Manufacturing and Procurement (Purchasing)
Life is difficult when you're at the end of a lifecycle that is characterized by change. The process of discovery means that a certain number of assumptions that the design engineer made will be wrong. This translates into rework. Also, the conflict between getting all the details of a design worked out and documented and the need to maintain schedule often result in incomplete engineering specifications. An item not adequately defined is difficult to manufacture either in manufacturing or by a supplier. Compounding the problem is the fact that most of those who make hardware and deliver services are craftspeople in short supply. Their skills in dealing with the ill-defined and the flexibility that results from their skills may in fact be the unprescribed antidote for the undesirable situation they often find themselves in. Unfortunately this
antidote is treating a symptom, not the cause.
Most of the detail planning, scheduling, and monitoring in manufacturing and purchasing is done by stand-alone systems. This "islands of information" condition is typical to the company as a whole. Often the system used is a system based on the manufacturing resource planning (MRP II) business model and has been partially enhanced to support the project environment. For those unfamiliar with MRP II, I suggest reading this author's paper, "Enterprise Resource Planning (ERP) —An Executive Perspective."3
The key critical business issues:
• frequent schedule changes
• unreliable schedules
• poor accuracy of BOM/product specifications
• poor inventory record accuracy
• too many engineering changes
• inadequate and inaccurate cost accumulation.
Frequent schedule changes—New requirements, rework due to engineering changes, and changes in priority all add up to a "nervous" and frequently changing schedule. Schedules that change frequently are often viewed as unreliable. When you doubt the integrity of the schedule, you make up your own. The situation is compounded by a capacity problem, the shortage of skilled craftspeople. A credible and relatively stable schedule is necessary to build a complex device.
Unreliable schedules—See above.
Poor accuracy of BOM/product specifications—If the BOM is inaccurate, there are only two possibilities: build it, discover it is wrong, and then rework it, or get engineering involved when you discover it is inaccurate and while you are building it. Both choices consume limited and precious resources and time. Remember that there isn't a pool of readily available capacity. If you do not properly utilize the resources you have, you are in trouble.
Poor inventory record accuracy—You think you have it in stock and then you discover you do not. Poor inventory record accuracy is the bane of any firm that assembles a complex device of hundreds if not thousands of parts. Perhaps an engineering change may have made a part in stock unusable and your inventory system does not record or show component revision levels. Also, in the freewheeling ETO environment, an item often is not processed through the inventory record system. There are many potential causes of inaccurate inventory records.
Too many engineering changes—If the customer has not adequately communicated their requirements, there will be changes as the discovery process continues. Sometimes engineers just make mistakes. The machine being designed and built is complex; there are pressures to perform to schedule on a project that may have very little schedule reserve. Then there is the possibility of bad habits, releasing a design without a review. Whatever the cause, the number of engineering changes is unacceptably high.
Inadequate and inaccurate cost accumulation—Meeting schedule is important, and so is making a profit. To make a profit you must meet or perform better then budget. Understanding how you are performing is important to corrective action to stay on budget. Understanding requires accurate information. Accurate information is dependent in part on ease of recording activities and the discipline of those recording it. The problem in part is the islands of information within a company. Another contributor may be the organizational reporting relationships. When I did some research on project accounting, I found that there was no real
consistency about which department this function reported to. Sometimes it was finance, engieering,project management, or manufacturing.
I mentioned earlier that whenever I discuss critical business issues, I try to understand if they are a symptom or a cause. Figure 5 is my attempt at interpreting cause and effect.
To Be Continued