Modern Manufacturing Methods and the Supply Chain
August 20, 2010
Fellow blogger Stephen Jannise from The Manufacturing Blog recently pointed me to one of his posts that discusses the interconnection between manufacturing and the supply chain [“A Plain English Guide to Modern Manufacturing Methods,” 16 July 2010]. In his email to me, Jannise noted that articles about modern manufacturing methods “are often intimidating for certain readers, so I wrote a ‘plain English guide’ for some of the manufacturing concepts we talk about these days. In particular, I’ve focused on three strategies: lean manufacturing, Six Sigma, and flexible manufacturing. I’ve broken down elements of each strategy, like Just-in-Time, DMAIC, and CIM, into tables with descriptions that aren’t bogged down with our usual jargon.” Jannise is correct to assume that anyone reading or hearing about a sector of human with which they are unfamiliar often finds themselves lost in the acronyms, concepts, and jargon associated with that sector. Jannise does readers a favor by trying to make things a little clearer. He begins:
“Methods of manufacturing – and the manufacturing software that enable them – have changed a great deal since the Ford assembly line, shifting from the rigid, push-oriented production principles of the early 20th century to more flexible, pull principles. If you find yourself wondering what a pull principle is, you’ve come to the right place. Put simply, assembly line manufacturers historically pushed mass production ahead based on estimates of future demand, which often resulted in wasted effort and resources when customers failed to produce the estimated demand. Modern companies can’t afford this kind of waste, so they wait for actual demand to pull production forward, manufacturing products when they’ve been requested by customers or when the previous batch of products has sold out. Consider this analogy. By trying to guess potential demand, manufacturers often found themselves in the same situation as someone carrying an umbrella on a sunny day because the forecast predicted rain: extra effort for no reason. Modern manufacturers prefer to stick their head out the window and check for rain before grabbing their umbrella, so to speak, limiting waste and maximizing efficiency.”
For a more in-depth look at demand-based supply systems, read my post entitled Demand Driven Supply Chains. As I note in that post, getting a demand-driven system right is not easy because the factors that can affect such a system are numerous and complex. Jannise next turns to the subject of complexity — complexity of subject as well as lingo.
“Understanding the many complex strategies behind these new manufacturing methods can be as difficult as predicting the weather, as they have brought along with them a series of three-letter acronyms that dominate jargon-filled conversations about current manufacturing trends, like JIT, TPM, QRM, and JIS. These letters don’t exactly help to explain the basic ideas behind pull-production manufacturing, which actually make a lot of sense when spoken in plain English. So for the next installment in our ‘plain English guide’ series, we’ve decided to break down the key concepts of lean manufacturing, Six Sigma and flexible manufacturing. While we couldn’t cover every concept – a Google search for ‘lean manufacturing glossary’ should satisfy most pedants – we have reviewed the important terms. … Let’s get started.”
Like Jannise, I believe that the best place to start is with the basics. He does a good job of reminding us about the basics of manufacturing.
“Basically, modern manufacturing methods boil down to three key concepts:
- Reduce waste – reduce the amount of materials, capacity and manpower wasted in the process by producing just enough product to meet current demand
- Maintain quality – devise more effective manufacturing methods in order to continue making quality products despite strict reductions of waste
- Accelerate production – decrease the amount of time needed to manufacture product, making up for the lack of surplus”
Keeping in mind that strategies aimed at achieving those goals must be executed simultaneously, Jannise discusses them in turn beginning with reducing waste.
“If this first concept sounds like the motto of the recycling movement, it’s because manufacturing, like so many other industries these days, is basing its methods on efforts to avoid waste. Earlier manufacturing methods allowed for waste and an excessive consumption of supplies in order to meet their goals of mass production, but the re-branding of modern manufacturing goes by a new name: lean manufacturing. Lean manufacturing describes the method used to achieve all three of the aforementioned concepts; in theory, a lean manufacturer would have the right supplies arrive at the right place at the right time in the right amount to create only the products that are necessary to meet demand. A number of concepts, defined in the table below, are influential in meeting this goal.”
Jannise next turns his attention to the subject of quality. As anyone who had access to the media this past year knows, Toyota, a company that helped define high quality, suffered a terrific blow to its reputation because it let quality control on some of its automobiles slip in its search for profits.
“In order to manufacture a product of consistently high quality, it’s necessary for manufacturers to not only perform frequent maintenance on their equipment, but on their entire process as well. This means identifying errors or defects in the production flow and eliminating them to maximize productivity. This is where Six Sigma comes in. The origin of the term itself is very complex. A manufacturing process is given a sigma rating based on the percentage of its product yield determined to be defect-free. A one-sigma rating designates a process with a disastrously low percentage of defect-free yield, 31%, while a six-sigma rating is reserved for processes that are nearly perfect, 99.99966% defect-free. In other words, every company wants to achieve six sigmas for all of its manufacturing processes. To meet this goal, the Six Sigma method was created, which focuses on measuring and analyzing process data in order to find and remove defects. Whereas lean manufacturing is concerned with improving the flow between processes to reduce waste, manufacturers use Six Sigma to improve the processes themselves. The table below includes some of the concepts that make Six Sigma work.”
In conclusion, Jannise turns his attention to production processes. He writes:
“In the era of lean manufacturing, when surplus product is considered waste, the manufacturing process must work faster to make sure products are made available and demand is met. However, speeding up the process has become more difficult than ever due to an increased customer desire for customization. In the 20th century, mass production and mass consumption went hand in hand. Assembly lines made it possible to make hundreds of thousands of the same product, and customers were entirely willing to own the exact same thing as their friends and neighbors. Now, with the advent of Internet shopping and its capacity to provide shoppers with a variety of choices, manufacturers must be prepared to adapt and change not only its products but its entire process as well. Enter flexible manufacturing. Though manufacturers would undoubtedly prefer to continue producing standardized products at low costs, they must nevertheless make the best of their customers’ new tendencies toward individualized, unique products. These manufacturers can limit their cost increases by designing processes that adjust quickly and effectively to change. This table provides a few of the concepts that allow manufacturers to remain flexible while continuing to reduce waste and maintain quality.”
In the personal electronics business, where new products make old ones obsolete very quickly, it is especially critical to be able to control inventories and change manufacturing processes rapidly. As Jannise notes, consumers have become a volatile variable that was once considered rather static. Jannise concludes:
“With customer demands shifting constantly on a global scale, manufacturers must utilize a number of strategies to maximize their profits and continue to compete. As this guide suggests, the three major goals of reducing cost, maintaining quality, and accelerating production are achieved through the combined efforts of lean manufacturing theories, Six Sigma methodologies, and flexible processes. It’s not a question of which manufacturing method is the right one, it’s a question of how to implement them all for optimum results.”
To implement strategies effectively, manufacturing teams and Sales & Operations Planning teams must be aligned. As I noted in my post on demand-driven supply chains, there are three essential characteristics that Sales & Operations Planning teams must possess. First, a company must have access to good data. Good data is the sine qua non of a demand driven supply chain. In today’s fast-paced marketplace, that data must also be fresh (the closer to real-time the better). Second, a company must have a good forecasting system. Such a system helps the bottom line by mitigating the ill effects of market volatility — especially during economic hard times. Finally, a company must also involve itself in some “what if” planning. One cannot plan for the future simply by extrapolating from the past. The future has a funny way of jumping sideways and surprising us with twists and turns.