02/11/2016 : 0 Comments
Prescription painkillers are abused by more than two million Americans every year. Each day, 7000 people are treated in emergency rooms across the country for abusing opioids such as Hydrocodone, Oxycodone, and Methadone, and the number of fatalities in the US alone has reached 44 people a day, higher than the number of car collision fatalities. Most of these are people are unaware of the addictive nature of these drugs, and have too-easy access to them via a prescription or from illegal sources. Recently, the New England Journal of Medicine has established a direct link between nonmedical prescription-opioid use and their more potent street counterpart, heroine. The statistics have looked bad for years, and recent overdoses continue to grow.
The rates of overdose deaths are rising particularly for women (up 400% from 1999 to 2010) and middle-aged Caucasian Americans. The New York Times, states in “Drug Overdoses Propel Rise in Mortality Rates of Young Whites”:
The drug overdose numbers were stark. In 2014, the overdose death rate for whites ages 25 to 34 was five times its level in 1999, and the rate for 35- to 44-year-old whites tripled during that period. The numbers cover both illegal and prescription drugs.
“That is startling,” said Dr. Wilson Compton, the deputy director of the National Institute on Drug Abuse. “Those are tremendous increases.”
Rising rates of overdose deaths and suicide appear to have erased the benefits from advances in medical treatment for most age groups of whites. Death rates for drug overdoses and suicides “are running counter to those of chronic diseases,” like heart disease, said Ian Rockett, an epidemiologist at West Virginia University.
Just last week, President Obama has proposed $1.1 billion in new funding to address the prescription opioid abuse and heroin use epidemic. So we at Invistics have decided to join our nation’s fight against the diversion of Controlled Substances. What is diversion? “Any criminal act involving a prescription drug.”
Our initial exposure to Controlled Substance compliance came in 2012, when one of our pharmaceutical customers approached us to modify our supply chain software to have specific capabilities to manage Controlled Substance inventory across their supply chain. Specifically, we built software for them with the following capabilities:
- Real-time visibility showing the location of all their controlled substance inventories, with alerts to flag if any material is not properly secured in the appropriate vault, cage, or restricted access location
- Electronic data entry screens that allow their employees in their analytical laboratories, product development, and research departments to convert paper-based log books into electronic, real-time tracking information
- Electronic reports that provide cradle-to-grave lot lineage, with audit trails for every movement of every gram or tablet or sample of controlled substances, and accurately compile the reports required by the DEA to prevent diversion or theft of controlled substances
- And assistance with requesting annual quota from the DEA for Schedule II controlled substances, the most additive and most dangerous controlled substances.
Since then, Invistics has spoken with hundreds of individuals who manufacture, distribute, prescribe, or administer Controlled Substances. We have talked with, and learned from, people working in every link of our nation’s Controlled Substance supply chain: drug manufacturing companies, wholesalers and distributors, hospitals and their doctors & nurses, retail pharmacists, and law enforcement agencies to learn the role we can play in helping prevent Controlled Substance diversion and accidental overdoses. This blog entry is the first in a series of five, detailing what we have learned, and why we are joining the fight to prevent Controlled Substance diversion. We will be posting four more articles on this topic over the coming weeks, with additional details about the problem, and the new approach we are taking to join our nation’s fight against this epidemic.
12/14/2015 : 0 Comments
Lora Cecerce, founder of Supply Chain Insights, posted a very insightful article in Forbes called “Does Better Forecasting Improve Inventory? Why I Don’t Think so Anymore”.
Inventory has always been necessary in supply chain management to buffer against supply and demand variability. With the advent of high-mix manufacturing and the need to produce a longer tail of SKUs with more equipment changeover, this is more true than ever before. Lora, in her recent analysis of planning benchmarking for large mult-nationals, states:
“A mistake that I see companies making over and over again is improving forecasting, but not improving inventory levels because of the lack of a holistic focus. After the implementation of a forecasting system, and getting basic functionality in place and providing a reliable forecast with minimal bias and accuracy, there is only minimal value in continuing to refine the forecast. Most companies do not have a forecasting problem. Instead, they do not know how to use the forecast to drive inventory strategies.
Why do I state this so boldly? The forecast is always wrong. This is true by definition. Improving it by a few percentage points on forecast accuracy is not going to drive the improvements in inventory that most people think. While most companies focus on the numbers, it is understanding the probability of demand and translating it to supply strategies that makes a difference.”
Lora counted four trends that lead her to rethink how inventory should be managed.
Cycle Stock is the Opportunity for Most Manufacturers
“Cycle stock is most effectively managed through the successful implementation of production planning. (Cycle stock is the management of stock required to cycle through production runs and procurement buys effectively. It involves complex logic on batch size, change-overs and production sequencing.) With the rise of item complexity, improving production planning becomes more important. This planning technology is tricky to implement and many of the technologies are not up to the task; but doing it well is essential.”
One of the cornerstone of Invistics’ solution is to view Inventory holistically as a combination of Cycle Stock and Safety Stock. It’s very common for companies to order materials in large quantities, often to meet a bulk discount, but then to skip the next step of figuring out bulk discount savings vs cycle stock inventory management costs. Even if you save 20% by ordering a years worth of product X in bulk, you must account for the holding, movement, and obsolescence risk of that left over inventory as it sits in your warehouse for the next year.
Download our Whitepaper to Learn More: Optimizing Cycle Stock, Lot Sizes, and Rhythm Wheels in High-Mix Manufacturing
Inventory is the Most Important Supply Chain Buffer, but Requires Design
“The most important buffers–shock absorber for volatility– in the supply chain is inventory and manufacturing capacity. The reduction of cost and improving asset utilization is usually the charter of the supply chain team. As assets become more and more utilized, manufacturing loses the ability to buffer volatility through manufacturing capacity optimization. In parallel, with more and more manufacturing outsourcing, companies lose the capability to buffer through the use of manufacturing capacity. As a result, inventory becomes the critical buffer to absorb demand and supply volatility. Designing the supply chain and making conscious choice about push-pull decoupling points, cycles, and late-stage postponement helps.”
At Invistics, we also stress the design before the implementation for three reasons. 1.) It builds consensus. 2.) It develops a relevant business case to get stakeholders invested, and 3.) it identifies processes and tools that are require to support the new approach. Our workshops begins with sketching out the “As-Is” value streams vs the future “Should-be” value streams, and discusses many of the items Lora mentions such as when to use Push vs Pull.
Technology can Help
“More and more companies are purchasing inventory technologies, but failing to give planners time to plan. This is a mistake. With the rise of the global multi-national. There is more and more need for an inventory planning role to manage the form and function of inventory and develop inventory strategies. Buying the technology and not having clear processes and accountability does not help. We are still in our infancy in the use of multi-tier inventory optimization technologies, but as shown in Figure 2, there is a strong impact when implemented correctly.”
Most high-mix environments will require technology due to sheer numbers. Traditional “rule of thumbs” approaches to inventory management such as “let’s hold 4 weeks of supply for product X” are becoming more and more outdated in a world where demand and supply rates fluctuate quickly. Often times you need a tool that can drill down into the just the items you are managing, to pull data from multiple computer systems, and can give you an accurate solution without tying up IT resources to sustain. If interested, here is a demo of a multi-tier inventory optimization technology called the Inventory Advsior: http://www.invistics.com/inventory-optimization-software/
“One of the surprises for me in the benchmark data is the gap in understanding of inventory strategies by the supply chain executive team. The concepts of planning and the management of form and function of inventory are not well understood. Most executives believe that the answer lies in having a better forecast. They are not able to have a discussion on the form and function of inventory. It takes training. The strategy requires careful definition with finance. However, it is worth it. Inventory turns correlate to market capitalization, and who can argue with improving market capitalization?”
Leadership is the key to sustainability. All the planning and software tools in the world aren’t enough to effect change if your companies management isn’t on board with visible metrics and staff training to ensure the new processes are being implemented with care.
To share with you an example from Invistics past, we completed a new inventory management workshop at a large company where we “capped” inventory using Pull-driven methods. Later on, when we came back to audit the shop floor, planners were still relegating to their old habits and focused only on maximizing machine utilization even when there was no demand for more of the product. In the planner’s eyes, the waste was due to letting a machine sit “unused”, instead of the storage and handling cost of the piles of unnecessary inventory. Leadership is key to bridge such communication gaps.
We hope this blog article was educational. If you have any questions or would like a consultant with Invistics please contact us using the contact button at the top of the page. And oh, a Happy Holidays to all.
12/03/2015 : 0 Comments
High-mix companies are manufacturing and distributing a wider variety of products every year, with increased variability in both supply and demand.
These companies have a choice for inventory optimization:
- Continue to struggle with homegrown, spreadsheet approaches,
- Invest significant time and money building and maintaining tools from ERP vendors
- Quickly optimize inventory using cloud-based tools, such as the Inventory Advisor from Invistics
Our Invetory Advisor software uses advanced analytics to optimize inventory levels & safety stocks. Implementation is quick and requires a minimal amount of inputs and resources from IT. You can configure the software to optimizes all inventory: raw materials, WIP, and finished goods, across the supply chain, while slicing and dicing the dataset in whichever way makes sense for your business so that you can manage your “A” SKUs (also known as high runners) differently than your “B” and “C” SKUs
Below is a video demonstration of the Inventory Advisor in action:
03/23/2015 : 0 Comments
Gartner posted an article detailing the benefits of pull replenishment in Demand Driven Value Networks:
Demand-driven value networks (DDVNs) integrate processes and data to translate demand signals into a supply response that creates value and mitigates risk.
The manufacturing, retail, high-tech, life science and healthcare industries with demand-driven capabilities perform better in the long term than peers with traditional, cost-focused supply chains. These companies grow revenue faster, achieve more than 15% higher perfect-order rates and reduce inventory levels by as much as one-third. They leverage an outside-in view based on insights about customer value. They apply this view to their product portfolios, supply networks and service processes to deliver customer value and profitable growth.
Orchestration of value networks includes selectively collaborating with customers, suppliers and partners, as well as effectively managing trade-offs internally through cross-functional processes that synchronize product, demand and supply decisions for maximized value. Critical capabilities for orchestration include supply chain visibility, agile decision making in response to volatility and demand shaping to optimize profitable balance.
Invistics has been helping high-mix manufacturers and distributors design and implement their Demand Driven Value Network for over 15 years. Our Pull Design Workshop is a great way to get started using three steps:
1.) Reaching consensus on the type of pull strategy to be adopted, the production planning parameters that will be impacted and the process and tools to be deployed to ensure a systemic and sustainable implementation.
2.) Developing a relevant business case.
3.) Identifying processes and tools that will support the new approach on an on-going basis.
04/20/2014 : 0 Comments
Our last blog post provided a general summary of Kingsman’s Equation and how it relates to your manufacturing operation. Today we’re going to delve a little deeper into the equation to prove that when it comes to lowering the Average Queue Time (or Average Wait Time) of your resources, Utilization is King.
For every system whether it’s a single machine or an entire factory, the time a resource spends as raw material or work-in-progress can be divided into two parts.
- -Process Time. This is value-added time it takes per machine or machines to process the resource and churn out a finished product.
- -Queue/Wait Time. This is non-value added time the resources are set aside to wait at the queue of machine or bottleneck, on a machine’s setup, etc
Lead Time = Queue Time + Process Time. In most manufacturing systems, the Queue time can comprise 80-85% of the lead time. This is all non-value added time that should be reduced in order to maintain a Lean operation.
Now let’s take another look at Kingsman’s equation:
AQT = Average Queue Time.
p = Utilization, expressed as decimal
Ca2 + Cs2 = arrival and process coefficient of variations.
τ = average process time
so what does this mean exactly? First let’s look at some examples where utilization(p) is at .25, .5, .7, .9, and .99. For these examples, we’ll just assume: (Ca2 + Cs2)/2 = 1 and process time(τ) = 60 minutes.
Case 1: If p = .25, Average Queue Time (AVQ) = (.25/(1-.25) * 60 = 20 mins
Case 2: If p = .5, Average Queue Time (AVQ) = (.5/(1-.5) * 60 = 60 mins
Case 3: If p = .7, Average Queue Time (AVQ) = (.7/(1-.7) * 60 = 140 mins
Case 4: If p = .9, Average Queue Time (AVQ) = (.9/(1-.9) * 60 = 520 mins
Case 5: If p = .99, Average Queue Time (AVQ) = (.99/(1-.99) * 60 = 5940 mins or 99 hours
In this example since (Ca2 + Cs2)/2 = 1, the STDEV of the respective variables would have to equal the mean to get 1. While such high variability does exist in the real world, it’s not very common. But regardless, this example is enough to illustrate two very important take-aways.
1.) Despite such high variability in both arrival and process times. If the utilization of the machine(s) is low, as it is in case 1 or case 2, the Average Queue Time is still manageable. This is because in terms of reducing your AQT, machine utilization is by far the most important factor.
2.) As you can see from the exponential increases in AQT over the cases, it is very, very wasteful to run your machines at such high utilization because your Average Queue Time goes through the roof. Can you imagine an 99 hour Average Queue Time for each of your products? And the screeching of your customers or sales reps? No thanks.
One final thing I should note is that the AQT in Kingsman is not the exact AQT, but more of a likely upper bound of your real AQT. Though it’s accurate enough to get the point across.
04/10/2014 : 0 Comments
In queueing theory, Kingman’s formula states that the mean waiting time is given by:
AQT = Average Queue Time.
p = Utilization, expressed as decimal
Ca2 + Cs2 = arrival and process coefficient of variations.
τ = average process time
So what are the practical, manufacturing take-aways?
- The longer the average process time is, the more important is the queue length. For example a process that takes a minute, with a queue of 5, is much better than a process that takes an hour with a queue of 5
- Utilization is king. If utilization is low (~50% or less), arrival variation and process variation will have a small impact. If utilization is high (80% or higher), arrival and process variation will matter much more.
- service, and assembly, extra capacity may not be as expensive compared to it’s manufacturing counterparts. This is because it is easy to move/add employees between functions.
- Since many service processes are longer than manufacturing processes, variation is generally more tolerable in service than in manufacturing. In other words, it is generally much more effective to focus on reducing failure demand than variation when it comes to service organizations.
- Reducing time variation is generally less critical than reducing utilization. Utilization is affected by errors which generate failure demand or rework.
- Arrival variation should not be ignored. It is just as important as process variation. Can your arrival variation be influenced through salesmen, incentives, informing customers or reducing supply chain amplifications?
- The work release behavior of processes upstream of bottleneck is important. The smoother (less lumpy) the orders come in at those work stations, the faster the bottleneck will process the orders.
Additionally, the Theory of Constraint advocates 5 steps of improvement: identify, exploit, subordinate, elevate, and repeat. Kingman’s equations gives these additional insights:
-To identify the constraint (bottleneck), it is easier to examine only the load and compare it with demonstrated capacity. Kingman shows that overload begins at less than 100% utilization, and that sensitivity variations is particularly important at high utilization.
-Exploiting constraints should include variation reduction in addition to other methods such as buffering with Inventory.
-Subordinating other resources should include looking upstream of the constraint to examine arrival variation coming into the bottleneck.
Kingman’s equation ties together Lean, 6 Sigma, TOC, and service systems to show that there’s not a one-size fit all when it comes to adding value to your operations. The key is in knowing when to apply each school of thought.
(Be sure to check out John Bicheno’s “The King of Equations” in the Lean Manufacturing Journal for more information and tips related to Kingman’s equation).
03/03/2014 : 0 Comments
Myth#1: Lean is a huge initiative that drains financial and human resources.
Believe it or not, many companies have opted to forgo Lean because of this very myth. The thought of overhauling their whole process puts them into a panic: trying to find where funding will come from and how much will it cost to train their employees.
In these economic times, everyone is looking for ways to cut corners and save. However, companies shouldn’t worry about Lean processes draining their financial, or even, human resources. The interesting truth about Lean is that, if processes are implemented properly, it will not cost as much as previously feared. In fact, some companies have reported a substantial return on investment within the first year.
To conserve financial and human resources and proceed with a Lean implementation, the best thing is to start with a fast, low-effort pilot that will quickly make up for the resources used in the project. The benefits and savings that a company will see within a few months will ease financial fears and pay for any future expansion of Lean.
Has your company overlooked Lean processes because of this misconception? Have you tried Lean and run into any strains, either financially or worker related? We would like to hear your input. Let’s discuss!
01/15/2014 : 0 Comments
Leaders, competitors, and followers exist in all industries, and especially in manufacturing. How does your company rank? Is your organization operating on the model that others watch — or are you following others? Find out where your organization stacks up with this quiz.
Note: Only add the corresponding points if your answer to the question is “Yes”.
1. Your company involves individuals from all business segments (including suppliers) in its business plans (add 1 point)
2. Your company focuses mainly on manufacturing areas & includes only a portion of those in aligned areas (add 3 points)
3. Your company focuses on the plant floor with weak support (add 5 points)
4. Your company has a broad use of metrics — some are automated and some are manual. (add 3 points)
5. Your company has a broad application of methodologies (i.e. Kanban, 5S) with wide access to real-time data (add 1 point)
6. Your company uses few Lean tools and has limited access to manufacturing data (add 5 points)
7. Your company’s business processes are embedded in Manufacturing Execution Systems which ensures consistency (add 1 point)
8. Your company applies Manufacturing Execution Systems and continuous improvement programs (add 3 points)
9. Your company’s metrics are calculated frequently by IT systems with high accuracy and credibility (add 1 point)
10. Your company has a several Lean tools and good access to manufacturing data (add 3 points)
11. Your company has a manual Business Process Management using tribal knowledge and is skeptical about new technology (add 5 points)
12. Your company has a few metrics that are manually calculated and not usually actionable (add 5 points)
If you scored 15 to 20 points, your organization is considered a Follower and there is room for improvement. Invistics offers resources such as free white papers, executive briefs, and hosts monthly webinars at no charge to help you achieve Leader status.
If you scored 9 to 14 points, your organization shows characteristics of being a follower and a leader, a status known as a Competitor. You are making the necessary steps toward Leader status. To help you on your path, check out the Invistics website for free information and monthly educational webinars to help you become a Leader more quickly.
12/06/2013 : 0 Comments
Steven Kuehn, Editor-in-Chief, recently published a great overview of the progress the Pharmaceutical Industry has made in the recent years in area of cutting waste and improving operations to be “Lean”: http://www.pharmamanufacturing.com/articles/2013/honing-the-competitive-edge/?start=3
It’s only been within the last 15 years that the Pharmaceutical Companies have begun to take the concepts of Lean and Six Sigma more seriously, mainly due to major cost constraints that were tightening profit margins across the industry. Kuehn writes:
“As mentioned, since approximately 2002 the pharmaceutical industry felt increasingly pressured by a number of new and relatively dramatic external and internal market forces (think patent cliff) and began to face up to its profligate spending sustaining inefficient drug development and manufacturing processes. With the cost of bringing a single blockbuster drug to market reaching some $1.3 billion and, according to Eli Lilly, the success rate of new chemical compounds falling from 12% a decade ago to 8% today, drug manufacturers indeed continue to have a tough fight ahead to remain competitive and sustain commercial success.”
However, despite the industries best efforts to reduce waste and variability, Lean hasn’t quite caught on. There were still many pharmaceutical professionals who believed Lean to be a cost cutting methodology. Nigel Smart, prinipal at Smart Consulting Group and author of “Lean Biomanufacturing” says:
Nigel Smart, principal at Smart Consulting Group and author of the just-released book, Lean Biomanufacturing, says, “For perhaps over a decade now, the pharmaceutical/life sciences industry has been attempting to apply Lean systems to its various process systems. Initially, there were attempts to apply the principles to manufacturing processes in an attempt to mimic the advantages seen in other industrial sectors, such as those in the auto industry. However, if one was to critically prepare a performance scorecard of the implementation of Lean throughout the [Pharma] industry, this analysis would at best give you a normalized score of perhaps 4/10.”
The article is worth reading in full to see who and what others in the Pharma Industry are doing to achieve best-in-class manufacturing operations using Lean Six Sigma methodology.
12/06/2013 : 0 Comments
Invistics has been providing educational Webinars on a variety of Lean Manufacturing topics since 2011. We strive to ensure our webinar presentations are up to date with the best practices utilized in the high-mix manufacturing world. Check back in every month for a variety of topics ranging from case studies, live demos, and best practices in inventory & lot sizer optimization (and more!). This month we’re offering two topics:
Join Tom Knight, Invistics’ CEO, for our new webinar, an in-depth case study on Dupont Pharmaceuticals. This particular facility was plagued by high-variable processes and products which lead to increased cycle-times, inventory shortages, and impacted customer service levels. Learn how Invistics put in place Lean processes that realigned product flows, established key metrics, and integrated this approach with IT systems in order to reduce cycle times, lower inventory levels, and improve service.
Date: Wednesday, December 18, 2013
Time: 1:00 PM (Eastern Time)
Duration: 60 minutes
Join Xing Guan, Process Improvement Consultant, to learn Best Practices for Lot Size Optimization for high-mix manufacturers and see how industry leaders analyze & calculate the “sweet spot” between changeover costs, inventory costs, and customer service. The presentation will include a detailed case study of the project Invistics did for a major manufacturer as well as a live demo of Invistics Lot Sizer optimization software.
Date: Thursday, December 19, 2013
Time: 1:00 PM (Eastern Time)
Duration: 60 minutes
Register Here: http://www.invistics.com/resources/webinars/