Lean demand and supply

Magazine Article, Source : The Manufacturer US
Zone : World class manufacturing
Published : 11 Apr 2006 20:25

Successful lean manufacturers think beyond the shop floor, to supplier relationships, demand creation, even data filtering to chief executives. George Schultz finds out how they do it

Successful lean manufacturers are using traditional software packages like data synchronization solutions, to enact their demand-driven and pull-based supply synchronization strategies. And the vendors of those traditional solutions are providing lean-enabled upgrades.

Consider the example of Pacific Scientific/EKD (electrokinetics division), which uses lean principles and software to focus its managers’ efforts. Pacific Scientific/EKD took the approach that lean manufacturing squeezes out non-essentials in space, material and time costs, and it squeezes out nonessential management time and effort. Joshua Valenzuela, materials control specialist, appreciates that his company’s lean support software system doesn’t needlessly bother interacting with managers when everything is going well.

“It never lets us know the ‘positives’,” he says, meaning that the software hums along transparently when all is as it should be. “But it lets us know if anything is different, automatically by e-mails – supplier quotes not received by anticipated date, for example, or notification if shipments are late, or no answer to a request,” he explains. Then the managers know when they need to take action, and can decide on the action to take.

Valenzuela’s facility manufactures components, particularly generators and alternators, for the aerospace and defense industries. Valenzuela and his colleagues ensure process flow from 17 suppliers using Signum software from Datacraft Solutions.
Keeping a parts inventory as lean as possible “but getting them when we need them” is a prime objective, Valenzuela reports. “Previously, we were warehousing a lot of what is now on Signum,” he says, citing the example of 200 to 300 pieces in one particular lot, despite consuming only eight per week on average. Now, scheduled flow is down to that realistic level, “so we’re increasing the number of inventory turns, with surplus in stock.” By contrast, he thinks back to the procedure more than three years ago before Signum, when kanbans and orders were handled manually via fax.

Crucial also to effectiveness, Valenzuela stresses, is that the software has helped to strengthen the supplier bond, by bringing them into the process. “Previously, suppliers ‘jumped through hoops’, but now that they’re on board [through an interactive electronic system], our facilities are adding much more product to kanban, besides other materials we purchase. They are part of the system.”

“One of the biggest challenges that the supply chain is really dealing with today,” contends Justin Diana, chief technology officer of Datacraft Solutions, “is the whole issue of accountability. When things go wrong – lines go down or product doesn’t show up – all players, interactively with tools via the Internet, can take necessary steps that transcend their boundaries. An ‘exception’ [event] that affects the end result doesn’t come as a surprise anymore. Managers already are involved in resolving them.”

The key to recognizing those exceptions is availability of data with total reliability and speed of access. “By having one place where data resides, you ensure that there are no disconnects or a lack of synchronization,” says Diana. “And think of all you can do on top of that data – creating intelligent reports, recommendations and suggestions, and preemptive alerts. All those things now enhance and improve what the data is beginning to do.”
Datacraft’s Signum is a centralized data application available via the Internet as an “on demand” module, with users paying monthly versus buying the software. “Basically, we provide the Signum solution to the manufacturers themselves,” Diana explains, “and then we provide a supporting Web portal for all their suppliers to view and interact.
“All the players in that supply chain can, as they order things, manipulate their inventory or their product. Suppliers can interact with them (the manufacturers) and, having auditing and event reporting, see what the customer is doing. The customer can see what the supplier is doing. All information is available in realtime to all of them.”

Or consider a more traditional type of software helping to enhance lean in an already lean company. Husqvarna Turf Care, of Beatrice, NE, makes a broad variety of equipment, including multiple lines of powered mowers, and other products for commercial and consumer outdoors markets. It was at the time, also acquiring another manufacturer, Bluebird, for its complementing equipment lines.

Husqvarna chose Pelion Systems’ Manufacturing Process Optimization or MPOsoftware suite for production line balancing and line layout to establish rates of material flow, applied to a “mixed-model” assembly line comprising various types of equipment.

That was only the initial part of Husqvarna’s objective in implementing MPO. “The other piece of the package, based on the load we set up for these assembly lines, was establishing the supplier kanban,” says Steve Habrich, the materials manager who plans and executes process materials flow in conjunction with sourcing and supplier selection by his purchasing group counterparts. “On the supplier kanban side, it is synchronized from the assembly line loads, back through the replenishment side while establishing a link back to the factory’s sources – also called a collaborative kanban,” explains Habrich. “Essentially, we’re using a Web portal to communicate demand back to the suppliers.”

Pelion’s MPO application enabled Husqvarna to reduce the number of suppliers, which Husqvarna found especially critical when it merged operations with the newly acquired Bluebird. Finally, Husqvarna expects MPO to help the company optimize space at its plant and in shipments. Practically speaking, steel, engines and tires make for bulky shipments, inventory and finished goods. “We want to shrink the quantity size of shipments going through that pipeline, but (also) get them (shipments) more often,” says Habrich.

Proof of the MPO application approach to its supplier kanban came with Husqvarna’s introducing its new Prosumer line of large mowers. “When developing that line,” says Habrich, “we were able to look at the supply chain for it, set up the assembly lines and look at the sequence of events down those lines – and use one supplier for most of the steel. It was supplier kanban from Day one.”

Kanban sizing also determines appropriate suppliers’ levels maintained within the Husqvarna warehouse. The system signals a supplier when parts levels drop below an established quantity, via a portal. Then shipments are received through Husqvarna’s ERP software interfaced with the Pelion system. “Once that kanban size is established, then it’s ‘demand pull’ out of our warehouse,” Habrich says.

Those two disparate manufacturer examples portray some roles of conventional manufacturing software in lean operations onto the shop floor, especially the close supplying of production processes – and out from the shop floor, if you include distribution. But what about conventional non-transactional planning software support for a strict ”demand pull” strategy?
“A lot of people say that if you’re doing lean manufacturing, you don’t need a forecast and you don’t need demand planning,” says Mike Campbell, president of Demand Solutions, a planning and analysis software provider in its DSOne Suite. “Lean seems a panacea and the wave of the future, but I also notice that there’s a lot of the ‘old manufacturing stuff’ there. They’ve got a lot of new names applied to it. They don’t have ‘inventory’ anymore; they have ‘buffer stock’, that kind of thing.”

Campbell asks such people to “back up a little into the supply stream” and queries them: What’s your lead time on raw materials, to get steel or product components? “They find they do need some kind of forecasting and some kind of demand plan for subcomponents, subassemblies, raw materials – to be able to pull off build-to-order manufacturing,” Campbell says.

“Look at one of the best examples of lean manufacturing today, Dell Computer. Customers call. (Customers) order specific configurations. And their computer is shipped out that day. But to be able to do that, Dell’s planning includes substantial demand planning – about 70 percent (of its total planning),” he’s heard.

Yes, Dell is an on-demand manufacturer, but as Campbell points out, stimulates demand with discounts, advertising and the like, and so must be able to fulfill it. “They’re trying to put in a demand plan that makes sense, so when they order from their suppliers all the components they need, plastic cases or hard drives, for example, they’ve got a good idea of what they’re going to sell. That’s why they’re so successful.”

“The reality is that people can’t just sit and wait for the order. Sure, they can make it right away, but they may be sitting a long time before an order comes to act upon,” Campbell observes wryly. Seems that lean demand doesn’t just stand by and rely solely on kanban cards.