Time to rethink processes and relationships, says Jaguar

You need to create a stable and accurate demand signal so that your supply base gets the best chance possible to deliver. That’s the view of Dave O’Reilly, head of manufacturing and purchasing systems at Jaguar and Land Rover in Coventry. It’s classic lean ‘Toyota Production System’ talk – and it flies in the face of those suggesting that OEMs and those that ‘own’ supply chains, can simply use modern systems to keep re-optimising their schedules and force their suppliers to respond rapidly to frequent late changes. “The problem is that OEMs want their supply base to be totally flexible – but that doesn’t work,” he insists. “For supply chains to work we need genuine partnerships.” He points out that it only takes one or two suppliers to fail to fulfil for whatever reason and – with your plant already lean and exposed in terms of inventory – you’re in danger of major disruption through the knock on effect, and possibly plant stoppage, particularly in automotive where line-up of vehicles down the track is fixed early on. “What’s important is, first, to get information on your long term plans for supply stable and accurate, and second, to let suppliers see, day-by-day, even hour-by-hour, what you want – not just the weekly buckets.” Stability and visibility where change has to happen are his keys. They recognise that there will always be problems, like suppliers failing to adhere rigorously to agreed schedules due to their own shortages and constraints on labour and their facilities. “Facility breakdowns are unavoidable, but shuffling around firm orders on suppliers has got to stop.” Jaguar and Land Rover’s supply chain system delivers a long range 26 week planning view in weekly buckets, followed by a mid-term daily or shift scheduling view 10 days out, both on EDI from Ford’s CMMS3 global ERP/MRP system. Then there are sequence delivery signals broadcast four to eight hours ahead of line-side delivery requirement, reflecting precise requirements, and triggered as painted bodies are teed up in sequence. Signals are Edifact messages broadcast every 10 to 15 minutes over leased lines with ISDN back-up via Jaguar-owned servers, and for most suppliers the result is a printed ticket that drives their finishing and despatch processes, although for some that’s driven through their ERP systems. O’Reilly is happy with the EDI trail, although he agrees that you’ll always find some suppliers struggle, partly because they have to deal with several different protocols but partly also if they don’t invest in adequate IT support on site. That’s an issue in he automotive sector, with the drive for suppliers to set up assembly and warehouse facilities on industrial parks adjacent to the OEM: if something on the IT side goes wrong and doesn’t get solved quickly, the supplier isn’t getting printed tickets and you’re in trouble. The solution is visibility of sent/received signals and determinism, with escalation if signals aren’t getting through – and investment in remote system management facilities on the part of suppliers. Wouldn’t an XML and portal approach be easier for suppliers? “It might,” agrees O’Reilly, “but we have 600 suppliers and Ford has thousands so the cost and upheaval would be considerable.” But he reckons most suppliers would accept the technology, and sees potential benefit. “If we could make it easier for the supply base to tell us material is on its way, using a web portal, that would help. Then, our expediters could see at a glance what material is missing and focus on the exceptions. “EDI is transaction-based so they have to go into each line item to see the stock and incoming position. With a portal they could see the hot spots and tell instantly that something hasn’t arrived but is on its way, or isn’t on its way.” Which leads him to another point: “Whereas before, one of the big issues was inventory management, when you’ve done lean manufacturing and lean logistics, you’re inventory levels are down – and then you expose how good your processes are! For example, we have about one day’s worth of material on site split between track-side and the lean marketplaces. So you need to revisit your processes for accurate inventory because your lean supply chain will fail wherever there is inaccuracy.” And that means revisiting your receiving processes, supplier labelling accuracy and technology and level of labelling, lean marketplace management, even your bills of materials (BoMs): if they don’t tally exactly with the real world, backflushing will kill you. For O’Reilly, the solution starts with monitoring supplier performance. “We have Q1 approval processes that cover a lot of things, but absolutely accuracy of delivery. We’re also encouraging the extended use of ASNs so that we can see materials coming in ahead of time, and move to push button receiving for our Q1 suppliers. Then we can focus our material handlers on the other suppliers.” Jaguar Land Rover also uses LLPs (lead logistics providers) like Excel Logistics, which now have responsibility for collecting materials from multiple suppliers on a milk round. Under the SLA, it’s their responsibility to validate fulfilment accuracy and to create an ASN, either from the trailer or indirectly via the logistics centre, using wireless PDA technology. Isn’t there a case for more barcoding or RFID to further automate receiving and materials movement to line-side? O’Reilly agrees there is, but there are cost and practicality issues. Many suppliers still only barcode to the stillages so there’s a way to go here, and limits on feasibility. “Remember, we’re a high volume business and suppliers would have to put cost on if they barcoded or tagged everything to the piece part level.” You can hear Dave O’Reilly at the MCS Lean Supply Chain Forum on 13 April at Gaydon in Warwickshire (www.mcsforum.co.uk).