Robert O. Martichenko is the Founder and CEO of LeanCor Supply Chain Group, a trusted supply-chain partner with a mission to advance the world’s supply chains.
Robert is an industry thought leader, who has spent over 25 years learning and implementing lean and operational excellence with a focus on end-to-end supply chain management across a wide array of industries. His mission is to embrace the role of the “Human CEO,” who believes respect, empathy, relationships, education, courage, and critical thinking are still matter in order to remain relevant and competitive.
As a professional speaker, Robert addresses topics such as “Building Cultures of Continuous Improvement,” “The Power of Narrative Leadership,” “Discovering Hidden Profit,” and “Make Work Meaningful: The Human CEO’s Strategy.” He also participates and volunteers on multiple advisory boards and educational institutions.
He has received numerous prominent industry awards, most notably, the Distinguished Service Award by the Council of Supply Chain Management Professionals, the highest recognition achievable for professionals in the supply chain industry.
Robert has written several business books, most recently, Discovering Hidden Profit. His other books include Everything I Know About Lean I Learned in First Grade and Lean Six Sigma Logistics and two Shingo Research award-winning books: People: A leader’s day-to-day guide to building, managing, and sustaining lean organizations and Building a Lean Fulfillment Stream, published by the Lean Enterprise Institute.
His debut novel, Drift and Hum, has won multiple awards including the IBPA Benjamin Franklin Gold Winner Award for Best First Book-Fiction. He has also written two children’s books, It’s Perfect Being Me and A Day Well Spent. Robert holds a bachelor’s in mathematics, an MBA in finance, and a six sigma black belt.
A Conversation with Robert Martichenko and Kevin von Grabe, authors of Building a Lean Fulfillment Stream: rethinking your supply chain and logistics to create maximum value at minimum total cost
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Q. Why do you use the term “fulfillment stream” instead of the more common term “supply chain”?
Businesses traditionally have referred to this supply and shipping of materials to and from companies and customers as their supply chain. But the idea of a chain suggests something heavy, inflexible, and prone to jamming and kinking. It’s a static image, rather than a dynamic one. Within a chain it’s easy for managers to lose sight of the flow of value from start to finish, and instead focus on optimizing their one link of control, whether it’s a process, department, or even an entire firm.
To capture the lean concept of smooth flow, we prefer to envision a stream of materials flowing to the customer, with the firms and facilities along the way serving as tributaries. We call this flow of parts and products a lean fulfillment stream. It’s the flow of items from the beginning of the value-creating process all the way to the end. It includes all of the activities that move raw materials and information from materials suppliers to end customers.
Q. Why is it so important to focus on total cost of fulfillment?
We need to recognize that any business is a system of different departments, functions, and processes. In the absence of looking at the total cost of the system we will no doubt make decisions that minimize costs within a subset of the entire system. If we do not understand the implication of these decisions to the total cost of the system, we will likely sub-optimize and not minimize total cost.
Q. Why do you advocate using the inventory calculation of average days on hand, instead of inventory turns, which is used by many companies?
We use average days on hand as opposed to inventory turns because in order for us to calculate inventory carrying cost we need to understand our average days on hand (ADOH). Also, average days on hand provides us with better visibility to see opportunities. For example, if we are carrying 20 days on hand of Part 6789 but our lead time for this part is five days, it becomes visible that there is an opportunity to carry less inventory but still protect our production lines.
Regardless of the measure, it is important to look at inventory turns or average days on hand at the SKU level. Different SKUs should have different goals relative to inventory levels, different replenishment intervals and different ordering strategies. It might be perfectly acceptable for a low running, highly volatile SKU to have an ADOH of 25 while our goal for a high volume SKU with low volatility to have an ADOH of 3.
Q. What are a couple examples of common wastes in supply chains and logistics that most managers miss?
Trailer utilization: Most supply chain and logistics managers are told either that their trailers are full or “know” for themselves that their trailers are full. Often times they are not being fully utilized. When a trailer does arrive to their dock fully utilized it is typically a result of a “push” supply chain where the last 10% or 20% of the trailer is considered “free” and material is sent downstream regardless of a signal or trigger from the customer.
Q. What’s a milk run?
A milk run is a transportation move that uses dedicated equipment but has either more than on shipper or more than one consignee. It resembles a Truck Load move in that it uses a dedicated piece of equipment but is more complex in that it will not contain just one origin and destination. This transportation strategy enables supply chain and logistics managers to increase velocity within their supply chains without using the Less Than Truckload network.
Q. Why do you think companies have applied lean to internal manufacturing processes but been slow to use them in the supply stream?
I think there are two reasons why companies have been slow to apply lean concepts to their supply chains. First there is typically an absolute ton of work to do within the four walls of their factories. They are able to see significant improvement just by focusing on areas that are completely within their control. But, at some point on their lean journeys they will become constrained by their supply chains. In order for them to continue, they will need to apply lean principles to their supply chains and introduce their supply chain partners to lean.
Second, supply chains are complex. Often times we do not have good visibility to what is actually happening day in and day out within our supply chains. Supply chain partnerships are often short in length and agreements and contracts do not lend themselves to collaboration.
Q. In your experience, what are the biggest mistakes companies make when trying to improve supply chain and logistics?
The single biggest mistake that we typically see is making decisions in absence of understanding total cost. Companies often work on projects, initiatives, and blitzes that focus on a small portion of total cost. For example we often see companies focus on transportation costs by shifting modes from LTL to Truck Load without fully understanding their inventory carrying cost, the impact of increasing lead time, and the impact of reduced scheduling flexibility.
- Carl Zeiss brings Lean to its distribution centers
- Q & A with Robert Martichenko and Joel Zeller, of Polaris Industries
An interview with author Robert Martichenko and Joel Zeller, director of logistics for Polaris Industries, describing the progress and pitfalls in applying lean supply chain principals, including how the conversion began, why, key challenges, and the reaction of suppliers.
- Lean Logistics & Supply Chain Networks: 8 Guiding Principles
Featuring Robert Martichenko and Kevin von Grabe
View the Webinar
Download the Slides
- Building the Lean Fulfillment Stream
The workshop highlights the critical elements and “must know” concepts of lean as they apply to the supply chain and logistics, and provides opportunities to discuss what organizations need to do to successfully build a Lean Fulfillment Stream. Beginning with understanding the current condition of your logistics and supply chain networks, this workshop will show how to map your value stream for the extended enterprise, isolate areas of waste and uncover opportunities for cost reduction through the use of lean principles. “Total Cost of Ownership” is a common theme through this workshop, as attendees discuss and dissect the importance of supplier and customer collaboration, cross-functional cooperation, and logistics and supply stream measurement.
LEI Workbook set
Buy all six of LEI's workbooks together and save 15%. Learn how to implement lean at the process, plant, and entire value-stream level with these Shingo Award winning books.