Inventory down 94% and production velocity transformed

Shop floor and machine management systems can make a fantastic difference to your cost base. Brian Tinham finds out how Sony Manufacturing in Pencoed achieved its 94% reduction in materials inventory alone Key benefits Cut materials and work in progress (WIP) inventory from £1.2 million to just £150,000 Reduced annual scrap from £1m to £70,000 Dramatically improved stock accuracy and usage prediction Slashed machine downtime Improved velocity of production through the entire facility Much more to come Sony Manufacturing’s auto-insertion PCB production facility at Pencoed, South Wales cut materials and work in progress (WIP) inventory from £1.2 million to just £150,000, annual scrap from £1m to £70,000, dramatically improved stock accuracy and usage prediction, slashed machine downtime and improved velocity of production through the entire facility. Much of that was due to real-time materials and machine management systems – and going even further, with shop floor advanced planning and scheduling (APS) linked to the site’s Oracle ERP. “I knew the impact would be significant,” says manufacturing manager Wayne Thomas, “but not that big.” When Thomas became auto-insert manager at Sony Pencoed, he found the materials side “out of control”. Not only was inventory value immense, but stock accuracy was poor, materials were stacked high, and the ad hoc manual management system couldn’t cope. The plant was a victim of its own success: the site makes wide screen television sets, video cameras and TV set-top boxes, and the pressure was on to keep Sony’s high-speed PCB auto-insertion machines running 24 hours a day. And that meant ensuring no stock-outs at the feeders – at any cost. With 2,000 part numbers – mostly tiny electronic components on around 12,000 reels, some used frequently for everything, others occasionally, and around 1,400 changeovers per week – all feeding 85 programmable insertion machines making some 100 models, safety stocks had mushroomed. “It was everywhere – in great ‘fridges’ at the front of the machines, in the warehouse…” Even Sony’s implementation of Oracle Applications site-wide didn’t help. Says Thomas: “The top level systems, like production management and planning and scheduling all changed, but our approach to materials didn’t.” MRPII was being used to order stock, but not to track usage on the machines at the component level. So while Oracle knew where everything should be, it couldn’t take account, for example, of spoilage. Darryl Porter, Sony support engineer: “The planning department was scheduling jobs into Oracle which in turn scheduled final assembly, and auto-insert followed against that, with S-Plan [finite scheduling] providing the weekly requirement.” But with shift leaders and machine operators making decisions about what to build when, and Oracle’s view of stock holdings lagging product completion at shift end, and without spoilage ratios or granularity, the system might believe there were enough components when reels ran out long ago. Thomas’ solution was by no means only about IT. Initially, he went for tighter materials control by reassigning people. Then, as part of an overall lean improvement programme, he changed the factory floor to six production cells, with around 15 machines in each, focused on particular products, customers or both. “They started to work independently of one another, with production managed separately, and it meant we were able to move from one huge materials ‘push’ system to six ‘pull’ systems.” At that point he moved all materials back away from production into the warehouse. “We just did it,” he smiles. In fact, he and his team then created much smaller inventory locations in front of each machine, specific to its production. “We looked at the loading plans, and changed practice so that the operator would initially pull from that much smaller fridge, and that would pull from the warehouse.” All that took materials inventory initially down to £600,000. Enter the materials management IT Timms, with its shop floor systems to manage lean replenishment, materials tracking, management alerting and machine diagnostics, as well as associated APS systems. Thomas first went for an early version of Timms’ component re-ordering engine (CMS). Conceptually, it was simple: if time to exhaustion of a component reel was eight hours, the re-order trigger would be after six, with materials people ensuring replenishment to the machine fridge. “Timms was already running the auto-insert machine programming,” says Thomas, “so it made sense to go for an integrated system.” The gain was substantial. By focusing on reducing the fridges and monitoring reel-on, reel-off movements and component write-offs, stock accuracy went up, stoppages due to operators searching for reels reduced, and people started depending on the system. Says Thomas: “The materials inventory measure fell to around £400,000. It was nothing short of a breakthrough.” Thomas went on to implement Timms PCS for predictive materials management. “We did a three-month evaluation with a cross functional team, and then rolled that out to get the fridges to zero.” In operation, each machine terminal shows material requirements in order of urgency. The machine feeders recognise unique barcode IDs for each of the component reels, so it’s largely automated. The result: “The system brought materials inventory down to about £150,000, which is world class in high volume electronics manufacturing.” And there were other benefits. Production velocity improved as material handling reduced. Says Thomas: “We were carrying less inventory, so there were less bottlenecks, touch points were down around 30% and everything was slick and smooth.” Also, with far less clutter on the factory floor and stock accuracy up from about 60% to 99.9%, even for infrequently used component reels, machine downtime caused by lack of materials went away. Talking of downtime, Sony also achieved further improvements through implementing ‘eTimms’. Whereas Timms’ foundation is in tracking machine information, eTimms is the alerting add-on, running to pagers and mobile phones for technicians and production managers. Says Thomas: “This is a high volume, 24 hour a day machine environment, so real-time information is critical – but there’s a lot of it! So the system gives us exception alerts. For example if a machine changeover is taking too long, or the machine’s running too slow, people are alerted, and it’s escalated automatically.” The result: machine breakdown time has reduced from 8% to 4%, partly because response times are better and partly because Timms also provides diagnostic and trend data, with drill-downs to isolate problems. Thomas also points out that moving to what is now a paperless, automated and lean environment has also reduced headcount. “Where there were 17 people involved in materials management, now there are 12. And where at the start of all this we had to implement perpetual inventory, now we’ve been able to stop it again because the system is accurate... I thought the impact would be big, but not that big. The system cost around £250,000 and our standard ROI is one year, but this system has already passed that.” Next up will be changes to the role of Oracle MRPII. “Ultimately, we don’t want our manufacturing to be constrained by MRP: we want to use it only for mid-to-long range planning internally and for our suppliers, and move closer to make-to-order with materials being delivered just in time for assembly,” says Thomas. In the auto-insert production area, Sony looks set to use Timms’ recently-developed APS module for that, driven from Oracle, and replacing S-Plan to provide more flexible and up to date scheduling, linked to machine programming, internal components management and the supply chain. Essentially, the APS will signal near term call-off requirements to suppliers against MRP longer range plans, with alerts and exception-based management using web technology for execution, problem resolution and eventually also automated electronic invoicing and matching. Says Porter: “Currently, Oracle links to S-Plan which generates the auto-insert plant demand against product demand from the exploded BoM [bill of materials] picture, with an average two week horizon. Plant demand is rekeyed into Timms CMS to provide the live production schedule on our Timms plant terminals for the cell leaders. Timms APS will replace S-Plan and that interface – deleting one more admin process, and improving our flexibility by providing closed loop real-time response back to Oracle.” “All of that can be done,” says Thomas, and he indicates that Sony is keen to spread the power of the Timms to its supply base for the win-win it can deliver. “Remember that in the electronics sector there has been massive consolidation. Unless our suppliers achieve the kind of savings and efficiencies we have, you have to question how long they will survive. And if they don’t, we have to start sourcing from Europe and our material costs will go up. So adopting these systems is in both our interests.”