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By now most, if not all, of us have been exposed or involved in what appears to be a ceaseless amount of change. The only variables are the scope and timing of the changes.

We have also had to accept the fact that effectively dealing with change is a skill we should learn quickly as it becomes more and more pervasive in our working and personal environments. Let's keep it simple and define change in two currently popular definitions. The first is evolutionary change which we can call "continuous improvement" and the second is revolutionary, typically known as "reengineering."

Continuous improvement reached its pinnacle of popular­ity during our focus on quality, which has been intense during the past decade. However, businesses in this in­creasingly competitive world have come to realize that if everybody is working on improving themselves (typically with the same popular quality thrusts), then this signifi­cant effort is resulting in no strategic benefit for any one firm. The company that wants to differentiate itself from the "rest of the pack" needs an approach that will have the potential to reap far greater and quicker benefits than can be achieved by a methodical improvement program. This latter goal has led companies to reengineer their business processes in the belief that this is the only way to achieve significant benefits (or else do it to survive, or rejuvenate existing improvement efforts which have reached a plateau).

Now let's evaluate the impact that these two different approaches to change can have in our Production and Inventory Management functions.

Production and Inventory Management Organization

Since P&IM organizations can differ significantly from company to company (even within companies), let's just address a few common functions that are likely to exist. Our structure will have customer order entry, master scheduling, material planning, and production activity control. Of course we will also have the following generic computer systems to support us; order entry & billings (customer backlog), production scheduling, bill of material, material requirements planning, inventory control, shop floor control, etc.

Now let's identify some improvements that have been made over the years and their impact on our organization.

Evolutionary Changes in P&IM

Similar to other functions undergoing traditional analysis, P&IM was evaluated to identify improvements that would result in a more efficient organization. It must be pointed out here that a key word is "efficient." Only recently have
we begun to look at a business process rather than business functions, and that is what drives you to focus on effective­ness rather than efficiency. The shift in focus came about as we realized that it is of no value to be 100% efficient, doing ineffective work.

The P&IM function has always had to deal with a large amount of data ranging from product families to raw material items; future, current, and historical demand/ capacity; selling prices and material costs, etc. In addition they were dealing in areas with a major impact on cash flow. The data, level of detail, and importance made it an attractive area to utilize computer system solutions.

One of the major improvements made over the years has been the integration of the separate systems that were used to support the different activities within P&IM or the related functions outside of P&IM. Although this change was based upon a modest request to eliminate the separate maintenance of each system (module) needed for produc­tion and inventory management, it paved the way for the benefits of data base management.

Unfortunately, these enhancements in information sys­tems resulted in the optimization of functional or task goals, while at the same time concealing the business process owner. In the absence of an owner, activities within the process may improve, but no one is evaluating whether or not the overall process improved. An example of a popular process is the order fulfillment cycle. It combines key functions or activities such as order entry, order scheduling, material planning, material handling (sup­ply), manufacturing, and material handling (distribution). The process cycle begins when an order is received from the customer and is completed when a product is shipped to the customer. In the past we would develop a system to make each piece more efficient and consider our efforts success­ful even if the total process did not improve. In many instances the changes to one activity adversely affected another! Today we are beginning to look at the whole cycle and if the entire process shows no improvement or no benefit to the customer we shift our resources to another potential opportunity.

To be Continued

For balance of this article, click on the below link:
Lean Manufacturing Articles and go to Series 02


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