Archive for October, 2009

Lean Emergency

October 27, 2009

David Edwards – Operations Professionals

As the health care debate rages in the US and centers on how to provide health insurance to our citizens, it seems our government leadership is missing the point, which is providing health ‘care’ to our citizens. Effective health insurance should by all rights be a zero sum proposition, the sum of all premiums collected should equal the sum of all health care provided (less a reasonable administrative profit), a seemingly simple concept that appears to escape the average health care consumer who is being led to believe that ‘affordable’ health insurance means paying less in premiums and receiving more in care benefits. Providing insurance to everyone will not accomplish this goal, decreasing the cost of health care will.

Manufacturing organizations have been faced with this challenge since the dawn of the industrial revolution. Companies that can effectively deliver higher quality products at lower costs thrive and those that can’t wither away. Unfortunately, our health care system has not benefited from this challenge. Health care costs, and therefore health insurance costs, have increased at more than double the rate of inflation since the 1970s. This exponential growth is a product of gross inefficiency in the entire health care / health insurance process.

Health care operations are beginning to understand the value of applying the ‘lean’ principals pioneered in the manufacturing sector to their health care processes. A recent study looks at 4 emergency room operations that tried to apply lean principles to their emergency care operations. According to Dr. Eric W. Dickson, a lead researcher in the study, “We have a fundamental problem in the U.S. health system, and it relates to delivering value to our patients.”

The results of this study indicate that health care operations can reap the same benefits that manufacturing operations have been reaping for years from the application of lean concepts. However, the results also indicate that health care operations are in the infancy of learning to apply these principals. Similar to US adoption of these principles in the 80’s and 90’s, health care operations are still very tentative and suspicious of the process. But, for the US (and global) health care industry, continued application of lean principals must be part of any solution designed to improve the quality, cost and delivery of health care.

Read the complete article here: Toyota Philosophy Works in the ER

 

 

 

Multi-Echelon Inventory Optimization – Eliminate The Slack

October 20, 2009

David Edwards . Operations Professionals

As our global supply chain continues to expand the number of layers of inventory between suppliers and the ultimate level of consumption, it is important to look more closely at how this inventory is managed. In traditional supply chain management practices, each level (echelon) of supply and demand is evaluated independently in order to determine the optimum level of inventory to carry at each echelon. Companies that have managed internal multi-echelon distribution networks have learned that this approach will ultimately lead to excess inventory levels in the system as a whole. This holistic evaluation process is now being applied across multi-company supply chains in order to minimize inventory across all levels of the supply chain while maintaining the ability to meet customer demands.

The linked white paper is an article on multi-echelon inventory optimization by Calvin Lee of Evant (Subsidiary of Manhattan Associates). Dr. Lee does a good job of explaining the advantages of the holistic planning process without getting to deep into the technical underpinnings of the process. A good paper for getting the idea and advantages of the multi-echelon optimization process in front of a broad audience.

Read the Article Here: Multi-Echelon Inventory Optimization

By Calvin B. Lee, Ph.D.
Vice President and Chief Scientist, Evant Inc.
The optimal deployment of inventory is a vital business function for an enterprise. The well-documented benefits of running a manufacturing, distribution or retailing operation with leaner inventory range from a permanent reduction in working capital to increased sales and higher customer satisfaction. As Forrester Research pointed out in a recent report, the ability to increase inventory turns is a key differentiator between highly successful and more poorly performing companies (e.g., Wal-Mart vs. Kmart; Dell vs. Compaq).

SAP 2.0 Promises Business Value – Can SAP Deliver?

October 12, 2009

David Edwards . Operations Professionals

SAP’s new executive Chief Value Officer (an omnipotent title), Chakib Bouhdary, is promising that SAP is prepared to arm it’s customers with exciting new insights into best practices, benchmarks, process optimization, and “creating value along the entire IT investment lifecycle”. Quite a mouthful from the largest provider of enterprise software in the market. Has SAP finally realized that software isn’t the “be all, end all” solution for business success? Can SAP reconcile the gap between information technology solutions and real business performance improvement? Can SAP deliver?

SAP appears to be recognizing the limits of the pure IT market, just like IBM did many years ago. Now, using a vast repository of SAP customer experience, SAP intends to expand into the world of enterprise “Value Engineering”. Bouhdary states “At SAP, we have always focused too much on products: we’re a product company. But we are at a time now when we need to have our conversations with CEOs and CIOs go beyond products and instead begin to help guide our customers on issues of strategic value.”

So what happens when the goals of the business are better supported by SAP competitors? Will SAPs value engineers be able to recommend and support the implementation of non-SAP solutions, or will that situation never arise due to the vast capabilities of SAPs solutions? What if the best solution is to reduce spending on software and consulting, and focus on internal capability development? The competing interests of software solution providers and their customers have always required customers to be diligent in determining the real value of the solutions under consideration, and now SAP wants to help their customers with that determination?

This new direction from SAP should be interesting. You can read more about it in the following article from InformationWeek:

Global CIO: SAP 2.0 Promises Business Value Over Products: Can It Deliver?

If SAP can deliver on the vision of its Chief Value Officer, it will make available to CIOs best practices, benchmark metrics, and breakthrough thinking and innovation.

By Bob Evans
InformationWeek
October 8, 2009 08:00 AM

 Talk can be cheap because the gap between what companies promise and what they deliver is often enormous. On Tuesday at SAP (NYSE: SAP)’s glittering new headquarters in suburban Philadelphia, an executive with the unprecedented title of Chief Value Officer made some sweeping promises about how SAP is prepared to arm customers with intense new insights into best practices, benchmarks, customer insights, process optimization, and “creating value along the entire IT investment lifecycle.”

ERP Taste Test – Don’t Drink the Kool-Aid

October 7, 2009

David Edwards . Operations Professionals

The Best of Breed Institute (BOBI) has a very entertaining video on their website called “Take The ERP Taste Test”. A really good laugh for those who have been through an ERP implementation, and a very interesting perspective for those who haven’t. While it is obviously a little (ok, a lot) slanted towards the sponsoring vendors product (the whole site is a tongue in cheek advertisement), it is an interesting approach to giving prospective buyers a “taste” of the decision they face when sourcing supply chain solutions. The bottom line is – don’t let ERP/SCM vendors influence your supply chain systems decisions. Do the work, understand your requirements, design your solution, then make them deliver!

Enjoy the video: ERP Taste Test

Supply Chain Excellence – The Top 25

October 5, 2009

David Edwards . Operations Professionals

Who are the current leaders in Supply Chain Management, and what are they focused on? A recent article by AMR Research gives us their perspective. The leaders are focused on improving bottom line business performance, not just by focusing on efficiency and cost minimization, but by paying attention to visibility, responsiveness, and adaptiveness. The leaders are leveraging supply chain to grow market share and improve revenues, elevating their supply chain from a cost liability to a strategic asset. The list of leaders (as defined by AMR) include names you would expect to see like Dell and Wal-Mart, as well as a few that may surprise you.

Supply Chain Excellence

By: AMR Research

After you’ve fiddled with labor costs, R&D, procurement, and such, if you’re looking for ways to boost financial performance (and who isn’t?), there’s still one slice of uncharted corporate terrain where additional business value is there for the taking. Pick your head up a bit and you just may notice it: the supply chain.