6
Lean Six Sigma Logistics
customer, then we will be able to reduce our reliance on the buffers dramati-
cally. In this regard, logisticians need to think of themselves as actuaries, like
those who develop rates for automobile insurance.
Actuaries look at key vari-
ables — the age of drivers, gender of the drivers, types of vehicle driven,
measures of past behavior (e.g., speeding tickets and accidents) — and then they
determine insurance rates that reflect the variability in the data. This is precisely
why the sixteen-year-old male who drives a sports
car will have the highest
insurance rates!
Logisticians are no different than the actuaries in this analogy. For demo-
graphics and sports cars, the logistician substitutes supplier competence, trans-
portation reliability, and demand fluctuation. Then the logistician determines
the “insurance rate,” using inventory as the unit of currency.
The problem here,
though, is that too many logisticians are treating their companies like teenage
drivers when, in fact, the company performance is more like a middle-aged
soccer parent who drives a minivan. A down-to-earth example of this is when
a manufacturer has leveled demand from a supplier who is an hour down the
road from the plant, yet the manufacturer continues
to carry twelve days worth
of that supplier’s parts in inventory! Why? Most likely the answer is twofold.
The first reason is that the leveled flow (and therefore low variability of de-
mand) is not understood; the second reason is more emotional. The emotional
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