"Inventory is a substitute for information: you buy them because you are not sure of the reliability of your supplier or the demand from your customer” - Michael Hammer,The Economist, 2000
“We care about every worker in our worldwide supply chain… what we will not do – and never have done – is stand still or turn a blind eye to problems in our supply chain. On this you have my word.” ~ Tim Cook, Apple
repost from source
Acknowledgement Growth in complexity of products, competition in innovation and globalization of markets also require changes in supply chains. Supplier sector has an important role especially in The Airline Industry. Improving relations between the partners, increasing the efficiency of cooperation, the introduction of e-commerce, continuous development and supply chains need to adapt to present conditions of the global market leads to changes in the transfer of responsibility for different tasks.
Where you have perfect information, you don't need any buffer stock. The less reliable information you have, the more inventory you need to hold. On a basic level there are two pieces of information needed: the reliability of the supplier to deliver to you and the stability of the demand from the customer. Inventory is a buffer for fluctuations in these two components of the supply chain.
Understanding Business Process Full Service Airline
A full service airline typically offers passengers in flight entertainment, checked baggage, meals, beverages and comforts such as blankets and pillows in the ticket price. The seats generally have more recline than a low cost carrier as well as more leg room. Full service airlines offer passengers the choice of economy or business class travel and on some flights premium economy and first class. The airlines in this category will transfer baggage between flights and to alliance partners of which most full service carriers are a part (SkyTeam, Oneworld, Star Alliance). Full service airlines often have a long history and are flag carriers for their countries of origin.
The 7 star assessment criteria for full service airlines is as follows:
Low cost and regional airlines cannot be compared with full service airlines as they offer an entirely different product on typically far shorter routes where the frills do not matter as much. Our rating system for full service airlines reflects the current market offering to passengers and we have adopted what has become a travel industry standard of seven stars to reflect the very best in full service airline offerings. Low cost and regional airlines simply cannot offer a seven-star budget product, because seven stars denotes excellence. Therefore you will notice we have adopted a simple easy to follow five-star system which reflects the most important features to passengers for regional and low cost carriers.
From the picture that shown published from ICAO Airline Operating Costs and Productivity at Tehran 20-23february 2017, as Functional Cost Comparison Analysis for In-flight services as part of System Operating Costs has contribute for 20% from total functional cost for Airline Industry. Let say, if airline has 1billion USD cost in total, so its 20% are 200million USD. If We could optimized with effective and efficient for Lean Supply Chain Management for inflight services material item, we could cost effective for 20% in total above.
Business Process Best Practise Full Service Airline
As per known, Airline Industry has many various Cost Structure for inflight material aspect, for case study we have understanding related cost structure for airline industry of full service airline scheme, mentioned bellow:
1. Cost per pax : is the fee charged by the airline to pay the caterer for the service which he has given in the form of Meal on board based on pax on board(PoB)
2. Cost per flight: is the cost catering to the airline for services that have been given in the form of inflight material equipment and beverage service on board.
3. Reimbursement: Amount refunded for costs incurred or expenses paid by airline to the caterer
Lean Supply Chain Management
According to Manrodt and Vitasek (2008), lean is defined as a systematic approach to enhancing value to the customer by identifying and eliminating waste (of time, effort and materials) through continuous improvement, by flowing the product at the pull of the customer, in pursuit of perfection. They also defined therefore lean supply chain as a set of organizations directly linked by upstream and downstream flows of products, services, finances and information that collaboratively work to reduce cost and waste by efficiently and effectively pulling what is required to meet the needs of the individual customer.
According to McKee and Ross (2010), lean SCM is a supply chain operational and strategic management philosophy that utilizes Internet-enabling technologies to effect the continuous regeneration of supplier and service partner networks. A lean supply chain network is empowered to execute superlative, unique customer-winning value at the lowest cost through the collaborative, real-time synchronization of product/service transfer, demand priorities, vital marketplace information and logistics delivery capabilities. Supply chain management, especially developing and implementing lean supply chain management, has challenges that must be acknowledged. These are in addition to the "usual" company issues with lean, such as lack of implementation knowhow, resistance to change, lack of a crisis to create urgency, gaining resources and commitment, and back-sliding.
Lean has become a strategic method for gaining competitive advantage and even for survival, for manufacturers, retailers and wholesalers. Adding value and removing waste are no longer options for companies. Non-lean practicing companies face competition from foreign made goods—competition which can have significant impacts on their business and industry. Even lean practitioners understand that the effort to be lean is ongoing (Jaskanwal et al, 2013).
Lean is used to describe the elimination of waste, particularly in the form of time, in favor of adding maximum value to a product or service. This is primarily accomplished by using feedback — including employee and customer responses — to address areas of inefficiency. In fact, studies have shown that an engaged employee — or one who feels valued and listened to by employers — has a direct, positive influence on profitability.
Six Steps for Implementing Lean Processes
1. Outline efficiency goals.
To implement lean processes properly, first identify business goals. Is the objective to reduce product surplus or improve order processing times? Is it to enhance customer experiences? No matter the goal, it must be clearly outlined.
2. Evaluate existing processes.
Process evaluation is the backbone of a successful lean model. This step enables the identification of impediments to the goals. An outside observer with a fresh perspective can be a very helpful management tool in identifying potential issues.
3. Garner feedback from the source.
Part of the evaluation process is retrieving information from employees on the front lines. By asking workers to regularly report impediments to performance, it’s possible to quickly learn where the waste occurs.
4. Make changes toward efficiency.
Once areas of waste are identified, implement immediate changes. The organization should not be so bureaucratic that it makes improvements difficult. If it is, that may be one area of waste to improve.
5. Implement a simple process for quality control.
Lean is not a one time procedure for fixing problems. Successful use of the model requires regular evaluation of internal configurations and the freedom for management and employees to make simple, ongoing changes toward efficiency improvements.
6. Repeat regularly. Lean is a truly simple process that can result in substantial improvements to efficiency and, ultimately, profitability. Following the model’s standards of continuous improvement will bring about an optimal supply chain.
No matter where a company is in the supply chain, its efficiency gains and losses will affect all suppliers and customers. With tight turnaround times and large financial risks, aerospace and defense (A&D) , Airline Industry, supply chains experience these impacts to an even greater degree. For this reason, it is important for A&D companies — and all supply chain players — to identify areas of waste and improve upon them to create a leaner, more profitable and on-time supply chain.
Kaizen (or continuous improvement)
Kaizen, also known as continuous improvement, is a long-term approach to work that systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality. Kaizen can be applied to any kind of work, but it is perhaps best known for being used in lean manufacturing and lean programming. If a work environment practices kaizen, continuous improvement is the responsibility of every worker, not just a selected few.
Kaizen can be roughly translated from Japanese to mean "good change." The philosophy behind kaizen is often credited to Dr. W. Edwards Deming. Dr. Demming was invited by Japanese industrial leaders and engineers to help rebuild Japan after World War II. He was honored for his contributions by Emperor Hirohito and the Japanese Union of Scientists and Engineers.
In his book "Out of the Crisis," Dr. Deming shared his philosophy of continuous improvement:
1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business and to provide jobs.
2. Adopt the new philosophy.
3. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost.
5. Improve constantly and forever the system of production and service to improve quality and productivity and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job.
8. Drive out fear so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales and production must work as a team to foresee problems of production and use of the product or service.
10. Eliminate asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
11. Remove barriers that rob the hourly worker of his right to pride of workmanship.
12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.
In Western civilization, kaizen is often broken down into four steps: assess, plan, implement and evaluate. In Western workplaces, a "kaizen blitz" is synonymous with a concentrated effort to make quick changes that will help achieve a short-term goal.
Inventory Buffers A Lack of Information
To continue with the theme from A Lean Journey's Daily Tips on supply chain this week I thought this quote was appropriate. This is also the season when the news is covering stories of Christmas toy shortages due to supply chain issues.
Improving in-season inventory positions requires getting merchandising, planning, supply chain, marketing and other functions to work off “one version of the truth.” It also means aligning these teams around the same critical metrics.
Numerous functions play a role in a retailer’s inventory management—not just the planning or supply chain functions. These functions may have quite different information on what’s selling (or not) and why, when product is due to arrive and when and where it is needed. This lack of common information leads to errant plans and disjointed operations, or simply put, the wrong inventory in the wrong place at the wrong time.
Where you have perfect information, you don't need any buffer stock. The less reliable information you have, the more inventory you need to hold. On a basic level there are two pieces of information needed: the reliability of the supplier to deliver to you and the stability of the demand from the customer. Inventory is a buffer for fluctuations in these two components of the supply chain.
Art Smalley, President of the Art of Lean, has a great visual explaining the basics of Toyota's inventory logic:
So if you want to reduce your inventory substitute distortions or uncertaninty in your supply chain with good information while continuously improving your cycle time.
Dashboard to Display and Control Metrics (Mockup Design)
In-flight Dashboard system mockup for Index of Landing Page.
A very common way to measure, analyze and manage supply chain performance is with the use of a dashboard. The dashboard can be as simple as data manually collected and put into a spreadsheet with some graphs, to a more automated, visually pleasing dashboard generated by an ERP system. A supply chain dashboard helps in decision making by visually displaying in realtime (or close to it) leading and lagging indicators in a supply chain process perspective.
In-flight Dashboard system mockup for Main Menu IDS.
Indicators
The metrics used in performance dashboards are typically called key performance inducators(KPIs). They usually fall into one of three categories:
1. Leading indicators : have a significant impact on future performance by measuring ether current state activites (e.g the number of items produced today) or future activities (e.g the number of items scheduled for production this week)
2. Lagging indicators : Measures of past performance, such as various financial measurement or, in the case of the supply chain, measurements in areas such as cost, quality and delivery
3. Diagnostic: Areas that may not fit under lead or lagging indicators but indicate the general health of an organization
Application Areas of Scorecard
The Dashboard, versus a scorecard, is more operational in nature and reviewed more frequently. More often than not, according to W.W.Eckerson in his book Performance Dashboards: Measuring, Monitoring, and Managing Your Business. Dashboards are used in three major application areas:[Eckeron,2005]
1. Monitoring
Make sure thins are in control by watching the dashboard metrics.
2. Analysis
Look at performance data across different dimensions and levels to get to the root cause of issues.
3. Management
A mixture of performance, diagnostic and control indicators are reviewed by executives, managers and staff. The dashboard allows for more granular detailed analysis, in addition to the aggregation functionality displayed in the dashboard view. We can then conclude that it is critical to set meaningful, relevant, and attainable targets to ensure that everyone is focused on a Lean Supply Chain, but at the same time, be cognizant of the fact that you do not want to create “Paralysis by Analysis” where people end up focusing more on the numbers that on the customers.
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