'Braking' from tradition at Arvin Meritor

“When we launched Resonance [now called ‘Thru-Put’ by Mapics] on 2nd February 2000, our inventory value was £5.8 million, which represented 13 [stock] turns at that point in time. By the end of our financial year, eight months later, we had already achieved a 45% reduction in inventory to £3.2 million and 19.1 [stock] turns,” says Arvin Meritor’s master production scheduler, Eric Blakemore. “And during the same period, average delivery performance to customers rose from 86% to 91% on time.” Arvin Meritor is a major supplier to the automotive industry. It has 112 sites worldwide, with the headquarters in Michigan, USA and manufacturing plants in the UK, Sweden and Italy. The UK arm of this company, Arvin Meritor Commercial Vehicle Systems, based in Wrexham, designs and manufactures trailer axles, suspension systems, brake system components and clutches for the heavy goods vehicle (HGV) market, selling mainly to trailer builders on the Continent such as Volvo, Iveco and Daimler Chrysler. The Wrexham site has an annual turnover of around £100 million, and last year, its 200 employees were responsible for moving more than 80,000 axles through the plant. And the factory has to cope with a huge variety of different products moving through it. Blakemore explains: “Batch sizes are typically very small here, with many of our clients wanting customised products. This means we have to contend with a huge diversity of parts and assemblies going through the shop floor.” “We schedule about 900 purchased parts each month from suppliers in the UK, US and mainland Europe. We manufacture 10 types of axle families and there are more than 6,000 permutations of features and optional items in our final assemblies,” he continues. Therefore effective scheduling of materials and manufacturing is absolutely critical to the firm’s success and sustained profitability. But the site’s production management team was like many other traditional manufacturing firms. Its main objective was machine and labour productivity. In other words, keep everything working and running for as long as possible. Of course the result was predictable: excess inventory, high work in progress, and poor scheduling resulting in production ‘bottlenecks’. So Blakemore and the firm’s manufacturing systems analyst Leon Nix were tasked with finding a solution. The answer was a mixture of both new scheduling software from Mapics, Resonance (now called Thru-Put), and the introduction of a complete culture change on the shop floor by moving to a ‘Theory of Constraints’ (TOC) manufacturing policy. This theory (based on manufacturing guru, Eli Goldratt’s book, ‘The Goal’) considers a production plant as a set of finite resources with varying capacities. The aim is to synchronise the flow of material through the production processes with the lowest capacity operation thus maximising throughput and reducing inventories. But to achieve all this is not easy. It means production schedulers only release material to production up to, and not exceeding, the capacity level of the identified bottleneck or ‘constraint’. And this means more frequent machine set-ups and changeovers, another bitter pill for some managers to swallow. The whole culture of the shop floor also needs carefully managing when introducing TOC. By focussing efforts on keeping the bottleneck machine running at all times, other machines and processes downstream sometimes become idle, waiting for material to be processed upstream. Blakemore: “We wanted to look for software to support TOC, but we also knew we’d have a battle to fight changing people’s attitudes on the factory floor. These were guys used to being paid bonuses for high productivity and getting as much work through their machine as possible in a given time period. What we were proposing to them would change this dramatically.” To counter this problem, the company actually introduced bonuses for orders delivered on-time rather than productivity-based rewards. “We even had to persuade our financial people that TOC was what the company needed. Luckily though, we had strong commitment from Jeff Waite [the group’s vp materials and logistics] at our US headquarters, who really drove the idea of TOC [and software to support it], but we still had a battle to win here with some of our own management team.” So when did the firm decide to look for new IT to support TOC? It all started back in August 1998, when the Wrexham site launched new Oracle ERP (enterprise resource planning) software, Oracle Applications 10.7. This decision was a corporate one – the group uses Oracle for financials and purchasing so wanted its global sites to follow suit. The decision to go with Thru-Put was made by Waite and Blakemore, but the complete system wasn’t ready for the site to start testing until June 1999, ten months after the Oracle implementation. “We wanted best-of-breed software rather than a complete Oracle suite. Oracle’s MRP is too inflexible – it has no production planning and scheduling capability, so we were doing this manually. It was taking us one month to schedule UK and European orders and two months for deep sea [Asia Pacific] customers. Now we’ve reduced these figures to one and three weeks respectively. “The problem was we quickly realised we would have benefited from seeing the Thru-Put software at the same time as we were implementing Oracle … There were various incompatibilities between our data in Oracle and what Resonance would accept. It took us seven months to solve these problems. We initially used [Microsoft] Access to modify and manipulate the data from Oracle, but now we’ve progressed to doing more complex things with [Microsoft] SQL,” says Leon Nix, manufacturing systems analyst for the company. And this ‘happy marriage’ between the two software systems has really been the key to the company’s success. Integration is key So how do the two systems talk to each other? Orders placed in the Oracle ERP system are mapped (via SQL scripts) to the relevant tables in Thru-Put. This is all done through a remote server based in Amsterdam. Thru-Put then calculates the production schedules and uploads this information back to the Oracle database in Wrexham where the server client is located. A ‘master demand schedule’ is then calculated by Oracle, allowing the company to place orders on its own suppliers for any bought-out parts and materials. “We have five PCs within our operations department (materials and production planning) at Wrexham, all linked to the Thru-Put server in Amsterdam,” says Nix. The Oracle-Mapics integrated system has now been up and running for more than 15 months. Blakemore explains the benefits: “We can easily synchronise supplier and in-house schedules now. We have complete supply pegging [traceability] now, but we can also manually manipulate the schedule in Thru-Put if we need to. We use Thru-Put’s reporting module [Crystal reports] to create and distribute reports to management and suppliers. “It also lets us dual source now. That means we can split an order on our suppliers into two or more separate orders and the system co-ordinates and tracks it all for us. Oracle on its own simply couldn’t handle this before.” But that’s not all. Blakemore explains further. “We now have very realistic production schedules, we can handle dynamic schedules too, and we can re-calculate schedules very quickly [in hours now!] with the new software. Even the shop floor operators are more flexible. If their machine or process is idle, we make sure they are cross-trained in other tasks. They now even get involved in preventive maintenance work. “Plus our inventory is now very strictly controlled. It only rises to any significant degree if we have delays in manufacture or shipping, but even this problem can now be quickly and easily addressed with rapid re-scheduling of suppliers using Thru-Put.” And what about customer lead times? “On average, I’d say we’ve cut lead times by 20%, although on some orders it’s been more than 30%. We’ve achieved this by reducing the time it takes to pull an order through the shop floor by a fifth,” says Blakemore. As for the future, the firm is looking to make further improvements by changing the factory layout. “This will help to smooth the flow of materials through the plant and cut lead times further. We want to become a lean manufacturer. “It’s taught us a very important lesson. You’ve got to prepare for the people issues involved with IT projects. We had to fight hard to get a best-of-breed system, and the success we’ve had is down to 50% software and 50% managing change.”