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.
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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 ……………………………………………………………….
