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Small Business ERP

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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


Small Business ERP for Winners

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