“We’re
Lost, But We’re Making Good Time”
E.
Mark Quinn, BDO Seidman
Introduction
In the movie “City Slickers,” Billy Crystal
finds himself, a group of friends and a herd of cattle on the plains of
the southwest, abandoned by the experienced guides that could lead the
party to its final destination. Looking around and realizing no one in
the crew has any idea where the cattle drive is headed, Billy Crystal
remarks “We’re lost, but we’re making good time.”
This observation accurately describes the
state many organizations find themselves in today.
Though they currently survive by meeting the fundamental business
objectives of shipping product and delivering services, they find profit
margins and market share eroding as they struggle to meet changing customer
expectations and challenge the improved capabilities of competitors.
In many instances, these organizations continue to practice antiquated
“business as usual” processes that were not engineered to efficiently
and cost effectively meet today’s customer expectations. By not visualizing and eliminating these inefficiencies, an
organization will see the complete erosion of profit margins and market
share.
To provide this visibility to an organization,
the concept of business process re-engineering has been developed. Business
process re-engineering can provide significant cost savings through process
simplification, reduction of redundant activities and improved process
control. Process inefficiencies and discrepancies that prevent meeting
business goals and objectives are identified, and these processes are
re-engineered to eliminate these inefficiencies and discrepancies.
Regardless of the industry or size of an organization, business
process re-engineering offers the opportunity to conduct a detailed analysis
of current and proposed business processes to determine the need and scope
of modifications.
To better understand all of the elements involved
in the process, we are going to examine a case study of a business process
re-engineering project. It
was conducted for a plastic molding injection firm, a high volume manufacturer
of plastic products, by a project team consisting of personnel from the
BDO Seidman Manufacturing Consulting Group in Chicago.
The team re-engineered selected business processes and installed
advanced finite capacity planning and scheduling software to both realize
and manage the benefits of reduced customer lead times, lower inventory
carrying costs and improved production/material handling efficiencies.
As-is
environment
The first step in the re-engineering process
is an analysis and documentation of existing operations and selected business
processes. This effort is typically described as constructing an as-is
model of the organization’s business processes. This model serves as a
benchmark for comparing existing business processes to proposed modifications
and customer requirements.
In the case of this manufacturer, the as-is
model of the production area demonstrated that customer orders were pushed
from one department in the shop to another. Since the operations of injection
molding, assembly, and warehousing were managed and scheduled by separate
department personnel it was as if three unique companies were operating
within the walls of the same facility. This lack of visibility between
the three departments complicated the completion of an order as it moved
from plastic molding into WIP warehousing and, finally, assembly. The
result of these difficulties was the accumulation of 60 million items
in work in process (WIP) inventory. This high WIP consumed valuable floor
space, complicated material management and consumed capital that the firm
could invest elsewhere at a higher rate of return.
The challenge facing the design team was to
devise a methodology for scheduling a customer order that would minimize
the requirement to warehouse WIP. High WIP inventory levels had always
been a problem for this firm. The design team felt that the intermediate
step of warehousing WIP items between plastic molding and assembly could
be eliminated. In addition to the savings available from reduced inventory
carrying costs, smaller quantities of WIP inventory would free-up valuable
floor space and reduce material handling requirements (see Figure 1).
The accumulation of WIP inventory was primarily
the result of a difference in cycle times between the automated assembly
and plastic molding machines of three to one. To keep pace with the assembly
machines, the molding department was run three shifts a day, seven days
a week. Build-to-stock molding jobs were run in anticipation of customer
orders and to provide a buffer so as not to starve the high-speed assembly
machines. The net result of these decisions was the accumulation of excessive
WIP inventories, which, surprisingly, did not have a significant impact
on reducing customer lead times.
Additionally, the measurement system used
by management to evaluate the performance of production management personnel
in the molding and assembly departments was machine efficiency. As a result,
the entire organization was driven to build WIP inventory levels to maintain
high machine efficiency ratings. WIP inventory levels grew and machines
were highly efficient; yet customer lead times increased.
Figure 1 – As-is material flow.
The operation was run using push scheduling. This required that a pallet be moved two times more than if
it were assembled using flow/demand pull scheduling. Push scheduling resulted in higher labor, inventory and material
handling costs.
To-be
model
After construction of the as-is models, the
design team began construction of a to-be model that represented proposed
modifications and goals for the selected business processes. One of the
principle goals set by the project team was the development of a scheduling
and operations methodology that would reduce lead times and WIP inventory
levels. To accomplish these goals, the organization needed a system that
would provide the capability to produce the right product at the right
time for the right customer. This would require re-engineering several
aspects of the selected business processes that included the elimination
of long established shop floor scheduling, performance measurement and
production methodologies.
As solutions to minimize and manage WIP inventory
levels were explored, pull scheduling became a viable alternative to the
existing push scheduling methodology. Since the part routing for an item
consisted of only two operations (molding and assembly), the visibility
up-stream from the last to the first process was not difficult. Pull scheduling
from the assembly machines could be done very easily. The design team
decided that when a customer order was released to the shop floor, scheduling
of that order would begin with the final operation-assembly. The order
would then be scheduled upstream through plastic molding and tooling.
The result would be a more streamlined movement of the product through
the facility.
The project team was still faced with the
challenge of reducing and managing WIP inventory between two departments
with such a large variance in production capacity. Many different options
from conventional storage to an automated storage and retrieval system
(ASRS) were considered. Eventually, the design team selected WIP staging
lanes as the best solution for managing WIP inventory. Staging lanes were
designed between the two departments and assigned to specific assembly
machines. The size and quantity of staging lanes that fed an assembly
machine were determined by the quantity of products assembled at the machine
and/or the number of presses that fed the assembly machine. Those items
that ran the most active product lines received more staging lanes.
One advantage to the staging lane concept
is the flexibility it provides for staging the orders of varying lot sizes.
Certain staging lanes were identified as “wild card” lanes, meaning they
could be assigned product and material for any order destined for any
assembly machine. These “wild card” lanes provide the flexibility to respond
to any order lot size that may be run in the facility. Staging lanes can
also be combined for large production runs.
A second advantage to the staging lane concept
was that it established a finite capacity for storage of WIP. In the past,
large quantities of WIP were stored seven to eight tiers in height throughout
the warehouse. The staging lanes minimized and dedicated space for floor
storage of WIP. This provided production personnel with improved visibility
to monitor, schedule and control WIP levels.
As part of the pull scheduling methodology,
the design team re-engineered the process of moving WIP inventory from
the molding department through the staging lanes and into assembly. A
Kanban card system was developed that controlled and simplified material
movement. Using a Kanban card and the raw material required for the assembly
operation, staging lanes were dedicated to specific customer orders. Once
a lane became available, that lane was assigned an order by moving raw
material with the Kanban card to the staging lane. This signaled that
molding of product could begin in the press department. The Kanban card,
with the job number and raw material, was prominently displayed at the
staging lane so that material handling crews moving cartons from molding
to assembly would know which staging lanes had been assigned to specific
customer orders. This system not only simplified the staging of product
from molding, but also facilitated the reduction of WIP inventories and
product lead times.
Advanced
finite capacity planning and scheduling
Once a model was developed for operating and
scheduling products in the shop, it became necessary to re-engineer the
computer system that supported the new production model. The design team
wanted an automated method of scheduling the inter-relationship between
the press department1 tooling room, staging lanes and assembly. This was
accomplished through the application of the advanced finite capacity planning
and scheduling software TACTIC from Waterloo Manufacturing Software of
Wellesley, Massachusetts. TACTIC provided a link between customer orders and the
shop floor. Using TACTIC,
customer orders were scheduled based on the finite capacities of the presses,
tooling and assembly machines.
TACTIC is a PC-based advanced finite capacity
planning and scheduling software package designed to integrate with ERP/MRP
II systems in development of detail production schedules. It is used by
schedulers to both develop detailed dispatch lists for the manufacturing
shop floor and to help identify and resolve shop floor problems.
Using the interface capabilities of TACTIC,
customer orders are passed daily from the ManBase MRP II system. TACTIC
schedules the customer orders across the press department, specifying
the press and tooling required to run the customer order. TACTIC provides
the visibility to manage the interrelationship between the press department,
tooling room, staging lanes and assembly.
Contention between customer orders for tooling and machine time
is also identified by TACTIC. Schedulers
can identify these contentions and quantify the impact on promised customer
delivery dates. What-if experiments
can then be run to consider optional scheduling sequences to minimize
or eliminate late customer order shipments.
Once the what-if experiments are completed
and the desired schedule selected, TACTIC prints out a detail production
schedule that is used to sequence work orders through the shop.
This process provides the schedule integrity that is critical to
the efficient operation of the press, tooling and assembly departments
at minimum WIP levels.
Cellular
manufacturing
One of the most popular methods for reducing
inventory levels and customer lead times is cellular manufacturing. It
provides a manufacturer with the ability to streamline and combine the
isolated functions that make-up a manufacturing process and eliminates
non-value-added activities the essence of business process re-engineering.
For example, material handling and changeover time can be reduced by grouping
products into production families that can be produced across a single
line or cell of machines. Many who implemented cellular manufacturing
have significantly reduced inventory and customer lead times.
The project team was anxious to realize the
benefits of cellular manufacturing. As a result, a Pareto analysis of
the product line was conducted to identify those items that accounted
for the highest production activity for the company. This analysis indicated
that 30 percent of the items accounted for 76 percent of the total production
volume. This provided the opportunity for the design team to dedicate
individual presses and assembly machines to specific items.
The project team was able to physically locate
these machines together in cells, eliminating the need for staging lanes
for these items. It also
minimized even more of the material handling and warehousing requirements
of the facility.
Implementation
benchmarking
Once the to-be model was constructed, the
design team selected representative products to run through prototype
cells for the purpose of initializing implementation. As the new business
processes were operated during implementation, critical measurements were
kept to benchmark the performance of the to-be model against the as-is
model. As unforeseen difficulties and inefficiencies were identified upon
implementation of these prototype cells, the to-be model was corrected
and future manufacturing cell implementations modified accordingly.
Full implementation of the to-be model was
completed nearly one year after initiation of the first cell. Benchmarking
of the company’s operations continues even today to maintain management’s
commitment to continuous improvement.
Project
results
The results of this re-engineering project
are dramatic. Finished goods inventory turns have increased from 10 to
40, WIP levels have been reduced from 60 million to 12 million items and
production lead times on many items have shrunk from weeks to days. Inventory
reductions have been so significant that floor space previously used for
warehousing WIP, has now been converted to manufacturing space with the
procurement of four new injection molding presses. These presses have
increased the capacity of this manufacturer to service new clients and
to further balance the flow of product between molding and assembly. The
results of this case study illustrate the successes that can be realized
by an organization that is committed to the concept of continuous improvement
and customer service.
Business process re-engineering, when done
correctly, forces an organization to benchmark business goals and objectives
against the existing processes that support accomplishment of these goals
and objectives. In the case of this organization, this introspection yielded
significant efficiency and cost savings that will return yearly dividends.
It has also created an environment of empowerment among employees that
will facilitate the process of continuous improvement that is essential
to an organization that must adjust to meet the changing needs of a dynamic
market place. This organization is not only making “good time” through
these process improvements, it also has a clear vision and understanding
of its position and capabilities in a fiercely competitive market place.
About the author
E. Mark Ouinn is
a senior manager in the Chicago manufacturing and consulting practice
of BDO Seidman. He has over 12 years experience in the analysis and design
of manufacturing systems.
About the paper
This Paper was published in APICS The Performance Advantage. It is being provided with compliments from Waterloo Manufacturing Software.
© E. Mark Quinn, All Rights Reserved.