COMPETITIVE KNOWLEDGE
NEWSLETTER
Let's get to it:
Due to the large response to our solicitation of interest in attending
a 4-hour breakfast presentation, "A Bill Gaw MRP/ERP WAKE UP
CALL!", we decid- ed to use this newsletter to answer some of the
relevant questions that were raised by CKN subscribers.
First, let me assure you that we do not recommend that companies abandon
their MRP/ERP systems altogether. We agree that MRP/ERP is a good system
for calculating time phased requirements and providing critical input 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.
For the past 20 years most companies have either been oblivious to the
data integrity problem or they have been "beating their heads against
the wall" in their attempts to fix it. Controlling the integrity of
MRP/ERP input data seems simple enough but in the real-world, there is no
more difficult chal- lenge than to achieve the elusive goal of
"six-sigma" data input.
So what is the answer? Most companies that have gained control of their
shop floor activities have moved away from MRP/ERP controls and have
adopted flow technology and point-of-use logistics. Our CKN featured
article this month is "Another MRP/ERP Wake Up Call." This
article addresses the problems and root causes of why MRP/ERP has failed
to deliver results on the factory floor as promised and what leading
manufacturers are doing to eliminate shop floor chaos and the
end-of-the-month crunch.
Because of the current downsizing trend, we bring you two relevant
articles: "Stay in School" and "What To Do If You
Lose Your Job." We finish off this issue with "Price Tends"
and a "Sampling from Bits & Pieces."
You are welcome to print and share this newsletter with your business
associates. We have indexed and archived this and all previous newsletters
for your reference. To go to the "point and click" index, click
on below URL appearing in our signature file at the end of this
newsletter.
This newsletter has reached your desk because we share a common
objective---to help manufacturing teams avoid "burnout" while
achieving their full performance potential. To unsubscribe simply send us
an email with "Unsubscribe" as your subject.
Enjoy,
Bill Gaw
COMPETITIVE KNOWLEDGE
NEWSLETTER - SEPTEMBER 2001
1. ANOTHER MRP/ERP WAKE UP CALL!
2. STAY IN SCHOOL
3. WHAT TO DO IF YOU SHOULD LOSE YOUR JOB
4. PRICING TRENDS
5 SAMPLINGS FROM BITS & PIECES
Small Business ERP for Winners
1. ANOTHER MRP/ERP WAKE UP CALL!
by Bill Gaw
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---that we would
still
be facing daily parts shortages, shop floor disasters and end-of-the-month
chaos. What happened to all those 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!" 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. (statistical 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
not 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.
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 an alternative? Certainly, we 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 program presents a unique
challenge. The kaizen program has no end. It is sustainable and successful
only when management has made a commitment to 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 sophistication is added to computerized shop floor
control systems, if we fail to master the eight basics of KBLM, we will
never eliminate the chaos that grips our shop floor day-to-day activities!
How can you learn more about the shortcomings of MRP/ERP and the benefits
of Kaizen Based Lean Manufacturing™? We are planning a special 4-hour
breakfast presentation on "ShowTime! A Bill Gaw MRP/ERP Wake Up
Call." It will be an action learning experience that will feature
MRP/ERP and KBLM simulation exercises followed by an interactive forum.
This cost- effective presentation will help your manufacturing team:
- Understand the power of Kaizen Based Lean
Manufacturing™ (KBLM)
- Realize the shortcomings of typical MRP/ERP
scheduling systems
- Question current manufacturing paradigms and
operating methods
- Commit to planning and implementing KBLM to help:
--- Eliminate shop floor chaos and "end-of-the-month"
syndrome
--- Step up improvements in quality, speed and profitability
--- Shift paradigm from "firefighting" (reactionary) to
proactive problem solving
Currently planned for the middle of October in San Diego, CA, it will
be finalized by mid September if we receive a sufficient level of
response. So if you haven't previously responded and you are interested in
attending such a
presentation, send us an email, simply CLICK
HERE and enter "Interested" as your email subject. No
obligation... of course.
Small Business ERP for Winners
2. STAY IN SCHOOL
by Price Pritchett
Today's world takes no pity on the person who gets lazy about learning.
Either you take personal responsibility for continuing your education, or
you end up without the knowledge needed to protect your career.
It doesn't take long for skills and knowledge to get out-dated in a fast-
changing world. Technological advances and the flood of new information
make it hard to keep up with what's going on. College graduates can find
even their most advanced technical skills outdated in a matter of years,
Craftsmen must constantly adapt to new products and techniques. And some
careers don't even get a chance to change---they simply disappear. We must
constantly retool ourselves, become perpetual students, or we risk
becoming obsolete.
The more you know how to do, and the better you do it, the more valuable
you become. The better positioned you are to market yourself. The greater
your job security.
So just forget about "finishing" your education. Defend your
career by developing a better package of knowledge and skills than the
next person.
Small Business ERP for Winners
3. WHAT TO DO IF YOU SHOULD LOSE YOUR JOB
from Scripps Howard News Service
Downsizing, restructuring, mergers, layoffs---are these a first half
phenome- non or just a result of a poor fourth quarter? Whatever it is, if
it happens to you, what really matters is what you do next.
- If you are eligible, go to your unemployment office
and file for compensation. It isn't much, and it's certainly not fun,
but it'll pay for a bill or two.
- How much money do you have and how long will it last?
Match your savings and severance pay to your cost of living and create
a serious budget.
- List your lifetime and workplace accomplishments, not
just your job descriptions.
- Using the Internet, libraries and networking
contacts, research jobs that need your strengths and seem to offer
opportunities to do what you enjoy doing.
- Network with everyone and anyone, in and out of the
workplace. Develop a 60-second introductory advertisement for yourself
that anyone in any industry will understand.
- Identify employers in each of your possible career
choices, including names and titles of management people who may be
able to make hiring decisions, not just human-resource departments.
- Contact employers directly, ask for interviews,
follow up, send thank-you letters and sell yourself a job.
Small Business ERP for Winners
4. PRICING TRENDS
from Bottom line/Business
Mixed
Or Weak
- Automotive:
Discounts on some SUVs and minivans now range as high as $4,500. Good
deals on many pickups are available, too.
- Computers: Still
more price erosion as Gateway matches prices of major rivals. Overall,
PC prices now average 20% lower than a year ago.
- Heavy Trucks: Look
for price breaks on used Class 8 models. Some five-year-old trucks
that would have sold for $31,000 a few years ago now sell for only
$18,000.
- Memory Devices:
Prices of flash chips, pressured by heavy supplies and slow demand,
have dropped by 30% to 50% since late last year.
- Office Space:
Falling occupancy rates are creating bargains. Some tenants are
signing leases with rates that are 30% to 40% under recent peaks.
Subleasing savings are available, too.
- Printers: Prices of small-office laser models
continue to fall. Some black-and-white machines with a text speed of
8.6 ppm sell for as low as $249.
New Products
- Software:
Microsoft's new Office XP makes it easier to
find commands formerly buried in obscure menus. It has
a disaster recovery feature, too. Price: 479, and 239 for
the upgrade for Office 2000.
Heading Higher
- Internet services:
Rates are rising---led by America Online, which is raising its charges
9% to $23.90/month if you already subscribe.
- Steel:
Manufacturers are pushing for a $20-$30/ton boost. This would bring
hot-rolled and cold-rolled sheet to $270/ton and $360/ton,
respectively.
Small Business ERP for Winners
5. SAMPLINGS FROM BITS & PIECES
Adapted from Bits & Pieces
Keep away from people who try to belittle your ambitions. Small
people always do that, but the really great make you feel that you,
too, can become great.
Mark Twain (1835-1910)
It doesn't matter how strong your opinions are. If you don't use your
power for positive change, you are, indeed, part of the problem.
Coretta Scott King, Reformer
I have never seen a monument erected to a pessimist.
Paul Harvey, Radio commentator
Failure is the opportunity to begin again more intelligently.
Henry Ford (1863-1947)
I am convinced that life is 10 percent what happens to me and 90
percent how I react to it.
Charles Swindoll, Clergyman and writer
The key to success is for you to make a habit throughout your life of
doing the things you fear.
Brian Tracy, Career development expert
A friend is on who sees through you and still enjoys the view.
Wilma Askinas, Writer
Laughter is a form of internal jogging.
Norman Cousins (1915-1990, Editor
A man should never be ashamed to own he has been in the wrong, which
is but saying, in other words, that he is wiser today than he was
yesterday.
Alexander Pope (1688-1744), Poet
Worry is a misuse of the imagination.
Dan Zadra, Business executive
The journey is the reward.
Greg Norman, Professional golfer
