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Purchasing and Manufacturing
Part 1 of 3


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Lean Manufacturing, Basics, Principles, Techniques

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The objective of this presentation is to discuss real-world examples of best practices that companies are using to successfully improve the interaction between purchasing and manufacturing. The changes tak­ing place today in manufacturing are happening at a dramatic pace. This coupled with the changes taking place in the use of new informa­tion technology makes it vital that these two critical business functions become more integrated than ever before. The following is a list of the typical business problems most manufacturing companies have to deal with weekly—and in some cases daily. Now I'm not suggesting that your company has any of these problems, but perhaps in the past your may have had one or two of these:

      schedule changes

      shortages

      lead time changes

      late deliveries

      customer order changes.

The point here is that these problems are inherent in the world of manufacturing and will always be with us. All the information tech­nologies and manufacturing philosophies will not make these prob­lems go away, they will only help us deal with these problems more effectively. One technology gaining in popularity today is electronic commerce. Refer to figure 1 as we discuss this important topic.

You've got mail!"—sound familiar? Not so long ago we looked for­ward to hearing those words, wondering who was sending us an e-mail. Today, we dread those words in the world of manufacturing. It is not uncommon to receive 30 to 50 e-mail messages a day. Some are impor­tant and require an immediate response, but most are junk mail, for your information (FYI), I'll be on vacation, the theme joke of the day, pick up a loaf of bread, etc. This is becoming a problem that we will have to deal with in the near future. However this is a small price to pay for the tre­mendous benefits manufacturing and purchasing are receiving through the use of electronic commerce.

Clients have asked me, which is better for their company, elec­tronic data interchange (EDI) or the Internet? My answer is, it's not a case of which is better, but which satisfies the needs of your custom­ers more effectively. Typically EDI is a solution for large trading partners, dealing with a large volume of orders and in many cases dealing with commodity products. This is the area where EDI is the


 

most effective. However, the down side to EDI can be the cost and the need for certain information technology skills. The truth of the matter is that if you want to do business with certain trading partners, you will use EDI regardless of the cost.

However, EDI isn't for everyone. If your customers are relatively small and the volume of orders is low, then dealing with those customers through the Internet will be the way to go. I have a client in the cut and sew industry who does just that and very effectively. About 80 percent of the orders they receive are for custom made-to-order product, and only 20 percent are made to stock. In the past, orders were received by fax, as were requests for quotes. After a fax was received, it had to be entered into their order entry system and if it were for a custom product, it would be sent to the design department who would cost out the new product. This was a time-consuming and costly process. Today, they have estab­lished a Web page, and their customers can place orders through the Web page and receive an immediate response that the order is placed and the estimated date the order will be shipped. No hard copies of or­ders are mailed, no faxes are sent back and forth. All this has been elimi­nated. Another important factor of this is customers can inquire as to the status of an order or make changes to an order, all online. The result is the elimination of paperwork, timely information, and improved cus­tomer service. They now have implemented a program that they believe will help them reduce inventory of raw material. When they get to the end of a run for a particular color or style fabric, they intend to advertise over the Internet that they are closing out a certain color or style at a significant discount. They plan to show pictures of the colors and styles with information on the quantity that remains in stock. It will be offered on a first-come, first-served basis.

Benefits to Manufacturing

A hidden benefit of using the Internet is that while each product is unique, manufacturing has the ability to sort orders based on similar characteristics and can group "cuttings" according to size. What they have done is categorize orders into groups A, B, and C, with A being the easiest to cut, B being somewhere in the middle, and C being the most difficult and complex to cut. What they do is download orders from the Internet and then sort them according to complexity, on spread­sheets according to degree of difficulty, A, B, or C. Since they have three cutting tables, each made up of a two-person team, they are able to give a balanced mix to each team. This leads to operating efficiency in the material pick operation and the cutting work center. Because of this operating efficiency, cycle times can be reduced and multiple set­ups eliminated, and as a result lead times have been reduced on the average by five working days. Since the competition is quoting three weeks for a custom order in season, this is giving my client a five-day competitive edge, and they are now booking orders for new customers and expect to see a 20 percent increase in sales this year, partly be­cause of the reduced lead times to deliver custom product.

To Be Continued


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