The business world is currently in a highly competitive state where the slightest and smallest of strategies employed by management determines the success and profitability of the organization. Through effective application of the strategies and concepts, a business entity might enhance efficiency and effectiveness of business operations, reduce costs and increase profits on commodities produced and sold. In this paper, I will look at two improvement process concepts in relation to logistics, the advantages and disadvantages of the concepts, when they are most effective and my personal opinion on each of them.
One/Single-Piece Flow vs. Large Batch
One-Piece Flow, also known as single piece flow, Continuous Flows, or Flow Manufacturing, is ideal of lean manufacturing. This concept entails building one item at a time to effectively and accurately meet consumer pull. It also involves the matching of demand and supply, where supply is only triggered when there is demand. Furthermore, supply is equivalent to demand, i.e. no excess commodities are produced and/or stored in anticipation of future demand trends.
The one-piece flow is very effective as products or finished goods are produced according to the level of consumer demand or built and made according to the specifications and needs of a consumer. This is a very effective method as it eliminates the risk of having dead inventory or inventory build-up. A reduction or elimination of inventory build-up reduces some operational costs, which is mainly storage costs. By implementing the single-piece Flow, a business entity maximizes on resource and space utilization.
This concept is very effective in production sectors that do not deal with perishable goods. A good example would be the case of Amazon. The company has a strict policy of completing an order at a specific or given time period. This concept took a while to be understood but associates of the Amazon Company have learnt the advantages of the single-Piece concept. The concept also reduces the occurrences of “switcheroos”. This is the possibility of placing items in the wrong batch.
In my opinion the One-Piece Flow concept is very effective in a stable economy. This method is most efficient with stable market prices and relatively low inflation rates. By reducing risk of overstocking on commodities and having dead stock in inventory, the producer reduces the risks associated with inventory.
The large batch concept is also known as “Batching”. This concept is founded on the notion of building up orders to a certain or desired level before the commencement of the production. This concept is employed by entities who seek to reduce average costs. Batching mainly relies on the benefits of economies of scale where average production costs are much lower when units are produced in large quantities or batches depending on the level of demand in the market.
The large batch or batching model is viable in the case where the speed, volume and variability of demand makes it nearly impossible to work on one unit at a time, which is the case with the current economic trend. With fluctuating demand levels, it would be more cost efficient to produce goods in bulk using batches. The economies of scale reduce average production cost and increases profit per unit produced.
FIFO Control
The FIFO control concept is by far one of the widely and most accepted concepts in logistics. This concept is founded on the principle that merchandise or goods stored first should be the first to be retrieved. This is a method of inventory organization. This inventory organization concept is most effective in warehouses that have perishable goods. This concept can largely employed in inventory, transportation and warehousing throughout the supply chain.
The FIFO system of handling inventory is not only efficient but also practical. By retrieving the first merchandise to be stored, one eliminates the risk of having dead or old stock. Most clients or customers demand goods at the perfect condition. This is only achieved when the commodity or merchandise is sold as soon as it leaves the production process, FIFO (First-In First-Out) achieves that.
FIFO eliminates the cost of depreciation or deterioration which lowers the value of the commodity. This concept or method is usually best employed when the economy has stable prices. When the economy is experiencing high and fluctuating inflation rates, the FIFO system experiences inventory profits. This is the profit gained on commodities by holding on to stock. This usually increases the value of the commodity by taking advantage of the high price tag on the commodities. This concept greatly reduces loss of value of commodities through wear and tear or depreciation as a result of extended storage periods.
Each of the above mentioned Improvement Processes concepts has their own pros and cons. Each has to be selected considering several factors such as state of the economy, commodity type, market forces and financial status of the company.
References
Bollinger, Steven. Single Piece Flow. Dearborn: Society of Manufacturing Engineers, 2006. Print.
Wendland, Christa. Fifo - Und Lifo - Lagerhaltungssysteme. Frankfurt, 1981. Print.
