This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
MAY 2008 CHALLENGE
ERODING VIRTUAL ENTERPRISE Gain control and confidence of outsourcing partners.
For Strataico Systems, it truly is a global business economy, and we’ve leveraged manufacturing and service capacities far away and close to home to build outsourcing relationships that have enabled exponential growth. As a provider of complex telecommunications systems, our outsourcing relationships are many and varied (components, subsystems, complete systems, and services such as product development and customer support), and we’ve attempted to hold these partners to four primary performance objectives: high quality, competitive costs, timely delivery/service, and, importantly, an ongoing strategic fit with Strataico.
But as we’ve expanded into an international company with revenues approaching $850 million, our ability to manage — or even stay informed of — the processes within our outsourcing base and the handoffs to Strataico and its operating systems has eroded. And, frankly, that’s assuming we had a good view of what was going on in the first place.
Strataico Systems has been fortunate, riding a huge wave of increasing sales. But as the incoming COO, I realize that my top challenge is to quickly gain some degree of control over our virtual enterprise — even as outsourcing relationships, processes, our products and the supply chain get evermore complex. The hairline fractures in this enterprise are only now emerging — dissatisfied and exiting customers, subpar operating performances internally and at our outsourcers, and a buildup of wastes throughout the supply chain (e.g., excessive inventory, rising expediting costs, obsolete components) that is beginning to hit the bottom line. Not only is Strataico Systems beginning to feel the pain, but our outsource partners, too, are increasingly dissatisfied with the supply-chain direction, despite rising revenues for the foreseeable future.
How can Strataico Systems stabilize this virtual enterprise, re-establish key performance criteria throughout the supply chain, and regain the trust and dedication of outsource partners who increasingly view this as something less than a win-win relationship?
AN INTEGRATED APPROACH Ensure supply-chain operating model meets challenges of outsourcing.
By Clarence Chen
If it’s any consolation to you, many chief executives across industries struggle with similar challenges as they outsource manufacturing and supply-chain components to third parties and suppliers. Companies faced with rapid growth and increasing cost pressures simply must pursue outsourcing to stay competitive. However, management teams often assume that by outsourcing certain operational responsibilities to suppliers, they will automatically simplify their company’s operations. Our experience shows that outsourcing does indeed simplify some things — but it also introduces a new set of challenges that, if unchecked, can result in the symptoms you describe. This is particularly true when a company expands its supply-chain footprint and outgrows its initial set of suppliers….
COORDINATE RATHER THAN CONTROL Facilitate transparency, trust and teamwork to solve problems.
By Randy Littleson
Many brand owners struggle with the transition involved in shifting from an internal manufacturing model to a heavily outsourced model. Despite the fact that you have outsourced the execution of critical processes, you remain accountable for the end result — for quality, customer satisfaction, your operating performance, etc. While the benefits of outsourcing are reasonably understood, the challenges are often less obvious….
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
JUNE 2008 CHALLENGE
FROM SUPPLY TO DEMAND Realigning supply chain to react to customer demand.
Every executive in my business talks about the increasing pace of product introductions and market shifts. At Orangecratz, a global provider of digital audio/visual networking systems and components, we once could count on a product sustaining a market share for a year to two years; we’re now watchful of movement after a few months. And even that window is closing.
In a market fueled by internet technologies and the emergence of wideband networks, Orangecratz has always had to introduce products at an accelerated clip. But within this new hyper environment we’re running into problems that directly impact operating results (bottom-line performance) and customer satisfaction (top-line performance). Facing increased demand volatility and ever-shorter product lifecycles, Orangecratz needs to:
Better coordinate our outsource network and suppliers — It’s not enough that we can respond to changing customer demands, but every partner and supplier upstream of us must as well, and many are falling short.
Accurately identify (and influence, if possible) customer demand — One slipup and we could lose an entire selling cycle and end up with warehouses of obsolete inventory.
Level all the demand signals coming back to Orangecratz — From chaotic customer-demand signals, we need to develop production and logistics schedules that don’t unnecessarily overburden our plants and capacity and that of our suppliers (i.e., we need to be able to make it and deliver it).
Continue to focus on providing the customer with higher levels of value — Anything less than continuous customer satisfaction means we’re out looking for new customers (i.e., our customer retention rates have been falling).
Orangecratz gradually has been transitioning toward a demand-driven model in recent years, but it’s a complex process and we have repeatedly hit roadblocks and reverted back to our old “build and sell” ways. Now current economic and market conditions have placed urgency on capturing every customer sale possible while carefully managing our resources and investments. How can we jumpstart our customer-driven supply chain?
COLLABORATE WITH CUSTOMERS Demand-driven model that aligns with corporate objectives.
By Randy Littleson
To combat the simultaneous pressures associated with increasing demand volatility, shortening product lifecycles, and the inherent complexities of an increasingly outsourced and global supply chain, many brand owners are shifting their business models to become more demand- or customer-driven….
IDENTIFY THE PROBLEMS What’s hurt Orangecratz in the past?
By George Taninecz
Many manufacturers, not just those in the electronics industries, increasingly have been moving toward demand-driven business models. And so Orangecratz and others must figure out ways to give customers what they want when they want it. To get there, you must determine why efforts to install demand-driven processes failed in the past (and might fail again in the future). Only by accurately identifying the problem(s) can you hope to implement sound solutions. Examine your relationships with customers and suppliers as well as your internal capabilities….
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
Despite a slumping economy and some tough competition from low-cost overseas competitors, my company Fochrest Test, a maker of digital test and measurement equipment for communications, electronics, and defense industries, has not only survived but thrived the last three years. In 2005 we aggressively embraced lean manufacturing concepts, and have been diligent about making the physical and philosophical changes within our operations. What’s resulted is a production capability at our three plants and extending out to suppliers that approaches world-class, relying on pull-based processes and a workforce that constantly seeks to minimize wastes (inventory, time, costs, etc.). We continue to get better as our employees uncover new ways to grow and improve.
Fochrest’s challenge, though, is a dramatic misalignment of sales and marketing with our production and supply chain. Our outdated sales and operations planning (S&OP) forecasts fail to capture the changing conditions in our facilities or with our suppliers (continuing to assume mountains of available inventory) and inaccurately assesses our volatile customer market (looking more than three months out is illogical in our industry). I want to better connect our new lean capability with our market — we’re agile and able to produce to a true customer pull — but this requires getting our sales and marketing processes and our S&OP in step with the pull-based mentality of production and the supply chain.
Sales is still locked into push-based planning system designed around separate demand and supply plans and relying on unreliable, batch-build statistical models. By the time stale S&OP numbers come to production, sales staff and customers have already revised them (and we often find SKUs in the schedule that we no longer produce). In addition, we frequently force our S&OP process outward to our customers, tying them into long-term orders and off-the-shelf solutions and discouraging product customizations or new product ideas.
Fochrest could be selling and making so much more, all the while improving customer satisfaction and our revenues and margins. Our sales and marketing leadership is aware of the limitations of their current S&OP processes, but unsure how to change to an integrated demand and supply model that will allow us to rapidly see what’s really happening in our market and supply chain and more profitably satisfy customers. Where do we begin?
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
S&OP? NOT REALLY Five ideas to get you on track.
by Tom Wallace
The good news is that you’ve implemented Lean Manufacturing. The bad news is that what you’re calling Sales & Operations Planning a) is not working, and b) is not even Sales & Operations Planning (S&OP).
You’re not doing S&OP because that process:
Is executive-driven.
Operates primarily at a volume level, not mix.
Represents a medium- to long-term planning process that sets the conditions for success (so that when you’re close in and fighting the daily battles, you have a much better chance of winning). Most effective S&OP processes go out 18 or more months into the future.
Identifies both units and dollars for financial planning and to support simulation.
Is demand-driven: one of S&OP’s jobs is to balance (align) demand and supply….
SENSE AND RESPOND You can’t plan the customer, so develop S&OP processes to swiftly react.
By Randy Littleson
Fochrest is not alone. Many companies are dealing with the same market forces as you are and struggling with the major implications that has on manufacturing and supply-chain operations.
Demand volatility has become the biggest area of concern to many manufacturers since the inability to respond quickly and profitably to your customers means the loss of revenue and market share to more nimble and increasingly aggressive global competitors….
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
AUGUST 2008 CHALLENGE
WINNING NEW BUSINESS But supply chain and operations must react and respond.
Brulletz Logic has been fortunate over the past two decades to have developed a stable industrial customer base for our products: programmable logic controllers (PLCs), PLC communications hardware, and user interfaces. Yet “stable” does not necessarily equate to “loyal.” Many of our customers are increasingly installing highly sophisticated equipment and production lines, often doing so in conjunction with myriad equipment makers taking part. Our existing customer often no longer calls the shots on PLC sourcing, instead outsourcing the equipment-line installation and integration activities to one of the equipment makers or third-party consultants/integrators.
What we’re finding is that what was acceptable and to specifications for our existing customer, isn’t even in the ballpark of what an outsourced line integrator may want. Our sales force has managed this well, professionally dealing with the changing market conditions and connecting with all the new players — we are, in fact, gaining substantial new sales leads by the market changes that are occurring.
Brulletz product development and production functions, though, have not been quite as agile in reacting to the market changes. They’re not getting a clear picture of customer needs from our sales staff until late in the game, and they are having difficulty ramping up new designs. And, lastly, our supply chain for CPUs, memory, circuits, relays, etc. — which has been on autopilot for years — similarly is not getting timely information that allows them to keep up with our market changes, and, worst, they’re reluctant to change.
Our inability to capture this new business because of our operations and supply chain problems poses a real threat to our future success, as much of the new business is supplanting our old business. If Brulletz Logic doesn’t grow with the new, we’ll be out with the old.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
BUILDING A RESPONSIVE SUPPLY CHAIN Ensure that short-term responses and long-term plans are charted out.
By Nari Viswanathan
What Brulletz faces as a company is a key challenge most companies face in today’s business environment — rapid changes in customer affinities resulting in eroded sales and profit margins. Half of companies surveyed recently indicated that it takes more than a month to sense changes in customer demand. The broad set of processes that Brulletz is inefficient in can be categorized as “order to delivery” or “design to delivery” (if the design aspects are included as well)….
REACT AS PLANS CHANGE Early warning and supply-chain visibility keep customers happy.
By Randy Littleson
You’ve successfully gotten over Brulletz’ first hurdle by acknowledging that customers just aren’t as loyal as they used to be. That may sound trivial, but too many companies continue to believe that things haven’t changed — and facing reality is the first step to winning. You’ve also correctly figured out that the sales force can find new business, but if operations can’t satisfy these new customers and meet demand, they won’t keep coming back for more. So what to do?...
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
SEPTEMBER 2008 CHALLENGE
FAST BUT INEFFICIENT Short lead times lead to excess inventory.
Gremalles Graphics is a manufacturer of computer printers and peripherals, targeting high-end markets of photography, architecture, graphic design, etc. Ours is a rapidly changing market, dictated by the many computer makers for whom our products interact as well as the professional fields that push us to make new and better devices that take advantage of the very latest digital technologies.
We sell a high volume of innovative, high-quality products, and Gremalles Graphics is fortunate to be in such a dynamic business. But this also creates challenges, especially in efficiently managing inventory. We incorporate material and components from more than a 100 different suppliers and from many varied supply chains (e.g., circuit technologies, plastics, packaging). Demand signals race to us from our markets, and so we try to quickly research and anticipate trends, develop products, source supply inventory, and make devices in order to quickly get our products out first to these markets. Since the market window is open for only so long, speed is the top criteria.
But to achieve speed, Gremalles and our supply chain is growing all sorts of inventory. The priority of our supply base is to get us the goods so we can get to market, and so we’re pulling in ample quantities of assembly and components inventory for products that must be shipped within 48 hours of order receipt. We also have plenty of work-in-process (WIP) inventory so that we can reconfigure product if the market shifts. And since we beat the drum for the supply chain, our vendors are similarly ramping up, pulling materials, holding WIP, and building finished-goods inventory that may or may not find a buyer. This ultimately increases inventories throughout the chain, which eat away at all our margins.
Are we recognized as first to market? Yes. Do we have a lot of inventory throughout the supply chain because of it? Absolutely. But how can Gremalles Graphics begin to reduce supply-chain inventory while maintaining (and even improving) customer lead times and lowering costs?
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
BREAK THE ‘BULLWHIP EFFECT’ Allow customer demand to drive value-chain activities.
By Bob Ferrari
The challenge posed by Gremalles Graphics is not unlike many day-to-day challenges experienced by manufacturers within the high-tech or consumer electronics industry where supply chains are driven by active and frequent product innovation cycles. In high-tech and consumer electronics, it is the earlier phases of product launch where profit potential tends to be highest, which makes the effects of out-of-stocks painful to the bottom line. Innovation-driven supply chains often experience high forecast error rates, anywhere from 40% to 100%. The existence of a forecast-driven inventory management process in this type of planning environment will often fuel the “bullwhip effect,” where forecast signals are amplified throughout the network, driving more inventories within this network. The fact that the Gremalles supply chain is growing all sorts of inventory provides evidence that the overall inventory planning process needs to be anchored by actual customer demand….
PREPARE FOR CHANGE Implement processes, leverage tools to respond to market dynamics.
By Randy Littleson
Gremalles, like many manufacturers, is finding that the pace of change today is creating a variety of supply-chain management challenges. While your company is successfully capitalizing on the growth opportunities in their face-paced market, you are not doing so in a profitable way. The current approach is burdened by a lot of expensive inefficiencies that are creating a corporate margin sinkhole. In order to reverse these trends, Gremalles would be well served by implementing processes supported by tools that enable the organization to do integrated demand-supply planning, monitoring, and collaborative response to the inevitable changes that you face daily....
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
OCTOBER 2008 CHALLENGE
PLAN FOR A NEW PLAN Old ways failing as new markets and geographies tackled.
Shatsunck Safety makes fire suppression systems for a variety of commercial and industrial buildings around the world, designing, making, installing and servicing systems tailored to each environment (e.g., clean rooms, information technology centers, laboratories, communications hubs). Our complex products and specifications for them change frequently due to customer requirements, location codes and regulations, and builders and engineering firms (which may or may not be our customer).
As our business has grown — Shatsunck is 20 years old — the challenge for planning our business has grown. Steadily Shatsunck has moved beyond its original customer base into new markets and new geographies. And we have subsequently grown our supply base as well, frequently relying on outsourcing to expand our capabilities for new locations, especially overseas customers.
The lessons we learned two decades ago and the models we developed for planning of product development, supply-chain coordination, financial management, and cash flow don’t necessarily transcend now across all our business and to our outsource providers. So invariably we under/overforecast inventories, frustrate suppliers and outsourcers, don’t read market signs fast enough and miss potential business, and increasingly scramble to make customers reasonably happy and retain their business. Simply, our planning is no longer working like it used to.
We want a new, better way to plan. Shatsunck wants to react more efficiently to signs from our various markets and distribution channels, provide clear signals back to our supply base and outsourcers so they and production can act on agree-to what-if scenarios, and, most importantly, satisfy customers — and in doing so sell and profit more than we ever had.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
KNOW YOUR SUPPLY CHAIN MODEL Transform your end-to-end supply chain operations.
By Nirmal Hasan and Tim Burks
Shatsunck Safety, like many companies, faces challenges responding to the new rules of engagement in today’s globalized and outsourced economy. Companies are under relentless pressure to create and deliver products with the highest quality at the lowest cost — and at a faster pace than ever before. Strategies and processes that may have worked well in the past are no longer effective, and short-term fixes do not produce results….
UNDERSTAND NEW SUPPLY CHAIN DYNAMICS And build processes supported by right tools to manage unplanned events.
By Trevor Miles
It used to be that to excel at manufacturing you had to be able to build a solid plan and then execute it well. Not surprisingly, the solutions mirrored this reality as supply chain planning and supply chain execution solutions arose to meet this need. Today, the emphasis has shifted, as Shatsunck Safety is experiencing. The incredible pace of change that Shatsunck and most companies face combined with increasingly complex supply chains has shifted. To succeed today, you not only have to be able to plan, but you must be able to monitor exceptions to that plan and develop rapid course corrections to respond to them in a profitable way....
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
NOVEMBER 2008 CHALLENGE
NO MORE BELT TIGHTENING Finding the hidden inefficiencies in the supply chain.
Most manufacturers today — even a sound, well-respected organization like Krustharden Hydraulics — have seen better days. The poor economy is sweeping through our industrial, refinery, and construction markets, forcing customers to delay or reduce purchase decisions and putting a crimp on capital. The costs we pay for components, subassemblies, and distribution and logistics are stripping profit from our bottom lines. Fuel costs and their impact on distribution have been particularly damaging, since our large hydraulic systems were subject to substantial freight costs even before recent oil spikes. Similarly, shipping costs for subassemblies and components have risen, and now suppliers are passing those costs on to us.
Krustharden has worked diligently over the past decade to apply continuous improvement methods, such as lean manufacturing, to our internal production and support functions. We also have pushed many operations improvements out to suppliers. As the owner and founder of Krustharden Hydraulics, I am proud of how well we and our supply chain builds products. Simply put, we’re world-class manufacturers. But I also believe that, separate from production, many untapped areas of improvement still reside hidden in our supply chain and the systems we use to manage and execute as a supply chain. Capturing those opportunities (from suppliers to customers) may enable us to further trim our costs and endure the current economic conditions.
I am confident that Krustharden will be satisfying customers for many years to come. But, in the short term, I don’t want to strip the company down to the bare bones (employees, locations, products) to make that happen. That would be a huge step backward. We must explore deeper how we interact with our suppliers and customers and turn hidden efficiencies into cost-savings and gains.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
APPLY RESOURCES AS DEMAND DICTATES Demand-driven network uncovers operational, tactical, and strategic inefficiencies.
By Julie Fraser
Having made the journey to become a world-class manufacturer, Krustharden knows the value of a coherent set of practices for operational excellence. To improve supply chain and value network operations, as with lean in production, you must move to a true to-order model and use resources exactly as demand dictates — you need to develop a demand-driven industry network….
PLAN FOR THE UNPLANNED Swift reaction to supply chain events offers cost-savings.
By Randy Littleson
In these challenging economic times, you’re not alone. Many companies are trying to find further efficiencies they can squeeze out to avoid much more fundamental cuts that could alter their competitive position in the marketplace. As you’ve no doubt seen, a lot of progress has been made over the last several years in reducing costs, which leaves few low-hanging fruit to be plucked from the tree….
Re: IW Manufacturing Business Challenge: Discussion
Dear Founder of Krustharden Hydraulics,
You are describing a situation where volatility in prices for purchased components and services is eroding your margins. Your comments also indicate that your customers delay purchase decision but are then looking for shorter lead times and have an even lower tolerance for delays. They want to move their projects into production faster once they have been approved, capturing returns as early as possible.
You specifically mention increases in component prices and fuel costs eating into your bottom line. However, chances are that other non-value added activities and expenses have been eating away at your bottom line already. I am thinking about costs for rework, last minute changes – either customer requested or caused internally, premium and expedited freight to make up for delays; just to name a few.
Krustharden has achieved great results with continuous improvement tools and lean techniques in your production area, even expanding the efforts into some of your suppliers. You are benefiting from a predictable and reliable process you describe as World Class. Undoubtedly you have seen significant improvements in productivity, and your process is more organized and focused. You probably have implemented performance measurements and established accountability through exception based reporting and follow-up.
You can extend the same tools and concepts that you used on shop floor and in production to your entire Request-for-Proposal to Cash cycle. Start out with a thorough value stream map. Follow the path of a few, maybe two or three, typical orders from Request-for-Proposal to the final invoice to the customer. For a start, the project file should have a wealth of information, including time stamps for specific milestones and documentation exchanged between participants. As you follow your projects, you will inevitably involve some of your key suppliers in the analysis. You will also gain insight and a better understanding into the specific features and services valued by the customer, discerning them from other items they would not be willing to pay for if given a choice.
At each step, look for the seven types of waste. Be particularly sensitive to rework and waiting. Identify the root cause: Has all the information been communicated properly? Why has there been no activity on the project for an extended period of time? Also, identify events and expenses that have diminished the project profit margin: Was a component price higher then the one used to determine your price to a customer? Did an internal or customer-issued request cause additional costs that have not been recovered?
Once you understand your current process and its shortfall, involve as many of they key players as possible in designing an improved process. Establish standardized tools and meetings to gather and communicate information essential for the project. Objective should be to eliminate any kind of rework or delay previously caused by request for additional information or ambiguity. Starting with your more standardized products, develop a project timeline and assign responsibilities for completion of key items at each milestone.
The quotation and estimating process should receive special attention. Develop a standardized process and methodology. A good team would balance the knowledge of the pricing team with input from resources executing the project such as Project and Operations Managers. The new process should be based on commitment and accountability to project performance from all sides. It should also have a clearly defined profitably threshold that would eliminate the release of quotes for projects that don’t have a chance to ever be profitable.
Work with your suppliers to establish a price list or fair pricing methodology for key components. In describing the features and services that matter to you and your customers, help them realize cost savings by eliminating non-value added activities. For example, they might be able to provide the functionality you are looking for with one of their standard products, rather than one that meets your overly detailed specs. This component would not only be available at a lower price, as it participates in a regular replenishment cycle it typically would also be able to use a lower-cost shipping option or might be accessible to you at a location closer to your point of use.
Utilize this agreed-upon component prices in your estimates rather then a best guess. Work with your suppliers to match the timing of their price commitment with the time from your estimate to taking delivery of the respective components. Keep your suppliers informed on the volume of quotes in the process and your expected conversion rate to allow them to manage capacity and hedge raw materials accordingly.
It will be sufficient to focus the above-mentioned efforts on a small number of key components and services. At a recent project implemented by Step3 Consulting at a heavy equipment manufacturer facing a similar volatility in raw material prices and decrease in profit margins, about a dozen items out of a bill of material of several hundred line items accounted for 70% of the cost. Managing price predictability of these few items was a major contributor in reestablishing profitability for the entire product line.
The last component to success in this improved Project and Profit Management Process is a set of tools that allows for tracking of profitability throughout the life of a project. At every milestone, actual costs incurred should be compared with the cost estimates for work and component content to this point. This will not only establish accountability at each level; it will also allow detecting unexpected changes in your cost structure. Recognizing these changes in a timely manner allows for more immediate feedback to the quotation and estimating process as compared to deviations discovered at a post-mortem audit.
So, use the experience in implementing lean, your process mapping skills, and your organizations capabilities in distinguishing value-added from non-value added activities by expanding them to the “front end” of the business. You will not only create an organization that can predict and deliver a specific margin for each order, you should also see reductions in lead-time and productivity improvements. Your project managers and engineering staff will be able to utilize the time freed up by eliminating re-work, unnecessary follow-ups, etc. to further improve your product to meet customers’ needs, perform better, or be produced at lower cost. The improved products and delivery on contract time-lines will further strengthen your competitive position.
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
DECEMBER 2008 CHALLENGE
LONGING FOR LEAN RESULTS More and sustained improvements expected
Calfform Interfaces manufactures LCD displays and interfaces for industrial equipment, vehicles, and media, communication, and information devices. My executive team and our board have been watching employees throughout our two plants work on lean manufacturing ideas for a little more than a year. We see lots of evidence that they’re trying to improve — cleaned and organized work areas, visual boards throughout the plant pointing to current up-to-the-hour performance, employee teams creating room-size maps of product value streams, and kaizen events every week.
Unfortunately, we have yet to see any change to our bottom line; profits have been flat since lean kicked off. What’s also disconcerting is that some operational measures, which initially improved, have begun to worsen. I continue to field calls from dissatisfied customers — new and old — who point to quality and delivery problems. Our sales director also is in my ear constantly, complaining of the new pull system with customers and how it makes it difficult for her staff to sell. Suppliers also are angry with the new “just in time” requirements we’re placing on them.
Two years ago we were an acceptable — if not spectacular — manufacturer. Sure, Calfform did have some quality issues as well as problems with mismanaged inventories. And customers have never been completely happy. At that time the new manufacturing director convinced my fellow executives, our employees, and me that lean manufacturing was the way to go. Now I’m not so sure; we’ve got a complex market of customers and products, and I’m beginning to think that lean is just too simple for Calfform. We’re not a local company that operates as one customer pulling one product, but a global company with constantly changing markets, thousands of SKUs, and hundreds of customers.
Can lean work at Calfform? How much longer should the manufacturing director and employees stick with lean? When will the lean results start rolling in?
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
GETTING RESULTS FROM LEAN What are the missing elements?
By Philip E. Quigley, CFPIM, PMP, and Douglas Lada, PMP
Calfform has seen some good results from its initial lean efforts. The first steps of lean — cell manufacturing, quality, proactive maintenance on equipment, cross training of people — are being done and they will have impact. In order to maximize the total value of lean efforts, however, the flow of material into the plant (supplier management) must be...
DON'T ABANDON LEAN Focus on applying the philosophy companywide -- not a tool here and there.
By Randy Littleson
Competitive necessities are driving many manufacturers to become more customer-focused, and lean manufacturing techniques are a powerful and proven means to support these supply chain management transformations. By ensuring the right processes and supporting tools are in place, Calfform can be...
Re: IW Manufacturing Business Challenge: Discussion
This is an excerpt from the IW Manufacturing Business Challenge, a monthly custom e-newsletter sponsored by Kinaxis. Click here to learn more about this free newsletter or to subscribe.*
JANUARY 2009 CHALLENGE
WEAKEST LINK Finding fault throughout the supply chain.
Drusspots Inc. designs and manufactures solenoid valves and valve assemblies for controlling air, gasses, water, fuels, and other liquids. Our electromechanical, hydraulic and pneumatic products are used in diverse fields (e.g., industrial, utilities, space, scientific, defense, nuclear) and are also incorporated into end-consumer products by other industries (e.g., aerospace, auto, power equipment). For 35 years Drusspots has made its name and grown dramatically based on our research and design (R&D) and engineering expertise, developing unique and cost-effective solutions for our customers. We have learned in the last three months that our livelihood rests on far more than our R&D expertise.
Drusspots recently had two product breakdowns, one at a utility client and another in a consumer field. Neither of the product failures was severe (resulted in loss of life), and for that we are fortunate; these could have occurred in other applications and brought down an aircraft or misdirected a missile. But both failures resulted in substantial warranty reimbursements and the potential loss of one or more customers.
What’s frightening is that neither product failure was due to our design or manufacturing: One of our many coil suppliers, cash-strapped because of the credit crunch and looking for ways to cut costs, changed to a cheaper supplier of inferior raw material. The material in the coil failed, the solenoid valves failed, and, subsequently, a large utility went dark for 10 minutes. The same material in our solenoids caused a lawn-mower manufacturer to report dozens of failed products.
I thought we did adequate due diligence on our suppliers, but we’ve realized that we do not have the business processes and information systems in place to minimize supply-chain risks to the degree that we should. For example, I now would like to know on a regular basis of the financial state of our suppliers (helping them out when possible or removing them if they choose to take a path that may put our products in jeopardy). In addition, Drusspots has been asked by many utilities (it’s surprising how quickly bad news spreads) that we need to not only mitigate supply-chain risks, but we need to prove risk-management to our customers: documenting, codifying, and sharing information with them to alleviate their concerns.
We know what we need to do, but I’m not sure how to begin this enormous process. We have dozens of suppliers around the globe, and ours suppliers have dozens of suppliers, and so on. Until we figure it out, though, we’re nervously waiting for the next failure.
* The Challenge incorporates hypothetical persons, companies, and products and does not portray the actions of any actual persons, companies, or products.
IDENTIFY SUPPLIER RISKS Look for ‘red flags’ and prepare for problems.
By Beth Enslow
Drusspots Inc.’s supplier concerns are an issue that every company should be aware of and tackling today. The credit crunch and declining demand for products puts a double-whammy on the cash position of companies and their suppliers. To keep afloat, suppliers may be cutting corners or taking other actions that could significantly damage your ability to serve and retain customers. Or worse, they may become insolvent and leave you stranded for key components or ingredients….
PLAN FOR THE UNPLANNED Three key strategies to assess, mitigate, and manage risks.
By Randy Littleson
Identifying and managing supply chain risk is near the top of the list of priorities for many supply chain management professionals. Outsourced and global supply chains increasingly are a network of interconnected partners dependent on each other to ensure end-customer demands are met. This is not your father’s supply chain. This environment that Drusspots encounters is substantially more complex and prone to risks that threaten product quality and operations performance objectives, one that could irreparably damage your brand….
IW Manufacturing Business Challenge: Discussion
Re: IW Manufacturing Business Challenge: Discussion
Linear Mode
