The Dabbawalas

This post will be devoted to explore one of the many sets of tools for process improvement, six sigma. 

But don’t worry about a tedious post with lots of theory and boring stuff. Just a very quick overview to have some context before travelling to India to discover one of the very few businesses that have been able to comply with the six sigma principles!

Introduced by Motorola in 1986, today, it is used in many industrial sectors. Six sigma seek to improve quality by identifying and removing causes of defects or errors and minimizing variability in manufacturing processes

A Six sigma process is one in which 99, 99966% of the products manufactured are free of defects, that is an error rate of 3.4 per million units manufactured, quite an ambitious challenge!

Now we know what six sigma is, allow me to take you to India, where there is a business that has achieved 99.9966% of effectiveness, but before that, I want you to stop thinking about bleeding edge technology, Harvard master minds or bright recently created companies, because most of the people that have achieved what today is the goal of the most cutting edge companies can barely read and most of them probably never have had a computer anywhere around their working facilities.

If you think this is not possible, let me introduce you to the Dabbawalas. A Dabbawala is a person in India, generally in Mumbai, who collects hot food in lunch boxes from the residences of workers in the late morning, delivers the lunches to the workplace utilizing various modes of transport, predominantly bicycles and the railway trains, and returns the empty boxes back to the customer's residence that afternoon.

There are approximately 5000 Dabbawalas in Mumbai that deliver around 200.000 tiffin boxes every day.

A typical day for a Dabbawala starts when the cylindrical metal tiffin boxes are collected from homes and taken to the nearest railway station where they are loaded onto crates and transported by train to downtown Mumbai where the boxed will be loaded onto hand carts or carried on long trays balanced on top of heads. 

On average one tiffin box will change hands four times in its journey from a home kitchen to a hungry office worker. So far, so simple, however, the majority of the Dabbawalas are illiterate and the sorting is done mostly by a system of color coding that has hardly changed since the first tiffin was delivered in 1890.

Lunch boxes are usually marked in several ways:

      - Abbreviations for collection points.

      - Colour code for starting station.

      - Number for destination station.

      - Markings for handling Dabbawala at destination, building and floor.

And here it comes the impressive fact; it is frequently claimed that Dabbawalasmake less than one mistake in every six million deliveries, equivalent of Six Sigma or better, proving to be more efficient than the most renewed companies in the world.

If you want to know more about the Dabbawalas, I would recommend to watch the next video, an image is worth more than a thousand words!

 

Patience, the forgotten key to success

Because sometimes, we may feel like our effort and hard work doesn´t pay off....

You have the potential to achieve any goal, you just need patience.

If it took more than sixteen years to Leonardo to complete his first masterpiece, shouldn´t we wait at least a couple of years before we lose hope?

Slow moving inventory...your worst nightmare!

Mid-year review, and slow moving and obsolete stock start coming up in every single meeting…it´s pretty much inevitable; inaccurate forecasts, undersells, overstocks, there can be hundreds of reasons why a sku become a slow moving, and we might explore in deep some of them in future posts, but whatever the reason is, when inventory doesn’t move, the business will incur in associated carrying costs and lose of valuable resources that could be used to invest in your business.

Defining what is “slow moving” is not easy as the criteria will vary from company to company, and what is considered slow moving from some retailers might not be for others, but there is a general rule that can be applied to most companies to define if a reference is slow moving or not; Having stock worth 6 or more months of demand for any given item will indicate that this particular sku is a slow moving.

Now we know what slow moving is, we can focus on the impact that slow moving stock has in our business. From an outside perspective, you can think that slow moving stock shouldn´t be the focus of an organization as “it only has a negative effect on our inventory”, but if we dig a little bit further, we will realize that the impact of slow moving stock affects a business in ways that we never thought about before.

• Interest paid on borrowed money. When inventory doesn't sell, you are incurring more interest charges. 
• Insurance costs derived of inventory on hand. 
• Obsolescence provisions; financial reserve to cover losses, write-offs, etc 
• Storage space of course. 
• Costs incurred when your warehouse is full of slow moving inventory; outside storage costs, build of new facilities, movement of stock from one picking location to other etc.
• Cost of destruction of obsolete stock. 
• Depreciation of the inventory month after month. 
• Time and personnel, including managers, stock keepers, material handlers, cycle counters, planners and controllers.

These are only some of the aspects in which slow moving stock has an impact, therefore the sooner you tackle the “slow movers” the more profitable your business will be.

In future posts I will try to extend this topic and underline the causes and also possible solutions to slow moving inventory.

Things in life we shouldn´t forget

Today I will let those other important things in life have their space in this blog. Because life is not about setting barriers but overcoming them, is not about holding a burden but releasing it, is not about doing what you should do or what everybody else expect you to do, but doing what makes you happy...

And if you are lucky enought to have a job you love, a caring family and a good bunch of friends......there is not much else you can ask for!

Push VS Pull flow

Terms like “Retail supply chain”, “Automotive supply chain” or “FMCG supply chain” have become widely popular, but there is not such a thing as a “specific” supply chain, there are basically two categories, and almost all supply chain processes fall into one of these two categories. All of the above industries fall under Pull or Push supply chain. In fairness, a hybrid new model called “Push-Pull” is being accepted as a third valid model but understanding the pull and the push models separately will make very intuitive the Push-Pull model.

What is Pull Supply Chain?

Under pull supply chain, products are manufactured based on specific customer requests, in fact, companies only make enough product to fulfill customer's orders. We also know it as “Make to Order” model (click here to learn more). We often see this model operating in High Tech Industries, where customization is the competitive advantage. Briefly, we have seen this model in automotive industry and it is being used in high end luxury market segment. The objective of this model is to minimize the Inventory and optimize supply. One advantage of the Pull system is that there will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost of carrying and storing goods. However, one major disadvantage is that it is highly possible to run out of product and not being able to supply the merchandise on time, leaving the company unable to fulfill the order which contributes to customer dissatisfaction.

What is Push Supply Chain?

Under Push model, products are manufactured based on anticipated customer orders. Companies must predict which products customers will purchase and determine what quantity of goods will be purchased. This model is also known as Make to Sock. The core assumption of push programs is that demand can be anticipated and that it is more efficient and reliable to mobilize resources in pre-specified ways to serve this demand. Some disadvantages of the Push model could include high inventory costs and huge warehousing and distribution costs, plus the fact that forecast are often inaccurate and sales can be unpredictable. An advantage of the push system is that the company is fairly assured it will have enough product on hand to fulfill customer’s orders.

Retailers heavily use push model but for some time now the big names in the retail industry are trying to adopt the hybrid Push-Pull model which is a combination of pull and push models.

The Push-Pull System

Some companies have come up with a strategy they call the push-pull control system, which combines the best of both the push and pull strategies. Push-pull is also known as lean inventory strategy. The goal is the reduction of product shortages which can cause customers to go elsewhere to make their purchases.