November 26, 2007  

Hi MBBP Subscribers,  

Today, let's focus on the "End-of-the-Month Crunch."  

In 1973, I started a new job as shop operations manager at a large OEM manufacturer. My new boss was concerned about non-linear production that was driving high non-value-added costs and poor on-time delivery performance. I was brought into the company to help solve what he called the "hockey stick" problem... shipping most products at the end of the month.   

I had recently participated in a successful Class A, MRP implementation, so, when my boss suggested that I install a magnetic schedule board to track DAILY production progress;— I said, "no, hell no!" 

My boss, a good leader and an effective salesman, convinced me to install the board and initiate a morning production status review meeting.  

Six months later the magnetic board, that I was sure would be a failure, became the primary tool in our efforts to eliminate this company's hockey stick syndrome and we eventually achieved high production linearity. Results: We eliminated overtime, reduced scrap and rework, improved quality, eliminated late shipment and most important helped our company exceed all growth and profit expectations. 

Today, the magnetic board has been replaced by the PC spread sheet but the daily meeting and tenacious follow up on early monthly tasks is still your best bet for achieving linear production. 

If your company is struggling with the end-of-the-month scramble, it is vulnerable to loosing customers and giving up 10-20 points of its profit margin.  

If this be your case, don't pass up reading this week's article, "If You're Not Linear, You're Not Really Lean!"

Have a nice day, and stay connected.

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

SAY GOODBYE TO THE END-OF-THE-MONTH-CRUNCH  

Manufacturers will never achieve their potential if they produce more than 25% of their monthly shipment plan in the last week of the month or more than 33% of their quarterly shipment plan in the last month of the quarter. Companies that live with the "end-of-the-month-crunch" are burdened with premium freight, internal expediting, overtime costs, and production inefficiencies that will crush their bottom line goals. But effective upfront planning and timely execution can make the “end-of-the-month-crunch" a bad memory and eliminate those profit killers.

A Typical Factory at the End of the Month  

Most companies are using ERP systems coupled with lean manufacturing techniques to plan and control their business activities. These have eliminated the end-of-the-month-crunch for some companies but there are many more still stuck in that cycle. To appreciate the extent of the remaining problem, spend time observing certain MRP scheduled factories during the last weeks of a financial quarter. You will typically observe profit draining overtime, internal/external expediting, last minute product changes and production inefficiencies. The inevitable scrap and rework add to the profit drain. Then there are the longer term consequences of quality problems in the field, warrantee costs and the resulting customer dissatisfaction.   

Many companies have found that implementing an operations linearity improvement program can eliminate the end-of-the-month-crunch and achieve gains in speed, quality and profitability. Such a program addresses the challenge of keeping pressure on the critical path of schedule achievement. Remember this… to guarantee a great year, you need four great quarters… to guarantee a great quarter, you need three great months… to guarantee a great month, you need four great weeks… and to guarantee a great week, you need five great days.

Day-to-Day Visibility and Traceability

Operations linearity starts with day-by-day visibility and traceability of all critical tasks and milestones for a "rolling" one or two months schedule. It requires team awareness, commitment and proactive problem solving to assure timely and successful execution.  

New product introductions, engineering changes, and customer revisions all contribute to the end-of-the-month-crunch An operational linearity improvement program forces engineering, sales and manufacturing to work together to establish realistic schedules for the key activities. Manufacturing must be responsive to the dynamics of these schedules. And that is the problem in companies suffering from end-of-the-month-syndrome. First line supervisors are simply expected to do their best and go home at the end of their shift. They are not held accountable for day-by-day schedule achievement. An operational linearity improvement program implements that accountability.  

An Actual Linear Application

The most effective operations manager I've known used a huge magnetic board to schedule and monitor daily tasks and milestones and track engineering and manufacturing performance. A focus on daily details, corrective actions and recovery planning was his management style. He would hold morning meetings
to review the previous day's progress and issue recovery instructions where necessary. He was an expert at team dynamics and his people always knew what was expected of them and were always provided the tools to get the job done. His multi-function teams were truly empowered. The combination of the magnetic board, the morning meetings, the effective, multi-function teams and a skilled leader was all that was necessary to improve operational linearity and avoid the end-of-the-month-crunch.

Shipment vs. Operations Linearity 

It is important to differentiate between shipment linearity and operations linearity. In a make-to-stock vs. a make-to-order manufacturing company the two linearity measurements will not be equal. Shipment linearity may be more of a function of sales' bookings and customer's preference rather than nonlinear manufacturing. Consequently, the measure of operations linearity must be developed to measure the performance of operation processes and not be influenced by sales bookings or customer related shipment delays.  

Conclusion

So let's put up the magnet scheduling boards or, for those who would prefer a more sophisticated solution, a good trade off would be to develop a simple computer spreadsheet designed to plan critical operation milestones and to measure/monitor operations linearity on a day-by-day basis. Your past does not control your future. An operations linearity improvement program, managed by a veteran operations manager, can allow your company to say goodbye forever to the end-of-the-month-crunch.

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