nents located next to the production line. The strategy
would also provide more space for production-related
activities and reduce the non-value-added time that production workers spent walking back and forth between
assembly stations and material storage locations, some of
which were not optimally positioned. In addition, since
almost all of the inventory would be in the warehouse area
at any given time, it would be much easier to anticipate a
probable stock-out a few days in advance just by looking at
the current stock level in the warehouse and in-transit from
the supplier. If there should be a high probability of a stock-out for a critical assembly item used in, say, the Conecto bus
model, then the scheduled assembly date for Conecto buses
could be pushed back a few days before it entered the three-day “frozen” zone, and other bus models for which materials were available could be brought forward.
Taking the above arguments into consideration, the team
decided to increase the number of parts picked from the
dedicated just-in-time zone in the warehouse. This basically meant that the team would have to balance the trade-off
between the cost of adding some more warehouse space
and the benefits of improved speed of delivery to the line.
Since this proposed system would allow for almost no margin of error in the MRP data, critical parameters entered
into the MRP system, such as pallet capacities, batch sizes,
and delivery frequencies, were carefully checked and corrected when necessary.
After implementing this plan, the percentage of materials
picked from the dedicated zone and delivered just-in-time
to the assembly line increased from 0.5 percent to nearly 15
percent. Because we learned from our reading that a reduction in the time to pick and deliver was a direct function of
warehouse configuration, 4 we made some modifications to
the configuration of the warehouse that helped to increase
picking and delivery speed. Another renovation was the
conversion of the small-parts storage area to an automated
storage and retrieval (AS/RS) system.
2. SUPPLY BASE LOCALIZATION
As we approached the year 2008, MBT became interested in
acquiring more parts from local Turkish suppliers. In 2008
we established a group within our logistics department that
was assigned to deal with localization of supplies. One of
our aims was to decrease the company’s total costs by
reducing logistics-related costs. (Our thinking was similar
to the total-cost-of-ownership approach described in the
article “Time to come home?” in CSCMP’s Supply Chain
Quarterly. 5) Over the last four years, the division has successfully localized more than 5 percent of the components
[FIGURE 1] SERVICE LEVEL OF DELIVERIES
FROM WAREHOUSE TO ASSEMBLY
100.0%
99.85%
99.81%
99.8%
99.76%
99.62%
99.6%
99.38%
99.4%
99.2%
99.0%
2008
2009
2010
Year
2011
2012
that originally had been imported from suppliers located
outside Turkey.
Using more local suppliers was also a way to perform risk
management by addressing both supply side risks and catastrophic risks, two of the five main risk categories outlined
in an article on that subject by Stephan and Bode (2008). 6
We also put forward a hypothesis that we needed to balance
both prevention programs and response preparedness in
our risk management practices. 7 Proof that this hypothesis
was correct came a couple of years later, when many firms
that were stronger in prevention programs had difficult
times during such disruptions as the massive earthquake
and tsunami in Japan and the eruption of the Eyjafjallajökull
volcano in Iceland. No manager would have thought to
include such unusual, extreme events in a prevention program or to develop contingency plans for them. 8
Meanwhile, many companies that were stronger in
response preparedness continued spending time, effort, and
money on response activities due to the disruptions, even
though at least some of those efforts could have been avoidable if they had paid more attention to prevention. It
should also be noted that the volcano eruption and the
earthquake led managers around the world to realize that
diversifying their supplier base might be beneficial.
However, managers should not have needed those supply
chain disruptions to come to that realization, since the
principle that diversifying the supplier base by splitting
orders among multiple suppliers could indeed be beneficial
(depending on certain factors) was already widely evidenced in literature. 9, 10 As discussed in those articles, the
expected reduction in shortage costs could make order-
