In a complex, repetitive manufacturing environment, Blount Sporting Equipment Division produces small arms ammunition, reloading equipment and components, gun care products, telescopic sights and mounts, shooting accessories and industrial powerloads. Employing approximately 1,000 people, Blount has plants in Idaho, Wisconsin, California and Florida.

In an industry where many companies are having rough times, Blount had one of its most profitable years in 1996 at its Lewiston, Idaho facility. Management believes an integral component to Blount's success lies in the changes they made to their manufacturing processes and measurements by using Thru-Put Technologies' Resonance scheduling, execution and planning software.

Although it would appear that Blount's environment is tailor-made for theory of constraints/drum-buffer-rope (TOC/DBR) scheduling, execution and planning, TOC/DBR had a hard birth here. After all, 45 years of evolved traditional accounting practices of tracking efficiencies were very ingrained within 11 production departments. Those looking to shift to TOC/DBR wanted to use a new set of measurements that sounded like babble to their management peers. They were looking at the velocity and stability of materials flow, while the others were looking at cost per part.

The TOC/DBR devotees felt that trying to measure efficiency is equivalent to locating a specific gallon of gasoline in your tank. First of all, you can't find it, and secondly, you're asking the wrong question. Instead of concerning yourself about where it is, you should be asking if you will use it, if it will work, and how far will it take you.

As for Blount's operations, the wrong questions were being asked. They had inventory, plenty of it. But could they use it? Unfortunately, much of the inventory was in the wrong products. Customers wanted other products. The work-in-process (WIP) mix was wrong for the products generating the best revenue streams. Sales orders were climbing, but shipments weren't. The dollars-day-late figure was approaching $60 million. Blount had to change — its procedures and its culture — to remain profitable in a capacity-constrained situation.

With TOC/DBR, checking the efficiencies of individual resources is out. Instead, complex manufacturers using TOC/DBR view the plant as a chain of resources working in tandem towards common objectives. Just as its weakest link determines the strength of a chain, only a few critical resources constrain shop floor performance.

Automating TOC/DBR scheduling, execution and planning provided Blount with a systematic approach to identifying plant constraints and exploiting them to their maximum potential. As these weakest links perform, so too does the plant. DBR then subordinates the rest of the plant to these constraints, feeding them by pulling product through the shop and maximizing their throughput.

The constraint is the DRUM, establishing the beat for the plant. A time BUFFER of materials to feed the drum (or constraint) is then established to assure the drum is at maximum capacity. The ROPE pulls the product through the plant to assure this happens.

With this new paradigm, Blount obviously needed to re-evaluate measurement standards — constraint throughput, schedule attainment, safety stock levels and dollars-day-late become important standards. Contrary to machine efficiencies, DBR proves that scheduling all resources to 100 percent efficiency is a detriment. More often than not, one simply ends up with more WIP inventory backed up behind the constraints. The machine that is producing such marvelous efficiencies may be the very work center hindering the drum from beating in the proper rhythm. Capacity and throughput do not improve; only WIP and cycle times are increased.

Blount had "controlled" its inventory to the point of not producing the right products at the right time. That's when a safety stock policy was implemented and a serious effort to drive customer service with Resonance began to have effect as more people came on board. Not all were convinced, though. The battle for changes in measurements intensified when some costs actually increased, especially when plant "efficiency" dropped from 100 to 91 percent!

As mentioned, Blount had to rebuild safety stock (i.e., buffer) in the right products to the right level. The manufacturer absorbed other costs when elevating some of its constraints. Plus, outsourcing expenses added to the total. On top of this, market pressure forced some sales price (margin) reductions. Explaining that DBR requires more set-ups and more time only confused the issue. So, at the beginning, the manufacturer was no better off according to the financials ... except everybody was aware of one major difference. Blount was now shipping product that met customer requests.


What really happened?
In this capacity constrained environment, while adding new products and customers along with sales approaching record levels, WIP actually trended flat or slightly downward. Raw materials increased due to more expensive outsourced components. Outsourcing was the most immediate way to relieve congestion at the primary constraint.

By design, finished goods did, indeed, increase dramatically as the safety stock policy was implemented. Resonance drove the plant to get the right stuff into inventory and out the door at the right time. Meanwhile, some of the "wrong" stuff stayed put in the warehouse.

What is amazing is that these dynamics began to occur immediately — within two weeks — after shop floor individual department efficiencies were dropped.

Since Blount knew the parameters of the safety stock requirements, it needed to track the progress. Results again immediately improved once efficiencies were dropped. Blount began staying within its parameters and started to reduce and tighten variability within them.

Today, Blount's primary measurement is Dollar-Days-Late ($DL). When management quit worrying about individual department efficiencies, $DL was at $60 million. As earlier mentioned, once safety stock was brought into the right balance, both raw materials and WIP dropped. Shipments increased. Most importantly, however, $DL was dramatically and quickly reduced to one-third its previous level, less than $20 million. Blount's present goal is to lower $DL even more.

The traditional financials also improved. At the Lewiston plant:

• Operating income is 35.9 percent better than budget
• ROCE (return on capital employed) is 30.3 percent better than budget
• Inventory days of COS (cost of sales) improved by three percent

Although "efficiency" and "headcount" measurements become irrelevant in the face of these improvements, the die-hard traditional cost accountants are still watching them. Managing change continues to be the greatest constraint.

For complex manufacturing operations such as Blount's, DBR is the only way to schedule, execute and plan the shop floor. Although there can be some anxious and frustrating times while the company changes to DBR, the results are worth it.

The commodity semiconductor market is a tough market to succeed in. Business as usual means that product prices routinely fall by about 50 percent per year after product introduction, product life-cycles continually shorten, and customers switch suppliers in a blink. Semiconductor suppliers must continually reengineer products and relocate manufacturing sites to reduce their costs while revenues decline.


The challenge
Cypress Semiconductor is thriving in this challenging environment. The $600 million company, based in San Jose, Calif., supplies integrated circuits to leading computer, networking and telecommunications companies worldwide. Products include Static RAM (SRAM), program read-only memory (PROM), data communications devices, programmed logic devices, computer products, and modules for customer PCs and workstations.

Cypress' global network of four wafer fabrication plants and 10 assembly and test facilities produce 450 chip types and 37,000 stockkeeping units, presenting a production planning challenge.

"Our industry is very capital-intensive. To build a new fab is a quarter of a billion dollars, to buy a new piece of test equipment is a million dollars, throw in a couple of handlers — a million and a half," says Steve Alexander, director of industrial engineering and operations research at Cypress Semiconductor. "So the key business issue is, how can you go ahead and utilize your resources effectively and efficiently? When you have many different types of product — and we have 14,000 end part numbers with multiple different flows — it's very difficult for the human beings alone to go ahead and be able to identify when to make what product."

Although Cypress had been expanding its production capacity, plant and equipment utilization was low — in some cases as low as 45 percent — and customer deliveries suffered. In most cases, the bottlenecks were in work planning and sequencing. Cypress had reached a point where conventional planning and scheduling methods fell far short of meeting their needs.

Cypress management knew that optimizing their supply chain was the key to closing the gap between customer demand and production capacity, and to improving customer service and return on assets. Cypress looked at 40 different software packages and chose MIMI (Manager for Interactive Modeling Interfaces) supply chain optimization software from Chesapeake Decision Sciences of New Providence, N.J.

"We decided early on that there was a whole group of possible solutions. But MIMI had the demand management portion that we were looking for, the scheduling portion, and the ATP portion," says Alexander.


The solution
Good planning requires good forecasting, so forecasting market demand was at the core of the new planning process. "We can't afford lost capacity by underloading our plants," says Alexander. "But conversely, we can't afford to build lots of inventory. So our forecasting system must look ahead and tell us what we need to build with minimal risk." With MIMI, the demand forecast is now done more accurately, and in less time than ever before. Combining accurate forecasts with backlog and inventory data, the planners can load the plants to cost-efficiently meet customer needs.

For Cypress, optimization means meeting customer delivery requirements at the lowest cost. "The customer is our number one consideration," says Alexander. "In the semiconductor industry, if you tell a customer that you can't deliver to their cost, quantity and time requirements, you effectively lose the order."

MIMI's linear programming module optimizes plant loading to eliminate backlog and enhance flexibility while making a profit. Says Alexander, "Without linear programming tools, we could never handle the complexities of our environment and make a profit. MIMI integrates all our planning data and analytical tools into a single package, saving us time and money."

After generating the forecast and creating the production plans, Cypress uses MIMI's "able-to-promise" (ATP) capability to commit orders against future production. As customers make delivery requests, Cypress' order services people use ATP to accurately make commitments between three and 16 weeks. ATP automatically checks the plan and provides a delivery commit for the customer. "This allows our order services people to commit deliveries and take orders in one phone call, without having to call the plants," says Alexander.

Scheduling the local manufacturing facilities will be addressed in the next phase of the project. "We phased the MIMI rollout to deliver the least-effort, high-payback functions early on," says Alexander. "If we can understand demand and create a reasonable plan to load the facilities, we've made a giant step — the shop floor scheduling system can wait."

The company plans to install MIMI's scheduling module at each plant to provide the production facilities a common set of tools to help run their business. The MIMI modeling tools can be tailored to each facility's requirements, enabling local staff to do a better job of scheduling and execution. Adds Alexander, "We don't want to control our manufacturing process from halfway around the world."


The benefits
Utilization of production assets significantly improved. Says Alexander, "Savings are enormous, when you consider the capital investment that we don't have to make to meet future demand." In the process, the company has also changed several business practices that no longer add value. Another benefit stems from operating from one common set of data. In the past, managers spent an enormous amount of time discussing the validity of their individual reports and "negotiating" yield, cycles times and capacity based on their unique sources of information.

"At Cypress, we were running at 88 percent performance on time to original commitment. After the implementation of demand management, linear programming, and able-to-promise, that performance has hit the target rate of 97 percent," says Alexander.

Like most manufacturers of highly engineered products, Navistar International faces major complexity issues with product variation and options on its leading products � heavy and medium trucks and buses. A major competitive differentiator for Navistar is customization. Navistar customers know they can purchase a vehicle that will be tailor-made to suit their needs.

Navistar faced continual challenges in creating, maintaining and using product structure data that fully satisfied the diverse needs of many users. Product structuring processes were based on the features/options approach to managing unique configurations. Two databases were used: an engineering parts list and a manufacturing bill of material. Highly product knowledgeable people were needed to bridge the information flow between the two databases. Problems of inaccurate data abounded; constant checking for quality of product data was a way of life. Even so, Navistar was able to build quality trucks and buses, but at a painful cost.

A substantial change in methodology for structuring product data was clearly needed. In conjunction with other major initiatives targeted at eliminating wasteful and inefficient processes, top management chartered a project to completely overhaul the existing product structuring methodologies.

Fortunately, in recent years, newer, more advanced techniques for managing complex product definition and use have been developed. Generally labeled as product configurators, these techniques have been pioneered by companies such as Digital Equipment Corporation.

Digital knowledge engineers worked with Navistar product managers and design engineers to develop configuration rules that were then coded into the configurator knowledge base.

After looking at over 20 software packages, Navistar realized the best approach was to capitalize on Digital�s application development expertise to design a fresh, advanced configurator package. Titled DCP (Distributed Configuration Platform), the resulting �heart of the business� process encompasses the entire spectrum of configuration information needs of Navistar and its dealers. Because of its success at Navistar, DCP is now offered as a commercial product sold through Enterprise Knowledge Systems (Marlboro, Mass.), a Digital spin-off.

The DCP provides a user-extensible platform for organizing and storing product structure knowledge, and for using that knowledge to produce and validate configuration solutions. With DCP, Navistar engineers � as part of their normal design activities � document the products as they are developed. Navistar found that they did not need a group of experts to act as translators between the product designers and the system. The use of DCP reduced the complexity and size of the database by a factor of six.

Once the engineering design is established, the DCP provides the information to Navistar�s Sales Tools system � a portable laptop computer proposal system. The online order/proposal system using DCP logic is a key Navistar strategy for maintaining customer satisfaction, increasing market share and improving the efficiency of the sales process.

Properly configuring a truck is a complex task. Many variations must be analyzed. A selection of a variation may need to be analyzed for the effect on other selection possibilities; for instance, a choice of an engine may affect transmission, gear ratio, etc. And cost may be a constraint. In a premier example of consultative selling, a Navistar dealer may dialogue with a prospect about their needs, immediately perform �what-if� scenarios, configure a recommended solution, then present the proposal, including pricing and associated graphics.

Since DCP contains all of the rules required for complete order validation and selection of parts at the time the order is released, manufacturing is ensured of a completely accurate order. The �per truck� ordering information is then stored in the electronic order file folder (EOFF) system. This new system provides easy access to accurate and timely configuration information to numerous downstream departments in the order fulfillment cycle, such as process planning, accounting and the assembly floor.

Of the many downstream uses of DCP configuration information, the AIS II (assembly information system) typifies the extensive use of the DCP information throughout the company. In AIS II, the �per truck� configuration information is integrated with the scheduling information to produce a detailed dispatch list for each work station. In addition, all assemblers have access to detailed �per truck� assembly instructions, and all drawings and bills of material are available online at any PC. At the end of the order fulfillment cycle, the �as-built� information is then transmitted to the service parts and vehicle information system. The quality of this product information has been improved due to eliminating duplication of information that required cross-checking; for instance, 40 percent of shop diagrams have been eliminated.

In the process of development, many of Navistar�s home-grown systems on IBM mainframes were replaced by the DCP on Digital AlphaServers and a new network of client workstations and PCs. Following an implementation strategy of gradual replacement, some of the IBM mainframe systems are still used in conjunction with the newer Digital-based systems. For parts planning, a legacy master schedule system drives a weekly material requirements planning (MRP) process with a planning horizon of six months. Bills of material used in the MRP system are mechanically driven from the DCP logic, thus keeping the databases in synchronization. n

When you are manually processing export documentation, it is easy to make a mistake. When you are a multinational manufacturer relying heavily on foreign markets, that mistake can be costly.

This is why VeriFone, a Hewlett-Packard Company and a global provider of secure electronic payment solutions (e.g., credit card authorization machines, secure set Internet payment products, and integrated hardware and software solutions for smart card payment) put aside its typewriters and pencils and implemented EMS-2000, an international trade logistics software solution from Vastera.

"Our computer system wasn't conducive to importing and exporting," says Patricia Maloney, VeriFone's import/export manager. "It was designed for invoicing and producing packing lists only. We filled out licensing documentation and airway bills on a typewriter or by hand. Each order took at least 30 minutes to process."

So VeriFone went looking for software that would automate the documentation process, expedite exporting and importing and, most important, ensure everything was in compliance with international trade regulations.

"We had situations when information was not copied correctly from one form to another or numbers were transposed on documentation," Maloney says. "We needed to eliminate the potential for human error."

Before choosing a software system, VeriFone conducted a complete analysis of its import/export processes based on existing international trade regulations and business functions. A committee was formed with representatives from every department affected by international trade, from accounting and sales to product delivery. The committee examined each department, asking what they needed from an automated import/export software system.

"We were not surprised the issues raised focused mainly around compliance and completion of documentation," Maloney says.

After looking at a number of software packages, VeriFone selected EMS-2000 to automate its international trade logistics processes. Developed by Vastera (originally Export Software International), EMS-2000 works with a company's existing order entry systems to produce complete and accurate export documentation and keep them in compliance with Export Administration Regulations (EAR). Users are assured compliance with the latest regulations because Vastera provides regulatory updates daily.

The software also helps companies choose the correct license for all exports based on the export control classification number and the destination country. License-decision processes are automatically kept current with changing EAR.

"EMS-2000 filled almost all our requirements, especially the Table of Denial Orders." Maloney says. "That was a critical component not a lot of the products we looked at included."

Table of Denial Orders, also called Denied Party Screening, automatically flags individuals, companies or governments closed to trade and denies orders intended for those parties.

VeriFone began implementation of EMS-2000 by installing a test version of the software, and by running orders side-by-side through EMS-2000 as well as manually to make sure every export process was being captured by the software. Once Maloney was satisfied the software could handle the full load, manual processes were stopped all together.

One challenge VeriFone didn't count on with automation was setting up its database of products. Maloney says the company never had to look at its products in a mass application. The company's former process was more decentralized, and connecting everything with its new international trade logistics software proved more difficult than expected. Also, Maloney says some employees resisted the change to an automated system.

"Some people didn't understand why we couldn't keep doing things the same way we had been doing them," Maloney says. "The Vastera support staff worked with our technical team to ensure everything was in place and everyone was trained."

Maloney says the main benefit of EMS-2000 is the peace of mind it provides for her and her staff. She says they no longer waste time worrying whether exports will clear customs and be within compliance. Keeping the database updated is the only remaining challenge. These activities, which used to occupy a large portion of the export/import divisions workday, are handled by EMS-2000 and have allowed them to increase their delivery volume without adding staff.

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