manufacturing & supply chain lean thinking and IT

How to make your

i

supply chain lean

Getting our supply chains working smoothly is the next major challenge. Brian Tinham talks to experts from Jaguar, Unipart and TrenStar on exactly how to do it
ts tough out there. International competition is forcing cost-downs but demanding more agile operations in the struggle for customer service. That puts lead times, batch sizes and inventory under even more pressure. And given that weve largely done the cost-cutting and efficiency improvements in our businesses and on our factory floors, that means we need a new solution. That solution is a better supply chain, and it means we need to think differently about our core IT. As Guy Dunkerley, formerly IMI Norgren director of European logistics, now research director with analyst AMR Research, says: Compartmentalisation of manufacturing is no longer valid in either business process or system terms. It isnt about supply chain or production systems any more: manufacturing has to be a constituent part of supply chain solutions. There are various names and models for the ideal: demand-driven supply network (DDSN) is one; lean supply chain is another. Both recognise the importance of collaboration with suppliers. Both focus on sustainable improvements through visibility of information for planning and real-time scheduling. Both also seek to enable synchronised execution also helping all parties to manage change due to events that happen in any business and on any production floor. And both are founded on the concepts and methodologies of lean thinking in tandem with modern supply chain systems. But how do you do this? What does a lean supply chain look like? How do you move from where you are today to a lean supply chain that fits you? I spoke to some of the expert panellists weve lined up to deal with this very subject at the MCS Lean Supply Chain Forum on 13 April at Gaydon in Warwickshire (www.mcsforum.co.uk) to seek their experience and advice. Dave OReilly, head of manufacturing and purchasing systems at Jaguar and Land Rover, sees several routes to improving supply chain operations. Top of his list is creating a stable and accurate demand signal so that the supply base gets the best chance to deliver. Its classic lean Toyota Production System talk, and it flies in the face of those suggesting that OEMs can simply use modern systems to keep re-optimising and force their suppliers just to respond to frequent late changes. The problem is that OEMs want their supply base

Carl Powell, consulting director, Unipart Solutions Practice (USP)

Manufacturing Computer Solutions IT Strategy issue March 2005 www.mcsolutions.co.uk

to be totally flexible but that doesnt work. For supply chains to work we need genuine partnerships, he says. He points out that it only takes one or two suppliers to fail to fulfil and with your plant already lean and exposed in terms of inventory youre in danger of major disruption. Whats important is, first, to get information on your long term plans for supply stable and accurate, and second, to let suppliers see, day-by-day, even hour-by-hour, what you want not just weekly buckets. Stability and visibility where change has to happen are his keys. There will always be problems, like suppliers failing to adhere to agreed schedules due to their own shortages and constraints on labour and their facilities. Facility breakdowns are unavoidable, but shuffling around firm orders on suppliers has got to stop.

ACHIEVING A LEAN SUPPLY CHAIN: MCS FORUM, 13 APRIL 2005

Manufacturing Computer Solutions

13 April 2005 The Heritage Motor Centre Gaydon, Warwickshire Book now on: www.mcsforum.co.uk

To learn much more about the technologies, processes and methods that deliver, come to the Lean Supply Chain Forum on 13 April. Morning Forum: brainstorm successful solutions, technologies and how to manage change with your peers and our experts. Hear lean guru Prof Dan Jones, Jaguars Dave OReilly, Uniparts Carl Powell, BPs Ken Douglas, Diageos David Marsh, Deloittes Mark Shaw and TrenStars Suart Facey. Afternoon breakout sessions: interactive deep dives focusing in detail on the subjects that matter. Choose three from 24 streamed sessions: see over for your selection.

Manufacturing Computer Solutions IT Strategy issue March 2005 www.mcsolutions.co.uk

but partly also if they dont invest in adequate IT support on site. Thats an issue in the automotive sector, with the drive for suppliers to set up assembly and warehouse facilities on industrial parks adjacent to the OEM: if something on the IT side goes wrong and doesnt get solved quickly, the supplier isnt getting the tickets and youre in trouble. The solution is visibility of sent/received signals and determinism, with escalation if signals arent getting through and suppliers investing in remote system management facilities. Wouldnt an XML and portal approach be easier for suppliers? It might, agrees OReilly, but we have 600 suppliers and Ford has thousands so the cost and upheaval would be considerable. However, he reckons most suppliers would accept the technology, and sees benefit. If we could make it easier for the supply base to tell us material is on its way, using a web portal, that would help. Then, our Jaguar and Land Rover expediters could see at a glance what material Jaguar Land Rovers supply chain system delivers a long range 26 week planning view is missing and focus on the exceptions. EDI is transaction-based so they have to in weekly buckets, followed by a mid-term daily or shift scheduling view 10 days out, go into each line item to see the stock and incoming position. With a portal they could both on EDI from Fords CMMS3 global ERP/MRP system. Then there are sequence see hot spots and tell instantly that something hasnt arrived but is on its way, or isnt. delivery signals broadcast four to eight hours Which leads him to another point: ahead of line-side delivery, reflecting precise requirements, and triggered as painted bodies When youve done lean manufacturing and are teed up in sequence. Signals are Edifact lean logistics, youre inventory levels are down messages broadcast every 10 minutes over and then you expose how good your processleased lines with ISDN back-up via Jaguar- es are! For example, we have about one days owned servers. For most suppliers the result is worth of material on site split between trackside and the lean marketplaces. So you need to a printed ticket that drives their finishing and revisit your processes for accurate inventory despatch processes, although for some thats because your lean supply chain will fail wherthrough their ERP. ever there is inaccuracy. OReilly is happy with the EDI trail, And that means revisiting your receiving although he agrees that youll always find processes, supplier labelling accuracy and some suppliers struggle, partly because they have to deal with several different protocols technology and level of labelling, lean mar-

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can go down the levels eventually to the KPIs. Most important is to ensure integration in order to achieve role-based useful visibility as close to real time as makes sense. At the centre you need the core functions working well: inventory management, forecasting and planning, production and warehouse management. Then supporting those you need systems for supplier planning and collaboration, with exception management, and all based on one view of the supply chain with visibility from the customers all the way back to the suppliers so that signals for planning and management are as noise-free as possible. Looking at key enablers to supplier collaboration, Powell cites RFID for the future, because of its potential to automate so much of material handling, and to improve accuracy. For now, however, he counsels getting more value out of existing ERP systems by driving towards supplier portals. Theyre still at the advanced end of thinking: not many companies are doing much yet We dont go down the EDI route much now: we look at supplier porketplace management, even your bills of materials tals, mostly using WebMethods because portals are eas(BoMs). If they dont tally exactly with the real world, ier to implement with new suppliers and easier to backflushing will kill you. For OReilly, the solution maintain. But which way you go, and what you do with the systems depends on your supply chain relastarts with monitoring suppliers. We have Q1 tionships. Tesco, for example, is different to others: it approval processes that cover a lot of things, but absolutely accuracy of delivery. Were also encourag- mandates how deliveries will be made and how you will ing the use of ASNs so that we can see materials comprovide information. SMEs cant be so demanding. ing in ahead of time, and move to push button receiving for our Q1 suppliers. Then we can focus our The trouble with technology material handlers on the other suppliers. For Powell, collaboration is critical in all this. Weve Jaguar Land Rover also uses LLPs (lead logistics been talking about collaboration for four or five years, providers) like Excel Logistics, which now have responbut the Internet technologies and the applications are sibility for collecting materials from multiple suppliers there now. And it needs to happen to make businesses on a milk round. Under the SLA, its their responsibili- and supply chains agile. ty to validate fulfilment accuracy and to create an ASN, An excellent example is Uniparts own work with either from the trailer or indirectly via the logistics cenJaguar: its parts suppliers can see everything on a tre, using wireless PDA technology. secure portal everything from the parts profile all the Isnt there a case for more barcoding or RFID to way down to the dealer network, and thats world-wide. further automate receiving and materials movement to The portal gives them rolling six-, three- and then oneline-side? OReilly agrees there is, but there are cost and month firm orders, and it lets suppliers do their own practicality issues. Many suppliers still only barcode to planning and scheduling using trends and usage data. the stillages so theres a way to go here, and limits on Theres a choice here, advises Powell. You can feasibility. Remember, were a high volume business stop information visibility at your level, or you can and suppliers would have to put cost on if they bar- share information and be transparent. I can see why coded or tagged everything to the piece part level. some companies might find the latter challenging, but that is how you get real collaboration and agility. All good and encouraging: however, no-one ever Where to start said this is easy. Stuart Facey, senior vice president and How should you get started? According to Carl Powell, consulting director at Unipart Solutions Practice general manager of asset management company Tren(USP), part of Unipart Logistics which runs Jaguars Star, has experience of supply chain technologies on spare parts supply chain, one of the points is to run an both sides of the fence as a user now, and formerly as IT assessment. How lean or agile your supply chain a vendor with supply chain IT developer Viewlocity and is depends on how good the underpinning IT is. We Dutch systems integrator Covast, where he focused on use a high level strategic health check, where we go in Microsoft BizTalk server for supply chain integration. He believes that too few organisations are taking at the board level and look at the business drivers and needs see what levels of service are needed and how advantage of what the technologies have to offer, but the company differentiates itself. Then we talk to the adds that unless the business will is there to collaborate IT manager and see if hes on the same page. The theres little point in pursuing the idea. Supply chain event management and alerting systems, for example objective is to assess that area of IT strategy: then you

Manufacturing Computer Solutions IT Strategy issue March 2005 www.mcsolutions.co.uk

manufacturing & supply chain lean thinking and IT

the early warning systems arent used enough. But they do require a huge amount of co-operation to set-up and get working. Likewise, he says: Supplier portals can work very well, partly because theyre one to n, rather than n to n, but I havent seen many good systems in operation. Theyre not as simple to get working as the software vendors make them out to be. And he has a similarly sceptical view of integration technologies. I dont think integration is any easier than it was. It would be fine if we had the time and the investment to turn everything useful we have into components. But we havent. Ive got a 15 year old AS/400 with no ability whatsoever to communicate with the outside world. But we need that system, and the cost of getting it integrated is prohibitive. Also, use of XML hasnt materialised as it

should; we may not have exactly the same problems as before, but with all the legacy stuff, sometimes its too difficult or too time consuming, or there are other priorities. You cant solve those issues with technology. I can see IT people struggling with those for 50 years. Returning to Jaguars OReilly, there is another piece of advice that has little to do with IT, but everything to do with success. We do value stream mapping across our main component suppliers. So when, for example, they quote for our business, we send a team in and walk through their end-to-end processes of materials in, production, assembly and delivery to track-side. We look at the costs, the wait times, find out if theres information we could give them to help make them more efficient. Lean supply chains start with partnership and for that to work, well, you need frank collaboration.

Scheduling key for make-to-order

Mike Novels managing director Preactor International
The demanding make-to-order (MTO) environment is arguably the toughest and most challenging of manufacturing disciplines. Companies in this sector need cost-effective, interactive decision support tools that can help them to become leaner and more agile. In particular, that means getting speed and accuracy of delivery right. For modern MTO manufacturers, it is imperative that customers often complex product specifications are dealt with in a cost- and time-effective manner. Manufacturers also need to have in place the ability to react speedily to change and still deliver to the customer within the agreed lead time. With the right scheduling software, manufacturers can optimise production and supply chain routings and bills of materials to ensure manufacture is perfectly in sync with requirements. With such a sound scheduling backbone, MTO manufacturers can benefit from substantial improvements in productivity; a sizeable reduction in work in process and inventory levels, and enhanced on-time delivery performance. In addition, the best modern scheduling systems are easy to operate, flexible and easy to integrate with an existing ERP solution. From a financial perspective, scheduling software can not only save manufactures substantial amounts of money through greater production agility, they can also reap a fast return on investment, often within weeks rather than months or years. With a state-of-the-art scheduling software package at the heart of an MTO manufacturers operations, users can ensure more accurate delivery to promise for customers, reduced inventory and reduced transport costs. So it is easy to see that a reputable scheduling software solution is a no brainer.

Lean Supply Chain Breakout Sessions: 13 April

Management Issues 1 Management Issues 2 Making supply chain operations agile and responsive Transforming departments into cross functional teams APS vs MRP systems: what you need and when Adapting your existing ERP for a lean supply chain Achieving automated data capture and tracking Supplier portals vs EDI: where to focus your investment Fast, efficient online sourcing and qualification of suppliers Managing late order changes through the supply chain Using Kaizen to reshape your supply chain Manage outsourced manufacture and distribution better What you need to make vendormanaged inventory work How to synchronise and optimise your supply chain RFID: the real opportunities and cost traps Enabling lean rapid replenishment at every stage Managing supplier relations better with the right IT Integrating with customer and supplier portals Integrating your shopfloor for agility How to get value from supplier portals and exchanges Collaborative demand and supplier planning and scheduling Managing late order changes through the supply chain How to build in exception management and alert systems Integrating disparate supply chain and ERP systems Choosing the right systems and KPIs for supplier performance management Enabling virtual Kanbans with your existing ERP systems

Planning and Scheduling 1

Planning and Scheduling 2 Visibility and Control Supply Chain Execution Supplier Management

The Big Issues For SMEs

Join Professor Dan Jones, world-renowned lean thinking guru and director of the Lean Enterprise Academy, both on the day and on the night before the Forum event over dinner, for frank discussions on sustainable ways and appropriate IT to transform British manufacturing and your supply chains. Tel: 01442 213212 or go to www.mcsforum.co.uk

Manufacturing Computer Solutions IT Strategy issue March 2005 www.mcsolutions.co.uk