By Tom Wallace

We've been talking about getting flexible. Not flexible as in deep knee bends, jumping jacks, and touch your toes. No, this is about flexibility in manufacturing.

In last month's column we stated that most manufacturing companies need far greater flexibility due to the increasingly stringent requirements being placed upon them by their customers. In that column we focused on products and how product design can support or inhibit flexibility. Now it's the time to look at processes and their role in being flexible.


Quick changeover
Do you find that you spend a lot of time worrying about lot sizes, run lengths, EOQs, etc.? Do you engage in frequent debates about these topics with people in other parts of the company? Do you often find yourself wrestling with the terrible trade-off of high customer service vs. low inventories vs. the production efficiencies that come from long runs? If so, your company is a candidate for getting very serious about reducing your changeover times -- and reducing them sharply.

Many companies have achieved 50 to 75 percent or greater drops in setup time with amazingly low investment, and they've done it quickly. These "smart" companies then use some of the money they've freed up out of the inventories to fund further setup reductions, driving their changeover times down even more. As a result they've been able to sharply reduce their run sizes with no increase in changeover cost and no decrease in output. Think about it this way: Reducing changeover time by 75 percent makes it practical to cut run sizes from, say, one month's supply down to one week's supply. The benefits:

1. Shorter runs mean fewer stockouts. This is because the company can cycle through the product line much faster. They're not "as far away" in the cycle from running a product that might be headed for a stockout.
   
   
2. Shorter runs can mean shorter lead times, for the same reason as above.
   
   
3. Shorter runs mean lower inventories. By putting one week's worth into inventory at a time, rather than one month's supply, the lot size component of the inventory should drop sharply. Safety stock should go down also because less forward protection is needed.

It doesn't get much better than this. Reducing changeovers gives manufacturing people the ability to do a far better job of servicing external "customers" -- end consumers, retailers and distributors -- through better customer service and shorter lead times. Simultaneously, you'll be helping your internal customers -- marketing and sales -- by keeping their customers happy. The financial folks will also be pleased by the lower inventories. And for those naysayers in your company who maintain that you can't afford to spend the money necessary to reduce changeover times, remind them that it needn't take a lot of money to get started. Then ask them this question: Where would you rather put your money -- in high inventories, or in better processes to service your customers?


Flow
The issue here is flow vs. functional. In-line flow processes are far superior to the classic arrangement with functional departments; for example, a machine shop with all the lathes in one area, the presses in another, and the automatic screw machines in the building next door. In a flow organization, the production resources (people, equipment) are grouped based on what they do to the part or product as it moves along; dissimilar pieces of equipment sit side by side.

If you work in a "process industry" kind of company, you've got flow already and you won't have to worry too much about this topic. (On the other hand, you'll probably have more of a challenge in reducing changeovers.) However, if your resources are currently grouped functionally -- by similar type -- then you are a candidate for going to flow. Companies do this by creating manufacturing cells where dissimilar resources are placed side by side based on what they do to the product.

Why go to flow? Flow is faster because the move time and queue time so prevalent in functionally organized factories are largely eliminated. Flow results in sharply lower work in process inventories. Flow also enhances quality because feedback is more immediate. But more on quality in a moment.

First, a caveat: For reasons of flexibility it's sometimes preferable to stop short of 100 percent flow. Last month, I cited the benefits that one process company achieved by breaking its flow arrangement into two stages: the first stage makes the base product but stops short of the point where the optionality is added. The second stage adds the unique features of the individual products, and it does this very quickly and flexibly.


Quality at the source
If quality is viewed as an attribute that's built into the product, rather than being inspected in, then this stop is very natural and easy to accept. Notice, I'm not saying easy to implement. As thousands of companies have found since the beginning of the quality revolution back in the 1980s, it's hard work to achieve source assurance of quality; but it's worth all of the effort and the relatively few dollars it requires.

The tools exist and so does the knowledge of how to use them. For example, statistical process control (SPC) enables people to measure the critical attributes of the product as it's being produced and to stop the process when the measurements indicate that the process is trending out of control.

However, there's more. Shigeo Shingo, one of the most brilliant industrial engineers to ever set foot on a plant floor, claimed that SPC is not the ultimate quality assurance tool. Rather, he asserted, the superior approach is "poka-yoke" -- the Japanese word for mistake-proofing. It says, simply, to design the product and/or the process so that it's impossible to perform the operation incorrectly. If the only way you can possibly make the product is the correct way, then the need for SPC and other control techniques tends to go away.

Let's sum up our discussion of process so far with:

Principle of Flexibility #4 -- quick changeovers, in-line flow processes, and source assurance of quality are indispensable elements of flexibility in manufacturing.

If you haven't begun working on these yet, I suggest you get started. Now.


Location
Location can be an important part of operational flexibility. This is because where the product is finished can make a big difference.

Last month we talked about deferral -- the need to hold off as long as possible in configuring the final product. We identified one of the key principles of flexibility: Add the optionality after the customers tell you what they want, and do it quickly.

Well, if you ship your product from distribution centers (DCs) rather than from the plant, what does that say about where the product should be finished? If you finish the product at the plant for shipment to the DCs, then it's a make-to-stock situation and you'll have to lock in the optionality before you're sure of exactly what the customers want. Avoid that if you possibly can, because that's the road to higher inventories, lower customer service and increased frustration.

Let's start thinking outside the box. Where is it written that all of the value-adding activities must be done inside the plant? If you do the finishing work in the DCs, you may be able to complete the product after you receive the customer order. In effect, the product becomes make-to-demand (or, if you prefer, finish-to-order).

Where it's practical, make the components, parts, modules, base product, etc. at the plant and ship them in a semi-finished state to the DCs. Let the DCs finish the product after the customers tell them exactly what they want. Defer adding the optionality not only to the latest possible point in time, but also to the best possible point on the map. That's normally the location that's closest to the customer.

So far we've looked at the product and process aspects of flexibility. Next month we'll cover the third of the "three Ps of flexibility": planning.

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