If you are reading this blog then I can guarantee that your lifestyle has led to dramatic changes in our supply chain and logistics functions. I know this because you are clearly not an off-grid spoon whittler in the wilderness of Alaska. You are a consumer used to having goods and services delivered direct to your home, place of work or even your smart phone.

The way in which we are selecting, ordering and receiving our goods and services is undergoing a radical change. In fact what was once considered the end point of the supply chain, the final delivery to the customer, is now no longer the end. Thanks to the Internet of Things we are now interacting with the supplier long after we have received and started using the item.

And, if we return goods that are either not what we wanted, or for recycling, then we are engaging in what is now termed a reverse or circular supply chain.

Our demands have changed

Not only do we now demand fast delivery times, but we want items delivered to wherever we are, not just to an address. And while we might be prepared to pay for express delivery, we want free options as well.

We want to choose our own set of features, not just accept an available product. This increases the complexity of the supply chains. Manufacturers are faced with more frequent change overs of equipment and potentially more stages and hand offs within the manufacturing process, as more departments become involved with making each item.

We also expect to be able to change our mind and return unwanted items at no cost to ourselves. This trend is on the rise as we buy more and more items on line.

Our supermarkets are also becoming more demanding of the manufacturers. I’ve noticed a new trend; where once we would have found separate boxes for each variety of a product, we now find the same size box with a mix of three.

More choice in less space is good for retailers, where availability and maximising sales/m² are key drivers. But again it adds a level of complexity to the supply chain.

Added to this, our demands are made against a back drop of rising transportation costs and increasing pressure and legislation to reduce any negative impact on the environment.

It is estimated that 50-70% of a company’s profits are eaten away by supply chain and logistics costs.

The supply chain response

Manufacturers, suppliers and logistics organisations are responding to these pressures and making changes to the way that goods are ordered, made, stored, despatched and transported.

Every component of the supply chain is under the microscope and a combination of lean techniques and new technologies are changing the way our supply chains work.

Here are a few examples:

1. As well as eliminating waste using traditional lean techniques, the creation of value streams run by cross functional teams, works well to reduce complexity in the manufacturing part of the supply chain.
2. Late customisation of items is another manufacturing response. Although this can work well, where flavourings or colour are added late in the process, it is not a viable option for all.
3. The use of real time integrated systems (supported by Cloud computing), wearable technology, GPS and 3D printing is also being deployed to take waste and non-value adding elements out of storage and distribution operations.

Next week we will take a closer look at some of the changes made possible by using new technology.

In the 90’s I worked in an amazing old 4 story mill where we made replica football kits. Half of the bottom floor was dedicated to incoming rolls of material and outgoing finished shirts and shorts. While some problems were instantly apparent, like transporting all the material to the top floor to be cut, others were less so.

Our business was expanding and in 1 year alone we doubled the order book. I had to increase the workforce and invest in more equipment. The biggest increase in staff was for material handlers, we barely kept material flowing round the plant. We bought extra cages, opened up an old warehouse across the road and tried to breathe life into an old conveyor system.

Then one day the cutters on the top floor ground to a halt. “What’s the problem?” I asked. The young material movers took me downstairs to the warehouse. Every shelf was full of rolls of material – so why nothing to cut?

If you’re a long suffering football fan you’ll know there is a new kit available at least once every season. I found every shelf was full of obsolete stock. There was no room left to bring in any new material!

The person ultimately in charge of the business was an accountant by trade. As inventory is traditionally reported as a current asset on the balance sheet, he couldn’t bear to write it off.

Instead of getting rid, or moving it to a more remote location, we had to hire containers for the new rolls.

Fortunately since then, I have learned that excess inventory is one of the 7 Wastes. Excess means anything more than is required to maintain the process flow.

Now I’m in a better position to question an accountant’s logic.

Have a look at the problems that are associated with excess inventory.

Hidden costs

1. Physical storage for any inventory not being worked on – off site warehousing, shelving. And in non-manufacturing businesses – computer memory storage, archives and in trays.
2. Upkeep of storage space – rents, rates and power bills.
3. Cash is tied up in inventory, it is something you have bought but have not yet sold. Too much inventory can result in cash flow problems.
4. Transporting inventory to and from storage – people, equipment such as FLTs, conveyors and trolleys. Add on the running costs and maintenance of that equipment.
5. Cost of stock taking – people and equipment.
6. Potential damage during handling and transport. Not just to the product but to infrastructure and injuries to people.
7. Cost of protecting the material during storage – special lighting, temperature control, coatings and preservatives.
8. Insurance for items in storage.
9. Costs associated with stock rotation – people and equipment.

Other problems

1. Money and storage tied up in slow moving and obsolete stock prevents purchase and incoming deliveries of material required now. This can result in late deliveries to the customer.
2. Holding high levels of inventory masks other problems:
   • Raw materials hide supplier delivery problems.
   • WIP hides bottlenecks, unplanned downtime, idle time and excessive operator motion.
   • Finished goods hides quality problems which can lie undiscovered until the customer finds them.
3. High levels of finished goods are a risk. They can become obsolete due to cancelled orders or a specification change.

Ask yourself “Do I incur any of these costs and problems?” and “What else could I do with the space, time and money tied up in excess inventory?”

As we enter the Fourth Industrial Revolution the various asset management and Computerised Maintenance Management Systems (CMMS) offer bigger, better and more affordable solutions than ever before.

Instead of using your own computer network you can buy into cloud based systems. In the world of interconnected devices every user can access the system using tablets or smart phones.

Even the machines can connect direct to the hub, feeding information back for analysis and receiving instructions to optimise running conditions. Old equipment? No problem, there are plenty of low cost retro fit devices for monitoring key parameters.

And of course all these systems are scalable, you can start small and add as you go along.

But before you rush out to buy the latest sensing technology and cloud based multi-screen service there are some important things to do to ensure you get the best out of your investment.

1. Decide on your maintenance strategy – how much are you willing to spend and for what expected benefit?

What is the overall goal of your maintenance strategy? Are you planning to maintain the same level of effectiveness and reduce maintenance costs or, continue to spend the same on maintenance and increase effectiveness?

Figures from Dupont’s 1991 benchmarking study showed that:

• Minimising maintenance costs while maintaining plant efficiency at the current level of 83.5%, would save them $1.2m per year.
• Maintaining the current level of maintenance spend and improving efficiency to 93.3% would increase profit by $9m per year.

The choice here was described to me as a “no brainer!”

2. Select the most important pieces of equipment

With the lure of relatively cheap devices, say £100-£150 per sensor, it may be tempting to connect all your equipment.

But is this the best use for your money? What value will you get? Will the mass of information cause you to spread your maintenance resources too thinly?

Most of us do not have the luxury of unlimited maintenance crews. You can focus the allocation of spend and labour by identifying your most critical items of equipment.

Simple tools like Value Stream Mapping and structured equipment ranking systems will help you do this.

              3. Maintain that equipment well

From a lean manufacturing viewpoint your assets generate value by being available to run when they are required, at the optimum speed and produce the right quality.

This is opposed to the traditional view of creating maximum value by running the equipment at all times.

Key to maintaining equipment availability is being proactive and looking after the equipment itself. Not just monitoring it and reacting to break downs.

And a final thought. When selecting CMMS features, which is more important – equipment efficiency or maintenance efficiency?

Concentrate on improving equipment efficiency before tackling maintenance efficiency. Having to repair items less frequently is better than being able to repair them quickly.

Now you are in a position to invest in technology to further improve both equipment and maintenance efficiency.

• You know what budget you have and what you want to do with it in terms of plant efficiency.
• You can prioritise which equipment you want to spend it on.
• You have a solid starting base of well-maintained equipment. This prevents you wasting money on reactively monitoring equipment that is prone to failure.

You can now pick the technological interfaces which will benefit your human resource the best – eliminating wasteful tasks and enhancing the team’s problem solving and diagnostic capabilities.

Related article

10 top tips for choosing the right CMMS software for your planned maintenance needs. Read more here: http://bit.ly/1RVdABY

We are living in a time of blindingly rapid technological change. Every day we read about a new material or method of manufacture that will not only improve our productivity but help us to improve health and raise living standards across the world. We are on the brink of the fourth industrial revolution.

But….

In the UK, the Royal Academy of Engineering predict that by 2022 we will have a shortage of around 550,000 advanced technicians and professional engineers.

In the States, Deloitte and the Manufacturing Institute estimate that due to a talent shortage, around 60% of the 3.4 million manufacturing jobs needed in the next decade are likely to be unfilled.

Although around 50,000 engineers graduate from UK universities every year, it is still 37,000 short of our predicted need. And despite the number of technical and engineering apprenticeships being on the increase, only half of the entrants finish their training.

How do we ensure the right skills for the future?

You might be tempted to think; Ok let’s list the skills we need and then design relevant, interesting and practical courses to be delivered in our universities, colleges and schools.

But this is extremely challenging. It’s estimated that 65% of today’s primary school children will go into jobs that don’t even exist yet! (US Department of Labor, 2013)

Also, our initial skill set is unlikely to see us through a lifetime of work.

Most industrialists and educators agree that sparking interest in science, technology, engineering and maths (STEM) subjects from primary school upwards is a great start.

So as well as involving students in exciting STEM based activities, we need to equip them with the ability and desire to constantly learn, not just memorise facts.

Phew – we seem to have solved that then! “Someone” can revamp our education system and “the employers” can look after continual skills development.

It’s not enough!

I think each of us in industry has a vital role to play. Right now!

It’s our responsibility to inspire the next generation to continue designing and building the world around us.

Whether we are in manufacturing, engineering or as a parent, we can influence and support their choices.

I’m going to end this blog with a list of just a few of the ways we can do this. And a challenge for you.

• Encourage youngsters to experiment with the latest technology. As representatives of Siemens explained it to me, they are looking for the gamers of today to be the designers of tomorrow.

Our iPad and smart phone savvy children are at home with the intuitive, visual drag-and-drop interfaces that will be increasingly used in the workplace alongside the VR and AR technology.

• Inform them about the myriad of possibilities open to them by choosing STEM subjects.

While some are excited by images showing amazing feats of construction, plenty more are impressed by YouTube videos of AR gaming.

• Share your exciting industry experiences, talk at school careers events. My job was described as “sick” by a year 8 student. What a compliment!
• Volunteer your skills at clubs (some links below). Especially ones in emerging technologies. 82% of young people say they are interested in digital making. But only half get the chance to do this once a week or more. Could you help year 7s with these BBC micro:bits?

My challenge to you – what will you do to build a better manufacturing future?

Interesting clubs and schemes

https://makerclub.org/ ‘The Maker Movement’ was the top toy trend of 2015!

http://www.stemnet.org.uk/ambassadors/ Encourage young people to enjoy STEM subjects.

http://www.ogdentrust.com/ Inspiring primary children with a love of science, especially physics. Providing continued professional development for teachers.

http://www.mykindafuture.com/ Schemes to get large business creating challenges for school leavers.

Creating UK engineers of the future – http://www.theengineer.co.uk/all-hands-on-deck-to-create-uk-engineers-of-the-future/

Business terminology – it’s a bit like Marmite.

You either love it or hate it!

Some people can’t wait to try out the latest Japanese sounding technique. Others are put off by foreign names, or associate them with a particular industry.

I find it always helps to use an analogy. This takes the focus off the terminology and shows the principles in a different context, separating them from one sector or style of business.

This is how I explain Hoshin Kanri, or Policy Deployment, to people in any sector.

Set the scene:

We are going on a group hike. We have a map and we are starting at position X.

I actually mark “X” on a real map in front of us.

Ask the team: “Do we just set off and hope for a nice ramble? Would we have a satisfying day out?”

Hopefully they answer along the lines of no. And they may elaborate, if not you can.

It’s not an ideal situation, some of the group may want to head off in a different direction, we may lose a few and most will probably lose interest as we wander aimlessly. At the end of the day we might well be tired but not very satisfied.

Now challenge the team: “Would it be better if we decided where we wanted to go and what time we wanted to reach our destination?” It’s especially useful if there is an incentive like refreshments to aim for.

So now on your map, mark a large “F” for the finish point and even write the finish time if you want.

Now ask the team: “Do we set off in a straight line and just hope for the best? Or what else might we give them?”

Encourage answers like:

• Give them a map and compass so they can check they are on course.
• Plot a safe route to follow across the terrain. A straight line isn’t always possible.
• Make sure the route gets them to the end on time.
• Give them a map and compass so they can plot a new course if unexpected obstacles arise, like a shut footpath or flooded river.

Ask your team: “Would this be a better day out?”

Everyone makes it to the end point, still tired but on time for the promised refreshments. Result – everybody is more satisfied!

How did the team achieve this?  They provided a clear end point and gave everybody the tools to move in the desired direction.

Now is the time to draw the analogy with Hoshin Kanri.

The start point “X” is equivalent to our current performance results. Where we are now.

The end point “F” is the results we want to have, at a set point in the future. Where we want to be.

The map is our view of the current and future business environment, the terrain we have to navigate from X to F.

When hiking we follow a specific direction on our compass. In business our vision statement is our direction.

The detailed instructions are created by turning your vital few policies into specific plans and objectives for each layer of your business.

Checking you are on course and have not been deviated by an obstacle, is like reviewing your progress and actual performance against target.

So by using an everyday analogy we aim to demystify the business terminology and help people to see the potential benefits of applying the principles. Then you can go on and design a Policy Deployment framework that works for your own business.

To make your system lean you need to introduce pull and flow.

A pull system is one that is designed to make only what the customer requires, when they want it and in the exact amount.

Flow means producing or processing one piece at a time. Each item is passed on immediately without waiting or being stored.

This makes sense, you think. No work in progress, no inventory of finished goods, no waste.

Last week you read that to introduce pull and flow you had to level the demand internally, even if your customer didn’t send the orders in a level format. Let’s try it…

Let’s level the quantity

Your customer orders 100 parts each week; 25 red, 15 orange and 20 each of purple, green and blue. They usually pull off 20 items a day for delivery.

It seems simple. You make a level plan for 20 parts each day; starting with red and working your way down the order.

The only minor problem is that each colour takes a slightly different time to make.

So did we create a level demand? No!

Although the quantity is level each day, the time to make each days’ work is different.

This results in ‘feast or famine’. One day you have more work than you can make in normal hours and on others you finish early.

To make matters worse, the customer asks for a mix of colours to be delivered each day. So we have to keep some finished stock to meet demand; about 4.5 days’ worth!

Let’s level the quantity and the mix each day

The ideal level demand is where the same quantity of product and the same mix of variants is required in each time period.

So let’s make the same number of each colour each day; 5 red, 3 orange, 4 each of purple, green and blue.

Is this level demand?

Sadly the answer is still no. Although the quantity and the variant mix are level each day, we still have batches.

It’s better than the first scenario, but not ideal. The work content still varies throughout the day and we still have to hold some stock, albeit only 1 days’ worth, to ensure we can meet the daily order.

Let’s eliminate the batches

If we make 1 of each colour at a time, we not only have the same quantity and variant mix each day, but the work content is levelled as closely as possible as well.

The more level the work the less inventory needs to be held in the system to meet demand.

As the lead time to produce all of the colours at least once is reduced, you can respond to changes in demand from the customer much more quickly.

We call this the “making Smarties” approach. It is the ultimate aim when demand levelling.

Caution!

While this looks good on paper, in practise there are other consequences.

If changing the variant involves a change in set up on the machine, you will increase the total amount of downtime and reduce your capacity.

For the “making Smarties” approach to work you will need to use SMED, or Set Up Improvement techniques, to reduce the amount of time it takes for each individual changeover.

So – how level is your plan? Are you making batches or Smarties?

If you need advice on any of these techniques the Industry Forum team will be pleased to help.