Posts Tagged ‘lean’

For a long time, the idea of implementing ERP and getting lean seemed like they were worlds apart.  ERP was robust and embraced all aspects of the business:  analyzing sales trends… forecasting inventory… pushing materials through production… managing the many aspects of the business.  Meanwhile, lean was small and responsive… material is pulled through production… just-in-time inventory planning becomes paramount… paring things down to their simplest proportions and keeping things moving constantly are key.

And yet.  When you look at lean coupled with ERP—as so many companies do today – you begin to see the synergies.  Streamlining processes (via lean), then automating them (via ERP).  Stripping complexity down (lean) and then using the improved process repeatedly throughout your workflows to eliminate redundant steps and waste (ERP).

Take kanban.  These are visual signals used to resupply inventory.  They’re an important early step in the lean process, and especially effective in single plant locations.  ERP supports kanban by turning these visual signals into electronic trigger points, and they work just as effectively across multiple locations.

A key principle of lean is the just-in-time inventory noted earlier.  You want just enough material to meet demand and keep flow moving.  It’s all about eliminating waste.

Well, with ERP, you can analyze individual workstations or shop floor cells.  You can investigate and analyze the impact of, say, setup times or machine changeovers or maintenance, and their effects on the overall schedule plan.

In the same vein, your ERP reports provide you with the data you need to compare your current inventory levels to your sales demands, and adjust accordingly – and quickly.  That’s critical to keeping inventories low, just-in-time and always moving.

In similar fashion, ERP can identify and track waste, the bane of lean.  You can’t improve something unless and until you can measure it, and with the right ERP setup you can track your most wasteful production areas, and know where to focus your efforts to eliminate it.

In other words, ERP allows you to analyze all of the many factors that come into play on the shop floor, and throughout the business.  It can provide the raw information you need then to begin to identify mistakes, inefficiencies and waste – on the way to getting lean.

We’re big believers in the combined power of lean and ERP.  In our view, they go together like a hand and glove – and together, they are the single most important factor in improving performance and profitability among firms that are growing – and those that want to grow.


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We like highlighting and learning from stories about companies getting “lean” because helping manufacturing and distribution companies become more competitive through lean processes supported by good software is exactly where we live.

A recent article in the Mar/Apr issue of APICS Magazine about a lean transformation of an Agilent Technologies spinoff called Keysight Technologies highlights the efforts of that firm to transform its supply chain into a more responsive, flexible and efficient one.  The goal was nothing less than to adopt a “holistic approach to develop a comprehensive lean transformation strategy.”

We found a few key takeaways from APICS Magazine’s review of Keysight’s challenges, most notably what they called the three key pillars of their lean transformation.  It’s worth noting by the way that Keysight earned the 2016 APICS Corporate Award of Excellence in Innovation as a result of its lean transformation.  Those three key pillars:

  1. Develop Competency: Ensure all employees across all sites are well equipped with the necessary lean competencies.
  2. Deliver Value: Use lean methodologies to achieve breakthrough results in the areas of cost savings, lead-time reduction and customer satisfaction.
  3. Sustain a lean culture: To derive long-term value from the lean initiative, foster ongoing improvements through a shift in mind-set and the adoption of lean throughout the organization.

While the full article is too lengthy to detail here, we believe that the points above and the anecdote that follows provide some good “thinking points” as you consider your own lean initiatives.  Quoting directly from the APICS article…

“To achieve world-class manufacturing at Keysight, a program was launched that encompasses cycle-time, inventory reduction, greater efficiency and enhanced flexibility.  Entire product lines were scanned in order to identify stock keeping units that had high inventories and were not meeting customer-requested lead times.  These items were then examined based on revenue and cause-codes, and constraints and bottlenecks were identified.  Innovative solutions were implemented one by one to break the constraints.  For example, the component-washing process at Keysight had been a cycle time issue because the activity was shared among many different product lines and could only be conducted in batches.  However, contract manufacturers did not face such constraints, so component washing was moved to that site.”

We cite the above only to illustrate the style of lean thinking, and the measured steps, that we’ve found over time lead to the virtuous cycle of continuous improvement.  Redesigning work centers, optimizing vertical spaces and assembly motion, and implementing other modular concepts are among other efficiency improvements brought about through lean thinking.

Want to hear more?  You can learn more about APICS locally here.  Want to learn more about how to lean out your operation?  At the risk of being commercial here, as we always like to say: We’re here to help!  Contact us (reply to this post).

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six sigmaIn our March 31, 2016 post we discussed how the tool set known as Six Sigma can help firms save a lot of money by enabling continuous improvement throughout their production (and other) processes.  We noted then that by utilizing Six Sigma’s tools to reengineer your business processes to the highest standard (of lowest defects) you can then let those processes drive your ERP implementation.  In other words, you let your business drive your ERP software, rather than the other way around.

Today we thought we’d enlist some added Six Sigma input from our friends at Panorama Consulting, whose President Eric Kimberling wrote a recent post describing a few key ways that Six Sigma can increase ERP benefits realization.  These include:

Six Sigma supports a broader business transformation beyond ERP software. Notes Kimberling, “The most successful ERP software initiatives are those that are managed more as business transformations rather than technology initiatives.”  By beginning an ERP implementation with clearly defined and well-designed business processes – a hallmark of Six Sigma initiatives – you allow your business to drive your ERP software implementation.

Six Sigma provides the performance measures required for any successful change initiative.  Here Panorama reminds us: “It’s widely known that if you don’t measure it, you won’t achieve it. Unfortunately, too many organizations neglect to define the specific performance measures and metrics that will be used to drive and manage business benefits moving forward.”

Six Sigma makes for a faster and cheaper ERP implementation.  While it may sound counterintuitive, the fact is “having clearly defined business processes up front avoids much of the ambiguity, inefficiency and ineffectiveness common in most ERP implementations.”

Six Sigma enables effective organizational change management.  Says Kimberling, “Not much helps enable organizational change management, training and employee communications as much as the tangible business processes and performance measures afforded by Six Sigma tools.  Well-engineered business processes, thorough process documentation and clear performance metrics all help drive adoption and accountability.”

The process improvements and the ‘leaning out’ that come as the direct benefits of Six Sigma (as defined and discussed in our earlier post here) are the very same thinking companies need to apply to early-stage ERP implementation.  Whether you hear that message from us, or Panorama, or anyone else, it’s a message worth careful consideration.



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Taiichi_OhnoTaiichi Ohno, father of the Toyota Production System, once said of the lean approach that “All we are doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash.  And we are reducing the timeline by reducing the non-value added wastes.”

Legions of disciples since then have flocked to follow his precepts, often obscuring the lean concept by overcomplicating it.  So it is good to recall what Rajan Suri, the creator of the quick-response manufacturing philosophy writes (while referring specifically to “manufacturing critical path time” but of practical relevance to any lean initiative…) that “knowing the critical path helps focus lean initiatives and reveals the greatest opportunities for waste reduction and lead-time improvement.”

It actually all boils down to taking a step back, that is, taking a ‘macro’ view.

Lean teaches that compressing the timeline increases velocity… reduces inventory… and improves cash flow.  Compressed timelines simplify processes by eliminating the many wastes that accrue over time.  The quicker the cycle (or lead time), the fewer chances for waste, right?  Other benefits accrue to such time savings from “quicker put-away and retrieval, counting and recounting, moving, recording transactions” and so on, notes Joyce Warnacut in a recent article featured in APICS Magazine called “Zoom Out to Build Lean Up.”  She notes that compressing the timeline to delivery “adds value for the customer in the form of quicker responses and leads to market opportunities.”

Pretty obvious when you think about it, right?

Warnacut makes the case for taking the macro view, noting that “lead time should not be measured at the operation level, but the system, or macro, level.  This is because reducing lead time at one step while leaving work in process (WIP) in queue at the next step is futile.”  Lead time must be measured from the point at which resources are committed to the point at which customers receive the goods.  This is particularly true in manufacturing.

That means that, unlike traditional on-time delivery schemes that suggest making and holding inventory for better order fulfillment, “a true time-based measure built around when resources are committed to an order [means that] making ahead is not advantageous.  It actually increases response time because having people, material and machines allocated to something that is just going to sit on a shelf negatively affects both responsiveness and cash flow.”

The point is, take the macro view and recognize that lead time must be defined as the time to complete and ship an order “from scratch” beginning with order placement and on until receipt.  Focus tightly on compressing that time line and you will succeed in increasing velocity, reducing inventory and improving cash flow.  Just as Ohno had prescribed.

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pushvspullThere’s a long running debate about push versus pull planning in the manufacturing production environment, with push typically exemplified by MRP (material requirements planning) and lean exemplified by pull techniques.  A recent article in the Jul/Aug edition of APICS Magazine article (“New-Fashioned MRP”) by Dave Turbide, an APICS certified CFPIM boils it down as follows:

MRP is based on a forecast of expected demand.  A forecast is prepared… production and purchasing are scheduled to support demand, and work proceeds.  So, you’re pushing forward, to make your product.

In pull, nothing is made until there is demand.  Finished goods require a customer order.  Replacement materials and sub-assemblies are not bought until existing items have been used.  Lean emphasizes making and buying to demand, along with one-piece flow and physical replenishment triggers (kanban).

While some say that push is simply bad, and pull (lean) is good, both approaches, Turbide points out, have their advantages and disadvantages.  Push is recommended in fairly high-variety, complex manufacturing and MTO (make to order) situations.  Pull works best when demand is high for a “relatively” small range of products.  Many companies incorporate elements of both push and pull in their manufacturing environments.

Push is appropriate in conditions of long lead times and a lot of work-in-process inventory.  MRP can be difficult to use in these cases, generating multiple exception notices.  Required information can be difficult to maintain in these cases.  MRP is not demand driven, which is to say, parts and products are acquired to meet a forecast regardless of demand.  If – a big if – “the forecast is accurate and the demand actually occurs, then the company can be efficient and profitable.  But there is no guarantee…” and any differences between forecast and demand create either shortages or excesses in inventory.

Despite all this, MRP remains “the best tool for handling complexity and it has the flexibility required to deal with a wide product variety.  Smart business leaders thus are uniting lean manufacturing tools (kanban, flow production) with their MRP-driven organizations,” notes Turbide.

He goes on to note that some practitioners have taken to using Theory of Constraints to enhance throughput and reduce lead times, and using demand-driven MRP “as a way to pull material replenishment with an MRP-based system.”

As Turbide concludes… “MRP is not dead but traditional techniques are becoming irrelevant as markets shift and evolve.  MRP that incorporates the best of the old with the modern, demand-driven extensions is the tool we need today.”

You can learn lots more about APICS here.



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The Seven Wastes

Shideo ShingoAPICS fans will recall that Shigeo Shingo – the master of lean manufacturing and Toyota waste reduction – first coined the notion of the 7 wastes of manufacturing.  In a recent article, Donald Sheldon of DH Sheldon & Associates, who lectures at SUNY and was one of the original authors of the APICS Operations Management Body of Knowledge Framework suggests two more.  But first, the Seven.

Shingo was once observed eating a banana on stage at an APICS conference and being bothered by having to buy bananas by weight when he did not eat the skins, which he considered “waste” (or “muda” the Japanese term for waste).

That sort of thinking is what drove him while at Toyota years ago to define his seven areas, which we thought worth reprising for the thought and benefit of our many manufacturing clients today:

  • Overproduction of products and services, as in activities not supported by customer demand
  • Waiting for parts, or a machine to finish, or a support function, etc.
  • Excessive transportation or handling of goods
  • Stocking unneeded inventory
  • Motion by employees that is redundant or avoidable
  • Defects in products or services that result in scrap or rework
  • Processing and transactions that are unnecessary

In an article in the May/June 2015 of APICS Magazine Sheldon adds that the APICS community added an eighth area and he suggests a ninth courtesy of a student of his who was certifying for his green belt in a six sigma class:

  • Waste of human creativity, and
  • Environmental waste (for example, wasted or excessive use of energy).

We mention these today to give readers a chance to pause for a moment and consider these areas of waste within their own plants and organizations.

Identifying such areas in your operation and taking the necessary steps to remedy them is simply one more link in your chain of continuous improvement.

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lean six sigmaIn manufacturing two sets of concepts are often discussed (though less often implemented).  These are “lean” and “six sigma.”  Each when applied in its own right brings enhanced value to companies and their customers.  Both are often ignored in small business – often thought of as “too complex,” or “not for our small company.”  In fact, there are simple lessons from both which, when combined, can bring operational improvement to any firm – even non-manufacturers.

First, a couple basics.  Lean focuses on value.  Simply put: what’s important to the customer?  Its key principles involve the elimination of waste and accelerating the velocity of processes.  It traces its roots back to Toyota.  If value is defined as “what matters to the customer” then value-added simply means work your customer is willing pay for.  Everything else is waste, to be identified and eliminated in a process of continuous improvement.

A simple acronym helps remind us of the 8 key forms of waste: DOWNTIME:  Defects, Overproduction, Waiting, Non-Utilized Talent, Transportation, Inventory (too much or too little), Motion, and Excess Processing.  As you reduce or eliminate these, you become leaner.  Meanwhile, “accelerating the velocity of processes” does not mean working faster; it means speeding up the end-to-end process, or the entire “lead time.”  Think of this as the time lapse between ordering something online and when you receive it.  Compressing those lead times at each incremental step possible increases velocity and makes you leaner.

Meanwhile, six sigma is a well-defined system of striving for the near-perfect delivery or products or services.  Without getting into its technicalities – books have been written – the idea is that if you can get to six “standard deviations” (a mathematical concept relating to how far a given process deviates from being perfect) you will have arrived at better than 99.999% (“five nines”) reliability in your process.  (Since one of our staff is a Six Sigma Black Belt, I’m sure I’ll hear about it if I’ve misled anyone here…)

Like lean, six sigma also has an acronym to describe its framework.  That would be DMAIC: Define, Measure, Analyze, Improve, and Control.  As implied above, with six sigma, you identify the root causes before implementing solutions.

When you combine the two, as Peter J. Sherman, an APICS Certified Supply Chain Specialist (CSCP) at Riverwood Associates writes… “we get something powerful — a business improvement methodology that maximizes shareholder value by achieving the fastest rate of improvement in Cost, Quality and Customer Satisfaction. It focuses on reducing waste by streamlining operations and reducing defects (i.e., services not delivered on-time or within budget).”

While companies generally prefer to utilize some outside assistance in solving their own individual continuous improvement initiatives, isn’t it heartening to know that at the core of it all, the concepts are so beautifully simple and logical?  The challenge, as is so often the case, lies in having the discipline and technique to pursue a successful initiative.



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