WIP down 20%, finished goods 50%, scheduling 20 times faster

“This system has radically changed the way we do business.” So says Phil Hawkins, assistant supply chain manager at Telford-based multi-million pound photocopier manufacturer Ricoh Products, of the firm’s advanced planning and scheduling (APS) system. Ricoh looked at systems from Frontstep (now part of Mapics), Ricoh’s packaged ERP provider Geac, STG (now owned by Manugistics) and Preactor before selecting Profax’s Asprova. Ricoh supply chain manager Rob James says it’s been even better than the team could have anticipated. Although it’s still early days, he confirms that he expects WIP (work in progress) to be cut by around 20% while finished goods stocks have already exceeded a 50% reduction. So we’re talking about very big money and very big wins. And that’s the story across this company – because there’s more. Ricoh’s not shy of leading edge IT and new processes where it can see routes to streamlining what it does and releasing value, whether as hard figures as above, or as providing time for its company-wide continuous improvement philosophy. So currently being linked to its APS system is a Cognos-based business intelligence system, and next will follow forecasting and inventory management software, both with a goal of faster, synchronised business management and associated opportunities and savings through collaborative working and information visibility. Returning to APS, Ricoh turned to the technology because, as Hawkins says, scheduling 22 photocopier consumables production lines with works orderless repetitive scheduling and mostly four or five level BoMs (bills of materials) “was taking four planners and 67 man hours every week for weekly planning.” With Asprova running across its entire consumable production plant, it’s cut this to one planner for three or four hours a week – allowing the firm to move easily up to daily scheduling where the need arises, and underpinning a VMI (vendor managed inventory) initiative for all customers. It’s impressive, and proves that getting away from the limitations of MRPII, by turning to APS, reduces costs and conveys competitive advantage by making factory operations more efficient and flexible. They do so because they can consider multiple parameters, like materials, capacity, constraints, sequence dependencies and key performance criteria (customer service, cost reduction, inventory minimisation), concurrently – and frequently. For most of us, this is one of the big ones. There’s a growing belief that ERP is no longer the solution of choice for planning and scheduling – indeed it should be relegated to handling administrative transactions, such as sales order processing, pricing, inventory control and so on. APS then should take over, providing for responsive and flexible manufacturing, linked to sales and with regeneration of the plan as frequently as makes sense. The benefits: you can promise and deliver on time, implement and support Just In Time (JIT) manufacturing and move to profitable make-to-order with the system helping, rather than getting in the way. APS also becomes a decision support tool – and the faster moving and more complex your environment (large number of items, orders, machines, set-up times, alternatives and people), the more useful that is. Ricoh’s experience certainly confirms this. Says Hawkins: “We have blow moulding plant, for example, so there are preferred sequences for colours and tools. Tools can weigh eight tonnes and are manoeuvred by a single crane, so the crane is a constraint and so are tool setters, but it’s all factored into Asprova. Before APS, if the schedule for optimal batches meant moving two tools at once, we couldn’t, so one of the machines would have to carry on making to stock or stand idle. We’d never thought about it because there was nothing we could do – we couldn’t get the information into the system. But Asprova knows this: the visibility for the planners is fantastic.” He continues: “And there’s manpower and holidays: previously we fully loaded our schedules because there was nothing else we could do – so they were rarely achieved.” He also refers to chemical mixes, yield factors and critical raw material storage tank levels, all of which couldn’t be adequately handled before. “It’s all within the capability of the APS. We didn’t go into APS with this much in mind. The limits seem exponential” Hawkins’ enthusiasm is palpable. “We’ll roll it out to the whole production plant,” he says. “We also want to see it used to optimise warehouse space use: if you keep bashing out product you’re going to run out, and APS can highlight that.” And he and James have similar plans for managing WIP, stock parts and raw materials inventory better. Says Hawkins: “At the moment we don’t have visibility of these operations so we don’t know what’s there. But with APS the system will say ‘no, you’re out of space’.” So much is becoming possible, he says. Immediate plans are to use the APS to help move the business to daily planning. Ricoh’s distributed sales operations have already gone to daily replenishment based on stock movements. “We need to be able to plan production on a daily basis,” he says. “We’re going to drive WIP and finished goods stocks down to the ground, without damaging customer service level: that remains sacrosanct.” Sounds great, but he’s the first to concede that it doesn’t all come without attention to the business culture, internal process and functions change and education and training – which requires managing. That’s key: for APS to work well, people on the factory floor and across the business need to get away from the received wisdom of personal efficiency, individual machine efficiency and so on – and refocus on collective efficiency. They also need to consider the prospect of dynamically rescheduled plans potentially changing production jobs at short notice. It’s important to find ways of making that work: your workforce won’t be inspired with confidence if jobs are perceived to be jumping around without reason. People don’t like change, they don’t like interrupting what they’re doing, and you need to look to their incentive packages to make it stick. Hawkins says production control has to be fully in charge. And he adds: “You have to take a leap of faith. It’s so fast and so complex you can’t see your way through it, and that is difficult. You think ‘I can’t see it working, so it isn’t working’... But we’ve decided if nothing’s going to be late we’ll just go with it.” Business intelligence and beyond In fact, being fully in charge is also what the other part of this compelling story is about – concerning business management, and making that work much better and faster for the company across departments. Ricoh operates Kaizen continuous improvement methodologies throughout – and no less across its business functions than in production. The goal is to encourage staff to participate in enhancing processes, and evolve the business through best practice. Making this work at the business end has been achieved so far by implementing business intelligence (BI) tools from Cognos with links into its ERP and APS systems. Next up will be an extension to include sales and inventory forecasting software. John Gittins, finance manager, explains that the BI initiative had several goals across the company, not least in his own department. For example, prior to BI, his finance team was absorbed practically full time with generating the rolling forecasts using spreadsheets across the cost centres as the key planning tools. Not only was it slow and labour intensive, but it didn’t involve departmental managers in the process – only in the provision of raw information. Gittins explains: “We believe that best practice planning should not be in the hands of a small group and we are committed to changing this at Ricoh to make planning more participative and collaborative. We wanted to increase the number of managers involved in planning without the inconsistency and unreliability of spreadsheets. We wanted to offer departmental contributors a fast, flexible input mechanism that would reflect their views, so they would recognise and buy into in the published plan.” So last year the company implemented Cognos Enterprise Planning (formally Adaytum). And after three months of implementation (staged over 12 months for practical purposes), not only was the rolling forecast planning cycle slashed from three months to just three weeks (77%), but the whole process became entirely collaborative across company departments. Gittins says everyone benefits: the system also enables managers to share each other’s contributions. “For example, much of our engineering is project-based and previously a ‘toner engineer’, for example, would not be able to see or learn from other engineers’ forecasts even if their suppliers and pricing were very similar. They can now share this information … saving time and uncovering potential cost savings.” He continues: “Also, preparation of a forecast, using contributions over the web from the various parts of Ricoh, can now take as little as five minutes.” That was a couple of days before, and it provides a level of detail previously just impossible to obtain.” He estimates that the £70,000 worth of Cognos it bought will have paid for itself in less than one year – not just from the time savings, but by the resulting good action: being able to realign resources to continuous improvement and achieving strategic objectives. For example, as a result of the link into production and the APS system, he says: “For the first time we can tie real-time production demand forecasting with our manpower planning data. This kind of integration of operational planning will increase understanding across departments, cut costs, improve staff scheduling, and help to safeguard production.” Ricoh now plans to extend the system to generate standard production cost data to individual product level, allowing it to accurately map labour costs to future production volumes and set production targets and standards. The next step will be to provide daily production cost monitoring over the web so that daily cost variances can be managed alongside downtime data capture. Ricoh reckons it’s now close to taking this to end-to-end web publishing of real time information with Cognos PowerPlay, getting spreadsheets out of the planning cycle and out of financial and information analysis, to further improve operational performance. Beyond that, Gittins says he wants to use the system to establish targets at a departmental level. His aim: to provide an ongoing organisational health-check by tracking progress, while also monitoring day-to-day operational performance. The near future looks just as exciting. Ricoh Telford is looking to integrate Optimus, which is already used within the European Ricoh group, will provide additional assistance with sales and inventory forecasting using trending algorithms that take into account history, new product introductions, seasonality and so on. Gittins believes this will help to further cut costs and streamline the business. “On inventory, for example, it will link into our Geac System 21 ERP down at the part level and, by looking at sales trends, explode that out to an inventory forecast – as in how much we need to fulfil predicted demand. That’s the first phase; then we can put that through the Asprova APS and look at capacity requirements and resources. Then we can use Cognos screens to do reports for the financial planners. Not only will it all be very automated; it will also be very granular.” In general, using Optimus, Gittins says managers throughout the business will be able to see how their parts of the business are performing from pre-configured ‘dashboard’ indicators taking manipulated data from the ERP system – providing near real time visibility for decision making with alerts and the rest. Then through Cognos they will continue to participate in the already established information exchange – with bottom-up real world and top-down vision coverage supported by its web data gathering. “Gathering and analysis of data will take hours instead of days, and that’s a huge benefit,” he says. And the bottom line is that it will streamline forecasting and be far more accurate and reliable – with the knock on effects of enabling further reduced safety net inventories and optimised fixed and variable costs of not only production, but ultimately all of the business.