Highlights:
- Improved OTDP from low 80s to better than 95%
- Reduced lead time by 53%
- Reduced DIOH from 91 to 56 days
Business Objectives:
This business is the $250 million Electrical Products Division (EPD) of a $1.6 billion foreign company owned by a large, well-respected, US venture capital firm. Products are made in three Northeast US locations, Brazil, and Mexico. EPD makes products for sale in the US and Central and South America. These products will be used in:
- Power transmission lines
- Power stations
- Commercial buildings
- Residential property
- Anywhere electrical power needs a connector
The division is headquartered in Northeast US while the parent company is located in Europe. The division has always been a cash cow, providing the parent company with an excellent ROI on capital spent to improve operations. As a result, the venture capital firm needed EPD to continue to be a leader in the field and address on-time delivery performance and fill rates that were an issue with the customer base as well as reduce inventory to pay down the venture capital company’s debt of acquisition.
The Business Challenges:
The EPD was a group of five manufacturing sites using traditional manufacturing methods to produce most products to stock in A, B, C classifications. There was also a growing made-to-order business that was causing difficulties in planning/scheduling and was failing to meet the 14-week (very long compared to minutes of standard time per piece) promised lead times.
Customers expect immediate availability of products, with same-day shipment as the required outcome. Product quality was perceived to be excellent, and the design of the EPD product literally wrote the book for other businesses to follow.
The first plant to be challenged with higher levels of productivity was the best-performing of all five plant sites. The parent company wanted the plant to accelerate its lean effort, improve OTDP and provide more cash to reduce debt.
The FlowVision Solution:
EPD interviewed three consulting companies to determine the best approach to implementing lean in the tough Northeast location. They decided to use FlowVision based on their experience, mathematical methodology, and record of performance at other companies owned by the venture capital owner.
FlowVision uses a mathematical approach to create a factory design that flows product, develops discipline for WIP inventory and therefore lead time, and incorporates the batch processes required to produce an electrical connector. Batch processes include cleaning, annealing, and multiple types of plating processes. The ability to use these batch processes without costly modifications, yet still achieve impressive lead time reductions, makes the FlowVision implementation process feasible and the ROI phenomenal.
The FlowVision process to size and replenish FGI uses a unique statistical approach to the implementation of a kanban pull system. The ability to size the inventory, and reduce the overall inventory balance dramatically, while improving the on-time delivery performance was reason enough to implement the required lean changes.
Implementation:
Before Lean Flow was implemented the Northeast plant site was configured in a traditional functional arrangement, with all-like processes located together, and large piles of inventory stored on pallets between processes. Electrical connectors were produced in oversize bread pans or totes or in large plastic containers on wheels. There were pallets everywhere with totes stacked full of parts. There was always a shortage of totes, and sometimes cardboard boxes were required to hold the excess inventory.
The lead time through the factory was extremely variable, because planners, supervisors, and management was constantly changing the order product was to be run based upon the hot list. The workforce was uncertain of what product to make next and there was a great deal of material handling waste digging out the product that needed to be produced. Extremely large batch quantities were the norm, but for larger products, this would tie up critical process capacity for days to run the large order.
The determination of what product was needed in the centralized distribution 2 hours away was made based upon a monthly sales forecast and the best efforts of the planners to complete as many late jobs as possible each day. Because the forecast did not accurately determine what was required from one day to the next, priorities were often wrong, salespeople were calling asking for expedites and answering calls from angry customers wanting to know when their electrical connector would actually ship.
With over 1100 flow paths defined the implementation team decided to focus on the flow paths with volume and not get bogged down in the endless variations that had very little demand. During the implementation, it was clear that the critical processes would be the presses, and that Lean Flow cells would be built to serve those processes. It was also clear that the batch processes like annealing could not be attached to only one press cell, and therefore became a cell of their own.
With batch processing in an annealing cell, then a move of 20-100 ft. to the press cell that was being fed by multiple other cells, one piece flow was not going to work either. The team decided to process from cell to cell orders of finished products with large orders being broken up into smaller units to facilitate less inventory, lead time, capacity bottle-necking, and mass confusion. This also reduced the dramatic difference in annealing and plating work content times because the lot sizes were now much smaller.
Almost every machine in the factory, over 100 (including the batch process anneal), moved in the relocation to create cells. Only the plating and a couple of very large presses were exempted or called monuments due to the cost to relocate. The resulting cells allowed dramatically improved flow, substantial WIP inventory reduction, and the removal of so many totes from the floor that they had to be stacked, wrapped, and sent to the central distribution for storage. The use of “line of sight” in the design from one process to another made the cells easier to manage, and improved communication between the processes.
The Lean Material Strategy (LMS) team developed the data necessary to perform the calculations for raw and finished product statistical kanban triggers (ROP), as well as the minimum order quantities to be produced (MOQs), and implemented the pull methodology from the central distribution to the plant site, to the factory floor, before the Lean Flow factory design was complete. The VP of Logistics stated, “we have to begin producing the right products at the right time, and to do that we need to implement the statistical ROP and stop relying on the forecast.”
Results:
The results of the Lean Flow implementation at this one 100,000 ft facility in the Northeast US were phenomenal. The results were
In addition, the bottom line:
- Improved OTDP from low 80s to better than 95%
- Reduced lead time by 53%
- Reduced DIOH from 91 to 56 days
With the new Lean Flow factory design In-Process Kanbans (IPKs or small queues of inventory between operations) created discipline and ensured that inventory and lead times were consistent, and continued to improve. Every aspect of the planning system was reviewed, re-designed, and re-implemented with a focus on reacting to the triggers from the FGI, maintaining FIFO, and only manipulating the demand in the factory to improve the OTDP. The teamwork that was generated at this plant site was one of the best outcomes of all. It showed that the implementation of Lean Flow was not just the latest fad; it had fundamentally changed the way this factory would function in every area.
On one follow-up visit a Lean Flow consultant mentioned that the same IPK Board that the plant site was using to control the order of production in front of the press cells, he had seen being used by another customer in Mfg Engineering to display, prioritize, and measure the engineers’ performance.
At the next visit not only was there a board for the Mfg Engineering group, but the plant manager had one hanging on the wall outside his office. He said “I wanted to use the same tools we were having the associates on the floor using. This way everyone knows what I am working on, what the priority is, and what I may expect of them.” That is a commitment to Lean Flow and leadership by example.