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Enterprise Profitability
Part 5 of 8

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Lean Manufacturing, Basics, Principles, Techniques

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Field Service
Manufacturers that make capital equipment, both consumer and indus­trial, need to fully integrate field service information with the entire organization through their TEI/ERP system. This ensures the avail­ability of field service inventories, correct billing of customers, and feedback of quality issues to the design engineers and suppliers.
Field service management software actually manages the day-to­day functions, including dispatching technicians and monitoring each piece of equipment that is being maintained.
Logistics and Distribution
The total cost to the entire supply chain is the most relevant performance measure for the integrated logistics process. "Total cost" includes all the direct, indirect, hidden, and qualitative costs involved in the movement and storage of materials. Today's supply chains provide the basis for understanding, and therefore minimizing, the total cost of manufactur­ing and delivering what the customers want, when they want it, and where they want it.
Value-added logistics (also known as manufacturing postponement) is a concept that reorganizes the logistics chain in a more integrated way, in order to lower the total costs (inventory, material handling, and transportation) and to increase service levels.
Transportation—Until recently, MRP II and ERP systems have basically ignored transportation, from both scheduling and cost stand­points. However, proactive management of transportation alone can contribute substantially to final profit margins. A primitive MRP II system calculates the manufacturing due date by back-scheduling from the customer on-dock due date to allow for a fixed transit time. A fully integrated TEI system can group shipments by destination, filling a truck for multiple stops (even in multiple cities), meeting customer due dates as the lowest possible cost, using the truck ship date as the internal due date for manufacturing.
Warehouse management systems (WMS) increase efficiencies and accuracy of the warehouse functions. WMS tracks inventories of each item, by physical location in the warehouse, by lot number. It can in­sure that the oldest lot is shipped first.
Ninety to ninety-five percent of a product's total cost is determined during the design cycle; its quality characteristics are also fundamen­tally determined during product design and process design. MRP II systems traditionally had a primitive interface to receive BOM and routing information from engineering design systems. This interface ignored the huge potential benefit of much tighter integration. A fully-integrated TEI system includes the following.
Design Process
Any product design is a compromise of many (potentially conflicting) requirements. In large companies, product design was traditionally a sequential exercise, with each department receiving information from the prior department, performing its function, then passing the infor­mation to the next department. Concurrent engineering involves all departments and functions in design sessions from the start, thereby dramatically reducing the elapsed design time and allowing a com­pany to bring its product to market much more quickly. This also re­duces total life cycle costs and improves manufacturability.
Getting the product to the market on time is much more important for long-term product profitability than staying on budget. For example, a six-month delay in entering a market (to avoid budget overruns) re­sults in a 33 percent reduction in after-tax profit. That six-month delay is five times more costly than a 50 percent development-cost overrun, and about 30 percent more costly than having production costs 10 per­cent over budget.2
The design process can be subdivided into seven stages; however, these stages should not be viewed as sequential. Instead, the stages should be concurrent or parallel to minimize the total time to bring a product to market. A core team performs the entire design process, supplemented by additional viewpoints as appropriate during some steps. The stages include
1. initial concept/proof of technology
2. design optimization
3. marketing effort (in parallel with step 2, design optimization)
4. pilot production
5. product launch
6. follow-up
7. engineering changes.
Product Data Management (PDM)
Product data management (PDM) originated in engineering departments concurrently with MRP II's growth in the materials and manufacturing functions. PDM and ERP/TEI overlap in product and process defini­tions and in controlling engineering changes. PDM software manages and controls the product information necessary to specify, analyze, and ultimately build a product. It also coordinates the processes used to create, review, release, and change product information. PDM provide the technology for engineers to integrate with customers, suppliers, and field service. PDM systems can access ERP databases, purchasing department databases and other sources of product information.

To Be Continued


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