Getting lean IT on the business radar

Marine radar systems manufacturer Sperry Marine, part of US-based Northrop Grumman, is taking lean thinking company-wide. Malcolm Bruce is the operations director, and he makes the point that, although production in the UK is now limited to small-scale assembly, the rest having been outsourced abroad, its strategic Lean Enterprise initiative is probably all the more important precisely because of that – and that IT is key. "When we had production here we did all the basic lean transformation with visual manufacturing, rapid improvement workshops and so on. Now we're applying that to the rest of the business," he says, "and it's a major undertaking, particularly on the back office side, but also with our KPIs. They're key to success and they need to be somewhat different." And he doesn't just mean financial metrics, or even trend analyses showing order intake, gross margins, cash flow and the rest, with year-to-date relative to the plan. "We also have a very large service capability, for example, so we need to track productivity and utilisation there… People are encouraged to have meaningful metrics and to check their performance against strategic objectives through the new KPIs." It's clear straight away that for Sperry Marine, going lean throughout the business isn't just about cost reduction: "Lean is also growth enabling," insists Bruce. "Like all businesses, we have to satisfy our stakeholders. So growing revenue alone isn't enough either: we need to grow revenue and increase margins. And in our case, we're comfortable with the cost base we have, but what we need to do is work smarter and eliminate waste to achieve that growth. Lean thinking is the way to do that." So where does IT fit into the strategy? He gives the example of collaboration. "We have three sites doing design and development so, for example, we're using tools like NetMeeting to make information exchange and dialogue much more efficient." He concedes that some will not see that as 'lean' – including many within the organisation. But really, who cares what you call it? The point is it coincides with lean's direction of kaizen, waste removal and continuous improvement. It is in that sense that Bruce justifies much of the firm's investment in enterprise IT and associated communications technologies – certainly the engineering and manufacturing management software tools. "They're inseparable from our lean manufacturing business strategy," he says. Lean and global ERP It is that fundamental: Sperry Marine is now an end-to-end Baan IV ERP (now SSA Global's NX) user, having recently completed roll-out of the system across Europe. "That in itself was also part of our lean direction. Before the system, because we'd grown by acquisition, we had different hardware and software at the various locations, and communication and visibility were difficult. Now, everyone can see everything they need to make the business run smoothly, keep inventory low, cut out risk and so on." How does ERP, or at least the manufacturing planning and scheduling end of it, change when you're going lean? Bruce says that, at Sperry Marine, MRP is now only used to profile material requirements into the future. The firm uses Baan's MRP and MPS (master production schedule), which together look after a rolling 12 month forecast, providing the data for monthly sales and operations planning meetings that in turn drive the near-term procurement and production scheduling. The rest is a matter of flexible agreements with the firm's manufacturing partners around the world, with kanban style auto-fax and email call-offs for common assemblies and options – for example, specific MMIs (man machine interfaces). "It's all aimed at achieving the best balance between fast customer response and keeping costs down," agrees Bruce. Interestingly, on the agenda for the future could be refining that process through the increasingly popular supplier web portal route. Meanwhile, spares production planning is done quite separately through the firm's SIC (statistical inventory classification) system, which marries historical, trend and sales data to get its predictions. And if that doesn't sound like lean pull, it's not. But it's probably the best planning engine for the job – driving, as close as possible, the right goods to meet likely after-market demand in what are always short timeframes. Lean IT tools Talking generalities now, Bruce is neither a luddite, nor one to jump on the latest bandwagon. He's convinced, for example of the value of finite scheduling, although the firm isn't an active user. His view: "If you've got a number of machines with different capabilities, some bottlenecks, a number of people with different skills and some order variability then it's hard to see how else you can cope efficiently." If you haven't, however, you might not need it. The same applies to shopfloor data capture (SFDC). Bruce suggests there's work to be done in helping some manufacturers to understand the full business justification of modern, more sophisticated SFDC, and where and when it makes sense in a lean context – and how much automation and sophistication is required. He does, however, make the general point that where systems have been implemented – assuming they've been built with due care and, crucially, involvement of shopfloor users – the business and the users get the real picture without assumptions or lily-guilding. And the value of that can be enormous in terms of helping to guide and prioritise improvements in everything from production itself, to shopfloor layouts, set-ups and changeovers, material movement choices and training. It can even help with difficult to visualise operational and maintenance changes. Apart from that, it can open the door to low cost production and product tracking right out to the shipping dock or on to the customer if being that in-touch confers competitive advantage. Barcode technologies in particular, but also emerging RFID, can also help to reduce waste and improve service around warehouse movements here – while for organisations with an important service revenue stream they can also be instrumental in automating provision of the right kit to the right operatives. It's all about improving internal and customer service at minimum cost, and ultimately speeding invoicing and payment. In this respect, it's early days for Sperry. For now, Bruce's priorities are more around the core Baan system. "We're now at the point where we need to do the 'leaning' of our ERP, for example." He would also like to go for a product configurator implementation. He sees the improvement potential there being large – with customers able to configure their own radar systems online. That's good for customer and manufacturer alike since it's error-free and validated, priced, confirmed and scheduled on the fly, potentially with little or no sales or engineering involvement. He also wants to improve information analysis capability and dissemination through Crystal Reports business intelligence (BI) software tools to get proactive ad hoc queries and reports flowing through the business. He makes two points here. First, it's through these, more than offline spreadsheets or pre-configured ERP reports, that clues for good business improvement decisions emerge. Second, although there is an argument that companies need to await good data before going for BI, "you need the reports so you can see the poor data and the gaps, and start getting the business understanding the importance of good data." Chicken and egg. Beyond that, Bruce observes the age old truism: "One of the hardest things – if you've got a number of people in different functions and geographies – is getting them to push the same way. Getting valid, meaningful information – so that they can all understand the task today, the task tomorrow and how they should be executing their part in a language meaningful to them – is not trivial." And that's your argument for considering web portal technology. "Northrop Grumman is using portal technology with workflow throughout." So the writing is on the wall.