Friday, September 4, 2009

Inventory Management Function Descriptions

When an organization is trying to implement a systematized inventory management process or trying to improve the one that is already in place, the real life tactical question arises as to what the functions of this process should be and who should do what on a day-to-day basis. The following list offers one way to break the process up into functional areas of responsibility which should have all or some reporting responsibility to the one responsible for the material management of the organization. Depending on the total value of inventory, the importance of inventory management and the size of the organization, these roles may be satisfied by either clerical or managerial staff, but the importance of the function needs to be paramount to upper management.

Inventory Quantity Management
(typically reports directly to Material Management)

  • Maintain the location master data within the ERP system
  • Verify the item master data within the ERP system
  • Verify system BOMs and shop floor backflushing transactions
  • Perform/Monitor all inventory transaction processing: Issues and Receipts
  • Assure valid inventory quantities throughout the system for all inventory items and locations (the goal should be 99+% accuracy)
  • Develop and conduct a cycle counting program
  • Integrate with Engineering, Inventory Valuation Management, Purchasing and Operations
Inventory Valuation Management
(typically reports directly to Accounting)
  • Perform standard item cost and cost roll-up maintenance
  • Track and validate last cost and average cost updates
  • Continually assure valid inventory values throughout the system for all inventory items
  • Analyze cost variances and periodically update the standard costs
  • Integrate with Inventory Quantity Management, Purchasing, Engineering and Operations

Purchasing/Vendor Management
(typically reports directly to Material Management)

  • Review and maintain open purchase orders for required adjustments
  • Create and maintain new purchase orders per material requirements
  • Create and maintain new purchase orders per outside service requirements
  • Assure the need for material before purchase orders are created
  • Maintain relationships with venders and work to improve the integration with each
  • Integrate with Inventory Quantity Management, Inventory Valuation Management, Engineering and Operations
  • Integrate with Master Planning to determine purchased part requirements

What other functions wold you include?

Friday, August 7, 2009

Employee Empowerment is Key to Success with Lean

The management concept of employee empowerment can be defined as the creation of an environment in which people at all levels feel they have real influence over standards of quality, service, and business effectiveness within their areas of responsibility. It is a strategy and philosophy that enables employees to make decisions about their jobs. In an organization where this style of management is not natural, adopting a management style that embraces empowerment will be a difficult but critical change in order to succeed in the effort of implementing Lean Enterprise Thinking.

Organizations that support empowered people have some common characteristics:
  • There are few management layers in the organization
  • Wide spans of control exist with relative responsibilities and accountabilities
  • A process-based organization structure is used as opposed to a purely functional based structure
  • Management stands behind people being empowered

Most experts who are familiar with implementing Lean in an organization will probably state something to the effect of “…. the major inhibitor to get a lean environment is the inability to trust the workforce and really give up a certain level of control in order to give people the power to implement their own ideas and be respected as experts in their area….”.

Without this level of trust within the workforce, those who know best how to improve the operation will not feel they can make the changes required to eliminate all of the waste possible and the thought of continuous improvement will not become a way of thinking as it must for Lean to be truly successful.

Empowering the workforce does not mean that management gives up control and lets people do whatever they please. Instead, guidelines and boundaries need to be set so that everyone knows the limits of how they can operate. A process needs to be established that allows management to set the direction for the organization but lets the workforce finds unique ways to achieve these goals and objectives. By letting the workforce be free to implement ideas within their work areas, management will find that the organization is much more productive than by following the direction of a few select individuals. The trick is to leverage one’s self though the talents of everyone involved.

The process of adapting an empowerment style of operating within the organization is not solely the responsibility of management. True, a manager needs to learn to let go without giving up total control, but in order for empowerment to work, the employee must accept it and the responsibility that goes with it. In short – they have to take it. However, not all are willing or able to do, or they do not know how and what it means, so care must be taken to educate and transition those involved.

Changing to a mode of operating that truly empowers the members of an organization is a difficult transition to make but is one that can be accomplished. It does take time and having a coach can be a real help. Everyone involved should be patient and realize that the organization is learning a new way to operate, but once it is successful with this transition, the organization will have taken a major step towards to Being Lean and not just Doing Lean.

What are ways that you have empowered people?

Friday, July 10, 2009

Message from Jim Womack Regarding Sustainable Success

In a recent article titled “Sailing a Straight Course in a Time of Variances”, Jim Womack, of Lean Enterprise Institute, Inc., presents an all too typical scenario within organizations that claim to be “Lean” and offers some key questions that can be asked to be sure the organization is on track to sustainable success. Rather than repeat in different words the sentiment of what he has to say, his article is included below (with permission).

Sailing a Straight Course in a Time of Variances

Recently I spent a day as a lean anthropologist, sitting in the back of the room and observing the behavior of senior managers during the monthly leadership team meeting of a large corporation. I hadn't done this in some years and it caused me to reflect again on how organizations do strange things, particularly in difficult times.

The first agenda item of this meeting was to review how the team was progressing on its lean journey, but I quickly noticed a lack of actionable detail in the team's mandate. They wanted to create a "world class" lean enterprise, responsive to customers and all other stakeholders. That's fine, of course (whatever "world class" means -- I always ask and rarely receive a useful answer.) But how? What were the big, cross-organization problems standing in the way? What countermeasures were being pursued to clear the problems in the path? And who was taking responsibility to do what when to implement the best countermeasures?

Given the lack of clear objectives and the lack of progress toward stating them, I was not surprised to feel the relief in the room when the meeting moved on from the high-level overview of "lean" challenges for the whole enterprise to the next agenda item, a discussion of each department's performance on its annual plan. Given that the plan had been developed in the second quarter of 2008 for a fiscal year beginning July 1, 2008, it was not surprising that there were a lot of variances from the plan to explain. But was the original plan wrong? Or had the economy collapsed in the mean time? (It had, of course.) Or was the plan poorly executed? Or was it all three? Or was it two of the three? Or…?

In fact no evidence was presented and no analysis was done. Instead the discussion was about tactical measures to make the situation look as positive as possible by the rapidly-approaching end of the fiscal year. And the path of least resistance was short-term cost cutting including more lay-offs. I was disappointed with the turn of the discussion, but I did learn something. I could see more clearly than I ever had the phenomenon present in every recession as companies rushing to avoid variances in out-of-date plans continue to cut costs and jobs after economies start to stabilize and stock prices start to rise (as is happening across the world right now.) This instinct then shortly turns to a realization that the skeleton crew doesn't have the capacity to deal with revenue growth in a rebounding market. And this is followed by a burst of re-hiring or outsourcing. The intensity of this natural but unfortunate response by senior managers to cut costs – which economist John Maynard Keynes long ago called the "paradox of thrift" – is a key determinant of the length and depth of a recession.

That' a shame for all of society because the recession is longer and deeper than it needs to be. But the loss to the company in this meeting was that the urgent – variances – had once again crowded out the important – the organization's long-term need to find its North Star and steer a steady course toward sustainable, superior performance. In fact, setting a course to stabilize the organization is what senior managers are supposed to do. And this is what senior leadership meetings should be for.

Next time you are in a management team meeting, whether you are a senior manager or working at a lower level of the organization, I hope you will keep a few simple questions in mind. (You might even want to ask them out loud at the start.)

"Are we all clear on what is really important for our organization in order to solve customer problems and succeed in the long term? (Or, stated another way, can we get past the merely urgent.)"
"Are we agreed on what big problems we need to solve as a team?"
"Are we sure what obstacles are in our way and their root causes?"
"Have we – or will we now – assign responsibility for determining the best countermeasures and removing the obstacles?"
"Critically important, do we have a way of surfacing and resolving all of the cross-function, cross-department conflicts that stand in the way of resolving all major problems in any multi-functional organization including ours?"

If you can answer these simple questions -- blowing away the clouds that obscure your North Star -- you’ll be on your way to sustainable success as the world economy recovers in the coming years. And you may avoid disruptive shifts in course to deal with short-term variances in financial performance.

James P. Womack
Founder and Chairman
Lean Enterprise Institute, Inc

Management expert James P. Womack, Ph.D., is the founder and chairman of the Lean Enterprise Institute, chartered in August 1997 as a nonprofit research, education, publishing, and conferencing company with a mission to advance lean thinking around the world.

© Copyright 2009 Lean Enterprise Institute, Inc. All Rights reserved.

Are you Best-in-Class?

Friday, June 26, 2009

Small Companies Can Benefit from Strategic Planning

The online dictionary Wikipedia defines strategic planning as “an organization's process of defining its direction and making decisions on allocating its resources, including its capital and people. It is often times viewed as a process for determining where an organization is going over the next 3 to 5 years or more”. Strategic planning enables an organization to answer the following questions:
  • Who are we?
  • What can we do?
  • What are our strengths and weaknesses?
  • Which critical issues must we respond to?
  • What should our priorities be?
  • Where should we allocate our resources?
  • How do we want to grow?
  • Where do we want to be in the future?

Most large organizations have a significant process of strategic planning where overall directions are given to the organization. They need to do this since there are large amounts of resources at stake and many people and departments involved to manage these resources. However, few small organizations do strategic planning even though relative to their size, they too have large amounts of resources at stake and people involved to manage these resources. The reason for this absence of a strategic plan is usually due to the fact that top management of the organization is very tactically oriented and involved with the day-to-day operations. Just getting through the near term is the only thing on their collective mind. The problem with this is that within the organization, there is no overall plan that gives people direction as they make decisions which means that different parts of the organization can be going in different directions at the same time. In small volumes, this is not such a problem, but as the company grows, it can become very chaotic, frustrating and problematic and can lead to failure due to the conflicting priorities that will exist.

A strategic planning process does not have to be long, time consuming and drawn out, but it should involve the key personnel of the organization. With guidance from a facilitator familiar with the process, implementing a planning process can be fairly quick and simple and can be done without being a major intrusion to the operation. Benefits that can be realized include:

  • Clearly defined business strategies and supporting objectives for growth
  • Identification of business strengths and weaknesses
  • Quantified resource requirements and financial projections
  • Integrated operational plans for each area of the business
  • Clearly defined business performance measures
  • A focus on achieving and building advantages

Strategic plans are very different from operational plans. Operational plans are tactical and are concerned with “today”. Strategic plans are concerned with “tomorrow” and are effective in coordinating the tactical activities so that the future growth of the organization is effective and under control. Without some aspect of a strategic plan that is known to all, activities of the organization will be disjointed and counterproductive, even though everyone is doing what they think is best. Frustration will exist within the ranks and growth will be difficult which can lead to the overall failure of the organization. With a well conceived and communicated strategic plan, an owner or management team will likely get what they want in terms of organizational performance, but without one, they will most likely not and everyone in the organization will suffer to some extent.

What do you find as pros and cons of Strategic Planning? Do you have examples where it helped or hurt?

Friday, June 19, 2009

Total Success by using Both Lean and ERP

There are those who feel that if Lean tools and concepts are implemented, there is no need for ERP tools and vice versa, but in fact, the two need to be used together in order for an organization to get the most out of each. Aberdeen Research recently released an article titled “… Reducing Waste in the Supply Chain”. This is an interesting combination of terms since “Reducing Waste” is typically associated with Lean tools and concepts and “Supply Chain” is often times embroiled in non-lean ERP tools and concepts. The truth is that BOTH sets of tools and concepts need to be used and integrated in order for the organization to go from “Doing Lean” to “Being Lean”.

In the study that is the basis for the Aberdeen article, Best-in-Class companies were achieving:

  • 96% Perfect Order Delivery
  • 3% decrease in Inventory Carrying Costs
  • 2% decrease in Inventory Write-off
  • 4% decrease in Customer Lead Times
  • 4% decrease in Manufacturing Cycle Times
Unfortunately for the lazy reader, Aberdeen saved the best part for the end where they discuss actions to combine the two schools of thought. Some of the ideas they present include:

Develop standardized information flows from the supply chain managers to the operation managers. The Sales and Operations Planning (S&OP) functions should be connected to the tactical execution functions via regular, collaborative meetings so that customer demand requirements and company supply capabilities are discussed and matched.

Establish bi-directional information flow between the supply chain and manufacturing functions. There is a need to compare monthly and weekly plans from S&OP activities to the weekly schedules and daily results of the execution activities. With this connection, the needs of the customer can be translated to what the plant needs to do (i.e. takt time) which leads to an execution plan to achieve what needs to be done.

Determine appropriate inventory buffers throughout the supply chain. Instead of keeping excessive WIP inventory, it is likely more effective and cheaper to keep finished goods to meet changes in demand patterns. Where keeping finished goods is not practical, such as with an engineer-to-order product, working to a planned inventory of semi-finished components may be a viable alternative.

Incorporate demand and production variability, inventory levels and supplier lead times as part of the level plan creation. In Lean, the goal is to eliminate all of this variability, but in many cases, this is not possible. ERP is a process of managing these variables. Using the two together can provide a compromise that satisfies the requirements of the specific business.

Develop Lean and ERP techniques that support pull concepts for both internal operations and suppliers. By combining Lean visual concepts of Kanban and other pull concepts with ERP software solutions that support non-visual processes such as time-phased predictions and advanced warning/alert tools, those who live in the hour-to-hour mode of operating will not be bogged down with the functions of “the system” and those who must manage the variabilities external to the execution processes will be connected to what is really happening.

Many times the supply process is longer than the delivery lead time demanded by the customer, so the key is to manage the process such that a minimal investment is made while still being able to manage the variations that exist and are uncontrollable. Lean can be used to manage the tactical processes that result in reduced waste, reduced work-in-process inventory investment and improved flexibility. ERP can be used to manage the longer term variables that are not controllable by Lean techniques. The integration of the two is what allows the organization to be successful.

Are you Best-in-Class?

Monday, June 1, 2009

Effective Inventory Management Leads to Business Success

Aberdeen Research benchmarked the people, processes, technologies and metrics associated with inventory management and determined that Best-In-Class companies are able to continuously manage their inventory throughout their supply chain to improve customer service levels, forecast accuracies and perfect order metrics. They defined Best-In-Class as companies that had:
  • 97% Average Customer Service
  • 15 days Average Cash Conversion Cycle
  • 95% Perfect Order Performance
  • 87% Average Forecast Accuracy at the Product Family Level

These companies are able to continuously manage their inventory throughout their supply chain to improve what they deliver to the customer, which encompasses more than the specific product or service that they deliver. Other aspects of what is delivered that don’t show as specific items on the invoice, but are improved with effective inventory management, include total order lead time, product quality, ease of doing business and the ability to deliver changes to the product or service without having to go through major business changes.

Regarding inventory management, successful companies follow the principles of Closed Loop Inventory Management which include the ability to:

  • Determine safety stock targets for inventory at critical nodes in the supply chain.
  • Replenish inventory into distribution buffers based on customer demand.
  • View end-to-end inventory while providing available to promise inventory.
  • Respond quickly to market events while executing the inventory requirements.
  • Segment inventory based on customer service requirements.

Although most involved with business management will admit that the above impacts on delivering to the customer are reason enough to make inventory management improvements a priority, there are also internal benefits to the organization from becoming Best-in-Class that should be mentioned:

  • Best-in–class companies are 10 times more likely to have reduced their inventory carrying costs year after year.
  • Best-in–class companies are 7 times more likely to have reduced their warehouse labor costs year after year.
  • Best-in–class companies are 63% more likely to practice centralized transportation planning.

Whether it is via the successful pursuit of Lean Enterprise Performance or effective implementation of ERP or Supply Chain principles, improving the performance of inventory management will improve the organization’s total customer delivery performance.

Friday, May 22, 2009

Monitoring Business Performance Leads to Improving Business Performance

In a recent article, I focused on the issue that the operation of any organization has plenty to offer in terms of letting management know what is working and what needs to be addressed. Once there is agreement on this, the next questions usually relate to what to do and how to do it. The key to success here is to get executive visibility into the operation so that focus can be put on issues that 1) matter and 2) can be controlled and affected. Monitoring current and future performance factors will be much more effective than monitoring performance for decisions made in the past. For instance, controlling the purchasing process to buy only what is needed when it is needed will affect the bottom line much more that paying attention to the utilization rate of a fixed asset which was bought and paid for some time ago. Three steps can be utilized to facilitate this process of monitoring key issues for performance improvement:
  • Measure Critical Few Performance Criteria
  • Analyze Results and Recommend Actions
  • Implement Focused Improvement Activities

Measurement activities need to target the life line issues that must be satisfied in order for the organization to survive. They also need to be factual, without emotional influence, so that owners of the process can objectively evaluate their performance and identify issues. Selecting a few key measures that tie directly to success will focus attention on the factors that affect success and will allow people to get a quick, substantive picture of current performance. Using drill down type metrics to provide more detailed information regarding the specific performance is fine, but it is most important that the appropriate message is received by the appropriate people via the top level measure. Areas to focus on include:

Customer Value: This is the most important area for any organization. What the customer considers as value is the only thing that is of importance to the organization. Having everyone understand how their actions relate to what the customer wants will allow them to re-evaluate what they do so that they can focus on eliminating wasteful non-value added activities. One way to think of value added activities is to consider if an item could be listed on the invoice for the activity in question. If not, then its value should be questioned. Suggestions for measures here include on-time delivery, total order lead time, quality per complaints/returns, and repeat business or lost customers. These metrics need to be at the customer level and not departmental level since the customer sees one organization, not a group of departments, some that perform well and some that don’t.

Operational Performance: Operational flexibility will allow the organization to adjust with the changes in demand without having to make major sacrifices in order to do so. By making a connection between what the operation does (actual supply) and what it needs to do (actual demand), those involved can begin to understand which of their activities are wasteful and which are value added. Suggestions for measures in this area include total operational throughput (as defined by deliveries to customers, not additions to inventory), processing lead time (quote to cash), non-capital investment (inventory, supplies, etc, not fixed assets), and ability to make changes to the schedule.

Financial: Cash. Let people know what is happening to the money in the organization on a regular basis (weekly or daily) and let them know how they affect this cash flow. Once workers understand this and see their impact, they will probably focus more on making good decisions. Obviously, this information must be presented in accordance with corporate information sharing policy, but the more people can relate their actions to the money being spent, the more they can affect the outcome. Some suggestions include cash flow - inflows and outflows, spending trends as a function of shipments, and comparisons to plan that are adjusted for volume differences. Simply showing the bottom line is ineffective because people typically cannot relate their actions to this measure.

All too often metrics are created, detailed and publicized that have little effect on improving performance. In order to be effective, it is important to improve the executive visibility to operational drivers, replace “gut-feel” decisions with “fact-based” decisions and educate everyone in the organization about the operational life-line drivers of performance. By making a direct connect between the metrics of performance and the actions of people, positive results from improvements are possible.

Are you Best-in-Class?

Friday, May 15, 2009

Hello?! The Operation is Talking to You!

In these economically challenging times, organizations of all industries are finding that they need to control critical issues in order to survive, much less remain competitive in the marketplace. Issues such as cost control, capacity and resource utilization and reacting to demand changes become areas of concern that get executives’ attention as areas that must be mastered. An all-to-often approach to getting at these issues is for the strategists of the organization to meet, develop priorities for improvement and then mandate the “Must Do” statements to everyone in the organization that include carte blanche directives for efficiency improvements, spending reductions, and labor reductions. However, by tuning in to the operation itself, issues that can have an impact can be identified and corrected, usually in a short time and with a quick return. Activities that can have an impact in this regard include:
  • Get real-time (or at least very timely) feedback from the operation as to progress of work being performed.
  • Implement scheduling and control techniques the provide directions as to what to work on next on a daily or hourly basis.
  • Utilize alerts, visual and/or computer, to quickly identify real time issues that need to be fixed before further work is performed.
  • Concentrate on customer facing issues throughout the operation, such as lead time reduction, on-time delivery, and end-item quality.
  • Reduce the inventory investment by concentrating on the reasons for having the inventory. Like lowering the level of water in the stream, more rocks will appear.
  • Create improvement teams consisting of those most directly involved with the operation to identify and implement quick hitting improvements.

In order to make these tactical practices effective and pervasive throughout the organization, management needs to adopt strategies that support this collaborative and synchronized approach. By having executives focus on the operation and looking beyond simple efficiencies in the work place, organizations can improve their overall performance. Aberdeen Research has identified several actions that organizations can implement to achieve Best-in-Class performance which include:

  • Improve collaboration across all functional boundaries, such as Engineering, Operations, Customer Service, and Purchasing.
  • Create visibility across of the operation throughout the entire enterprise, including the executive level.
  • Synchronize the output of operations to match the changes in demand.
  • Dynamically update business practices as best practices are developed.
  • Create a scorecard that normalizes performance across all areas of the organization.
  • Engage the system integrators at the executive level.
  • Automate the work flow to manage non-conformance events across the enterprise.

By achieving Best-in-Class performance, Aberdeen has identified results that will improve customer performance, improve capacity utilization and translate directly to the bottom line:

  • 97% On-time and Complete Delivery to the Customer
  • 92% Overall Equipment Effectiveness (OEE) accounting for variability, performance and quality
  • 99% Operation Compliance as measured by in-compliance output vs. total output

It should also be noted that when these operational issues are managed effectively, an improvement in cash flow and profitability can be expected.

Are you Best-in-Class?

Friday, May 1, 2009

A Roadmap to Lean: Measure Continuous Improvement

Part 10 of a 10 part series
In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The fifth step in the Implementation phase is to Measure Continuous Improvement throughout the organization. In this step, we want to:
  • Implement Measurements for Key Success Factors and for Each Improvement Event
  • Develop Business Performance Metrics that relate to Customer Value
  • Develop Metrics to Monitor Lean Learning for Everyone in the Organization
  • Establish Baseline Measurements Prior to Improvements
  • Communicate Progress and Results to the Entire Organization on Daily Basis
  • Initiate a Formal Review Process for Key Functional Leaders

In a traditional business model, cost plus profit was used to determine the price. In the Lean model, price minus cost determines the profit, so the focus needs to be on the elimination of waste. True, the price may be affected by the concentration on customer value because the customer is willing to pay more for what you deliver, but price is not under the organization’s control as much as cost is due to market and competition issues, especially in the world market we exist in today. Measures that focus on the Lean process, the elimination of waste and customer value are those that will drive continuous improvement once the initial Lean effort is complete. Key deliverables of this phase include:

  • Business Performance Metrics (a critical few) that are Simple and Straightforward
  • Operational Metrics that Relate to Takt Time and Waste Elimination
  • Public Scoreboards to Communicate Event Related and Business Performance Metrics
  • Lean Learning Metrics that Promote Cross Training, Improvement Activity Involvement, Problem Solving, Team Building , Empowerment, Commitment and Cooperation
  • Dynamic Communication to Everyone Regarding All Lean Initiatives
  • Rewards that are Aligned with Lean Goals
  • Frequent Celebrations of the Successes

This tenth and final step in the Roadmap to Lean is not really a single step – it is an ongoing and ever evolving process: hence the term Continuous Improvement. Those who treat Lean as a project that comes to completion are missing to whole point of taking the trip. The real benefit is the transformation within the organization that allows everyone to contribute to the elimination of waste and the concentration on what brings value to the customer. It is the culture change that occurs that brings the biggest benefit of the Lean journey. Lean performance is focused on the efforts of people to accomplish change and is never complete. Instead, it is an ongoing process that will lift the organization to previously unattainable results. By following these ten steps of this Roadmap to Lean, an organization should be able to change its focus from “Doing Lean” to “Being Lean”. Are you Best-in-Class?

Friday, April 24, 2009

A Roadmap to Lean: Integrate the Supply Chain

Part 9 of a 10 part series
In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The fourth step in the Implementation phase is to Integrate the Supply Chain into the lean ways of the organization. In this step, we want to:
  • Evaluate Each Supplier and Customer as to Applicability of Lean Concepts
  • Define “Quality at the Source” and “Pull” Demand Concepts
  • Select a Few Key Partners for a Pilot Progra
  • Build Mutually Beneficial Relationships with Supply Chain Partners
  • Share Information and Synchronize Planning
  • Develop and implement an Education Program for your Supply Chain Partners

To be most successful, organizations need to extend the lean thinking concepts from the shop floor to the entire supply chain including, the front office, customers and suppliers. Transferring the benefits of Lean to your suppliers and customers can greatly enhance the benefits of your own Lean efforts. By using your results and facilitator skills to motivate them, these supply chain partners will be able to improve their operations so that they can coordinate their activities with yours and accurately deliver what you need to improve your success. Key deliverables of this phase include:

  • Definition of Mutual Benefits
  • Lean Education Materials Adjusted to Each Supply Chain Partner
  • Lean Education and Training for Facilitators of Partner Organizations
  • A Roll-out Plan for Targeted Supply Chain Partners
  • Key Metrics of Success Related to Quality, Cost and Delivery Performance
  • Implementation of Lean Concepts and Techniques across the Entire Value Chain

To be honest, working with suppliers will be easier than working with customers because with suppliers, you are the customer and they may be more willing to listen. However, don’t let customers slip by the wayside. One of the key concepts of Lean is that of “Pull Demand”, and who better to include in this effort than the customer who pulls from you. Success in having your supply chain partners effectively implement Lean means that your organization can eliminate the wasteful buffers that exist between your organization and theirs. The next and last stop in this roadmap is to Measure Continuous Improvement.

Are you Best-in-Class?

Friday, April 17, 2009

A Roadmap to Lean: Transform the Information System

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The third step in the Implementation phase is to transform the information system within the organization. In this step, we want to:

  • Define What Implications the Lean Objectives Have on the Information Systems
  • Document As/Is – To/Be Information Flows
  • Identify Visual Methods that can be Used in Lieu of the Information System
  • Determine Which Systems Need to Change to Support Non-Visual Requirements
  • Create a Plan for Making the Changes Necessary to the Information System
  • Monitor Cut-over and Provide Support

Sometimes, when an organization is implementing changes to their information system, such as implementing an ERP system, Lean principles can be applied. Sometimes, when implementing Lean, limitations are reached since the information system needs to be changed. Either way, addressing the needs of the information system early in the process will reduce the roadblocks that arise during the effort. With the main premise behind Lean being to eliminate waste and support value added activities, the information system needs to be revised so that it is not causing wasteful activities in and of itself. When evaluating the information that is being collected within the system, it is important to ask “How am I actually going to use this information and what value does it provide?” If good answers do not come of this evaluation, it is likely that there is no need to have it in the system so revisions should be made to eliminate it. In this step of transforming the information system, key deliverables are:

  • Definition of “Must-Have” vs. “Nice-to-Have” Information
  • A Plan of Action to Eliminate/Replace Non-Essential Information
  • Written Procedures and User Training Documentation
  • Training of Users for Visual and Non-visual Techniques
  • Specification, Coding and Testing of Software Changes
  • Tracking of Open Issues for both System and Procedural Issues
  • Updated Performance Measurements

There are some who think that if Lean is implemented, there is no need for an information system to be used, however, most experts who understand the whole business process will agree that the two go together to support the whole business and must be integrated in order for the organization to be successful in its Lean efforts. However, this step of transforming the information system will often times include the need to change how one thinks of the business process requirements altogether, but then that is the whole purpose behind the effort of Going Lean. The next stop in this roadmap is Integrating the Supply Chain.

Are you Best-In-Class?

Friday, April 10, 2009

A Roadmap to Lean: Manage the Culture Change

Part 7 of a 10 part series

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The second step in the Implementation phase is to manage the culture change that comes with going Lean. In this step, we want to:

  • Identify the cultural impediments that must be overcome
  • Impart the vision of Lean to the entire organization
  • Make sure that “Continuous Improvement” and Quality are part of the culture
  • Get middle management on board
  • Identify and win over the “Grumblers”

Attaining the paradigm shift that is required throughout the entire organization is the biggest challenge to succeeding at Going Lean. Along with developing the idea of Continuous Improvement, Employee Empowerment is one of the most critical issues for success. It has been stated “…. the major inhibitor to get a lean environment is the inability to trust the workforce and really give up a certain level of control in order to give people the power to implement their own ideas and be respected as experts in their area….”. Although this is a statement regarding the managerial side of the issue, it must be noted that it is as difficult of a change for the regular workers as it is for the managers. You can’t just give empowerment to people, they have to take it, and many do not know how to be empowered.

Management needs to monitor the impact of Lean on the organization and make Continuous Improvement, Quality and Empowerment part of the culture. Points to remember in this process are:

  • Resistance to change IS THE NORM, not the exception
  • People must be informed, empowered, willing and able in order for changes to be made effectively
  • Personal and organizational values affect how people react to change
  • People go through the change process in stages and go through these stages as individuals

Managing the culture change is vital to success in Being Lean. The consequences of not doing so include having managers who don’t supply resources or those who filter important information, employees become distracted and loose interest, valued employees leave the organization, or unforeseen obstacles arise. By succeeding in this aspect alone will mean that all of the unknowns and obstacles can be overcome as they arise. Transforming the information system is the next stop on our roadmap.

Are you Best-in-Class?

Friday, April 3, 2009

A Roadmap to Lean: Implement Rapid Change

Part 6 of a 10 part series
In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The first step in the Implementation phase is to implement a process of rapid change by following the overall plan developed so far. In this step, we want to:
  • Form the Kaizen event for a specific improvement
  • Train work teams on new methods
  • Observe the process being addressed
  • Develop the Takt Time
  • Develop improvement ideas and a detailed action plan
  • Cut-over and monitor results

A Kaizen event is a team activity aimed at rapid use of lean methods and tools to eliminate waste in particular areas of business processes. The purpose of the Kaizen team is to investigate, analyze, and evaluate each process and every operation in order to add value and eliminate waste. This is usually done by a small group of people directly involved with the process being analyzed, however, it is also a good idea to include someone unrelated to the process in order to provide an un-biased opinion. Deliverables from this task can include:

  • Value stream mapping of the specific process
  • Work flow re-design and re-positioning of equipment
  • 5s - organizing the work place and standardizing processes
  • Standardized work for tasks being performed
  • Setup Reduction and shortened change over times
  • Visual “pull” for materials
  • Error proofing techniques for tasks
  • One piece flow (or at least significantly reduced batch sizes)
  • Cellular manufacturing / processing

The Kaizen event itself typically takes three to four days where the team develops solution ideas and a plan of action which is typically implemented within a month or two after the event is complete. In this way, results are quick and noticeable throughout the organization and the benefits from the Lean process are realized quickly so that the improvements directly affect the bottom line of the organization. Because of this quick return aspect of Lean Implementation, this process is a great way to make improvements during tough economic times and when the times improve, the results are that much more magnified. In addition to addressing the mechanics of going Lean, Managing the Culture Change is the next step in our roadmap.

Are you Best-in-Class?

Friday, March 27, 2009

A Roadmap to Lean: Creating the Plan

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The final step in the Planning phase is to create the implementation plan. In this step, we want to:

  • Define and sequence the Kaizen events to be conducted
  • Identify and allocate personnel required for each Kaizen event
  • Re-allocate existing workloads if required to free up resources
  • Create a plan that reflects the priorities identified to date
  • Define the overall metrics to be used to monitor progress

All of the planning steps so far have lead to this point in the effort. With this information, the plan can set in motion the actions that will begin to deliver actual results – savings from waste elimination. Although the plan should be oriented to deliver the best bang for the buck, it is often times a good idea to start with a fairly simple, easy–to-do event so that those involved can learn about the process and have an early success. Coming out of the chutes with the biggest, most difficult event will likely discourage people before they even get started. Deliverables from this task will include:

  • An activity plan that defines the sequence and duration of the planned Kaizen events
  • Defined milestones and expected dates of achievement
  • Definition of the progress metrics to be used
  • Assignment of participants and accountabilities for each Kaizen event
  • Creation of a public information area so that everyone can be informed

It should be recognized that this plan is not set in stone. Many times, during one Kaizen event, an issue is uncovered that was not considered before which becomes more important than others in the plan. By being flexible, which is a mantra of Lean, these new and better ideas can be addressed without losing the overall focus. As long as these ideas are in sync with the overall goals and metrics set forth in the beginning, changing the plan makes sense to seize the new opportunities.

This five step planning phase for Going Lean can take a few days or a few weeks, depending on the size and type of organization and the scope the effort. However, it needs to be done to some extent since implementation without it will lead to a haphazard approach that kills momentum and does not yield significant results. It also isn’t really over when it is “done”. Like the whole idea of Being Lean, it is all about ongoing, continuous improvement - so it all needs to be constantly reviewed over time.

On to Implementation!! Are you Best-in-Class?

Thursday, March 19, 2009

A Roadmap to Lean: Analyze the Opportunities

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The fourth step in the Planning phase is to analyze opportunities for Lean in the organization. In this step, we want to:
  • Create Current and Future State Diagrams of the Business Processes
  • Identify Non-Value Added Activities
  • Identify Potential Process Redesign Opportunities
  • Define and Document Expected Improvements
  • Review with Management for Approval

Using a value stream approach to looking at the current state of the processes used in the organization, non-value added activities can be identified and targeted for elimination. With this map of the current state and the knowledge gained by the team though the strategy development activities and the education to date, a future state of the organization can be developed. Deliverables from this task will include:

  • Current and Future Process Flow and/or Value Stream Mapping Documents
  • New Process Layouts and Material Flow Diagrams
  • New Organization Diagrams and Work Team Assignments
  • Ranked List of Potential Lean Opportunities

By developing a future state map of the organization and identifying where the various Lean concepts can be applied, waste eliminating opportunities will be identified. The specific opportunities that come from this analysis will lead to Kaizen events in the implementation phase and will form the basis of the plan to be developed. The ranking decisions will incorporate the magnitude of the change, the impact on the organization, the potential cost, the potential benefit, and the ease of implementation. This information will become inputs to the next and final step of the planning phase, Creating an Implementation Plan.

Are you Best-in-Class?

Monday, March 16, 2009

A Roadmap to Lean: Education and Training

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The third step in the Planning phase is to address education and training regarding lean in the entire organization. In this step, we want to:

  • Identify “Gaps” in the Lean Education for Management
  • Document Cultural Change Objectives
  • Develop Lean Employee Education Curricula
  • Prepare Skills Matrix and Education Schedule

The goal here is to identify overall education needs for the entire organization which will include an overview of Lean concepts and the possibilities that exist. Another important area to include in this education is change management so that people understand up front some of the challenges they will be facing when making change happen. It is also important to include education about the transformation process itself so that everyone understands how this transformation process will be conducted and how they will be involved. Deliverables from this task will include:

  • Education Plan for the Entire Organization
  • Lean Education Session Materials
  • Lean Facilitator Notes
  • Delivery of “Lean” Education to Key Functional Leaders

Not all Lean educational needs of the organization will necessarily be met with this segment since each kaizen event in the implementation phase may need specific training in order to be successful. This topic specific training will be conducted at that time for those who will participate in the task. Instead, this education is necessary for the entire organization so that all who are to participate are on the same page and are going in the same direction with the same understanding. Once it is complete, participants will be able to understand the concepts and possibilities so that they can proceed to the next step of planning, Analyzing Opportunities.

Are you Best-In-Class?

Thursday, February 26, 2009

A Roadmap to Lean: Develop a Lean Strategy

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The second step in the Planning phase is to develop a market driven strategic plan for implementing lean in the entire organization. In this step, we want to:

  • Educate Senior Management on the Fundamentals
  • Identify Market Drivers for Lean
  • Define a Lean Vision
  • Develop Leadership Commitment
  • Update the Strategic Business Plan to Include Lean objective

By using the Lean assessment and the resulting findings and recommendations from the first step, the biggest opportunities and overall directions for the organization will start to become clear. The deliverables from this task will include:

  • A Lean Management Education Course
  • An Organizational Profile with a Lean Vision
  • Documentation of the Critical Success Factors
  • A Written Lean Mission Statement
  • A Proposed Implementation Time Frame

Including Lean in this level of strategic planning for the organization will assure that the lean concepts, practices and activities are in sync with the overall direction desired for the organization. Without this activity, it is highly possible for an organization to embark on the Lean journey, only to find that it keeps running into the “same ol’ way of doing things” and that the attempts at Lean are counter to the overall direction the organization wants to go. This will lead to ineffective implementation at best with downside results that include the creation of even more waste, poor morale on the part of those involved, and a loss of momentum for making improvements in the future. People are very tuned into performing per the direction from above, so if the top leadership of the organization has not taken the steps to be sure all is in order at the top, it will be very difficult to get the ship to turn around. Once the Lean strategy is developed, the next step of planning, Analyzing Opportunities, can proceed.

Are you Best-in-Class?

Sunday, February 15, 2009

A Roadmap to Lean: Assess Lean Readiness

In order for an organization to transform from its current state of operation to one of a Lean Enterprise Organization, a two phase approach – Planning and Implementation - can be utilized. The first step in the Planning phase is to assess the Lean readiness of the entire organization and determine what fundamental changes needs to occur in order for the effort to be successful. In this step, we want to:
  • Determine how prepared the organization is for Lean concepts
  • Determine how Lean fits the business strategy and corporate culture
  • Evaluate the level of Lean concept understanding
  • Develop a high level list of potential opportunities
  • Identify changes that are required to support the effort of “Going Lean”
  • Estimate how long it should take to achieve results

By using an established checklist and management interviews, the assessment should cover the entire organization in the following areas:

  • Workplace Organization, Visual Control, Housekeeping
  • Just-In-Time Production
  • Quality in the Product and Processes
  • Empowered Employees/Teams
  • Visible Management
  • Continuous Pursuit of Perfection
  • Company Organization and Management Style
  • Company Services

As a result of this assessment, the findings and recommendations need to be documented with candid points about issues that must be addressed prior to any Lean activity being performed as well as high level potential benefits that can be expected. These findings also need to identify the strengths of the organization that will support a Lean effort that is attempted. The biggest change to an organization going lean is usually the culture change and paradigm shift that goes along with the ideas of waste elimination, continuous improvement, and empowerment – all of which are central to being Best-in-Class as a Lean Enterprise Organization. Not addressing the high level issues identified will mean that subsequent activities will only have marginal success (if any at all) and the organization will have the status of “Doing Lean” rather than achieving the quantum leap overall improvement that goes with “Being Lean”. Once this assessment is complete and accepted, the next step of planning, Developing a Lean Strategy, can commence.

Are you Best-in-Class?

Friday, February 6, 2009

Lean is All About Continuous Improvement

“Lean” is a concept involving the elimination of waste and the concentration on value added activities and is rooted in the idea of continuous improvement. Although it has primarily been associated with and developed by the manufacturing sector, it is becoming apparent to many that the concepts of lean apply to much more than manufacturing. For example, in our practice at Peak Enterprise Solutions, we have applied our lean methodology to help manufacturers improve the processes of the front office and have helped a junior college improve their admissions process of accepting applications. In another example, the healthcare industry has been using the concepts of lean for quite a while.

In my previous note, I spoke about a 5 step cycle for continuous improvement. Although this cycle can be used to address specific problems or opportunities, there is a higher level process that should occur in order for an organization to take the path of “Going Lean”.

For an organization to become lean, we use a two phase approach – Planning and Implementation – each of which has five steps (why five? I don’t know, but it works!). This approach is customizable to a particular situation or client, but if we were to take someone through the entire process, the approach would be as follows:

Assess Lean Readiness
Develop a Lean Strategy
Analyze Opportunities
Address education and Training
Create a Plan of Implementation

Implement Rapid Change
Manage the Culture Change
Transform the Information System
Integrate the Supply Chain
Measure Continuous Improvement

In the next few notes, I will address each of these steps individually as a roadmap to going lean. Even if used only in part, along with the 5 step cycle for continuous improvement, the methodology vastly improves the chances of success from a shotgun approach used by many who attempt the effort. It is also key to the idea of “Being Lean” and not just “Doing Lean”. Please stay tuned or contact us for more information and please feel free to pass this on to others who may be interested.

Are you Best-in-Class?

Friday, January 30, 2009

“5 on 5” The Continuous Improvement Cycle

When playing a game of “5 on 5” in basketball, the key to success is for the team to work well together, utilize the strengths of each of the players and repeatedly work their process as defined by the coach. As the process is repeated over and over again through the course of the season, the really great teams “develop a chemistry” which is something that is unseen and unquantifiable, but which gives the team an edge over its competition and leads to success.

The same is true in the business world for companies that want to improve and succeed. A business team needs to work well together, utilize the strengths of each of the team members and use a process that is repeated over and over. The following continuous improvement cycle used repeatedly will lead to a new “chemistry” within the organization so that the culture begins to change to one of continuous improvement.

“5 on 5” - The 5 Step Continuous Improvement Cycle

1. Identify the target process
2. Organize and improvement team
3. Describe the issues, concerns or opportunity
4. Collect current performance data
5. Create a process map

1. Identify the process customers and suppliers
2. Define the process inputs and outputs
3. Identify wastes and value added activities
4. Define the process requirements
5. Generate a list of potential improvements

1. Establish desired performance goals
2. Prioritize the potential solutions
3. Establish the selection criteria
4. Select the best solution(s)
5. Define the desired process

1. Develop an action plan
2. Develop process performance metrics
3. Document the solutions(s)
4. Test the changes
5. Implement per the action plan

1. Measure progress per the action plan
2. Compare results with desired performance goals
3. Establish ongoing feedback
4. Determine corrective actions that need to be taken
5. Repeat the cycle to define new opportunities

The key to really being successful using this process is the very last step – going back to the beginning and looking for new opportunities. Without this, it is one-time change, not continuous improvement. All too often companies declare victory when a change is complete and sit back for the new status quo to set in rather than taking another look at things to find more opportunities. By using this cycle on a formal basis over and over as problems or opportunities are addressed in the organization, inherent use of the cycle will begin to occur since people will become accustomed to it and the culture of the organization will begin to embrace the idea of continuous improvement. This resulting chemistry that begins to develop will be unseen and unquantifiable but will provide an edge for the organization so that it can succeed within itself and against the competition.

Basketball anyone?

Friday, January 23, 2009

The Strengths of Operating as a Team

Wikipedia defines a team as a group of people or animals linked in a common purpose. A group in itself does not necessarily constitute a team. Teams normally have members with complementary skills and generate synergy through a coordinated effort which allows each member to maximize his or her strengths and minimize his or her weaknesses. These can be independent or interdependent, self managed, project related, sports, or even virtual in today’s electronic age.

In business, teams have various roles to accomplish that include:
  • Problem solving
  • Looking for improvements
  • Providing leadership
  • Giving focus to specific issues or functions
  • Leading in change management

Effective teams are ones that are carefully organized, have clear rules of conduct, utilize practices for having effective meetings, and properly utilize team operating processes such as problem solving, situation assessment, and decision making. Teams also need to avoid the various dysfunctions that build on each other which include:

  • Absence of trust
  • Fear of conflict
  • Lack of commitment
  • Avoidance of accountability
  • Inattention to results

Although teams have some pitfalls as part of their nature, such as taking longer to make decisions, the benefits of an effective team outweigh the risks:

  • Teams provide a broader look at solutions
  • Teams will tend to balance out the risks
  • Teams usually provide better collective judgment
  • Group participation leads to better understanding of the problem and decision
  • Involved people will better accept the change required and lead others to the new way

Are you Best-in-Class?

Thursday, January 15, 2009

Using ERP to Achieve Best-in-Class

The current world of increasing energy and material costs and the drive to become “Lean” and stay competitive create unique requirements for special features in Enterprise Resource Planning (ERP) in order for the ERP system to be used in a Best-in-Class performance. In a recent survey, Aberdeen research has found that companies considered as Best-in-Class had performance results that include:

  • 16% reduction in manufacturing operating costs
  • 20% reduction in administrative costs
  • 20% improvement in order cycle times
  • 94% complete and on-time shipments
  • 90% manufacturing schedule compliance
  • 90% overall yield

As previously noted in these messages, the top four pressures impacting the ERP system and its use are:

  • Must reduce costs
  • Must improve customer response times
  • Must be easier to do business with
  • Need to manage growth expectations

Actions that companies can take to achieve Best-in-Class performance using their ERP system include:

  • Use business process analysis techniques to fully understand the needs of the business and how the ERP system can satisfy these needs
  • Use continuous improvement teams to fully utilize the capabilities of the ERP system
  • Take steps to reduce the dependence on spreadsheets and manual processes to satisfy industry specific requirements
  • Make integration of enterprise applications a priority
  • Connect the plant floor applications to the ERP system to increase visibility and controlImplement event management to monitor transactions and conditions as they occur

Are you Best-in-Class?

Monday, January 5, 2009

How to Fail at Implementing an ERP System

Implementing an ERP system is a daunting task for the entire organization and will be a major cost item for the year. Whether you are implementing a whole new system or re-implementing parts of an existing system, there are many ways to fail in the effort. Although there are numerous details that must be attended to, any of which can derail the effort, some of the major ways to fail include:

Don’t fully understand your requirements prior to making the selection of an ERP system. Without a detailed list of required features and functions, the system being considered cannot be properly evaluated and any request-for-quote from a vendor will only be a best guess as to what it needs to do and how it meets the needs of the company.

Don’t pay attention to the business processes of the entire organization. Not understanding and documenting the business processes will mean that no improvements to the way business is done will be explored so that requirements that help these changes are also not known. Without this understanding, assumptions will be made that may or may not be right.

Choose a system because it was successfully used by someone else. Every company has its own set of requirements and to select a system based on the fact that a friend, colleague or another company in the industry has been successful does not mean that you will be successful.

Choose a system because of how it looks. Although the user interface to the system is important, it is more important that the system does what you need it to do. Also, seeing the system simply via a demo conducted by the vendor can mask issues you may struggle with when you go to use it yourself.

Don’t educate and train those who will be using the system. Without training, users will not know how to do what they need to do and without education, they will not understand why they are having to do this. Training also needs to include plenty of practice time with real transactions so that the go-live experience delivers fewer surprises.

Don’t accept (or manage) the fact that major organizational change is about to occur. Either change WILL occur or the new system will simply replicate the sins of the old. Much of the change comes from the fact that the business processes need to change and these changes need to be addressed and managed proactively.

Overload those involved with project activities while expecting them to perform all of their regular job duties. If both project work and regular job activities cannot be done, the project activities will be sacrificed.

Implement a system without thorough testing of the software AND business processes. Many users assume the software will work as advertised (not an unreasonable expectation) but it often times has problems you would not expect. More importantly, testing the way the business will be run using this tool must be done to be sure that the business can continue once the system is implemented.

Implement everything all at once without considering a modular approach. So much is at stake with the “Big Bang” approach that any slip in the implementation can be disastrous. May of the problems will not become evident until later when accounting and finance try to piece together all that has happened through the new system. This all-or-nothing approach typically “bets the company” on being successful.

Attempt implementation without the assistance of an unbiased expert who has done it before. Without the knowledge of experience or a proven methodology, many points will be missed and mistakes will be made that could easily be avoided. Using only the software vendor is risky too since their goal will be to make your company work in the software rather than make the software work in your company.

It is most important that you get this implementation right. It is your system and you need to live with the results. You need to understand the current requirements, the business processes and what needs to change and what you want from the business in the future. If you are unsure of how to proceed successfully on your own with experts from within, be sure to contact an experienced consultant that is not tied to any software solution or system. Implementing an ERP system is a very costly proposition but it is even more costly the second or third time around.

Are you Best-in-Class?

Tuesday, December 9, 2008

Planning is the Key to Success to Implementing Lean

Lean is a philosophy that is based on continuous improvement, the simplification and standardization of business processes, and the elimination of all forms of waste throughout the organization. Implementing Lean techniques can help companies to improve their operational performance and customer responsiveness and drive positive results to the bottom line.

Companies that are new to implementing Lean often times start with taking small steps, sometimes as a trial to test the process. Once they realize the early benefits of using Lean techniques they get more aggressive with their strategy and expand the program throughout the organization. The basic steps to developing the Lean plan are:

  • Review and assess Lean readiness within the organization
  • Identify the readiness issues that must be addressed to make Lean successful
  • Develop aLean strategy and metrics that will be used to guide the Lean implementation
  • Analyze and prioritize improvement opportunities
  • Provide overall Lean education and training, including change management
  • Develop a plan of action for implementing the improvement opportunities

Engaging top management is vitally important to facilitate the adoption of Lean philosophies and technologies. In order to get and sustain buy in from top management, it is important to make them realize that adopting Lean tools and concepts will help assure the long term viability of the company.

Benefits of implementing a well planned Lean effort are:

  • Alignment of operations and corporate strategy
  • Clear enterprise-wide communication
  • Increased throughput on the shop floor and front office
  • Reduced costs by the elimination of wastes
  • Increased flexibility in satisfying changing customer demands

As the famous adage goes “it is easier said than done”, companies face challenges in implementing Lean concepts. Having a systemic approach to the implementation, incorporating education at all levels along the way and focusing on change management will help assure success in the adoption of Lean tools and concepts.

Are you Best-in-Class?

Monday, December 1, 2008

Cost Control Becomes the Number One Pressure

Cost control has been cited by Aberdeen Research as the number one pressure impacting the ERP strategy within a manufacturing company. This phenomenon is particularly prevalent in process industries where cost control has gained a renewed focus in these economically hard times. As a result of their recent survey, the top four pressures were listed by Abredeen as:
  • Must reduce costs
  • Must improve customer response times
  • Must be easier to do business with
  • Need to manage growth expectations

With the emergence of cost control as the number one business driver this year (number two last year), the following were listed as the top cost issues:

  • Rising costs of raw materials
  • Rising energy costs’ impact on manufacturing operations
  • Rising energy costs’ impact on in/out bound transportation
  • Impact of poor quality
  • Proliferation of changeover costs

ERP systems are able to assist the organization in managing these costs with the integration and data availability that are inherent in most systems today. By properly aligning business processes and ERP functionality, manufacturers should be able to gain control of most of their significant costs. Along with the standard features of an ERP system, there are special enablers that exist in many systems that can prove to be very useful:

  • Advanced Planning and Scheduling
  • Inventory Optimization
  • Material Change Management
  • Event Management (triggers and alerts)
  • Manufacturing Execution System (MES)
  • Enterprise Asset Management
  • Specialized Inventory Management features: Lot Traceability, Shelf Life Management, Actual Costing, Co and By-Products, Compliance Reporting

Peak Enterprise Solutions is able to help clients redesign their business processes and utilize the tools of the ERP system to allow them to increase the value of their business.

Are you Best-in-Class?