Innovation for Business

Rick Mance

Monthly Archives: May 2019

Logistics: Route Design and Staging

Freight delivery companies can achieve greater effectivenes through route design and staging.

A challenge that delivery companies face is how to shorten the cycle of outbound delivery and returning pick-ups within an operating day. Time compression can be achieved by changes in how outbound freight is loaded onto trailers, making delivery cycles faster.

Each city a freight company serves is first divided into zones that can be served in a driver’s route. Each zone is then divided by a Staging Designation: “F” for Front, “M” for Middle, and “R” for Rear.

F-M-R
As outbound freight is received on the loading dock, delivery addresses are matched to Zone and Staging Designation.

The Zone directs material handlers to place outbound freight behind the door for the correct route; the Staging Designation indicates the position of freight for loading trailers.

Using this staging sequence enables delivery trailers to enter their zones and offload freight first from the rear (R), next from the middle (M), and finally from the front (F) avoiding time otherwise needed for re-arrangement, re-handling or backtracking within the delivery zone.

Benefits are immediately realized in better driver effectiveness (less trucks), time compression (less missed pickups), and lower fuel costs (less miles driven per route).

Using geographic data in delivery route management is an Innovation for Business that makes logistics more profitable.

Working Capital: Maximizing Free Cash Flow through Inventory Planning

The object of maximizing free cash flow through inventory planning is to commit cash to purchases as close to the demand date as possible. With 30 or 60 day payment terms to vendors, the most successful working capital managers may achieve the ultimate goal: paying cash for inventory investments after the sale date.

Cash outlays too far in advance of expected sale dates tie up excesss working capital that could be used for other purposes. If demand is expected to occur at year-end, paying for inventory at the beginning of the year and holding it ties up cash and storage space, and invites losses to spoilage, damage or obsolescence.

Each inventory item, or family of items, has a unique Demand Date, the date of expected sale.

Volumes at expected demand dates can be plotted as a percentage that adds to 100% for the year. These plots, I term “demand curves”.

Figure One shows demands at the end of each quarter:

Chart 1

Figure Two shows demands that are even throughout the year:

Chart 2

Figure Three shows demand only at year end:

Chart 3

Figure Four shows year-round demands that are seasonally higher in the third quarter:

Chart 4

Any annual usage pattern can be represented using this simple plotting of demand curves.

Using percentages instead of fixed values allows an inventory planning and procurement system to easily scale for different annual usage volume forecasts.

Expected volume x demand curve percentage = amount to purchase.

Demand Date – Lead time = Date of purchase.

Illustration of use:

Given a Demand Date of March 31, expected volume is 25% of 4,000 in forecast annual usage and a supplier lead time of one week and 30 day payment terms, an order placed on March 24 (March 31 less 7 days lead time) will be available for sale on March 31. With 30 day payment terms, cash for that inventory will not be used until April 23 (March 24 plus 30 days).

Cash investment in inventory is actually negative.

Making your working capital work for you is an Innovation for Business that gives your company a competitive edge.

 

Planning and Scheduling as ‘Tetris’

TetrisCredit to FreeTetris.org for the image.

Tetris is a game which involves arranging falling shapes to form complete rows without gaps.

Planning for manufacturing or distribution services can be done very effectively using the ‘Tetris Principle‘ – a term coined by Owen at Asymptomatic.

“If you want to score big in Tetris, you can’t simply continuously build endless series of single completed rows at the bottom of the board. What you need to do is build the board up so that there’s a hole in it that is one block wide and four blocks tall. Eventually, with a little luck or a little planning, the 1×4 piece that fits in that slot will fall, and you’ll score the highest bonus available in the game.”

Whether one completes a single row or several rows at once, the overall goal in Tetris is to eliminate gaps. Effective planning and scheduling really has the same goal.

If you can think of gaps as lost capacity and visualize the work center routing as the shape of each ‘piece’. You have the conceptual basis for an effective planning and scheduling system.

Add capacities for each area and resource restraints (maximum effective crewing, shift schedules, break times, maintenance schedules, work and material availability, etc.) and you have the components for effective real-world scheduling tools.

Just add data and programming logic and floor controls, transportation routing, supply chain logistics, and many other processes can be optimized to the point where for a given system or process it would not be physically possible to produce more in a fixed amount of time while using less resources.

The economic benefits of system or process optimization is the value of all the ‘gaps’ that previously existed in the process. The payoff for companies that optimize their processes can be tremendous.

Visualizing work processes as ‘shapes’ which can be arranged to use capacity and resources effectively and developing management systems to use the ‘Tetris Principle’ is one example of applied Innovation for Business.