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Inspection Connection: Radiographic and ultrasonic weld inspection

2009-12-18T01:32:00.001-08:00

Inspection Connection: Radiographic and ultrasonic weld inspection

Establishing weld integrity without destroying the component

By Tony Anderson, Contributing Writer
February 14, 2002

This article outlines the differences in radiographic and ultrasonic weld inspection, the two most common methods if nondestructive testing. It gives an overview of both methods, including how they are used.

Radiographic and ultrasonic weld inspection are the two most common nondestructive testing (NDT) methods used to detect discontinuities within the internal structure of welds. The obvious advantage of both of these testing methods is their ability to help establish the weld's internal integrity without destroying the welded component.

Radiographic Testing

Radiographic testing (RT) usually is suitable for testing welded joints that can be accessed from both sides, with the exception of double-wall signal image techniques used on some pipe. Although this is a slow and expensive NDT method, it is a dependable way to detect porosity, inclusions, cracks, and voids in weld interiors.

RT makes use of X-rays or gamma rays. X-rays are produced by an X-ray tube, and gamma rays are produced by a radioactive isotope. The basic principle of radiographic weld inspection is the same as that of medical radiography. Penetrating radiation is passed through a solid object (in this case, a weld rather than part of the human body) onto photographic film, creating an image of the object's internal structure on the film.

The amount of energy absorbed by the object depends on its thickness and density. Energy not absorbed by the object causes exposure of the radiographic film. These areas will be dark when the film is developed. Areas of the film exposed to less energy remain lighter. Therefore, areas of the object where the thickness has been changed by discontinuities, such as porosity or cracks, will appear as dark outlines on the film. Inclusions of low density, such as slag, will appear as dark areas on the film, while inclusions of high density, such as tungsten, will appear as light areas.

All discontinuities are detected by viewing the weld shape and variations in the density of the processed film. This permanent film record of weld quality is relatively easy to interpret if personnel are properly trained. Only qualified personnel should conduct radiography and radiographic interpretation because false readings can be expensive and can interfere seriously with productivity, and because invisible X-ray and gamma radiation can be hazardous.

Ultrasonic Testing

Ultrasonic testing (UT) can be used on ferrous and nonferrous materials and often is suited for testing thicker sections accessible from one side only. In general, it can detect finer linear or planar defects than can RT.

UT makes use of mechanical vibrations similar to sound waves but of higher frequency. A beam of ultrasonic energy is directed into the object to be tested. This beam travels through the object with insignificant energy loss, except when it is intercepted and reflected by a discontinuity.

The ultrasonic contact pulse reflection technique is used in UT. This system uses a transducer, which converts electrical energy into mechanical energy. The transducer is excited by a high-frequency voltage that causes a crystal to vibrate mechanically. The crystal probe becomes the source of ultrasonic mechanical vibration. These vibrations are transmitted into the test piece through a coupling fluid, usually a film of oil, called a couplant.

When the ultrasonic waves pulse strikes a discontinuity in the test piece, it is reflected back to its point of origin. Thus, the energy returns to the transducer. The transducer now serves as a receiver for the reflected energy.

The initial signal, or main bang; the returned echoes from the discontinuities; and the echo of the rear surface of the test piece all are displayed by a trace on the screen of a cathode-ray oscilloscope. The detection, location, and evaluation of discontinuities become possible because the velocity of sound through a material is nearly constant, making distance measurement possible, and the relative amplitude of a reflected pulse is more or less proportional to the size of the reflector.

One of the most useful characteristics of UT is its ability to determine the exact position of a discontinuity in a weld. This testing method requires a high level of operator training and competence and depends on establishing and applying suitable testing procedures.

Tony Anderson is a regular contributor to this section and technical services manager with AlcoTec Wire Corporation, 2750 Aero Park Drive, Traverse City, MI

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RFID Drives Up Efficiencies at ABB

2009-12-18T01:29:00.001-08:00

RFID Drives Up Efficiencies at ABB

At its factory in Helsinki, Finland, the manufacturer is using EPC Gen 2 tags to track the production and shipment of the motor drives it makes, resulting in a range of benefits.

By Rhea Wessel

Nov. 25, 2009—ABB a global manufacturer of power and automation equipment for utility and industrial companies, is employing radio frequency identification at its factory in Helsinki, Finland, to better track outbound shipments of approximately 200,000 drives per year. The drives are frequency converters that control the rotational speed of alternating current (AC) electric motors.

ABB implemented the RFID system in order to reduce shipping errors, since such mistakes impact its invoicing process. Without a shipping receipt, the company cannot collect the funds it is owed. In addition, ABB faced a lack of floor space at its Helsinki facility, because production was rising at a rate of roughly 20 percent every year. ABB wanted to have a forwarding operator take over the task of logistics and warehousing, but was hesitant to do so because of its own unreliable, pen-and-paper- based method of manually tracking goods leaving the production area. The company believed that if it could improve its ability to track its goods shipments, it would then have reliable data to compare with that of a logistics partner—thereby reducing the risk involved in outsourcing some of its logistics and warehousing tasks.

RFID readers installed at ABB's loading platforms are used to verify that the correct products are loaded onto trucks.

To meet this goal, ABB designed an RFID system to replace its manual shipping processes, enabling it to reduce outbound shipping errors. The company launched its RFID implementation in 2006, used the system in production by 2007 and completed the integration of the technology with its existing SAP system in mid-2009.

"By implementing RFID into SAP, we have reduced our manual work and have a more reliable way of inputting transaction data," says an ABB spokesperson who requested not to be named, in compliance with his company's policy. "Input time for transactions is only seconds, and we generate multiple readings at the same time with RFID—something that is impossible with the bar code."

The SAP implementation was a lengthy process, because ABB had to simultaneously perform a general update of its SAP system. Now, the firm is working to increase the number of fixed readers it uses at its dock doors from three to seven.

The smallest drives that ABB manufactures weigh about 15 kilograms (33 pounds) and are shipped in boxes, while the largest drives weigh up to 400 kilograms (882 pounds) and are transported on pallets. As soon as a drive is manufactured, it is placed in a box or on a pallet, and a worker applies a printed adhesive label containing an EPC Gen 2 UHF inlay to that pallet or box. The drives are then loaded on trucks or trailers for short-term storage or immediate forwarding. RFID tags are interrogated as the goods are moved past fixed gate readers in the loading area near the dock doors. Information about specific goods is linked in the database to the ID number of the truck or trailer, which is entered manually so that ABB knows the loading progress of each vehicle, and has an exact description of the goods it contains.

The system produces a warning error at the gate if a worker attempts to load the wrong products onto a vehicle, and it also notifies employees when a truck's consignment is incomplete. What's more, by outsourcing some of its logistics and warehousing to a partner, ABB was able to free up space at its factory to expand its production capacity.

UPM Raflatac is supplying the tags for the implementation. Vilant Systems, which served as the systems integrator for ABB's RFID deployment, provided the readers, which have a range of 3 meters (10 feet).

Later, ABB hopes its logistics partners will utilize the RFID tags on the pallets and boxes as well, in order to provide it with additional information regarding the status of goods, as well as improve its own services. The company plans to introduce item-level tracking for the components that make up the drives; a large drive may comprise thousands of parts.

In a separate application, ABB has been using RFID in a kanban process involving reusable plywood boxes since December 2005. Both the supplier and ABB read the boxes' RFID tags. When a full box leaves the supplier, its tag is read and an electronic notice is created in SAP. Once an empty box leaves ABB's factory, it triggers a material order from the supplier.

According to ABB, the system has decreased the manpower the company requires to process incoming packages. It has also reduced errors compared with the bar-code system previously used, the firm reports, and provided a return on investment within a few months. In December of this year, ABB plans to implement the same system at a factory in Estonia.

Reference : http://www.rfidjour nal.com/logistic s

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Fresh Graduates Vs Experienced Professionals

2009-11-09T20:46:00.001-08:00

Fresh Graduates Vs Experienced Professionals

Many successful companies, both national and multi-national, pride themselves on recruiting the best employees, and tag their workforce as being the secret of their success. This set of employees consists of a combination of both experienced and fresh professionals. Two key points in this regard would be the role of employees in the attainment and success of company goals and their own career and personal growth.

Young Vs Experienced Human Resources – An Overview

Starting out as a young professional one is more flexible, eager to work for longer hours and more passionate about coming up with innovative ideas for the company. On the other hand, senior personnel tend to have a great deal of experience; they have explored different phases of their professional life and use their previously learnt experiences to come up with better solutions in different situations.

Many employees with greater experience have a problem with relatively fresh individuals joining their departments because they take this as a threat. The reason is that the fresh graduates show much enthusiasm and eagerness to perform as compared to the employees in their middle ages. Thus, the elderly fellows see a clear potential that these young minds my surpass them and engulf their positions.

Being connected with the developing trends in business and marketing, the fresh recruits bring new ideas to the table. Alternatively experienced workers have better networking in way to develop their career. Moreover, nowadays, companies are using Social Market Strategies in order to be more marketable. Businesses use techniques such as blogging and connecting with customers on sites like Facebook.com and Twitter.com. They are depending on the younger employees to lead the social marketing strategy initiatives; after all, they are more aware of the technology and are more internet-savvy. On the other hand, a great barrier that lies with the experienced employees is that they are relatively difficult to train, and not comfortable with new technology.

5 Suggestions For The Experienced Professionals

Following are the five suggestions for the senior employees (from the age of 29 onwards) that are either hunting or striving to sustain a job:

Trim Your Appearance

Improve your outfit and your outlook; but be careful not to do anything unnatural that makes you uncomfortable with your appearance.

Market Yourself

Although experienced professionals work hard, they do not know how to promote themselves to the world. Work on opportunities to speak at a conference or become quoted in an article that appears on the Internet, or update your biography on your company's website, if you are working at a higher post.

Show Energy And Enthusiasm

You have to keep your energy level up while talking to recruiters and interviewers. During an interview you should be proactive and lively. Experience counts a lot. Many companies staffed with younger employees still want a few gray heads around to call on the large corporate clients and to help the company avoid mistakes.

Demand A Fair Financial Reward

Find an employer who is willing to pay you according to your worth. Play on the fact that you are experienced and you should be remunerated accordingly.

Get Yourself Wired To The New Technologies

Keep yourself socially and technologically up-to-date. Things are changing more rapidly than you could ever imagine. If you want to work in the New Economy, you have to prove you belong there. Being computer proficient and Internet-savvy combined with much experience will make you a perfect choice of the employer.

5 Tips For The Fresh Graduates

Here are five suggestions for the young employees (between the ages of 22 to 28) to help you win at the business world's game:

Develop A Sellable Persona

Think of yourself as an advertiser with the aim of promoting your own self. Learn to benefit from your skills, and briefly state your achievements. Your persona should be professional and decent.

Establish Profitable Relationships

Business networking is a valuable tool to gain career-related information, increase your recognition in your field and make connections that will help you move forward in your career. Make new contacts and set ideals, people who interest you the most.

Master Goal Setting, Effective Communication And Time Management

These skills will serve you well no matter what future path you decide to pursue. Make the most of your time. Work with your boss to set specific, reasonable, and attainable goals for your present position that will help you advance to the next stage.

Stay Motivated

There is no doubt that the business world is quite frustrating; however, remember that you can 'choose' your response to your environment. If you decide to begin each day with a positive attitude, negative conditions at work cannot take that motivation away from you.

Respect Your Seniors

Always respect your senior co-workers no matter how irritating they get. Keep in mind that other people don't care what you want; they rather want to know what's in it for them. If you show them respect and maintain an obedient attitude, they will automatically start cooperating with you. By approaching negotiations with an attitude that allows both parties to win, you'll be ultimately getting what you want.

It is a fact that every organization definitely needs a combination of experienced employees as well as fresh recruits. Hiring fresh or experienced employees depends upon the pre-determined attitude of the employer. Moreover, in every organization there are non-productive workforce as well as fine and hardworking recruits and this can be applied to young and experienced alike. Well-experienced professionals or fresh employees, both should show the best performance for the sake of their team, their company and their boss. Holding back because one is afraid of working more than others and not be rewarded for it is an immature belief.

Both, experienced and fresh employees, have an equal opportunity to develop their career with their own hard work and commitment towards their job. Salary or other fringe benefits should not be the ultimate goal. In order to acquire success one should concentrate on the performance, ability to cope with his responsibilities, and also the business needs of your company or organization.

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Hand Tool Ergonomics

2009-11-08T20:32:00.001-08:00

How can one reduce the risk for work-related musculoskeletal disorders (WMSDs) resulting from the use of hand tools?
What are the major ergonomic concerns of a hand tool design?
What should one remember when selecting and using hand tools?
How does hand tool maintenance reduce the risk for injuries?

How can one reduce the risk for work-related musculoskeletal disorders (WMSDs) resulting from the use of hand tools?

Tool design (weight, shape, fit to the user and the task), workstation design (size, shape and layout), and the way tasks are scheduled are all key factors in making hand tool use safe and risk-free. Since, none of those three areas is more important then the other, an effective prevention strategy must address all of them simultaneously.

What are the major ergonomic concerns of a hand tool design?

Weight of the tool

Ideally, a worker should be able to operate a tool with one hand. Therefore the weight of the tool, especially for repetitive use, should not exceed 1 kg (2.2 lb.). It is also important that the centre of gravity be aligned with the centre of the gripping hand.

Figure 1

In other words, tools should feel "easy" to hold either in an upright position or in the position it will be used (ie. pointing down). For example, drills that are "front-heavy" will require effort (especially in the wrist and forearm) to hold in a usable position and should be avoided. The exception to this principle is a power hand tool, such as a grinder, that has to be heavy in order to reduce the force that the worker has to exert while using it. Tools heavier than 1 kg or poorly balanced tools should be supported by counter-balancers.

Power

Where possible, power tools should replace hand tools which normally require the exertion of frequent and repetitive force to do the job, because the greater the force exerted with a hand tool, and the more the hand has to twist to use it, then the greater the risk for WMSDs.

Handles

With the exception of tools for precision work (e.g., watchmaking, microsurgery, carving), the handles and grips of hand tools should be designed for a power grip. The belief that smaller tools should have smaller handles while larger tools have larger ones is debatable.

Handle shape

Tools with "bent" or angled handles or tools with pistol-grips are beneficial where the force is exerted in a straight line in the same direction as the straightened forearm and wrist, especially when the force must be applied horizontally (see Figures 2, 3, 4).

Figure 2

Figure 3

Figure 4

Tools with straight handles are for tasks where the force is exerted perpendicular to the straightened forearm and wrist, for instance, when the force must be applied vertically.

Shaped tools such as bent-handle tools are effective where most of the tasks are done in the same plane and height as the arm and hand, and when only one or two other tools are used (see Figure 5).

Figure 5

Knowing the tasks and the layout of the workplace where they will be used is vital for selecting the right tools for any given job. Select tools that do NOT require wrist flexion, extension or deviation. In other words, select tools that allow you to keep the wrist straight or in a neutral position.

The crucial ergonomic principle in tool use and design -- bend the tool, not the wrists -- however correct and valuable does not always prevent discomfort and injuries when bent-handle tools are used indiscriminately, regardless of the layout of the work situation.

Diameter

Handles should be cylindrical or oval in cross section, with a diameter of between 30 mm and 45 mm. For precision work the recommended diameter for handles is between 5 mm and 12 mm. For a greater torque large screwdrivers should have a handle diameter up to 50-60 mm.

Length

A handle that is too short can cause unnecessary compression in the middle of the palm. It should extend across the entire breadth of the palm. Tool handles longer than 100 mm (preferably 115-120 mm) will reduce the negative effects of any compression exerted. Rounded handles will minimize palm compression on the palm still further. Keep in mind that the use of gloves requires longer tool handles.

Separation between handles

Crushing, gripping or cutting tools such as pliers or tongs are equipped with two handles. The recommended distance separating handle is between 50 mm and 65 mm. Such a range will fit both male and female users. Tools with larger or smaller spans will reduce one's maximum grip strength and may contribute to the onset of carpal tunnel syndrome.

Power tool triggers

Frequent movements of the index finger while operating the trigger of power tools (such as a power drill) poses a considerable risk for both "trigger finger" and "trigger thumb" (tendonitis in the index finger and/or thumb). A longer trigger which allows the use of two or three fingers to activate them reduces discomfort and minimizes the risk for injury. The recommended minimum length of the trigger is 50 mm.

Materials and texture of handles

To ensure a good grip on a handle, sufficient friction must exist between the hand and the handle. This is particularly important where a considerable force must be applied with a sweaty hand. Hand tools should be made of non-slip, non-conductive and compressible materials. For example, textured rubber handles provide a good grip, reduce the effort needed to use the tool effectively, and prevent the tool from slipping out of the hand. Glossy coatings and highly polished handles should be avoided. The electrical and heat insulation properties of the handles are important for power hand tools. Handles made of plastics or compound rubber are recommended. Sharp edges and contours can be covered with cushioned tape to minimize lacerations.

Vibration

The only effective way to reduce vibration in power tools is at the design stage. This fact makes tool selection most critical. The common practices of covering handles of vibrating tools with a layer of viscoelastic material or of using anti-vibration gloves made of similar material are of dubious value. These "anti-vibration" materials will dampen vibration above certain frequencies that are characteristic for the kind of material, but most of the vibration energy in a handle of a power tool is below those frequencies.

What should one remember when selecting and using hand tools?

When selecting and using a hand tool it is important:

to "bend" the tool, not the wrist; use tools with angled or "bent" handles, when appropriate)
to avoid high contact forces and static loading (see Hand Tool Ergonomics - Health Hazards)
to reduce excessive gripping force or pressure
to avoid extreme and awkward joint positions
to avoid twisting hand and wrist motion by using power tools rather than hand tools.
to avoid repetitive finger movements, or at least reduce their number
to avoid or limit vibration
to minimize the amount of force needed to activate trigger devices on power tools.

How does hand tool maintenance reduce the risk for injuries?

The condition of tools is an important factor. Blunt or dull tools such as scissors, cutters, saws, screwdriver tips, in fact any tools in a poor state of repair, not only compromise safety but also increase (sometimes by a factor of ten) the effort needed to use them. Tools in poor condition should be discarded (with the exception of those few that can be restored to optimum condition, for example, a wood chisel or wood saw) and replaced with new ones.

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The Benefits of Rapid Prototyping Technologies

2009-10-24T05:45:00.001-07:00

The Benefits of Rapid Prototyping Technologies

Rapid prototyping is being used in just about all industrial sectors, although there are probably more applications in the automotive industry than any other. This is not surprising, however, given the intense global competitive pressures that are being experienced by automotive firms. A number of diverse application examples from different sectors are described in Chapter 2 of the Management Report.

The application at Rockwell Automotive (see Chapter 2, page 38 of the Management Report) is a typical example of what many companies using this new technology are achieving. In Rockwell's case the technology was used to:

increase visualisation capability during the early phases of design by using rapid physical models;
detect design flaws before the manufacture of tooling;
rapidly create tooling to manufacture physical prototypes.

Rockwell claim that this allowed them to reduce by seven months the time taken to develop a prototype engine. They also claimed that cost savings were achieved on the development project.

Time and cost savings

The applications described in Chapter 2 of the Management Report show firms using rapid prototyping technologies to achieve both cost and time savings in the process of new product development. This is to be expected given the high emphasis that is being given in most industries to reducing both the cost of new product development and time to market.

In most cases firms using rapid prototyping have gained time reductions in the production of prototype tooling and parts, which is mostly how these time savings have been specified.

The figures for time reductions on prototyping vary greatly, ranging from 60 to 90%. On the whole this range is likely to be realistic given that the estimation of time savings, when compared to the conventional methods of prototyping, is a fairly straightforward matter.

Little information is provided in the public domain about cost savings. Clearly there is a potential for cost reduction. For example, if mistakes can be identified before commitments are made to expensive tooling, then the costs associated with modifying such tools can be avoided. However, the information on cost reductions should be treated with some caution. The cases where cost reductions are claimed do not provide sufficient details of the basis for the calculations or the assumptions that have been made.

Innovation

Whilst pursuit of time and cost reductions are necessary business objectives, it is evident from studying the application examples in Chapter 2 of the Management Report, that some firms are using rapid prototyping in more innovative ways than others. Included in these innovative applications are:

the development of new analysis and testing procedures (see, for example, the Andersen Corp. case, page 46 of the Management Report);
manufacture of production tooling (see, for example, the Buddy/L case, page 43 of the Management Report);
improving communications across product divisions (see, for example, the Square D Company case, page 42 of the Management Report); and
supporting customised manufacturing (see, for example, the Wright Medical Technologies case, page 45 of the Management Report).

Given the high capital costs of some rapid prototyping machines, especially the larger ones, these innovative applications are probably the key to the successful and cost-effective use of the technologies. It may be the case that rapid prototyping will only be seen as financially viable when these wider potential benefits are taken into account.

http://www.cheshire henbury.com/ rapid/benefits. html

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Global Supply Chain: Keys to Succeeding in China

2009-10-24T05:43:00.001-07:00

Need for Relationships is Different in China; Avoiding Joint Ventures

SCDigest Editorial Staff

SCDigest Says:

Investing time and effort in building long-term relationships in China is essential for success there, experts say – and that includes the Chinese government .

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The growth of China, both as a supply base and potential source of market expansion, over the last 10 years or more has been phenomenal. But navigating the complexities of buying from or selling into China has never been easy, especially as the pace of change there is almost mind-boggling.

Still, the companies that have been doing business in China for many years have learned a number of lessons that can benefit others that have more recently made the move or are considering expanding their buy or sell efforts. Many of those lessons were discussed during a recent conference at Arizona State University and co-sponsored by AT Kearny, including a panel discussion that featured executives from Motorola, Emerson Electric, Harley-Davidson, ON Semiconductor and TPI Composites, as well as ASU faculty members. Those lessons are summarized below:

Leave your "Cutting Edge" Technology Behind: "Hit-and-miss IP regulation is a significant inhibitor to development in China," said W. P. Carey School supply chain management professor Philip Carter.

But companies shouldn't ignore China due to the IP risks, but rather go into China with older, "second best" technologies that present lower risks to the company if the IP is ripped off.

However, it is worth noting that IP protection in China has become better and likely will continue to improve. That's in large part because as Chinese companies themselves continue to move up the value chain, they also will be looking for greater protection of their IP. In fact, in 2007, China's Premier Wen Jiabao said, "The competition of the future world ... is the competition of Intellectual Property Rights."

Focus on Recruiting and Retaining Management Talent: Finding basic factory and unskilled labor in China is easy, but supervisory and management talent is a lot harder to come by – yet, that management talent is obviously key to success.

"You need to have people on the ground in China who can interact with the government and move quickly," said Peter Yam of Emerson Electric. "Delegate decision-making to people on the ground -- to senior executives who are actually based in China."

Companies must invest in finding good managers and keeping salaries and opportunities attractive, and keep a strong and consistent focus on middle and upper management staffing.

Understand the Importance of Relationships: Relationships are different and arguably more important in China than in Western economies. The Chinese term guanxi, meaning "connections," is indicative of the role that relationships play in Chinese business.

Investing time and effort in building long-term relationships in China is essential for success there, experts say – and that includes the Chinese government.

"Our great relationships with the Chinese government have been critical," said Ronald Hutchinson of Harley-Davidson at the conference. "The ultimate authority over a company's success in China is the government, and there's always a veiled threat of retaliation -- that's why building relationships is so important."

One risk: understanding when you might be crossing the line in terms of corruption or related issues in China itself or your home country's laws, especially as bribery and anti-corruption laws in China continue to change rapidly.

It is also important to work hard to really understand the Chinese culture and embrace its reality. Many companies have failed by trying to fight those cultural differences.

Think Sell, not Just Buy: While making products in China either directly or indirectly for export back to Western markets can dramatically reduce costs, companies must really look at entering the domestic Chinese market as well, despite the challenges, those with experience there say.

This is again where relationships with government officials is key, as it may smooth the way to joint ventures and even 100% ownership by Western companies of businesses in China, as Motorola was able to achieve with its operations there.

But beyond the ownership and regulatory challenges, Western companies must also work very hard to understand China's heterogeneous market, experts say, though that is not easy given the relative lack of publicly available information.

Procter & Gamble, for example, has hired hundreds of research managers living with Chinese families in cities and on farms to learn how they use everything from detergent to toothpaste, habits that can vary dramatically from region to region.

Be Careful with Joint Ventures: While, in many cases, a joint venture with a Chinese company may be the only path into China, such moves have to be done with care and the right strategy to avoid creating a competitor and losing IP.

"The best model to incorporate in China is a wholly-owned subsidiary of the American or multinational company," says Gary Took of Motorola.

However, in some cases, the only deal that can be struck is a joint venture. In that case, ensure you have a majority stake, and that there is a clear path to increasing that share. The experts also advised against forming a joint venture with a Chinese competitor.

Look for Win-Win: Companies likely will find more success in China if they look for opportunities that are not only good for their companies, but also good for China. That's a different approach than is needed in the West – but may be the key to building relationships with government officials and accelerating official approval for new plans and development.

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Managing Spare Parts

2009-10-24T05:40:00.001-07:00

Proven, controversial, and new approaches are part of an effective asset management program.

Proper planning and control of spare parts inventory is a critical component of an effective asset management program. If the right parts are not on hand when needed for routine maintenance or repairs, downtime is prolonged. If too many parts are on hand, the enterprise absorbs excessive costs and the overhead of carrying the inventory.

There are tried and true strategies to manage spare parts in support of effective asset management, along with some that can be considered questionable, and a variety of new and innovative practices. Advanced enterprise asset management (EAM) solutions support the proper implementation of these capabilities. Following are examples of each.

Proven strategies
Item search. It can be frustrating to a maintenance planner who is not familiar with item numbers to locate the appropriate part in a computer system. Nouns and qualifiers are a way of simplifying a search. A noun is a simple, meaningful name for the item, for example "pump." The qualifier adds more detail, such as "hydraulic." A search on this combination will bring up all hydraulic pumps in the stock item master file.

An assortment of captions and a detailed item description can provide an increasingly narrowed search that considers make, model, size, formulation, capacity, etc. If the part can be substituted with an alternate or equivalent part, that reference also should be stored in the stock record.

ABC and XYZ analyses. The generally accepted 80:20 rule illustrates that approximately 80 percent of any storeroom's volume is associated with only 20 percent of the items in inventory. It is important to pay extra attention to that critical 20 percent.

ABC and XYZ codes are commonly used to identify those parts. The codes are assigned based on value or quantity of stock movement, and each code will have an associated "upper limit." Highest value parts, for example those that cost more than $5000 each, can be assigned the ABC code of "A," and fastest moving parts can be assigned an XYZ code of "X."

Automatic replenishment. Automating the thought process related to reorders has generated proven savings. Suggested reorder functionality creates requisitions based on reorder points (ROP) and reorder quantities (ROQ) that are stored in the inventory record. Once inventory levels for a part fall below the reorder point threshold, a suggested reorder is placed for the reorder quantity, which in turn creates a requisition. This saves time and prevents the delays and errors that can occur with manual purchasing processes.

When a simple ROQ value is not enough, an economic order quantity (EOQ) algorithm can be used to calculate the right quantity of a spare part to purchase when replenishment is needed. The EOQ can consider volume discounts, the cost of placing an order, carrying costs, and other factors.

Vendor service levels. Capturing supplier service level data within the inventory record helps bring to light the most efficient, dependable, and cost-effective vendors. Preferred suppliers can be identified based on historical lead times, pricing, quality, number of short- or over-shipments, how often goods are received damaged, frequency of backorders, and other criteria. Preference can be given to these vendors in the procurement process.

Where used. A view of where a part is used, for example on which assets a certain ball bearing is installed, provides benefits to both the plant floor and storeroom. This view enables inventory personnel to understand how extensively a part is used throughout the operation, and helps the maintenance planners to determine the item number and quantity of parts installed on an asset.

Multi-stores capability. Taking where-used one step further, a multi-stores capability enables an enterprise-wide view of spare parts inventory that is stored at more than one warehouse or off site by a third party. In a multi-plant environment or when maintenance departments are distributed, visibility into inventory at the various storerooms permits monitoring of parts availability and service-level agreements across the enterprise as a whole or on an individual basis.

Controversial methods
Just-in-time (JIT) replenishment is a popular but sometimes controversial concept of storing minimal inventory in the warehouse and replenishing it only when and as needed╛just in time. Although enabling significant carrying cost savings, there are risks involved. The best replenishment formulas cannot predict an emergency breakdown, a vendor going out of business, a carrier going on strike, or a sudden shortage of raw materials. Being too conservative in stocking levels can result in the inability to repair equipment in a timely manner or to keep the production line running.

In asset management, the criticality of a part determines whether it is a candidate for JIT. A criticality code in the EAM inventory record can be used to identify these items.

Lean manufacturing is a similar concept with a broader scope. Lean manufacturing means doing more with less, cutting time to market, and eliminating unnecessary processes. This impacts maintenance and the storeroom by stressing improved efficiencies, better planning, and reduced costs╛and running an operation with far less inventory.

A comprehensive lean manufacturing program can be costly to implement, but a number of steps can be taken to support lean inventory levels. EAM inventory analysis tools, catalog management, and automatic replenishment can be used to reduce on-hand inventories, track where individual items are used, how they are used, and where they are stored, so that inventory maintained is matched to inventory needed.

New approaches
Purchasing through the Internet is an effective means of acquiring indirect items and hard-to-find, inexpensive, or short-notice spare and replacement parts. Almost all OEMs, brokers, distributors, manufacturers, and machine shops have Web ordering capabilities. Most companies are now purchasing indirect materials online, about half are purchasing direct materials online, and about a third use industry exchanges and e-marketplaces such as Pantellos and Enporion for utilities and ChemConnect for chemicals and plastics.

An e-procurement solution that is tightly integrated with a company's EAM system checks to see if the item is already in stock, automates the approval of purchase orders, and alerts the buyer to exceptions. By negotiating better prices and terms with e-sourcing, companies have been known to save 10-15 percent on direct goods and 20-25 percent on indirect goods and services, while slashing sourcing cycle times.

Mobile computing is becoming more sophisticated and is increasingly popular in the storeroom. Warehouse personnel can conduct cycle counts without halting operations by automating parts identification with bar codes. Wireless technology can capture inventory through bar codes and transmit the data in real time to the corporate network. Critical material availability is easier to track, resulting in timelier asset management.

With a wireless system, real-time information flows throughout each key process in the warehouse, including receiving, put-a-way, picking, issues/returns, and bin movement activities. For one energy company that implemented mobile asset management, errors were slashed, pick time was cut by one-third, on-time picks were improved from 64 percent to 98.89 percent, and overhead costs were reduced by 20 percent.

Key performance indicators (KPI) are increasingly popular decision support tools. For example, an EAM solution can calculate a KPI on inventory turns by dividing inventory expenditures by average inventory level. When problem areas are flagged, notification can be sent automatically to the plant and storeroom managers for escalation. Other supply chain KPIs can include vendor performance, obsolescence, items available but not used, supplier pricing, and more.

Supplier relationship management (SRM) is the newly branded concept of developing and managing long-term relationships with suppliers of specialized equipment and replacement parts. In asset-intensive industries, some suppliers enjoy a near-exclusive position because of the uniqueness of their replacement parts.

These relationships support the automatic electronic procurement of required parts, offsite storage of parts, or onsite storage with vendor ownership. SRM requires establishing the two-way visibility of parts requirements and availability, which is built into advanced EAM solutions.

Vendor-managed inventory (VMI), where suppliers own raw material inventory until needed, is a strategy that reduces inventory and administrative costs, while meeting the demand for parts and equipment. The collaborative capabilities within advanced EAM solutions support the two-way visibility and transaction flow required by this strategy.

Outsourced asset management and maintenance follows the trend of using partners for the execution of noncore businesses. In asset-intensive companies, the extensive infrastructure and deep knowledge base required to manage certain strategic assets can be beyond their capacity. Collaborative commerce (c-commerce) and Internet-enabled collaboration within enterprises now supports remote asset monitoring and proactive maintenance services. Advanced EAM solutions can support this business model by providing the ability to share the necessary real-time information within and outside the enterprise.

Clearly, effective spare parts management plays a critical role in asset maintenance, which in turn keeps the operation running. A combination of tried and true inventory and warehouse strategies, strategically aligned with new and controversial methods that are properly implemented, can result in tremendous benefits for the enterprise. MT

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Supply Chain : Supply Chain Value

2009-10-24T05:39:00.001-07:00

Developing an effective supply chain is not easy. A company must have the right technology and the support of the best suppliers for it to work. However even once that obstacle has been overcome, another major issue may still loom ahead: finding real cost-reduction in the supply chain. Unfortunately, the unanticipated costs of running the supply chain often surprise managers and force companies to make some tough decisions. Thankfully, understanding what causes or drives these costs is half the battle.

There are actually six main causes of cost problems in supply chains. Usually a supply chain will not exhibit all of these problems but they commonly do have a combination of numerous ones since many of them are related. One of those causes is simply that the business and its partners have not clearly thought about what they are doing. Anyone who has ever put together a supply chain knows that it is a truly ambitious endeavor that is truly worth doing right. However, many companies lack sufficient direction to accomplish such a goal. Along those same lines is a second cause: confusion. When so many different elements come together, confusion is almost inevitable initially, especially if there was not enough planning, training, or communication among those elements.

Another problem deals with the way supply chain success is measured. Too many companies continue to use outdated financial yardsticks as the sole indicator of the success of a project or of the business. This approach does not work for supply chains since its main goal is not necessarily to only to improve profits but to balance supply and demand among all of the chain's elements. Using profits and revenues as the main unit of success measurement means that many partners may begin to sacrifice quality or to make other drastic changes which seem to help the bottom line but which destroy the supply chain's foundation.

A third cause of extra costs involves barriers. Those already involved with supply chains probably already understand that small changes are magnified at each level of the supply chain. A minor price cut at the distributor level may be a major problem for vendors supplying the raw materials. In order to minimize these effects, businesses must be able to overcome the barriers that exist between each separate organization involved in the supply and between the different departments operating within one's own company. Unfortunately crossing these boundaries is not always as easy as it sounds. However, dealing with these situations before they arise and choosing supply chain partners who are open to that level of collaboration can help alleviate many of these problems.

Finally, supply chains often suffer because either one or several links in the chain are unable or are resistant to change or when attempts are made to make everyone involved in the link adhere to strict guidelines. Being willing to adapt and to be flexible is one of the biggest challenges supply chain partners must face. An insistence that the status quo be the way to go will ultimately cost all parties involved a great deal and might actually destroy the supply chain.

While there are a number of ways to avoid these cost problems, they all boil down to one thing: take pre-emptive action. When a supply chain waits for a problem to arise then deals with this problem, the consequences have already occurred and the damage may not be able to be reversed. Instead, companies need to sit down with their supply chain partners and discuss issues like flexibility, barriers, metrics, and direction. By going over these concepts in advance, the companies can ensure that everyone is on the same page and that anyone who is not willing to be part of the group can get out before they get too deeply involved.

Overall supply chains can be tremendous assets to companies and their vendors, but they often come with a price. Businesses must be willing to change their attitudes, their routines, and their ideas of how things need to run. A failure to do this means that not only will the supply chain fail, but the businesses involved will likely lose a great deal of money in the process.

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Fw: [indusnmfg] How to Calculate Bend Allowance for Your Press Brake

2009-10-24T05:38:00.001-07:00

How to Calculate Bend Allowance for Your Press Brake

Calculating the correct flat pattern layout is crucial to getting a good quality finished part from your press brake. Yet, many CAD and CNC programmers have no idea how to calculate the required values. Years ago, the real experts created cheat sheets and tacked them to the wall. They only taught the new apprentice how to apply the results shown on the cheat sheet, not how to calculate the numbers. Well, now those experts have retired and it's time for a new generation to learn the right way to do the calculate the correct flat pattern layout.

Calculating the flat pattern length from the 3D part really isn't that difficult. Although you may find several different formulas that claim to calculate the Bend Allowance (SeeBending Definitions), they usually are the same formula, only simplified by filling in the angle or a K-factor. Oh, and yes, you do need to know the K-factor to calculate the Bend Allowance.

Let's start with a simple L bracket. The picture shows that the legs of the bracket are 2" and 3". The material thickness is 0.036", the inside radius is 0.125", and the angle of bend is 90 degrees. The flat length is the total of the flat portion of both flanges plus the length through the arc of the bend area. But, do you calculate that on the inside of the material or the outside? Neither! This is where the K-factor comes into play. The K-factor is the percentage of the material thickness where there is no stretching or compressing of the material, for example, the neutral axis. For this simple L bracket, I will use a K-factor of 0.42.

The formula (See Bending Formulas) is: Bend Allowance = Angle * (PI / 180) * (Radius + K-factor * Thickness). Plugging in our numbers, we have: Bend Allowance = 90 * (PI / 180) * (0.125 + 0.42 * 0.036) = 0.2200999813105009. If you don't have a calculator handy, try the Bend Calculator.

So the flat pattern length is 2" + 3" + 0.2201 which is equal to 5.2201. So if you add up the flat length of all the flanges and add one Bend Allowance for each bend area you have the correct flat length of the part.

But look at the drawing. That is not how we normally dimension a sheet metal part. The dimensions are usually to the intersection of the flanges or the Mold Line. This means that we have to subtract two times the material thickness plus the bend radius (also known as the Setback) for each bend area. For this set of dimensions, it would be easier to calculate the Bend Compensation value. The Bend Compensation value lets you add up the length of each flange using the Mold Line dimensions and then add one Bend Compensation per bend area to the total. Don't bother with your calculator. Just go to theBend Calculator and get the answer. It is -0.1019, a negative number, which means you will subtract this amount from the total of the flange lengths, 5", to get 4.8981.

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The Benefits of Inert Lubricants

2009-10-24T05:35:00.001-07:00

Inert lubricants are widely used in industry because they present a number of benefits which aren't present with petroleum- and chemical-based lubricants. These lubricants have special properties that make them a much better option for industrial purposes than many other greases and lubricants, allowing lubrication to be put in locations and on materials that would otherwise not be able to be effectively lubricated.

Defining Inert Lubricants

In order to understand the benefits of inert lubricants and why they're so vital to industry, it's important that you first understand exactly what inert lubricants are. An inert lubricant, also known as a PCTFE (polychlorotriflour oethylene) lubricant, is one that has been saturated with halogen in order to make it chemically inert. This means that the lubricant isn't going to react with chemicals in order to form new compounds such as dangerous gasses. The process of making the lubricants inert also renders them nonflammable, meaning that using them eliminates the danger of fire that can be associated with petroleum-based lubricants. Other features of inert lubricants include a high thermal stability, high density, and a low compression factor.

Usefulness of Inert Lubricants

As mentioned above, inert lubricants are nonflammable. This makes them ideal for use in high-heat environments where traditional lubricants could not be used because of the danger of ignition. The high thermal stability of these lubricants is very useful in these environments as well because the lubricants will continue to do their job even when less stable lubricants would have broken down or become too thin to be very useful.

Because the lubricants do not react chemically with materials they can be used on metals which are generally quite reactive in order to prevent oxidation and to provide necessary lubrication. This allows the inert lubricants to not only keep machinery working by keeping the parts lubricated but it also can greatly extend the life of chemically-sensitiv e parts by preventing unwanted chemical reactions such as rust which can greatly damage those parts and reduce their functional lifespan by years.

The low compression factor of inert lubricants can make them very useful in hydraulic systems. Because the lubricants don't compress very much when pressure is applied to them, they can provide significant resistance in hydraulic drums (which in turn gives more power to the hydraulic system as a whole without the need for a larger amount of fluid in the system.)

Inert lubricants also have a high density as compared to some other forms of lubrication, which allows them to serve as a better lubricant that is much more likely to coat the system that it is used in. Combining the high density with the high thermal stability of these lubricants lets you see how the lubricants can be effectively used in engines and other heavy machinery in order to provide adequate protection for the system without the fear of a loss of viscosity or thermal breakdown which could cause the lubricant to become too thin to use effectively.

Along similar lines, inert lubricants also have what is known as a high dielectric strength; this means that they can resist a significant amount of electricity before they start to break down (in much the same manner as they can resist heat.) This allows them to be used effectively in the lubrication of electrical systems where a short or exposure to voltage might cause other lubricating materials to break down much sooner.

Other Benefits

In addition to the benefits that are mentioned above, inert lubricants provide an alternative to some other petroleum-based lubricants. They are made from specific polymers instead of being produced directly from petroleum, meaning that they do not have the same dependence on fossil fuels that a number of other lubricants have. Because these inert lubricants aren't going to react chemically with the materials that they're used on, they can also be used more freely without having to worry about causing accidental damage to some sensitive equipment.

Aside from the reduced reliance on fossil fuels, inert lubricants also are much less likely to cause environmental damage that usually results from large fires or the release of hazardous gasses because of the inert properties that these lubricants display. This means that they can assist industry in reducing its environmental impact and having a reduced carbon footprint.

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Simplifying the Vendor Selection Process

2008-10-07T03:35:00.001-07:00

Managing the vendor and product selection process at your company isn't as hard as you think, writes CIO Update guest columnist John Lakey of Acquity Group.

Contemporary companies rely on outsourcing for success in today's competitive marketplace, and selecting a vendor is now as important a process as developing new products.

Products and services are selected for cost, requirements, overall quality, stability of the supplier, time-to-market and traditional partnerships. The purchase approval process often involves more than one criteria and one opinion and requires the establishment of a broad-based team to manage the process.

Creation of a repeatable evaluation process is critical and development of a process that works for your company is not as hard as many think. It's worth the time and effort and can be broken down into a four step approach that will allow selection of the right vendor for the job.

The key to a successful cost-based evaluation is that the product or service in question is an undifferentiated offering (e.g., long distance phone service). When evaluating offerings that can be differentiated, it becomes much more difficult to find a company that offers a solution that is clearly superior along all dimensions your organization would like to consider.

In these situations, cost is joined by other evaluation areas such as: functionality, ease-of-use, company history and financials and value-added services.

A Four-Step Plan

Sophisticated product and service evaluations can be accomplished in four steps:

Evaluating Business Needs Request & Assess Offers Vendor Interviews & Proof-of-Concepts Negotiation

Step 1 - Evaluating Business Needs: This is where you ask the tough questions that drive the execution steps in the successive steps in the process:

What need you are looking to satisfy? Which evaluation categories you will use? What are your business, technical and usability requirements? How you will roll your evaluation into a scorecard?

The evaluation team should be made up of representatives from all of the key stakeholder groups. This allows for clear reporting back to stakeholders as the process proceeds and for balanced discussions.

Establish a base set of scorecard categories and a base scorecard that is the default for any evaluation. A good starting set is: business requirements, technical requirements, TCO, usability and vendor health.

By turning this starting point into a reusable template, you will give the cross-functional evaluation team more faith in the process. You can then discuss deviations from the process upfront for a given evaluation which increases the sense of transparency and is critical to generate the buy-in necessary to successfully move from evaluation and selection to implementation.

Step 2 - Request & Assess Offers: Once you understand the requirements that your evaluation team will be working with and how you will score the vendors you are evaluating, the next step is to gather the information necessary to fill in the scorecard and to create a shortlist of vendors for interviews and, where appropriate, proof-of-concept activities.

Assuming you have options, consider whether you need to send out a request for information (RFI). Do you have a solid understanding of the market? Are you dealing with a limited number of potential vendors? Are you ready to get proposals?

If the answer to these questions is "yes" then you may be able to send out a request for proposal (RFP) directly to each of the potential vendors. Often, vendors are more responsive to requests that have quantifiable requirements and dollar goals than to general requests for information.

After you get the information you need, fill in as much of the scorecard as possible. Your goal is to see if any vendor fails to meet your "must have" requirements.

Evaluate which vendors withdrew from consideration and why. Finally, work with the evaluation team to document who made the short-list and why. Document everything so that the evaluation team has clear logic to support the short-list decision.

Step 3 - Vendor Interviews & Proof-of-Concepts: Once the evaluation team has a short-list, it should move quickly to invite vendors in to engage in a set interview schedule.

All vendors will need the agenda in advance and each member of the evaluation team should try to be present for each meeting. If the evaluation involves a process or technology, consider a proof-of-concept as a piece of the vendor interview process.

There should always be a section of the evaluation scorecard that includes vendor interviews. These dog and pony shows are important because they will demonstrate the personality of the vendor and their level of commitment to your account.

Step 4 - Negotiation: After the vendor interviews end and all of the evaluation team's questions are answered, the team should pick the finalists for negotiation.

Use the scorecard to make the determination. It is generally easier to complete the scorecard with preliminary pricing allowing you to narrow the field to the clear scorecard leaders and then to revisit the scorecard as the negotiating process continues with the few remaining vendors.

Some companies like to work with the entire short-list and to get final pricing up front which is okay, but it can take longer than narrowing the list before the evaluation team hands the recommended finalists over to purchasing. Finalized pricing will give the evaluation team the last element of the scorecard.

To generate the buy-in necessary for implementation, it is important for the evaluation team to present the final scorecard to the broader stakeholder group and answer any questions about the recommended vendor that may come up.

By properly evaluating which products and services organizations can save time and money. Implementing a flexible and repeatable model for evaluations will give all stakeholder groups comfort that the evaluation was fair and complete, which will give the resulting projects the legitimacy they need to succeed.

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JUST-IN-TIME (JIT) PRODUCTION

2008-10-07T03:34:00.001-07:00

Just-in-time (JIT) is defined in the APICS dictionary as "a philosophy of manufacturing based on planned elimination of all waste and on continuous improvement of productivity". It also has been described as an approach with the objective of producing the right part in the right place at the right time (in other words, "just in time"). Waste results from any activity that adds cost without adding value, such as the unnecessary moving of materials, the accumulation of excess inventory, or the use of faulty production methods that create products requiring subsequent rework. JIT (also known as lean production or stockless production) should improve profits and return on investment by reducing inventory levels (increasing the inventory turnover rate), reducing variability, improving product quality, reducing production and delivery lead times, and reducing other costs (such as those associated with machine setup and equipment breakdown). In a JIT system, underutilized (excess) capacity is used instead of buffer inventories to hedge against problems that may arise.

JIT applies primarily to repetitive manufacturing processes in which the same products and components are produced over and over again. The general idea is to establish flow processes (even when the facility uses a jobbing or batch process layout) by linking work centers so that there is an even, balanced flow of materials throughout the entire production process, similar to that found in an assembly line. To accomplish this, an attempt is made to reach the goals of driving all inventory buffers toward zero and achieving the ideal lot size of one unit.

The basic elements of JIT were developed by Toyota in the 1950's, and became known as the Toyota Production System (TPS).. JIT was well-established in many Japanese factories by the early 1970's. JIT began to be adopted in the U.S. in the 1980's (General Electric was an early adopter), and the JIT/lean concepts are now widely accepted and used.

Some Key Elements of JIT

1. Stabilize and level the MPS with uniform plant loading (heijunka in Japanese): create a uniform load on all work centers through constant daily production (establish freeze windows to prevent changes in the production plan for some period of time) and mixed model assembly (produce roughly the same mix of products each day, using a repeating sequence if several products are produced on the same line). Meet demand fluctuations through end‑item inventory rather than through fluctuations in production level. Use of a stable production schedule also permits the use of backflushing to manage inventory: an end item's bill of materials is periodically exploded to calculate the usage quantities of the various components that were used to make the item, eliminating the need to collect detailed usage information on the shop floor.

2. Reduce or eliminate setup times: aim for single digit setup times (less than 10 minutes) or "one‑touch" setup ‑‑ this can be done through better planning, process redesign, and product redesign. A good example of the potential for improved setup times can be found in auto racing, where a NASCAR pit crew can change all four tires and put gas in the tank in under 20 seconds. (How long would it take you to change just one tire on your car?) The pit crew's efficiency is the result of a team effort using specialized equipment and a coordinated, well-rehearsed process.

3. Reduce lot sizes (manufacturing and purchase): reducing setup times allows economical production of smaller lots; close cooperation with suppliers is necessary to achieve reductions in order lot sizes for purchased items, since this will require more frequent deliveries.

4. Reduce lead times (production and delivery): production lead times can be reduced by moving work stations closer together, applying group technology and cellular manufacturing concepts, reducing queue length (reducing the number of jobs waiting to be processed at a given machine), and improving the coordination and cooperation between successive processes; delivery lead times can be reduced through close cooperation with suppliers, possibly by inducing suppliers to locate closer to the factory.

5. Preventive maintenance: use machine and worker idle time to maintain equipment and prevent breakdowns.

6. Flexible work force: workers should be trained to operate several machines, to perform maintenance tasks, and to perform quality inspections. In general, JIT requires teams of competent, empowered employees who have more responsibility for their own work. The Toyota Production System concept of "respect for people" contributes to a good relationship between workers and management.

7. Require supplier quality assurance and implement a zero defects quality program: errors leading to defective items must be eliminated, since there are no buffers of excess parts. A quality at the source (jidoka) program must be implemented to give workers the personal responsibility for the quality of the work they do, and the authority to stop production when something goes wrong. Techniques such as "JIT lights" (to indicate line slowdowns or stoppages) and "tally boards" (to record and analyze causes of production stoppages and slowdowns to facilitate correcting them later) may be used.

8. Small‑lot (single unit) conveyance: use a control system such as a kanban (card) system (or other signaling system) to convey parts between work stations in small quantities (ideally, one unit at a time). In its largest sense, JIT is not the same thing as a kanban system, and a kanban system is not required to implement JIT (some companies have instituted a JIT program along with a MRP system), although JIT is required to implement a kanban system and the two concepts are frequently equated with one another.

Kanban Production Control System

A kanban or "pull" production control system uses simple, visual signals to control the movement of materials between work centers as well as the production of new materials to replenish those sent downstream to the next work center. Originally, the name kanban (translated as "signboard" or "visible record") referred to a Japanese shop sign that communicated the type of product sold at the shop through the visual image on the sign (for example, using circles of various colors to indicate a shop that sells paint). As implemented in the Toyota Production System, a kanban is a card that is attached to a storage and transport container. It identifies the part number and container capacity, along with other information, and is used to provide an easily understood, visual signal that a specific activity is required.

In Toyota 's dual-card kanban system, there are two main types of kanban:

1. Production Kanban: signals the need to produce more parts

2. Withdrawal Kanban (also called a "move" or a "conveyance" kanban): signals the need to withdraw parts from one work center and deliver them to the next work center.

In some pull systems, other signaling approaches are used in place of kanban cards. For example, an empty container alone (with appropriate identification on the container) could serve as a signal for replenishment. Similarly, a labeled, pallet-sized square painted on the shop floor, if uncovered and visible, could indicate the need to go get another pallet of materials from its point of production and move it on top of the empty square at its point of use.

A kanban system is referred to as a pull‑system, because the kanban is used to pull parts to the next production stage only when they are needed. In contrast, an MRP system (or any schedule‑based system) is a push system, in which a detailed production schedule for each part is used to push parts to the next production stage when scheduled. Thus, in a pull system, material movement occurs only when the work station needing more material asks for it to be sent, while in a push system the station producing the material initiates its movement to the receiving station, assuming that it is needed because it was scheduled for production. The weakness of a push system (MRP) is that customer demand must be forecast and production lead times must be estimated. Bad guesses (forecasts or estimates) result in excess inventory and the longer the lead time, the more room for error. The weakness of a pull system (kanban) is that following the JIT production philosophy is essential, especially concerning the elements of short setup times and small lot sizes, because each station in the process must be able to respond quickly to requests for more materials.

Dual-card Kanban Rules:

No parts are made unless there is a production kanban to authorize production. If no production kanban are in the "in box" at a work center, the process remains idle, and workers perform other assigned activities. This rule enforces the "pull" nature of the process control.
There is exactly one kanban per container.
Containers for each specific part are standardized, and they are always filled with the same (ideally, small) quantity. (Think of an egg carton, always filled with exactly one dozen eggs.)

Decisions regarding the number of kanban (and containers) at each stage of the process are carefully considered, because this number sets an upper bound on the work-in-process inventory at that stage. For example, if 10 containers holding 12 units each are used to move materials between two work centers, the maximum inventory possible is 120 units, occurring only when all 10 containers are full. At this point, all kanban will be attached to full containers, so no additional units will be produced (because there are no unattached production kanban to authorize production). This feature of a dual-card kanban system enables systematic productivity improvement to take place. By deliberately removing one or more kanban (and containers) from the system, a manager will also reduce the maximum level of work-in-process (buffer) inventory. This reduction can be done until a shortage of materials occurs. This shortage is an indication of problems (accidents, machine breakdowns, production delays, defective products) that were previously hidden by excessive inventory. Once the problem is observed and a solution is identified, corrective action is taken so that the system can function at the lower level of buffer inventory. This simple, systematic method of inventory reduction is a key benefit of a dual card kanban system.

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SOURCING

2008-10-07T03:33:00.001-07:00

Saving money is always at the forefront of every business decision but when it comes to purchasing and sourcing, there are a number ways to cut costs that are often neglected or which do not use to their full advantage. Companies who fail to see these possibilities could be standing in the way of significant savings that would dramatically improve their bottom line. Many of the ways that are available to cut costs vary depending on the business. For example, manufacturing companies may want to first start finding savings by talking to the suppliers of their raw materials. Since these represent a larger portion of their purchases, these areas often offer the greatest potential cost savings benefits. When buyers sit down with vendors, they can often negotiate an arrangement that will be more cost-effective. Other companies may find their great potential savings opportunities revolve around their MRO purchases.

In order to identify potential savings opportunities in this area, companies need to take a straight look at their current operations to determine areas that need improvement. Rejected parts or excessive downtime are two of the most common problems for many companies and both of these areas can significantly add to the cost of operations. To solve the problem, companies should call in their suppliers, provide them with the necessary information, and ask them to come up with suggestions.

These suggestions will usually come in the form of valued-added services from the suppliers. These extra services can sometimes then become the backbone of the supplier selection process. Many companies make the mistake of choosing vendors strictly on the basis of the quoted price; however, the lowest stated cost does not always spell the best deal for the business. Instead of focusing strictly on price, buyers need to evaluate suppliers additionally on their willingness to provide these value-added services.

Another way for companies to save money over the long term is by tracking the performance of their suppliers. Once relationships with select vendors have been formed, the company needs to begin assessing their overall job performance because poor performance translates into additional costs for the buyer. Some analysts suggest evaluating vendor performance in terms of Total Cost of Ownership (TCO). Essentially, this means that the company looks at one event that the supplier is responsible for and uses that as an indicator of their overall performance. For example, if a vendor is scheduled to provide a delivery of raw materials in two weeks but misses the target date by a full week, then that delay would need to be figured into the costs of doing business with that vendor. Most companies do not currently use the TCO model for judging vendor performance and instead base their decisions solely on quoted costs. These companies generally find out in the long run that a low price does not always equal adequate performance.

While all of these cost saving measures may sound good on paper, many companies may find suppliers reluctant to cooperate. One reason suppliers are often hesitant to get involved in these value-added ideas is that to achieve their objectives they require cooperation from within the company itself. If a vendor is asked to make a process within the plant more efficient but workers within the plant are interfering with their ability to make that happen, then this reflects badly on the vendor who doesn't live up to his or her end of the bargain. Companies need to reassure suppliers that they will have total cooperation from all levels of management and staff to accomplish their tasks. The individuals in charge of purchasing should also maintain an open line of communication with the suppliers throughout the process so that they can be alerted immediately if conflicts do arise.

Companies often overlook the value-added services that many vendors offer simply because their savings are harder to quantify. By using the TCO model and getting suppliers more actively involved in the creative process, however, companies can see definite improvements in their bottom line.

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PROCUREMENT - VALUE ADDED SERVICES

2008-10-07T03:32:00.001-07:00

Every company is looking to lower costs and increase profitability. Each year, company management devises new initiatives to cut costs and boost productivity. However, one area that is often overlooked by company management is the purchasing department. The purchasing department is usually in charge of purchasing direct goods (fall into the cost of goods sold) and indirect goods (other areas like office supplies, computers, etc). The efficiency and effectiveness of a purchasing department is often difficult to quantify. However, it is worthwhile for companies to examine purchasing departments since cost savings in the purchasing department translate directly to the bottom line.

New purchasing software equipped with advanced RFQ, automated bid submission, and automated negotiation have made it possible to realize significant cost savings from the purchasing department. While eprocurement can offer companies a lot of tangible benefits, it takes specific knowledge of software and the purchasing process to maximize these benefits for the company. This article will describe some areas where specific knowledge of the purchasing process can lead to cost savings and efficiency gains when this knowledge is used in conjunction with software.

Spend Analysis: A knowledgeable partner will help you obtain detailed supply management goals and objectives and provide detailed vies of current and projected spend. Once current spend has been analyzed, a knowledgeable partner can help develop actionable strategies to support goals. Technology can then be used to develop capabilities to manage and analyze spend going forward.

Market Analysis: If a company is going to purchase a particular type goods in the open market, the buyer / partner will need to understand the market dynamics. This means having a knowledge of the average prices, key suppliers, drivers of value. This will also determine which procurement methodology will be used to purchase the goods. For example, if there is only one or two suppliers of a particular item in the world, an auction event will not work.

Supplier Sourcing: One of the biggest problems that buyers face in setting up automated procurement events is supplier participation.. For large procurement events, the addition of an additional supplier will enable the buyer to obtain a much better price. This calls for expertise in supplier sourcing and requires the ability to locate new, qualified suppliers.

RFQ creation: The way that an RFQ is worded can often have a strong impact on how a procurement event unfolds. Each RFQ should contain enough information for a supplier to make a bid. Depending on the type of item, this will include delivery terms, payment terms, and specifications. An experienced RFQ creator will know what suppliers are looking for and will understand the key drivers of price.

Supplier Invitation: The decision of which suppliers to invite has a profound impact on the way a procurement event progresses. Generally, the more suppliers participate, the better that the event will work.

Event Structuring: To maximize the value of powerful, feature rich purchasing software, knowledge of how to structure the procurement event will be necessary. This includes knowing what information to show suppliers during the event, the type of logic to use for the event (sealed bid, dutch, percent over cost, vickrey, etc).

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AUCTION LOGIC OVERVIEW

2008-10-07T03:31:00.001-07:00

Today, auctions have come a long way since the days when businesses generally used them only for reclaiming their investments in machinery, in automobiles, and in the other tools of their trade. Now auctions have come into the computer age and have changed the way businesses think about procurement and selling goods and services. Many people new to the world of auctions - both on- and off-line - may not realize that there are a wide variety of auction logics being used to set the rules for numerous auction events.

In this case, the term logic refers to a sequence of instructions which is part of the software and which sets the pricing rules for an auction event. Software developers have attempted to create logic systems that imitate the same types of auctions that are conducted in the brick and mortar world. For example, there are several major types of auction logics: first price, second price, English, and Dutch.

First price auctions are fairly traditional auctions. A good or service is offered up for bidding. Participants place bids in an effort to compete with the other bidders but while also trying to keep the price low so that they can get a good deal on the items. When the auction is over, the highest bidder wins and pays his bid. One thing that does make this type of auction different than English and Dutch auctions is that all the bids are sealed so that no one knows how much the other participants have bid.

Second price auctions, also known as Vickrey auctions, are somewhat different. In these auctions, participants place their bids as with first price auctions. At the end of the simple quantity second price auction auction, however, the winner does not pay his bid but pays the highest losing bid. For example, Bidder A wins the auction by bidding $400. He beats out Bidder B who placed a bid of $350. Bidder A then has to pay $350 and not $400 to the seller. Like, first price auctions, however, all bids are sealed and are not viewable by the participants.

Another type of auction logic is the English auction. With English auctions, the prices are not sealed because these types of auctions were traditionally run by auctioneers in public. With online auctions, the seller gets to act as auctioneer while the software itself tracks the bids. In this type of auction, a low price is announced to start the auction. Bidders then raise that price in increments until no more bids are offered. At that time, the highest bidder is considered the winner.

Finally, there are Dutch auctions. Like with English auctions, bids are known by all participants because these auctions were traditionally handled by auctioneers as well. In these auctions, the auctioneer called out a very high price for the item. He then lowered the price in specific increments until someone accepts the price. Some confusion has been caused over the definition of the Dutch auction because a third-party online auction site has labeled other, non-Dutch auctions as being Dutch.

All of these types of auction logics each have their own benefits and their strategic uses. Sealed auctions, such as first and second price auctions, generally are more useful at driving prices higher for a smaller number of participants than more open auctions. The reason is that when people cannot use other bidders' prices as a guide, they tend to bid higher than they normally would. Participants in English auctions are usually the most bidder-friendly because it gives them an advantage. They can see the other bids and can use them to help determine how much to bid themselves. Dutch auctions are trickier because to be effective a bidder must have some idea of how low the bidding will go before it is accepted. For example, if the bidding starts at $1000, then goes to $900, then to $800, the anxious bidder may go ahead and accept that price even though it could have went all the way to $500 without being accepted.

All auction logics can be used by businesses to increase revenue and/or to decrease costs. Businesses simply need to pick the right logic for their needs. And to understand these logics to determine which logic is right for their auction event.

INTERNET AUCTIONS

Today, most people recognize that the Internet has changed the way businesses and individuals handle shopping transactions. After all, millions of people go online to buy everything from computer software to office supplies to heavy equipment. Nowhere has that change been most obvious than in the popularity of Internet auctions. Internet auctions work similarly to traditional auctions. A seller places an item up for bid and interested buyers offer to purchase it for steadily increasing amounts of money. The differences, however, are in how this simple process is executed and in the array of benefits it provides for both involved parties.

In order to understand some of these reasons why Internet auctions are so popular, one must also realize that there are two types of Internet auctions. One type is a direct-sales auction; the other is a vendor-operated auction. Direct-sales auctions usually involve individuals who want to buy or sell items and often go through third-party sites in order to accomplish this goal. Vendor-operated auctions, on the other hand, usually involve businesses as the sellers and, sometimes, as the buyers. Some vendor-operated auctions go through third-party sites also, but many others use software to create their own online auctions.

Both types of auctions share many of the same benefits. For example, online auctions simply attract a greater audience than traditional, in-person auctions. People from all around the globe can participate in the bidding easily when these auctions are held on the Internet, so the chances of getting a bigger selection of bidders is increased. Likewise, buyers are more likely to find the items they want thanks to online auctions. Just as there are millions of bidders, there are also millions of sellers with a wide-range of items up for auction. Another benefit is that the prices are determined by competition among the bidders, so sellers can usually earn a better price for their goods than if they choose a fixed-price marketplace. While this may seem like a disadvantage for buyers, it isn't always. In many cases, buyers have been able to walk away with a nice deal on the item they really wanted thanks to strategic bidding. They are unlikely to get such a bargain in a fixed-price marketplace, even if the seller is willing to engage in price negotiations.

Another benefit of both types of auctions is that they save both buyers and sellers time. For the buyer, he or she doesn't have to devote hours, weeks, or longer trying to track down an item. Instead, they can sit at their desk, search for the item, and make an offer within minutes. Sellers don't have to worry about setting up displays in brick and mortar stores or in trying to lure in customers. They simply create a product description, post it using the auction software, and wait for the bidders to show up. Also, since the entire auction process is automated, the auction can be going on while the seller deals with other business.

Although the benefits are similar, there is at least two main differences. One difference is the amount of information required to sign up as a bidder. Direct-sales auctions, particularly those that go through third-party sites, require a minimum amount of information. They don't request any of your payment information since that information is only exchanged between the seller and the buyer. With vendor-operated auctions, however, users generally have to provide all payment and shipping information when they sign-up as a bidder, since the entire transaction from beginning to end will be handled solely by the vendor.

The second difference is in the security of the auction. Direct-sales auctions have a reputation for being risky propositions. Sellers lie about the goods for sale or never send them to the buyer while buyers fail to ever make payment. Thankfully, vendor-operated auctions are less likely to have these types of problems. In fact, many vendors even offer guarantees and warranties on the items they auction online.

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E-PROCUREMENT

2008-10-07T03:30:00.000-07:00

Definition of E-Procurement

E-Procurement is more than just a system for making purchases online. A properly implemented system can connect companies and their business processes directly with suppliers while managing all interactions between them. This includes management of correspondence, bids, questions and answers, previous pricing, and multiple emails sent to multiple participants.

A good e-procurement system helps a firm organize its interactions with its most crucial suppliers. It provides those who use it with a set of built-in monitoring tools to help control costs and assure maximum supplier performance. It provides an organized way to keep an open line of communication with potential suppliers during a business process. The system allows managers to confirm pricing, and leverage previous agreements to assure each new price quote is more competitive than the last.

Benefits of Adopting an E-Procurement System

E-Procurement helps with the decision-making process by keeping relevant information neatly organized and time-stamped. Most are template-driven which makes all transactions standardized and trackable. Keeping track of all bids means leveraging your knowledge to obtain better pricing. Companies can focus on their most lucrative trading partners and contracts.

Well-managed e-procurement helps reduce inventory levels. Knowing product numbers, bid prices and contact points can help businesses close a deal while other suppliers are struggling to gather their relevant data.

E-Procurement systems that allow multiple access levels and permissions help managers organize administrative users by roles, groups, or tasks. Procurement managers do not need to be as highly trained or paid because such systems are standardized and easy to learn.

Typical Adoption Strategies

Some firms have discovered that many of their transactions still take place on paper, and they have run into problems ranging from content management to supplier participation in their systems. Most companies who desire to make the switch fall into two camps. The first are the slow step-by-step adopters. They implement one piece of their system at a time and slowly bring trading partners on board. The others follow the total replacement model. They build a totally parallel system, test it, then switch over to it when it works. There is usually some pain involved and some mistakes are discovered, but by and large these are absorbed and the business continues.

Pitfalls to Avoid

Don't bite off more than you can chew. The parallel system approach should only be used if you have the time and resources to do this. If not, stick to the incremental approach.

Don't expect an immediate return on investment. A short-tem gain may be noticeable, but it may be eaten up by the cost of staff training and equipment purchases. A year or two down the road, a larger ROI should be evident.

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Deming Cycle

2008-10-07T03:26:00.001-07:00

Deming Cycle

W. Edwards Deming in the 1950's proposed that business processes should be analyzed and measured to identify sources of variations that cause products to deviate from customer requirements. He recommended that business processes be placed in a continuous feedback loop so that managers can identify and change the parts of the process that need improvements.. As a teacher, Deming created a (rather oversimplified) diagram to illustrate this continuous process, commonly known as the PDCA cycle for Plan, Do, Check, Act*:

PLAN: Design or revise business process components to improve results
DO: Implement the plan and measure its performance
CHECK: Assess the measurements and report the results to decision makers
ACT: Decide on changes needed to improve the process

Deming's PDCA cycle can be illustrated as follows:

Deming's focus was on industrial production processes, and the level of improvements he sought were on the level of production. In the modern post-industrial company, these kinds of improvements are still needed but the real performance drivers often occur on the level of business strategy. Strategic deployment is another process, but it has relatively longer-term variations because large companies cannot change as rapidly as small business units. Still, strategic initiatives can and should be placed in a feedback loop, complete with measurements and planning linked in a PDCA cycle. To illustrate the relationship of business unit processes to strategic processes, we may construct two nested PDCA cycles:

This 'wheel within a wheel' describes the relationship between strategic management and business unit management in a large company. There are actually several separate business units, of course, each with its own set of metrics, goals, targets and initiatives. But this figure illustrates the idea that the business activities constitute the DO part of the overall strategic effort.

* Note: The PDCA cycle was in fact originally developed by Walter A, Shewhart, a Bell Laboratories scientist who was Deming's friend and mentor, and the developer of Statistical Process Control (SPC) in the late 1920s. So sometimes this is referred to as the "Shewhart Cycle". There are also several recent variations on this concept.

PDCA - The Deming Cycle

This cycle of "Plan - Do - Check - Act" is also known as the Control Circle, or PDCA.

Kaoru Ishikawa has expanded Deming's four steps into six:

Determine goals and targets.
Determine methods of reaching goals.
Engage in education and training.
Implement work.
Check the effects of implementation.
Take appropriate action.

Benefits of the PDSA cycle:

- Daily routine management-for the individual and/or the team
- Problem-solving process
- Project management
- Continuous development
- Vendor development
- Human resources development
- New product development
- Process trials

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GE restructures into four business segments

2008-10-07T03:25:00.001-07:00

CEO Immelt under pressure from investors to make changes

HARTFORD, Conn. - General Electric Co., which owns businesses ranging from light bulbs to NBC television, on Friday said it will restructure into four businesses from six, a move that Chief Executive Officer Jeff Immelt says will focus the company on growth.

Immelt has been under pressure to shake up GE since it shocked investors with disappointing first-quarter earnings. GE's share price has since dropped nearly 22 percent.

Friday's move follows GE's recent plan to consider spinning off its iconic lighting and appliance businesses, a brand familiar to Americans for generations.

The new structure includes GE Technology Infrastructure, led by Vice Chairman John Rice, which includes Healthcare, Aviation, Transportation and Enterprise Solutions.

GE Energy Infrastructure, headed up by John Krenicki, includes Energy, Oil & Gas and Water.

GE Capital, led by Vice Chairman Mike Neal, brings together all the financial service businesses, including Commercial Finance, GE Money, industry verticals and Corporate Treasury.

NBC Universal, headed by Jeff Zucker, will remain unchanged.

(Msnbc.com is a joint venture of Microsoft and NBC Universal.)

In the reorganization, GE's Commercial Finance, GE Money, GE Industrial and GE Healthcare were folded into new, expanded business segments.

Analyst Nicholas Heymann of Sterne Agee in New York said in an e-mail that GE made the right move, and that the new structure suggested GE would be focusing increasingly on infrastructure and, to a lesser extent, on commericial finance.

The expected sale of GE Money at a favorable price "should further underscore GE's narrowing focus of its businesses," Heymann said. Immelt has said GE will consider selling portions of GE Money, which provides banking and credit services.

GE, which is based in Fairfield, has been getting rid of other units that have failed to drive profitability. It announced in May it would sell or spin off its appliance business, but this month said it would spin off the entire unit that includes household appliances such as dishwashers and clothes dryers and lighting, motors and electrical distribution.

Last year, GE shed its underperforming plastics business by selling it to a Saudi Arabian company for $11.6 billion.

Analyst Matt Collins of Edward Jones in St. Louis said investors will benefit from the reorganization if it helps GE officials focus on key markets and provides more transparency.

In particular, he said organizing GE's array of financial services into one unit makes it a "little easier to figure out where the financial earnings are coming from," he said. "That's overdue."

The reorganization is GE's second announcement in a week. On Tuesday, GE said it had formed a joint venture with an Abu Dhabi government investment company that will pump $4 billion of outside capital into its weakened commercial finance business. The deal with

Mubadala Development Co. also will launch or broaden several other ventures with the Persian Gulf investment vehicle, which expects to become one of the top 10 institutional investors in GE.

Immelt also announced that GE's board has named Krenicki, 46, a 24-year GE veteran, as a vice chairman of GE.

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The father of Kaizen speaks!

2008-10-07T03:17:00.001-07:00

The 73-year-old mind of Masaaki Imai runs razor sharp belying the frailty of his small frame. He talks with sincere conviction, pausing to select the right words.

He has to be careful, after all, his words have been changing the way the corporate world talks, and more important, acts.

When he first threw the word 'Kaizen' at the corporate world through his book Kaizen: The Key to Japan's Competitive Success in 1986, it was swallowed hungrily by a world in the throes of transition. Translated in fourteen languages, Kaizen became a fad the world over.

Toyota, the outstandingly successful Japanese carmaker, became one of his most committed followers.

However, Imai, the founder of a leading international management and executive recruiting firm, and consultant to over two hundred companies, realized that the concept had neither been digested nor well implemented.

He introduced an evolved form of Kaizen in 1997 in his book Gemba Kaizen: A Commonsense, Low-Cost Approach to Management, to reassert the importance of the shop floor in bringing about continual improvement in an organization.

Today, the father of 'Kaizen' and 'Gemba Kaizen' is convinced that to survive in an increasingly competitive world, top management must adopt a just-in-time approach and drive change down the hierarchy without yielding to resistance.

Forget forecasting, concentrate instead on crashing the time taken to execute orders. According to Imai, 90 per cent of all corporate problems can be solved using common sense and improving quality while reducing cost through the elimination of waste is the only option for survival.

In an exclusive interview to The Smart Manager, Imai explained the principles underlying his just-in-time philosophy:

Kaizen is about constant continual improvement but in today's world, are small improvements enough? What if you need to make big, radical changes?

Kaizen is the means to achieve a corporate strategy, not the strategy. Every corporation needs to make a radical change, or some change at least, to survive in this very competitive, rapidly changing world.

The most important challenge facing top management today, especially in a manufacturing company, is to establish a target about where they want to take the company in the next two, five and ten years.

In manufacturing, there are only two systems. One is the batch or queue production system, and the other is what we call just-in-time (JIT) or the Toyota production system.

One of the most urgent tasks for top management is to choose the strategy, and say that we have decided to change to the just-in-time production system to be able to survive in the new millennium.

Kaizen is misunderstood by most people. They say Kaizen is small step improvement and this is the age of big jumps, but in my way of thinking, the biggest jump is making the transformation from the batch mode to JIT.

Why should companies move away from the batch mode to just-in-time?

The batch production system, to which almost 99.9 per cent of all manufacturing companies subscribe, is destined to perish. It is the most inefficient way to make products.

It is prone to all kind of shortcomings: it is almost impossible to build quality in a product and it defeats the purpose of making products at low cost.

It also makes it very difficult to meet customer requirements, which come in different orders, like different volumes in different time frames and so on. On the other hand, JIT production system is the opposite of the batch system.

The batch system derives from the agricultural mentality. When the industrial revolution took place in the nineteenth century, managers adopted the pattern of production from agriculture: first you sow seeds, then harvest and store. The more wheat you had, the more secure you were, so everything was made in big batches.

Similarly, in the batch system, you purchase material and produce in big batches and there are many processes. At every process, you accumulate the batch and at the end you accumulate the finished product in a batch, which is stored in the warehouse.

Which is very efficient, offers standardization. . .

This kind of production system is based on market forecast. You say, this year we will sell half a million cars, so you plan according to that and start making half a million cars. What happens if your forecast is wrong and you manage to sell only quarter million cars?

You are left with quarter million cars unsold and a chunk of cost -- labour, raw material, etc -- is in it. What are you going to do? You think it is the most efficient production system?

Batch system is good when there is demand. As a company begins to acquire the capacity to produce faster and faster and more and more, eventually there will come a time when its production capacity goes above what the market can bear.

Today, several Japanese electronic companies are in big difficulty. What do you think happened to these companies?

These are the companies that didn't know that they should have introduced JIT. Most of the electronic companies have a production system based on assumption of the market and market forecast.

The same thing happens in the computer chip industry. You end up with huge inventory of unsold products and excess capacity, then you borrow money to carry that inventory. By that time you have acquired too many people for every process.

Do you think that is a very efficient way of making a product? Eventually the company will have to restructure or go bankrupt.

And what is the solution? Just-in-time.. The starting point of JIT is to pull from the market. The market should always come first and production later.

How long would the customer have to wait for the product?

In some cases, only a few hours. In the case of a car, maybe a few days.

But it is a competitive market, why would a customer wait? There are lots of car manufacturers, there is lots of choice, I can walk into any showroom and buy a car. Why should I wait?

In batch system, the company has to anticipate that the customer will request this kind of a model. Right? And it will have to build an inventory of this kind of car, but they don't know how many orders are coming. They have to have so many cars waiting for your order to arrive, which is very inefficient.

The customer may not know that she wants a product. The inventor has to estimate the market for it. It is the role of marketing to define the product and the role of production to make the product.

Well, I think it is the other way round. The role of marketing is to dig out the potential or hidden requirement that the market has.

You don't follow the product out approach but first find the need of the market and then make the product. If you don't have technology, you have to develop it and if you don't have the machinery for such a product, you have to design it.

Managers today are obsessed by a 'growth' mentality? Do you think growth is a smart strategy?

I can say that 99.9 per cent of all companies in the world today are obsessed by a growth mentality. These are companies that can make profits only when the market is growing.

In real life, market demand always fluctuates. The only companies that will survive in to the next millennium will be the ones that have the flexibility to produce according to fluctuating demand.

I read that Kaizen works most effectively in the time of crisis. Why?

During a crisis, everyone understands the urgency of the situation. The transformation of the production system is a massive physical operation, like operating on the bone structure itself, which is why it is very important that top management be committed to make such a transformation.

That is the only way to survive in the new millennium because it is the most effective way of making a product. It also increases your cash flow immediately, so when companies are faced with crisis, it is the best time to introduce Kaizen.

For instance, in India, there are many situations emerging, like China exporting products far below the cost price.

In this age of global supply chain management, being the best in India is not enough, you have to be the best in the world.

Do you have a Kaizen institute in China? What makes China so efficient?

No, we don't have an institute in China. What makes China superior is its labour cost, which is 1/50th of Japan's labour cost.

But lower labor cost does not equal efficiency. What makes China so efficient?

I wouldn't call the country very efficient. They can produce a certain product, particularly consumer-related products, at a lower cost in mass production because so far many western and Japanese companies have transferred technical know-how to them.

China has acquired the basic production capacity. Earlier the same thing happened with Malaysia, Korea, Taiwan. Today it is China's turn.

What happened was that Japanese, American and European people have transplanted technology, they hired local people and brought machines there and trained them to do the job. So that's how they can produce.

So, would you call China a superior manufacturer?

Not superior, but they can produce at a far more competitive price. Superior has many connotations, in terms of design, efficiency, etc. I certainly wouldn't call China superior.

They also have efficient processes. . .

But so far, those processes have been given to them from Japan and the western world.

The price of labour is cheaper in China, but would the productivity of a Japanese worker be higher than that of a Chinese worker?

I am talking about labour cost. Of course, you have to make quality products and in order to make quality products, you must have quality conscious employees. How do you develop quality conscious employees?

Most Japanese companies when they went to China had a hard time training them, the people didn't have quality consciousness.

The Japanese spent a lot of time selecting the right people and training them in production procedures. So this kind of training has been provided along with some basic principles of quality assurance.

These managerial practices can be transferred, but you see in China, they are paying the equivalent of one Japanese worker's wages to fifty people. Quality control has been introduced and can be exported in any country.

Japan was at its peak in the 1980s but now China is far ahead, does this suggest that the Japanese model is invalid?

We need to distinguish between external circumstances (social, cultural and political infrastructure) and internal circumstances (like how business is conducted within the company).

The recent negative reports about Japan relate to the external circumstances, such as governmental regulations, overprotected market in some sectors, aging society and the Big Bang needed by the monetary institutions.

There is a realisation that Japan Inc may not be functioning as efficiently as it used to. This in no way means that Japanese management practices (internal management of the company) have proven to be inferior.

The Japanese companies developed a very effective system of management, particularly in the manufacturing sectors, and the rest of the world has much to learn from these practices.

What are your views about management practices in the Indian corporate sector?

I see that Indian managers are extremely intelligent. They are abreast with latest technologies and developments. But the problem is that they completely isolate themselves from reality.

They are under the impression that real knowledge can be gained only by reading books and attending lectures. How often do they actually roll up their sleeves and get into some action?

They really need to make more effort [at getting into the thick of action]. They have immense knowledge, but what they lack is wisdom that comes by doing things yourself.

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SWOT Analysis

2008-10-07T03:09:00.001-07:00

SWOT Analysis

Strengths, Weaknesses, Opportunites and Threats (SWOT).

SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.

At the bottom of this page are FREE SWOT examples - so please read on.

In SWOT, strengths and weaknesses are internal factors. For example:A strength could be:

Your specialist marketing expertise.
A new, innovative product or service.
Location of your business.
Quality processes and procedures.
Any other aspect of your business that adds value to your product or service.

A weakness could be:

Lack of marketing expertise.
Undifferentiated products or services (i.e. in relation to your competitors) .
Location of your business.
Poor quality goods or services.
Damaged reputation.

In SWOT, opportunities and threats are external factors. For example: An opportunity could be:

A developing market such as the Internet.
Mergers, joint ventures or strategic alliances.
Moving into new market segments that offer improved profits.
A new international market.
A market vacated by an ineffective competitor.

A threat could be:

A new competitor in your home market.
Price wars with competitors.
A competitor has a new, innovative product or service.
Competitors have superior access to channels of distribution.
Taxation is introduced on your product or service.

A word of caution, SWOT analysis can be very subjective. Do not rely on SWOT too much. Two people rarely come-up with the same final version of SWOT. TOWS analysis is extremely similar. It simply looks at the negative factors first in order to turn them into positive factors. So use SWOT as guide and not a prescription.

Simple rules for successful SWOT analysis.

Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis.
SWOT analysis should distinguish between where your organization is today, and where it could be in the future.
SWOT should always be specific. Avoid grey areas.
Always apply SWOT in relation to your competition i.e. better than or worse than your competition.
Keep your SWOT short and simple. Avoid complexity and over analysis
SWOT is subjective.

SWOT Analysis Examples

SWOT Analysis Wal-Mart

Strengths.

Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
Wal-Mart has grown substantially over recent years, and has experienced global expansion (for example its purchase of the United Kingdom based retailer ASDA).
The company has a core competence involving its use of information technology to support its international logistics system. For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.
A focused strategy is in place for human resource management and development. People are key to Wal-Mart's business and it invests time and money in training people, and retaining a developing them.

Weaknesses.

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not have the flexibility of some of its more focused competitors.
The company is global, but has has a presence in relatively few countries Worldwide.

Opportunities.

To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as Europe or the Greater China Region.
The stores are currently only trade in a relatively small number of countries. Therefore there are tremendous opportunities for future business in expanding consumer markets, such as China and India.
New locations and store types offer Wal-Mart opportunities to exploit market development. They diversified from large super centres, to local and mall-based sites.
Opportunities exist for Wal-Mart to continue with its current strategy of large, super centres.

Threats.

Being number one means that you are the target of competition, locally and globally.
Being a global retailer means that you are exposed to political problems in the countries that you operate in.
The cost of producing many consumer products tends to have fallen because of lower manufacturing costs. Manufacturing cost have fallen due to outsourcing to low-cost regions of the World. This has lead to price competition, resulting in price deflation in some ranges. Intense price competition is a threat.

'Wal-Mart Stores, Inc. is the world's largest retailer, with $256.3 billion in sales in the fiscal year ending Jan. 31, 2004. The company employs 1.6 million associates worldwide through more than 3,600 facilities in the United States and more than 1,570 units . . .more? Go to Wal-Mart Facts

Disclaimer: This case study has been compiled from information freely available from public sources. It is merely intended to be used for educational purposes only.

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PEST Analysis

2008-10-07T03:08:00.001-07:00

What is PEST Analysis?

It is very important that an organization considers its environment before beginning the marketing process. In fact, environmental analysis should be continuous and feed all aspects of planning. The organization' s marketing environment is made up of:

1. The internal environment e.g. staff (or internal customers), office technology, wages and finance, etc.

2. The micro-environment e.g. our external customers, agents and distributors, suppliers, our competitors, etc.

3. The macro-environment e.g. Political (and legal) forces, Economic forces, Sociocultural forces, and Technological forces.. These are known as PEST factors.

Political Factors.

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1.How stable is the political environment?

2.Will government policy influence laws that regulate or tax your business?

3..What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

Economic Factors.

Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

1. Interest rates.

2. The level of inflation Employment level per capita.

3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.

Sociocultural Factors.

The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:

1.What is the dominant religion?

2.What are attitudes to foreign products and services?

3.Does language impact upon the diffusion of products onto markets?

4.How much time do consumers have for leisure?

5.What are the roles of men and women within society?

6.How long are the population living? Are the older generations wealthy?

7.Do the population have a strong/weak opinion on green issues?

Technological Factors.

Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

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Belt / chain transmission with more sprocket wheels.

2008-10-07T02:47:00.001-07:00

Belt / chain transmission with more sprocket wheels.

The calculation is developed for geometrical designs of belt / chain transmissions with more sprocket wheels. The application provides designs for the following basic tasks.

Calculation of the necessary length of the belt (chain) using known positions and diameters of sprocket wheels
Achieving the desired (table) length of the belt / chain using a change in the position of the selected sprocket wheel.
Calculation of geometry (angles of wrapping, numbers of teeth in engagement, axis distances, etc.)
Calculation of the radial force acting on the sprocket wheel axis.

The application works withe 2D CAD systems.

Control, structure and syntax of calculations.

Information on the syntax and control of the calculation can be found in the document "Control, structure and syntax of calculations".

Information on the project.

Information on the purpose, use and control of the paragraph "Information on the project" can be found in the document "Information on the project".

Process of calculation.

Select units and the type of calculations (belt / chain) and fill in the desired global transmission parameters (spacing, power, speed). Paragraph [1.0]
Fill in dimensional units in the table of sprocket wheels (co-ordinates of wheels X, Y, numbers of teeth, switcher outer/inner side of the wheel) and press the button "Calculation". Paragraph [2.0]
Execute additional calculations of the desired length of belt / chain. Paragraph [3.0]

Basic input values. [1]

Define basic parameters of the calculation in this paragraph.

1.1 Units of calculation.

In the selective list, select the desired system of units of the calculation. All values will be recalculated immediately after switching to other units.

1.2 Type of calculation.

Select here whether the calculation has to be executed for a belt or for a chain.

Warning: Calculations of the pitch diameter of the pulley / sprocket wheel for the belt / chain. Do not forget to specify the type of calculation.

1.3 Pitch - toothed belt / chain.

Enter the pitch of teeth of the belt/ chain links in the input field. The selective list to the right of the input field includes pitches of commonly used toothed belts ( chains. The value selected in the list is transferred automatically to the input field.

1.4 Transferred power.

Enter the power transferred by the transmission (the first, driving sprocket wheel).

1.5 Speed of the driving sprocket wheel.

Enter the speed of the first (driving) sprocket wheel - the wheel marked by the digit 1.

1.6 Belt / chain slack side tensions in % of the effective pulling force.

The pulling force is calculated according to the formula F=Mk / R (ratio of the torsional moment and radius of the first pulley). The force in the relieved part of the belt can be chosen as follows:

Belt transmission

15% - without shocks, quiet loading, one-shift operation
30% - medium size of shocks, two-shift operation
50% - strong shocks, three-shift operation

Chain transmission

A chain transmission is not usually prestressed. Therefore, use the value 0%.

Calculation table / Calculation. [2]

The following rules are defined for the calculation:

The driven sprocket wheel is wheel no. 1. It rotates in a clockwise direction.
The belt /chain circulates around the outer side of the sprocket wheel if the respective wheel rotates in the same direction as wheel no. 1.

The paragraph includes a calculation table and a drawing (side view) of the designed transmission. Enter co-ordinates of centres of all wheels in the table (columns C,D), the numbers of teeth of each wheel (column E) and specify whether the belt /chain has to circulate around the outer (disabled) or inner (enabled) side of the wheel (column B).

If you also wish to solve the force conditions, enter for each pulley the withdrawn power as a percent of the power demand of the first pulley (column G). The button "Calculation of the transmission" [2.2] initiates the calculation.

Hint: The drawing can also be used for modification of co-ordinates. Click on the centre mark of any pulley and with the mouse button pressed down, shift the centre mark to a new position. Co-ordinates of the centre are changed in the table as well.

2.1 Coordinates and dimensions.

Calculation table.

It includes the following columns.

Order number of the sprocket wheel.
The check mark button specifying whether the belt /chain circulates around the outer / inner side of the sprocket wheel.
X-co-ordinate of the sprocket wheel centre.
Y-co-ordinate of the sprocket wheel centre.
Number of teeth of the sprocket wheel.
The pitch diameter of the sprocket wheel - is calculated additionally using the pitch and number of teeth. It is necessary for the calculation. If you need to enter it directly (e.g. in case of calculation of a flat belt), rewrite the formula in the cell using the desired value.
Loading of the sprocket wheel as a percent of the withdrawn power demand (of wheel no. 1).
Speed of the sprocket wheel.
The angle of wrapping of the sprocket wheel.
Number of teeth in engagement (low number of teeth in engagement makes the parameters of the transmission significantly worse). More detailed information can be found in the calculation of the toothed belt or chain.
Radial force Fr acting on the sprocket wheel axis.
Axis distance of sprocket wheels (from the actual wheel to the following one).
The length of the belt /chain strand (from the actual wheel to the following one).

The illustration shows the outer side marked by a green arrow of rotation, the inner side is provided with a red arrow.

Warning: The calculation uploads rows of the table, beginning with the first row, as long as it meets the row which includes the zero pitch diameter of a sprocket wheel (column F). Other rows are ignored in the calculation.

Drawing of the pulley

Axes X and Y shows dimensions in actual units (mm / in) . The driven sprocket wheel no. 1 is marked red.

2.2 Calculation of the transmission

Pressing the button initiates calculations.

Calculation of the length of the belt / chain. [3]

The following calculation of the table of wheels gives the total length of the belt / chain [3.1]. However, in most cases we need to use belts of standardized length or chains with a number of links which is equal to an integer. In this part we can enter the desired number of teeth of the belt or links of the chain and change co-ordinates of the selected sprocket wheel to achieve the desired length of the belt / chain.

3.1 Total length of the belt / chain.

The length of the belt / chain which is necessary for the designed transmission.

3.2 Number of teeth / chain links.

The value gives the actual number of teeth / links of the calculated belt / chain.. It is expressed as a real number (with a decimal part).

3.3 Desired number of teeth / chain links.

In most cases there is available a series of standardized lengths of belts and a series of chains with numbers of links equal to integers. Enter the desired number of teeth of the belt / chain in this field. If the field next to the input cell is provided with a check mark (enabled), the desired value is filled in automatically with a value equal to the whole part of the actual number of teeth of the belt / links of the chain from row 3.2

3.4 Free sprocket wheel / direction.

To calculate a system of wheels to find the desired length of the belt / chain, it is necessary to specify which wheel will be shifted. For this purpose there is available this selective list, which includes numbers of wheels and the direction (X-horizontal or Y-vertical) in which the wheel will be shifted.

3.5 Calculation of a new position of the slackened wheel.

Press the button "Calculation". If the task has a solution, the slackened wheel is shifted to a new position so that the desired length of the belt / chain is obtained.

Warning: An incorrect geometrical requirement (e.g. big change in the length of the belt together with incorrect slackening of the wheel may lead to a task which has no solution. In such cases, modify the entered data.

Graphic output, CAD systems.

Information on options of 2D and 3D graphic outputs and information on cooperation with 2D and 3D CAD systems can be found in the document "Graphic output, CAD systems".

Supplements - This calculation:

Using this calculation, you can make a drawing of the arrangement of the wheels in a front view. You can make a drawing of pitch circles or pitch circles including contour circles.

4.3, 4.4 Overlap..

Set the overlap of contour circles as shown in the illustration. If the overlap is set to zero, the respective contour circle will not be drawn.

Setting calculations, change the language.

Information on setting of calculation parameters and setting of the language can be found in the document "Setting calculations, change the language".

Workbook modifications (calculation) .

General information on how to modify and extend calculation workbooks is mentioned in the document "Workbook (calculation) modifications".

Supplements - This calculation:

Calculation of a flat belt

The calculation is designed for toothed belts / chains. If you need to design e.g. flat belts, follow the procedure below:

Save the calculation under a new name and perform changes in this copy.
Rewrite the formulas in column F in the input table directly with the value of the pitch diameter of the pulley.

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Time-series Forecasting Error Statistics

2008-10-07T02:46:00.001-07:00

Time-series Forecasting Error Statistics

How can I Predict measure the optimality of a time-series forecast? We cannot expect a time-series forecast to be perfect; it will surely and always have prediction errors. IPredict defines some statistics based on the error terms:
e_t= X_t- X'_tthis is the difference between the actual time-series X_tand the forecast X'_tand will be useful to analyze and summarize the accuracy of the forecasts.

The Cumulative Forecast Error is the sum of all prediction errors:
CFE = ∑ e_t

The Mean Error is the arithmetic average of all prediction errors:
ME = 1/n ∑ e_t

The Mean Squared Error is the arithmetic mean of the sum of the squares of the prediction errors; this error measure is popular and corrects the 'canceling out' effects of the previous two error measures:
MSE = 1/n ∑ e²_t

The Root Mean Squared Error is the square root of the MSE:
RMSE = √ MSE

The Standard Deviation is as the name implies the standard deviation of the prediction errors.

The Mean Absolute Deviation is another popular error measure that corrects the 'canceling out' effects by averaging the absolute value of the errors:
MAD = 1/n ∑ |e_t|

The Mean Absolute Percent Error is a very popular measure that corrects the 'canceling out' effects and also keeps into account the different scales at which this measure can be computed and thus can be used to compare different predictions:
MAPE = 100/n ∑ e_t/ X_t

How much accuracy can we expect from a forecasting system? How much does this accuracy (or inaccuracy) cost to you or your company? In general a MAPE of 10% is considered very good, a MAPE in the range 20% - 30% or even higher is quite common. How much will you or your company save if the MAPE reduces say from 25% to 20%? Inaccurate forecasts will increase the need to keep stock in your inventory system and will reduce the service level to the customer. Inaccurate forecasts mean poor stock trading decisions and wrong timings. The cost can thus be very high and it is worth the effort to insure that forecasts are as accurate as possible.

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Supply Chain News: What is the Tipping Point for Bringing Back Production to Domestic Market?

2008-10-07T02:45:00.001-07:00

Supply Chain News: What is the Tipping Point for Bringing Back Production to Domestic Market?

Logistics Costs as Percent of Total and Infrastructure Costs are the Two Key Drivers, says MIT's David Simchi-Levi

SCDigest Editorial Staff

With the dramatic rise in fuel prices and thus transportation costs, there is growing evidence that some companies are relooking at the numbers and, in some cases, deciding to bring back production from Asia to domestic sources or "nearshore" low-cost countries, such as Mexico for the US or Eastern European countries for Europe.

"For every company and product, there is of course a "tipping point" where rising logistics costs negate the unit cost advantages of China or other Asian countries," says Dr. David Simchi-Levi of MIT, who has been doing research in this area..

Earlier this year, Simchi-Levi did an analysis for Supply Chain Digest that showed how rising transportation costs would impact optimal network design as the price of oil reached progressively higher levels. (See Oil Prices and Supply Chain Network Design.) In one case, using real customer data, the analysis showed that as the price of oil went over $150 per barrel, triggering a corresponding increase in transportation costs, one consumer goods company should move a substantial amount of production volume from Mexico to a factory in Omaha to have the lowest total supply chain cost. Even though the US unit manufacturing costs were higher, they were offset by lower shipping costs to customers.

"Now, what we are starting to see is that, what we predicted might happen then, actually beginning to occur," Simchi-Levi said. He added that he has seen a number of companies that either put Asian offshoring plans on hold or, in some cases, brought production back to domestic or nearshore sources.

Impact of Logistics Costs

Simchi-Levi said he has been looking at a variety of macro-economic data for the past 4-5 years. He said that during that time, transportation costs have risen by about 40% - and not surprisingly, inventory carrying costs have also risen about 50%.

Why? In the constant trade-off between transportation and inventory costs, rising fuel costs ultimately mean it is cheaper on the margin to hold more inventory if doing so can reduce other logistics costs.

Two Decision Drivers

Simchi-Levi says that to facilitate this analysis, it is helpful to consider two variables in a simple 2-by-2 matrix. First, are logistics costs to move products from Asian factories as a percent of total supply chain costs high or low? Second, are the costs or barriers to move infrastructure from Asia high or low?

While each company may define the boundaries differently, such a matrix can be used to visually assess where a company's products fall. For example, products with high logistics costs as a percent of total costs and with low costs or barriers to moving the infrastructure are the prime candidates for moving sourcing back from Asia. Conversely, products with low logistics costs and high costs to move infrastructure likely won't make sense to reconsider.

Those products in-between the two extremes need to be evaluated in even more detail, though in some cases the inability to move the infrastructure may preclude any sort of move. For example, if the domestic supplier base is gone, it may be impractical to return to domestic sourcing even if the physical factory itself could be easily and cheaply reconstituted in the home country.

"If logistics costs are a relatively low percent of total supply chain costs, then clearly even a substantial rise in those costs is not likely to have a large impact on optimal sourcing decisions," said Simchi-Levi.

Simchi-Levi says he has already seen makers of products such as furniture and televisions bring production back from Asia to either the US or Mexico. In the case of furniture, the primary factor is high relative logistics costs. With high-end televisions, it is part logistics costs, and part the cost of the long lead-times associated with Asian sourcing.

"With flat panel televisions, for example, the market price can decline by as much as 8-10% per month," Simchi-Levi said. "So, with 40-50 day cycle time from China, the product could lose 15% of its value. With Mexican sourcing, the cycle time may be only 7 days, and there is little loss in the value of the inventory."

Simchi-Levi says we are early in this trend, and it is not clear, especially with volatile oil prices, how permanent it will be. However, he said it is important for companies to be aware of the "tipping points" where Asian sourcing no longer is the best choice, and have enough flexibility in the supply chain to react accordingly.

"There is always a tipping point," said Simchi-Levi. "What is important is to monitor the supply chain to know when it is close to being reached for various products."

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Product Life Cycle Management

2008-10-07T02:42:00.001-07:00

Product Life Cycle Management is the succession of strategies used by management as a product goes through its product life cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.

Product life cycle

The product life cycle goes through many phases and involves many professional disciplines and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product lifecycle management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/engineerin g point of view.To say that a product has a life cycle is to assert four things that products have a limited life, product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,profits rise and fall at different stages of product life cycle, products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.

The different stages in a product life cycle are:

1. Market introduction stage

* cost high
* sales volume low
* no/little competition - competitive manufacturers watch for acceptance/segment growth losses
* demand has to be created
* customers have to be prompted to try the product

2. Growth stage

* costs reduced due to economies of scale
* sales volume increases significantly
* profitability
* public awareness
* competition begins to increase with a few new players in establishing market
* prices to maximize market share

3. Mature stage

* Costs are very low as you are well established in market & no need for publicity.
* sales volume peaks
* increase in competitive offerings
* prices tend to drop due to the proliferation of competing products
* brand differentiation, feature diversification, as each player seeks to differentiate from competition with "how much product" is offered
* Industrial profits go down

4. Decline or Stability stage

* costs become counter-optimal
* sales volume decline or stabilize
* prices, profitability diminish
* profit becomes more a challenge of production/distribu tion efficiency than increased sales

Ref

http://productionpl anning.blogspot. com/

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