Linking lean with ERP for continuous improvement

Continuous improvement has been one of the ongoing, all-encompassing big messages for manufacturing survival for at least the last 20 years, but enlightened users are increasingly focusing on a few key initiatives. Top of the list are lean Manufacturing and Six sigma. To these we should add Kaizen, JIT (Just in Time), TQM (total quality management) and then applied Theory of Constraints (TOC), with its Drum-Buffer-Rope (DBR) and buffer management additions. And, at the risk of shocking the purists, we could sensibly bracket these under lean Thinking. Why these? Because they have established firm track records not just for improving, but for transforming companies’ efficiencies and profitability fastest – and sustaining that transformation. All well and good, but given that we are where we are, where should we start? What are the key process and people issues? How do we prioritise? And what changes are required of out IT – all of it, from the business systems to the plant and factory monitoring and management systems? To get the answers, we turn here to experience and advice from someone who’s been there and is proud to wear the figurative tee shirt – or perhaps more accurately, belt. John Bourne is business systems manager and head of engineering at Redditch-based, make-to-order fire alarms manufacturer KAC Alarms, which is currently going through a lean transformation. His first observation is that to get world class, going for transformation has implications for all departments and disciplines, not just manufacturing. Just over a year ago, the firm relocated to a new factory, with its own injection moulding lines, presses, and production and packaging cells – and, facing growth and cost pressures, embarked on a lean initiative with kanbans and the rest. Bourne makes it clear that this is ongoing and all-embracing. We’re not just talking about restructuring for cell manufacturing, although that’s a key component; we’re also talking about everything from product redesign and rationalisation, to improving sales order processing and production and procurement scheduling. In terms of ERP, KAC is a long term McGuffie Brunton Impact Encore user, with integrated financials, sales, purchasing, manufacturing and distribution currently on v4.0, and currently upgrading to Syspro 6 for its e-commerce, workflow, document flow and CRM (customer relationship management). Bourne says the system has been instrumental in the initiative. “We’ve been able to improve some processes directly around the system, while in other areas we’ve used its flexibility to develop new subsystems and information flows for the new processes.” He cites, for example, sales management: “With sales order processing, we’ve gained significant benefits… For instance, the stock code interchange module, which takes customers’ product codes and converts them into KAC codes, has delivered dramatic time savings. And the ability to program the various customer pricing and discount structures, has meant that as our sales people type in customer codes, they see appropriate pricing on the screen. These two functions alone have really helped shorten the time taken to enter the 1,000-plus orders we get per month.” It’s also worth noting that Bourne is currently building an extranet cum web presence integrated with KAC’s ERP, geared to taking orders automatically from customers’ ERP systems, bypassing sales order entry. The emphasis here is on the word ‘integration’. As he says: “If they can get live information from their systems to ours, it will happen; they don’t want to go to a website to keep ordering product.” At present, he’s running trials with 25 big customers, but the plan is to take this out to the export market, providing customers with access to purchase history, stock codes, pricing, statements, and providing order tracking. “Again, this will make it easier for our customers to deal with us, and help to reduce costs,” says Bourne. And there are similar observations to be made around its export documentation, which is entirely automated through integration to an ExportMaster publishing system, and monthly reports for parent Honeywell, which is now automatic from Impact. “They’re all relatively simple issues,” he agrees, but because they eliminate manual data manipulation, we have improved process efficiency and reduced our administration costs.” Turning to production though, it’s a more classic story of lean practices aimed at improving the flow of products through production and eliminating wasted activities. To date, it’s undertaken several Kaizan initiatives to implement visual management, and set up semi-autonomous manufacturing cells. It’s also introduced single piece flow through a number of its main manufacturing processes, and kanban and JIT (just in time) supply systems are now being operated both internally and with main suppliers – many of which hold stocks against forecast for call off, again cutting costs in process and inventory. At present it’s configure-to-order manufacturing, with components and generic assemblies built for subassembly stocks alongside bought-in items like switches on kanbans, and products then late-configured to customer order. Bourne says that following value stream mapping, that’s changing to a more direct build-to-order model, which is being achieved by reducing the existing mass of product variants to five generic ranges, through a Six Sigma redesign project, thus also cutting labour content and reworking the factory to fully cell-based production. Interestingly though, even within the existing environment, MRP has no role in production management – schedules are driven straight from sales orders. At the moment, planning takes ERP reports on sales orders, due dates, BoMs, routings, stock, work in progress (WIP), etc, and develops daily and forecast factory work schedules and orders within ERP, which then monitors progress via shop floor data collection terminals connected via ODBC, recording jobs and labour. But that’s just for the injection moulders, presses and so on. As for the cells, although the process is similar, for lean it’s been decentralised. “Instead of having their work load planned for them, they’re now self managing,” explains Bourne. “The cell leaders know their capacity, how many people are available, and how long jobs take. We’ve also developed reports based on Encore data, like BoMs and components data, supplier lead times and so on, that provide the cell leaders with information on the overall volume and mix requirements so they can plan their own work schedules. The cells look at everything from constraints to quality management.” And this is the model for all his manufacturing, as the firm moves to fully cell-based production, with individual and groups of cells dedicated to products and variants. Centralised planning will be disbanded, and the cells will take over, mostly using the existing cell reports and mechanisms, with orders being placed on ERP, data going straight to the relevant cells for planning, and building direct to requirements. It’s underway now, and working. “Over the last few weeks, we’ve seen improvements of individual cell performance and productivity increases around 5—10%,” says Bourne. He reckons that from the ERP perspective, it’s not that big a deal: “it’s mostly about getting different reports out of the system fast to support the initiatives – getting the data they want to see in the way they want to see it.” And the keys to that are real flexibility, standards and ODBC connectivity. There’s still more though. Bourne makes the point that your ERP should be an essential part of underpinning all process and business improvement, helping, for example, by analysing product costs and profitability, redefining product ranges, making spares policy decisions, reducing stocks and WIP without impacting customer service and monitoring productivity. “We’re doing activity-based costing with it, recording set-up times etc for the cells and analysing against selling prices so we can see which lines are profitable. And we’re working with key suppliers on a Six Sigma project, providing better analysis for stocking policies: inventory was £1 million, it’s now less than £600,000.” Next up for him will be improving the links between his Pro/Engineer CAD drawings and the BoMs in his ERP. Engineering change control (one of the new modules in Syspro) would then update the whole system. There’s a reasonable amount of engineering design – both new product development and bespoking, and automatic production of manufacturing BoMs, part numbers, descriptions and the rest would cut out another whole admin process, turning production engineers into, well, production engineers.