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On-Time Performance With David Altemir From Altemir Consulting (MFGMonkey Episode 21)

MFG Monkey | David Altemir | On-Time Performance


This week, Dustin talks with David Altemir, a former NASA aerospace expert. They discuss lunar soil research, managing the X-38 spacecraft’s composite fuselage, and transitioning to commercial aerospace and consulting. They talk about the unexpected joys of consulting, the challenges faced at Aurora Flight Sciences, and the crucial role of on-time performance. Shifting gears, they explore challenges in the fitness industry due to excess inventory and introduce Sales, Inventory, and Operations Planning (SIOP).

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On-Time Performance With David Altemir From Altemir Consulting

Introduction And Professional Background

David Altemir has over 30 years of professional management experience in engineering, R&D, manufacturing, supply chains, and enterprise IT. His diverse experience has spanned aircraft, UAVs, rotorcraft, spacecraft, medical devices, contract manufacturing, consumer products, food manufacturing, and manufactured homes at nearly all levels of functional areas.

After his early NASA engineering experience, Mr. Altemir helped manufacturing companies, large and small, meet growing customer demand with on-time delivery and high quality. His career has been marked by developing and implementing numerous transformational improvements. Wow, we are going to have fun today.

Mr. Altemir holds a Bachelor’s of Mechanical Engineering from the University of Texas at Austin, Masters of Materials Science from Rice University, and an MBA from Massachusetts Institution of Technology. He is also certified Lean Six Sigma Sensei and the author of Lean MRP: Establishing a Manufacturing Pull System for Shop Floor Execution Using ERPs and APS. That’s a lot. We are going to have fun. Welcome, Mr. Altemir. Thank you so much for joining me from Texas. This is the first SHOW I’ve done since 2021. You’re the perfect person to have on our first one in such a long time.

Thank you so much for inviting me. I appreciate it.

Early Career And NASA Experience

The thing that stuck out to me was that there were a lot of things I didn’t know about you. We met for a short time when you visited our warehouse in Ohio, and I’ve just been following you on LinkedIn and thought you would have a lot to offer the audience. Definitely, thank you. Tell us a little bit about your experience at NASA.

I was there for ten years, so I did a little bit of everything. I started out in the R&D area and did advanced programs, did lunar soil research, and tried to use microwaves to make bricks out of lunar soil so we could have a lunar colony. I did trajectory analysis on the Titan IV launch vehicle to insert space station modules and into orbit. I was a project manager for the X-38 spacecraft fuselage, the composite fuselage. It was the first all-composite fuselage of a spacecraft ever. I did lots of different things there.

You were there for ten years. Did you jump right into owning your own company? Tell us a little bit about that.

No, I was very research-y at the time in material science. I was in the materials engineering group. At the time, the materials engineering group had merged with the manufacturing division, and we got pulled out of the structures and mechanics division, as they called it. The materials people went to the manufacturing group, and we said, “Why are you doing this? We’re manufacturing, what are you talking about?”

We all learned, including me, that manufacturing is really cool. I’ve been in manufacturing ever since. After NASA, I worked in commercial aerospace for many years, and then eventually, I worked in medical devices for a couple of years, including orthopedic implants and things like that. I started consulting a few years ago. I wasn’t born a consultant. I don’t particularly care for consultants. If you ever told me I was going to be a consultant, I would’ve thrown you out of the window. Here we are and I like it. It’s rewarding.

I have some friends who are mechanical engineers. If I said, “Why don’t you start a consulting company?” “What the hell are you talking about? No, I’m not doing that.” I can appreciate that for sure, but I can tell that you will definitely enjoy it now. Just meeting with you, your passion and who was the gentleman that came with you?

That was Rick Emerson. He’s our warehouse consultant.

He was a great guy too. Mechanical engineering into consulting, and you do so much on LinkedIn, which we call sales, which is a four-letter word for engineers, right?

That’s right. I never thought I would be in sales.

Transition To Manufacturing And Consulting

Your videos are great. There’s a lot of great content on your LinkedIn. What was your favorite stretch? Was it the study or the manufacturing or now the consulting?

I really enjoyed it all. I’d be loathed to try and put one above the other. Tell you what, the consulting’s been interesting because I’ve seen so many different kinds of things. Maybe in that regard, it’s definitely been interesting, but working in aircraft, aerospace, and medical devices has been great.

What was your favorite part about your manufacturing experience at NASA?

The X-38 was the first major manufacturing effort that I was involved in. What was great about that was that I was at Johnson Space Center, and they had not built anything out of composites before. Not only was the design of the composite fuselage brand new and from scratch, we also had to develop the facilities. We do all of the material testing and develop all the material allowable and stress analysis and the tooling. We had to design the tooling. It was like the whole enchilada. There were basically two of us who led that. Yeah, it was great.

Consulting Insights And Experiences

With those experiences, did that drive what your expertise is now with your consulting with on-time performance and how to measure it or did that come later once you got into consulting?

No, I didn’t. It came right after NASA. I worked for a company called Aurora Flight Sciences, which is now a branch of Boeing. We built the composite fuselage for the Global Hawk UAV. I got there right at the point when they were transitioning from the RQ-4A Global Hawk to the RQ-4B was the new model was much bigger and had to be retooled. It was the whole aircraft, the fuselage, the whole air structure. There were ten bomb levels deep and hundreds of parts. There was a very acute need for coordination, control and scheduling. That’s where I cut my teeth on production, scheduling, and product finite capacity scheduling.

The whole operation was stretched. We were a relatively small second-tier supplier to Northrop Grumman, who was the prime. The other folks that were our colleagues or our counterparts in the second tier were companies ATK Alliance Tech Systems, Raytheon and L3 Communications. These are multibillion-dollar companies. At that time, the Global Hawk went to war. We flew the first eight prototypes in Afghanistan and it was just performed stupendously and they couldn’t get enough. There was a lot of pressure.

The program was falling behind. Operationally, we were super stretched and the elastic was breaking. It was a turnaround project. That was very informative in terms of on-time performance and all of the foundational elements that lead to on-time performance because if you’re on time, it means you’re doing a lot of things right. It was basically a wall-to-wall, end-to-end transformation of the entire operation and program.

With one-time performance comes one-time purchasing, which I know is one of your guys’ specialties, teaching manufacturers the importance of one-time purchasing because if your raw goods aren’t in the building, you’re automatically late, right?

Yeah. On-time performance, on-time purchasing and manufacturing are the keystones of our consulting business.

On-time performance, on-time purchasing, and manufacturing are the keystones of our consulting business. Share on X

What firms are you currently working with in your consulting business?

They’re all manufacturers. There are just a few exceptions. We have worked with some industrial service providers, but it’s a manufacturing consultancy and it runs the gamut. We have aerospace experience. One of our consultants was the president of a Caterpillar division and did industrial equipment. We’ve had consulting clients that are industrial equipment, food manufacturing, paper products, genetic engineering equipment, modular homes, food manufacturing. A little bit of everything. Anything that’s discreet. I think the areas that we haven’t done and that I think we probably shy away from would be things like pharmaceuticals and large-scale chemicals refineries, continuous processing, and anything that’s discreet, we’re good for.

Do you have a favorite industry that you’ve worked in while consulting? Is there one that you have more passion for than all the others?

I like industrial equipment, but they’re all very interesting. I’ve had terrific fun with food manufacturers and we’ve done some medical device companies too. It’s interesting. Go for the regulatory compliance issues. There are other bells and whistles that you’ve got to deal with there. We’ve worked with someone who made toilet paper and paper towels, and that was interesting. The allure of it is that these industries that I didn’t know anything about and wouldn’t have imagined what was going on in these companies. There are challenges everywhere.

The food industry intrigues me. I didn’t have any experience in the food industry at all. One of the guys in my Vistage group owns a vegetable and fruit manufacturing company. They’re taking vegetables and fruits, packaging them, and sending them to schools, and the process is mind-blowing to me. They take celery, get it into a little package, and send it out to schools.

Their business is involved in the health of our children throughout the United States. It was awesome to see that process. How are you taking all these carrots and getting them into a little package? It’s a combination of automation and a lot of hands, a lot of people, and a lot of knives flying around. The paper industry was my first experience in manufacturing. I work for a wet felt paper manufacturer. We made the felt on the wet end of the press. It was pretty mind-blowing to see, especially a tissue company. How fast are those presses running? Our presses are slow compared to what some other countries are running. Pretty interesting stuff. You have a lot of paper mills down in your area, too, don’t you?

Our paper clients were in Alabama, Wisconsin and Quebec. I haven’t worked with any around here. I’m sure they’re around, but I haven’t seen them.

On-Time Performance In Manufacturing

What is on-time performance and how do you measure it? Walk us through that.

On-time performance simply means being able to ship a product out on time. In some environments where there’s a lot of complexity because the bombs are large or there are lots of manufacturing steps, the routings are long, perhaps. It’s much more complex. If you’re trying to build an aircraft that takes seven or eight months to put together, you need an early warning system for on-time performance because you can’t wait until your nose is right up to the customer order due date to see whether you’re on-time or not. You need to deconstruct on-time performance.

On-time performance simply means being able to ship a product out on time. Share on X

Measuring on-time shipments is the bottom line measure. In terms of a day-to-day tactical type of metric, the way I would measure on-time performance is to deconstruct that a little bit, working back from the customer order. To ship on time, you have to complete work orders on time and to complete work orders on time, you have to complete all of the manufacturing operations on time. To do that, you have to start them on time. To start them on time, you have to adhere to schedule priorities that make sense.

That there is the key to on-time performance and so we’ve developed metrics and you implemented metrics where we measure that health every milestone along the way in building a large product or small product because we want to deconstruct and look at on-time performance. This is not just at the end item deliverable but for every work center and every operation so that we can then have some data that will tell us this is where the bottlenecks are, and this is where things are going awry.

Are you guys helping people implement ERPs or are you helping improve the ERPs that are already in process?

Yes and yes. We do implementations. We do selections, implementations but I would say most of what we do is what I would call optimizations of existing systems. If they have performance issues in the business, maybe that’s what’s driving them to come to us, or they know full well that they’re not utilizing the system fully or taking full advantage of it. ERP optimization would be the term that we use for that work.

Do you have a favorite one? Is there one that if somebody doesn’t have an ERP system that you’re like, this is your go-to? This is my favorite one, and it’s easy to operate.

It depends on the scale and the size of the businesses. Some systems are terrific, but they require a lot of care and feeding because they’re complex enterprise-level systems for multinational conglomerates. I wouldn’t want to wish that on a small business, but it’s a terrific system. It has to be appropriate. Listen, most all, and I would say virtually all, except weirdo systems. If it’s a weirdo system, then it’s not architected like most other ERP systems.

If you look at the back tables, the architecture tends to be very similar from system to system. That’s because over decades of ERP and MRP software evolution, best practices have suggested how these systems need to work and that’s why we’re system agnostic. We can work pretty much with any system. I like Epicor. I like the scheduling functionality in Epicor, but there are lots of others that are nice, too.

If there’s a small machine shop or sheet metal fabrication company or powder coating company that they might be doing $4 million or $5 million a year and they’re not operating on a system at all. They’re still operating off of a spreadsheet. What would be your go-to if one of those companies came to you and said, “We know that we’re operating off of a spreadsheet and there’s a lot of holes here and we’re probably 80% on-time delivery, what would you suggest for those folks?

I would invite them to look at it. There’s a system called MRPeasy, and we are their authorized partner. We’re a consulting partner, so we don’t sell the software, make no money selling software, but we’ve worked with it and it’s good for small businesses. It interfaces with QuickBooks online and I got to tell you, it’s a lot of bang for your buck. That little system is nice and it’s easy to use and it’s very intuitive and they did a great job putting it together. They’ve added functionality over the years.

That’s a good one. It’s an actual costing system and hard ping system, which most are not. Most are standard costs. For a machine shop that does custom work or that if it’s a light bulb factory, you can deal with standard costing. If you do any custom work, or it’s a startup and you don’t know your unit cost, and you need an actual costing system, and that’s been, MRPeasy has been the best one that I’ve found in that tier of ERP system for small businesses.

With the costing, it has the ability to scan on and off at each work center and track all the labor costs and everything throughout the entire process.

Yeah. It has a built-in MES screen, so you can do all your material and labor reporting.

Factors Affecting Manufacturing Performance

It’s interesting for me to go into so many small facilities and they don’t have a system or they have a system and they’re using it, but it’s so clunky that nobody wants to use it and certainly not the folks on the floor, that’ll be good. What do you typically see as the main drivers of performance as you evaluate on-time delivery or on-time purchasing?

I’d say, at a very fundamental level, there are two prerequisites that you have to have for on-time performance. One is you have to have a tolerable level, an acceptable level of production quality. Your quality defects have to be within a tolerable range. If you have serious quality problems, then the whole operation is virtually unplannable and un-schedulable because everything’s unplanned. That has to be within bounds. You have to have a good modicum of capacity. If you are constantly trying to put 50 pounds of potatoes in a 30-pound bag, nothing’s going to work. If you have the basics, which are good quality and capacity in the ballpark, then there are things you can do to drive on-time performance.

If you have a solid foundation in quality and sufficient capacity, then there are things you can do to drive on-time performance. Share on X

The things that are the main drivers are things like inventory accuracy, inventory planning, which is making sure that you have the right stuff at the right levels. A lot of companies have a combination of shortages and overstock. The things that are high churning, they can’t keep on the shelf. The things that are slow churning start piling up and then the accountant on the balance sheet in the aggregate sees all of this stuff accumulating over years and years and it’s high. That’s a planning problem. Doing purchasing where the requirements are not clearly known, that’s another killer. In some businesses, if you don’t have the right approach to production, scheduling, and production control where you’re actively managing the schedule, that’s another killer, so things like that.

I’m guessing bad data and bad data out, right? So if people aren’t marking off that they’re using a widget of any kind, and the system says that you have 400 of them and you have four and your folks just aren’t using the system, then you’re never going to get ahead, right?

That’s right. If we were talking about inventory accuracy or poor inventory accuracy, it is usually a people-process thing. It’s not a system because you’d have to show me an inventory management system that can’t manage inventory because it’s in and out, pluses and minuses. Chances are you’re not managing the pluses and minuses correctly. It’s usually people in process, but there could be some underlying data quality issues. Units of measure is a good one. It still remains to this day. The best way I know to hose up inventory is to have a poorly selected unit of measure that comes in the category of bad data.

Complaints About ERP Systems

We were talking about people complaining about the ERP systems. Is that part of the problem? Are people not knowing how to use it or they don’t use it, and then they blame it on the ERP system, saying that it’s wrong?

That sure does happen a lot, doesn’t it?

Nobody wants to take responsibility, right?

I’m sure that’s the case. Sometimes they honestly don’t know what the issue is and they think that the system is the problem. We’ve had clients come to us wanting inventory improvements and to improve their accuracy and or they come to us asking for us to help them select a new ERP system because the one they’re using doesn’t work and it doesn’t keep inventory straight and it most assuredly is not the situation.

We had a customer like that, too. It was a gas utility and they had a fabrication shop and they had no idea what they had in their entire shop. We were in there and they had the wrong parts on the wrong shelf with the wrong coding and they had no idea what they had. We spent months going through and reorganizing and retagging everything and then straightening up their warehouse management system, and they were buying and buying and buying stuff that they already had in their shop. It was wild that that was going on and there were certainly people that weren’t happy because there were people that they found that weren’t, they had systems in place, but they weren’t using them.

If your buyer is exporting data out of ERP into Excel to massage it and figure out what he wants to buy, how much and when, then you know you’ve got a problem.

It’s because your system should be triggering you when to buy or should be buying those things automatically if everyone’s using the system, right?

Yeah. The thing is, it’s so much easier that way. It’s such a beautiful thing. Some folks have never worked in an environment like that where it worked. I’ve come across buyers who don’t feel comfortable using MRP because they’ve always done it this way, and they’re all in Excel and they always felt that it was their job to create the requirements, but it’s not their job to create the requirements. The business’s job is to generate requirements based on demand in a good way so that the buyer can execute.

You’ve run across buyers who feel like they’re almost cheating by using a system because they feel that it’s their personal responsibility to physically keep track of inventory?

I wouldn’t say it’s their job to build and develop the purchasing requirements. By the same token, there are production schedulers who feel it’s their job to constantly manage the schedule. These are make-work projects. They are burning hours, dollars, and calories to no useful end. There are better ways to do this that will make the entire supply chain work harmoniously with itself when everyone is tied into the common data bus and then the requirements come out very beautifully and it tells you what to buy or how much and when and then if you execute accordingly, guess what? You won’t have any shortages and you’ll be on time.

Are you seeing many companies working with outside warehousing companies to help either with space issues or with their on-time delivery as far as managing inventory for them and then pulling from a warehouse? It seems like you see Hondas or Toyotas do that where they do a lot of kiting and they want that kit labeled a certain way to go on the production line. They don’t do those things in-house. They have a third-party company that will make those kits for them.

I think the bigger companies do that. They have a 3PL. I know Peterbilt has a plant up the road here and there are 3PLs right across the street and they do exactly what you said. I don’t know. In fact, we finished a big project there in Ohio with 3PLs. Most of the companies we work with are manufacturing businesses where they have the factory and the warehouse and the same piece of land. It’s all self-contained but depends on the scale.

With different manufacturing and fitting into your consulting practice, all this goes hand-in-hand, right? If your ERP system is banging away properly, your manufacturing process is more lean.

Lean Manufacturing And Six Sigma

The thing with Lean-In-Lean manufacturing, which is the state of the art in continuous manufacturing improvement, is Lean manufacturing and Six Sigma. I’m Lean Six Sigma Sensei, so I’m totally into that. We do Lean projects at the shop floor and warehouse level, where we improve cycle times, efficiencies, labor efficiency, and other things. I would say that the most hard-hitting transformational projects that we have are our Lean improvements at a higher level because they are usually not inefficient in the manufacturing process. It’s not like they’re not welding fast enough or they’re not cutting metal fast enough. It’s the timeliness and availability of raw materials, the supplier performance, and managing them.

It’s coordinating sub-assemblies and making sure all the parts are there on time so that you don’t have half-built assemblies lying around. All of these front office things at a higher level govern the efficiency of the entire operation, and those are the kinds of Lean improvements that I enjoy most because they’re the most fruitful. Usually, you can put your screwdriver in the set screw and turn it a quarter turn and things start to work a lot better together. This goes back to ERP optimization, but it can also be procedural or training issues. It doesn’t have to be system-related. It could be anything, and things would start to fall into place. We have some great case studies where we’ve made on-time improvements from 40% to 95%, 98%, or 100%, and that’s usually pretty meaningful.

Absolutely. Customer satisfaction and bottom dollar. If you’re on-time, your customer’s happy and your account’s happy, usually.

You’re usually more profitable because the overtime doesn’t suck you dry and all of your indirect labor and trying to coordinate. I’ve worked in some environments where the collective blood pressure was high. In manufacturing, management can be a pressure cauldron. I remember my boss telling me that, “The statistics show that manufacturing managers die of heart attacks more often.” I don’t know if that’s true, but I wouldn’t doubt it.

I have not heard that one. I can imagine how much it improved culture as well. If all the systems are running and everyone’s happy and everyone’s meeting goals and management’s happy, the culture of the entire company would have to improve by turning that set screw a quarter of a turn. We’ve seen companies that have cultures and people who are grumpy and hate their lives sometimes. Your point would stem from the squeaky wheel getting to grease where managers are yelling because this part is not on time or that part’s not on time. There’s a deeper issue. Just listening to what you’re saying, it’s usually a system-driven issue, not a labor issue.

Sometimes, I wouldn’t say it’s not a system, a data, a people, or a process issue. It’s a philosophical issue. For those businesses that rely on a production schedule, there are different ways to compose the project schedule and the production schedule. If you’ve got the wrong philosophy or idea of what a schedule is, what it’s supposed to be, and what role it plays in your business, then you can spend endless hours turning the crank on a broken machine and not knowing.

Sometimes, it's not a system, a data, a people, or a process issue. It's a philosophical issue. Share on X

Would you say that the single most important thing with on-time performance is the philosophy, or what would you contribute to that?

It is for make-to-order businesses. I would generally say, yeah, that’s probably the single most. It can be any number of things. On-time performances could be lots of different things together. It’s rarely one thing. I would say the single most important issue on on-time performance for a make-to-order business is having the right conception of what a schedule is, what it means, what it’s supposed to do, and how to manage it so the schedule doesn’t turn into a chaos machine because, after all, the purchasing people are connected to your production schedule.

As soon as your production schedule starts becoming flippy floppy or it becomes an oscillator, the buyers and your suppliers are now working to a fuzzy schedule and lead times get long and bad things happen. That’s a make-to-order business where the production schedule is very preeminent. In a make-to-stock type of business, I would say the thing that tends to go south most often is inventory planning because you have to maintain finished good stock. If that protective wall of finished goods, that is basically insulating your factory from customer demand because you have that protective wall of finished goods inventory in the middle, so that when a customer order comes in, it hits the warehouse, and your factory can replenish it very leisurely.

If you’re planning this off or not right, holes will develop in that protective wall, and customer orders will fly. They’ll bypass the warehouse altogether and land in the lab of the factory and now you’ve got a bunch of hot orders and everyone’s hair is on fire and then it becomes a daily occurrence. The red flag is there, and this is an experiment you can do at home. You ask your material manager, “Hey, what method do we use for determining how much stock we should keep on hand?” And nine and a half times out of 10, the answer will be, “We keep 30 days on hand or we try and keep at least 45 days or whatever. It depends on the lead time of the product. It’s a 14-day item. We try and keep it.” That’s the wrong answer.

Anything that’s based on averages or lead times, it’s simple, it’s easy, it’s intuitive. You could concoct some logic around it, but it would only be a half-truth because you’re not accounting for all of the variability in customer demand and your supplier performance, right. We all know about COVID and what happened to supplier performance and that’ll never go away. There’ll always be supplier performance issues. All of that needs to be taken into account with the inventory plan.

By the way, when we do that, when we have a simulation model that we use to optimize inventory levels. We’re almost always, and I got to tell you, it’s almost always, and I would say all always, except I can remember one cut case where they didn’t have enough inventory, but almost always, we’re able to reduce inventory by 20% to 50% generally. Our record is 80% reduction but 20% to 50% is not uncommon. At the same time, material availability, fill rates, service levels, and raw materials or products will be improved at lower inventory levels. It’s because we’ve rightsized the inventory for every part in a very sophisticated way that takes into account the things that matter.

How do you account for unknown sales cycles? Everyone has some data and history, but if your sales cycle is unknown month-to-month, is your system or your philosophy taking it? Obviously, take into account the inventory levels and order levels because we see that in our shop and what we’re doing. Last January, we did 2,000 of something. Automatically, we plan to do 2,000 of whatever this January, but that may not be the case. If it’s more or less, those things get out of whack.

There’s no single magic solution to that because this stuff is unknown. You don’t know what’s going to happen. The only three things you have to rest on are historical demand and supply. Seasonal behavior, if you want to take it to that level of precision because that tends to be a fine level of precision, but that’s a factor. Seasonality and historicals, and then you need something that to extrapolate forward, you need to adjust it up or down by your forward-looking outlook. That’s where forecasting comes in, the thing with forecasting, unless you’re Procter & Gamble. Procter & Gamble is a consumer product. They’re selling soap. People shower and wash their hands as much as they shower and wash their hands. It’s pretty reliable.

There's no single magic solution to unknown sales cycles because you don't know what's going to happen. Share on X

Forecasting there boils down to what new marketing channels are coming online or are we doing some promotion here or is it new branding, whatever’s going on, marketing or sales-wise. With other businesses, I think back to medical devices where we’d have orthopedic braces and you’d have a left brace or a right brace. Of course, you’d have 8 sizes, 1 for kids, 1 for toddler, and then 1 for giant people.

You’d have all these sizes. It’s like shoes and the demand for any one skew is very episodic. It’s not like soap at all. That’s where that statistical behavior and that historical analysis, you can use it because it’ll tell you if you want to keep it on hand, 99% of the time, or 100% of the time, this is the level, and it’s usually a level that’s much lower than you were keeping previously.

If that’s the case, if you say it’s unknowable, it may be either because your history isn’t well understood or you simply don’t know what the future will bring from the market side. I rely on salespeople to give insights on the market side, but one thing you can’t do is let the forecast be a market timing experiment. The stock market timing doesn’t work. I’ve seen forecasts, and I’ve seen four Fortune 500 companies where they’ll give you a part number, “Here’s my twelve-month forecast.” They’ll say, “We are expecting 200 units in March and 0 units in April and 700 in June.”

I’m going, “How do you know with so much precision where these orders are going to drop and what monthly bucket?” Invariably, they give you an update of the forecast, which is completely different. God forbid that they start building the forecast as a lot of companies do because then you’ve tied an oscillator to another oscillator to another oscillator and everything’s host. With inventory planning, you’ve got those three things, a forward-looking forecast from sales that is sensible. You’re not trying to predict the future in a way that you can’t, but you are mindful. It is informative with respect to what marketing channels are opening up.

Where this product is going to go obsolete, so it’s going to go away. These kinds of structural fundamental things that you can have a handle on that. You can ask your salesperson and get a good answer saying, “We’re going to shut down that. We’re not shipping to Denmark anymore, or we’re going to open up in Chile.” Those things are known, but if you go to your sales team and say, “How many units are we going to sell in July?” They’ll give you a number, but they will not know. That’s a chunk of data.

You brought up COVID and inventory levels during COVID. I wonder, how many companies do you see right now that are sitting in warehouses of inventory of finished goods? Especially the fitness industry. Probably Peloton and Rogue and all these other companies that had something to do with the fitness industry, their sales went bonkers and they never saw it coming because people couldn’t go to the gym. Now they’re so heavy on inventory, how do they work through that? That’s a scary thing for some companies right now.

Yeah, I do see that. In most of the companies we deal with, a lot of our clients don’t have finished goods. They’re make-to-order, but we certainly see that in finished goods and a lot in raw materials, for sure. It happens.

That might be an interesting challenge for you next, helping some of these companies that are sitting on a mountain of inventory to get their processes in order and get rid of that inventory.

SIOP Process

The buzzword for that is SIOP of sales. There are two acronyms for that. It’s SIOP or SONP. Same thing. It’s sales, inventory, and operations, and planning. It’s a word made up by consultants years ago. It’s a formal process where a company asks themselves, “What is demand? What is the demand outlook?” And they’ll do demand planning and they’ll talk to their sales and marketing people to try and inform that demand planning. They’ll use it to say, “Are we prepared? Are we going to turn down the throttle on production or are we going to ramp up? Do we need capital equipment? Do we need to go and get a capital budget ramped up or do we need to hire or fire?”

I was at an aerospace company and we implemented a SIOP process there and this was in 2008 during the big downturn of the real estate bubble and we saw it coming and our SIOP process worked and we removed $500 million of aircraft from our production schedules and ramped down. It can happen, of course. You’re certainly not always clairvoyant, but you’re certainly wrong if you don’t do that because then you don’t even try and things happen to you and the warehouse gets full of stuff and you don’t know how it happened.

As far as the vendors, that makes your relationship with your vendors and your partners so much better if your projections are what they are and you’re giving out purchase orders because you need a certain widget and your purchasers are incorrect and then the year later, you come back and you’re like, “We don’t need that, those million widgets anymore.”

Final Advice For Companies

However, your supplier bought material to make those million widgets, and then you end up in a lawsuit because you have material for a million widgets but no sales for a million widgets. The user doesn’t want to take them. It’s interesting how important all this stuff is and I’m sure you’ve seen some wild things. If you want to leave our listeners with one last thing, what would be your most important piece of advice for any company, small or large?

Just to be clear, I’m an operations management consultant, so I can’t say anything about sales or marketing or financial planning or anything. Operationally, inventory management is something that is often. It’s not often. It’s almost always not practiced correctly and by that, the inventory planning part, inventory control also has its problems, but inventory planning. It’s one of those top five, top ten red flags that, as I said before, if your rule of thumb is to have 30 days on hand, you’re probably missing the boat.

inventory management is something that is almost always not practiced correctly. Share on X

Making it 45 may not be the right thing, either. Inventory scheduling, the thing I would say, is actively managing the schedule. It sounds like a wonderful, delightful, and productive thing to do. To me, it’s the root of all evil because what you’ve done is you’ve created a chaos machine. In the effort to try and make the schedule accurate, whatever that means, you’ve inadvertently created a circular feedback loop in your operation and ERP system. Sometimes, you could see it and I’ve taken measurements and it turns it into a random number generator.

There was a large aerospace company where I took measurements in the time and frequency domain of date changes in the system, and they were uniformly distributed, which is to say it was their MRP system was a random number generator. It’s because they had the wrong idea of what a schedule is and how to use it and how to manage it. Inventory and scheduling, planning were the things that overarch any of the Lean improvements that you can do at a very localized level for a CNC process or an assembly process or things like that because whatever Lean improvements you make in those local processes, they get completely overshadowed and wiped out by the inefficiencies that are happening in the front office via inventory planning, via scheduling, production control.

What is your ideal size of company to work with?

Let me tell you, we work with almost any pre-revenue startups and multi-billion dollar companies and everything in between. I’ve got to tell you, anything between $20 million to $200 million tends to be a sweet spot because they have resources that can be brought to bear, but it’s small enough that things still get done and it’s not political. Those tend to be the best outcomes.

I appreciate your time. I’ve learned a lot talking to you and I appreciate you coming on. I know you’re extremely busy, but hopefully, everyone finds this interesting. If somebody wants to get ahold of you guys directly, how do they do that?

Go to and it will all unfold right before you.

Thank you so much.

Thanks a million for inviting me, Dustin. I’ve enjoyed it.

Thanks, everyone, for joining us for this episode of MFG Monkey. If you have any questions or suggestions for future episodes, please email them to us at


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