Tag: Lean

Why Data-Driven Manufacturing is Not Enough

Occasionally, someone will mix up DDM (Demand-Driven Manufacturing) with another DDM acronym in our industry: Data-Driven Manufacturing. There are similarities. For example, executing demand-driven principles relies heavily on data and shop floor visibility. However, it doesn’t stop there.

In this post, we’ll take a look at Data-Driven Manufacturing and why it’s useful but not enough to help you reach your goals.

Data: It Is What It Is

One of the main problems with data is that it’s just data. It passes no judgment on whether the results you’re getting from the shop floor are good or bad. Nor does data provide guidance on how to use it to improve operations.

As an example, let’s say you’re monitoring the utilization rate for a new piece of equipment in which you recently invested several hundred thousand dollars. Suddenly, the utilization rate starts dropping. Is that good or is that bad?

The knee-jerk reaction you’ll probably get from your average, stressed-out production manager (or the CFO that signed off on the order for the equipment) is that it’s bad. However, to make that call, you need to put the data into context.

Maybe your new equipment is so efficient that it is no longer a constraint in the system. At the lower utilization rate, you are still producing product fast enough to meet demand. In that case, the drop in utilization rate isn’t a problem. In fact, if you can find profitable ways to use that extra capacity, such as taking on new business, then the drop in your utilization rate is actually an opportunity.

Trying to address the “problem” without putting it into its proper context could lead you to produce more than you need, which could lead to even greater problems like inflated inventory levels.

You’ve Got to Have the Right Principles

You often see continuous improvement talks or articles that promote the idea of the three levers of improvement: people, processes, and technology. To that, I’d like to add a fourth: principles.

I’m not talking about ethical principles as in “doing the right thing.” (Although that’s never a bad idea.) I’m talking about manufacturing principles such as Lean, Theory of Constraints (TOC), Flow. and Demand-Driven Manufacturing.

In the example I gave above, in making a judgment call on whether the drop in utilization of your expensive new equipment was good or bad, we put it into the context of Demand-Driven Manufacturing and TOC.

Creating Chaos

Many manufacturers take a principle-agnostic approach. They don’t necessarily discount that concepts like Lean, TOC, and Demand-Driven Manufacturing have something to offer, but they understand push manufacturing and MRP because that’s the context they’ve been using for years.

Instead of jumping wholeheartedly into something new – though most of the concepts behind Demand-Driven Manufacturing are hardly new as they’ve been around since at least the middle of the last century – they figure they’ll just take the best from all of these principles and combine them into a holistic approach to continuous improvement that is as unique as their organization.

Unfortunately, this just creates chaos in an environment that is already prone to chaos. Without common principles, senior management might issue an edict to improve productivity and efficiency, while shop floor managers initiate a pull-based skunkworks project. Individual work center operators see one thing from the CFO and the COO, but hear another from their manager. In the end, no one knows quite what their priorities should be.

If you’re still taking the agnostic approach, we can help. John Maher recently wrote a series of posts exploring the use of TOC, Lean, and Six Sigma in a demand-driven environment. In addition, we have a number of white papers that may prove useful such as our Kanban Series White Paper: Gaining Control: Exploring Push v. Pull Manufacturing. Finally, we also have a recorded presentation on YouTube explaining Theory of Constraints if you need a refresher on the concept.

And as always, I welcome your questions and comments. Either reach out to me directly or add them in the comment box below.

June 25, 2018
Going Lean: Should You Replace Your ERP System?

By Trey Jordan, Senior Software Consultant

Enterprise Resource Planning (ERP) has been around for decades. You’d think, by now, the industry would have it figured out. Yet, every year, we hear news about ERP implementations that fail. For every one of these high-profile flops, there are many, many more implementations that simply fail to live up to expectations.

At some point in their Lean journey, nearly every manufacturer faces the same decision: Do you take the time to fix or replace your broken ERP systems or just keep working around them?

Is “Rip and Replace” Really Worth the Effort?

If you’re even a modest-sized manufacturing enterprise, you’ve probably already sunk hundreds of thousands of dollars into your ERP system. If you add up everything including the software costs, implementation, training, maintenance fees, etc., the actual figures can get pretty scary.

Perhaps even worse than the costs, though, is the chaos that typically surrounds an ERP implementation. Some years ago, Gartner created a model called the Hype Cycle that they used to represent the life cycle of a technology. Though the intent was to represent technology as a whole, I think it also pretty well represents what we see in a typical ERP implementation. The only difference is that many manufacturers never emerge from the Trough of Disillusionment.

Gartner Hype Cycle

Does Your ERP Implementation Meet Expectations?

Depending on what study you reference, roughly three-quarters of ERP implementations fail to some degree. Many studies look specifically at whether or not the implementation finished on-time and on-budget. They often fail to consider whether the ERP system helps the organization achieve its desired objectives. If that were factored in, I suspect the percentages of “does not meet expectations” implementations would climb even higher, especially in manufacturing.

The challenge is that Lean Manufacturing, which unquestionably can help manufacturers achieve a wide variety of bottom-line benefits, requires a pull-based approach that is tied to customer-demand (throughput). ERP systems, with their forecast-driven, push-based approach to resource planning and production scheduling, aren’t necessarily designed to support a Lean environment. Even most ERP systems that claim to support Lean Manufacturing are still built around push-manufacturing, with pull implemented using a variety of add-ons and workarounds.

Interestingly, if you do a Google search on why ERP implementations fail, you will get lots of different answers, from lack of executive support to poor change management practices to unrealistic expectations. All of these may be valid, but they fail to address the core underlying issue: the ERP system wasn’t designed to work in a Lean Manufacturing environment.

Even if ERP systems were easier to implement, success isn’t likely to be achieved even with a new ERP system when success is measured against desired outcomes such as increased velocity and reduced inventory levels. So, why would anyone go through the hassle of replacing their ERP system as part of their Lean journey?

ERP: What is it Good For?

Now that I’ve completely ripped apart the concept of ERP, let me head back in the other direction for a moment. While ERP doesn’t do particularly well at resource planning and production scheduling, it does have its uses.

For most organizations, ERP is the system of record for all financial transactions and information. As things happen in the business, e.g., something is bought, sold or produced, these events trigger financial transactions that flow through the ERP system and eventually to the general ledger.

In addition, ERP is also the backbone of the sales system. Whether your sales team is using the sales order module that comes with your ERP system or add-on applications for configuration, pricing, and quotes, the ERP system is the system of record for master files such as bills of material, pricing and customer information.

Likewise, your current ERP system can create a solid backbone for a Lean implementation as it can provide the master data information needed and collect the financial transactions that result from production. You just need to overcome the inherent shortcomings of ERP in a Lean environment. For example, SyncManufacturing synchronized planning, scheduling and execution software (part of the Synchrono® Demand-Driven Manufacturing Platform) sits on top of your current ERP application(s), giving you the power to transform a push-based production environment into to a demand-driven, pull environment. It doesn’t really matter which ERP you use; SyncManufacturing can accept data from any source – even multiple ERP systems.

Related post: The Pros and Cons of Consolidating ERP Systems

But What if You Don’t Have ERP?

Occasionally, I will run across a manufacturer that doesn’t have an ERP system at all. Much of the time, the manufacturer started out as a small job shop using no more than a simple financial system and a few spreadsheets to manage their operations. Over the years, the business grew, and perhaps even changed manufacturing modes, but their systems didn’t quite keep up.

The question I often get from this type of manufacturer is a bit different. They want to know: Do I need to implement ERP at all in a Lean environment?

The answer is not necessarily. Technically, all master data (resources, items, BOMs, routings, inventory, purchase orders, and sales orders) can be entered and maintained directly into SyncManufacturing planning, scheduling and execution software. SyncManufacturing is also creating inventory transactions as parts are produced, consumed, received, and shipped. The business will probably want some sort of financial system of record to collect financial transactions and produce reports, but it is not strictly necessary to have even that to implement Lean using SyncManufacturing software. It is certainly not necessary to have MRP or production scheduling functionality in place before implementing Lean.

Still have doubts? That’s not unusual. Early in our careers, most of us were taught that getting MRP right was the key to improving results. It’s hard to give up MRP and ERP, if not totally, at least as the keys to all our operational challenges. But no matter where you are in your journey, I welcome your questions and comments. Please add them below or reach out to me directly, and I will do my best to respond to each and every one.

June 11, 2018
The Pros and Cons of Consolidating Manufacturing ERP Systems

Managing operations through multiple manufacturing systems can be challenging, but it’s a daily reality for many manufacturers. In this post, we’ll look at the pros and cons of consolidating ERP systems – and propose an alternative.

When Two Worlds Collide

Whenever two or more organizations merge, they are almost always using different ERP systems. As anyone who’s ever tried to consolidate an ERP systems knows, it’s not easy.

Each organization chose their respective ERP systems for a reason. For instance, one facility might operate in a make-to-stock mode and the other in a make-to-order mode even though they manufacture the same types of products for the same customers. Addressing local regulations and business practices is another common (and good) reason for implementing one manufacturing system over another.

Even if their chosen system isn’t perfect, the users in each facility may have learned it well enough (or customized it enough) to work around many of the application’s shortcomings. I’ve seen people who told me they HATE their ERP system fight tooth and nail to keep it when told the organization was considering replacing their system with the same system used at corporate or at another facility.

The 3 Cons of Consolidation

The first con of consolidation is obvious – consolidating ERP systems is hard on your employees. Even those who are willing to get with the program are going to have to learn an entirely new system. That takes time and money and eats into productivity.

Then there are the real and valid reasons why facilities chose different systems. Even if the ERP system on which the company decides to standardize is flexible enough to handle multiple manufacturing modes and other unique requirements, there will still be challenges. For instance, different setup parameters and customizations may mean that the systems won’t talk to each other the way you had hoped.

Finally, there is the expense of consolidation. ERP systems can cost hundreds of thousands to millions of dollars – just in software costs alone. Though some vendors offer ERP on a more budget friendly subscription basis in a SaaS model, the costs can still be considerable if you have a lot of users. Plus, you still have the upfront costs for things like implementation, training, customization, and so on.

The 3 Pros of Consolidation

If a consolidation project goes as planned – and that’s a big if – the company is probably hoping to gain benefits such as:

Simplified support and maintenance – Theoretically, if everyone is using the same system, user support should be easier. I don’t want to discount this benefit because it’s one that can be achieved, though it can take years to get there and may require functional compromises.

Increased visibility – Management wants to have a clear picture of what is happening across the enterprise. With disparate systems used in each of the facilities, getting accurate KPIs is a challenge. Getting KPIs in real time is next to impossible.

Decreased lead times – If the organization is vertically integrated, with facilities supplying each other, increased visibility into capacity and material availability across facilities should allow production managers to optimize production schedules and resource utilization. In my experience, though many ERP vendors claim to be multi-entity capable, in practice, their ability to handle cross-facility resource management varies widely.

Is it Time to Take Your Lean Initiative to the Next Level?

The Synchrono Demand-Driven Manufacturing Platform can help you achieve the consolidation benefits you’re looking for plus the benefits of Lean for a fraction of the cost and without the loss of productivity and sheer chaos of an ERP consolidation initiative. Here are just a few examples:

One version of the truth – Our Platform sits on top of your ERP systems, so there is no need to rip and replace any of them. We can consolidate information from disparate systems and serve up data and insights in role-specific dashboards.

A sample dashboard from SyncView software

In the video, How Orbital ATK Enabled the IIoT and a Visual Factory, Orbital ATK’s systems architect shows a graphic of all the different systems from which their Synchrono implementation pulls data. The entire video is well worth watching, but if you just want to take a quick peek at their chart, it’s at about 5:15 in the recording.

Management by exception – Trying to keep your eye on everything that is happening across facilities can drive you crazy. Our visual platform allows you to see status across your enterprise and drill down on those that require your attention, to better understand the root cause of the issue.

This bird’s eye view of the entire enterprise was taken from the webinar Visualizing Metrics in the Factory of the Future.

Pull-based replenishment – Demand-driven inventory management is a core principle of Lean, and our eKanban software allows you to send electronic replenishment signals across facilities. You can also bring your suppliers into your Lean initiative – and improve supplier collaboration, visibility and performance – with our supplier eKanban capabilities and supplier communication portal. Watch a demo.

Synchronize resources across facilities – Our exclusive CONLOAD™ scheduling algorithm drives production flow across facilities by controlling the release of work into production based on the availability of people, machines, materials, etc. and managing constraints using principles from the Theory of Constraints. Watch our YouTube demonstration.

Capable to promise – Because we can access and manage data across multiple enterprise systems (and machines, sensors, etc.), our capable to promise functionality provides a true picture of what can be produced and when.

Learn More

Consolidating ERP systems is such a burdensome, disruptive process, it’s worth taking the time to at least consider the alternatives. In addition to the resources I’ve already shared throughout this post, here are a few more I think you’ll find helpful:

Article: What is Demand-Driven Manufacturing?

White paper: E2E Supply Chain Visibility Technology is Here

Video: How to Synchronize Production Planning, Scheduling, and Execution

June 4, 2018
Guest Blog: Real-world Advice for Getting Started on eKanban
by Jim Shore

Through this guest blog series, I’d like to share some of my experiences implementing supplier quality and Lean manufacturing initiatives by focusing on eKanban systems. This first entry offers advice for planning an eKanban rollout – suggestions that can also be applied across any Lean manufacturing project.

As a result, my hope is that you, too, will experience successful Lean results.

Leadership matters

My training as a U.S. Marine gave me many skills I carried over into civilian life and into my work as a Lean practitioner. First, I gained deep respect for strong leadership; and second, I’ve come to value a pragmatic approach to project execution.

Successful projects start with buy-in from the top and an eKanban initiative is no exception. At a minimum, recruit an executive sponsor to serve as the project spokesperson – someone who will fully support and clearly communicate with all stakeholders the rationale for the project. I know it sounds simple. Even though the benefits to the business are real (e.g., reduced inventory waste and carrying costs and more) asking people to change the way they work is also real. Let your leaders know project success is accelerated through gaining universal buy-in. (If you think about it, this is also a waste-reducing, Lean strategy!)

The reality is that sometimes change is welcomed and other times you may meet resistance. Efficiency programs, whether Lean, Six Sigma or Theory of Constraints (ToC), require that teams understand the impact change can have on an environment. Change management strategies stress over-communication of:
1. What the organization intends to accomplish;
2. Why the organization is undergoing the change;
3. What the change means to each individual;
4. How success will be measured;
5. How accountability will be measured.
From the plant floor to senior management, buy-in starts with a clear rationale and explanation of how the new eKanban process or Lean methodology will add value. Leaders must effectively engage all levels of the team; explaining how the new process is great for them, the company, the customer and suppliers (for those using supplier Kanbans). The last two bullets are extremely important. Ensure it is clear how success will be defined and how everyone will be held accountable for achieving it. In my experience, the best method is tying the annual bonus to the success of the project.

Overcoming barriers to create lasting change vs. “initiative-of-the-month” change

While rare, resistance can manifest as blatant sabotage of the new Lean initiative. More likely, resisters will remain quiet and hope the advocates of the new method will lose enthusiasm and the execution of the Lean project will fade, reverting to the status quo. To reverse this, make them part of the solution.

On an eKanban project I led for a materials testing and extrusion-control instrumentation manufacturer, the rollout of the new software involved multiple sites. Corporate leadership sponsored and evangelized the project, but we still needed buy-in at the local plant level. By involving outspoken resisters in the process, we ended up gaining some real advocates – it also helped that we were able to reduce the replenishment process from 66 to just 6 simple steps.

It goes without saying that for this – and any eKanban project – you achieve success through consistent communication and universal team buy-in. Depending on where your replenishment occurs, this principle extends beyond the four walls of an individual plant or enterprise, to your suppliers. (I’ll provide advice for engaging suppliers in the next post.)

As part of their advocacy for the eKanban initiative – or any modern demand-driven supply chain project – leaders need to distinguish the project as a serious, ongoing operating process, not an initiative of the month.

Drive the planning process with bottom-line facts

A significant part of the planning process is business justification. Automating replenishment with an eKanban system provides some highly quantifiable returns.

There is a real cost of carrying inventory and eliminating this cost frees up accessible cash that can be reinvested into the company. Consider the following:
- The cost of just carrying inventory at a component level adds 10% to the valuation of the actual part – and that valuation increases by 10% for every month the material is not transformed into sellable goods.
- On average, the cost of carrying finished goods is approximately 20% of its cost.
For manufacturers managing materials with expirations, these costs can be compounded through scrap.

These are just some examples of costs I help clients quantify as part of their business case for investing in an eKanban solution. Examine how these cost savings could impact your business. You can see how real-time inventory replenishment with an eKanban system can pay for itself fairly quickly.

In the next post, I’ll cover some best practices for eKanban implementations utilizing Kaizen events and value stream mapping.

Related resources:

Article: Going eKanban – Moving from a Manual to an eKanban system

Case Study: Continuous Improvement Immersion + the Right Tools Proves Profitable for Dynisco

White Paper: Common Barriers to Moving from Push to Pull Manufacturing

Jim Shore is the Principal of Quality Lean Solutions, a Consultant Firm that specializes in Medical Device companies, Supplier Quality and Lean Manufacturing principles. Mr. Shore is co-author of “Proactive Supplier Management in the Medical Device Industry” (2016: Quality Press). Jim has 25 years of quality and supplier management experience in medical devices, semiconductor, aerospace and defense for firms and organizations including Titan Medical, Nypro Healthcare, Boston Scientific, Aspect Medical, Brooks Automation, Raytheon and ACMI Gyrus (now Olympus). He is Six Sigma Black Belt and Quality Manager/Operations Excellence-certified by the American Society for Quality (ASQ), as well as an ASQ-certified Quality Auditor and Mechanical Inspector. A veteran of Operation Desert Storm, he served in the U.S. Marine Corps for more than 15 years.
October 30, 2017

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