The best Supply Chain ever!

As we are now in that hectic time of the year, and not long ago Gartner published the Top 25 Supply Chains it’s a good time to write about one supply chain that unfortunately the esteemed analyst firm continues to overlook. And it just happens to be the greatest supply chain of all times!! I'm talking about The Santa Claus Supply Chain, whose demonstration happens every Christmas Eve, each and every year, with perfect execution!

Only an elusive such as Santa Claus could possibly manage the adversity and diversity that the Christmas supply chain demands of him. His reputation speaks for itself. He has been in business for as long as I can remember, and yet, he has managed to deliver great service year after year.In this Supply Chain, the difference between 'just-in-time' and 'just-too-late' may result in a flood of tears from a deserving child who was sure that when the letter was sent to Santa his/her request would arrive on Christmas Eve in a neatly wrapped package with a special note written personally by Santa himself.

During the summer months, the North Pole's post office is usually a placid place. But when the calendar turns to October 1, the pace of activity quickens. Letters from boys and girls around the world start arriving. Hundreds of letters a day arrive in October, thousands in November and millions during the second and third weeks in December and each one must be carefully sorted and checked twice by the audit and compliance department. Each letter contains lists full of special requests. Mr. Claus expects perfection so everyone working at the company is focused on the critical mission. There can be no identification and delivery mistakes and no disappointed customers.

But, how does Santa manage such a complex supply chain and how come he can manage to deliver timely an average of 3, 9 billion presents and overcome the several setbacks he has to face every year?

Let’s take a closer look at Santa’s supply chain superiority:

Order taking

Traditionally Santa has taken a large number of orders personally, usually by face to face customer meetings (whilst sitting on his knee) or from lettersdelivered via the mail system. Thankfully Santa accepts now orders electronically through popular social networking sites like Facebook or Twitter.

Next he has to translate requirements into detailed bills of material for the elves in the manufacturing department, as they are the ones who are going to produce the gifts.

Manufacturing and Distribution Facility

At first glance, Santa’s manufacturing and distribution facility in the North Pole is not ideally located from a logistical perspective. However he does have total control of his manufacturing and makes good use of economies of scale in production by having a single manufacturing facility located in a land that in addition is free from bureaucracy.

Customer Service

No doubt, Santa has the toughest crowd to please, but yet, he has a reputation for delivering what was promised, there’s never a late delivery, and in my experience, he usually delivers more than expected! I’d say that he deliver a perfect order rating of over 100%.

Supply Network Collaboration

There is no official count of how many suppliers Santa deals with but some analysis indicates that 1, 9 million suppliers might be a reasonable accurate figure.Santa requires a phenomenal level of visibility to orchestrate purchase orders, shipments, in transit inbound inventory of raw materials and components to get all his supplies to the North Pole on time.

He seamlessly collaborates with his suppliers all year to make sure he has all the materials needed for the hottest toys

Supply Chain Planning

Demand forecasting must be another area of concern for Santa. With millions of SKU’s that all peak at exactly the same time he also has to deal with unbelievably short planning.

Transportation and Logistics

Santa has the logistical and fulfillment challenge of visiting every customer in a 24 hour period. This is all done through a fleet of a miniature sleigh, and eight tiny reindeers.

I imagine that the area of delivery is partially outsourced. A 3PL partner must be assisting in the delivery of all this presents on Christmas Eve!

Another likely area of outsourcing must be in the area order entry and administration. The initial order place by any child is changed an average of 3 or 4 times before delivery, surely Santa must have some help with this aspect of the supply chain.

Inventory Management

Santa’s manufacturing facility needs to produce over six million presents every day of the year. As a result, inventory of billions of end products are built up towards the peak season creating the ultimate warehouse management challenge.

Santa also seems to have perfected his Inventory Optimization and safety stock planning, as you never hear of a “Santa Sale” on December 26th.


But although it seems like Santa has everything under control, even he faces occasional supply chain disruptions that negatively impact on businesses, on the short as well as on the long run however, this Christmas Eve, we shouldn't worry about how Santa does it, we should just be grateful that he does perform perfectly year after year. 

Merry Christmas to all and to all a good night.

Christmas time!

Ohhh the joy of Christmas, it´s almost this time of the year again. It seems like it was yesterday when we were singing Christmas songs and cooking the turkey, and here we are, getting ready to wrap the presents and put them under the tree...but have you ever though about the journey of your present from you to your beloved folks?

Don´t miss the next video because it shows as we have never seen before how a superhub of a courier company work during Christmas!

Now, don´t you think it´s a miracle to get our parcels right during Christmas? I bet Santa uses a similar system to manage to get all the present delivered timely on the 24th!!

It´s still early to say it but....Merry Christmas!!

Busiest container shipping sea ports

Following the last post, here is a quick snapshot of the world´s busiest container shipping seaports. No need to say that Southern Asia is now the giant behind the exportation of most of the products we consum everyday around the globe.

There are no other countries that can rival with the Asian potential when it comes to producing and moving goods, and the below image is the prove.

China´s unstoppable growth

At this point it shouldn´t surprise us China´s hegemony when it comes to building the most astonishing infrastructures. No country has done more in the last ten years to improve theit communication lines than the Chinese, from airports to train lines and motorways, China is now a days a giant looking to control the global trade.

The lastes, from now, megastructure was built in the Yangshan islands, about 30km away from Shangai, it cost 12 billion dolars and more then 10.000 workers to complete the job.

Whether is the car you drive, the computer at your desk or your mobile phone, there is a very good chance that they have come from here....

 

We are talking about the Yangshan port, a monster the size of 470 footbal pitches capable to move 32 million TEUs (twenty-foot equivalent unit,  an inexact unit of cargo capacity used to describe the capacity of container ships) during the year.

 

In this post I will kill two birds with one stone, the topic is obiously transport and therefore logistics related, and the mouth dropping video below showing the different phases during the construction of the port shows the operational side of an engeeniering work like this.

I amazes me what the engeeniers can do! No wonder now why China is the world power of the 21dt century

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!