It is a widespread misconception that the bullwhip effect is caused by irrational behaviour. In fact, it also occurs when planners react completely rationally. To prevent the bullwhip effect, you first need to understand what causes it.It is such a shame that the bullwhip effect is blamed on irrational behaviour. Moreover, it is not particularly...
In my previous blog I talked about the colours of yellow and blue: two behavioural styles from the DISC personality profile. A keen eye for detail, accuracy and caution are typical of blue behaviour, while yellow behaviour is characterized by taking the initiative, a short attention span, creativity and a high degree of interaction with others. ...
In an edition of the Dutch newspaper Het Parool dated 17 February 1967 I came across a full-page advertisement in which the high-end Amsterdam department store De Bijenkorf proudly announced its 26 (!) collections per year – ‘fast fashion’ way ahead of its time. In fact, it took until the start of this century before fast fashion really achieved...
Effective production management contributes to achieving the company goals. However, manufacturing companies regularly face challenges such as disappointing customer experiences and excessive costs. All too often it becomes apparent that long lead times are still too short, high inventories are still too low and substantial capacities are still...
Decrease safety stocks with 25% with a decrease in service level. That sounds like a good deal! And it is quite easy to establish by differentiating service level targets. By aiming for high service levels of inexpensive fast movers and a lower service level of expensive slow movers, a good service level can be obtained on average against...
The life cycle of items is getting shorter and shorter. Many items nowadays exist for only one year or sometimes only one season. Just think of items in the apparel industry or consumer electronics. Managing these short life cycle items is complicated. If these items are purchased in Asia, only one purchasing decision can be made, often long...
Most production companies acknowledge the importance of batch sizes. They realize that batch sizes directly contribute to inventory levels, costs, working capital and even capacity. A one-size-fits-all solution, for instance to give every item a batch size of a month, is without a doubt not optimal. There is room for optimization. There are two...
When asking a financial director what he thinks the cost of inventory is, he will undoubtedly give an answer like the Return on Capital Employed (ROCE) or the Weighted Average Cost of Capital (WACC). When asking a logistician the same question, his answer will be the sum of interest, storage space and risk. Unfortunately both are in the wrong,...
Since the eighties we know that customer orders penetrate our company until the Customer Order Decoupling Point (CODP). For the fist time, Hoekstra and Romme made the explicit distinction between production to order and production to stock. With hindsight it seems hard to believe that this was such a big discovery. How difficult can it be? You...