By ANDY VABULAS, CEO & Owner, I.B.I.S. Inc.
This is part two of a two-part piece. Part one can be found here.
The Right Numbers to Make Visible?
“There are business objects at the executive level that are rarely tied to specific operational measures on a day-to-day basis,” says Mike Frichol, general manager, manufacturing, with Microsoft Business Solutions. Consequently, many manufacturers cannot assess the full impact of declining performance measures until it’s too late. “That‘s where better visibility of the right information is really key to making progress relative to overall objectives.”
What is the right information — the right numbers — that individual companies must make that decision based on their unique business objectives, but there are many performance measures that can and should find their way into corporate-wide systems. The Manufacturing Performance Institute (MPI) finds that successful manufacturers track many of the following measures to answer:
1. “Can we make product?”
To schedule operations confidently, plant personnel need to know real-time customer demand by SKU (including orders changes as they occur), as well as what is likely to come or forecast. And even when advanced applications, such as demand planning software, do produce accurate forecasts for today or next month, can that information be accessed on the plant floor or by suppliers?
Are there enough materials and components? Is it the right amount? Excess inventory can drain corporate cash flow, yet inside many manufacturing plants, it’s common to see large amounts of material stored at each cell, line or department. It is also common for these plants to lose material or not have enough of the right material, requiring expediting orders and extra shipping costs.
Knowing what material is on site is vital, as well as knowing material has been received, stored and logged properly. Also, knowing real-time finished good levels per SKU and can sales see that information?
Capacity & Availability
What are current production volumes, available manufacturing times for additional output and the overall capability of production — including people, processes and machines — to make quality product in a day, week or month? Answer the fundamental question: “Do we have enough physical operations capacity and material to satisfy customer demand?”
2. “Can we make product profitably?”
The frequency with which production can turn over its inventories — raw material and components, work in process, finished goods and total inventory — indicates how efficiently and cost-effectively it uses this inventory. Low turn rates relative to industry benchmarks can point to inefficient purchasing, non-lean production processes, scheduling problems and/or unreliable demand data, poor internal quality and poor product development processes.
While capturing quality at the end of production or from customers can provide a historical perspective (finished-product yields, warranty costs, customer rejects), capturing and sharing quality measures that occur now (in-process yields, scrap and rework by workstation/cell) enable staff to react to quality problems as they occur.
The numbers should be tracked as close to real time as possible at the source, with plant personnel empowered to stop production when they see that quality is slipping. It is better to react to real-time data and shut down a line or cell, identify root causes and implement a sound solution than to track quality only at the end of the line — after producing an hour or days’ worth of bad product.
Organizations need to know the time that it takes to produce goods from start to finish (manufacturing lead time or cycle time) and to satisfy orders from entry to delivery (order-to-ship lead time). In make-to-order settings, production speed indicates how quickly orders can get out the door. To control operations, production time needs to be regularly measured against customer demand, tracking how the pace of production for a given product aligns with customer demand for that product.
Identifying & Sharing Data
The above is only a subset of the possible measurements that a company may need to determine what it needs to hit its strategic objectives, control its operations, drive its improvement, help its suppliers and satisfy its customers. After the key data has been determined, it must also be distributed to the correct groups or individuals within your business. Leveraging an integrated alert system to notify operations of critical information and conditions that require action is a manufacturing best practice. Alerts enable a management by exception approach to operations control, driving immediate notification and response to drive profitability.
Another example of streamlining communications and sharing data is represented through workflows. Workflows can create electronic representations of your processes, and rules to control and speed the flow of information based on rules for your processes, leveraging email as the conduit. Workflow enables parallel electronic communications where appropriate to speed the throughput of information and reduce the manual effort associated with processes, such as approvals or change orders.