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BMA People

by Brian H. Maskell, President, BMA Inc.

This article includes:
- Introduction
- MRPII and World Class Manufacturing
- Where Do We Go From Here?
- Software's Role?


Introduction

Providing software support for a mature world class manufacturer is a relatively straightforward task because much attention will have been given to simplifying production and distribution processes which, in turn, simplifies software requirements. However, providing software support for Western manufacturing companies in the process of making that journey "over the rainbow" from traditional production techniques to world class manufacturing is a much more subtle and complex task.
The traditional MRPII approach to manufacturing is a hindrance to the introduction of world class manufacturing. While the objectives of MRPII and world class manufacturing are entirely congruent, MRPII contains a rigid, operations research approach to the solution of production and inventory problems that needs to be changed if the systems are to be useful in a world class manufacturing environment.

The introduction in the mid-1970's of material resource planning (MRPII) was heralded as the approach that would enable Western manufacturers to attain and maintain world class status. Oliver Wight called MRPII the method for "unlocking America's productivity potential". MRPII required computers, and computers available at that time had the power, speed, and storage capacity to handle the volumes of data and calculations required by MRPII. A new industrial era was in sight.

There is no denying that manufacturing resource planning has provided enormous benefits to thousands of Western companies. These benefits have manifested themselves in improved customer service, reduced inventories, reduced production costs, and greater flexibility. But the introduction of MRPII has not been the resounding success expected by its proponents. A recent letter in Information Week magazine stated that "the claims of MRPII consultants seem to approach fraudulence at times". Be that as it may, MRPII has not resulted in the flowering of a new age of productivity in Western manufacturing.

Several reasons can be cited for this lack of success. One reason is that expectations have been set too high. A survey of MRPII implementations showed that only 58 percent met expectations. Another reason is that mistakes have been made in the way the systems have been implemented. But principally MRPII implementations fail because company managers do not have the vision and perseverance to make the changes required to obtain the benefits. They view their MRPII implementation as a new computer system, when it should be viewed as part of the introduction of radically better business methods.

It would be wrong though to paint a gloomy picture.The fact that very few companies achieved the full potential of MRPII does not mean that the use of MRPII systems is unsuccessful. The vast majority of companies implementing MRPII achieved improvements in all the important areas of their business. The United States, where the majority of MRPII systems have been implemented, has the highest level of productivity in the world. Productivity in France and Britain, where MRPII systems gained momentum in the 1980's, has increased dramatically. But MRPII did not create a revolution in productivity and customer service - that revolution took place in Japan and was lead by companies with very different ideas.

MRPII and World Class Manufacturing

Companies successful with world class manufacturing techniques are those prepared to make fundamental changes in the way they do business. Many Japanese pioneers of world class manufacturing methods simplified production processes so that computerized planning and control systems were not necessary. These innovative companies introduced manual methods of control like the kanban system. As time has gone by many of these companies have begun to use computerized systems, but have not resorted to a Western style MRPII. Companies like Nissan have integrated MRPII into their production planning processes but have combined it with the radical changes in management philosophy needed to bring about total quality and continuous improvement.
MRPII and other modern production and distribution techniques were developed in a very different environment from that of world class manufacturing. Although the objectives of a Western approach to production and inventory control is entirely consistent with world class manufacturing, the theoretical framework within which each was developed was quite different.

The basis of modern Western production management lies at a time when computer systems were becoming widely available to industrial companies. The premise of operations research is that if the problem can be modeled mathematically, then the issues of the problem can be analyzed and a solution determined. This approach has been widely used in manufacturing and distribution industries for forecasting, economic order quantities, shop-floor scheduling, and MRPII. During the 1970's and early 1980's thousands of companies employed these techniques - but they run counter to the ideas of world class manufacturing. They are complex, inhibit change, foster mediocrity, and are inflexible.

Mathematical modeling is complex. The people using the results often do not understand where the numbers come from. This leads to people feeling confused and alienated, and they either unthinkingly follow the figures or manually override so many that the analysis becomes useless. World class manufacturers stress simplicity of methods and empowerment of the shop-floor personnel. For this to work effectively the systems - both manual and computerized - must be simple and transparent to the people using them, and the people must be trained to use them properly. The complex operations research approach, replete with algorithms, is not compatible with this new approach to management.

The purpose of developing an operations research model is to simulate reality by incorporating all the myriad variables and conditions of "real life" into the model. Operations research engineers have been amazingly clever and creative in the development of production planning and inventory control models. Unfortunately these models have enshrined within them many features of the production plant that need to be changed or eliminated. It is difficult to eliminate a bad practice once it has been "baked" into the system, particularly when the people using the system do not fully understand the model.

An example of this is the standard cost; much loved by accountants and operations managers. The standard cost calculation takes account of scrap rates, queue times, material movement, and many other non-value-added activities. If a production supervisor manufacturers to standard - with no variances - he or she will think they are doing a good job. Nothing could be farther from the truth. A company manufacturing to traditional standards is far from world class.

The assumption of trade-offs, that is inherent within traditional production planning and control systems, betrays a basic philosophy that is contrary to world class manufacturing. World class manufacturers are always striving for perfection; never achieving it but continuously moving towards it. An operations research approach is always looking to balance contradictory variables; often using complex regression analysis for optimization. This practice is good mathematics but it is very poor business management. The world class company strive to eliminate the trade-offs.

An arch example of this is the general acceptance of economic order quantities (EOQ). EOQ is a trade off between carrying costs and set up costs, and takes account of spurious factors like inventory holding costs to make the calculation. The only thing a world class manufacturer needs to know about EOQ is that batch sizes should be halved every 90 days until they approach a batch size of one.

The inflexibility of traditional systems creates further problems to the world class manufacturer by developing a model with a specific approach to production in mind and then driving the plant in accordance with that approach. Flexibility is an increasingly important aspect of world class manufacturing. Increased flexibility of product mix, product volume, production methods, and flexible people are significant objectives of a world class manufacturer. Other aspects of flexibility are reduced time-to-market and concurrent engineering with its emphasis on meeting customer needs and expectations. The inflexibility of the traditional systems hamper companies striving for radically improved service to their customers.

Where Do We Go From Here?

Tried and tested production planning and control techniques like MRPII have been developed from the operations research viewpoint and suffer from the shortcomings discussed above. These techniques become stumbling blocks to companies endeavoring to move into world class manufacturing because they are complex, they inhibit change, make sub-optimal trade-offs, and do not provide the required flexibility. What should replace them? Should we throw out our MRPII system?
There is no set answer to this question because the needs vary considerably from one company to the next. A world class company tailors its systems to the needs of the customer, the industry, and the global marketplace. In addition, there is often considerable difference between two companies in the same market because each company has its own emphasis. Many of the basic techniques of MRPII are here to stay, including MRP, Master Scheduling, Rough-Cut Capacity Planning. It is the "closed loop" of shop floor control, complex cost accounting systems, detailed work order tracking, and other aspects of MRPII that are out of line.

Unlike the MRPII approach, it is wrong to consider that there is one "right way" or proven path. One size does not fit all. There are, however, some common characteristics of software systems that enhance the improvement efforts of a world class manufacturer. These characteristics include integration, simplicity, flexibility, openness, and accessibility.

Integration

Disintegrated systems are a major source of waste to an organization. They require the same information to entered more than once which is wasteful in itself, but it also compels people within the company to waste time arguing about whose information is "correct". Disintegrated systems are complex because they are different in different parts of the company and often required complicated interfaces to be built before the information can become useful. They lead to delay and confusion when, for example, the order entry people do not have direct access to credit information in the accounts receivable system.
A company with integrated systems has the advantage that all information is available in one place, is entered only once, is up-to-date and accurate, there are no delays while the data is interfaced, and (if the software is well designed) provides a similar "look and feel" for all aspects of the system. The availability of accurate and timely can be regarded as a quality issue equally as important as product quality.

Simplicity

An important aspect of world class manufacturing is the application of simplicity. The sub-title of Professor Schonberger's influential book World Class Manufacturing is "The Lessons of Simplicity Applied". Simplicity is at the core of these radically new approaches to production excellence. If systems and processes are simple then people understand them. If people understand the processes and systems they are better able to contribute to the company's goals, and participate in the continuous improvement process.
There is, of course, a distinction between being simple and a system being simplistic. A simplistic system is inadequate for controlling a business. A well-designed, simple system can take account of the issues involved in a modern, sophisticated production plant without the people being confused by the complexity. People are not intimidated by simple systems; on the contrary they regard them as useful tools.
A key element of simplicity is the production process itself. The systems can not be simple if the production processes are complex and convoluted. World class manufacturers place much emphasis on simplifying the production process. Making things and systems complicated is easy to do; making them simple requires effort, perseverance, and intelligence.
Cellular manufacturing simplifies production systems by having fewer control points. Reducing inventory simplifies stockroom control and the cost accounting associated with it. Reducing transactions in the system creates simplicity and improves accuracy. Reducing cycle times simplifies the process because the product is made more quickly and the operators participate and understand the entire manufacturing process.
Designing simple systems that reflect the simplicity characterized by world class manufacturers requires a sophisticated approach to software design. This is accentuated by the need to provide software that assists companies making the transition from traditional manufacturing. Consistency of design is important so that the system has a similar look and feel throughout. The removal of redundant and confusing data eliminates much of the screen and report complexity of traditional systems and makes the system easier to use.
A logical flow throughout the software, reflecting the flow of the company's procedures and processes, enables the software to fit conveniently into the way the people work. Including features and functions that match the company's needs rather than the ideas of the designers and pundits makes the software more useful to the people using it. It is not necessary for the system to have all the latest "bells and whistles". A clean, sharp system that addresses the real issues of production planning and control is preferable to a system with multitudes of extraneous features and functions.
The complexity and sophistication of manufacturing planning and control software should be in the design and programming behind the scenes. The people using the system must see simplicity, clarity, logical flow, and no unneeded features.

Flexibility

The only thing we know about the future is that things are going to change. A world class manufacturer thrives on change and deliberately instigates change as part of the continuous improvement process. The implementation of world class manufacturing methods requires radical change that is often made in stages. A company with multiple production plants will usually have different needs in the different plants. The software must fulfil these needs for flexibility.
The production, distribution, and administrative software supporting a world class manufacturing organization must have a range of features and functions available so that the company can make progressive change - both continuous improvement and radical change - and have the software move along with the needs of the organization.
This is where software can hamper or help the implementation of world class manufacturing techniques. Traditional manufacturing software hampers the introduction of world class manufacturing methods because it forces the company to organize production operations according to the needs of the software. Well designed and appropriate manufacturing software contains the flexibility and simplicity to allow a company to move gradually or radically from traditional manufacturing methods to world class manufacturing, and the software fully supports the changing needs of the organization.
One example of this is the move from a make-to-stock, work order driven production operation through to rate-based, kanban shop floor control. Most companies do not make this transition in one step. They select product lines or a single location to pilot the new approach, and then expand the approach to accommodate the rest of the company. There may be some areas of the business which do not lend themselves to kanbans, for example, and require an inventory push approach but the company does not want to use work orders. The software needs to support this scenario. There may be other parts of the operation that are genuine job-shop operations requiring the continued use of work orders. The software should support these transitional changes and must be able to support mixed-mode manufacturing seamlessly and without complexity.
There is a dichotomy between flexibility and simplicity. At first sight it would appear that flexibility requires a vast array of features and functions, and that this is contrary to the objective of simplicity. In reality it is possible to design software containing both the simplicity required by world class manufacturing and the flexibility to meet the company's changing needs. The software must be designed intelligently and creatively to fulfill these dual requirements.

Openness

The traditional production control system was run on a central computer with terminals used by data entry clerks in office scattered around the factory. The new systems take advantage of the changes in hardware technology and operating system compatibility. The computing power is spread out across local area networks (LANs) and client server relationships. Individual cells or lines control their own activities using local systems that are integrated with a central system.
This openness has been created by market demand. The hardware vendors used to make their systems proprietary so that their customers were forced to stay with one vendor. A revolution has taken place over the last two or three years. The market has gone to open hardware and open operating systems, and the big manufacturers like IBM and DEC have suffered. The standards bodies are finally gaining agreement and acceptance among the customers and the manufacturers. Open systems provide the flexibility world class companies require as their businesses adapt to the changing needs of the market.

Accessibility

Information contained within the computer systems must be easily accessible to the people using the system. Traditional systems have standard reports and inquiries. Most companies find that the standard reports do not fully meet their needs and "custom" reports must be written. The dynamics of world class manufacturing enhances this need for tailored output. The information in the database must be readily accessible to everyone within the company.
The performance measures used by world class manufacturers are often very different from those of traditional manufacturers. These reports also change from plant to plant, and change over time. In addition, plant personnel also need to extract information for ad hoc analysis or special purposes. They can not wait while a the MIS department design, programs, and tests a new report.
The information within the database can be made accessible to people through easy-to-use report writers and the data access features built into relational databases. When these features are carefully planned and someone in each area is trained to use them, they can become powerful tools for performance measurement, continuous improvement, and control of the manufacturing operation.
These data accessibility tools have some drawbacks. They are sophisticated pieces of software and their use puts a heavy load on the computer. If too many people are using them at once, they can slow the computer down. These programs can also be very powerful data manipulation tools that can change data as well as report it. Strict control must be kept to ensure the integrity of the database.

Software's Role?

The software required by sophisticated world-class manufacturers is often straight-forward because the simplicity that has been built into the processes by a relentless commitment to continued improvement and total quality. The software required to help companies making the transition from traditional manufacturing to world-class manufacturing needs to be carefully planned and implemented.
The traditional MRPII approach to manufacturing planning and control, while containing many valuable features, represents a fundamentally different approach to manufacturing management than that of an aspiring world-class manufacturer.

The software needs to be fully integrated so that information is entered only once, is up-to-date, accurate, and accessible to all users. The programs screens and reports need to be designed in a way that makes them simple and easy-to-use. Simplification is a key aspect of world-class manufacturing and the software must reflect this.

Throughout the implementation of world-class manufacturing techniques a company will make significant changes. The software must have the flexibility to to allow users to introduce new techniques in one area while retaining the old approaches in other areas. This flexibility lends itself to a smooth and low-risk approach to implementing world class manufacturing.

The software must be designed for openness. Software to support the introduction of world-class manufacturing must lend itself to easy interfacing with other systems and networking between multiple computers. The information contained within the database must be accessible to all authorized users. The information is required for creating performance measures, ad-hoc analysis, and for integrating with other systems. A well-designed fourth generation report writer or data access tool provides this availability to the user.

The integration, flexibility, simplicity, openness, and accessibility of the software provides a valuable tool that can help a company move to world-class status instead of being a hindrance.


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