APICS, in the 9th Edition of the Dictionary, defines lean production (or manufacturing) as: A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-added activities in design, production, supply chain management, and in dealing with the customers. Lean producers employ teams of multi-skilled workers at all levels of the organization and use highly flexible, increasingly automated machines to product volumes of products in potentially enormous variety.
One of the problems with the definition is that it tries to cover all the different vertical market arenas. Another is that mass customization is implied as part of lean. The key factor is the elimination of non-value-added (NVA) activities throughout the enterprise. This NVA approach can be applied to any enterprise, both in delivering products and/or services. To date, a good deal of lean implementations have focused on the shop floor, while most of the NVA may be resident elsewhere. For our purposes, we are going to build a four-legged stool of lean, with the following attributes for each leg:
- Providing customers with the highest possible level of satisfaction of their needs
- Providing suppliers with the best technical and scheduling information to maximize their ability to partner with us
- Eliminating all the NVA in the entire process from initial product and process design to the final, on-time shipment of products or services and ongoing support
- Empowering all our enterprise stakeholder so they can maximize meeting the corporate mission while gaining true individual job satisfaction and rewards
Lean manufacturing can be seen as an evolutionary process wherein we took the best parts of MRPII, JIT, ERP, TOC, SCM, PDM, TPM, CRM, VMI and the host of tools at our disposal and finding out how to fold the best of them into an environment where NVA is reduced to an absolute minimum in order to achieve the goals listed above. One of the most significant facts that have come out the journey to lean is that there is no one cookbook solution or path that can guarantee successful implementation in any specific enterprise. See Figure 1.
LEAN AND TOC
It may be an oversimplification, but the Theory of Constraints has the following major attributes:
- Identifying the bottleneck work center
- Managing the production schedule to the capacity of the bottleneck
- Adjusting the long-range capacity of the bottleneck to cover anticipated demands
- Going to the next work center and repeating the process until all operations are marching to the rhythm (drumbeat) required by customer demand
One of the overlooked factors in most bottleneck definition is that the true bottlenecks may not be on the shop floor, or even in operations. Some areas that present opportunities to break bottlenecks are:
- New product introduction from engineering
- Implementing of engineering changes
- Customer product definition
- Order taking
One must ask: what is the value added in reducing manufacturing throughput time by 70% when it takes weeks for sales to get a set of functional specifications from the customer, engineering take weeks or months to design the product and the number of engineering changes hitting the shop floor are measured in hundreds per month?
Concurrent engineering has taught us that allowing all the stakeholders to participate actively in the design process can radically reduce both design time and the incidence of engineering changes after release to manufacturing.1 There is still a great opportunity in bringing the design and operations communities into an enterprise level team.2 Having two separate bills of material databases is a prime cause of NVA and a real inhibitor in getting to the lean enterprise. Implementing lean manufacturing and letting engineering continue their old time-consuming practices is not the best use of enterprise resources.
There are three basic kinds of activities that accountants deal with:
- Value added activities, adding value to our customers
- NVA activities, candidates for elimination
- Required NVA (RNVA), that required by stockholders, regulatory agencies, IRS, etc.
The fact is that the rules by which accounting operates have not changed much since 1933, while management's vision and the manufacturing process have gone through a whole set of generational changes. A lean look at accounting activities shows that there are two branches, Financial Accounting, mostly RNVA, which cannot be avoided, but are prime candidates for electronic capture and dissemination; and Management Accounting, where a great deal of the capture and reporting is unnecessary and, indeed, slowing down the movement to the lean enterprise. Insistence on detailed variance reporting, budget absorption, etc.., when lean manufacturing has reduced the throughput time from days and weeks to a matter of hours and minutes, is a real example of NVA accounting.
A program to implement Lean Accounting should be on our management's agenda.
ADVANCED PLANNING AND SCHEDULING (APS)
While there is no consensus definition of APS, here are a few that I've come across recently:
- Constraint based, finite capacity optimization
- Concurrent synchronization of material and capacity to customers orders
- Finite scheduling of manufacturing orders
- Scheduling and rescheduling at the specific order, machine, material component and worker level... within the shift
- Finite scheduling across the supply chain
Obviously, what we mean by APS is a function of the application software being used. For our purposes, we will assume that finite scheduling, taking into account all the resource constraints, risk evaluation and specific management policy rules is the approach.
The Internet and e-commerce have brought us to the point that we can identify true customer demand almost instantaneously. APS purports to allow the enterprise to respond to customer demands with detailed pricing and delivery scheduling in an on-line mode. However, APS success has been quite spotty; perhaps because of the lack of a clear definition and unrealistic expectations. We should apply TOC and see what the constraints are in achieving the benefits of APS. There several things that must be in place before APS can function properly:
- The definition of the product, with its features and options must contain the customer's needs
- The material and capacity must be available to achieve the desired delivery schedule
- Engineering, Operations and key suppliers must be in lean mode so that lead times are minimized
- Management must understand the process, its risks and its benefits
It follows from the constraints listed above that APS is not for everyone. Particularly it is not for any enterprise that does not understand the implications of using APS before any implementation is approved. The ideal types of businesses that are readily adaptable to APS are those where the product variation is small, or well defined, and the speed of response can be high. As product complexity and manufacturing cycle time increase, the ability to apply APS tends to diminish to the point where the costs exceed the benefits. Figure 2 illustrates the four quadrants of APS opportunity.
LEAN AND APS, A WAR STORY
APS, because if its very nature, demands changing the production schedule each time a new customer demand is allowed to take precedence over one or more previously scheduled demands. This means, on the shop floor, everyone must be totally prepared to change priorities at the drop of a new order.
Lean, on the other hand, has as one of its core competencies the ability of self-directed workers on the line to set their own schedules, within specific guidelines.
These two tools seem to be mutually exclusive. But are they really incompatible?
Consider the (real) case of a company that spent two or more years developing a lean manufacturing capability and had achieved a set of self-directed teams with significant reduction in manufacturing throughput time.The teams were real gung-ho and truly happy with the new environment and its empowerment. Along came APS, which would take away all the hard earned lessons of lean manufacturing. APS would now dictate what they would do and when. Morale in the lean leadership team went right through the floor.
Fortunately, the APS initiative was in its Conference Room Pilot stage when the dichotomy was discovered and clear thinking prevailed. The solution was absolutely elegant and actually worked. TOC concepts were brought into play. APS would be applied only in the bottleneck work center and lean would continue to be the watchword in the balance of the plant.
The key lessons learned are:
- There is great merit to using lean manufacturing, TOC and APS
- They cannot be applied as point solutions
- Implementation teams must truly understand the functions of each and their interdependence
- Conference room pilots should surface conflicts before they are applied on the shop floor
Taking the best of each of these tools and welding them together into a coherent, integrated solution is the way to get real benefit from all of them. This is the challenge of achieving world-class manufacturing at the start of the 21st century.
- Frank, Concurrent Engineering; Too Important To Leave To The Engineers: Proceedings of the APICS Total Manufacturing Performance Seminar July 1991, Proceedings of APICS International Conferences 1992,1993,1994
- Frank, Engineering and Manufacturing, the Next Critical Merger, Proceedings of the APICS E&R Summer Workshop, Toronto, Canada, August 1998
ABOUT THE AUTHOR
Donald N. Frank (BSEE, CFPIM, CIRM), is President of D. N. Frank Associates. He holds a BSEE from Newark College of Engineering (NJIT), Class of 1959 and is APICS Certified at the Fellow level in Production and Inventory Management and in Integrated Resource Management. Since 1971 he has been helping companies in the selection, design and implementation of computer-oriented manufacturing systems and associated educational programs. His current practice includes companies moving toward ERP, TQM, Concurrent Engineering, MRP-II and Lean Enterprise environments in such diversified fields as aerospace, electronics, semiconductor fabrication, food processing and plastics processing.
Don is active in the APICS New Jersey Chapters. He served on the CIRM I&CD Certification Committee and on the CPIM MRP/CRP Committee. He teaches Certification training courses at client locations and for APICS Chapters in the Northeast.
He serves on the Steering Committee of the APICS EPAD (formerly CI SIG) and is the designated instructor for the APICS MMAS Standards and ERP Software Selection and System Implementation workshops both at public and in-house locations.
He is a frequent speaker on the professional society circuit and is well known in the literature for his papers on the interface among engineering, manufacturing and the database.
He is a member of APICS CI, CM, PI, REMAN and SM SIGs and of IIE, CASA of SME, PMI and was a charter member of the Industrial Advisory Board for the Materials Management Program of Bloomfield (NJ) College.
Don can be reached at 973/377-6782, email@example.com, or at http://www.dfrankasso.com/.