MRO Today - No more busted knuckles

Lean-linear production

by Bill Gaw

The MRP evolution took us down the road of computer sophistication. It was to be the panacea for solving all manufacturing problems. Little did we know that when we finally arrived at the final phase – ERP – that we would still be facing daily part shortages, shop floor disasters and end-of-the-month chaos.

What happened to all those promises?
MRP at first look is not a complicated system. We input a master schedule that uses bills of material, part lead times and lot-size algorithms to calculate gross requirements. These requirements are then balanced against the aggregate of on-hand inventory, work-in-process and open purchase orders to determine coverage. The MRP system then does a gross to net requirements explosion to establish time-phased net requirements. The resultant output is notification to planners in the form of take-actions to reschedule, reorder or cancel shop and/or purchase orders.

If we dig deeper into what is happening in the gross to net requirement process, we discover that many calculations are made based on the data and systems parameters supplied by production/buyer planners.

Before computers, these calculations were done by hand calculators but only for high-cost/critical items. They were classified as A items; B and C items were purchased on a min-max or two-bin pull system. When the computer came on the scene many planners got carried away and started doing these gross to net calculations for all items on their product bill of materials.

In reality, the computer is flawless in its ability to calculate the gross to net requirements; however, the data supplied by the planners is not. Consequently, results are subject to human error.

The nervous system
The typical ERP/MRP system generates more take-action exception messages than planners can handle effectively; we call it a nervous system! My experience is that most MRP exception message parameters report far too many non-essential take actions. If your planners can't get to all of their take actions in a timely manner, then it's time to readjust the exception message parameters by replacing theoretical parameters with practical know-how and common sense!

For a measure of ERP/MRP shortcomings, we need only to spend some time in a manufacturing facility...especially during the last weeks of the final financial quarter. In a typical company, we'll find that converting the quarterly financial forecast into reality still requires overtime, internal/external expediting, last-minute on-the-run product changes and even a little smoke and mirrors.

Results are scrap, rework and warranty costs that negatively impact profitability. In addition, relevant quality and shipment problems deliver less than acceptable customer satisfaction.

Companies that have spent thousands of dollars in pursuing ERP/MRP and ISO-9000 certification are distressed when they experience their business decline due to uncontrolled operating costs that caused non-competitive pricing.

Other companies have won the Malcolm Baldrige Award for Quality and Business Excellence and subsequently fell far short of achieving growth and earnings expectations.

Manufacturing methodologies
Today, most manufacturing companies are still organized for functional manufacturing. Mechanical assemblies, electronic boards, cables, machined components and purchased parts are produced or purchased in lot sizes and received, inspected and moved to stockrooms.

This methodology includes the picking-of-parts to fill shop orders kits and the movements of them to the production area to build, inspect and returned sub-assemblies to the stockroom.

Finally the end product shop order kit is picked, moved to an assembly area, assembled, inspected, tested and finally shipped to a customer. Ollie Wight would be turning over in his grave if he knew that in spite of his 1970s MRP crusade, the shop/purchase order "launch and expedite syndrome" is still alive and kicking. Why? Because the realities of information integrity and statistical probability reduce the effectiveness of all MRP shop floor control systems.

No matter how much sophistication is added to our computerized shop floor control systems, if we fail to master the basics of flow technology and visual controls, we will never eliminate the chaos that grips our shop floor day-to- day activities! Changing factory floor realities is an objective of Lean manufacturing.

Today’s realities
We need to shift from the order launch and expedite system to a system of flow technology; I call it sequential production. We need to convert stockrooms into production space and move the materials to point of use; I call it Point-of-use-logistics. It's time to eliminate the end-of-the-month crunch and focus on linear production. We need to design our manufacturing system to be flexible and agile so that we can contend with inside-of-lead-time orders.

The realities of today find most manufacturers still bogged down applying old computer systems for controlling shop floor operations. To survive in the 21st century these companies will need to make the transition from ERP/MRP to the hands-on methodology of Lean manufacturing.

Remember, if you continue to work the same way, you're going to get the same results. You and I know that if you've read this far, you're seriously interested in bringing sanity to your day-to-day work environment and helping yourself and your company achieve their full growth and earning potentials. So just do it!

Bill Gaw’s manufacturing experience spans more than 35 years. During those years, Bill has held positions as a shop expeditor, production planner, buyer, manufacturing manager, director and president. Bill has participated in four successful financial turnarounds. Visit www.bbasicsllc.com.