Push versus Pull Order Fulfillment: The Changing Landscape of Automated DCs

Our intent in this three-part series is to provide insights into lean solutions, such as continuous processing and/or pull systems while avoiding the buzzword and best practices traps that tend to leave practitioners believing that there are easy answers, or "silver bullets." In the second and third part of our series, we provide application examples and associated results achieved from these lean initiative, as well as a discussion on the environments that are expected to benefit most from these solutions.

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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're really behind again - bear with us. But keep the letters coming!

Including letters on a variety of topics this week, including our First Thoughts piece on the just released inventory statistics for 2006 (See Inventory Management Challenges Continue), including our Feedback of the week from Debmalya Chatterjee, who works in the medical products industry, and says a lack of collaboration leads to excess inventories.

You’ll find another letter on this topic from a reader who offers some thoughts on rising inventory levels, and a reader responding to our Labor Management case study on Sara Lee Foods (See Sara Lee Foods Finds LMS Value), who says unions and companies are working together just fine in most cases.

Finally, a writer from the UK, commenting on our article on Tesco entering the US (See In the Face of Tesco Invasion, Wal-Mart to Launch Smaller Store Formats) , says he thinks Tesco’s outstanding loyalty program is a key to its beating Asda/Wal-Mart in the UK.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – On 2006 Inventory Levels

I work in the Supply Chain for medical devices. We have faced a considerable pressure on reducing inventory levels for our products driven primarily by the need to reduce expiry write-offs. However, it seems to me the industry seems to be trapped in a vicious cycle, forced to keep more inventory at accounts to reserve shelf space (an important driver to increase unit sales) from competition. This leads to a fight for shelf space at accounts at the cost of DIO and turns. It seems that Inventory Management in our industry should include a broad-based collaboration between collaborators, customers (and maybe even competitors) which will enhance the efficiency of the entire supply chain.

Debmalya Chatterjee

More On Inventory Levels :

Lean Management is in - and lower inventory, whether measured through inventory turns or in number of days, is a part of analytics in supply chain management that will serve good purpose.

However, this measures a result of various actions and should be treated as such. Sometimes I wonder whether the inventory race makes people conceal facts to reflect better statistics, and this is where line needs to be drawn- so that the inventory turns (or days) is not stated differently from what they actually are.

For example, many industries use an aggregator or a 3PL to collect components and sub-assemblies on their behalf and deliver to their factory as per their requirement, just in time.

With a margin on costs (added for the services of the aggregator) the purchase prices are higher on the total cost basis than the rate at which the item is procured. But in the anxiety to show lower DIO, this is not highlighted. One should also remember the comfort factor that the inventory gives to the Purchasing Organization especially for a bought out item, in terms of giving time and space for a buyer to explore alternatives in sourcing, in timing the purchase, and deciding logistics.

The increase in inventories due to offshoring referred in your column is a similar result and a realistic increase should be granted, lest the offshoring with tight inventory targets results in stray cases of stockouts, which may in turn lead to the whole (worthwhile) effort getting viewed negatively.

T A KRISHNAN
General Manager-Corporate Supply Chain Management
Larsen & Toubro Limited-India

On Labor Management:

I am not sure there is anything special about the Sara Lee Foods Labor Management story.

Unions have been having management and labor meeting for years. Once a year management and labor from all different companies, along with the Federal Mediation & Conciliation Service (FMCS), meet in San Antonio for two days to discuss different issues and solve problems together.

Ronnie Vaculik

On Wal-Mart versus Tesco

I am responding to an article of yours regarding why Wal-Mart struggles to compete with Tesco in the UK, still a relevant question. As a Tesco shareholder, I could offer one answer.

I can offer another as a pure consumer however (albeit as a shareholder I am a peculiarly motivated consumer). So here goes. Since deciding to shop at Tesco for everything we can (groceries, petrol, credit cards, home insurance) all of which are very competitively priced, my wife and I have become Clubcard point junkies.

As such, we also do business with other companies (also competitively priced) who are affiliated to the Clubcard regime to gain further rewards. The result? Next year, my family will go on its third holiday paid for purely by Tesco Clubcard deal vouchers. You can't do that with Asda.

The analysis? After an age where companies could rely on loyalty to its brand, Tesco has mastered the art of the new religion, which is loyalty to oneself. If Asda offered cheaper prices, better rewards, and the ability to aggregate them, I would switch allegiance in a second. But they don't!

Mike Hughes
UK

Q. What year was the term "Lean manufacturing" first introduced into the industry?

A. The term was coined in 1990 to describe Toyota's management practices and production systems.