Transitioning from Push to Pull Manufacturing

1. Transitioning from Push to Pull Manufacturing Rea Buchanan, QAD March 20, 2006

2. Objectives • Provide a base of understanding about the two styles of manufacturing execution • the mechanics • the implications • Take the mystery out of the terms • Provide an understanding of how QAD supports pull principles

3. Planning vs. Execution • Planning is the activity of preparing to manufacture • Forecasting sales volume and mix of products • Determining when and how much material to procure • Calculating internal build requirements and the impact on resources • MRP / CRP process • MPS process • Medium to long term

4. Planning vs. Execution • Execution is putting into action: • Material deliveries • Internal manufacturing of component parts / sub-assemblies • Assembly of end product • Work Orders, Repetitive, Purchase Orders, Firm Schedules • Scheduling process • Short term

5. What is “push” based manufacturing execution? • Procurement, fabrication and assembly of products based upon anticipated customer demand • Orders are “launched” to suppliers and internal production centers • Work is “pushed” through the shop from one work center to the next until final assembly is completed • Often associated with mass production

6. Implications of push based manufacturing • Products being assembled may/may not meet true customer demand • Imbalance of finished goods inventory • Higher finished goods inventory • Expediting product to satisfy customer orders • Overtime, extra set-ups, premium freight

7. Implications of push based manufacturing • Work is scheduled in large lot sizes to promote efficiencies • Materials queue in front of the next production process leading to larger WIP inventory • Priorities are difficult to distinguish; “hot lists” set priorities • Leadtimes lengthen • Quality risk and obsolescence increase

8. What is “pull” based manufacturing? • A method of production where the decision to assemble, fabricate and procure more ofan item is based onactual consumptionby the downstream “customer” • Downstream “customer” signals authorization to re-supply via card (kanban), container, empty space on floor • Re-supply may be units of one or small batches • Associated with lean manufacturing

9. Implications of pull manufacturing • Products are made only when consumption signals are received • Product inventory is more balanced to recent customer consumption patterns • Inventory decreases • Supply chain priorities become clearer • Scheduling activity lessens; replenish kanbans on FIFO (First In – First Out) • WIP inventory decreases • Floor space is “freed-up”

10. Implications of pull manufacturing • Manufacturing processes need to be predictable and available • High quality levels becomes more important • Manufacturing capacity needs to be managed • Set-up times must be reduced in order to make smaller quantities more often • Product lead time collapses • Production and supply problems are exposed • Conventional manufacturing measurements need to be re-thought and altered

11. Does pull manufacturing make MRP go away? • Don’t confuse Planning with Execution !! • Both execution methods need 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!

12. So, how Does QAD support pull based manufacturing? With the Lean product offering

13. 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

14. VSM – The Language of Lean Source: Bill Kerber, SIG 14

15. MFG/PRO Lean Manufacturing includes … • Transformation of value-stream models to data structures leveraging existing MFG/PRO data • Kanban (pull) transaction system • Kanban planning and analytics using MFG/PRO data to calculate kanban loop size • Level loading and flow support • Fully integrated and part of MFG/PRO

16. Mixed-Mode Manufacturing Support Inventory Stores Receive Sub-Assemblies Work Order Issue (push) Issue (push) Receive from Supplier Finished Goods Ship to Customer Backflush Receive End Items Receiving Dock Shipping Dock Kanban (pull) Backflush Kanban (pull) Kanban (pull) Repetitive or Flow Schedule Point of Use Locations

17. Transforming the Value Stream to Data Structures • Define kanban items/steps, processes, supermarkets • Associate items/steps with processes • Define kanban loops combining items/steps, supermarkets and supplying sources • Supplying sources may be processes, suppliers, other supermarkets, other sites • Specify time or quantity accumulator for the loop • Set average demand calculations • Define safety stock parameters

18. KANBAN Master – Loop Data Make Item

19. KANBAN Master – Supermarket Safety stock method can be manual, simple or peak (both statistical calculations) Safety stock quantity and days can both be used Safety stock template, service level and peak average days are used with statistical methods

20. KANBAN Master – Card Control Accumulator type may be quantity, time or schedule Card reporting may be standard, add one or subtract one FIFO time for internal and external processes

21. Kanban Transactions • Provides transactional support for Kanban • Inventory movement (purchase receipt, inventory transfer, production completion & back-flush) and financial transactions automatically created • Scan or manually enter Kanban ID’s • Generate limited use kanban cards • Print/reprint Kanban cards on demand with barcodes • Manage cards: deactivate, create, re-activate • Empty authorized kanbans generate replenishment signals • Transaction sequence enforcement; audit reports

22. Kanban Transactions

23. Supply VisualizationKANBAN Board View Graphic representation of a Kanban board

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

25. Kanban Dispatch for SubA

26. 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

27. KANBAN Loop Sizing Workbench • Kanban loop sizing based on average daily demand, replenishment time, buffer stock, packaging and logistics constraints, EPE Interval (lot sizing) and variability factor • Iterative Excel-like calculations to determine loop sizing • Lot sizing based on EPE I for internal manufacturing processes • Validates manufacturing capacity based upon demand, cycle & set-up times (EPE I calculation) • Lot sizing for variable quantity/fixed interval, variable quantity/scheduled interval, fixed quantity/variable interval • Sizing calculations consider defined kanban container size • Simulation capability to evaluate different scenarios • Inventory impact evaluation • Add & remove kanbans automatically based on resizing calculations

28. 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

29. Why Smaller Intervals? • Reduces lead time • Increases flexibility and responsiveness • Reduces in process inventory • Reduces space • Improves quality • Fewer “surges” upstream • Increased opportunities to ship on demand Will mean more trips by material handlers – which is why equipment needs to be close together Goals must include smaller and smaller EPE Intervals

30. KANBAN Workbench The Kanban Workbench calculates the EPE Interval for the process. You can override the EPE Interval on an item by item basis. The overall EPE I will take into account any overrides you’ve specified.

31. KANBAN Workbench

35. Objectives • Provide a base of understanding about the two styles of manufacturing execution • the mechanics • the implications • Take the mystery out of the terms • Provide an understanding of how QAD supports pull principles

36. Questions?

37. Transitioning from Push to Pull Manufacturing Rea Buchanan, QAD March 20, 2006