Can flow encompass the supply chain?
A new breed of software offers expanded support for flow manufacturing
By Sidney Hill, Jr., executive editor -- Manufacturing Business Technology, 4/1/2003 12:00:00 AM
When Cascade Engineering adopted lean manufacturing principles, some of its suppliers struggled through a period of adjustment.
Cascade, a $200-million-a-year global manufacturer based in Grand Rapids, Mich., designs and builds durable plastic components that go into automobiles, home and office furniture, and other products. To support its lean manufacturing model—which calls for building only as many products as are needed to fill current orders—Cascade asked its suppliers to deliver smaller amounts of parts at more frequent intervals.
"We have some suppliers delivering four times a day, or more, so that we don't have huge amounts of inventory on hand," says Sandi Ragan, Cascade's materials manager. But, Ragan adds, some suppliers initially had difficulty gauging how much material to bring on each trip. That meant Cascade often found itself holding more inventory than it needed.
Ultimately, Cascade tackled that problem by installing an Internet-based software package that gives its suppliers a real-time view of Cascade's current inventory levels and production schedules. This tool, which Cascade calls a supplier visualization portal, is an extension of the MFG/PRO enterprise resources planning (ERP) package that Cascade purchased from QAD, Carpinteria, Calif.
Cascade's story is just one example of how manufacturers are warming to the notion of using packaged software to support lean manufacturing initiatives—an idea that had long been frowned upon by lean purists. Cascade also is among a growing number of progressive manufacturers demonstrating that the concepts associated with lean—which also is referred to as flow manufacturing—can be applied beyond the factory floor. Some of these manufacturers are using lean or flow principles to engage both customers and suppliers in new, streamlined supply chain management processes.
Lean and agile
Dick Slanksy, an analyst with ARC Advisory Group, Dedham, Mass., says these developments are triggered by market forces—such as increased global competition and shorter product life cycles—that are forcing manufacturing enterprises to become not just lean, but agile.
"The concept of lean, which calls for removing all unnecessary steps from a process, works best when a company builds products with configurations that don't change much," Slanksy says. "In that environment, lean manufacturing can be managed with very light information technology support. But with customers now demanding a wide variety of options in every product, and overall product life cycles shrinking, manufacturers are moving to more collaborative business models. We see companies that practice lean manufacturing taking on more attributes of what I would call an agile manufacturer—one that can respond quickly to changing market conditions." And, Slanksy notes, the agile manufacturer relies heavily on information technology.
Bill Swisher is a vice president with JCIT, an Englewood, Colo.-based educational institute that teaches companies how to practice a particular brand of lean manufacturing, which it calls Demand Flow. He argues that the real reason that software has not traditionally been used in flow-oriented enterprises is that software vendors have been slow to build systems that could properly support the model.
The glaring weakness in most software systems, according to Swisher, is they don't allow a manufacturer to use a demand forecast as the basis for a reliable materials purchasing plan. This problem exists because flow-oriented manufacturing starts with a process called demand smoothing. This technique involves looking at a forecast over a certain period of time—typically anywhere from one week to 12 weeks—and determining how many products must be built each day to fill the total amount of orders that are expected to come in over that time. The flow manufacturer will then ask suppliers to deliver parts every day, with each shipment amounting to only enough parts to satisfy that day's quota.
Stuff happens
When executed properly, this methodology allows a manufacturer to operate with little or no inventory while building products with short lead times. And it works fine as long as nothing changes during the time covered by the original forecast.
That's where Cascade Engineering ran into trouble with its suppliers. As Cascade's customers changed their requirements from day to day—lowering or raising order quantities or changing ship dates—Cascade's suppliers continued to deliver according to the pre-arranged delivery schedules, often leaving Cascade's inventory out-of-sync with its actual demand.
Now, Cascade has its QAD inventory management system programmed to send automatic updates on inventory status to the supplier portal every 10 minutes. "Our suppliers can look into the portal and see exactly where we stand in terms of consuming the inventory they sent on previously deliveries," says Linda Kelsey, a lean leader in the Cascade business unit that builds products to improve the acoustics inside automobiles. "It has really helped one supplier that was constantly sending too many parts. Instead, shipping in line with a schedule that was created Monday, they can look and see exactly how many parts we need to have each day."
Swisher says flow practitioners need more tools like this. "The software industry needs to develop a more dynamic planning model," he says. "It needs to allow for practicing demand smoothing and committing to building a certain number of products on a daily basis, while also working out a way to bring suppliers into the loop."
Minneapolis-based SoftBrands and Factory Logic Software, Austin, Texas, have responded to that challenge. Both vendors offer systems that pull demand information from an ERP system and convert it into a smooth demand model that allows communicating accurate purchasing requirements to suppliers.
Ian Achterkirch, a SoftBrands business leader, says his company's DemandStream package can save the average user a minimum of three hours to four hours of planning time each day. Without a flow-oriented software package, Achterkirch says production planners typically review current orders in an ERP system, "and then start walking around the plant to see if they have inventory and production capacity available to fill those orders. Then they go to a spreadsheet to create new production schedules for the next three or four shifts." As the order mix changes, the process is repeated.
Automated flow
Achterkirch says DemandStream has three modules that automate this entire process, including the final step of sending material requirements to suppliers. To use these systems effectively, Achterkirch says, a manufacturer must first adapt its plant to a flow production model, which means it is operating work cells that build families of products rather than traditional production lines, and that it already has established rules for sending replenishment signals to its suppliers.
Once the business is ready to practice flow, a materials replenishment module in the DemandStream system can be programmed to pull current order information from an ERP system. It then reviews the existing inventory and capacity information in the ERP system to determine if those orders can be filled. Based on that analysis, the DemandStream replenishment module sends separate lists of requirements to its own shop-floor execution and supply chain execution modules.
The shop-floor execution module gets a schedule of when each work cell in the plant should begin building individual products to fill current orders. The supply chain execution module surveys existing inventory and then determines if a replenishment signal should be sent to any suppliers.
SoftBrands expects most of its customers to use a method known as kanban for communicating with suppliers. Under this method, the two parties agree on how much of a given item the supplier will bring on each delivery, but deliveries will only be made when the customer issues a kanban signal.
Kanban is a Japanese word for a sign, and in the early days of flow, paper cards were used to signal the need to replenish certain parts. In those days, flow also was confined primarily to the production area of an individual company, so kanban cards typically were attached to bins that held parts for a particular work cell.
In systems like DemandStream, the kanban signal is electronic. It often comes in the form of an e-mail that leads the supplier to a secure Web site to view exactly what the customer needs at that moment.
The desire to manage a growing number of kanban cards drove Guide Corp., a Pendleton, Ind.-based manufacturer of lighting systems for the automotive industry, to purchase its first flow-oriented software package. The system, from Factory Logic, is running in a new plant in Mexico that was built to accommodate the flow methodology from the start. Guide also plans to install the system in two other plants in Louisiana and Indiana, according to Jim Johnson, the company's chief information officer (CIO).
Guide has not yet worked its suppliers into its flow processes, but it does use the Factory Logic software for more than managing kanban cards. Says Johnson, "We use the system in three ways: for level scheduling, to calculate kanban sizes and create kanban cards, and to program a Heijunka process."
Detailed scheduling
Level scheduling is another term for demand smoothing, or determining the number of products that must be built each day to fill the number of orders the company expects to receive over a given time period. Calculating kanban sizes means arriving at the number of parts that suppliers will bring whenever they make a delivery.
Heijunka scheduling is a means of creating detailed instructions for each task a worker must complete to produce the required number of parts in a given work shift. "It starts with finished goods in mind, and works its way back through the production process," Johnson explains. "We start with a shipping schedule and then create Heijunkas, or authorizations for a cell to begin building products. It lays out the whole plan for a cell. It says, 'From 8:00 o'clock to 10:00 o'clock, you will run this part. From 10:00 o'clock to 10:15 you will do an equipment changeover, then you will run this part.' Everything is controlled to a strict level of detail to get out the number of parts that the level schedule calls for each day."
Both the Factory Logic software and the DemandStream package from SoftBrands contain a handy feature called dynamic kanban sizing that allows companies to resize kanbans on-the-fly. "It takes roughly 15 minutes to resize a kanban in our product," SoftBrand's Achterkirch says. "It can take weeks to do it manually."
It's all in there
Allan Wilson, Factory Logic's CEO, says Factory Logic's dynamic kanban feature works in concert with a built-in analytics package that monitors all aspects of a flow operation to ensure that everything from the layout of a work cell to the pace at which parts move through the cell are keeping the company's level of production in line.
"We provide great benefit by helping customers track demand and recalculate kanbans more frequently," Wilson says. "This prevents outdated kanban sizing, which can lead to material stock-outs or excess inventory."
Not to be outdone by the upstart vendors, many established ERP suppliers now have flow functionality in their software suites. QAD's supplier visualization portal is a prime example. It's also clear that companies that practice flow welcome the software vendors' support, whether it comes from an established ERP supplier, or a newer company with a stand-alone, flow-oriented package.
"We run our entire plant on Factory Logic, and it does an excellent job for us," says Johnson, the Guide Corp. CIO. And according to Ragan, Cascade Engineering's material manager and a QAD user, "Since we adopted lean manufacturing, our inventory has gone down considerably. Inventory turns are up, and accuracy has improved. The combination of lean events to streamline processes and eliminate waste, and tools like the QAD software, have helped with that."
Key terms for running a lean supply chain
| Demand smoothing | Involves looking at a forecast over a certain period of time, and determining how many products must be built each day to fill the total amount of orders. A flow manufacturer will then ask suppliers to deliver only enough parts to meet each day's production quota. |
| Kanban | A method of replenishing inventory. Under this method, two parties agree on how much of a given item the supplier will bring on each delivery, but deliveries will only be made when the customer issues a kanban signal. |
| Kanban sizing | Calculating the number of parts the supplier will bring with each delivery. |
| Heijunka scheduling | Creating detailed, almost minute-by-minute instructions for each task a worker must complete to produce the required number of parts in a given work shift. |
| Who's inside | ||
| Datasweep: www.datasweep.com | Factory Logic Software: www.factorylogic.com | QAD: www.qad.com |
| SoftBrands: www.softbrands.com | ||
Getting lean is a group exercise
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