Board of Directors

Chair Karl Harward, MBA

Vice Chair Mary Walker, CPSM, CPSD,

C.P.M., A.P.P. Secretary/Treasurer

Sheila D. Petcavage, C.P.M. Chair Emeritus

Ken Killen, Ed.D, C.P.M. Director/Coordinator Sponsoring Programs

(ISM Conference) Fred Lutz, C.P.M., CIRM Membership Chair

Raymond F. Hopkins, C.P.M. Director

Cheryl Phillips Director

John H. Guju, MBA, C.P.M.

Director Terry R. Volpel, CPSM, C.P.M.

Technology Advisor Robert A. Bonnell, C.P.M.

Advisor M. Bixby Cooper. Ph.D, MBA

Advisor Steven Melnyk, Ph.D.

Inside this issue:

Out With the Old, In

With the New: Intra-

logistics

1

The Wonder, Wacky

World of WIP

2

Author — Thomas L. Tanel, C.P.M., CTL, CISCM

In this column, I would like to introduce the concept of Intra-logistics as the new mantra for Materials Management. APICS defines Materials Management as a grouping of management functions supporting the com-plete cycle of material flow, from the pur-chase and internal control of production materials to the planning and control of work in process to the warehousing, ship-ping, and distribution of the finished product. Intra-logistics is a recent European term that describes the internal flow of materials between different logistics nodes within a company. Conceptually, Intra-logistics in-cludes the set of logistical activities neces-sary to find, purchase, receive, store, pro-cess, issue, and deliver materials. This same set of functional activities is involved in con-trolling both the flow of resources and the associated data into and out of the logisti-cal operating system. In today’s global sup-ply chain, the efficient and effective alloca-tion of logistical resources is a challenge common to all organizations. Increasingly, organizations are recognizing the need to allocate their logistical resources, through the implementation of the Intra-logistics con-cept, to maximize profits or budgets, im-prove customer service, establish needed controls, and reduce costs. Intra-logistics consists of the following lo-gistics functional activities:

Purchasing - The responsibility to source, contract, negotiate, and pro-cure materials, equipment, supplies, services, etc. while maintaining a viable supplier base

Receiving and Stores - The responsi-bility for activities related to in-bound transport, receiving, inspec-

tion, storing, handling, issuing and controlling stock and inventory

Inventory Management - Includes activities and techniques required to maintain materials, products, and supplies at desired stocking levels

Material Control - Directing or regu-lating the movement of materials through the entire manufacturing, processing, or conversion cycle from beginning to end

Materials Handling - The functional and organizational design pertain-ing to the flow and movement of materials and supplies throughout the organizations facilities

Distribution and Transportation - Encom-passes all the operations in the movement and flow of finished goods to include inven-tory control, warehousing, order processing, and outbound transport. In the framework of Supply Chain Man-agement, Intra-logistics controls the material flow along the complete value-added chain. Just like Materials Management, Intra-logistics is an organizational concept that fosters a total systems approach to plan, acquire, store, move, and control materials, supplies, parts, work-in-process, and fin-ished or consumable goods in order to opti-mize all organizational resources. In conclusion, Materials Management typi-cally is concerned with the regulation of the flow of material to, within, and from the organization. Since Intra-logistics covers a wide spectrum of varied activities, totally committed to providing a smooth flow from suppliers to operations/production/maintenance then to internal and/or exter-nal customers, perhaps it’s time to retire the term Materials Management. What do you think? Out With the Old, In With the New?

Out With the Old, In With the New: Intra-logistics

May 2013

We’re on the web!

www.ismmmg.org

Page 2

The Wonderful, Wacky World of WIP

produce a finished good in the shortest amount of time at the cheapest cost with the least wasted time and effort. In the past couple of years there are a couple of new factors that have en-tered the discussion that I believe will have significant effects on how the whole WIP system is managed in the next number of years. The first is the whole “social con-sciousness” aspect of business. Whether it is a consumer perception of a “sweat shop” or a forced labor situation, com-panies like Nike and Apple are being forced to look beyond the pure eco-nomics of manufacturing to the reputa-tion and practices of their outsourcing suppliers. Now we are starting to see more discussion about “conflict miner-als” and a manufacturer’s responsibility to identify and manage their supply chain to the point where they can certi-fy the source of their raw materials. In time I believe a consequence of this may be more companies deciding to “insource” more of their production or to establish rigorous audit processes to inspect and correct substandard labor practices, particularly in third world or developing countries. The second is the whole environmen-tal movement. This really started to take hold in the early years of this cen-tury with the EU’s Reduction of Haz-ardous Substances (RoHS) legislation and later with the ”Registration, Evalu-ation, Authorization and restriction of Chemical Substances” (REACH) pro-grams. Growing from these initiatives we now see more focus on measuring a company’s carbon footprint. This will go way beyond “greenwashing” for pub-licity’s sake and should become a major factor to consider for companies who are examining the “make or buy” cal-culations for their products. With the growing calls for a price on carbon in whatever form it takes (cap and trade or carbon tax) manufacturers will have to adapt their WIP decisions and meth-odologies to suit the changing situations. I anticipate a number of new buzzwords will hit the industry as theo-rists and academics devise new and better ways of managing that mystical world between raw material and fin-ished good. Like Dorothy said, “Toto, I have a feeling we aren’t in Kansas anymore.”

Author — Terry Volpel, CPSM, C.P.M., SCMP, LSSBB Ask many people to define a Raw Material and they won’t even blink before answering. Ask them what a Finished Good is and they will rattle off a reasonable definition. Ask them about how one gets from one state to another and you often get the classic “deer in the headlights” look. This is the realm of the WIP (Work in Process) and like mystical alchemy it transforms raw materials into finished goods like water into wine, carbon into diamond and plants into oil. Much has been written about manu-facturing and its processes. Motorola’s Six Sigma, Toyota’s Lean, Goldratt’s Theory of Constraints, JIT and others are some of the buzzwords floating around. All these methodologies de-scribe the path towards the perfect system of transformation. In all of these systems we can find successes and fail-ures. We have yet to find the ultimate or perfect system for all manufacturing and one of the main reasons why can be found within a discussion of WIP. Work in Process (WIP) starts with an input of raw materials into some trans-formational process. Lean Manufactur-ing theory tells us that every time we touch that material we need to add value. JIT tells us we should not have idle machinery or material backed up waiting for the next process. Theory of Constraints (TOC) tells us that process steps are rarely even and so the “Takt” time to do any process may be differ-ent from the previous step or the next step, automatically causing a buildup of inventory. TOC tells us to identify these “constraints” and solve them. The auto industry has done this by starting with a time slot and fitting as many steps into a slot as they can. For example, a stop on a Ford assembly line might be 10 minutes and a number of processes need to be accomplished in that time frame because that car moves on to the next station at the end of the ten minutes unless manually stopped because of a problem. So in adjacent stations one might do 5 steps in one and 15 steps in the next because that is what can be fit into the time. Another type of process involves the Theory of Constraints (TOC) concept of individual process steps and batch sizes

of one. The “Drum, Buffer, Rope” con-cept is as easy as “sell one-make one”. Each process step is designed to pro-cess a single unit at a time. If a step takes twice as long as the previous step and the subsequent step, the answer is to build a buffer inventory after the longer step so the subsequent steps can continue producing one unit without waiting for the longer step to produce a unit. Boeing (787) and Airbus (A380) experimented with a new concept in the aerospace industry modeled loosely on the automotive manufacturing system of JIT. They quickly ran into Supply Man-agement problems with suppliers who were unfamiliar with the new technolo-gies and both manufacturers ended up either financially bailing out or even acquiring some tier 2 and 3 suppliers to keep material flowing in their pipeline. Additionally the delivery delays due to an incredibly long and complicated supply chain pipeline added years to deliveries and are still being felt today. Even though we refer to a “supply chain”, the reality is that it is more like a supply “mesh” or “web” with multiple tiers and spokes guiding the incoming materials to a specific place and time. The consumer electronics industry is very tied to economies of scale where a manufacturer (Apple, Samsung, etc.) would build in large batches. At first many did this in house but the trend has been to use third party contract houses (Hon Hai (Foxcon), Flextronics, Celesti-ca, etc.) to make the products by the thousands or even millions. This can ac-tually simplify the supply chain for raw materials because they can and do order the complete run of raw materi-als as it is a finite number (e.g. 5 million Blackberry 9910 units). Once that run is done it may not be repeated and the next model is being geared up with its own raw material requirements. When the first model begins to run out, the new model goes into production and hits the market just as the older model is sold out. The few remaining older models are discounted and sold off. Sometimes there are two or three gen-erations or models in the planning and preproduction stage while the current models are being introduced to the marketplace. I mentioned earlier that the general goal of all of these methodologies is to