Learning from Experience
Friday Nov. 11th,2011 Eli Schragenheim will lead a workshop on Learning from Experience. The purpose is to learn how to understand the cause and effect (the why) of disturbing and unexpected results from our actions AND, more importantly to take and apply the important lessons we learn.
The stories below are all about unexpected effects that someone has experienced and that he or she could not properly understand. With Eli, we will look at such problems (bring your own!) and analyse them.
The Workshop (English) will be at the hotel Schiller in Olching (near Munich) followed by the TOC4U Meeting (mostly German) on Saturday Nov. 12th. You can register here: REGISTER or call +49 6252 795 3070 if you have problems with the German registration page.
Where should we hold our Stock?
The business produces sheets of an insulating and fireproof material sold to the electrical, electronic and speciality construction industries. Sheets are produced in a standard width and must be cut to size for the various specific applications – into roll widths, and various panel (or sheet sizes). The company had a central stock together with a slitting and cutting operation to produce to customer requirements. From there material is sold through distributors throughout Europe (one distributor per country).
The division was under constant pressure to reduce stock levels. Levels were always high because cutting to customer requirements resulted in many end-products produced against a forecast and many partial rolls and off-cuts kept in stock in case a customer required something that could be supplied from these rests. Their computer system always selected material from these off-cuts whenever this was possible.
The pressure to minimize stock resulted in the strategy to give distributors the job of cutting to customer order. Distributors would order the few standard rolls and cut these to customer requirements. Distributors were happy because they gained an additional way of adding value to their service and the supply chain manager finally got the ‘too high inventory’ monkey off his back.
Soon, however, things did not turn out as expected. Distributors started to complain about the huge investment they had to make in ‘off-cuts’ that then could only be sold with great difficulty. On top of this they had to invest in cutting equipment to produce for clients. Distributors began to demand lower prices and/or consignment stock to take care of their deteriorating financial situation – their increased need for working capital to finance the additional stock.
What is happened?
What can we learn?
What might be the better solution?
Technorati Tags: 6-Sigma, Continual Improvement, Costing, Distribution, Efficiency, Focus, Inventory Management, Replenishment, Shareholder Value Add, Strategy and Tactics, SVA, Theory of Constraints, TOC, TQM, Value Chain
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