working together.  It is about enterprises huddling as one in developing common mutually beneficial objectives and strategies;
  2. It isn’t a merger.  Collaboration doesn’t mean becoming one enterprise.  There’s still a distance to maintain because there would still be diverging interests.  A customer who’s into retail may not want to really involve herself too much with a supplier who’s into manufacturing, for instance; 
  3. Collaboration is dedication via leadership.  Enterprise executives must lead by showing initiative, investing time, and developing trust with their counterparts.  When executives dedicate, they show how serious they are to the organisation.  Naturally, the organisation would follow the leaders; 
  4. But it’s dedication not commitment.   Collaboration is more like a friendship, in which individuals come together as a team to explore opportunities and come up with common goals.  But it’s not a marriage where an enterprise wholly commits itself to another.  We don’t sell our souls when we collaborate; 
  5. Collaboration is not for everyone.  Small businesses may not have much leverage to collaborate but who cares?  Some firms may be perfectly fine without collaboration, for now or for the meantime.  A hardware store dealing with thousands of items wouldn’t spare the time to collaborate with a vendor of very few items, even if the items make up a significant bulk of sales;
  6. Collaboration is an activity that requires preparation and structure.  Dealing with counterparts, whether internally or externally, with other functions or with vendors or customers, requires planning, policies, and a framework of assignment, accountability, and performance measurement.  There must be a front-line team who will work with another from the other side.  That team must know what it wants, what its limits are, and what it must answer for; 
  7. Collaboration is a system.  At least it should evolve into one.  Collaborating is not just a meeting of minds and just getting things done together.  For it to be worth it, it has to result in a continuous mutually beneficial relationship.  Each side should establish a shared routine of communications, negotiations, and transactions that point toward higher levels of performance that give rise to ever increasing benefits. 

Collaboration is not only about getting two parties together, ironing out differences, and coming out with an agreement.  It’s not a meeting.  It’s not something that leads to a contract or even a merger.  It’s an activity where counterparts work together toward a common purpose for mutual benefit.  But it’s not a marriage; counterparts should respect each other’s individual personality and path.  It requires a team with a set agenda and that’s dedicated to perform.  It eventually becomes a system where the parties perform and grow together in a shared environment. 

It’s not easy to start, not easy to sustain.  But it might be worth the effort.  Because two heads are always better than one.  Working together is better than working alone. 

About Overtimers Anonymous


[1] Reuben E. Slone, J. Paul Dittman, and John T. Mentzer, The New Supply Chain Agenda: The 5 Steps that Drive Real Value (Boston, Massachusetts: Harvard Business Press, 2010), chapters 5, Kindle.

[2] Ibid, chapter 5, Kindle.

[3] Ibid, chapter 6, Kindle.

The Three Capacity Types

How much can we make?

How much can we buy?

How much can we deliver?

These are typical questions executives ask their managers all the time.  Executives often want straightforward answers; they’d rather be spared the complicated assumptions behind any of them. 

Calculating capacities can be a headache.  It’s never really as straightforward as a machine’s rate of production or how many items a person makes in a day.  Operators sometimes slow machines down or speed them up.  A shorter person may not make as much as a taller person.  Raw materials from one vendor may lead to higher output than that from another supplier. 

How executives view an enterprise’s supply chain capacity is also often different from that of employees.  Executives usually prefer what’s the most that can be produced and delivered.  Employees typically equate capacity with how much they have delivered in reality. 

Answering the questions of capacity therefore requires knowing what assumptions to base on and what data and formulae to use. 

I usually propose three types of capacities for enterprises:

  1. Maximum Capacity
  2. Operating Capacity
  3. Demonstrated Capacity

Maximum capacity is how much an operation can make or deliver assuming it runs at its highest designed rate all the time, that is, 24 hours a day, seven days a week, 365 days a year (366 if it’s a leap year).  No breaks, no shutdowns. 

maximum capacity = design rate x 24 hours/day x 365 days/year

Note that it involves the highest designed rate, that is, what the operation is engineered to do.  The design rate isn’t what it can actually do but what it’s supposed to be capable of. 

Operating Capacity is how much an operation can make or deliver assuming it runs at its highest designed rate based on a schedule.  Operating capacity computations are based on planned timetables but regardless of downtimes.

operating capacity = design rate x scheduled operating time

Note that operating capacity uses the highest design rate and 100% of the scheduled time.  Operating capacity does not take into account planned or un-planned downtimes, such as break-times or time lost during an operation for whatever reason.  For example, in a production process that has a design rate of 100 pcs per minute and is scheduled to run eight hours a day but with allowed breaks totalling 1-1/2 hours, the operating capacity would be:

operating capacity = 100 pcs/minute x 8 hours/day x 60 minutes/hour = 48,000 pcs/ day

Operating capacity does not factor in the break-time.  It does not consider any slow-down from the design rate. 

Demonstrated Capacity is based on the actual output of an operation.  It is determined by multiplying the actual operating time with the actual operating rate

demonstrated capacity = actual operating time x actual operating rate

The actual operating rate is the regular rate of output or what an operator or supervisor establishes as the equipment’s or workplace’s attainable output of items.  The actual operating time is the total amount of time the operation was running after deducting planned and un-planned downtimes.  For a production process that has a design rate of 100 pcs per minute, but an actual output of 5,000 pcs per hour that has a schedule of one eight-hour shift a day with 1-1/2 hour breaks, the demonstrated capacity would be: 

demonstrated capacity = (8 – 1.5 hours) x 5,000 pcs/hr = 32,500 /day

Demonstrated capacity does not take into account the design rate or the total eight (8) hour scheduled shift.  It only considers the actual operating time and actual rate of output.  It does not, however, deduct any unacceptable output (e.g. scrap, rejects). 

The Three Types of Capacity

Executives, especially financial managers, prefer maximum capacity when it comes to assessing how well an enterprise is utilising its assets.  If an enterprise’s supply chain schedules an operation at one (1) shift a day, it would be utilising at most one-third of an operations assets’ capability, which reduces the potential return on investment for the assets.  For an enterprise’s owners, that would be tantamount as wasted opportunity. 

Supply chain managers favour operating capacities in measuring efficiencies.  Operating capacities would be the baselines to determine how reliable operations are. 

Many operators and supervisors like demonstrated capacities for performance measurement.  Some would see operating and maximum capacities as unreachable parameters.  They’d instead measure their output against what they can attain, which would be demonstrated capacities.    

When it comes to determining what the capacity of an operation is, one has to be aware of who’s asking and what is being looked for.  Is it how much an operation is capable of? (Maximum Capacity).  Is it how much can be achieved at full efficiency over a planned time frame?  (Operating Capacity).  Or is it how much can one realistically count on to attain? (Demonstrated Capacity).

Enterprise executives, managers, and engineers may have their own versions on capacities.  It should be based on what one is after.  An executive seeking the best return on investment would have a different perspective from an operator who wants to know how much can really be done. 

Capacities apply to every operation.  Variables such as design rates can be tricky to determine, especially if the design rate is to be determined from labourers or logistics.  Supply chain engineers can help provide the data. 

That’s what they’re there for. 

About Overtimers Anonymous

The Nimble Supply Chain: Is It Even Possible?

Managers like things to turn out elegant.  A well-laid out factory that produces flawlessly.  A warehouse with more than enough storage space and material-handling equipment.  A complete fleet of trucks that delivers all the orders without delay.  A smoothly running purchasing system in which supplies and materials are bought at the best price and arrive on time. 

Nice to dream about but hardly the reality.  All it takes is one disruption to mess everything up. 

The COVID-19 pandemic of 2020 is the popular example.  Many enterprises have closed thanks to sudden drops in demand and supply.  What many executives thought would be a good year turned out the opposite. 

But as much as the pandemic was the biggest whammy to business in recent memory, it is not the last and it certainly wasn’t the first.  Disruptions happen all the time in different degrees and forms.  There will always be uncertainties and resulting variabilities in supply and demand.  Consumers will overstock or switch to other brands.  Business customers will be fickle about buying new equipment.  Vendors will speculate and change prices, terms, and the availabilities of items.  Third-party providers will abruptly ask to renegotiate contracts.

Many consultants cite the need for supply chain flexibility and resilience in order to re-grow and survive.   But that’s not the answer. 

What we need are nimble supply chains.  Nimble means having the prowess to adapt and respond quickly to changing circumstances without having to invest or spend too much in resources.  It’s more than being synonymous to agile.  It involves the ability and tendency to adapt rapidly to changing circumstances.  Enterprises not only need to run fast but run fast and dodge unpredictable obstacles while aiming toward moving targets.     

Hence, the challenge for supply chains:  with all its differing functions and all the uncertainties, how does one become nimble from start to finish?  Can it even be done? 

The answer is yes but it would need changes in mindsets. 

First, nimble is not a buzzword.  Consultants and so-called experts have promoted buzzwords like agile, just-in-time (JIT), Six Sigma, ERP, Lean, and responsive.  Many projects have ended up dead-on-arrival while consultants and so-called experts made money out of them.  When we say we want to be nimble, it doesn’t mean uttering it in every meeting.  (“we need to be nimble!”, why aren’t we nimble?”). We need to define it and make a strategy out of it. 

Second, nimble does not mean a total change in how we operate.  It’s more of finding and focusing what to improve and where.  How fast can we switch to a different item?  How do we shorten the set-up times between products? How do we adapt our order-to-delivery systems?  How do we quickly source new materials?    

Large consumer goods firms such as Unilever and P&G have bragged about their introduction of hand sanitizers and face masks in the wake of the COVID-19 pandemic but it took them several weeks to develop the items.  Toyota has made it a routine to retool their assembly lines and make available a new vehicle model in a matter of hours, if not minutes. 

Third, it is relevant to all functions in the supply chain.  Nimble isn’t limited to manufacturing (where a lot of people think it does).  And even if an enterprise thinks it can be nimble just on the production line, it is doubtful its supply chain will be if its logistics and purchasing functions aren’t geared up for it. 

A large wholesaler excelled in the procurement and inventory management of merchandise but had room for improvement when it came to deliveries.  The wholesaler hired a freight trucking company to deliver products to customers.  The wholesaler insisted that the trucking company supply large 6-wheeler trucks to maximise loads and minimise freight costs.  Trucks, however, often had to wait for hours till they were fully loaded and the wholesaler usually loaded the trucks with up to 10-15 customer orders each.  Either way, deliveries were frequently delayed or trucks weren’t able to deliver all of the orders in a single day.  Customers complained.  The wholesaler finally relented to the trucker’s call to use smaller four (4) wheel vans which delivered to customers faster, sometimes within the same day orders were received.  It turned out freight costs didn’t significantly increase as four (4) wheel vans could do several trips in a day.  

Fourth, nimble applies in every industry.  Whether it be consumer goods, industrial, or energy, going nimble can help enterprises of every sort. 

For many years, a large cement company sold to a captured market.  It had steady revenues and all it had to worry about was cost.  Its factory was designed to mass produce cement bags by the hundreds in a day.  One day, however, the government allowed foreign cement producers to enter the market.  Suddenly, the cement company found itself at a pricing disadvantage.  The cement company eventually closed down its factory.  Imported cement was cheap and had better quality.   The cement factory never bothered to improve its products or its operations.  It thought it never had to. 

Fifth, nimble isn’t limited to enterprises that sell tangible products; it works for service-oriented organisations too.  Hospitals in Taiwan have long realised that fast turnaround of patients is crucial in keeping costs down and reducing wait times for sick people seeking treatment.  Taiwan hospitals were well-prepared for the COVID-19 pandemic.  They had an inventory management system that assured enough medicines, supplies and personal protective equipment (PPEs).  They also set up a structure in which assigned medical teams, consisting of doctors, nurses, and staff, would be dedicated exclusively to the contagion.  These teams would work separately from other medical practitioners dealing with patients with other ailments.  The strategy worked and Taiwan was nimble enough to dodge the virus bullet. 

Sixth, and finally, it needs an engineering approach.  Leaders set directions, managers plan and implement, but engineers do the nitty-gritty design and development of structures and systems essential to the improvement of operations. 

Enterprises don’t construct factories on their own.  Enterprises hire engineers to do that.  In the same way, they should engage supply chain engineers to build systems and structures that would enable an enterprise to become nimble. 

Enterprises don’t have to start from scratch.  And it would not need super large investments.   Engineers can identify workplaces along the supply chains that would significantly contribute towards becoming nimble. 

It can consist of re-designing production lines to quickly change over to different items, such as what Toyota did.  Or it can involve having smaller trucks to deliver rapidly to customers, as what the wholesaler did.  It can also just entail identifying areas to reduce costs and improve quality which the cement company failed to do. 

Supply chains operate in a normally disruptive world.  Enterprises need to be nimble; flexibility and resilience aren’t enough.  Buzzwords are useless.  For an enterprise to be nimble, it needs to define its strategy, focus on where to improve, and involve all functions.  Enterprises have to believe that nimble applies to all industries, even service-oriented ones. 

The best approach to nimble is via supply chain engineering.  Supply chain engineers have the best qualifications to build the nimble enterprise. 

About Overtimers Anonymous