Senior management too often chooses to concentrate its efforts in other areas, leaving manufacturing partially or totally unintegrated. Too many corporate myopias and parochial views place manufacturers in a less than desirable competitive position.
The competitive challenge necessitates a new corporate attitude about the increased importance of World Class Manufacturing. This will cause senior management to view manufacturing with renewed importance as part of an integrated corporate strategy. This renewed importance for manufacturing will require a better understanding of manufacturing strategy implications, tradeoffs, and manufacturing planning, execution, and control techniques to gain and maintain competitive advantage. We must also recognize that MRP, JIT, etc. by themselves are only a piece of the whole. A new perspective is needed. The old, and unfortunately some new, parochial views have caused many of us to be nearsighted and lose ground because of it. We have learned a hard lesson. One of our greatest areas of vulnerability was in taking for granted that we knew how to apply our own manufacturing techniques, and we were so good at manufacturing that no one could beat us at our own game. What must be understood by senior management is that planning, organizing, executing and controlling manufacturing resources is one of the key cornerstones to a profitable and dominant competitive position.
In order to gain competitive superiority in a world economy, the development and implementation of an effective manufacturing strategy has become an essential, overriding mission for manufacturers. Developing a highly competitive manufacturing strategy, as an integral part of an overall corporate strategy is a vital part of the management process as a company develops its instincts for Manufacturing Excellence.
Are You on THE RIGHT Track? You may be on the right track but please ensure that you don’t sit down on the track as you may be run over and end up not knowing what hit you.
Is your company firmly committed and involved with making Manufacturing Excellence an integral part of the management process? After serious consideration, candid answers to the following 10 questions will help you benchmark how your organization is progressing toward the goal of Manufacturing Excellence.
The scoring system is 10 points for yes and zero points for no answers. Nothing less than 100 points or 100% performance is really acceptable if Manufacturing Excellence is an integral part of your company's strategy for competitive advantage.
• Do we have a formal, top management driven Sales and Operations Planning process for determining the capacity requirements, financial resources, cycle times, etc. to support anticipated customer demand?
• Do we thoroughly understand that excess inventory masks operational and quality problems, making it difficult to identify the specific cause for correction?
• Do we know the expected reduction in work-in-process and finished goods inventories from shorter cycle times?
• Have we developed the mindset to constantly identify problems and immediately resolve them?
• Are we working aggressively on the redesign of complicated products, which are difficult to manufacture because they have been over designed
• Does senior management thoroughly understands that they decide how important quality is and improvement begins from that point?
• Have we calculated the production capacity increase from a 75% or more reduction in current changeover times?
• Have we significantly reduced alternate sources of supply and made our primary vendors working partners?
• Do our performance measurements stimulate improvement in the right direction?
• Do we have a well conceived, documented action plan that has the organization focused on and aggressively working on the right issues?
Wednesday, March 1, 2006
Strategic Planning Process
Strategic planning is a business process that many companies employ to identify critical success factors that set the course for future growth and profits.
Lewis Carroll in "Alice in Wonderland" makes a good case for it: "Would you tell me, please, which way I ought to go from here?" said Alice. "That depends a good deal on where you want to get to," said the Cat. "I don't much care where…," said Alice. "Then it doesn't matter which way you go," said the Cat.
Like most business processes, the key to success is the effective implementation of the plan. Companies that do a good job of developing and executing their strategies can create a competitive edge that provides increased market share and higher gross profit margins. Organizations that turn their plan into a "dust collector" upon an executive bookshelf, will never achieve their full growth and profit potential.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Most criticism of strategic planning is aimed at the planning process. They question the validity of a plan that has been based on market "guestimates", the questionable valuation of the depth and breadth of competitors and an optimistic assessment of the company's internal strength and weakness. The fact that strategic plans can be overly optimistic is not the core problem. Although the criticism may be appropriate, it puts the focus for improvement on the wrong end of the process - it is the implementation task that is critical to producing positive results and it is here where most companies fail at strategic planning.
Poorly implemented rational, strategic plans will produce limited positive results. On the other hand, overly optimistic strategic plans, effectively implemented, can produce results beyond everyone's expectations. This being the case, what is the key to effective implementation? In one word - commitment!
Companies that are good at strategic planning build commitment to the planning process and to each of the strategies within the plan. They build commitment throughout the organization, working with people from all business functions to build commitment before, during and after development of their strategic plan.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Winners begin early in building a commitment to the strategic plan. Suggestions are encouraged from managers at all levels, from key executives who will participate in the planning sessions, and others who will share responsibility for implementing the resultant strategies. Together, they surface issues that will require changes in business process and/or culture and identify those constraints that will need to be overcome if implementation is to be successful
During planning sessions, key executives from each functional area are all encouraged to participate and contribute to the plan. These executives develop strategies that build on organizational strengths and consider resources required to accomplish those strategies. They assure that a key executive "owns" each strategy and commits to a time schedule for its accomplishment. The key executives give thought to resource planning - realizing that human resources are the key to making positive things happen in difficult, complex business environments - and they commit accordingly.
Following the development of their plan, those responsible for implementations develop their own "tactical plans." These action plans, when coupled with self-directed work teams, are major contributors to a successful Strategic Planning implementation. Teams use their plan to manage, to make decisions and to grow their business. Periodically, they review their "tactical plans" to monitor and report on the progress of implementation - keeping the plan "alive" by revising strategies and tactics when necessary.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Finally, to insure successful implementation of their strategic plan, they work on the planning process itself. The planning group continuously "fine tunes" the planning process to insure that inputs from all business functions are given their due consideration and to insure that buy-in and commitment to the final plan is agreed upon throughout all levels of the organization.
So, why are most operations management teams outside of the strategic planning process? Why do many line managers view strategic planning as a make work project that produces little or zero value to customers? Maybe, it's because they did not participate in its development nor did they buy-into its validity - let alone commit to the execution of its strategic objectives. In short, they're not connected to the process! To achieve a company's full growth and profit potential, CEOs and business owners need to insure the active participation of operation management in the strategic planning process.
Lewis Carroll in "Alice in Wonderland" makes a good case for it: "Would you tell me, please, which way I ought to go from here?" said Alice. "That depends a good deal on where you want to get to," said the Cat. "I don't much care where…," said Alice. "Then it doesn't matter which way you go," said the Cat.
Like most business processes, the key to success is the effective implementation of the plan. Companies that do a good job of developing and executing their strategies can create a competitive edge that provides increased market share and higher gross profit margins. Organizations that turn their plan into a "dust collector" upon an executive bookshelf, will never achieve their full growth and profit potential.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Most criticism of strategic planning is aimed at the planning process. They question the validity of a plan that has been based on market "guestimates", the questionable valuation of the depth and breadth of competitors and an optimistic assessment of the company's internal strength and weakness. The fact that strategic plans can be overly optimistic is not the core problem. Although the criticism may be appropriate, it puts the focus for improvement on the wrong end of the process - it is the implementation task that is critical to producing positive results and it is here where most companies fail at strategic planning.
Poorly implemented rational, strategic plans will produce limited positive results. On the other hand, overly optimistic strategic plans, effectively implemented, can produce results beyond everyone's expectations. This being the case, what is the key to effective implementation? In one word - commitment!
Companies that are good at strategic planning build commitment to the planning process and to each of the strategies within the plan. They build commitment throughout the organization, working with people from all business functions to build commitment before, during and after development of their strategic plan.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Winners begin early in building a commitment to the strategic plan. Suggestions are encouraged from managers at all levels, from key executives who will participate in the planning sessions, and others who will share responsibility for implementing the resultant strategies. Together, they surface issues that will require changes in business process and/or culture and identify those constraints that will need to be overcome if implementation is to be successful
During planning sessions, key executives from each functional area are all encouraged to participate and contribute to the plan. These executives develop strategies that build on organizational strengths and consider resources required to accomplish those strategies. They assure that a key executive "owns" each strategy and commits to a time schedule for its accomplishment. The key executives give thought to resource planning - realizing that human resources are the key to making positive things happen in difficult, complex business environments - and they commit accordingly.
Following the development of their plan, those responsible for implementations develop their own "tactical plans." These action plans, when coupled with self-directed work teams, are major contributors to a successful Strategic Planning implementation. Teams use their plan to manage, to make decisions and to grow their business. Periodically, they review their "tactical plans" to monitor and report on the progress of implementation - keeping the plan "alive" by revising strategies and tactics when necessary.
Strategic plan knowledge for anyone ... anywhere ... anytime.
Finally, to insure successful implementation of their strategic plan, they work on the planning process itself. The planning group continuously "fine tunes" the planning process to insure that inputs from all business functions are given their due consideration and to insure that buy-in and commitment to the final plan is agreed upon throughout all levels of the organization.
So, why are most operations management teams outside of the strategic planning process? Why do many line managers view strategic planning as a make work project that produces little or zero value to customers? Maybe, it's because they did not participate in its development nor did they buy-into its validity - let alone commit to the execution of its strategic objectives. In short, they're not connected to the process! To achieve a company's full growth and profit potential, CEOs and business owners need to insure the active participation of operation management in the strategic planning process.
Sunday, February 12, 2006
world class- and moreeeeeeeeeeeeeeeeeee
World-class status is not a singular stand-alone event.
I would like to define it as a journey through time for the company.
It is a series of events and activities, which add up to a process. It is a journey in search of new ways of working similar to those of Vasco-da –Gama and Christopher Columbus who set out to find new worlds.
The new worlds in our context will be work places. The new world allows the company to be competitive, best among the best in its class, profitable and fun to work for:
Some benefits of world-class excellence are as follows:
· Lower total cost of products
· Greatly improved supplier service
· Greatly improved quality
· Better design
· Improved administrative efficiency
· Increased productivity
A simple definition of a world class company is as follows: “ The right item* in the right place at the right time in the right quantity and meeting the customer (both internal & external) requirements each time and every time and everywhere in the company at the lowest summed up cost”.
Item* could mean information as well as material.
Many companies implementing JIT/TQC are surprised at the indirect effects than the obvious ones.
In this article we are going to go through a few materials related areas and discuss threadbare as to how one can be assessed by any assessment agency. One thing we need to digest is that assessment is not a faultfinding process. It is a process of judging the present levels of operations in the company and assessing with respect to industry best and then to customer requirement and finally to world class .
From here we target level 3 that is world-class status.
Please bear in mind that going from one level to another is not at all easy, as it seems on paper. There is a lot thinking, strategizing, tactical thinking and implementation and above all changing the mindsets, attitudes of the people. It is crucial to remember that we are dealing with different personalities who come from different cultures, have different upbringing, having different value systems, speak many dialects of the many regional languages and yet we have to unify these people to come together in the spirit of camaraderie and work to achieve world class status and sustain the company as a world class one.
As mentioned earlier I am going to walk you through the basics of some of the assessment criteria in the materials related area.
· Inventory turn over ratio: the measurement of inventory turn over ratio is perhaps the best method of determining progress towards world class. Many companies struggle to achieve four turns in a year i.e. Three months inventory on hand. Inventory turn over ratios must be raised to 18 turns, 22 turns, and 36 turns to be more competitive in the future.
Rm+wip+swp+sme
Fg
Performance measure
Target
Actual
Target
Actual
Formula used
Inventory turn overs/year
· Supplier delivery performance: actual receipt date in comparison to confirmed and required delivery date. Early receipt of goods, items and material is as costly as late deliveries. If you receive material one or two days ahead of schedule or requirement the inventories will rise and you will have to pay the cost of carrying it. As a thumb rule for assessment the higher the number of suppliers delivering on time and smaller the delivery quantity the more closer the organization will move towards world class. The goal to be set for each supplier or vendor is to deliver on the committed day or hour as the case may be.
Performance measure
Target
Actual
Formula used
Supplier delivery performance
· Record accuracy: in today’s scenario it is imperative that the information we use to plan is up to date and as close to reality as possible and we cannot use inaccurate information to plan.
· Just in time: being as good as our competitor is just not good enough. We need to analyze why we have problems and the reasons as to why our competitors don’t have them. Being the best is our goal. Some areas that come to mind are: - we must know that we are in a crisis of quality. We have grown used to rework and refurbishment, we are accustomed to sitting on huge levels of inventory. JIT is an approach, which seeks to minimize waste obsolesce and complexity while maintaining customer focus, satisfaction and high service levels. Steps in implementation of JIT are as follows:
· Understand the concepts of JIT. Attend seminars and visit implementing companies.
· Conclude that the philosophy of JIT is applicable to the business model and has the support of the top management.
· Work out a custom made strategy with quantified goals and time lines for achieving them.
· Appointment of project teams.
· Develop implementation schedules with budgets and timelines.
· Implement with everyone involved having knowledge of entire details of happenings.
· Involve key suppliers in the implementation process.
· Improve continuously
In order to implement JIT the following activities must be carried out as a part of the implementation process:
Ø Means and methods of controlling processes.
Ø Organizational restructuring to reduce specialist departments and replace them with cells as per the application.
Ø Simple and flexible job structures.
Ø Training programmes
Ø Process capabilities in manufacturing & process flow charts
Ø Process & methods to reduce change over time.
Ø Communication systems & channels at all levels
Ø Interfacing between internal & external customers and suppliers
Ø Goal setting and encouragement of continuous improvement across departmental barriers.
Ø Material flow controls across the internal supply mechanism.
Ø Factory scheduling
Some major benefits that could be achieved after implementation are:
· Improvement and strengthening of work culture
· Cost reduction achieved to operations would make the products more competitive.
· Inventory reduction and utilization of storage space for productive purposes.
· Improved customer satisfaction as a result of delivery of high quality products to the customer.
· Better relationship with suppliers & vendors.
Review of JIT level in a company would invite a probe as follows.
1) What is your organization’s vision?
2) Is there a JIT cell? Who are all involved?
3) Has any formal training been imparted?
4) Is there a panel making the make v/s buying decision? How does it function?
5) Is there a formal value analysis programme? How do you go about on a day-to-day basis?
6) Is there a prescribed way of problem solving?
7) Is there a formal budget and business plan?
8) Is there a formal sales plan?
9) Is there an aggregate planning procedure in existence?
10) Have areas of potential improvements been identified?
11) Are tracking and reporting of performance measures or performance indicators in place? Inventory consideration: reasons for inventory reduction programme are as follows:
Eliminate additional inventory carrying cost.
Expose factory within the factory
Minimize obsolesce
Respond to change so as to meet customer requirement quickly.
Eliminating high level of inventory will expose real problems and allow us to be more productive in our factories.
****************************************************************************************************************************************
Purchasing supply management : we need to possess the following supply system to be world class.
· Dedicated ancillary suppliers
· Supplier location as compact as possible.
· Knowledge of production plan and its scheduling to suppliers and vendors to ensure readiness to deliver as planned.
· Development of high quality suppliers who eliminate the need for incoming inspection.
· Innovative parts packaging and internal material handling system.
Lead-time, lot size reduction & set up reduction:
The above three areas are very vital and the following principles must be demonstrated at work.
1) Presence of fast changeover equipment, process or procedures in order to facilitate smaller lot size.
2) Procurement decisions must be based on quality and need rather than price.
In order to be world class, organizations must move from long production runs to flexible manufacturing.
1) Is there cost evaluation criteria established & adhered? If yes demonstrate and show proof in the following areas
a) Inventory carrying cost
b) Labour costs
c) Overhead costs
d) Product pricing
e) Other areas such as PLH &SME.
f) Packing
g) Carriage outwards
h) Scrapage and rework
2) Are demand forecast, production plans, reorder levels and safety stocks adequately reviewed and approved?
3) What is the schedule-planning horizon?
4) What is the requirement generation system and conversion into production plan?
Purchasing policy:
1) Has a purchasing policy manual been made and adhered to?
2) What are the purchase objectives?
3) What is the policy on vendor or supplier development?
4) Is there a system of approving purchase orders or scheduling agreements with specified authority levels? What are they?
5) Is there a supplier evaluation system? How often is it done? Does it relate to in totality to operations of the materials function?
6) Are source list and purchase requisition generated?
7) What is the system of receiving material?
8) What is the documentation process for receipts?
9) How are rejections handled at incoming and in process?
10) Does a system of EOQ, periodic and perpetual review system exist?
11) How are buyers assigned responsibility and authority?
12) Are there list of qualified, approved and certified suppliers in the system?
13) Are the buyer performance directly related to supply performance?
14) Is there a systematic approach to reduce the vendor base in a systematic manner?
15) What is the materials management organization structure?
· Material handling: as material moves in from the main gate through the incoming inspection there must be a pull that is attracting the material towards the manufacturing and obviously to the bonded storeroom.
A litmus test would be as follows.
1) What system is used to track inventories?
2) How are stores designed? Open or closed?
3) Is order picking and kitting done?
4) What are the storage principles used?
5) Are store orders /shop floor requisitions used?
6) Are work orders or shop orders handled as required?
7) Who does production planning?
8) Are lot-sizing concepts adhered to?
9) Are capacities planning techniques employed?
10) How is inventory measured and reported?
11) What inventory reports are generated and how are they acted upon?
12) What sort of equipment is used to handle material? Is it required?
13) What types of holding systems are utilized?
14) How are line balancing done with regards to kits during change over?
15) What is the time taken for vehicle to reach the store from the main gate? What is the vehicle holding time in the factory ?
16) How long does the vehicle wait outside the premises?
17) How do the warehousing personnel and security personnel track the vehicle?
18) How are the crates and other material handling equipment tracked by security?
19) How are material quantities verified?
20) What feed back system exists to report shortages?
21) What feed back system exists to inform management on defaulters?
22) What scrap disposal systems exists? Are forward auctions conducted by using e-sourcing tools?
23) How are inventories moved in the system?
And it goes on ……………………………………………………………….
I would like to define it as a journey through time for the company.
It is a series of events and activities, which add up to a process. It is a journey in search of new ways of working similar to those of Vasco-da –Gama and Christopher Columbus who set out to find new worlds.
The new worlds in our context will be work places. The new world allows the company to be competitive, best among the best in its class, profitable and fun to work for:
Some benefits of world-class excellence are as follows:
· Lower total cost of products
· Greatly improved supplier service
· Greatly improved quality
· Better design
· Improved administrative efficiency
· Increased productivity
A simple definition of a world class company is as follows: “ The right item* in the right place at the right time in the right quantity and meeting the customer (both internal & external) requirements each time and every time and everywhere in the company at the lowest summed up cost”.
Item* could mean information as well as material.
Many companies implementing JIT/TQC are surprised at the indirect effects than the obvious ones.
In this article we are going to go through a few materials related areas and discuss threadbare as to how one can be assessed by any assessment agency. One thing we need to digest is that assessment is not a faultfinding process. It is a process of judging the present levels of operations in the company and assessing with respect to industry best and then to customer requirement and finally to world class .
From here we target level 3 that is world-class status.
Please bear in mind that going from one level to another is not at all easy, as it seems on paper. There is a lot thinking, strategizing, tactical thinking and implementation and above all changing the mindsets, attitudes of the people. It is crucial to remember that we are dealing with different personalities who come from different cultures, have different upbringing, having different value systems, speak many dialects of the many regional languages and yet we have to unify these people to come together in the spirit of camaraderie and work to achieve world class status and sustain the company as a world class one.
As mentioned earlier I am going to walk you through the basics of some of the assessment criteria in the materials related area.
· Inventory turn over ratio: the measurement of inventory turn over ratio is perhaps the best method of determining progress towards world class. Many companies struggle to achieve four turns in a year i.e. Three months inventory on hand. Inventory turn over ratios must be raised to 18 turns, 22 turns, and 36 turns to be more competitive in the future.
Rm+wip+swp+sme
Fg
Performance measure
Target
Actual
Target
Actual
Formula used
Inventory turn overs/year
· Supplier delivery performance: actual receipt date in comparison to confirmed and required delivery date. Early receipt of goods, items and material is as costly as late deliveries. If you receive material one or two days ahead of schedule or requirement the inventories will rise and you will have to pay the cost of carrying it. As a thumb rule for assessment the higher the number of suppliers delivering on time and smaller the delivery quantity the more closer the organization will move towards world class. The goal to be set for each supplier or vendor is to deliver on the committed day or hour as the case may be.
Performance measure
Target
Actual
Formula used
Supplier delivery performance
· Record accuracy: in today’s scenario it is imperative that the information we use to plan is up to date and as close to reality as possible and we cannot use inaccurate information to plan.
· Just in time: being as good as our competitor is just not good enough. We need to analyze why we have problems and the reasons as to why our competitors don’t have them. Being the best is our goal. Some areas that come to mind are: - we must know that we are in a crisis of quality. We have grown used to rework and refurbishment, we are accustomed to sitting on huge levels of inventory. JIT is an approach, which seeks to minimize waste obsolesce and complexity while maintaining customer focus, satisfaction and high service levels. Steps in implementation of JIT are as follows:
· Understand the concepts of JIT. Attend seminars and visit implementing companies.
· Conclude that the philosophy of JIT is applicable to the business model and has the support of the top management.
· Work out a custom made strategy with quantified goals and time lines for achieving them.
· Appointment of project teams.
· Develop implementation schedules with budgets and timelines.
· Implement with everyone involved having knowledge of entire details of happenings.
· Involve key suppliers in the implementation process.
· Improve continuously
In order to implement JIT the following activities must be carried out as a part of the implementation process:
Ø Means and methods of controlling processes.
Ø Organizational restructuring to reduce specialist departments and replace them with cells as per the application.
Ø Simple and flexible job structures.
Ø Training programmes
Ø Process capabilities in manufacturing & process flow charts
Ø Process & methods to reduce change over time.
Ø Communication systems & channels at all levels
Ø Interfacing between internal & external customers and suppliers
Ø Goal setting and encouragement of continuous improvement across departmental barriers.
Ø Material flow controls across the internal supply mechanism.
Ø Factory scheduling
Some major benefits that could be achieved after implementation are:
· Improvement and strengthening of work culture
· Cost reduction achieved to operations would make the products more competitive.
· Inventory reduction and utilization of storage space for productive purposes.
· Improved customer satisfaction as a result of delivery of high quality products to the customer.
· Better relationship with suppliers & vendors.
Review of JIT level in a company would invite a probe as follows.
1) What is your organization’s vision?
2) Is there a JIT cell? Who are all involved?
3) Has any formal training been imparted?
4) Is there a panel making the make v/s buying decision? How does it function?
5) Is there a formal value analysis programme? How do you go about on a day-to-day basis?
6) Is there a prescribed way of problem solving?
7) Is there a formal budget and business plan?
8) Is there a formal sales plan?
9) Is there an aggregate planning procedure in existence?
10) Have areas of potential improvements been identified?
11) Are tracking and reporting of performance measures or performance indicators in place? Inventory consideration: reasons for inventory reduction programme are as follows:
Eliminate additional inventory carrying cost.
Expose factory within the factory
Minimize obsolesce
Respond to change so as to meet customer requirement quickly.
Eliminating high level of inventory will expose real problems and allow us to be more productive in our factories.
****************************************************************************************************************************************
Purchasing supply management : we need to possess the following supply system to be world class.
· Dedicated ancillary suppliers
· Supplier location as compact as possible.
· Knowledge of production plan and its scheduling to suppliers and vendors to ensure readiness to deliver as planned.
· Development of high quality suppliers who eliminate the need for incoming inspection.
· Innovative parts packaging and internal material handling system.
Lead-time, lot size reduction & set up reduction:
The above three areas are very vital and the following principles must be demonstrated at work.
1) Presence of fast changeover equipment, process or procedures in order to facilitate smaller lot size.
2) Procurement decisions must be based on quality and need rather than price.
In order to be world class, organizations must move from long production runs to flexible manufacturing.
1) Is there cost evaluation criteria established & adhered? If yes demonstrate and show proof in the following areas
a) Inventory carrying cost
b) Labour costs
c) Overhead costs
d) Product pricing
e) Other areas such as PLH &SME.
f) Packing
g) Carriage outwards
h) Scrapage and rework
2) Are demand forecast, production plans, reorder levels and safety stocks adequately reviewed and approved?
3) What is the schedule-planning horizon?
4) What is the requirement generation system and conversion into production plan?
Purchasing policy:
1) Has a purchasing policy manual been made and adhered to?
2) What are the purchase objectives?
3) What is the policy on vendor or supplier development?
4) Is there a system of approving purchase orders or scheduling agreements with specified authority levels? What are they?
5) Is there a supplier evaluation system? How often is it done? Does it relate to in totality to operations of the materials function?
6) Are source list and purchase requisition generated?
7) What is the system of receiving material?
8) What is the documentation process for receipts?
9) How are rejections handled at incoming and in process?
10) Does a system of EOQ, periodic and perpetual review system exist?
11) How are buyers assigned responsibility and authority?
12) Are there list of qualified, approved and certified suppliers in the system?
13) Are the buyer performance directly related to supply performance?
14) Is there a systematic approach to reduce the vendor base in a systematic manner?
15) What is the materials management organization structure?
· Material handling: as material moves in from the main gate through the incoming inspection there must be a pull that is attracting the material towards the manufacturing and obviously to the bonded storeroom.
A litmus test would be as follows.
1) What system is used to track inventories?
2) How are stores designed? Open or closed?
3) Is order picking and kitting done?
4) What are the storage principles used?
5) Are store orders /shop floor requisitions used?
6) Are work orders or shop orders handled as required?
7) Who does production planning?
8) Are lot-sizing concepts adhered to?
9) Are capacities planning techniques employed?
10) How is inventory measured and reported?
11) What inventory reports are generated and how are they acted upon?
12) What sort of equipment is used to handle material? Is it required?
13) What types of holding systems are utilized?
14) How are line balancing done with regards to kits during change over?
15) What is the time taken for vehicle to reach the store from the main gate? What is the vehicle holding time in the factory ?
16) How long does the vehicle wait outside the premises?
17) How do the warehousing personnel and security personnel track the vehicle?
18) How are the crates and other material handling equipment tracked by security?
19) How are material quantities verified?
20) What feed back system exists to report shortages?
21) What feed back system exists to inform management on defaulters?
22) What scrap disposal systems exists? Are forward auctions conducted by using e-sourcing tools?
23) How are inventories moved in the system?
And it goes on ……………………………………………………………….
The Flow and Just in time
The flow is one of the most important concepts in understanding Kaizen, since there is always a flow of processes in all types of businesses providing products or services to customers.Looking at the flow provides us with crucial keys for KAIZEN.Take, for example, production systems, which can be classified into two major types: traditional system and just-in-time system.
Traditional SystemIn the former type, the planning department in the corporate office makes production plans based on sales forecast and issues production orders to the plant, which are converted into daily production schedules and forwarded to each process within the plant for execution.The shortcoming of this system is that the sales forecast never turns out to be correct.Sales people are afraid of having no products to sell when orders are received and, consequently, their forecast tends to be on the optimistic side, and production started on this basis inevitably leads to excess inventory.The problem is that, even to this day, majority of manufacturing companies subscribe to this system.It might be said that these companies are in the gambling business since they bet the future of the company on the most unreliable information.Many problems faced by today’s manufacturing companies are derived from this fact, and their problems are mostly intrinsic to the system they subscribe to, namely, traditional system.
Under the traditional system, it is difficult to devise a smooth flow, because production plans are made on forecast which is often untrue, and the plans are subject to change, thus, disrupting the smooth flow. Since batch production is employed in the traditional method, it is another reason why the flow is disrupted between processes.In other words, the traditional system is plagued with an intrinsic shortcoming of disrupted flows. Whenever the flow is disrupted, inventory is accumulated. The quality suffers. Delivery commitment to customers is not fulfilled. This leads to require far more managerial and administrative procedures, interventions and documentations (commonly called as indirect work) and these activities are often carried out in the corporate office far removed from Gemba.These interventions include such activities as production planning, production instructions, instruction of production changes, checking the level of inventory, logistics between processes, warehousing and many more. Further, it leads to require managers or persons to work on these “indirect” assignments at each process.Just –in-timeIn just-in-time production, on the other hand, all activities are triggered from the most reliable information.....customer orders,In the final and ideal stage of JIT , customer orders are forwarded directly to the final production process, namely, assembly process. Based on this information, the last process (assembling process) produces as many number of products as have been ordered, and ship them to the customer directly from the plant, without going through the warehouse. In the meantime, the information on the products assembled in the final process is fed back to each previous process through such means as one-piece-flow and KANBAN. Thus, the information which was started from the customer is forwarded throughout the entire processes, until it reaches the first process of production, namely, purchasing of raw materials and supplies.Take, for example, the case of purchasing of parts and components. Again, in the ideal form of JIT, the role of purchasing is to place orders only as many as have been consumed in the downstream processes, instead of placing orders in big volume, in advance, based on forecast. This is a natural outcome of the reverse flow of “pull” information which started from the customers. Thus, there is a long flow of information starting from customers and going through various processes, and finally, reaching purchasing , and suppliers.
Thus, the flow of information is much simplified in the case of JIT, making the job of managing the entire processes very easy, since one only has to look at the flow and take actions whenever the flow is disrupted. Taiichi Ohno, who was a driving force in developing Toyota production system at Toyota, once said that in JIT system, the “flow” manages the processes, while in the traditional system, management must manage the processes.The core activities of building JIT system is to engage in never-ending KAIZEN activities to make, shorten and minimize the flow, and as a result, to reduce the total lead time. Under this system, the first step is to review all the processes and try to make a flow by connecting separated processes. Once the processes are put together, the next step is to shorten the flow, and minimize the lead time.
Thus, in KAIZEN terms, any bottlenecks that disrupt the flow must be dealt with, and solving these bottlenecks are called KAIZEN. KAIZEN is an indispensable means to build JIT system. In short, any company that has subscribed to traditional system needs KAIZEN. Since the concept of “flow” has been virtually non-existent in the traditional system, KAIZEN is needed in almost all spheres of the business including production, must be carried out involving everybody and continually in other words on the daily basis.
Minimizing the flow offers the following advantages:1. It identifies MUDA (non-value-adding activities) of all kinds.2. It identifies unbalances between processes.3. It shortens the lead time of production, and realizes prompt delivery.
4. It reduces inventories of both work-in-processes and finished products.
The following are the conditions for making, shortening and maintaining the flow.
1. Standardization
As the traditional system is disconnected almost at every process, building JIT system comes class to negating and undoing almost every thing has been done in the past.
Every time a new way of doing the job has been established, it must be standardized so that Gemba does not go back to the same old way. There is always a strong tendency for Gemba people to go back to the same old way, to which they feel comfortable most. Even after KAIZEN was made to build a flow, the manager often finds on visiting the site several weeks later, without checking from time to time, everything has gone back to the old way.
This is also partly because they find the new way uncomfortable, and because they feel that what they had been doing was slighted.
Thus, standardizing the new process and making certain that everybody follows the new standards becomes a key factor to stabilize the new procedures.
2. 5S
As was detailed in the book, Gemba KAIZEN, 5S’s, the five steps of housekeeping, are one of the three pillars of Gemba KAIZEN, together with standardization and muda elimination.
From the standpoint of making a flow, 5S’s are absolutely necessary steps. To make a flow, between processes and shorten the distance and minimize the time of transporting materials within the shortest lead time, everything must be at the right place, which is 5S’s.
In case there is a distance between two processes, for materials to be brought to the next process to make a flow, first, the location to place the material in each process must be fixed. The volume of material must be minimized, avoiding a big batch.
An operator working on a work bench should have all the parts placed within arms’s reach for quick handling to shorten the cycle time.
These activities are all 5S’s.
In the contrast of JIT systems, 5S’s are conducted to make a most efficient flow, and the specific locations for all the materials represent the result of 5S’s activities, namely, standardized 5S’S.
3. MUDA elimination
Taiichi Ohno said that elimination of all types of MUDA was the TASK of Toyota Production System. He listed 7 types of MUDA which were commonly observed on the shop floor, but, in a broader sense, we can say that anything and everything that distracts the smooth flow, is MUDA to be eliminated.
4. Visual management
In the course of developing JIT system, many visual tools have been developed in Gemba so that Gemba people can identify abnormality in real time. Many of them have been developed to help Gemba people to recognize abnormality and take corrective actions in real time and on the spot.
When a total flow has been established, connecting all the processes in the plant, a manager in charge only needs to manage the flow, and Gemba workers are also empowered to maintain the flow. Visual management is the means by which Gemba people, both the manager and workers, assume the responsibility of making the products away from those who are managing Gemba from an isolated office.
5. Recognizing management structure
Once a flow has been established, the relations between production Gemba and other functions such as sales & marketing, physical distribution production planning, production instructions, engineering, quality, industrial engineering, R&D, purchasing, Human Resource Development and Finance go through profound changes.
The responsibility of production falls on the line management, and the roles of other functions are to serve the line. Where Gemba used to be regarded as a problem-child, where thins go wrong, and a good manager would rather not be involved in Gemba affairs. In JIT system, Gemba emerges assume all the necessary responsibilities and accountabilities.
For instance, quality used to be regarded as a job of quality professionals, but in the new role, it is the line management’s role to realize quality, and line management requests the assistance from quality.
In industrial engineering too, Gemba often comes up with a new idea and requests industrial engineering to cope with it.
For instance, Gemba may decide to install a low-cost, small equipment to be installed on the dedicated line for a slow-moving product. The engineering, then starts designing such equipment based on Gemba’s requirements.
On the other hand, once a flow is established, we only have to watch the flow, because the flow manages the processes as Ohno has said.When a flow is established and shortened, only one manager in charge is needed to oversee the entire flow of a particular line or product, and make certain that the flow is running smoothly without disruptions. In effect, JIT not only creates lean production system but also lean management system.In this case, the manager and workers in charge of the flow in Gemba become star players of the game, and are motivated to perform their tasks because they are in direct contact with the customer’s daily requirements and the situations in Gemba, and are empowered to manage them.
As the Gemba people begin to share more responsibilities, the management structure that hitherto has supported traditional system must undergo profound transformation.
Top management is required to review its management system and cross-functional activities with Gemba management in the center.
This is the reason why I believe that we should be using the term JIT management system, rather than JIT production system.
Last but not least, a few words on 5S and visual management. What are the purposes of these activities? My interpretation is that these activities are required in order to make, shorten and minimize the flow, and bring the managerial hegemony to Gemba. No matter how hard one may work to clean the work place with 5S, it is useless unless it leads to shorten the flow.
To sum up, the following shows the difference between the two systems.
Traditional Just-in-time
Production is based on forecast. Production is based on firm orders.
Changing plans is difficult in Gemba. Changing plans is easy in Gemba.
Production plans are dictated by Production plans are dictated by
corporate planning. customer orders.
Managing the flow is complex and The flow is simple and managed by
time consuming. the manager and employees in Gemba.
It requires much managerial and Decision is made in real-time and on the
administrative interventions to Gemba spot in Gemba.
by people who are physically and Gemba managers and employees are
mentally isolated. responsible for managing the entire
flow on their own.
Traditional SystemIn the former type, the planning department in the corporate office makes production plans based on sales forecast and issues production orders to the plant, which are converted into daily production schedules and forwarded to each process within the plant for execution.The shortcoming of this system is that the sales forecast never turns out to be correct.Sales people are afraid of having no products to sell when orders are received and, consequently, their forecast tends to be on the optimistic side, and production started on this basis inevitably leads to excess inventory.The problem is that, even to this day, majority of manufacturing companies subscribe to this system.It might be said that these companies are in the gambling business since they bet the future of the company on the most unreliable information.Many problems faced by today’s manufacturing companies are derived from this fact, and their problems are mostly intrinsic to the system they subscribe to, namely, traditional system.
Under the traditional system, it is difficult to devise a smooth flow, because production plans are made on forecast which is often untrue, and the plans are subject to change, thus, disrupting the smooth flow. Since batch production is employed in the traditional method, it is another reason why the flow is disrupted between processes.In other words, the traditional system is plagued with an intrinsic shortcoming of disrupted flows. Whenever the flow is disrupted, inventory is accumulated. The quality suffers. Delivery commitment to customers is not fulfilled. This leads to require far more managerial and administrative procedures, interventions and documentations (commonly called as indirect work) and these activities are often carried out in the corporate office far removed from Gemba.These interventions include such activities as production planning, production instructions, instruction of production changes, checking the level of inventory, logistics between processes, warehousing and many more. Further, it leads to require managers or persons to work on these “indirect” assignments at each process.Just –in-timeIn just-in-time production, on the other hand, all activities are triggered from the most reliable information.....customer orders,In the final and ideal stage of JIT , customer orders are forwarded directly to the final production process, namely, assembly process. Based on this information, the last process (assembling process) produces as many number of products as have been ordered, and ship them to the customer directly from the plant, without going through the warehouse. In the meantime, the information on the products assembled in the final process is fed back to each previous process through such means as one-piece-flow and KANBAN. Thus, the information which was started from the customer is forwarded throughout the entire processes, until it reaches the first process of production, namely, purchasing of raw materials and supplies.Take, for example, the case of purchasing of parts and components. Again, in the ideal form of JIT, the role of purchasing is to place orders only as many as have been consumed in the downstream processes, instead of placing orders in big volume, in advance, based on forecast. This is a natural outcome of the reverse flow of “pull” information which started from the customers. Thus, there is a long flow of information starting from customers and going through various processes, and finally, reaching purchasing , and suppliers.
Thus, the flow of information is much simplified in the case of JIT, making the job of managing the entire processes very easy, since one only has to look at the flow and take actions whenever the flow is disrupted. Taiichi Ohno, who was a driving force in developing Toyota production system at Toyota, once said that in JIT system, the “flow” manages the processes, while in the traditional system, management must manage the processes.The core activities of building JIT system is to engage in never-ending KAIZEN activities to make, shorten and minimize the flow, and as a result, to reduce the total lead time. Under this system, the first step is to review all the processes and try to make a flow by connecting separated processes. Once the processes are put together, the next step is to shorten the flow, and minimize the lead time.
Thus, in KAIZEN terms, any bottlenecks that disrupt the flow must be dealt with, and solving these bottlenecks are called KAIZEN. KAIZEN is an indispensable means to build JIT system. In short, any company that has subscribed to traditional system needs KAIZEN. Since the concept of “flow” has been virtually non-existent in the traditional system, KAIZEN is needed in almost all spheres of the business including production, must be carried out involving everybody and continually in other words on the daily basis.
Minimizing the flow offers the following advantages:1. It identifies MUDA (non-value-adding activities) of all kinds.2. It identifies unbalances between processes.3. It shortens the lead time of production, and realizes prompt delivery.
4. It reduces inventories of both work-in-processes and finished products.
The following are the conditions for making, shortening and maintaining the flow.
1. Standardization
As the traditional system is disconnected almost at every process, building JIT system comes class to negating and undoing almost every thing has been done in the past.
Every time a new way of doing the job has been established, it must be standardized so that Gemba does not go back to the same old way. There is always a strong tendency for Gemba people to go back to the same old way, to which they feel comfortable most. Even after KAIZEN was made to build a flow, the manager often finds on visiting the site several weeks later, without checking from time to time, everything has gone back to the old way.
This is also partly because they find the new way uncomfortable, and because they feel that what they had been doing was slighted.
Thus, standardizing the new process and making certain that everybody follows the new standards becomes a key factor to stabilize the new procedures.
2. 5S
As was detailed in the book, Gemba KAIZEN, 5S’s, the five steps of housekeeping, are one of the three pillars of Gemba KAIZEN, together with standardization and muda elimination.
From the standpoint of making a flow, 5S’s are absolutely necessary steps. To make a flow, between processes and shorten the distance and minimize the time of transporting materials within the shortest lead time, everything must be at the right place, which is 5S’s.
In case there is a distance between two processes, for materials to be brought to the next process to make a flow, first, the location to place the material in each process must be fixed. The volume of material must be minimized, avoiding a big batch.
An operator working on a work bench should have all the parts placed within arms’s reach for quick handling to shorten the cycle time.
These activities are all 5S’s.
In the contrast of JIT systems, 5S’s are conducted to make a most efficient flow, and the specific locations for all the materials represent the result of 5S’s activities, namely, standardized 5S’S.
3. MUDA elimination
Taiichi Ohno said that elimination of all types of MUDA was the TASK of Toyota Production System. He listed 7 types of MUDA which were commonly observed on the shop floor, but, in a broader sense, we can say that anything and everything that distracts the smooth flow, is MUDA to be eliminated.
4. Visual management
In the course of developing JIT system, many visual tools have been developed in Gemba so that Gemba people can identify abnormality in real time. Many of them have been developed to help Gemba people to recognize abnormality and take corrective actions in real time and on the spot.
When a total flow has been established, connecting all the processes in the plant, a manager in charge only needs to manage the flow, and Gemba workers are also empowered to maintain the flow. Visual management is the means by which Gemba people, both the manager and workers, assume the responsibility of making the products away from those who are managing Gemba from an isolated office.
5. Recognizing management structure
Once a flow has been established, the relations between production Gemba and other functions such as sales & marketing, physical distribution production planning, production instructions, engineering, quality, industrial engineering, R&D, purchasing, Human Resource Development and Finance go through profound changes.
The responsibility of production falls on the line management, and the roles of other functions are to serve the line. Where Gemba used to be regarded as a problem-child, where thins go wrong, and a good manager would rather not be involved in Gemba affairs. In JIT system, Gemba emerges assume all the necessary responsibilities and accountabilities.
For instance, quality used to be regarded as a job of quality professionals, but in the new role, it is the line management’s role to realize quality, and line management requests the assistance from quality.
In industrial engineering too, Gemba often comes up with a new idea and requests industrial engineering to cope with it.
For instance, Gemba may decide to install a low-cost, small equipment to be installed on the dedicated line for a slow-moving product. The engineering, then starts designing such equipment based on Gemba’s requirements.
On the other hand, once a flow is established, we only have to watch the flow, because the flow manages the processes as Ohno has said.When a flow is established and shortened, only one manager in charge is needed to oversee the entire flow of a particular line or product, and make certain that the flow is running smoothly without disruptions. In effect, JIT not only creates lean production system but also lean management system.In this case, the manager and workers in charge of the flow in Gemba become star players of the game, and are motivated to perform their tasks because they are in direct contact with the customer’s daily requirements and the situations in Gemba, and are empowered to manage them.
As the Gemba people begin to share more responsibilities, the management structure that hitherto has supported traditional system must undergo profound transformation.
Top management is required to review its management system and cross-functional activities with Gemba management in the center.
This is the reason why I believe that we should be using the term JIT management system, rather than JIT production system.
Last but not least, a few words on 5S and visual management. What are the purposes of these activities? My interpretation is that these activities are required in order to make, shorten and minimize the flow, and bring the managerial hegemony to Gemba. No matter how hard one may work to clean the work place with 5S, it is useless unless it leads to shorten the flow.
To sum up, the following shows the difference between the two systems.
Traditional Just-in-time
Production is based on forecast. Production is based on firm orders.
Changing plans is difficult in Gemba. Changing plans is easy in Gemba.
Production plans are dictated by Production plans are dictated by
corporate planning. customer orders.
Managing the flow is complex and The flow is simple and managed by
time consuming. the manager and employees in Gemba.
It requires much managerial and Decision is made in real-time and on the
administrative interventions to Gemba spot in Gemba.
by people who are physically and Gemba managers and employees are
mentally isolated. responsible for managing the entire
flow on their own.
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