Striving for Manufacturing Excellence

1. Striving for Manufacturing Excellence Rea Buchanan QAD September 22 ,2008

2. Why Lean Manufacturing is Relevant Rea Buchanan QAD September 22 ,2008

3. Lean Manufacturing When Implemented Properly Results In … Significantly improved customer service – 99%+ Reduced inventory – down 40-80% Less obsolescence Reduced manufacturing floor space – down 35-50% Dramatically shortened lead times and ability to respond to change – down 80% or more Improved operational flexibility Reduced product development times – down 50-80% Increased productivity – 20% per year or more Reduced conversion costs – down 25-40% Reduced premium freight spend Increased sales Reduced purchased costs

4. Companies’ borrowing costs rise alarmingly Subprime mortgage mess’ effect reaches even the biggest names Companies are getting a taste of how the credit crunch is making it more costly to borrow. Yields on corporate bonds jumped again Thursday as investors were less willing to lend and demanded bigger yields. • Soaring costs for the highest-regarded companies. “So-called investment-grade companies are having to pay interest rates equal to what junk bond issuers paid as year ago” • Devastating interest rates for lower-rated companies. “Borrowing costs faced by low-rated companies are approaching record level. This is squeezing the lower end and the companies that need cash the most” • Less available short-term borrowing. The commercial paper market, a popular venue for big companies to borrow cash on a short term basis shrank $52.1 billion the week ended September 17, the Federal Reserve says. USA Today Sept 19, 2008

5. Lean Manufacturing When Implemented Properly Results In … • Reduced inventory – down 40-80% • Dramatically shortened lead times and ability to respond to change – down 80% or more • Less obsolescence • Reduced manufacturing floor space – down 35-50%

6. What is Lean (Manufacturing)? Elimination of waste and non-value added activities throughout an organization • Way of thinking, an attitude • Continuous improvement • Setup reduction • Facility reconfiguration • Process improvements • One piece flow • Kanban techniques • Streamlining supplier & interplant flow • Automated financial processes

7. Lean Building Blocks Quick Changeover Setup Reduction Value Stream Analysis Workplace Organization 5 “S” System Total Productive Maintenance TPM Cellular Manufacturing SUPPORTING CONCEPTS One Piece Flow Visual Controls Takt Time Team Building Equipment Replacement Balanced Flow Quality at the Source Employee Involvement Stabilized Operations Continuous Improvement Kanban Kaizen Six Sigma

8. How does QAD support pull based manufacturing? Lean Manufacturing module

9. Supporting Lean Manufacturing: Model the value-stream – items, processes (internal and subcontract), supermarkets, suppliers, loops Plan, analyze, and simulate kanban loop sizing – average demand, statistical safety stock, kanban (EPEI and sizing) workbench calculations, analyst aids Support kanban transactions – bar code, wedge, light pen, or key input; real time update, full inventory integration Level load at takt and create flow schedules (master schedules) to drive component projections Fully integrated with and part of QAD Enterprise Applications

10. Top Painsof Those Who Have Implemented Kanban • Improper loop sizing • Difficulty in adjusting loop sizing • Lost cards • Integration with ERP system • Communication of replenishment signals

11. Kanban Loops Supplying Source Supermarket Process Item Number/Step Supplier Supermarket

12. Kanban Loop Sizing Attributes • Average Daily Demand • Replenishment Time • Safety Stock and Safety Time • Kanban Size (quantity) • Accumulation Logic – quantity, time or schedule • EPE Interval – for processes • Cycle time • Set-up time • Process availability (time) • FIFO Time • Variability Factor

13. EPE Interval Calculation Basic calculation: One Production Day Time Required To Changeover All Items, 1 Time Time Left For Changeover Time Required To Changeover All Items, 1 Time Time Available For Changeover, Day 1 Time Available For Changeover, Day 2 Time Available For Changeover, Day 3 Total Run Time (All items) By inspection you can see that if you run lot sizes approximately equal to 2.5 days of demand (changing over every 2.5 days) for each item, you will be able to support the anticipated demand and not overload the process. You will also not generate any excess inventory! Time Available For Changeover, Day 4 Time Available For Changeover, Day 5 Process

14. Kanban Workbench • Kanban calculations to determine proper loop sizing using Excel-like metaphor • Calculate EPE I and minimum lot size (reorder quantity) for processes • Validate manufacturing capacity based upon demand, cycle & set-up times (EPE interval calculation) • Simulation capability to evaluate different scenarios • Inventory impact evaluation • Add & remove kanbans automatically based on resizing calculations • Print kanban cards

15. Kanban Workbench

16. Kanban Workbench

17. Kanban Workbench

18. Kanban Workbench

19. Top Painsof Those Who Have Implemented Kanban • Improper loop sizing • Difficulty in adjusting loop sizing • Integration with ERP system • Lost cards • Communication of replenishment signals

20. Does pull make MRP go away? • Don’t confuse Planning with Execution !! • Pull methodology still needs planning • A supplier cannot be expected to quickly respond to a pull signal unless they have an expectation of future need • A manufacturing plant cannot be properly facilitized and staffed without some idea of volumes and mix • MRP is no longer used to launch orders • Does MRP go away? • NO, emphatically, NO!

21. Integration with ERP • Average daily demand (forward and backward looking) is derived from ERP • Items and BOMs reside in ERP • Transaction processing for inventory and financial purposes is done in ERP So, doesn’t it make sense to have lean and ERP fully integrated?

22. Kanban Planning Multiple Average Demand Calculations • Average historical demand (over n days, from inventory transaction history) • Projected future demand (over x days, from independent demand and dependent demand calculated from bill of material explosion) • Blended historical and future • Set manually Multiple Demand Templates Multiple Safety Stock Mechanisms • Manual safety stock quantity • Days or fractions of a day • Statistical based on desired service level • Peak demand

23. Kanban Transactions • Provides transactional support for Kanban • Fill, consume, • Acknowledge, ship, authorize • Complete tracking of activity on each kanban ID generated • Inventory movement and financial transactions automatically created (optionally by loop) • purchase receipt • inventory transfer • production completion & back-flush • Scan or manually enter Kanban ID’s

24. Kanban Transactions • Manage cards: deactivate surplus cards, create additional cards, print cards • Limited use kanban cards provide for system fill, joker, buffer build, or “Saturday-set” • Automatic status change based upon accumulator logic for lot sized production or time/schedule based intervals • Audit report for lost kanbans (kanban ID’s not transacted upon within a user determined frequency) • Enforce transaction sequencing, prevent duplicate transactions

25. Kanban Consume (Empty)

26. New Features – QAD2008SE • Inventory enhancements • Record under and over fills of kanban quantity • Record scrap quantity • Override issue and receipt locations within a supermarket • Create one-time kanban for shortfall reporting • Kanban loop copy enhancement • Back-flush and subcontract transactions can now be processed with kanban ship transaction • Kanban fill transaction can also process incomplete back-flush or subcontract transactions left over from ship transactions

27. Kanban Fill & Ship - New Features

28. Kanban Master - New Features

29. Kanban Control - New Features

30. Top Painsof Those Who Have Implemented Kanban • Improper loop sizing • Difficulty in adjusting loop sizing • Integration with ERP system • Lost cards • Communication of replenishment signals

31. Visual or Electronic Tracking and Signaling

32. Kanban Transactions • Automatic status change based upon accumulator logic • Quantity accumulator • Time or schedule accumulator • Empty authorized kanbans may generate “dispatch lists” to internal and external suppliers • Reports, e-mail, fax • EDI • Supply Visualization displays status of each kanban

33. Kanban Dispatch

34. Supply VisualizationKanbanBoard View

35. ‪ Empty KANBANs Order Point Safety Stock  Shipped KANBANs Acknowledged Kanban  Filled KANBANs Accumulate

36. Top Painsof Those Who Have Implemented Kanban • Improper loop sizing • Difficulty in adjusting loop sizing • Integration with ERP system • Lost cards • Communication of replenishment signals

37. Jobs Come Home As shipping costs rise for imports, U.S. factories benefit “With fuel prices at record highs, the cost of sending a standard 40-foot container of goods has gone from $3,000 in 2000 to about $8,000 today” “The model of outsourcing to China emerged at a time when oil was going for $20 a barrel” “Other factors are helping drive a flight from China: the increasing value of the Chinese currency, a new labor law, the repeal of some export tax rebates and inflation” “This has led some companies to move production from China to northern Mexico… But others have chosen to relocate inside the United States.” Columbus Dispatch Sept 14, 2008

38. Questions?

39. Striving for Manufacturing Excellence Rea Buchanan QAD September 22 ,2008