MTS or MTO

A friend commented that MTS decision as requested by sales team. Is this true?
Do you think sales team have full accountability?

Perhaps Supply Chain has to take accountability to decide whether:
- MTS: Make to Stock or RTS (Replenish to Stock)
- MTO: Make to order or Indent (for import)
Certainly to decide this, we need all stake holders input, including sales.

Here is some rationale to decide:
MTS/RTS: Fast moving, large volume, less fluctuate demand pattern.
MTO/Indent: Slow moving, in consistent demand, project items

Exception: Gambling… rare situation
Exclusive hi cost consequence spare part with no substitute. Example: an electric fuse than specifically designed for Power station, very expensive. But need immediate replenishment to avoid catastrophic black out.... but Do you want to stock the whole power plant?

How do you think?

Inventory or Stock level

I shared about safety stock already… Ok, a bit more general how about inventory..
How much inventory shall we keep?
Why we need this inventory?
These more …. where shall we keep the inventory, when, who shall keep this?

Let focus on How much and Why (also for Finish Goods/FG only)
A friend said… about 20 days… if too less.. becoming JIT (Just in Trouble)…..
The other friend said, …. We target about 12 days, but currently at 9 days….
The other business maintaining more than 40 days….
How come? Who’s right?

My opinion: Ideal INVENTORY = SAFETY STOCK + CYCLE STOCK

SAFETY STOCK = Securing against fluctuation/uncertainty

CYCLE STOCK, depend on your business… how much time required on production cycle/ replenishment leadtime.

Extreme example:
- Ship building industry, this is make to order… no FG stock required.
- Consumers good…. Need more inventory, ensure available in market pipeline… never allow your customer has any reason to buy competitor product due to stock out at retail selves

So how much inventory shall you keep? Depend on your industry, fluctuation, cycle time, etc…. This is the art, what is the right level…. Which also shown your Supply Chain expertise level… :-)

Safety Stock or convenience stock

It is similar (if not exactly the same) as you do at home. What do you stock at home? Soap, Shampoo, dish soap, softener, nail, paper.
Why you keep that stock? Convenience, right? Easy to grasp

How much would you like to spend ($$$$$....) for this conveniences?
Perhaps an extra USD 100 for your toiletries and consumer goods… no problem..
How if your inventory value USD 10MM, with about 10% working capital rate = USD 1 MM per year = USD 80000 per month…. How if part of this value use for your employee benefit? Hmmmmmm

But… if no stock the risk is very big…. depend on your business nature.
I don’t say, “no stock”, but how much…
If we double our stock…. Will we eliminate 100% risk.??? I dont think so..

So, how should we calculate the risk and ensure we have sufficient stock and risk and "conveniences"….. :-)

Supply Chain Metrics

Every function has their particular metrics or KPIs or score cards, what ever you name it..
Nothing wrong with the metric, they are all good or great…
The "Art".. how you select the right metrics that suitable to your business (kind of and size) and how you will get the data.
Potential danger:
- Metric measured not directly relevant to operations
- Metric just to satisfy management
- Spend too much effort to measure (compared with the real operation/real work)
- Generalize metrics (Certain standardization are good, but shall be relevant)

MRP II

This is a very basic and useful knowledge/concept, not only for logistic/supply chain people, but also business (commercial, marketing, sales), production team.
Theory : *****
Management understanding and commitment : ***
* = acceptance level (my guesstimate).
People could learn and trying (trying I really mean) to understand the concept, but how is the implementation.. it might result differently.

Potential danger:
- Low understanding and commitment at management level (even worst if at operational level)
- Focus on wrong metrics

http://en.wikipedia.org/wiki/Manufacturing_resource_planning
http://www.ifm.eng.cam.ac.uk/dstools/process/mrp2.html
http://www.erpwire.com/erp-articles/mrp2-fundamentals.htm

How shall we implement MRP II in our business? In my opinion, the implementation is very customizing. It is an art, below illustration might be help
Fabric : MRP II as theory
Tailor : SC expert
Dress : MRP II implementation
How well you dress up (or utilize MRP II) in your life (company) will be the end result..
You could feel great using MRP II, because of great tailor.. or
You feel great using MRP II, because it is really suit you..

Back ground of Supply Chain – Logistic Free thought

Being a supply chain person in almost my career (> 20 years), has build a bit of expertise that might be useful to share. The expertise also enriched with:
- Major supply chain experiences in planning, warehousing, terminal, 3PL manufacturing and repackaging, distribution and transportation
- Added with Purchasing, production and maintenance fields experiences
- R&D, Accounting, Sales and Marketing, HR close interactions
- Heavy industry (Steel factory), consumer goods (house hold, automotive and personal care) and chemical (Gas, Plastic, Basic and Performance, also agro chemicals) industry experiences
- Managing 3PL (Land transporters, Marine bulk and Packed Cargo, Sea and Air shipments, forwarder)
- Dealing with small (garden services, bolt), Medium (Bearing, hydraulics, pneumatics), big (lubricant, gas, chemicals) vendors and traders.
- Planning and scheduling; with small (ie. 50ml packed products) with heavy marketing promotion up to big (ie. 3000 MT bulk) with tight dealing time slot.
- Understanding small spare part (nut and bolt) up to big construction (steel refractory, double haul chemical tanker design)
- Managing a simple (house keeping) up to complex (ie. ISO, SQAS, CDI) Safety Health and Environment programs.
- Working on shop floor (mechanic), department head (logistic Manager), up to managing joint venture agreement (supporting CEO)
Hope all above are enough… to support you that interested to share and hope I could also learn from you.