Lean in Supply Chain is Key for Success

Although C-level executives are enthusiastic about the benefits that can be derived by “Leaning out” manufacturing operations from plant to plant, there is a large performance gap between those companies that are simply using Lean techniques on the shop floor and those that have built a culture based on Lean thinking throughout the Enterprise and in particular, the supply chain.

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 and executive suites, customers and suppliers. By doing all of this, the company will progress from “Doing Lean” to “Being Lean”. Best-in-Class performers have three basic characteristics:

• Transfer of Lean thinking from the shop floor to the supply chain
• Consistent senior management commitment across the supply chain of suppliers, customers, and distribution partners
• Extension of Lean concepts and techniques across the entire value chain

Once the Lean way of thinking is successful within the organization, suggestions for expanding into the entire supply chain include:

• Include major suppliers, customers, and partners as part of the audience as they are deployed across the supply chain
• Evaluate each supply chain process as to applicability of Lean concepts
• Implement performance measurements that span the supply chain network. Measure quality, cost and delivery performance.
• Build mutually beneficial relationships with partners to share information and synchronize planning activities driven by ‘Pull’ demand concepts

Are You Best-in-Class?

Peak is featured in the SB Tribune

South Bend Tribune Weekly
August 11. 2008 6:59AM

Consulting Firm Wants to Help Businesses Run Better

By JENNIFER OCHSTEINTribune Correspondent

Brad Staats wants to see manufacturers reach their peak value.To help companies realize this goal, Staats started his consulting firm, Peak Enterprise Solutions, just more than a year ago.“We work with manufacturing companies to help them run better businesses,” said Staats.While he and the consultants who work with him don’t touch finance, human resource, sales or engineering aspects of a company, Peak Enterprise Solutions deals with the rest of the business processes. “From the time the order is made from the time it is shipped — we deal with all the processes involved in running a business,” he added.

Staats and the consultants he works with work in four business practice areas: business consulting, which includes enterprise resource planning; lean manufacturing planning and implementation; systems solutions and educational programs.A resident of LaPorte for the past 20 years, Staats said he started the company partly because he saw a need for it within a 100-mile radius of South Bend.“I feel there is a lot of opportunity to help companies, and I wanted to keep consulting,” Staats said. “I saw a market for it.”

With 25 years experience in consulting and manufacturing management, Staats started consulting in the steel industry, deciding to go into business for himself in April of 2007.While there are three active consultants associated with Peak Enterprise Solutions, Staats has no employees. He said the three form an association of consultants that offer expertise in different areas of manufacturing. Staats calls in different consultants to differing business situations.

His company’s services are based on “rate of return” and savings to his customers. His goal is to save his customers “more than what they’re paying us. We want to bring value to a company.”That means that his fees cannot be justified if the company doesn’t see a savings after his services are rendered. And Staats said he believes he can help his customers see savings in the companies by helping them improve and streamline their business processes and strategies. On top of that, Staats offers a free, one-day analysis to customers to determine whether he can help them. It gives him and the executives of a company a chance to talk and for Staats to propose any savings he can bring the company through his work with them.“We can see each other firsthand and understand each other” with a meeting like this, said Staats.

He believes what makes his company unique is the methodological approach he takes to implement strategies and educate employees, which includes team building, supervisory skills, effective communication and time management classes.For instance, when helping implement a lean business model into a company, he has a step-by-step process he follows based on the needs of the company. His methodology also takes on a holistic approach, working with everyone in the company from executives to those who work the shop floor. And he can oversee the entire project with a bird’s-eye view through project management.“This is my one focus — to keep everyone on task and to keep moving forward for the project,” Staats said.

For more information, contact Staats at (574) 232-3610 or visit his Web site at www.peakindiana.com.

Supply Chain Management: A Key to Success

Aberdeen Research Group’s survey of over 800 supply chain executives found just how tough the business pressures have become in their supply chains and highlighted the critical role that supply chain management can play in the overall success of the company. They found that Best-in-Class companies had:

• Finished goods inventory turns of 28 turns
• Total logistics costs as a percentage of sales of 5%
• Perfect order percentage (complete and on-time) of 96%

In order to achieve these results, they found that:

• Best-in-Class companies are 1.7 times more likely to have end to end supply chain visibility.
• Best-in-Class companies are 1.5 times more likely to have implemented cross functional metrics across the entire enterprise.
• Best-in-Class companies are 2 times more likely to have a single executive with overall supply chain responsibility.

In order to improve and achieve Best-in-Class status, companies need to:

• Invest in data quality as part of the supply chain initiatives.
• Institute a formal Sales and Operations Planning roadmap to execute reporting and metrics.
• Improve supply chain responsiveness in order to manage and react to market events.

Are You Best-in-Class?

Best-in-Class Success via ERP

Pressures to reduce costs outweigh all other business drivers regarding Enterprise Resource Planning (ERP) systems. While ERP is generally viewed as required, it can also be key to streamlining the business processes. Aberdeen Research has surveyed over 1200 manufacturing companies and found that while ERP implementation generally produced a reduction on costs and improvements in scheduling across the entire organization, Best-in-Class companies had better results:

• 20% reduction in levels of inventory with 97% accuracy
• 95% manufacturing schedule compliance
• 97% on-time and complete shipments
• An average of 3.3 days to close a month

This survey showed that Best-in-Class companies:

• Implemented 30% more ERP functionality
• Implementation is 33% more likely to be owned by line-of-business executives
• Standardized enterprise wide procedures for all business processes

In order to achieve Best-in-Class, companies need to:

• Assign ownership of ERP success to line-of-business executives
• Broaden the use of the ERP system to include all of the functionality available
• Standardize common practices and ERP implementation

Are you Best-in-Class???

Gain Visibility across Production

Manufacturing executives have many challenges optimizing performance while attaining corporate goals. In today’s economic environment, a significant reason for performance management is operating cost reduction while continuing to serve the customer. Aberdeen research has found that:

• Best-in-Class manufacturers operate with 25% operation margin.
• Best-in-Class manufacturers realize 19% increase in On-Time Delivery, a 21% increase in OEE, and a 22% increase in yield.
• Best-in-Class manufacturers realize 97% Raw Material Yield.

Their research also found that:

• Best-in-Class manufacturers are 65% more likely to standardize exception handling processes and procedures across manufacturing operations.
• Best-in-Class manufacturers are 2 times more likely to enable continuous improvement teams with analytics and real time visibility.
• Best-in-Class manufacturers are 4 times more likely to display operational data and metrics in real-time.

In order to achieve Best-in-Class performance, companies must focus on improving operations in the following ways:

• Automate data collection across manufacturing operations and use this data to control production.
• Provide role based visibility to information and establish automated workflows across manufacturing operations.
• Invest in visualization and analytical technologies to gain visibility across all operations and improve decision making.

Lean Transformation Strategies

Lean transformations that effectively improve the culture and performance of
an enterprise use an integrated approach across people, business processes,
and technologies. Based on the survey responses of over 800 manufacturing
professionals, the Aberdeen Research Group has identified specific strategies for manufactures to deploy at every stage along the Lean journey. Survey results show that firms enjoying Best-in-Class performance share several common characteristics which include:

• Lean processes are standardized across the enterprise and are based on best practices.
• Executive ownership of Lean initiatives exists, and these executives have worked to establish Lean Centers for Excellence across the enterprise.
• External consultants are utilized to set expectations, help establish best practices, and train the appropriate number of internal champions.
• Lean Scheduling software solutions are used to standardize processes and support decision makers in real-time.

Aberdeen has identified required actions for enterprises at every point of the
Lean journey. In each case, the required actions have been validated by the 800
survey respondents and shown to improve KPI performance in defects, first
pass yield, on time delivery, and throughput. Actions to reach Best-in-Class include:

• Use external Lean domain experts to begin training, set expectations and establish best practices for pilot Lean initiatives.
• Establish executive ownership of local Lean initiatives and establish a pilot Lean Center of
• Excellence to support best practices across the enterprise.
• Use manufacturing operations management capabilities to enable Lean tools that support Lean Scheduling and Execution initiatives.

Are you Best-in-Class?

Peak is TAG Grant Qualified

My company, Peak Enterprise Solutions, has just been qualified to deliver training and education for Lean Manufacturing under the Indiana Training Acceleration Grant (TAG) program.

By partnering with the Apprentice Academy of South Bend and Vincennes University, the Lean Enterprise Education curriculum developed by Peak is eligible to be used as part of a TAG grant where the company will be reimbursed for out-of-pocket expenses incurred for on-site training and education for Lean Manufacturing.

In addition to the reimbursement from the state, the individuals that participate in the program can qualify for course credit in the Vincennes University Business and Industry Division continuing education program “Customized Certificate of Applied Learning in Advanced Manufacturing”.

This hands-on education and training program is a great way for a company to start down the path to Lean and with the TAG grant, out-of-pocket expenses for this training are reimbursed by the state.

Why Peak Enterprise Solutions? All of our consultants have 25+ years of experience in both consulting and management, our approach uses a proven methodology, our projects are ROI based and we are locally owned.

Please visit the site www.in.gov/dwd/2698.htm for more information regarding the TAG grants.

Measurement is Key to Lean Success

Aberdeen research studies have consistently reported that the majority of manufacturers
have begun some form of Lean initiative and are at various states along their Lean journey. Manufacturers are focusing on improving operational factors in an effort to garner profits to the organization while continuing to meet customer expectations. They also report that:

• While most companies indicate that they are Lean to some degree, few are Best-in-Class: adequate measurement and control is one missing link.
• Operational factors are among the top three reasons driving Lean Measurement and Control
• Operational metrics are often misunderstood or misaligned with strategic goals

Going through a lean transformation requires change to occur in all areas of the business and without some basic metrics beings in place, it is difficult to know where you have been and how you are succeeding in your effort. Developing metrics also forces the organization to determine what it is they are really trying to achieve by going lean so it facilitates getting everyone on the same page from the outset.

These metrics need to be basic, straightforward and close enough to the operation that those involved can actually influence them. Things like cycle time, changeover time or WIP inventory are things that people can see, touch and affect. Things like ROI, P/E ratios and ship-on-time percents are difficult since people have a hard time relating what they do day-to-day with these results. What is important is that the metrics being used at the tactical level support and contribute to the results desired at the strategic level, so careful consideration must be made when developing the lean metrics to be used.

Lots of things can be measured in a lean effort, so pick the few that are critical to your success. I'd love to hear what metrics are being used in your lean effort, so please let me know.

How Lean is Your Manufacturing Machine?

Manufacturing is more challenging today than ever before and most businesses struggle with many of the same critical issues:

• Customer definition of value is constantly changing and is a lot more challenging.


• Lead times are shrinking and on-time delivery to customers is less than satisfactory.


• Inventory is out of balance with both shortages and excesses.


• High cost purchasing/material mangers are expediting material.


• There are more “Hot” tags on the floor than ever before.


• Capacity problems…struggling to get enough product out the door.


• Some work centers are idle while others are over capacity.


• Profit margins are shrinking and cash flow is a problem.


• Processes have excess labor, material or time or all three.
  

Becoming a lean organization can eliminate these challenges. Reduce inventory, lead times, labor cost, expediting and frustration. Increase customer value, throughput, capacity, cash flow and profits. Sounds idealistic? It's not. Going down the path to lean is rewarding and productive, both for the individual and the organization. Especially in these economically hard times, eliminating waste and concentrating on value added activities can give an organization the competitive edge it needs to stay afloat during hard times and really prosper during better times.

As I see it, there are two keys to being successful in the lean transformation:

• Having a plan - going through the process with a plan and clear expectations will allow everyone involved to know where you are going and how well you are accomplishing the goal.


• Managing the change - going lean is a likely a culture change/paradigm shift for the organization. It's probably a fundamental change in how the business is run, so working to make the change in behavior and then sustaining it has to be a conscious effort.

Companies that are successful at going lean are flexible, agile, good places to work and most importantly - profitable. They are able to change with the times much better than most and are poised for success in the future. There is lots of help out there if you are not sure how to go about it (most don't) so, go for it! Good Luck!