Production Planning and Supply Chain Management (SCM) Improvements in a SME

Impact and Effectiveness of a Change Agent in the Development of the Operations Systems in an SME.

Dr Austen Jones

School of Engineering, Leeds Metropolitan University, Leeds, UK

Mr Bernard O’Toole

School of Engineering, Leeds Metropolitan University, Leeds, UK

Prof Dave Webb

School of Engineering, Leeds Metropolitan University, Leeds, UK

Mr Jonathan Robinson

Operations Management, Saftronics, Leeds, UK

SYNOPSIS

Communication problems within and between organisations are nothing new and they are not uncommon.  Unfortunately, the results of inefficient communications are significant and can adversely affect the organisation’s performance.  This paper describes the methodology undertaken to analyse the communication problems and Operations systems problems within a medium sized manufacturing company and the recommendations that were the result of the analysis.

Following through the outlined proposals in combination with the successful implementation of the information sharing tool is expected to provide a solid foundation for production planning by providing the Planning function of the company with an up to date and accurate schedule of what will be delivered and when.  This information will make resulting production plans realistic and schedules much more likely to be workable and should also reduce the prevailing sense of uncertainty on the shop floor.

1 BACKGROUND

The importance of communication up and down the supply chain is well documented in the literature.  Despite the mass of prescriptive do’s and don’ts in the area of inter-company communications and information sharing many companies score poorly on both fronts, internally as well as externally.  The reasons for this are complex and are not necessarily the fault of the organisations per se but more often a reflection of how they have grown and the prevailing cultures within them.  Simply put, systems that serve small organisations well often serve to throttle them once they have grown.

Aside from the ongoing review of internal systems that should be on the agenda of organisational strategy, the developing organisation also has a duty to itself to look beyond its boundaries to see if there are any opportunities born of, for example, new technology that can be used to benefit itself and improve its operations.  Such benefits may include the speeding up of information flow and reporting and improving the quality and usefulness of communications.  It is from this point of view that Saftronics and the main operational issues it is addressing will be introduced.

Saftronics as a business was becoming aware of some of the opportunities presented by improving their existing internal systems and mechanisms used for dealing with their key supplier.  This business opportunity translated into a two year Teaching Company Scheme (TCS) Project.  The overall aim of the project is to implement an effective Production Planning and Control system and an important stage in this process is to audit existing internal systems and procedures as well as those applied to dealing with the company’s supply chain and to make recommendations as to how they may be improved.

Saftronics employ approximately 130 people and assemble motor control centres (MCCs) and control panels (CPs) the majority of which are supplied to the UK water industry.  These MCCs & CPs consist of large bespoke fabricated and painted metal enclosures containing various low voltage electrical switchgear and components as requested by the customer.  Orders are treated as discrete projects and the target turnaround time for projects is in the region of 12 weeks, 2.5 weeks of which is assigned to the fabrication and painting of the metalwork enclosures.

Saftronics have enjoyed steady growth over recent years and are looking forward to continued success in their core market, the expectation being that annual turnover will increase by approximately 20% to c£9.8m in the next 24 month period.

2 ADOPTED METHODOLOGY

The systematic approach that was agreed to be adopted for undertaking the improvement program is shown in Figure 1.

A hands-on approach was adopted in relation to investigating and documenting existing systems and procedures inasmuch as the author was immersed in the product planning and expediting roles within the company.  This immersion approach to determining extant systems was very useful as not only did it provide a complete context within which the systems could be analysed it also meant that various sub-systems were unearthed that would have been missed if a more removed stance had been adopted.

Figure 1. Methodology Adopted for Improving Operations Systems

3 OBSERVATIONS AND KEY ISSUES TO BE ADDRESSED

Saftronics have a very competent and skilled engineering employee base and are also fortunate in having a similarly highly competent shop floor work force in the areas where needed.  However, Saftronics did not have an effective system for disseminating either information concerning targets or information concerning progress against any targets.  This void was further exacerbated by the poor internal communications especially between different departments of the organisation.

From a supply point of view, Saftronics single sourced their fabricated metalwork enclosures.  After fabrication, metalwork was sent from the fabricator’s premises for painting at a third party paint shop.  Painted metalwork was then delivered to Saftronics such that production activities could then commence.  The fact that production could not commence until the metalwork had been delivered to Saftronics coupled with the fact that metalwork deliveries were often significantly late gave rise to some serious operational problems, namely that:

• delivery dates of orders to Saftronics’ customers were routinely after schedule.
• when Saftronics did deliver an order on time it was usually achieved at considerable additional expense by the use of over time or outsourcing.
• ‘planning’ of production tended to be reactive and short term undertaken with reference to what metalwork was in the building rather than what should be produced.
• as a result of the lack of true planning, production was essentially ‘hand-to-mouth’ with excessive dependence on expediting systems.

Analysis showed there were a number of contributory factors which when intertwined lead to the various problems that Saftronics was experiencing, for instance:

· metalwork delivery performance was not measured or tracked in any real way.

· similarly delivery performance of jobs to end-customers was not monitored.

· the over-use of ‘red spotting’ of urgent orders meant that order sequence of jobs being fabricated and subsequent tracking of those jobs became difficult.

· the dates that metalwork was wanted to be delivered to Saftronics tended to be imposed rather than arrived at by consultation and with respect to available capacity.

· there being considerable scope for metalwork orders to dither in no man’s land, beyond the control of Saftronics, between fabrication and the paint shop.

· the fact that items of metalwork were not uniquely identified meant that there was no formal checking in process for items of metalwork that were received.

Internally the problems outlined had manifested themselves in a variety of symptoms and inefficiencies that had become part of the status quo, for example:

• internal conflict and stress
• double handling of work
• excessive WIP and stock
• metalwork items being lost and damaged
• excessive non-value adding activity i.e. progress chasing
• uncertainty and lack of faith in production plans and delivery schedules

4 KEY PROPOSALS & UNDERLYING RATIONALE

The set of problems to be addressed were substantially interlinked.  There were four main areas that, if properly addressed would serve to greatly reduce the operations problems that Saftronics had been experiencing, these were:

• Measurement of performance
• Realism in relation to targets and plans
• Traceability of items of metalwork
• Visibility of job status and targets both internally and in the supply chain

4.1 Measuring Performance

Given that you cannot control a process that is not being measured it was essential that job progress performance be monitored against each job’s project plan and that this data be kept and monitored routinely.  Key aspects to measure included the lead time for receiving painted metalwork from order placement and Saftronics’ delivery performance to its customers.

4.2 Realism

Rather than attempting to impose unachievable delivery dates on the company’s key supplier it is better to consult with them and ask them to give a delivery date that they are willing to commit to.  The emphasis here being squarely on eliciting workable dates such that plans will be met and will start to be seen as being credible.  This required a change in mindset from Saftronics’ point of view as it necessitated that the disruptive system of ‘red spotting’ (expediting) jobs would only to be used as a last resort.

4.3 Traceability

After consultations with the metalwork supplier it was agreed that metalwork items would be uniquely identifiable.  This would enable a formal parts checking in process to be followed which in turn will mean that metalwork items will be less likely to go missing and also that any metalwork shortfalls will be picked up early in the manufacturing cycle such that the issue can be easily averted before it develops into a schedule affecting crisis.

4.4 Visibility

Communication, by definition, is a two-way process and in this respect there were ways that Saftronics could improve communications with their metalwork supplier.  For instance, Saftronics have started to give advance warning of orders such that as soon as the company wins an order they alert the supplier about the job, its size and when designs are scheduled for release to the supplier.  This means that the supplier is able to make informed planning and resourcing decisions based on an anticipated order schedule.

From the point of view of Saftronics, the information required for workable production plans will be enhanced by the onus being on the supplier to advise Saftronics of any problems in respect of advance warning of late deliveries to Saftronics.  In order for the metalwork supplier to be in a position to provide this information it was necessary to ensure that they felt able to be honest about delays and also that they were given control of the paint process so they could be held accountable for missed delivery dates.

The above suggestions are important, however, in and of themselves they do not guarantee relevancy, timeliness or visibility.  To these ends a database system accessible by both Saftronics and the metalwork supplier was proposed to replace the existing paper-based and spreadsheet systems.  Such a centralised database system would ensure that each party was working to the same set of information and up to date information could be extracted and entered efficiently.

4.5 Database Driven Information Sharing Tool

In order to make the tool easily accessible to both parties it was decided that the system would be deployed via the world wide web and access to the various functionality of the system would be controlled by username and password.  The online information sharing tool provides the following functionality via the web interface:

• Allows jobs with end customer delivery dates to be defined and allows the bill of material (BOM), from the metalwork point of view, for a job to be entered.
• The system is date oriented rather than activity oriented i.e. the emphasis is clearly on what date Saftronics can expect to receive which parts rather than at what stage in the fabrication / paint process a particular job is with the supplier.
• Fast highlighting of outstanding metalwork items that need to be chased.
• Easy tracking and reporting of items that were delivered late.
• Allows the filtering and sorting of information to the specific requirements of the user thus ensuring that only information relevant to the user is displayed and that this is done so in a format that is appropriate to the task that is being undertaken.
• The system is automated and contains various error checking routines, for instance, you cannot check items in before they have been ordered.
• The content and functionality made available to system users is dependent upon their login level, for instance only Stores members are able to check in metalwork parts, only the supplier is able to update the ‘revised delivery date’ field and so on.
• Provides the supplier with information to assist decision-making regarding rough cut capacity requirements.
• Provides Saftronics with a more solid idea of what items are due in when to assist with production planning in the factory.

4.6 Completing the Jigsaw

To clarify the ground rules and to define the context within which the information sharing tool will be used an agreement was drawn up between Saftronics and the metalwork supplier, the key aspects being:

• Supplier updates the schedule with ‘revised delivery dates’ as appropriate on at least a daily basis.
• Supplier takes control of the paint process as well as the metalwork and is paid an additional management fee for this service.  This removes scope for problems falling between the gaps (i.e. between the fabricators and the painters) and therefore increases visibility and eases monitoring of any slippage.
• Supplier receives additional motivation for achieving delivery dates they have agreed to i.e. a percentage of the agreed fee is forgone if the agreed dates are missed.

• Deliveries are signed for by Stores and this delivery date is recorded on the metalwork logging system (a sub section of the information sharing tool).

The online database system has been developed and, at the time of writing, is being tested prior to full implementation.  More details about the system and its current operational status can be found at www.leanscm.co.uk.

6 CONCLUSIONS

• Fewer delivery problems will be encountered if suppliers are asked when they can deliver and held accountable for late deliveries rather than simply having unachievable dates imposed upon them.
• The development of the online database system will facilitate the Planning functions of both Saftronics and the metalwork supplier.
• Holding information centrally, making it easily accessible and editable by the appropriate persons is a boon as it provides the Planning function with up to date, relevant and visible information that enables informed decisions to be made.
• Monitoring of historic / trending information is crucial if performance improvement over time is to be monitored.
• Shop floor culture and the reliance on overtime as a mechanism for upping output tend to instil activity-focus rather than goal-focus and this can be counterproductive
• Effective and mutually beneficial communications necessitate that information flow in both directions.

REFERENCES

1 Davenport, T. and Prusak, L. (1997) Working Knowledge: How Organizations Manage What They Know. Harvard Business School Press.

2 Vollmann, T., Berry, W. and Whybark, D. (2002) Manufacturing Planning and Control Systems. McGraw-Hill.

3 Jones, A., Kochhar, A. and Hollwey, M. (1998) Education and Training Requirements Specification for Implementation of Manufacturing Control Systems.  Strategic Management of the Manufacturing Value Chain,  pp439-46.  Kluwer Academic Publishers.

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