Made to orders

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Magazine Article, Source : The Manufacturer
Zone : Leadership and Lean
Published : April 2006

With customers becoming more demanding and competition hotting up, the nature of manufacturing is undergoing a dramatic change. Malcolm Wheatley discovers what it takes to step up a notch and manufacture to order

Stoke on Trent-based Tekdata Interconnect Systems is a manufacturer of wiring harn-esses and systems for the avionics, marine, medical and instrumentation markets. It boasts a host of world class, blue chip customers – companies such as A S Goodrich, Thales, Alenia Marconi, BAE Systems, General Electric and Fujitsu.

But over the past two years, explains manufacturing manager Robert Smith, the nature of the company’s business has changed out of all recognition. The products and customers are the same, to be sure – but a huge proportion of output is now demand-driven. “The make-to-order proportion of our business used to be a lot less: it’s now 65 per cent – and growing,” he notes.

To cope, the factory floor has been transformed. Before, cables were made on benches. An operator would undertake the harness build, and pass the completed batch of harnesses to inspection. Inspection would inspect them, and pass the batch to the encapsulation department. After encapsulation, the batch would be re-inspected, and then go to the moulding department.

No longer. These days, the entire output of the factory comes from 12 productions cells, which collectively contain the entire manufacturing workforce. There are as many as 16 operatives in the largest and most complex cell, says Smith, while the smallest one contains just three employees. And rather than operations such as encapsulation and moulding being contained within separate departments, as before, it has proved possible to incorporate them within the cell structure.

The impact on the business has been immense. Lead times have fallen, work-in-progress levels have reduced – and customers increasingly get what they want, when they want it. Lean practices, such as 5S, kaizen, and TPM (total productive maintenance) have also had a significant impact on the factory floor. “We’ve put a lot of effort into lean,” says Smith. “There was a lot to do – and there’s a lot that is still left to do: we’re now working at team communications, ‘visual factory’ approaches, and looking at throughput as well as manufacturing efficiencies.”

But if Tekdata Interconnect serves as an object lesson in how to transform the factory floor in the face of pressure to become more demand-driven, there is ample proof that the challenges facing them in achieving this go far beyond the factory floor. The simple truth remains that before a customer’s order can even reach the factory floor in order to be fulfilled, it must first navigate its way through tiers of administrative systems and processes designed with anything but demand-driven manufacturing in mind.

Take the mundane act of actually entering an order in the first place. Sabre Ballistics, a defence manufacturer located in Caterham, Surrey, junked its existing text-based UNIX enterprise system in favour of a replacement from Horsham, West Sussex-based Anagram Systems, a vendor specialising in business systems for smaller enterprises. In the process, explains Sabre’s managing director, David Balfour, the company found that the Anagram system’s Microsoft-based architecture transformed the task of creating orders and their related bills of material.

No longer a laborious, time-consuming activity, these days item records for new products can – quite literally – be created by ‘cut and pasting’ elements from existing orders and bills of material. In contrast, the previous system had called for stepping through items one at a time, adding and altering as necessary, explains Balfour. And an improved speed of response hasn’t been the only benefit, he adds: quality and compliance levels have also improved. “Because it’s easy, people follow the rules and do it correctly when creating orders – so there’s no need for shortcuts and ‘workarounds’,” he says.

Yet often, the issues that impact a business’s ability to be demand-driven are not to be found within its own four walls, but within the supplier base and the distribution system that brings raw materials and components to the factory. Traditionally, uncertainties and inefficiencies within the supply chain have been buffered by inventory – but no longer.

“Astute use of technology can replace inventory with information, and replace forecasts with fact,” says Steve Bossom, director of manufacturing at Cisco Systems. “Instead of predicting what will be required, it’s now possible to actually know what is required. What’s more, instead of discounting, companies can earn the full profit margin, selling to customers what they actually want, rather than persuading them through discounting to select from items that are in inventory.”

At Peterborough-headquartered Geest, for example, which supplies food retailers and foodservice providers with products such as ready-mixed salads and chilled meals, this recognition saw the implementation of a whole new ERP system from SSA Global. According to Chris Hassell, the programme manager at Geest in charge of the implementation, the switch was targeted on improving supply chain visibility, standardising upon ‘best of breed’ business process, and at the same time improving customer satisfaction through improved lead times as well as reducing stockholdings.

The transformation at Geest is typical of many of SSA Global’s recent implementations, adds the company’s Dave Anderson. And even if the words ‘demand-driven’ aren’t the phrase used to describe the objective, the impact is the same, he notes. “Companies are increasingly aware of the opportunity cost incurred through not meeting demand,” he says. “Capturing and successfully filling demand that would have otherwise gone elsewhere is an easy way of growing the business.”

In other words, there’s no need for expensive advertising campaigns or marketing initiatives in order to earn revenue from potential orders that went unfulfilled – all that’s required is the manufacturing and supply chain systems to make sure that such orders can in fact be met. Better still, it’s not necessary to replace entire IT systems to achieve this – augmenting what already exists can work just as well.

Take Pontefract, Yorkshire-based Finlay Beverages. Tea and coffee from the company’s extensive plantations in Kenya, Sri Lanka and Bangladesh are shipped to its three UK sites, where state-of-the-art manufacturing facilities and a substantive investment in premium packaging formats have cemented the company’s position as the pre-eminent supplier of own-label teas and coffees for the UK’s major supermarket groups – among them J Sainsbury, Asda, Somerfield and Netto.

Four years ago, explains IT manager Paul Bacon, the company recognised that it needed to reduce its inventory of finished product – then typically around four week’s stock – and become more responsive to actual demand. But early moves to operate with less stock quickly foundered, he relates: as orders came in, the company found itself short of packaging items, leading to shortfalls on orders.

Tea blending, too, came under pressure: what appears to the consumer as just a packet of tea is instead subtle blend – typically comprising 25 to 50 grades – drawn from among the hundreds of grades the company harvests, dries, and holds in stock. And consistency of product is paramount: the consumer, rightly, expects the packet of Sainsbury’s Red Label that they have just bought to taste just like every other previous purchase of Red Label.

Better forecasting, ironically, was part of the answer, bolstering the company’s core Intentia Movex system with a demand planning system capable of better extrapolating seasonal trends, growth, and market insights from the company’s commercial team who were in touch with customers.

More important, though, was the decision to complement this with an advanced planning module, capable of taking the combined forecast and order book and carrying out the short-term planning needed to keep the company’s production lines firmly-focused on producing the optimum sequence of product. With day-to-day production and packaging requirements now synchronised, relates Bacon, stocks have fallen rapidly, and now stand at two week’s worth. “We already had the core Movex package,” he stresses. “What we needed were the extra modules to help us achieve it.”

And even businesses that already regarded themselves as responsive can benefit from a renewed focus on demand as a trigger. Twenty years ago, for example, computer giant IBM was one of the world’s first electronics companies to apply just-in-time principles taken from the automotive industry.

Yet reorganising its factories, procurement function, distribution operations and planning processes into a single $45 billion integrated supply chain business unit – embracing 78,000 products, 33,000 suppliers of over two billion components a year, and 16 manufacturing plants in 10 countries – and then applying best-of-breed demand planning tools from i2 Technologies, has yielded impressive improvements on what was already a creditable performance.

The i2 tools, says Joe Di Prima, manager of supply chain optimisation within the integrated supply chain business unit, allow IBM to not only plan more effectively, but also process demand more quickly: orders – literally – are scheduled in less than a second, as they arrive electronically through sales channels.

“The frequency of our ‘supply refresh’ – where we tell suppliers what parts and components we want from them – went from every two weeks, to daily,” says Di Primo. “Our on-time performance to the customer went up by six percentage points, our order cycle time was reduced by one and a half days, and we reduced the supply management and scheduling workload by 25 per cent. In addition, when we promise a date to a customer, we’re now more likely to stick to it, rather than re-schedule it.”

IBM, of course, is a giant among companies. The good news for smaller businesses – particularly SMEs – is that significant enhancements to demand responsiveness can be attained without expensive software tools.

“Treat forecasting as a business-wide process, not as a narrow activity carried out in a functional silo like stock control or sales,” urges Harjot Sachdeva, director of hi-tech solutions at i2. “Focus on forecast error reduction, and inventory accuracy, and on the impact of forecasting on customer service levels.”

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