Author: chung

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As described in the text book, the MRP Process is meant to find out how many materials is needed in a given time while keeping the inventory level the lowest. The MRP process was firstly built by Joseph Orlicky in 1964 on the basis of the Toyota Production System (TPS), which was called the origin of the Lean Manufacturing by Jim Womack in the late 1980s.

In the 1930s, Kiichiro Toyoda found out a way to solve the problems aroused from Ford’s assembly line, which was throughput time and inventory was increased considerably. It was also hard to produce customized products while the market needs turned to a variety of products at that time. Instead of focusing on the utilization of machines in each step, the TPS emphasized on the product flow through the production process. Toyoda’s idea was to produce product with high variety and high quality with rapid throughput time and low cost. He later summarized five methods to address this issue; predict the actual volume needed for machines, adapt self-monitoring machines for quality assurance, arrange the machines in process sequence, make sure that each process report the needs for materials to the previous one, and introduce quick setups so that machines can make small volumes of many part numbers [1].
The Lean Thinking now is not only restricted to manufacturing process but applied in the broad management world. The fundamental ideal of Lean is all about bringing more customer value while decreasing its cost. While there are thousands of lean methods and tools out there, the most important task to initiate a lean transformation is to review the Purpose, Process and People within the business. [2]

Reference
[1] A Brief History of Lean
[2] What is Lean

Every time a new method is introduced to a production process, times and human powers are supposed to be saved. Boeing’s new automatic production system, Fuselage Automated Upright Build (FAUB) has been online for more than two years and now is facing serious challenges due to incomplete jobs done and errors during assembling process.

In the past, fuselage sections were built simply by hand. It was a hard work and posted a great danger to worker’s safety. With the help of FAUB, Boeing reduced half of the injuries reported during the automated production process, according to an old news posted on Boeing website. More than that, Boeing also expected this new process can save build time and increase first-time quality.

However, things have turned south lately. Workers in the final assembly line find out FAUB leaves many incomplete jobs. In order to fix this situation and keep up on schedule, these mechanics now have to work over time even on holidays.

On the other hand, in a report on Seattle Times, the management level thinks it is not only FAUB’s faults but also supplier’s issues. Although the executive did not explain exactly how suppliers messed up with FAUB system, it sounds like a pushback. If unfit materials are the reason, shouldn’t they have already known that once the planned order was created?

This news reinforces the idea that innovation can be groundbreaking; still, to make it work, prudence and thorough understanding are vital. I surely hope FAUB will be successful one day.

Walmart is building up its ability competing with Amazon in the online retailer field through acquisition of Jet.com and installation of new warehousing technologies such as automated product sorting and improved item tracking. It’s like two giants coming from different sides of the world, one rises from virtual online marketplace and the other has been dominated real thousands of real shops and stores, wrestling with each other. An interesting article from Forbes gives us the insight; whoever wants to win this battle must know the following three things: 1. knowing your own advantages and your customers, 2. establishing a robust and flexible supply chain, and 3. discovering new services in retails and dominating it.

To design a set of strategies that address the above three concerns, one thing cannot be ignored is all about information. How to obtain customer and market information, how to analyze and predict where are the demands, and how to storage goods to optimized delivery efficiency, each one of them are big problems waiting to be solved. We are so lucky to live in a world with computers hence tools and algorithms for solving problems are possible. Tools and strategies are not enough, without precise execution, it is very likely to repeat Canada Target’s story.

In the early September, Samsung issued a safety recall for Galaxy Note 7 in response to the reported incidences of exploding phones. Consumers can chose either to exchange for another Samsung model with 100 dollar credits as a gift, or switch to other brand with 25 dollar credits. Samsung also decided to stop manufacturing this model. This decision, without doubt, has triggered a series of countermeasures within Samsung’s global organizations.

The first functional department that has direct impact is the fulfillment department. They now have to estimate the number of returns and exchanges, report customer credits to accounting department, order and distribute other models to make sure that consumers can get their new phones as soon as possible. They might not need to check the condition of each returned phones because the policy is to end this product. Accounting department also takes a good hit. They need to keep track of the gifted credits, record sales returns, update allowance accounts, etc.

On the other hand, project systems, production and procurement process might have suffered less. However, since Galaxy Note 7 is discontinued, the project team will also be closed or reassigned. Production and procurement start to alter/improve/adjust original plans. Production might want to improve quality assurance in the manufacturing process of the next flagship model. Procurement department will need to review battery vendors and their quotation for better materials procurement.

This recall costs Samsung at least $5.3 billion, according to USA TODAY. Besides the fact that Samsung employees now have lots of extra work, I’d say this is a good call. It takes time and money to build a brand with a good name. (Just think about all the advertisement time in football/baseball seasons, that is not a small amount.) What’s more terrifying is that, they finally finish the integration of  mobile phone supply chain. If their phones stop selling, all will be gone and Samsung will be pushed back to manufacturing. That is the last thing we, Samsung and the market, want to see.

Hanjin Shipping Co., one of the worlds’ top ten container carriers in terms of capacity( according to Statista), filed for bankruptcy in Seoul, Korea and Newark, U.S. in the late August and early September respectively. According to Richard Howells’s article published on Huffington Post, Hanjin’s bankruptcy has caused products that worth $14 billion floating and idling on the ocean. Imaging you were one of the retailers who had been prepared for the coming holiday (shopping) season, what would you do on hearing this bad news? All the hard works, visiting vendors, quality control, making and signing contracts, waiting your inventory to be loaded by goods that will boost your annual sales, are all in vain. Now you need to locate your cargos, figure out a way to bring them into the shore, reschedule onshore transportation, looking for substitutions, and probably pay for other extra fees for storing and violation.

I tried to find out where I can trigger this emergent action in procurement process from a buyer’s position, but failed. It happens sometime after PO processing and before goods receiving. If I were an international enterprise like Samsung, I might be able to turn the situation around from fulfillment process because I’m big I have resources and I practically am the producer and the seller. However, if I were a small retailer selling Christmas light bulbs, this crisis could force me to abandon those goods (waiting is unrealistic), initiate another procurement process, put a new PO to another or same vendor, hence drain my cash flow and increase operation risks. No matter what, knowing your conditions and capability is the first thing when facing an unexpected crisis.

By the way, the paragraph in Richard Howells’s article about “How to Prepare” is enlightening. In summary, in order to survive from this kind of crisis, you need to 1. Predict and response to a supply chain disruption with the assistance of real-time data, 2. Match supply and demand in no time, and 3. Develop risk mitigation strategy for unpredictable disasters. After all, procurement is just one component in the supply chain.

Due to the lack of the financial concepts, I reviewed the basic definition of the accounting equation, which is Assets = Liabilities + Shareholder Equity. Problems happen when imbalance of this equation occurs. And then I start to wonder, since it is not my ambitious to become a well-trained accounting professional, or CFO, what else I can do with the financial functions in the ERP systems besides accounting objective. I accidentally came across this article which intrigued me to think a lot more than the daily accounting routines.

In the article ,“Financial Statement Manipulation An Ever-Present Problem For Investors“, the author Troy Adkins introduced a long existing problem, almost since the start of the economic behaviors happened among human beings; people have been manipulated financial statement for different purpose. Adkins explains four reasons why financial statement manipulation thrives in the modern economy:  management of the company encouraged to do so by the company structure, the flexibility of GAAP standards, the interest conflicts between being an independent auditor and a company client. The author also summarized several accounting processes that were categorized into seven categories from Dr. Schilit’s publication “Financial Shenanigans” (2002), as some basic guidelines of manipulation that investors can start to pay attention to.

For example, item one from the third category is “Increasing profits by selling assets and recording the proceeds as revenue”. A vivid recent example is Yahoo. This process makes the company assets decrease while the managers increase their bonus. This is a sign for investors to be aware of.

Of course there is no way an IPO company will ever allow their investors to login their ERP systems and check what’s going on inside, still it would be interested if we know how to identify these symptoms from ERP aspects.

In the first week, we reviewed the basic components of an enterprise and how the business processes connect each component hence minimize the silo effect while at the same time enable collaboration within an enterprise. However, manually updating or transferring information across functional departments is not an efficient method, which can lead to time delay or overhead, and that is why ERP systems are necessary in this modern, rapid business environment.

The Internet has changed the purchase behaviors so differently. Twenty years before, people had to go to a physical store for shopping. Nowadays I can shop online for the next season IT items before the product is even produced. Although the quality is not guaranteed (you can read people’s funny preorder reviews online), it is still an improvement (or unsuccessful innovation) and I believe one day, there will be an online service that directly connects consumers and manufacturing factories across the world. No matter how this service will be implemented in the future, I believe it must be based on the current ERP design. I am looking forward to the details of ERP system and how to design an effective, optimized one.