Apics pdm intro 4-13-10
- 1. Implementing Synchronized Planning in a Complex Manufacturing Environment A Case Study April 13, 2010 Terry Cook, CFO – Delkor Systems Inc. Rick Bernett, Partner -3sixty solution llc.
- 2. 2 Thank You! for Supporting our APICS Chapter Our goal is to share a real story along with a few insights we gained along the way: 1. Appreciation of the differences between the goals of education and training 2. Ways to eliminate the ‘islands’ of information to improve enterprise planning 3. Formalizing an effective agreement between the sales function and operations 4. Creating the drum schedule based on the strategic constraint and synchronizing MRP and final assembly to the drum schedule 5. A few tips on overcoming pitfalls of implementing change
- 3. 3 Agenda I. Overview of Delkor – Terry C II. Why We Started – Terry C III. How We Approached the Situation – Rick B IV. Results/Key Insights – Terry C V. Next Steps – Terry C
- 4. 4 I. Overview of Delkor Systems Manufactures end of line packaging equipment Originally started in mid 1970’s Majority of business sold in 1990 with retirement of owner The name ‘Delkor’, an idea, and 3 employees The idea turned out to be patentable - Spot-Pak® And the company grew to $37M averaging 20% per year Employee count grew to 90 2 Buildings, one 35K Sq. Ft. and the other 22K Sq. Ft. used for sub assembly and storage Key customers include Fortune 500 food companies Innovation and operating cost reduction is a key offering to our customers
- 5. 5 Trayfecta ® S FormerSpot-Pak® Loader Delkor Systems designs and manufactures end-of-line automated packaging systems Our equipment provides robust, innovative solutions for carton forming and closing, top load case packing, tray packaging, and robotic palletizing Overview of Delkor Systems (Con’t)
- 6. 6 Historically, Delkor custom engineered, machined, assembled, tested and installed Lead times were 18 – 22 weeks Machine prices vary from $10K to over $500K Typical machine consists of 3,000 parts About 30,000 items in Item Master File Internal machine shop Strong supplier network, most local Several Patents Overview of Delkor Systems (Con’t)
- 7. 7 Started first Company-wide strategic planning process (with guidance from Fred Green) Completed our first draft of key process maps and SOP’s Completed first Corporate strategy meeting Strengthened our management team with a new Director of Engineering and a new Director of Marketing We had expanded our product lines beyond Spot-Pak® The economic uncertainty had finally caught up to Delkor in Q2 08 – we had incoming orders, but they were declining, compared to the usual 20% growth we had become accustomed II. Why We Started Spring 2008 -The Context
- 8. 8 Why We Started (Con’t) This lull was seen as an opportunity to improved planning functionality in our existing ERP system along with other strategic initiatives Purchased the ERP system in 2003 Microsoft Dynamics NAV (Navision) Good handle of inventory status and cost information However not using MRP as a planning tool Purchased Solid Works 3D CAD system in 2000 Several report writing tools available But as the company grew, the impact was felt in numerous ways Inventory crept to unacceptably high levels Expediting activity increased Rework in assembly increased to unacceptable levels Overall work environment became overly reactive Current planning processes limiting continued growth
- 9. 9 Engaged 3sixtysolution to guide the overall project Retained our Navision support (Solution Dynamics) for key technical support Following the initial 3sixty solution assessment, we agreed on phase 1 scope – Material Planning fundamentals This included: Standard vocabulary (using APICS as reference point) Educational workshops (key assumptions, necessary conditions, limitations etc.) Viable Master Scheduling process Full MRP functionality in test database Goal to complete by 6/30/2008 Why We Started (Con’t)
- 10. 10 III. Our Approach Kicked off with a full day offsite education session with Senior Management Fully utilized the existing MRP project team including: Terry Cook - CFO and project sponsor Dirk Norgaard - Inventory mgr. Jenny Mate - Business Analyst Tom Tetzlaff - Production mgr. Met twice weekly – maintained action registry and project plan etc. Next, held a series of educational workshops covering all relevant topics (i.e. MRP mechanics etc.) Needed to integrate this initiative with the new strategic planning process
- 11. 11 Order Fulfillment Process Assembly Assembly Assembly Assembly Ship Assemble to Order Kitting Machine Shop Suppliers Make to Stock 25% Order Engr. Machine Shop Suppliers Make to Order 75% Delkor was predominately engineer–to-order About 75% MTO & 25% MTS
- 12. 12 A Few Pinch Points! Assembly Assembly Assembly Assembly Ship Stores Machine Shop Suppliers Order Engr. Machine Shop Suppliers Highly skilled Techs! Excellent Inventory Accuracy Make to Stock items Based on Min-Max Shortages/ Stealing/ Rework / Excess $$ Late Drawings The Green Blob! Hand-Offs
- 13. 13 New Direction As part of the new Strategic Plan, Delkor decided to greatly increase Product Standardization From 25% to 75% Standardized items From 75% to 25% Custom Items A Major Engineering initiative! More important, a major culture change! But it created a new opportunity on how to proceed
- 14. 14 1. Training vs. Education Education Deals with understanding underlying concepts and principles Helps to understand how various functions relate to each other Answer the ‘why’ questions Connecting the dots Provides context
- 15. 15 Education at Delkor A key objective was education! Directors and key managers attended most of the workshops! Workshops included time for dialogue! Solidify understanding and acceptance Worked to get agreement on: The specific problems we were addressing (scope) The reasons why the proposed direction would solve the problems Recognize possible negative consequences and address directly
- 16. 16 Education & Constancy of Purpose Deming Point #1 - Constancy of Purpose Repeat, repeat and repeat until the “aha’s” happen! Discipline to avoid the easy ‘outs’ or ‘controversy’ A few eggs must be broken to make an omelet! Communicate “Formally” Quarterly company reviews Weekly status reports to CEO and Directors Bulletin boards etc. More importantly, communicate “Informally” Not over hyping, but honestly explain what and why we are doing this transformation Explain the likely organizational changes/roles personally to individuals
- 17. 17 2. Creating the Bridges to the ‘Islands’ of information Assembly Assembly Assembly Assembly Ship Assembly had info Kitting Inventory Control had Info Order Engr. Machine Shop Suppliers Engineering had Info The machine Shop had info Purchasing had Info Sales had Info Sr. Mgt had Info There were tons of data, but little credible “information!”
- 18. 18 Engineering has full design authority A 3D software product (Solid Works) was used to accomplish their work – the initial BOM resides in Solid Works ERP system resides in Navision Bills of Material must be transferred from Solid Works to Navision Initially, this was a manual process! Engineering Solid Works BOM ERP (Navision) BOM Bridge 1 Solid Works CAD to Navision ERP®
- 19. 19 A critical information interface had to be created Delkor IT (Paul C) worked to create electronic transfer from Solid Works to Navision’s BOM file This “BOM Push” was a major and critical IT effort We decided to wait until this was complete before going live with full MRP It also forced us to improve the ECN process Bridge 1 (Con’t) Engineering Solid Works BOM ERP (Navision) BOM
- 20. 20 While MRP was ‘installed’, it was configured in a basic Min/Max mode – i.e. treated dependent items as independent demand To get full MRP benefits, we had to re-configure it Updated numerous planning parameters With the new standardization effort, agreed to master schedule at the key option level Planning BOM Agreed to test full MRP functionality using a pilot product line (Trayfecta) in the test data base To reduce internal effort we got assistance from Solution Dynamics
- 21. 21 Planning BOM Example BOM’s could be as deep as 5-7 levels SP-12345 Spot Pak Loader XYZ Food Inc.
- 22. 22 Using Planning BOM’s, the MPS is manually entered into Navision Custom parts, of course, are build to order With MPS, Inventory File and BOM’s, the MRP calculates all dependent material needs (i.e. planned orders) Agreed to floor stocking where it was practical Full MRP Functionality
- 23. 23 Custom items are designed and built to order, thus the process starts with a Request for Proposal (RFP) If customer accepted the proposal, had to create a Sales Order in Navision - a manual process Agreed to purchase a product configurator that is a bolt-on application to our Navision ERP System This project is still in process! Will create the demands (Options) in Navision Reduce RFP complexity Reduce manual data entry RFP Process Stand alone Order Entry Navision) Sales Process Bridge 3 RFP’s to Order Entry
- 24. 24 The next bridge, the S&OP process, took more than software! S&OP a necessary bridge
- 25. 25 Value is created when we sell something – the process starts with Sales! Delkor provides capital equipment thus sales process is long & complex 1-2 years not uncommon 3. Sales Buy-In A Necessity for ERP Success Sales involves other groups Applications engineering – Quotes, Proposals & Changes Engineering – Is design viable? Assembly – Can we actually build it? Finance – Are we going to make money? Sales staff is technically capable, but focus on sales, not forecasting What we needed for effective planning was a ?
- 26. 26 Conceptually S&OP is easy! Even the details are not too involved Sales & Operations Planning Version 1.0 Initial Sales Forecast Formal S&OP Meeting Recommendations Pre-Meeting Capacity Check Updated Sales & Production Plan The real challenge is changing old nasty habits!
- 27. 27 Required CEO’s direct involvement (with a key push from the CFO!) This took several iterations! We back slid at least several times But we pushed forward Sales Customer Mgt. System (ACT) re-implemented Guidelines on inclusion to sales forecast agreed Forecasting is still more art than science! New Approach – if something ‘big’ happened, no hallway orders-meet as a team and agree from there Discipline! Old habits die slow & must be driven from the top! Note, if the above is not possible – It’s a Show Stopper!! Creating the S&OP Process at Delkor
- 28. 28 Summary thus Far 1. Provided educational workshops 2. Bridged many ‘information islands’ BOM Push Full MRP capability Order Entry Configurator (in process) 3. Formal S&OP in place (i.e. Bridge #4) But we did not want bridges to nowhere! Still had not yet fully synchronized the order fulfillment process
- 29. 29 4. The Strategic Constraint - Drum Beat The Theory of Constraints (TOC) includes the 5 Focusing Steps: 1. Identify 2. Exploit 3. Subordinate 4. Elevate 5. Start Over In 2008 the true system constraint was obviously external - the ‘market’ The sales team worked to ‘exploit’ this constraint, but this is another story unto itself Internally, however, we needed to identify the strategic constraint – a logical control point to synch up all other activities
- 30. 30 A daily “Engineering Release” meeting was held to provide downstream resources as what they could work on the next few days Engineers were rushed and stressed Someone was always waiting for some information from engineering-specifically, mechanical engineering) Design Engineering Assembly Machine Shop Purchasing A new drawing
- 31. 31 Step 1 – Determine the Strategic Constraint Where should the internal constraint be located? It depends! E.g. what is the natural constraint of a Boeing 767? Kitting Order Entry Engr. Machine Shop Suppliers Assembly Assembly Assembly Assembly ECN’s Recall, Delkor designs and builds machinery
- 32. 32 Step 2-Exploit How to Best Utilize Engineering? What actions would allow us to get the biggest bang for the buck in engineering? New Director of Engineer – Adam Koller Training in updated Solid Works CAD system New roles – e.g. have tech run interference between assembly, machine shop etc. to cover the most common design issues Improved ECN process Improved upfront scrutiny of sales order proposals – validate we can do what customer wants Stop the bad multi-tasking (huge urban myth!) Create a finite schedule for Mechanical Engineering which would be used to synch up all other operations- “Drum” Schedule
- 33. 33 How to Schedule Engineering? July Aug Sept Oct Nov Dec Project ABC Create a finite schedule (drum beat) based on mechanical engineering capacity and customer needs We had several false starts Agreed on a simple Gantt Chart – using MS Project Project 123 Project XYZ • Stagger Mech. Engr in the most effective way to assure capacity not exceeded • Time Estimates based on complexity of project
- 34. 34 Step 3 – Subordinate by Synching Up Once we had created the Drum, we could easily forward schedule all key downstream tasks Mech. Engr.Review Elect. Engr. Integ. Machining Engr. Release Pick Assemble MPS MRP Orders BOM Suppliers Drum • Use the Pick Date to trigger MPS due dates • Lot size set at L4L • True demand pull for all dependent items • The buffer is the backlog • Only release if ALL conditions are a ‘GO’!
- 35. 35 Example of MS Project Drum & Load Report • Mechanical Engineering is the control point for capacity, but secondary view in assembly is also checked Load Report
- 36. 36 Step 3 – Dealing with Murphy Murphy lives in a plant, Delkor was no different We needed to buffer against Murphy 1. Between Engineering and Production 2. Between Production and Shipping We used two time buffers Mech. Engr.Review Elect. Engr. Integ. Machining Engr. Release Pick Assemble Suppliers Drum
- 37. 37 Summary Created the Drum based on finite capacity and customer needs at Mechanical Engineering Schedule downstream action accordingly Synchronize the MPS/MRP to the release and pick dates established Mech. Engr.Review Elect. Engr. Integ. ShipMachining Assemble BOM Release & load MPS Parts Due Date Protect against Murphy – add 2 buffers Drum Engr. Completion Buffer Shipping Buffer New policy - No order until specifications understood and engineering samples in-house
- 38. 38 Step 3 of TOC - “Subordination” - is the toughest nut to crack! Requires new habits e.g. Push back on sales until idea can be validated Using different measures for decision making Explore Throughput Accounting vs. GAAP based Avoiding the temptation to pull work ahead to keep everyone ‘busy’ Cannibalizing material from one project to another Trying to ‘save’ set ups by using large lot sizes Leaning out too much-resulting in lack of protective capacity Challenges
- 39. 39 A weekly production status meeting held Review Drum Schedule and Buffer Consumption Master Scheduler facilitates meeting, actions and issues entered real time (& hyper-linked to production log) Application Engineers provide project management support The use of the Drum provides a enterprise-wide easy to view picture of all engineering and operational activities Drum
- 40. 40 5. Tips on Implementing Change CEO must be educated and understand this is not a software thing – but a new way to conduct business CFO must be on-board! Do not assume the nodding of heads implies understanding Assure all agree on the problem at hand – don’t assume this is true! Gain agree on the general direction of the solution first Acknowledge concerns on possible negative consequences – provide viable workarounds with their involvement Maintain constancy of purpose - plan to repeat this many times!
- 41. 41 From 1. Decentralized information 2. Questionable information 3. Informal hallway decision making 4. Manually interface between CAD & ERP 5. Project schedules informally and inconsistently updated 6. Unaware of strategic control point Results & Key Insights To 1. Centralized Information 2. Confident information 3. Formal decision making (S&OP) 4. Electronic interface from CAD to ERP 5. Project schedules formally and consistently updated 6. Leveraging of strategic control point
- 42. 42 Education We tried to do it ourselves, but we did not understand the underlying principals Needed to learn the underlying concepts to see how to apply to Delkor Moved to thinking of Delkor as an assemble-to-order company and how to structure processes to support that type of manufacturing Visibility There is a central repository of information, (Navision and the Drum schedule) Formalization of communication Dramatic Reduced Hallway meetings Installed and executed SOP meetings to make decisions based upon input from all functions which then can be executed (I.E. setting ship dates while addressing load and customer requirements) BOM Push Had been started but really it took action to support MRP project We now have accurate data in Navision with little manual input thus freeing up a FTE to address other needs in the production/ purchasing department Results
- 43. 43 Productivity Improvements Comparing 2008 to 2009 we: Reduced Engineering time ≈ 25% Reduced Assembly time ≈ 33%
- 44. 44 We doubled throughput capacity with only a 10% headcount increase Reduced Inventory 18% Improved Pick % from high 80% to high 90% Less Chaos Overall
- 45. 45 Hold the gains! Complete product configurator process Continue to improve ECN process Continued strategic growth V. Next Steps
- 46. ? …(0)~ # ^ % $&# Questions?