Sensing success on a stunning lean journey

When Turck, the global industrial automatic sensing equipment maker, wanted to reduce lead times while simultaneously cutting inventory and costs and smoothing production, it embarked on a lean manufacturing programme that has far exceeded even its expectations. Within two years the firm saved $12 million in inventory alone, and paid for a complete new factory in Minneapolis. And over three years, it’s cut lead times from three weeks to three days, including shipping – manufacturing any of its 50,000 finished goods in its item master within three shifts. This is one hell of a story. Brad Beagle, Turck’s director of IT, says it began in 1998 when the company was running conventional MRPII-based ‘push’ manufacturing under a Fourth Shift (now Soft Brands) ERP system, making mostly to stock and forecast and partly to order. What the company has moved to – initially through proof of concept, then with an impressive ‘big bang’ – is completely automated hybrid pull-push manufacturing, with around 80% of production now working in lean cell manufacturing mode with full supply chain kanbans, plus MRP for specials and development work. “We started out with one or two families of products,” says Beagle, “putting together experimental manufacturing cells instead of work centres, and making them responsible for building product from start to finish, the packaging, everything.” Material flows to the cells were configured as fairly conventional kanbans and he says the effects were immediate and wide-ranging. “We were staggered how much it changed people’s morale in the cells; it changed their outlook completely. We used to have a hierarchical organisation with all that means, but this was a flat structure with cells having their own budgets, employees hired by their own people. They took on responsibility for everything, even the tooling: rather than have some manufacturing engineer push something on them, they were encouraged to use their line-side knowledge to say what was needed to make their job easier and the work flow smoother. There was a real buzz around the company.” He concedes that it meant a leap of faith for managers, but it worked. “It really was a big success. People stopped the punching the clock mentality; jigs and fixtures improved; people started acting as teams.” So successful was it that when, late in 1999, the firm moved to a new factory in Minneapolis, lean cell manufacturing was introduced from day one. “We used the move as a demarcation point: we were push, now we’re all pull-based lean manufacturing.” From the IT and automation perspectives, that move demanded radical thinking – starting with semi-switching off MRPII. “At the time we moved to a bespoke pull system using Visibar factory data collection systems, barcodes and hand held radio swipe devices to trigger kanban replenishment from stock rooms, or the warehouse,” he says. “But the underlying materials procurement remained under MRPII, so it was pseudo-pull.” Nevertheless, the results were impressive. In 1998, manufacturing lead time was cut by 33%, work in progress (WIP) was similarly reduced by 33% and administrative lead times for fast-track items were cut by 75%. Overall inventory was down 20%. In 1999, as lean continued to bite, the firm cut lead times by an additional 33%, WIP by another 33% and inventory again by another 20%. Lead time was down from 15 days to five. Which was a good start, but Beagle and his team knew it could go further. Around that time at the Fourth Shift user group meetings, Beagle became aware of developments underway to support fully pull-based lean production with new ERP modules aimed at managing what were perceived as limitations with factory lean signalling. “We worked with Fourth Shift to develop what’s become their DemandStream, and that’s what now runs 80% of our production.” He explains that the system deals with the shortcomings of MRP for lean using three modules. “It’s a supply chain execution and communication system, based on demand-pull and linked into ERP. It’s got a materials replenishment module that does the automatic dynamic kanban re-sizing you need to handle demand changes and parts quantity triggering automatically. It’s got a data integration module that lets you configure different kanban signalling methods for your own stock rooms or suppliers. You can make it switch on a call light, trigger an email, send a fax, refresh a [virtual] kanban board on a website, or even recommend procurement to issues a purchase order. We’ve also linked it to our automatic storage and retrieval machine so that that brings the right product to the picking face ready for the picker to collect. It deals with the real world of supplies and suppliers.” And on top of that is the system’s supply chain module, which runs the web kanban boards. “That allows our people not only to see the triggers, but to drill down into inventory holdings, see demand pattern and plan their production better.” He makes the point that it is the sheer versatility of the system – working as it does with suppliers no matter what their technology or your credit status with them – that has made lean material management work right across Turck’s supply chain. And he adds that it’s also removed another limitation of MRP. “MRP couldn’t handle our multi factory, multi-warehouse environment. We have two factories, one here and one in Mexico, as well as three warehouses, all on one instance of Fourth Shift. With MRP looking at the aggregated demand and stock positions we couldn’t get efficient local replenishment without workarounds. The new system handles multi-site management because it’s so pragmatic, just pulling materials to where they’re needed when they’re needed, rather than running a mathematical model.” What does he think of the other way – advanced planning and scheduling (APS)? “I guess if we had constrained capacity or very volatile demand then APS would have been a requirement because you have to force a plan and an operational schedule. But we have a pretty good idea of the product mix we’re likely to sell in any of the sensor families so lean was our way to go.” Talking of constraints, there was more: this company bought its way out of them. “There used to be central critical processes, like injection moulding lines with costly tooling, long set-ups, cleaning and change-over times, where product would queue and wait for economic order quantities. But we made the decision that responsiveness was so important to us that we invested in more tooling and machines. That’s reduced the set-ups and now we can build economic order quantities of one if we need to.” He accepts that for many businesses that’s not an option, and they have to work smart with their bottlenecks using initiatives like Theory of Constraints (ToC), scheduling material release and buffers to the beat of the constraint drum. But ToC and lean aren’t mutually exclusive. And he makes the very valid point that either way, “when you get rid of the clutter – and I mean the intellectual clutter as well – you can see problems and what needs to be done without even thinking about it.” Then your velocity goes up and you’re into a virtuous circle. Has IT played a key role in lean? “Absolutely,” says Beagle. “Our IT is as important as our tooling. For our operators that say, ‘if only I just had to scan this one barcode to have the parts arrive automatically’, we say, ‘job done’. Lean is all about removing waste, and your IT is essential to achieve that. Sometimes ‘feeding the beast’ can be tough and time consuming; our goal in IT is to get rid of that waste. “So, for example, we’ve automated data entry for shipping so that s guy with an RF scanner can just do his zapping and the automated picking machine – which is one or two steps ahead of him – is bringing his packages to the pick face. We’ve cut out data entry, rekeying, all that. And how else are you going to extend lean thinking into your entire supply chain?” Was it easy? Bill Schnieder, Turck’s managing director, says yes and no. “I don’t recommend moving to lean manufacturing unless your board has bought into the concept. Six or seven years ago, we tried to move towards lean and failed. I believe that you need to start small, set one clear goal and get your employees behind it. The transition is not always easy – but [for us] it’s been wonderful.” Indeed; and with Turck’s company-wide commitment, the results have been stunning. Not only did the firm pay for its factory from inventory savings, but it’s identified many other benefits. In the last couple of years on-time deliveries have continued to go up, guaranteed lead times are now under three days; employee morale is higher than ever; and productivity world class. “And one of the nice things about all this has been we’ve been able to ease ourselves into it,” says Beagle.