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Supply Chain Key Performance Indicators pp y y
GC&P Performance Measurement System (LOGOS)
Supplier Service Analysis Vendor Rating
Cross Analysis Cross Analysis
Customer Service Analysis
OEE A l i Analysis OLE Anlaysis Flow Index
Customer Service: Order Line Dates
Date Received Date Entered Date Required Date Promised Date of Last Shipment Time
Customer Waiting Time
Order Lead Time
Customer Service: Which Indicators?
Indicators representing an average: e.g. Average customer waiting time, average flexibility, average reliability average order lead time reliability, time. Indicators representing a percentage: e.g. On time delivery (% of order lines delivered on time), time) flexibility (% of order lines confirmed on the same date required by customer) order customer), lead time (% of order lines delivered within a lead time of XX-days) Note: Both the average and the % indicators have the advantage of being simple to calculate and to understand, but at the same time they do not give a comprehensive overview of what is happening. Indicators represented by a histogram or curve : e.g. Customer Waiting Time Curve, Flexibility Curve, Reliability Curve, Order Lead Time Curve, etc. Indicators can be calculated either on the total number of order lines, or just on a few of them (for instance: order lines of a particular product / item range, order lines by customer, order lines related to a certain period). In such cases we speak of “analysis segmentation”.
Customer Service: The 4 Service Curves
Customer Waiting Time Curve
2500 2000 Line N° 1500 1000 500 0 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81
A CWT Curve like this is almost impossible (one-item-only companies). But it could show more peaks as related to the product ranges.
10000 8000 6000 4000 2000 0 1 2 3
To be flexible is fine, but only if the service policies are shared with customers. Should the Flex curve be erratic, it might be disastrous for the company!
9 10 11 12 13 14 15 16 17 18 19
Days of Customer Waiting Time
Days of Flexibility
Re liability Curv e
Order Lead Time Curve
1800 1600 1400 Line N° 1200 1000 800 600 400 200 0 1
11 23 35 15 19 43 49 59 27 31 69 -9 -5 -1 3 7
L eN in °
The OLT curve shape is affected by the trend of the other three curves.
5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89
Days of Delay y y
Days of Lead Time
Customer Service – A Real Example of Reliability Curve 6 .
customer is happy to find that service policies are well defined and that. Generally speaking. the most complex items are delivered later while the simplest that instance are delivered sooner. . for instance.7 Customer Service – A Real Example of Order Lead Time Curve p Service policies designed with accuracy: Some items will be delivered in 1 week and others in 2-3 weeks.
Customer Service: Files and Data Needed Customer Database Customer Code Company Name Feature (Country) F t 1 (C t ) Feature 2 (Area) Feature 3 (Category) Feature 4 (Etc. 8 .) Shipment Lines Plant Code Warehouse Code Shipment N b Shi Number Shipment Line Order Number Order Line Number Shipment D Shi Date Quantity Shipped Note: All the data in the above lists can be retrieved from any information y system.) Order Lines Order Number Order Line Number Order Date Required Delivery Date Confirmed Delivery Date Order Line Quantity Customer Code Item Plant Code Warehouse Code Note 1 (Order Type) Order Not Completed (Y/N Flag) Order Cancelled (Y/N Flag) Item Master File Item Code Description Plant Code Pl t C d Standard Cost Lead Time Unit of Measurement Feature F t 1 Feature 2 Feature 3 Feature 4 (Etc.
Customer Service – Some Tips to Consider The fundamental service measurement indicators are: Reliability Curve Order Lead Time Curve The customer waiting time and flexibility are not always possible to calculate. It could be interesting to measure the speed at which a confirmation of delivery date is given to the customer. a long time frame (from 6 months to 1 year) should be n id r d considered. Indicators can be calculated on the basis of order lines. of quantities or by amount (How many lines/Kg/€ could be delivered on time?) 9 . i h For a meaningful analysis. since the delivery date as requested by customer is sometimes not managed by IT systems.
4. An erratic shape of the Order Lead Time Curve shows that a delivery date determination policy is missing. partial deliveries cause a cost increase for handling and transportation. Problems with the production planning. Indicators can be also used as a tool in negotiations with customers. Beside meaning a lack of service to customers. They can even show one or more among the following: 1. Lack of service policies. Insufficient production capacity. Late deliveries do not just decrease the customer satisfaction. 3. Inability to determine the delivery date.Customer Service – Some Tips to Consider Indicators can be calculated either in working days or calendar days. 10 . p 2.
Exercise 02-01 11 Draw the on time delivery Curve and the Order Lead time Curve for the Company CINZANO Calculate the average delay and the average order lead time How many lines have been delivered with a delay of less than 1 week? y y Is the customer service the company is providing good or not? .
s d g ds c d ds b sys . and out of a manufacturing organization: f t i i ti Raw materials: purchased items received which have not entered the production process. cleaning staff) . through. MROs: item used that do not come part of the product (maintenance supplies. Finished goods: products that are ready to be sold as completed items.12 Inventory and The Flow Of material One often-used classification is related to the flow of materials into. Work-in-process: raw materials that have entered the manufacturing process and are being worked on or waiting to be worked on. g ) . Distribution inventories: finished goods located in the distribution system. spare parts and consumables such as lubrificants.
Information System data is not updated Designers do not standardize components which causes unnecessary increases in complexity. The price of this products fluctuates according to world supply and demand. 13 . Hedge inventory: some products such as minerals and commodities are traded on a worldwide market. Lot-Size inventory: items purchased or manufactured in quantities greater than needed immediately Transportation inventory: they exist because of the time needed to move goods from one location to another such as from a plant to a distribution center.Why Inventories y Anticipation inventory: inventories are built up in anticipation of future demand. for example they are created ahead of a peak selling season. Fluctuation inventory (safety stock): inventory is held to cover random unpredictable fluctuations in supply and demand.
storage cost. deterioration). Carrying costs include all expenses incurred by the firm because of the volume of inventory carried (capital cost. production control costs. and factory overheads. damage. pilferage. For an item manufactured inhouse. the cost includes direct material. pilferage deterioration) Ordering costs: are those associated with placing an order either with the factory or a supplier ( li (purchase order cost. direct labor. set up costs) h d d i l ) Stockout costs: if demand during the lead time exceeds forecast we can expect a stockout .14 Inventory Costs The following costs are considered in inventory management decisions: Item costs: is the price paid for a purchased item. risk cost such as obsolescence.
Introduction y g Need of inventory measurement tools tools. y g p 15 TO MAKE DECISIONS ABOUT WHEN TO ORDER? HOW MUCH TO ORDER? IN ORDER TO PROVIDE THE REQUIRED CUSTOMER SERVICE . Need of inventory management policies.Inventory Management .
Cross Analysis – Steps y p Classify items into groups: Raw Materials (RM). Multiply the average stock and the annual usage by the item standard cost. 16 USAGE Class A Class B Class C Class D Cl A Cl A Cl B Cl C Cl D STOCK Cl B Cl C Cl D USAGE STOCK Class A Class B Class C Class D . Classify the items according to their annual dollar usage and average stock value. Finished Products (FP). Determine the average stock and annual usage per each item. Work in Process (WIP).
Cross Analysis – A Real Example (FPs) Stock Stock Usage IT Item N° Stock Usage IT Item N° Stock Usage IT Item N N° Stock Usage IT Item N° Stock Usage IT Item N° 17 Usage g Total T t l .
506.506.18 Inventory Turns and Days of Supply Inventory Turns Annual FP Shipped € 6 050 471 6. based on usage.5 M of inventory a company is able to generate 6 M in sales.577 Average Daily Shipments = 90 Calendar Days (55 Working Days) Days of Supply is a measure of the equivalent number of days of inventory on hand.050. Days of Supply Total Average Stock = = € 1.061 € 16.061 = 4 = Total Average Stock Turns / Year What do the inventory turns mean? At the very least it means that with 1. .471 = € 1.
) WH Transaction type file Transaction Type yp Description Plant Number Warehouse Number Note: All the above data can be retrieved from any information system. .Files and Data Needed Stock file Part Number Plant Number Warehouse Number Quantity on Hand Date WH Transaction File Item Number It N b Plant Number Warehouse Number Transaction Type Quantity Handled Transaction Date Item Master File Part Number Description Plant Number Standard Cost Feature 1 (Part Type) Feature 2 (Category) Feature 3 (Family) Feature 4 (Etc.19 Stock Control .
The curve shape shows seasonality. 20 . g g In case the number of items having neither consumption nor stock (DD class) is high. The choice of transactions types is very important in running the cross and turns analysis. In calculating the item usage do not include internal transfers. it g might be that standard costs have not been calculated for all items. Flow curves show stock and lead time trends in time. The Cross Analysis should be run for Raw Materials (RM). the number of pickings and the frequency of pickings.Cross Analysis – Some Tips to Consider The stock for each item can be either the Average Stock or Stock on Hand. the number of orders. Work-In-Process (WIP) and Finished Products (FP). Flow curves on a single-code provide what is usually called the “Item Logistics History ”. These are phenomena which cannot be seen in a simple Cross Analysis. Average Stock is a better measure.
On which parts number would you work to increase the turnover ratio? . Comment on the final results.Exercise 02-02 21 Make the cross analysis for the finished products of the CINZANO Company Company.
Manufacturing Lead Time – Introduction c = Sh Floor Shop Fl = Work Center = Stores 22 RM b a FP Single Lead Time g Start End Cumulated Lead Time a + b + c Flow Index Routing Flow Curves / Distribution Curves STD Time .
y p g p .Manufacturing Lead Time . 95% of the production lead time is Waste Time. Move Time: Transit time between work centers. Move Queue Setup Run Wait Queue Setup Run Wait 23 Among the above elements. Manufacturing lead time consists of five elements: Queue Time: Amount of time the job is waiting at a work center before operation begins. Run Time: Time needed to run the order through the operation. Setup Time: Time required to prepare the work center for operation. Generally speaking.The 5 Elements Manufacturing lead time is the time normally required to produce an item in a typical lot quantity. order is completed and loaded into stock. all the other elements are Waste Time. Wait Time: Amount of time the job is in the work center before being moved to the next work center. the only one that generates value is Run Time. For our purposes it is the time from when the order is released to the shop floor to when the purposes.
choosing the unit of measure and the unit of time. t . gp The main problems in using the flow curve method are: determining the initial WIP.Manufacturing Lead Time – Flow Curves 24 Kg g Load WIP/Backlog Lead Time Unload Flow Curves are the best tool to show the manufacturing lead time of a work center or of the whole manufacturing process.
. In other words: for each Value Added hour 10 hours are needed hour.Manufacturing Lead Time – The Flow Index 25 FI = Lead Time Run Time The Flow Index measures the relationship between Lead Time and Run Time. A Flow Index of 10 means that for each cycle time unit there are 10 lead time units. needed.
067 b Avg Lot size (pcs) i ( ) 76 89 8 14 39 10 8 8 0 6 LRT min i 4.Manufacturing Lead Time – A Flow Index Calculation Example I d C l l i E l Seq u.404 96 611 0 69 13.6 6. 15 20 25 30 35 40 45 50 55 60 TOT p Description Hydraulic Presses Preparations Automatic welding Manual welding Turning Drilling and riveting Intermediate check Electrophoresis plant El t h i l t Transit Final check Avg LT 7.681 1.9 29 1.025 1.8 3.115 0.285 0.605 334 549 4.158 0 158 0.7 5.5 2.9 51.8 3.250 0.550 LRT days d 9 3 1 1 10 3 0 1 0 0 28 c 26 FI = a / b = 47.025 0.8 .201 1.079 0.0 a RT min 55 18 44 38 120 137 12 76 0 12 512 RT days d 0.4 10.0 5.092 0.7 3.000 0.038 0.
Manufacturing Lead Time – Files and Data Needed Work Center Master File Work Center Number Description 27 Item Master File Part Number Description Plant Code standard Cost Lead Time Unit of Measurement Feature 1 (Part Type) Feature 2 (Category) Feature 3 (Family) Feature 4 (Etc.) Routing File Part Number Work Center Number Sequence Run Time Setup Time Shop Order Master File Shop Order Number Part Number Order Quantity Quantity C mpl t d Q ntit Completed Quantity Scrapped Balanced Due Shop Order Date Shop Order D e Date Due Completion Date Shop Order Detail File Shop Order Number Part Number Operation Number Actual Setup Time Actual Run Time Initial Date Finish Date Note: The data needed for Manufacturing Lead Time measurement are normally available in companies that have a Shop Floor Data Collection System. System .
Manufacturing Lead Time – A Few Tips to Consider 28 In order to reduce Manufacturing Lead Time. the longer the Manufacturing Lead Time) . a lack of balance causes Waiting Time) Planning and control tools Lot size (the bigger the lot. it is important to consider the following manufacturing system items: Layout Capacity balance between processes (if processes are linked.
29 Machine Efficiency – Overall Equipment Effectiveness Ratio ( y q p (OEE) ) OEE is a method to measure the overall effectiveness of equipment. ratios Availability Ratio Performance Ratio Quality Ratio Normaly OEE is presented as a percentage. . It is calculated by multiplying three ratios.
planned maintenance) Theoretical Available Time Available Time: (theoretical available time not used) available time - Available time Ex: (480 m .30 m) / 420 m = 92 9% 92. hours not worked.1% Quality ratio: (total Real Time Defects production production – defects)/Total Ex: (358 units – 5 units) / 358 units = 98.60 m) = 420 Availability ratio: (Available time – Working Time Setups Breakdowns Startup Downtime/Available time) Ex: (420 m .6m/units X 358 units) / 390 m = 55.6% .9% Efficiency Net Working Time Minor Stoppages Reduced Speed ratio: (Run Time X total production/working time) Ex: (0.30 Efficiency – Overall Equipment Effectiveness Ratio ( y q p (OEE) ) Potential Time: 24h a day X 365 days Potential Time Theoretical available time: (potential time – days closed.
4% = Production Time 49.6% losses Analisi delle Perdite Linea XY 40% 100% 35% 93% 86% 97% 99% 100% 90% 80% 30% 29% 27% 23% 56% 79% % % cum 70% 60% 50% 40% 25% Losses Analysis 20% 15% 29% 10% 30% 7% 6% 4% 2% 1% 20% 10% 0% 5% 0% Cambio Bobina e setup Regolazione e verifica taratura tecnica Fermo macchina per avaria Manutenzione Ordinaria Mancanza qualità Mancanza stampa alimentazione da stampante TPM Addestramento .31 Efficiency – Overall Equipment Effectiveness Ratio ( y q p (OEE) ) Work Center XY OEE= Availability ratio X Performance ratio X quality ratio= 50.
32 Example 1: Automatic Welding 100% .
33 Example 2: Stamping p p g 100% .
34 Example 3: Injection Moulding p j g 100% .
Cilindro) Mancanza Componenti Regolazioni Guasti Robot (Almeno 10 Minuti) Materiale Difettoso Pulizia Macchina Pulizia Stampo Prova Colori Mancanza Attrezzisti TOT PERDITE 4.471 30.35 Example 3: Injection Moulding (Losses Analysis) Attività Ore Peso% TempoT ot OEE STAMPAGGIO 19.828 1.471 30.471 VERO Mancanza Personale Mancanza Ordini Prova Stampi Cambi Stampo Fermi Straordinari Cambi Colore Pausa Pranzo/Cena Guasti Stampo (Almeno 10 Minuti) Avviamento/Spegnimento Macchine Guasti Macchina (Almeno 10 Minuti) Mancanza Stampo Da Officina Pulizia (Gruppo Iniezione.155 2.15% 0.471 30.471 30.25% 0.471 30.471 30.471 VERO FALSO VERO VERO FALSO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO VERO .76% 0.471 30.949 65.73% 0 73% 0.47% 1.05% 1.15% 0.521 13.01% 0.09% 0.471 30.66% 0.01% 0.471 30.471 30.00% 34.28% 4.361 380 320 313 231 228 222 201 77 64 47 47 26 13 4 3 2 1 10.04% 0.03% 0.75% 0.25% 1.471 30.471 30 471 30.47% 30.471 30.00% 0.21% 0.471 30.471 30.471 30.471 30.471 30.53% 30.64% 9.471 30.
Efficiency – Files and Data Needed Work Center Master File Work Center Number Description 36 Item Master File Part Number Description Plant Code standard Cost Lead Time Unit of Measurement Feature 1 (Part Type) Feature 2 (Category) Feature 3 (Family) Feature 4 (Etc.) Shop Calendar Work Center Number Week Day Shift Workstation Code Available Time Routing File Part Number Work Center Number Sequence Run Time Setup Time Shop Order Master File Shop Order Number Part Number Order Quantity Quantity Completed Quantity Scrapped Balanced Due Shop Order Date Shop Order Due Date Completion Date Shop Order Detail File Shop Order Number Part Number Operation Number Actual Setup Time Actual Run Time Initial Date Finish Date Waste Type File Workstation Number Waist Type Operator Item Number Shop Order Number Quantity Completed Quantity Scrapped Q i S d Time Note: Data needed for the OEE calculations are not easy to collect. Usually the y y OEE is used by companies with very advanced manufacturing systems. .
defects or accidents. You are not the only company with these problems The average Overall Equipment Effectiveness (OEE) problems. team-based program that is proactive instead of reactive. That means the machinery is averaging only 22 minutes of operation out of every hour! The Answer is Total Productive Maintenance (TPM). meet deadlines and make money while keeping customers happy. is 37%. etc. 37 . The TPM system addresses your production operation with a solid. It helps eliminate losses. warning signs that you need help: Equipment experiences unexplained shut-downs and failures or needs constant repair. you make products. it is not making you money – it is costing you money. Lean systems minimize excess capacity and links all machines and processes When one machine stops productivity screeches to a halt Here are some processes. Equipment operates at a slower speed than designed.Total Productive Maintenance Eliminate machine stoppages with Total Productive Maintenance (TPM). It hits Lean Manufacturing companies even harder. stops.Focus . Productivity decreases due to machine-related problems. halt. whether from breakdowns. But if a machine breaks. Would not it be great if you had a maintenance program that fixed your equipment before it broke? Because when your equipment is running as it should.
Total Productive Maintenance How TPM Works TPM begins by measuring and analyzing your Overall Equipment Effectiveness (OEE). Sengupta and Associates) 38 . In addition. often from just the sound or feel. employees. team Historically maintenance has been done by dedicated highly skilled employees not machine operators But machine dedicated. Startup. but also becomes the measurement to determine how successful TPM efforts are. Finally TPM shows how equipment can be modified and preventive and predictive tools can be applied to make daily modified. Finally. operators. TPM eliminates machine-related bottlenecks that hold up your processes and torpedo your productivity. TPM will help you achieve: Improved machine reliability Extended machine life Increased capacity without purchasing additional machines or sacrificing additional floor space Improved teamwork between machine operators and maintenance people Improved safety Employees knowledgeable in machine-related processes A more involved. TPM then introduces the concept of Autonomous Maintenance. They can tell if their machine is not working perfectly. they become “process owners” while relieving skilled trades of simple yet time-consuming jobs. This not only helps diagnose problems. creative workforce The ability to re-allocate your skilled workforce by having machine operators perform routine maintenance Dr. Properly implemented. speed. They can alert maintenance people and provide excellent information. with machine operators as key members of the maintenance team. Historically. maintenance quick and easy. stoppages.Focus . Sengupta (CEO Dr. Breakdowns. operators know their machines better than anyone. when they perform routine maintenance and lubrication. The “Big Six” Wastes TPM will also teach you how to recognize the “Big Six” equipment-related wastes and how to minimize them: Setup and adjustment Breakdowns Idling and minor stoppages Reduced speed Startup Defects adjustment. Also.
.Supplier Service Purchase Requisition Date Order Entry Date Date Needed Date Promised Date Received Time Paper cycle 39 Waiting time FLEX Reliability Supplier Lead Time Note: All the above data can be retrieved from any information system.
) Goods Received File Bill Number Order Number Order Date Item Number d Received Quantity Date Received Warehouse Number 40 Note: All the above data can be retrieved from any information system.Supplier Service – Files and Data Needed Supplier Data Base Supplier Number Company Name p y Feature 1 Feature 2 Feature 3 Feature F t 4 Purchasing Order File Order Type Ord r T p Order Number Order Date Date Needed Date Promised Supplier Code Item Number Order Quantity Unit Price Item Master File Part Number Description p Plant Number standard Cost Lead Time Unit f Measurement U i of M Feature 1 (Part Type) Feature 2 (Category) Feature 3 (Family) ( y) Feature 4 (Etc. y y .
Supplier Service – A Few Tips to Consider The Th purchasing office i overwhelmed b d il routine activities. volumes or value. Indicators can be used as a tool in negotiations with suppliers. p g y y Partial deliveries can affect both production and customer service. Comparing the System Lead Time and Actual Lead Time can be of especial interest and can lead to reduction of inventory inventory. h i ffi is h l d by daily i i ii h i i di i etc. 1 year. it is necessary to take into account a time span of at least 6 months. Little time is actually spent on selection and evaluation of suppliers or on stock level analysis. They can also cause a receiving and handling cost increase. too. expediting. Indicators can be calculated on the basis of either order lines. 41 . All of the above can be applied to subcontractors. The basic indicators to measure supplier service are On-Time Delivery and Order Lead Time. In order to get significant results from the analysis. such as receiving. Indicators can be expressed in either working days or calendar days.
Vendor Rating 42 .
Logistics Costs EBIT P & L of the logistics process Operating Cost Revenues 43 Operations Cost General & Administrative Expenses Logistic Cost Materials and M i l d Subcontractors Labor Overhead Inbound logistic Cost Internal Logistic Cost Outbound Logistic Cost .
3. 4. 4. stores & inventory personnel) Warehouse Equipment Rents Inbound Transportation Inventory Opportunity Cost 1. Personnel (planning and control. 5 2. 4. 3. . stores & inventory personnel) Warehouse Equipment q p Rents Outbound Transportation Distribution Centers Inventory Opportunity Cost 2. 5. Personnel (purchasing. 2. 6. Personnel (customer service.Logistics Costs 44 Inbound Logistic Cost Internal Logistic Cost Outbound Logistic Cost 1. stores & inventory personnel) Warehouse Equipment Rents Inventory Opportunity Cost 1. 3. 5.
Performance Measurement Reference Table 45 Indicators Customer On-Time Delivery Company Inventory Turns Flow Index OEE Supplier On-Time Delivery l T l % of Logistics Cost on Revenues* Benchmark > 95% > 10 < 10 > 85% > 95% < 8% *Note: Excluding distribution centers and subsidiaries costs. .
h k ) – Define coordinated improvement actions. .The Purpose of Logistics Meeting 46 – Examine monthly the logistic performance trends: Service to customer Stock levels (total and by part type) Production lead time Efficiency / Productivity Service from suppliers – Detect problems and perform analysis according to the Denim cycle (plan-docheck-act).
each taking the responsibility of one or more indicators. Definition f t D fi iti of targets for each indicator. Access?. Choice of the calculation tool (For example: Excel?. Business Intelligence?. Gap analysis and definition of improvement actions. The tool should be aligned with the corporate IT system and constantly t ) Th t l h ld b li d ith th t t d t tl updated .).The steps in running Logistics Meeting Definition of the indicators to be adopted. Appointment of persons. Follow up on improvement actions. Participants: • • • • • • Purchase Manager Production Manager Sales Manager Marketing Manager IT Manager Supply Chain Manager 47 . etc. t f h i di t Periodic status reports on indicator trends by the above persons.
The Logistics Meeting Reporting System (1) Customer Service Trend 48 target target target .
180 2.000 3.829 5.1 31 3.000 14 6.265.614 6.1 2 0 01/01/2002 .000.326 1.916 4 1.946.000 8 3.000.000 target IT target 6 2.000 49 6.30/06/2003 0 Period Usage Avg stock IT .000.31/12/2002 01/06/2002 .31/05/2003 01/07/2002 .022 12 5.000.000 10 (Std co value ost) 4.000.000.033.1 3.000.991.The Logistics Meeting Reporting System (2) Company Inventory Turns 7.128.965.000 1.
The Logistics Meeting Reporting System (3) Supplier Service Trend 50 target target .
You choose the business and the company type. 51 Assignment 02-06 You want to measure your customers satisfaction. Prepare a questionnaire to measure the customers satisfaction.Assignment 02-05 See Case Study Attila in attached file. .
Operations M O i Management.References 52 Logistics KPI – Slides. Introduction to Materials Management. Ni l Sl k – Ch Nigel Slack Chapters 12 12. . Tony Arnold – Chapters 9-10-11.
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