Promises get real
Fixed lead times are out, dynamic order promising in at HON Industries, others
By Paul Mann, Contributing Editor -- Manufacturing Business Technology, 1/1/2002 12:00:00 AM
If you quote your customer a 22-week lead time in this market, you'd better be delivering the punch line to a very funny joke. Otherwise, the odds are that your customer will soon be placing orders with someone else.
"It's real simple," explains Mark Lindquist, president of Rapid-Line, a Grand Rapids, Mich.-based metal fabricator. "My customers only care about three things: they want their orders better, cheaper, and they want them now."
Even the furniture business, famous for lead times that can reach three months or longer, is feeling the heat. "In the middle market, where we're the largest office equipment manufacturer, our customers want it all," says Malcolm Fields, chief information officer for HON Industries, the $2-billion manufacturer based in Muscatine, Iowa. "They want to choose from hundreds of styles, and thousands of combinations of finishes, fabrics, and colors. They want the assurance of our lifetime guarantee. They want low prices, and they don't want to order one year ahead.
"Today, everything we produce is built-to-order," Fields says. "We can produce literally millions of SKUs [stock keeping units] at one of 18 manufacturing facilities, and deliver to thousands of ship-to locations—generally in two to three weeks."
"In the old days, we may have had a feel for what was going on in the shop, but often it wasn't much better than just holding your finger in the air and guessing," says David Krisovitch, president of Micro Tool Co., a Bethlehem, Pa.- based manufacturer of precision-machined parts for the aerospace, medical devices, and communications industries. "Today, within 20 seconds, we can check inventory, look at material lead time, available resources, and say—with a high level of confidence—that we can deliver in two weeks. That's what my customers expect."
The convenience of short lead-time deliveries is one driver to the focus on order promising. There also is a sound business reason that customers demand shorter and shorter lead times.
"Customers believe that if they order only what they need right now, they reduce the risk of having too much of the wrong product when conditions change," observes Greg Gorbach, director of e-manufacturing at ARC Advisory Group, a technology assessment firm based in Dedham, Mass. "If manufacturers can shorten lead times, improve on-time delivery performance, and provide customers with timely information about order status, then more than likely they'll continue to do business with those customers. Sometimes, they can even get more money for their product by offering this level of service."
Austin, Texas-based computer manufacturer Dell—with its ability to customize and deliver computers in less than a week—has reset lead-time expectations. But getting to the compressed lead times that Dell enjoys is no easy task.
One thing is clear: relying on standard lead times devised to accommodate earlier generations of planning tools such as material requirements planning (MRP) that did not address capacity constraints is becoming untenable. As a result, companies are implementing factory-scheduling solutions that address capacity constraints, and in so doing, offer a foundation for order promising based on prevailing conditions, rather than fixed lead times. Finite scheduling applications, as well as planning engines that make use of advanced planning & scheduling (APS) technology, are central to this trend. Solutions for lean manufacturing management also are part of this desire to compress lead times.
Bye-bye workarounds
Countless manufacturers use spreadsheets, whiteboards, and other semi-automated approaches to sync up MRP-generated plans with the realities of plant execution. But such "brute force" methods are hard to pull off in complex environments. "At any one time, we have well over 1,000 jobs in-process," says Bill Hendrickson, materials manager at Sinclair & Rush, a St. Louis-based maker of dip-molded products such as grips for Craftsman hand tools. "There's no way to manage that volume of work without a powerful scheduling tool. The alternative is that we'd either have bad on-time performance, or we'd have lots of people tied up making good on our bad promises. Today, at the time of order, we know what's achievable and can nail down a specific time for delivery."
This isn't a job that anyone could manage on a legal pad, or even a sophisticated spreadsheet-style application. That's because there are too many variables. "Our goal is to reduce changeover," Hendrickson says. "Where we gain efficiencies in dip molding is by running as many jobs as possible with the same tool, the same formula, and the same color combinations—back to back. If that's not possible, then we need to group molds together and color combinations from lightest to darkest."
To achieve real-time available-to-promise (ATP) and maximize factory throughput, Sinclair & Rush invested heavily in technology over the last several years. First, it implemented an enterprise resources planning (ERP) solution from Redwood Shores, Calif.-based Oracle Corp. The company then added the RSBizWare Scheduler from Rockwell Automation, the Milwaukee-based provider of industrial automation solutions, to manage shop-floor scheduling.
"When we did a return-on-investment analysis prior to purchasing, we thought we could get an 8-percent reduction in changeovers with a more sophisticated scheduling tool," Hendrickson says. "We've also seen a reduction in work-in-process [WIP] inventory of approximately 25 percent, though some of that is due to economic slowdown."
Perhaps the most significant benefit is in the area of customer service. "With this system in place, we have the flexibility to service the customer much better," Hendrickson says. "If they get in a jam and need an order real fast, we have the information to let us know we can do it, or what it will take to do it, and what the impact on other orders will be."
Rockwell Automation will announce RSBizWare Scheduler 4.0 in early 2002. The big news in this release is the move to a client/server architecture. "Later this year, in version 4.1, we will be adding powerful capable-to-promise capabilities," says Matt Gohr, product manager for RSBizWare Scheduler. "This will connect to the ERP system, track new sales orders coming in, look at what's already on the planning board, check what's happening in the plant, and quickly determine realistic due dates."
Handling growth
Providing realistic due dates has long been a challenge for Micro Tool Co. Prior to 1992, the company managed the process on legal pads. From 1992 to 1997, a homegrown system managed the process. "But it got to the point where the volume of jobs grew dramatically, and we outgrew the system," Krisovitch says. "We had so many jobs going that it was a nightmare to manage everything and keep our commitments.
"We have always invested in new technology to provide our customers with a good, cost competitive product—delivered on-time," Krisovitch continues. "That's one of the things that separates us from our competition."
One of those technology investments was the October 1997 purchase of the VISUAL Manufacturing suite from Lilly Software Associates, a Hampton, N.H.-based vendor of ERP and supply chain solutions. On January 2, 1998, the system—an ERP package with finite scheduling—went live and started delivering results.
"Before implementing the new system, we really didn't know what our WIP was, so it's hard to point to before-and-after results," Krisovitch says. "I can tell you that the system drives everything, minimizes our WIP, compresses our lead times, controls our indirect labor, and reduces inventory. Because of the total integration of the system, we have doubled in size without adding overhead, and I think we could probably triple in size with the same staff."
While ERP systems have been maligned for their reliance on MRP engines that assume infinite capacity, today's extended ERP solutions offer integrated, constraints-based planning tools that allow users to get away from standard lead times. According to Rapid-Line's Lindquist, constraints-based planning is crucial in dealing with large, demanding customers; and equally large, not-so-flexible suppliers.
"We're the mouse between two gorillas," says Lindquist. "Our customers generally come to us for the hard stuff—the complex products with short lead times. They're demanding shorter and shorter lead times, and pushing inventory down on us. The only way to be successful is to be fast on our feet."
That agility, however, required an enterprise system overhaul. "Until 1999, we were using a 1983-vintage MRP system designed for make-to-stock manufacturing," Lindquist says. "Trying to use that in a make-to-order environment wasn't working. We had very high inventory levels, long lead times, and quality suffered because orders sat around too long."
No amount of brute force seemed to help because the company manufactured some 9,000 end-items and frequently had as many as 700 orders in-house during any given week. "Previously, we had salespeople promising the customer anything, as if we had unlimited resources," he says. "As a result, we sometimes did production scheduling based on who was the better customer. Often, we weren't aware of problems until the order was two days late and the customer was irate."
The answer was the Syte Line extended ERP suite from Columbus, Ohio-based Frontstep. The suite's integrated planning tools support dynamic order promising, says Lindquist. "Now, at the point of order entry, we can provide a firm promise date," he says. "If that date doesn't work, we can quickly do a what-if analysis—looking at time, costs, and resources—to determine an alternative."
In the first quarter, Frontstep plans to introduce its Supply Chain 6.0 product. "The entire supply chain has to fulfill the order, not just the plant," says Ken Musselman, supply chain evangelist. "In version 6.0, all the pieces come together to facilitate a view, via the Internet, of the entire order-fulfillment process. It includes a point promiser for inventory promising, capacity promiser for rate-based promising, an intelligent sourcer that helps you figure out which suppliers to pull from, and an APS system."
Beyond delivery dates
With 18 production facilities and six distribution centers across North America, thousands of ship-to locations, and millions of possible SKUs, HON Industries faces complex challenges. "On-time delivery is an extremely important aspect of this business," says HON Industries' Fields. "At one point, we were hitting just 75 percent in some segments, and we had a lot of additional costs for overtime and expediting associated even at that level. The problem was our old system did well at managing production-line capacity, but had no concept of our distribution capabilities."
HON Industries turned to SynQuest, an Atlanta-based vendor of supply chain planning solutions, for an answer. The company went live in March 2001 and has been pleased with the results. "Now our complete and on-time delivery is in the mid- to upper- '90s," Field says. "Our logistics costs have gone down significantly. Last year, our freight costs went from 6.5 percent of total sales to 5.8 percent of sales, and we're a $2-billion company."
Key to this efficiency is a planning engine that simultaneously considers procurement, production, and distribution constraints, resources, and options. "The software looks for the optimal way to manage the entire process," Fields says. "It will look for the best cost, and the best way to supply against a given set of orders. Sometimes, it will deliver counter-intuitive results. For example, it will tell us to build in areas where we have higher manufacturing costs if that is offset by savings in other areas."
According to Chris Jones, a SynQuest executive vice president, planning solutions need to do more than get the delivery date right. "There are numerous possible solutions that meet the order-promise date, but only one maximizes profit," Jones says. "That's what we solve for."
Last November, SynQuest introduced Advanced Supplier Collaboration to pull external information to planning activities. "The biggest challenge for many manufacturers is maintaining the models with various suppliers," Jones explains. This [collaboration capability] allows suppliers to log onto the solution and make the appropriate changes."
Factory Logic, an Austin, Texas-based provider of Web-based software for demand-driven manufacturing, also has been hard at work developing new solutions to streamline the order-promise-to-fulfillment process.
"Over the last six months, we've had a 400-percent increase in people calling us to see how we can help them move to a demand-driven model and cut their inventory 70 percent, reduce lead times 50 to 90 percent, and improve productivity 30 percent," says CEO Richard Lebovitz. "We offer a manufacturing suite called Streamline that incorporates lean design and lean management tools to support a demand-driven model fully integrated with a factory execution piece, and a materials procurement piece."
In the first half of 2002, the company plans to introduce a new Web-based dashboard for improved system visibility. The dashboard can be personalized to display only information pertinent to the user, such as key performance indicators.
"When something happens in the supply chain that can put an order at risk, the software can trigger an e-mail to all affected parties," says Lebovitz. "Then, the software brings up the dashboard, and access to relevant information to troubleshoot the issue."
Meanwhile, Irvine, Calif.-based Wonderware, a vendor of industrial automation and manufacturing execution software—working closely with its parent group, Herndon, Va.-based Invensys Software Systems—is poised to announce the first products from its eManufacturing Solutions Group. The big news is new Supply Chain and Manufacturing workflow products with ATP capability. The new product is slated to be generally available in first quarter 2002.
"When a customer service rep is looking to take an order, they need to know if the product is in inventory," explains Paul LeMert, director of product development. "If it's not in inventory, is it in-process? If not, do they have the manufacturing resources, the raw materials, the machines, and the operators to produce it—and when? This is the visibility we bring to the manufacturing process."
Key elements of the new offering include a workflow system, enhanced standard and custom reporting, portal access to data, and enterprise application integration (EAI) adapters. "Without ATP, you frequently see the plant manager frantically running around trying to figure out if they can take an order," LeMert says. "Now they will see immediately if they can take an order, and when they can deliver. Plus, they will have the visibility to determine what orders they should even be bidding on."
No question, software vendors and manufacturers alike are interested in streamlining the order promise-to-fulfillment process. "This is a problem that's been around for a very long time," says ARC's Gorbach. "The difference is that today, there are tools available with a strong connection to the shop floor that can help manage the process efficiently."
| FOR MORE INFO: | ||
| Factory Logic: www.factorylogic.com | Frontstep: www.frontstep.com | Invensys Software Systems: www.invensys.com |
| Lilly Software Associates: www.lillysoftware.com | nMetric: www.nmetric.com | Oracle Corp.: www.oracle.com |
| Rockwell Automation: www.rockwell.com | SynQuest: www.synquest.com | Wonderware: www.wonderware.com |
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