Kaizen Management

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MANUFACTURING BASICS & BEST PRACTICES BULLETIN

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Competitive Knowledge for Manufacturing People 

Kaizen Management
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March 28, 2005

Hi [[firstname]], welcome back. 

If your company is having problems with the integrity 
of their MRP or ERP systems, don’t miss reading this 
week’s article. “A MRP/ERP Wake Up Call!” It comes 
from my Web site’s archives file. 

Have a nice day, keep the faith, and stay connected.

Bill Gaw
Business Basics, LLC
Bg@bbasicsllc.com
760-945-5596

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ANOTHER MRP/ERP WAKE UP CALL!

First, let me assure you that I do not recommend that 
companies abandon their MRP/ERP systems altogether. I 
accept that MRP/ERP are good systems for calculating 
time phased requirements and providing long range 
inputs for purchasing parts and capacity planning. 

However, when it comes to detail scheduling, marginal 
data input integrity causes MRP/ERP systems to create 
far too many rescheduling actions that can cause a shop 
floor to lose control of day-to-day activities. This 
schedule instability is human driven and not a system 
design problem. 

The MRP evolution took us down the road of computer 
sophistication. It was to be the panacea for solving 
all manufacturing problems. Little did we know that 
when we finally arrived at the final phase---ERP---
we would still be facing daily parts shortages, shop 
floor chaos and end-of-the-month scrambling. What 
happened to all those “salesmen” promises?

MRP/ERP at first look, are not complicated systems. 
We input a master schedule that uses bills of material 
and parts procurement lead times to calculate gross 
requirements. These requirements are then balanced 
against the aggregate of on-hand inventory, work-in-
process and open purchase orders to determine the net, 
time phased requirements. The resultant is subjected to 
lot size algorithms and planned orders are created. 
(The final output is notification to planners in the 
form of action messages to either reschedule, reorder, 
or cancel shop and/or purchase orders.) 

If we go deeper into what is happening in the gross to 
net requirement process, we find that many calculations 
are made based on the data and systems parameters 
supplied and maintained by planners. While a computer 
is flawless in its ability to calculate the answers, the 
data supplied by the planner is not. Consequently, the 
answers are subject to human error.

In our "ShowTime!" ( http://bbasicsllc.com/showtime.htm)
presentations we do an exercise in statistical 
probability. Each participant writes down what he/she 
knows (or guesses) to be the percentage accuracy of 
their company's master schedule input data. To arrive 
at the aggregate input accuracy of the master schedule, 
they convert the percentages to decimal equivalents 
and multiply each to the other. (Statistic probability 
is not the averaging of the decimals, as many people 
think). 

Using the same statistical probability approach, the 
resultant decimal is used as the master schedule 
accuracy input into the requirements planning step to 
calculate a shop order launch accuracy. An accuracy 
level of 0.70 or 70 percent (70%) is quite common and 
indicates that their order launching and rescheduling 
efforts are based on a system error of 30 percent. Is 
there any wonder why MRP and ERP are not the panacea 
we once thought them to be!

An effective method for evaluating how well a company 
is doing in managing their MRP input data is to ask 
questions as to how accurate are their bills of 
materials, how accurate is their purchase order status, 
how accurate are their inventory records, etc. If the 
answers you get are vague, like---good, OK, not too 
bad---then you know that this is a company that needs 
help in stepping up to the problems of poor information 
integrity. 

If a company is neither measuring their system's data 
integrity, nor in constant pursuit of continuous 
improvement, then their results will always be poor and 
their production environment will surely produce shop 
floor chaos and late deliveries to internal schedules 
and to customers delivery commitments.

For a measure of MRP/ERP shortcomings, one needs only 
to spend some time in a manufacturing facility ---
especially during the last weeks of the final financial 
quarter. In a typical company, you'll find that 
converting the quarterly financial forecast into 
reality still requires overtime, internal/external 
expediting, last minute on-the-run product changes and 
even a little smoke and mirrors. Results are scrap, 
rework and warranty costs that negatively impact a 
company's bottom line performance. 

In addition, marginal quality and late shipments 
deliver less than acceptable customer satisfaction. 
Companies that have spent thousands of dollars in 
pursuing MRP/ERP are devastated when they experience 
a business decline due noncompetitive pricing caused 
by uncontrolled operating costs. Is there a solution? 
Certainly, I call it Kaizen Based Lean Manufacturing™.

Kaizen (pronounced Ky'zen) is the Japanese word that 
means gradual, continuous improvement. In my experience, 
managing a continuous improvement project is difficult 
but a kaizen management program presents a unique challenge. The 
kaizen program has no end. It is sustainable and 
successful only when management has made a commitment 
to keep the faith and stay the course --- discipline 
and tenacity are basic requisites for kaizen success. 

Kaizen Based Lean Manufacturing™ (KBLM) is a proven 
methodology that employs practical tools and techniques 
that optimize manufacturing performance and helps 
companies to consistently exceed performance 
expectations.

KBLM involves arranging and defining manufacturing 
resources so that products flow most efficiently through 
the manufacturing process. Today, most manufacturing 
companies are still organized for functional 
manufacturing---mechanical assemblies, electronic boards, 
cables, machined components and purchased parts are 
produced or purchased in lot sizes and received, 
inspected and moved to stockrooms. 

This process includes the "picking-of-parts" to fill 
shop orders and the movement of shop orders to the 
production machining and assembly build areas. When 
the parts are completed, they are returned to the 
stockroom to be "picked" for the next higher assembly 
shop order. 

Finally the end product is "picked", assembled, tested 
and accepted. KBLM eliminates all the non-value-added 
tasks in this "order launch and expedite" system ---
the result: A significant increase in quality, speed 
and profits.

No matter how much computer sophistication is added to 
shop floor control systems, if we fail to master the 
8-Basics of KBLM, we will never eliminate the chaos that 
grips our shop floor day-to-day activities!

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Kaizen Management

Manufacturing leaders have a responsibility to 
educate and train their team members. 20-World 
Class Manufacturing, cost-effective, training 
modules are just a click away:

http://bbasicsllc.com/training-modules.htm

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Business Basics, LLC
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596

Manufacturing Knowledge you’ll not find at offsite 
seminars nor in the books at Amazon.com

Lean Manufacturing - Balanced Scorecard 
ISO 9000:2000 - Strategic Planning - Supply Chain 
Management - MRP Vs Lean Exercises - Kaizen Blitz 
Lean Six Sigma - Value Stream Mapping

All at one Website: http://bbasicsllc.com

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Manufacturing leaders have a responsibility to educate and train their team members. Help for developing a self-directed, World Class Manufacturing training program for your people is just a click away:

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You are welcomed to print and share this bulletin with your manufacturing teams, peers, suppliers and upper management ... better yet, have them signup for their own copy at:

http://bbasicsllc.com/subscribe.htm

With the escalating spam-wars, it's also a good idea to WHITELIST our bulletin mailing domain via your filtering software or control panel: 

bizbasics@getresponse.com

This will help guarantee that your bulletin is never deleted unexpectedly.

Manufacturing Knowledge you’ll not find at offsite 
seminars nor in the books at Amazon.com

Lean Manufacturing - Balanced Scorecard 
ISO 9000:2000 - Strategic Planning - Supply Chain 
Management - MRP Vs Lean Exercises - Kaizen Blitz 
Lean Six Sigma - Value Stream Mapping

All at one Website: Good Manufacturing Practices

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6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596