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Building a sound management foundation for strategic planning of manufacturing.

Managers are realizing the need for strategic planning to make them more competitive in a global environment. Because of the increased emphasis on quality and price, the manufacturing component of this strategy is critical to success. Key tactical elements in the Manufacturing Strategic Plan (MSP) include programs such as Total Quality Control, Just in Time(JIT) Cellular Manufacturing and Computer Integrated Manufacturing. The MSP often fails to achieve its objectives because of a rush to implement these programs without the proper foundation.

To provide a sound foundation for a more realistic, achievable MSP we should begin by gathering data for a detailed self evaluation. Common sense should then be used to correct deficiencies exposed by this data. The prerequisites for any new manufacturing programs being considered for the MSP should be evaluated. All of this will provide information for the strategic planning process that should make it much more effective, and should expedite implementation. This approach is proposed as a three phase process.

In Phase I management should gather information to accurately evaluate your present performance. This is not a superfluous activity since most of this information is required to design the programs under consideration. Phase II will involve an identification and correction of problems exposed in Phase I that can be corrected without major investment or changes in corporate philosophies. Phase III is a statement of the commitments required by management to implement the new strategy, and may include changes in corporate policies as well as major investment. A detailed plan and timetable for implementing the tactical components of the MSP should be prepared at this time.

Many organizations have attempted to directly begin MSP depending heavily on an outside consultant, because they do not have the time or the available personnel to work through the proposed phases. Consider the following arguments for investing in these three phases:

* These first three phases may make the difference between merely having a MSP, and having an effective MSP that can be implemented. This is because this information may result in different, more realistic tactical components, and also because it should greatly enhance your understanding of the manufacturing system.

* Strategic planning and its implementation will make serious demands on management's time and on skilled personnel in all areas that will make the requirements of the first phases insignificant by comparison. If you have insufficient resources for the first three phases, you have no business attempting MSP.

* You may view the first three phases as a test of your technical expertise and organizational skills. This is a relatively easy way to detect those areas that should be strengthened before proceeding with MSP.

* The first three phases are an excellent means of sharpening your skills, and refining your management teams so that a MSP may be implemented in a professional, effective, timely manner.

The following outline of the content of each phase is intended only as a very general suggestion. The actual content will vary considerably between organizations.

Phase I

Phase I is the diagnostic phase. To attempt the implementation of a MSP without conducting extensive data gathering would be like a physician performing major surgery without conducting any preliminary tests. Yet this phase is often neglected. Modern material handling systems may fail because the basic flow characteristics were not documented. Warehouses are often expanded unnecessarily, when the present warehouses contain excessive and obsolete inventories. A flexible manufacturing system may be idle because inaccurate inventory records resulted in a material shortage. Major investments are made to increase throughput, when one new machine at a bottleneck, or a simple preventive maintenance program would have had the same net result. JIT and cellular manufacturing are predicated upon an accurate product flow analysis and work in process information.

The following procedures for collecting information are not mathematically sophisticated but will require time consuming conscientious "detective" work, which may be tedious at times.

Flow Charts: A flow chart is a map showing the path of key materials on a sketch of your facility. In developing this chart the analyst should determine a reasonable work in process for each material at each machine, and compare this to the present supply. Production rates of each machine should be verified so that bottlenecks can be located. The material flow should be defined in terms of units per day and trips per day, with notes on the dimension, weight, etc. of each item. The present packaging and material handling equipment should be documented. Obsolete equipment, scrap storage and safety hazards should be noted. Quality control records should be summarized, and the percent defective items at each location recorded.

Warehouse Capacity Analysis: A large number of warehouse locations, roughly a few hundred, should be selected at random from a layout. At a time of peak warehouse utilization, these locations should be visited and the percent of the available volume at each location that contains material should be estimated. Compiling this data will give an estimate of the present utilization.

Inventory Accuracy: Randomly select a few hundred of your most important inventory items and compare the inventory records to what you actually have on hand. If the on hand amount is within 10 percent, consider it to be an accurate record. Estimate the percent of your inventory records that are accurate.

Inventory levels: Obtain a graphical plot of on hand inventories for a one or two year period for items that have a high annual usage or high investment. A visual examination of these plots will allow them to be placed in one of three categories: a) items that have experienced stock outs, or have had dangerously low levels, b) items that could have had significant reductions in inventory and still had comfortable safety stocks, c) other items that have experienced overall reasonable inventory levels. Obviously the inventory levels of "a" items need to be reduced, and "b" items increased. This simple analysis has a potential for making drastic reductions in your total inventory, while providing a better service level. It is also an excellent means of determining if you need an audit and perhaps a revision of your inventory models.

Vendor Analysis: The purchasing department should evaluate the relationships with current vendors to determine the potential for establishing closer, long term contracts with the possibility of frequent, JIT deliveries.

The above list is intended to serve as a general guide and not a complete listing. Other factors that may be included are data on downtime and the causes, an evaluation of preventive maintenance, scheduling efficiency, times to changeover equipment for different products, and accuracy of the bills of material. The recommended data is not expected to be statistically sophisticated, but to provide a guide to locating problems in which a more in-depth analysis could result in significant savings. It is much less painful to become aware of your deficiencies in an analysis of this type than in the middle of the implementation of a new MSP.

Phase II

Phase II involves the use of the information obtained in Phase I to take corrective actions that do not require major investments or a change in corporate philosophy, but may result in significant savings. It is possible that the savings from Phase II may be substantial enough to convince you that the incremental improvements from some of the proposed manufacturing programs are not adequate to justify the massive investment required.

The data from Phase I should be used to identify areas with maximum potential savings. Task groups may work in several areas simultaneously, but there must be close communication between them. The following is an example of possible improvements in Phase II.

Plant Layout: Dispose of obsolete equipment and inventories, and scrap. Adjust work in process for each item at each machine (Many use a general guideline of a four to eight hour supply). Relocate equipment to reduce the excessive movement identified by your flow chart. Consider adding equipment at bottlenecks to increase capacity. Eliminate safety hazards.

Material Handling: Provide standard containers for in plant material handling. Plan procedures so that items are moved in the right quantities at the right times. Provide training for material handling operators. Perform economic analysis to see if new material handling equipment can be justified. The material handling should be improved with the plant layout changes, such as clearing scrap and excessive inventory from the floor, and reducing some excessive moves.

Warehousing: Perform a physical inventory to improve records accuracy and dispose of scrap and obsolete items. Reduce excessive inventories in those items that were identified as candidates in Phase 1. Install an identification system in the warehouse that is legible and consistent with your computer printouts for improved order picking. Consider installing a carousel system or an AS/R system for smaller items with high turnover.

Quality Control: Phase I should identify points where defects are occurring. There should be a follow up to determine if operator training, equipment modification, materials improvement or new QC procedures are appropriate.

Vendor Relationships: There should be an effort made to establish closer, more long term relationships with fewer vendors.

Many of the newer programs aimed at improving manufacturing efficiency, such as JIT, total quality control, kanbans, and cellular manufacturing are noticeably absent from the above examples. That is because a high level of employee participation and support is essential to the success of these programs. In most cases, this will require a change in corporate policies and a new commitment on the part of both management and labor, which should not be taken lightly. This should be considered in Phase III. The suggestions made here should be feasible with the present labor-management relations in most organizations.

Phase III

Phase III is an assessment of the prerequisites necessary for the implementation of the newer manufacturing programs. This should include a search of the technical literature, sending management personnel from different parts of the organization, and at different levels, to seminars and obtaining advice from outside consultants. You should also contact other organizations that have attempted implementation for their advice. Professional and technical organizations are an excellent source of information. The following suggestions are merely a "tip of the iceberg" compared to what you should expect to find.

The most crucial prerequisite to the implementation of any new program is the complete support of top management. The CEO should be given a written summary of the prerequisite assessment, as well as a summary of the first two phases, so they are aware of the magnitude of the commitment required for success.

All of the newer manufacturing programs require a high level of management labor trust and cooperation. Many organizations that have achieved an excellent working relationship have done so because competition from foreign manufacturers placed them in a position of improving labor relations or becoming extinct. It is difficult for some managers to place the required emphasis on improved labor relations without this motivation. Labor must be convinced that these new programs are in their best interest, and must take a positive, active role in the implementation. Management must be willing to spend money on employee training and development.

Employee training programs are prerequisite to new manufacturing programs. In addition to technical instruction, there should be general classes explaining the objectives, philosophies and expected employee participation. These classes should be informal and involve employee feedback. If you are implementing total quality control, formal instruction in statistical quality control basics is necessary. For cellular manufacturing, job training must be expanded to create a true multi-disciplinary worker. For computer integrated manufacturing, the requirements for classroom instruction coordinated with on the job training can often be extensive.

Most managers are aware of the general magnitude of financial investment required for computer integrated manufacturing, but tend to underestimate the investment for other programs such as JIT, total quality control, and cellular manufacturing. Total quality control and just in time will both uncover problems, such as defective equipment, that will require an investment to correct. Cellular manufacturing will require an investment for the design of new equipment, and in some cases, even new-technologies.

A closer relationship with both suppliers and customers involving improved communication and more day to day interaction will accompany these new initiatives. This may require organizational and personnel changes.

Developing a schedule, or timetable, for achieving project milestones can be one of the most frustrating aspects of this process. Some Japanese companies have taken over twenty years to develop their present systems. Many American companies have worked to implement these systems for years without accomplishing all they had expected.

Summary

Most organizations can, with some retrospect, examine their experience in installing computing systems, and realize the need for a coordinated strategy based on detailed information and analysis of their capabilities and requirements. The need for detailed background information and coordination is just as real in the installation of the newer manufacturing programs, because of the interaction between these programs and the resulting synergism. Because of this interaction most manufacturers install multiple systems simultaneously. The resulting complexity of the MSP requires a sound management foundation based on detailed information and analysis of your capabilities and requirements.
COPYRIGHT 1992 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Claycombe, W. Wayne
Publication:Industrial Management
Date:May 1, 1992
Words:2180
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