MEI cashes in on production APS transformation

MEI (Mars Electronics), which makes cash machine readers and systems for vending and games machines around the world, has identified $500,000 worth of inventory reductions within the first six months of moving up to advanced planning and scheduling (APS) on its production floor at Winnersh. Beyond that, the firm says it has massively improved customer responsiveness and order promising, with 100% due date performance, while also getting ‘what ifs’ for decision support in everything from production scheduling to sales and pricing. And MEI reckons its extended the life of the existing ERP system as far as manufacturing management is concerned for the foreseeable future. It’s a catalogue of success. MEI at Winnersh has a turnover of about $100 million and some 200 people in the factory. There are four production areas, each with its own manager and planners. There’s: a PCB manufacturing area with four SMD (surface mount device) machines; a robotic assembly line for the common discriminator modules; calibration cells (for functional programming); final assembly; acceptor; changer and TMG (“all the odd balls”). Back in 1997, most of the business was managed by a CA Manman enterprise system – handling financials, sales order processing, engineering and manufacturing, the latter with MRP/MPS and conventional arrangements for forecasting, purchase orders, works orders, material release, stock control and the rest. Robert Gee, MEI’s global pipeline manager and the then project manager, takes up the story. “We’d gone through process re-engineering to cut costs: we’d decentralised our production planning teams. It was working and it’s fair to say we were getting better performance and factory effectiveness. “But it was being achieved by long hours and lots of spreadsheets. We wanted to cement that and integrate it into our production management processes: it was all about ensuring good, reliable, robust delivery performance, shorter lead times and more on time delivery.” Cutting a longish story short, MEI selected ST Point, then from STG, now from Manugistics and called Networks Production Scheduler. Culture problems But that done, Gee found himself straight into the culture and the people problems. “It soon became clear that our management just didn’t understand how our current system worked – its limitations and deficiencies and what they meant to the business and to production efficiency, sales and so on. Their expectations of what we currently had were way too high.” Why should they? Up and down the land the detail of production management is the fifedom of manufacturing managers. But unless you flesh out the real world and demonstrate the benefits, you’re going nowhere. And there was fear. Senior factory planner Serhat Sonkur says: “An APS exposes all the issues. There’s no place to hide and nobody likes the finger pointed at them. This system it’s going to show you all the orders that are late and what’s restraining them, whether that’s the commercial department, the factory, which part of the factory.” The trick, he says, was to set up processes so that issues could be resolved quickly. There was also cost justification. Gee says that although there was soon commitment from, for example, manufacturing and sales, it didn’t amount to measurable hard cash. “Sales were keen on the idea of better, faster order promising, but we couldn’t get them to commit to more sales from it. Manufacturing agreed that the efficiency benefits would be there, but they weren’t prepared to fund the development.” Finally, justification was based on inventory reduction and factory efficiency improvements. MEI bought its APS in December 1997, started piloting and implementation in January 1998 and went live, following training and the rest, a little over nine months later in October 1998. It’s now responsible for production scheduling direct, with full integration into sales, procurement and the rest. The Order Promiser module sits between the customer/call centre and the production scheduler itself, which in turn links back into the Manman ERP. “We could have implemented in six months,” says Gee – but again people and processes got in the way. “First, we used a part time project team ... so we kept on losing momentum.” Just as important, he says that allowing the four production area teams to model their own systems in the hope of knitting them together at the end, was not good. Gee: “We should have standardised on the modelling and also some of the processes – like kanbans, which are the same in the different areas but managed differently.” The lesson: where processes are not documented or well understood they must be, or complexity and slippage will result. On routing structures, for example, MEI was meticulous, but it took three months to get them formalised because, as Sonkur says, “We had no routing structure other than that through the SMD machines… We were driving manufacturing from the BoM structures.” But after the pain, ‘go live’ was eventually forced. “In the end we went live with some of the managers still wavering. We had one guy who managed the automation and cal area who was saying ‘this makes sense – let’s just do it’, and he was key in making it work because he insisted on sticking only to the schedule,” says Sonkur. “You need that strength of character,” adds Gee, “to drive the system to work.” And Gee observes that, after ‘go live’ there are still critical aspects to any successful APS implementation. You need: a good understanding of the big picture; no work-arounds; commitment to the schedule; reliable lean manufacturing machinery and processes; MRP data accuracy; and “a leap of faith”. Says Gee: “Stock accuracy wasn’t a real problem for us, but purchase orders were soon moving around a lot. To be fair, commercial always worked on the basis that POs had to reflect reality, so if a tool or a machine broke down they’d push out orders and de-commit. But with the APS, production would then be running around wondering why schedules had changed and material wasn’t available.” It had never been an issue under MRP, partly because of its stability, partly the lack of feedback into purchasing and partly because of higher safety stocks. “The system was tightening it all up so there wasn’t much slack. Now if a tool breaks, the rule is you wait till you know when it will be fixed and then act.” Nevertheless, APS has transformed order promising across the board, with instant CTP (capable to promise) decisions based on real materials, capacity and constraints. As Sonkur says: “It’s very responsive. Before, we were forecast only, so there was a six week lead time. Now, in a few seconds we’re able to get a real production schedule and lead time of two weeks.” Gee and Sonkur also believe that without it MEI couldn’t have turned round the hugely inflated demands it faced last year on the run up to the introduction of euro coins across the EU. Sonkur: “Our order volumes tripled and at the same time factory space was halved as part of cost cutting measures.” Fantastic power In fact, the firm turned to its Mexico plant, which is a high volume producer, and asked for production capacity. And this, says Sonkur, shows the power of its APS beyond the four walls. ST Point was used to manage all materials allocation and remote factory planning, with stable long term production schedules and updates emailed as spreadsheets for the Mexico factory. Gee: “We just couldn’t have done it without our order promiser and scheduler. It meant we could promise on orders in a few seconds and deliver by far the majority on time, taking into account material supplies and capacity. And where we couldn’t, the system gave us visibility of what was going wrong – supplier problems, whatever. We could see lead times moving in and out all the time.” Sonkur agrees: “Rescheduling used to take a whole day to achieve, and then it was wrong because it was out of date. Now it takes a few minutes – and it’s right.” How important is this kind of project? Gee: “All I can say is this system has delayed having to implement a better [SAP] enterprise system as far as manufacturing management is concerned. It was also much lower cost and much faster to implement. It improved customer service; it’s driven down costs, reduced inventory, improved our asset utilisation. And it was excellent value for money. We got our return on investment in six months. “APS was completely within our own control. I just can’t think of another project that could deliver that much so quickly.”