It may surprise some of you that not all manufacturing managers value excellent customer service, low inventory and fast throughput. What we have come to know as the "bad old days" is still embraced like a comfortable security blanket in some companies.
Recently I was asked, "Why is implementing lean manufacturing such a big deal? The book I just read suggests I only need to worry about managing the value stream. Why is it so hard to do?"
While the effort required to be successful in an enterprise resources planning (ERP) system implementation is fairly well documented and understood, implementing lean and world-class manufacturing is far less clear. To help those who have a strong background using ERP systems, let's draw some analogies common to both types of implementations.
Enterprise Sales & Operations Panning: Synchronizing Demand, Supply, and Resources for Peak Performance
By George E Palmatier with Colleen Crum
J.Ross Publishing
In their book Enterprise Sales and Operations Planning: Synchronizing Demand, Supply, and Resources for Peak Performance, George Palmatier and Colleen Crum invite the reader into the inner workings of Universal Products Company, a division of Global Products and Services, Inc. The reader gets to spy on a company, discover how it operates and learn abouot senior staff, and see how a company can be turned around. The story is not all rosy. A number of major internal problems surface early on and the book follows the hero, Mark Ryan, as he meets key individuals and faces major issues in his effort to fix those problems.
System complexity, an inherent element of most modern production and inventory control systems, creates a plethora of direct and indirect costs. To attack complexity, the manager must attack its effects and then identify and address root causes.
Complexity shows up in excess inventory, increased lead times, and falling quality levels (yields). Lets be clear, though, about one thing. There is nothing wrong with complexity if that's what the customer - especially the critical customer - wants and is willing to pay for. But complexity is wrong if it results from our attempts to satisfy customer demand at all costs or from our tendency to view and attack problems in isolation without drawing on past solutions.
A young 2nd Lieutenant was in the intelligence center of the Army. The building in which the intelligence center was housed also contained a number of other military units in the intelligence business. The lieutenant's commander, then a lieutenant colonel, had appointed the young lieutenant a supply officer. A short time later, when the lieutenant colonel was promoted to full colonel, his first official act was to summon the supply officer. He said, "Lieutenant, as you know, my new rank demands a new chair for my desk." It is true that the chairs of lieutenant colonels and colonels are the same, but the tops are different. The top of a colonel's chair is four inches wider than that of a light colonel and it has a full leather upholstery instead of PVC.
The kanban system from Japan speeds up production by pulling inventory through the work center instead of pushing up to the next workstation where it sits in a queue. In Japan, kanban systems often use display cards as the visual signal to tell a workstation to begin operations. The idea is to keep the lot sizes as small as possible to optimize use of space and labor. Many plants have adopted the system and modified it to use some appropriate signal rather than a card. An empty space can do for a signal to begin production. In Energizer's version of kanban, for example, components are placed in special containers. An empty container signals the need for more parts.
Demand can be classified into two types: dependent and independent. Demand for a finished product is independent; demand for a component used in making the product is dependent. Forecasting should be done only for the independent demand; dependent demand can be calculated from the forecast.
Like MRP, distribution resources planning (DRP) organizes dependent demand. Before we look more closely at DRP, we'll draw a distinction between systems that pull inventory through the distribution chain toward the retail end and systems that push inventory down the chain. In reality, many distribution chains include elements of both push and pull systems. The question for the supply chain manager is which system is best adapted to the needs of his or her chain.
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