Intelligent Manufacturing € March € 1995 € Vol. 1 € No. 3

Foundation for Profits:
The Basics

By Paul Peyton

"If we had those things, we wouldn't need MRP!"

This spirited comment was made by my former boss, the manufacturing manager of a major manufacturer of commercial cooking equipment. I had just reported to him the prerequisites to MRP success, which I had learned at a week-long MRP implementation school conducted by IBM in Chicago. My report concluded that our company needed control over inventory, accurate bills of materials, and a master production schedule that was stable for the length of the lead time of our longest lead time material.

His comment has influenced my work for nearly two decades. In the fast-paced manufacturing world of the 1990s, I see increasing numbers of companies who mistakenly believe that some program or technique will turn around their inefficiencies and high costs. Most are tagged with some three-letter acronym: MRP, JIT, TQM and such. I recently taught a professional class in which the instructor's manual exhorted students to memorize four and one-half pages of acronyms.

All of these programs are techniques. We should view these techniques as tools. In order to benefit from the use of any tool we must: 1) Learn how to use the tool, and 2) Learn when and why we should use the tool.

Many of us in American manufacturing are technique-happy. We are so excited about learning how to use new tools that we are neglecting to learn when and why we should use those tools. It's somewhat like a mechanic who replaces the springs on a car just because he has a new spring compressor and has learned how to use it. But did he troubleshoot the car to determine whether it needed new springs? Is it going to solve any problems to put new springs on the car? Or is it a waste of money that fails to address the real problem?

My company of long ago learned about the new tool of the era, MRP. They bought it. But no one did the troubleshooting to find out whether the company needed MRP. Or whether the elements of success were in place to allow MRP to work. Sort of like putting new springs on a car with no axles. The owner will realize no improvement in performance. MRP did not work in my company because the basics were not in place.


Basics: The Foundation of Manufacturing
So, what are the basics? They are the inviolate principles that allow manufacturing to work. Something like the laws of physics for manufacturing.

An example is a Stable Master Production Schedule. In the example above, I proceeded to work with Sales and Production to gain stability for the Master Schedule. We designed a simplistic program to sort existing orders by due date and model. Planners put together a single level bill of materials for each model that listed major items only ("A" inventory items...). Production agreed to keep all major items in orderly locations in order to allow quick, visual inventory verification.

At the beginning of the project, the company had a production rate that averaged 66 units a day - with extensive overtime. Six weeks later, we improved to 100 units a day with nearly no overtime. That's a 50%+ increase in productivity.

Here's the point: In six weeks time, we realized more productivity increase than the company ever hoped to achieve with a full MRP implementation. That increase in productivity came from a crude and simplistic attention to the basics. (It is noteworthy that the company was still using the simple scheduling program 10 years later and had made no further efforts to implement MRP.)

The editors of Intelligent Manufacturing have asked me to write a series of articles, the central theme of which will be a call for attention to the basics - the building blocks of profitable manufacturing. The time is critical for America. We have drifted so far away from the basics that we think our difficulties with manufacturing are normal. Many of our managers are attempting to implement sophisticated techniques when the basics of their businesses are in total chaos. They are doomed to frustration, high costs and inefficiencies.

In these articles, we will talk about the basics and the complex interrelationships among them. What do we mean by stability and how does it affect profits? How does product design lock in (or lock out) quality and cost control? And what about people: How does morale and involvement contribute to profits?

We will talk about organizational structure and its effect on the implementation of the business plan. We'll also discuss how communication and responsibility and accountability fit into the foundation of manufacturing profits.

Cost control is one of the basics. The basic element of cost control is the ability to determine real costs. We will talk about both and their impact on the bottom line. We will talk about accurate forecasting. It is possible for you to have an accurate forecast - discover how you can and why you should.

Everybody worries about excess inventory. We'll look at the causes of inventory in an upcoming issue. When you can manage the causes of inventory, you are managing the inventory - and it's easier. We'll also talk about management in general - what to manage, how to manage and when to manage.

The basics of manufacturing success are something like the laws of physics. At once they are both ultra-simple and ultra-complex. A full understanding of the basics is the foundation for long-term, high-level success in manufacturing. Stay tuned to Intelligent Manufacturing.

Paul Peyton is president of DynaTech Industries (Colville, Wash.), a manufacturer of a new type of solid fuel heating device. Over the course of his career, he has also been manufacturing manager for Aladdin Steel Products, manager of manufacturing planning and control for Welk Brothers Metal Products, and manager of product engineering for Frymaster. He can be reached at (509) 732-4066.