What can we learn from the big boys?
To the westerner sumo wrestling is a very strange sport. There is another Japanese export that Western manufacturing industry must also embrace if it is going to survive, and that is “SOMO” which is the strategy adopted by many Japanese companies of “sell one make one” and is just as strange to traditional Western thinking as the spectacle of two thirty stone men trying to push each other out of a very small circle in what appears to be an extremely painful manner. Similar to the real Sumo wrestling, introducing a SOMO strategy is not as simple as it first appears, there are a great many hidden implications and implied skills that all need a great deal of understanding if this process is going to be successful.
As the business world continues to shrink, the greatest challenge facing the supply chain industry is to gain and maintain a competitive edge in a global market place. In my experience this means providing a better service than the competition and at the same time managing costs in order to make a greater profit. Customer service can be defined in many ways but the areas that need to be focused on are:-
- High quality (Product and information)
- Response and delivery
- Value in the eyes of the customer
The issue of response says that we can not only respond to customer requirements very quickly, but also we are very flexible when those requirements change. In order to achieve this we need to look at supply chain lead times and examine the constraints that are obstacles to the reduction of those lead times. In many industries one of the major constraints to reducing lead time is the batch or lot size that is defined for that product. Therefore is we are going to reduce the lead times one of the considerations is to examine what can be done to reduce the batch size to such a level that only what is actually required is manufactured. This of course implies that there are potentially many more change overs or set-ups and therefore a prerequisite to reducing batch size is to reduce the set-up time, so that it no longer represents a constraint and the number of change overs is a non-issue. The purpose of a set-up reduction programme is not to eliminate waste in order to reduce costs, (although this is a very positive by-product of the process) it is to enable the reduction of batch sizes and consequently lead times which allows greater flexibility.
If the reduction of lead time is vital to gain a competitive edge then we need to examine what elements make up that lead time and their relative contribution to the overall time. It is not unusual to find that less than 20% of lead time is actual process time leaving 80% or more consisting of queue time. Move/transport time, storage etc., all of which are non-value adding and hinder our ability to be responsive and to reduce costs. This 80% represent a massive opportunity to change the business in order to gain a competitive edge. Lets look at some of these elements:
- What are some of the valid reasons for having queues?
- Buffer against poor quality
- Buffer against poor supply
- Buffer against fluctuation in demand
- Buffer against process breakdown
- Buffer against unbalanced flow
- Ability to “cherry pick” for production “efficiency”
- Operator job security
If we are going to reduce queues (WIP) in the factory and therefore reduce overall lead times we need to address all of the above and not just to eliminate the queue time from the lead time in the system. The good news is that today there are tools and philosophies which help address all of the above constraints viz:
- Improve reliability, internally and externally through the processes of Total Quality, in particular Six Sigma.
- Provide better information to vendors through the integration of Integrated Business Planning/S&OP/Master production Scheduling and Vendor Scheduling which provides the ability to enter into partnership relationships thereby improving delivery performance.
- Develop Master Supply Planning and Demand Management in order to protect the shop floor against fluctuations in demand from the market place.
- Instigate a Preventative Maintenance Programme and plan machinery utilization at around 80% to increase the reliability of the process.
- Reduce set-ups/change overs and consider cellular structures to improve flow through the manufacturing process.
- Reduce set-ups/change overs to eliminate the need for selecting jobs in order to improve efficiency.
- Provide quality data that is easily understood by the factory in order to provide visibility of future work.
Is the factory always laid out so as to facilitate the quick flow of material and processes?
The answer too often is that the factory’s layout is cumbersome. One company that I visited a couple of years ago found that the average batch of material travelled seventeen miles through a fairly small factory. Provide the opportunity to re-layout the factory (cellular and focused factory concepts) encouraging reduced through-put time for the product.
Why do we purchase or make more than we need and then store the materials and products that are not needed?
Clearly it is possible that storage will be necessary for certain items. It is unlikely that for very expensive or hazardous materials that we will ever store them at the point of use. Often the bulk of materials in the stores is there as a buffer against poor supply or forecast accuracy. That material is often purchased in larger batches from the vendor, in the effort to obtain a “better price”. This of course automatically increases inventory and as it is now in a storage area we need to look after it, count it, relocate it, issue it and maybe even lose or damage it. Quite apart from the obvious waste in these activities they all add to the lead time thereby reducing the opportunity to be more flexible. What world class companies do is work with their vendors in order to achieve more frequent deliveries of smaller quantities straight to the point of use. It is a myth to believe that this can only be achieved by the application of “clout” or purchasing power. The real secret is to encourage the vendors to follow a strategy of Business Excellence in their own business and address all of the issues that we are considering as part of our own transformation improvements.
Does inspection of product ensure higher quality or does it actually encourage people to be less concerned about quality?
The truth behind the existence of separate inspection operations is that we don’t trust vendor or our own manufacturing process to produce high quality items every time. Consistent quality is a key ingredient in gaining a competitive edge. We need to recognise that we cannot inspect quality into the product, we must expect quality from the process. Indeed it should be the process which is monitored for reliability, not the items. This means that if we are going to increase the reliability of the process we need to provide people with the tools to collect data and monitor that process. These tools include Six Sigma and some of the problem solving techniques such as fishbone, diagrams, histograms, control charts and brainstorming. The truth is that inspection does not improve quality, all it does is increase lead time and add cost.
The challenge today is to examine what is necessary in order to allow us to move away from the traditional batch production towards flow production. Many things need to be addressed before we can achieve expertise in the new SOMO game, but if manufacturing industry is to survive we need to gain competitive edge by becoming more responsive, achieving more consistent quality and providing greater value.
The time to start is now. The new Japan has developed in Eastern Europe and China/Asia. We need to hone our cutting edge very quickly. To quote Demming “Survival is not compulsory”
DM Integration Ltd
LEADERSHIP t h r o u g h INTEGRATION