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2013

For a hundred years or longer, businesses have used inventory to protect and defend themselves against variability. Even the APICS Dictionary states as much, using the term “protect” with reference to “safety stock”—yet another telling term.

 

 

Even the terms used highlight the defensive position taken by most business enterprises.

 

Of course, this strategy worked reasonably well when product variety was small and variability was low. In my lifetime, I have seen huge increases in product variety. When I was much younger, I can easily recall that toothpaste brands ranged to a dozen or so and occupied a fairly small amount of shelf-space at the stores. The same was true of many other products ranging from canned good to cigarettes.

 

Today, however, there are nearly as many varieties within a single brand (e.g., Crest toothpaste) as there were brands of toothpaste in my childhood. Similarly, cigarettes and other tobacco products have undergone huge growth in brand proliferation over the last several decades.

 

As result, even if consumption of “toothpaste” as a generic product may be relatively steady, that relatively constant consumption rate may show very large demand variability over the range of 30 or more varieties. Therefore, attempting to use inventory in a defensive way—i.e., safety stock—to cover demand variability becomes an overwhelming affair encompassing very large investments in inventory and the space to store and, potentially, display the large inventories.

 

Supply chain managers are running out of options

 

Supply chain executives and managers have labored for the last 30 or so years over what most have considered their three basic options:


Cost Cutting

 

Going back 30 years and beyond, we easily see that most organizations looked almost entirely inward. They looked for every possible means to cut costs. Some even look up the supply stream—toward the source—trying to eek out even more cost-savings from their upstream suppliers.

 

Unfortunately, cost-cutting has very definite limits. There is only so much a firm can cut costs before it starts affecting productivity, quality, customer service or other factors that soon begin leading to reduce revenues, as well. This explains why, of the Fortune 500 companies who self-identified as “cost-cutters” in the 1980s, almost a quarter were no longer found among the Fortune 500 firms a decade later.

 

This maximum boundary for cost-cutting improvement in most companies is in the range of ten percent (10%).


Productivity Improvements

 

The next big thrust (after cost-cutting) was productivity improvements. This was still inward-looking and, unfortunately, almost entirely focused on making improvements to departments, work centers, and other silos. There was almost no recognition of the fact that improving the “efficiency” or “utilization” of an individual department or work center does not necessarily contribute to an improvement in the “system”—the entire enterprise.

 

This was highlighted to me when I heard (back in the 1980s) that one of the (then) Big Four auto-makers in the U.S. had undertaken a project to improve their accounts payable processing. They invested several millions of dollars in this “improvement” while losing several billions of dollars in their competition with foreign auto companies from Japan and Germany.

 

Clearly, improving “accounts payable” did not contribute to the performance of the enterprise in terms of real Throughput and profit on the bottom-line.

 

Typically, the maximum boundary for productivity improvements is about 20 percent.


Automation

 

The falling cost of ever-increasing computing power beginning in the 1980s and continuing even until today has caused almost every firm to seek improvements through automation of a wide array of production and other business processes across the enterprise.

 

This approach, while still inward-looking, has likely contributed more the improvements in U.S. (and worldwide) productivity over the last 30 to 40 years than any other single factor. (The world owes a huge debt of gratitude, in my opinion, to Microsoft Corporation and its competitors for their contribution towards making computing power and applications affordable.)

 

Still, the maximum boundary for improvements from automation in most enterprises sits at about 50 percent.

 

It’s time consider a new approach

 

It’s time for a new approach to take-hold in supply chain management. It is high time to re-evaluate supply chains from the outside-in, as Lora Cecere adamantly advocates (see posts on the recent Supply Chain Insights Global Summit).

 

Seeing the supply chain from the outside-in moves the focus of the enterprise from the “defensive” position (which began with inventory and safety stock) to the “offensive” position. The offensive position is the one that innovates to find new ways to create and serve markets at the end of a supply chain that works to synchronize the flow of product.

 

You will note that safety stock is about managing what is static and internal to the supply chain, whereas, working toward synchronizing the flow of product with demand is all about managing what is moving in the supply chain with what is external (the actual demand).

 

What is the maximum boundary for a supply chain focused on “flow” and synchronizing the flow through agility?

 

No one knows with absolute certainty.

 

However, it has been demonstrated by some that improvements in the range of 5,000 percent are not out of the question when supply chain agility is closely coupled to actual demand through high levels of visibility. The truth is, there is no theoretical upward boundary for such an approach.

 

What keeps firms from avidly pursuing this approach?

 

Simply stated, what keeps most firms from avidly pursuing supply chain agility and demand-driven supply chain management is bad metrics. While management accounting is still focused on cost-cutting, productivity improvements (as measured by “efficiencies” and “utilization”, for example), and automation (as a cure-all), companies and supply chains will still be bound by bad metrics that actually militate against agility and becoming demand-driven.

 


 

Please give us your opinion on this topic. You may leave your comment here or, if you prefer, contact us directly. Thank you.

 

One would think that Robert S. Kaplan, then the Arthur Lowes Dickinson Professor of Accounting at Harvard University Business School, would know what he was talking about when he said in 1984, “Efforts to revitalize manufacturing… cannot succeed if outdated accounting and control systems remain unchanged. Yesterday’s accounting undermines production.” [1]

 

 

 

 

Eight years later, others were still saying the same thing.

 

Dr. Eliyahu M. Goldratt argued frequently and adamantly that cost accounting was hugely destructive to productivity and other business improvements. [2, p. 27]

“The basic argument is that the standard cost procedures and the performance measures supported by these cost systems all too often trigger dysfunctional actions within the organization in general and specifically within the manufacturing system. The reason for the occurrence of these dysfunctional actions is that traditional cost accounting systems try to maximize the efficiency of individual subsystems instead of optimizing the performance of the total system." [3, p. 11]

What do we mean by “the total system”?

 

The “system” to which we refer consists of all the moving parts in the business—the organization—that form a chain of dependent events working together to produce a profit (in a for-profit organization).

 

Cost accounting would have you believe that if you optimize each part of the system individually—e.g., sales, inventory, production, accounting, etc.—that the system itself will be optimized. This, however, is not true.

 

A crude, but very clear, example of this is optimizing production and quality control. Production is optimized—i.e., produces the most; is most efficient—when it need not pay particular attention to quality. Quality control, however, is optimized—and is usually measured and rewarded—based on the quality of the products being produced. In business, balancing these so-called two silos against one other for the benefit of “the system,” is frequently called “making trade-offs.”

 

But, take a look at the illustration above.

 

The “system” is really a money-making machine (again, in a for-profit scenario). The entire system is optimized when Throughput is maximized and Operating Expenses are minimized.

 

Toyota recognized this when they determined that “quality” must be measured by the customer’s entire “experience” in its dealings with the enterprise. Toyota recognized that everything from sales (the channel) and marketing, to the purchase price, to the quality of the vehicle, to the time of delivery, to the after-market maintenance, and much, much more contributed to what the customer decides is “quality.”

 

This forced Toyota rethink its entire supply chain from the outside—beginning at the customer.

 

Looking for results from “the total system”


The “long-term result [from a business system] is not a mechanistic sum of individual results produced independently by separate parts; it emerges holistically from the system of relationships among a community of interconnected and interdependent parts.”[4]

 

This is a message that far too few supply chain managers today have come to understand, or at least, apply. Many times, I find, that even if the supply chain managers have come to grips with it, they are still wrestling (or given up wrestling) with the financial side of the organization where most of the participants are still entrenched in cost-world thinking.

 

“Toyota seems always to have known this, because their strategy for reducing cost and increasing profit is not to cut costs or pump up revenues; rather, it is to continuously improve the system of relationships among all parts of the business, in ways that eliminate waste and increase flow. In other words, they believe that improving the system, not simply moving or changing its parts, is the surest way to improve long-term financial results.” [4]

 

A system view essential to achieving supply chain agility

 

While there is much, much more I could say here—and probably will in future articles, I am convinced that when supply chain managers and their financial watchdogs quit measuring for “cost” and start measuring for “Throughput” (revenues less only truly variable costs), that great improvements will come forth in supply chain agility.

 

Beyond that, when supply chain leaders begin to see that their entire supply chain is “a system” and that improvements must be made to the weakest link in the systemto improve the flow of Throughput-producing product to the end-user, then everyone in the supply chain can begin enjoying an improved bottom-line.

 

A great starting point is to do as Lora Cecere suggested at the Supply Chain Insights Global Summit: Start thinking about your supply chain “outside-in” instead of “inside-out.”

 


 

We would like to hear your thoughts on this matter. Please leave your comments here, or feel free to contact us directly, if you prefer.

 


 

[1] Kaplan, Robert S. "Yesterday's Accounting Undermines Production." Yesterday’s Accounting Undermines Production. Accessed September 26, 2013. http://hbr.org/1984/07/yesterdays-accounting-undermines-production/ar/1.

[2] Goldratt, Eliyahu M., and Jeff Cox. The Goal: A Process of Ongoing Improvement. Great Barrington, MA: North River Press, 1992.

[3] Umble, M. Michael., and Mokshagundam L. Srikanth. Synchronous Manufacturing: Principles for World-class Excellence. Guilford: Spectrum, 1996.

[4] Johnson, H. Thomas. "Manage a Living System, Not a Ledger." Manufacturing Engineering. Society of Manufacturing Engineers, Dec. 2006. Web. 18 Nov. 2009.

 

 

Lora Cecere, presenting at the Supply Chain Insights Global Summit 2013 in Phoenix, Arizona, brought many important factors affecting supply chain performance to light. One of the big ones that caught my eye, however, was the tremendous gap between companies’ recognition of the importance of agility in their supply chain and the actual performance of their supply chains.

In an April 2012 survey of 117 supply chain executives conducted by Supply Chain Insights, LLC, nearly nine out of ten recognized the importance of supply chain agility as a contributor to their success. However, only about one in four (27 percent) of these same 117 executives ranked their own firms’ actual performance in the realm of agility as “high” (five to seven on a scale of one to seven).

 

Held back by inside-out thinking

 

It my firmly held belief that the most elemental thing that is holding these firms—and others like them—back from reaching for higher levels of agility in the performance of their supply chains is “inside-out” thinking.

 

Allow me to elaborate.

 

 

The vast majority of companies—from the Fortune 500 down—are still strategizing, designing and managing their supply chains focused primarily on the “inside.” That is to say, they are still measuring most internals.

 

Most executives and managers begin looking at their supply chain focused entirely on measures of “efficiency.” They are looking intently a metrics like COGS (cost of goods sold), “contribution,” gross margins, and cash-flows.

 

Unfortunately, the cost-world based metrics they are using as guides for decision-making are almost always loaded with allocated costs—thanks to a hyperactive cost accounting department. Since these allocations are virtually always wrong (since they must be based on production estimates and averages), they never represent the day-to-day reality in which their plants and supply chains actually operate.

 

As a result, these executives and managers “push” and “pull” levers hoping to effect change, but the actual outcomes seldom match their expectations.

 

What these supply chain leaders should be looking at, in order to get a firm grip on reality is Throughput, defined as revenues less TVCs (Truly Variable Costs). In this world, the reality is plainly evident that the follow equation always holds true:

 

 

where delta-P = change in Profit; delta-T = change in Throughput; and delta-OE = change in operating expenses

 

 

Next Steps

 

After satisfying themselves that their “efficiencies” are in order (even if misguided), the next area “inside-out” supply chain managers look at is general “customer service levels.” That may be reduced to having the right product in the right place at the right time.

 

When they look at failures in “customer service,” they may be tempted to increase their inventories in order to improve the likelihood of having the right product in the right place at the right time. But, if their eyes are open, they will begin to recognize that excess inventories just clog up the supply chain. These inventories actually slow down the entire supply chain’s sensitivity to changes in demand.

 

As a result, frustrated supply chain executives and managers frequently discover that the very increases in inventory designed to increase customer service levels actually result in nothing more than huge overstocks on some items and an increasing number of missed opportunities and lost sales due to out-of-stocks on other items.

 

Again, if these managers are open-eyed and open-minded (and not overly-influenced by their cost-accounting department), they may come to the same conclusion that Rick Sather, VP of Supply Chain for North America at Kimberly-Clark, did: that producing in smaller batches with greater frequency will actually increase the flow of product through the supply chain.

 

This is the next step of growth, but there are generally wrong-headed “efficiency metrics” standing in the way. But, like Sather reported at the Supply Chain Insights Global Summit this month, it is possible to improve Throughput and reduce waste “by many percentage points” even while increasing by “four times the number of change-overs [set-ups]” in production operations.

 

In fact, Sather’s team has seen “millions of dollars of improvement on one [a single] SKU” as a result of effort leading to smaller batch sizes for both production and transfers, especially when accompanied by supply chain visibility all the way to the retail shelf.

 

So, by the time an organization has reached this stage in a journey toward supply chain excellence, it is beginning to make the transition from “inside-out” to “outside-in” thinking about how its supply chain really works.

 

Becoming demand-driven

 

To begin seeing their supply chains truly from the outside to the inside of their operations, requires designing their supply chain and supporting systems to provide “outside-in” visibility. This begins with demand sensing and demand visibility.

 

This doesn’t have to be fancy. POS (point-of-sale) data in real-time is an unreachable dream for many at the present. But that should not prevent a POOGI (process of ongoing improvement) that constantly works to shorten the actual demand feedback cycle and improve its accuracy.

 

For example: even if the replenishment cycle is 45 days (presently) from some product line, that does not mean that orders need to be aggregated every 45 days. Begin by having orders submitted up the supply chain every two weeks, so that the actual demand is visibly sooner. Then work to reduce the order-placement cycle to ten days; then to once a week; and ultimately to every day or every other day. Fancy computer systems are optional to achieve this.

 

Just this simple new visibility into actual demand should facilitate better planning and production across the supply chain. It will also reduce the damaging affects of “the bullwhip,” and encourage supply chain participants to at least begin thinking about smaller production and transfer batch sizes.

 

Synchronizing flow with demand

 

The ultimate goal of all of this is, as Rick Sather described it, “aligning the lines”—that is, synchronizing the production lines with the shipments lines with the shelf take-away (actual consumption) lines. Doing this maximizes the supply chains throughput while minimizing waste of time, energy and money for every supply chain participant.

 


 

Please tell us about your experiences—good or bad—with moving your supply chain toward excellence. Leave a comment here, or feel free to contact us directly.

Speaking at the Supply Chain Insights Global Summit 2013 in Phoenix, Arizona, on 12 September 2013, Rick Sather, Vice President – Customer Supply Chain for North America Consumer Products, told a rapt audience about how Kimberly-Clark made its very successful transition from a “push”-driven to a demand-driven supply chain.

 

Kimberly-Clark (K-C) has a supply chain in which they are intimately involved that runs from raw materials (such as trees for pulp) to the consumer bearing hundreds of brands with which you are likely familiar.

 

Sather told us that, “for decades upon decades in” K-C, the supply chain concept was “make and push” product out the door. The firm operates huge machines—machines two and three stories tall—to manufacture some of its products. The capital investment in such equipment tends to make management believe that the machines must be run 24 hours a day, seven days a week, with a minimum of down-time for set-ups. As a result, attempting to introduce “LEAN” and “demand-driven” as management concepts had formidable hurdles to overcome.

 

Beginning as late as 2005 (I, personally, would have thought these concepts would have prevailed earlier in Fortune 500 firms; but I was clearly wrong), K-C has steadily moved from large batch runs to a small batches run at more frequent intervals as demand dictates.

 

The “bullwhip effect” is alive and well

 

“The ‘bullwhip effect’ is still alive and well,” Sather affirmed. And K-C is still working through a process of ongoing improvement (POOGI) in its attempt to “align the lines,” as Sather calls the efforts to bring into alignment the lines generated by forecasts, actual shipments of products, and the shelf take-away (or end-user consumption).

 

What Sather and K-C’s experience clearly demonstrates, however, is that synchronizing the flow of product through the supply chain through agility and shelf-back sensing is the real key to increasing both top-line and Throughput performance. Sather flatly stated that K-C has seen “millions of dollars of improvement on one [a single] SKU” as a direct result of their new LEAN approach and self-back sensing.

 

Promotional activity (read: policy-induced demand variability) used to result in a bad—and costly—mix of too much inventory in some stores while other stores suffered “massive out-of-stocks.” Now, Sather and his team have been able to move far more product with far less disruption and consternation with the help of critical supply chain changes:

  • Near real-time feedback on end-user consumption
  • More flexible LEAN production measures
  • Smaller and more frequent replenishment

 

While the shelf-back sensing aspect of this improvement may be attributed to Big Data (or, more appropriately, “fast data”), the production flexibility and more frequent replenishment are both aspects of agility. Demand visibility and agility are the cornerstones of “aligning the lines”—that is, synchronizing flow with demand.

 

Looking for the R.O.I.

 

Unlike some supply chain managers, who somehow come to believe that ROI is impossible to calculate or measure on some efforts, Sather told the Summit audience that, in everything K-C does with regard to their supply chain improvements, they “tie [it] back to expected outcomes.”

 

Some supply chain managers have settled themselves on the concept that, because precise figures cannot be known, it is, therefore, not worth the effort to calculate or measure results of POOGI efforts. This is wrong-headed thinking, in my view.

 

While I agree that the exact numbers cannot be known, it is far better to be “approximately right” and prepare estimates for the key factors affected by any improvement effort than it is to make no effort simply because you know the estimates will be “precisely wrong.”

 

The critical factors that should be considered in calculating ROI for any given improvement are these:

  • Change in Throughput [T] (where T is defined as revenues less only truly variable costs)
  • Change in Investment [I] (where I is defined as inventory or other investments require for the proposed improvement)
  • Change in Operating Expense [OE] (where OE is all the other moneys paid out over the calculation period not included in T or I)
  • The simple formula for calculating ROI for any improvement project may be stated as follows:

Where delta-T = the change in Throughput, delta-OE = the change in Operating Expense, and delta-I = the change in Investment.

 

Great take-aways

 

While Rick Sather’s presentation covered more—and, perhaps, I will yet cover other aspects in another article—here are the key elements I took away from his presentation on Kimberly-Clark’s journey toward a demand-driven supply chain:

  1. You will need a champion to overcome the inertia of the organization
  2. Demand visibility and supply chain agility are the keys to improving Throughput
  3. Every improvement effort should be tied-back to expected results

 


 

We will be writing more about what was learned at first annual Supply Chain Insights Global Summit 2013 in the near future. Stay tuned right here for more in the near future.

 

Give us your feedback. Feel free to post your comments here, or contact us directly, if you prefer. We would be delighted to hear from you.

 

At the first annual Supply Chain Insights Global Summit (SCISummit) held in Phoenix, Arizona, earlier this month, Lora Cecere of Supply Chain Insights opened the event. In her opening comments she said, “[A]s we think about embracing the supply chain as a complex system, we need to imagine new processes outside-in.”

 

 

The “outside-in” supply chain

 

Later in the SCISummit, Philippe Lambotte (Merck, Inc.) would remind us all:

"We think about supply chains as going from right-to-left or left-to-right.... What we don't think about [is that] we've been raised and trained [to think of the supply chain] sequentially.... In fact, the world works in concentric circles.... What is exciting to me is making things available anywhere, anytime, and much faster."

 

It is, of course, very true. We are used to planning, designing, thinking about our supply chains like this:

 

 

While our logic is linear, the real world is not (as Lambotte properly assessed). The real world works like this:

 

 

All the raw materials are at the center of all the potential supply chains. All the customers and end-users are on the outside of the circles. There is not, necessarily, a single path from raw materials to the satisfaction of end-user wants, wishes, needs and desires. There may be, in fact, an infinite number of paths to be imagined and discovered as we rethink and re-imagine our supply chains “from the outside-in.”

 

Kimberly-Clark agrees

 

Rick Sather, Kimberly-Clark Corporation’s VP of Customer Supply Chain, agrees with the outside-in evaluation of supply chain design, construction and performance. He told attendees at SCISummit that only seven or eight years ago, Kimberly-Clark (K-C) viewed their supply chain in a pretty straightforward way: “Make it and ship it.”

 

However, since 2005, K-C has thoroughly reworked their supply chain management and operations. Today, Sather said, we look at our supply chain by starting at “the [customer’s] shopping cart.”

Today, K-C has an entirely new view. Sather told the audience that, in the past, promotions frequently led to scenarios where they had “too much inventory in some stores” while other stores would be suffering from “massive out-of-stocks.”

 

K-C has taken a number of steps to move toward a truly demand-driven supply chain. They have begun using “shelf-back sensing,” and now have visibility into about 70 percent of their channel’s product consumption on a daily basis. They have leveraged tools from RSI (Retail Solutions) and Terra Technology to accelerate improvement.

 

K-C’s strategies for LEAN production (implemented incrementally over the last seven or eight years), combined with strategically placed inventory buffers and rapid response to demand-sensing allow their supply chain to respond with the right products at the right time in the right places. This has dramatically improved customer service rates and reduced stock-outs during peak demand periods and promotions.

 

Redefining our supply chains

 

If the SCISummit brought one message into clear focus it was just what Lora Cecere has been trying to tell supply chain managers and executives for some years now: The new world of supply chain management is not about making “old systems, like advanced planning, …faster…. [I]t requires the redefinition of what we’re doing…. It’s not about ‘evolution,’ but a ‘revolution’” that’s needed if companies are not going to remain “stuck” with little or no real improvement in the coming years.

 


 

Stay tuned for more updates from the Supply Chain Insights Global Summit 2013 right here in coming articles. Also, we would be delighted to hear from you. Please feel free to leave your comments here, or contact us directly, if you wish.

 

 

Will Rogers offered some great wisdom in very down-to-earth terms when he said:

“There are three kinds of men in this world: Those who learn from reading books; those who learn by watching others; and those who have to pee on the electric fence for themselves.”

 

We all have opportunities to learn from the experiences of others, and the upcoming Supply Chain Insights Global Summit to be held in Phoenix, AZ, 11-12 September 2013, is just such an opportunity.

 

The years of supply chain experience that will be represented at this conference is astounding.

 

What’s even more important is that YOU don’t have to be there to reap the benefit of this great event. Stay tuned right here and we will try to bring you some of the highlights, some of the nuggets, a distillation of important points that come out of the speaking at this conference.

 

Some examples

 

What can you expect? Here is a sampling of the level of talent and experience that will be attending and speaking at this conference, and some of what you might expect to learn.


Lisa Sauer, VP of Product Supply, Global Home Products and External Supply Solutions at Procter & Gamble, has 25 years with P&G. She will share from her experience how to build a customer-driven value network and on supply chain metrics that matter.

 

Insights on how to build processes to sense and respond to customer needs while improving supply chain resiliency will be offered by Tony Romero, General Manager of Customer Fulfillment, Planning and Logistics Group at Intel Corporation.

 

A blue-ribbon panel including Nicolas Little of Michigan State University and current chair of the Supply Chain Council’s North America Leadership Team; Cindy Urbaytis, Managing Director of the Institute for Supply Management; Joe Krkoska, Supply Chain Director and Business Manufacturing Leader for External Manufacturing at DOW AgroSciences; and Patrick Curry, Director of Supply Chain Talent Development and University Relations at IBM will discuss the shortage of supply chain talent and mid-management roles with the organizations.

 

The panel discussion will be moderated by Jake Barr, who himself has more than three decades of experience in supply chain management with Procter and Gamble. Barr is now CEO at BlueWorld Supply Chain Consulting.

 

Others from whom you might learn

  • Robert J. Bowman, managing editor at SupplyChainBrain covering supply chain management, logistics, transportation and international trade
  • Karen Conway, executive lead for industry relations at GHX, working internationally with standards bodies, government agencies, analysts, academic institutions and industry associations to aid healthcare providers and suppliers to the healthcare industry identify opportunities and optimize supply chain operations
  • Mitch Free, founder of MFG.com, an online marketplace for manufacturers and named by the New York Times as one of the ten companies to change the world
  • Dr. Mani Janakiram, Principal Engineer and Director of Supply Chain Strategy and Analytics at Intel Corporation

Stay tuned…

 

Over the coming few weeks will will be bringing you highlights from the Supply Chain Insights Global Summit. We will be tweeting with the hashtag #SCISummit live from the conference and posting updates here, as well. After the conference, we will try to provide more insights that have flowed from the event, as well.

 

So, stay tuned right here—even if you cannot attend the conference personally.

 


 

If you have comments or questions, post them here, or contact us directly, if you wish.

 

I am a firm believer in what Dr. Eliyahu Goldratt calls “inherent simplicity.” That is the concept that the more complex a problem appears to be, the simpler the truly effective solution must be.

 

This came clear to me, recently, when I was working with one of our clients. This client was reporting that they were spending considerable time tracking down the right materials for work orders on the shop floor. In fairness, the firm handles lots of small orders for mass-customized items, so they do face significant challenges. And, they also have costly automation at work in their enterprise trying to make life easier for themselves.

 

The problem is, all the costly automation is actually making daily shop floor execution more and more prone to chaos and consternation.

 

CHC WOHeader_before.jpg

 

Let me see if I can describe their situation…


The illustration above is an example sort of a standard Work Order (WO) header, bearing typical WO header data:

    • Work center (with bar code)
    • Machine ID
    • Work order number (with bar code)
    • Produced Item ID
    • Quantity required
    • Some descriptive data
    • Needed-by date
    • Priority level
    • Some other data


Below this header, all of the work order step details would appear.


Now, picture this: As the products moved through the plant, stacks of WIP (subassemblies) would be placed in various staging and storage areas. These work order documents would be left with the header portion sticking out from between the stacks so that workers needing to locate a particular subassembly for the next operation could find the parts they were seeking by reading the information on the exposed WO header.

 

CHC WorkOrder redesign_before.jpgThe specific pieces of information that would provide the greatest clues to the workers as to appropriate actions are shown highlighted in red outlines in the full-page view shown here.


However, with the header sticking out from the piles of subassemblies, all these data had to be read UPSIDE DOWN by the workers looking for the pieces they needed to work on next.


Inherent simplicity in action


It was already clear that the technologies that this client had in-place were only increasing the burden of effective manufacturing execution, so we were seeking a inherently simple solution to helping workers locate with speed and accuracy the components they needed to carry on with their productions.


Since the paper travelers had to stick out from between the stacks, we proposed that the Work Order form be reworked, moving the “header” information onto a “footer,” instead. This would allow the projecting portion of the work order to be read right side up, instead of upside down.

 

CHC WOFooter_after.jpg

 

Next, we proposed that the important and human-readable information be made prominent and in large print to be readable from some distance. The result (as shown above) is a projecting “footer” that readily shows:

  • Part Number of the subassembly: “EM_32241” in this example
  • Priority: “2” in this example
  • Needed-by Date: “7/31/2013” in this example
  • Quantity: “908” in this example

A simple solution


Simply by making the document more human-readable and highlighting the key data that triggered action, actions on the shop floor were accelerated.


Next, rather than putting the WIP components in a relatively random order on the shelves based on when they were completed by the preceding operation, we suggested that the parts be grouped (like street addresses) by the component part ID. You know…

  • The 10000 block
  • The 20000 block
  • The 30000 block
  • And so forth….

These two simple, virtually no-cost changes helped our client toward accelerating their manufacturing execution and actually reduced their reliance on technologies.

 

That doesn’t mean they won’t need technologies in the future to accelerate some other aspect of their enterprise. But what it does mean is that they can reap the benefits of increasing today in order to liberate cash and increase profits to help pay for technologies where there is a desperate need for it.

 


 

We would be delighted to have your feedback on this article. Please feel free to leave your comments here or you may contact us directly.