Steve Barr, Sales Manager - Manufacturing and Supply Chain , at ERP solutions provider IFS talks to us about how software can help to make lean manufacturing a reality

Monday, 21 April 2008

Lean Manufacturing is a term familiar to just about everyone working in the manufacturing industry, and many people will be familiar with Japanese industrialist Shigeo Shingo's observation that: "It's only the last turn of a bolt that tightens it - the rest is just movement." However, making such a lofty observation a reality and cutting away the needlessly wasteful habits of many a manufacturing firm is quite a challenge.

I often speak to people in the industry who are looking for a software solution that will help them to achieve leaner manufacturing processes. As a starting point, I always try to help them identify where work can be reduced. So often we find that manufacturing businesses focus on material, labour and overhead costs, yet ignore less tangible wastage such as time squandered in waiting for the next production step or a shortfall in inventory to be reconciled. Identifying such non-value adding work is the first step towards purging sluggish work processes and exploring previously untapped opportunities.

Flourishing manufacturer - and IFS customer - Danville Metal Stamping (DMS) found themselves with a problem common to engineer-to-order (ETO) and project-based manufacturers, that of department-centric IT systems that lagged behind the flourishing pace at which their company was expanding. Their ambitions explain how the principles of lean manufacturing helped them to tackle the issue:

"To us, lean manufacturing was a necessary step in maintaining our position in a highly competitive industry. As demand for our products increased, our customers demanded shorter lead times and additional price concessions. We knew we couldn't continue to meet these requirements without exploiting every opportunity to reduce waste in the production process."

DMS management outlined the company's lean manufacturing objectives, which included specific goals for reducing scrap, rework, overproduction, inventory and work in progress.

The principles of lean manufacturing can be employed to tackle the challenge of overcoming unresponsive, disjointed IT systems that are not specifically adapted to business needs, or systems developed in-house that struggle to meet current technology standards and fail to anticipate future developments.

At IFS we encourage customers to look at the four key issues that affect a seamless operation, and consider how lean manufacturing can help to achieve these:

Value

Lean thinking purports that anything that your customers do not perceive as contributing in value ought to be eliminated. For instance, if your customers believe that short order lead-time from their suppliers is the differentiating factor in the market (within given standards of quality and functionality), then those who can accommodate these requirements most adeptly will flourish.

Value Stream

Once you understand the value that you deliver to your customers, you need to analyse every stage in the manufacturing processes in order to determine which ones actually add value to your business.

If an action is discovered not to add value, you should consider removing it from your operations. How many enterprises collect data about composite business processes and financial performance that are of no consequence to the customer and are often never used within the business to track performance of any kind?

IFS Customer Gerry Thornton of the Wandsworth Group, the UK's oldest manufacturer of electrical switches and accessories, asserts: "The emphasis is now on our manufacturing procedures and stock turnover to ensure we obtain maximum profitability for the capital employed. Flexibility on the shop floor is the new watchword and attitudes have had to change totally from pre-set machine runs, manufacturing to stock; to a new lean approach - only making what can be sold."

Flow

Flow relates to the uninterrupted movement of physical objects and data within the enterprise. In a complex ETO company, this refers to the channel from information to design; engineering and estimating; projects and procurement.

The tradition of processing in batches - and moving these batches from one department to another, or from one machine to the next - must be dismantled if work flow through the manufacturing facility is to be streamlined. By the removing of departmental 'stovepipes' and fomenting co-operation across functions, it becomes eminently easier to have the right part, at the right place, in the right amount, at the right time.

The results speak for themselves: shorter cycle times, decreased amount of inventory that the manufacturer is compelled to carry, low work-in-progress, and a flexible atmosphere for the type or amount of product that the manufacturer would like to run. To this end, the big challenge is most often in balancing order fulfilment and availability without creating excessive levels of stock.

Customer ordering is complicated by the fact that components are often installed at different stages as the building work progresses. Products are supplied both direct to installer, or through stockists and demand can fluctuate from high volume to small quantities for refurbishment projects.

When the Wandsworth Group undertook its major project of implementing lean manufacturing techniques, IFS carried out detailed studies into the movement of materials through the manufacturing process, economic batch sizes, bottlenecks and available capacity.

The aim was to eliminate waste in various forms from excessive stocking to idle capacity, blocked because of batch runs and scheduling issues. Part of this involved ultimately moving from Re-order Point Control in conjunction with sales forecasts base on historic demand patterns, to a materials requirement planning (MRP) approach.

Pull

Rather than working from a forecast of potential customer demands - a 'push' system - the objective with lean implementation is to perform a process by linking it directly to real-time customer demand - a 'pull' system.

By employing industry-focused ERP software such as IFS Applications, the whole process shifts in focus. Whether configure-to-order or make-to-order, the sales department can enter the customer requirements, calculate the cost and price, and determine the planned delivery date based on current shop load, material availability, and supplier lead times -distracting neither engineering nor manufacturing from their expert tasks.

Details of the tailored adjustments are carried through the manufacturing and procurement process - especially important if multiple levels of the product structure are affected - to ensure speed and efficiency of assembly.

Of course, it ought not to be overlooked that, for many manufacturers, after-sales support and service are among the fastest growing and most profitable areas of business. This too is incorporated into the lean solution: ERP tailored software very cleverly increases the opportunity for further profit by allowing the user to track service and warranty information, perform maintenance and repair, and process spare parts - all at the click of a button.

In short, ERP software and the lean manufacturing techniques it implements ought to be regarded as a shrewd, long-term investment. Obviously, invoking a new lean strategy is first and foremost a management task; good software helps, but is not a substitute for, good management. The most important message to understand when adopting the concepts of a lean enterprise is that you need a systematic approach. Lean manufacturing is about more than merely cutting costs in the factory: it is manufacturing at its most orderly, distilled and profitable; and software such as IFS Applications provides the scaffolding.