Back in the day, when I was hard at work in the factory, I learned a very valuable lesson about the difficulties of manufacturing and supply chain operations. The top three challenges of running production and distribution companies that I learned are:
- The forecast is always inaccurate
- The forecast is always inaccurate
- The forecast is always inaccurate
And unless you have a magic crystal ball, the typical way companies mitigate this risk is by stocking up on inventory. It doesn’t take a rocket scientist to understand how horrific this is, especially when your company offers a wide variety of finished goods.
So the way we addressed this issue is by emulating the leading supply chains and focusing on the three following concepts:
- Reduce lead time to negligible amounts if possible
- Build a flexible manufacturing & replenishment process
- Drive down the cost of goods sold as much as possible
When I had responsibility for manufacturing and production scheduling, my number one concern besides hitting on time performance targets was minimizing finished goods and WIP inventory. Although we have rolling monthly forecasts from our customers, the variations in demand were astounding and often spikes would occur unexpectedly. And since we were a turnkey supplier for high tech OEMs, inventory lying around the shopfloor was easily visible to management. This was especially true in our sheet metal fab (Ever try to step around a metal fab plant piled to hilt with rusted blanks? Not pretty). The printed circuit board inventory was extremely costly as well, but due to the comparative size, it could be hidden around the plant pretty easily. (That is until the QBR, when we had to review the age of our board builds and ASIC inventory).
So I first concentrated on identifying bottlenecks in the sheet metal fab where WIP could build up and go stale. In our case, the forming process and the operations feeding it were causing a lot of buildup and quality issues. A lot of times, the preceding operation, which was punch pressing different shapes from sheets of cold rolled steel was not properly tied to changes in demand (meaning MRP wasn’t being regenerated frequently enough).
The answer was in implementing Quick Response Manufacturing & Replenishment techniques. The highlights of this approach included:
1. Running MRP more frequently with net changes for specific product lines
- Production scheduling of punch press operations closely ties to MRP
- Applying a nesting software to maximize the yield of the punch press operation while also reducing cost per part produced
- Tying in a pull-based Kanban process to the MRP run. Keep in mind that this was before we investigated using Advanced Planning Systems based on the Theory of Constraints
The lead time of dropping a production order to the floor to replenishing the OEM’s consignment stock was dramatically decreased. Not to mention the WIP levels throughout all operations across the plant. And best of all, we were able to improve on-time performance. I’ll post the details of the approach as well as how the Quick Response Manufacturing & Replenishment program worked along with the graphical changes in WIP inventory.
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