Reprinted with permission from Woodworking International.
by Dipl.-Ing. Adolf W. Schaper, managing partner of Schuler Business Consultants GmbH
The idea of producing their furniture line only after having the customer's order in hand is almost unimaginable for many manufacturers of box-shaped furniture. However, for object manufacturers, interior finishers, manufacturers of upholstery furniture and the woodworking trade this is all bread and butter.
It should be possible to coordinate the delivery and processing time of serial production with the individuality of made-to-order production. This is all the more understandable as we live in a time of technical and organizational possibilities. In the past, the experts talked a lot about this matter. Ideas of this kind have remained unrealized but today there is nothing to stop it. So why are we not getting on better here?
Reassessment Of Traditional Manufacturing Processes
Made-to-order is simply the ideal method of industrial furniture production. It unites all the advantages concerning the cost and expense with independence and flexibility for product development and marketing. In addition there is the possibility of reducing the number of processing steps of an order, that is, the idea of 'lean production' will really be
However, going this way requires a shift in thinking and leaving ingrained methods and procedures of manufacturing as well as changes in the organizational structure. As in trade, the principle is simple and efficient:
-- Working when orders are in, suspending work when orders are lacking
-- Purchasing when it is known which customer pays the goods
-- Producing when customers, orders and deadlines are defined
Each operational stock with finished goods or components according to the bill of materials shows clearly the alternative facts:
-- Delivery times required by the market are shorter than the processing time of the industry.
If these restrictions exist, individually or in combination, there is only one way out: analyzing and changing. If the employees are mainly occupied with finding reasons for the impracticability of orders, an external consultant is necessary. The alternative is supporting the opinion of the skeptics and leaving everything unchanged.
Each enterprise establishes certain priorities according to the market position and the product line. Therefore, we give only a selection of (radical) demands, the fulfillment of which depends only on the 'willingness' of the persons concerned. Neither process time nor material shall be wasted for production without having the customer's order in hand
or without knowing the time and quantity needed. Internal buffers between the processing steps serve to the cumulation for a reasonable order distribution, to the redistribution for identical processing steps and to the control of completeness and quality. They do by no means serve as stocks for undefined future needs. The rate of material turnover should be
increased significantly, for example to 10 - 12 times per year. Stock-keeping and stock-chasing of supplied parts is only allowed for components with a procurement cycle that exceeds the delivery time of the enterprise and when alternative solutions could not be found. Current capital should be shifted to fixed capital in order to increase the value of the business, which improves the flexibility of the enterprise and the quality of products. For the realization of the value-added activities in connection with the order, all component parts play an equally important role. A delay in delivery can be caused by a lacking linking plate as well as by a lacking door of precious crystal glass.
Operations Under Close Scrutiny
There is no need throwing away the whole machinery and buying new CNC-plants in order to arrive at a reasonable solution. On the other hand, new processing concepts aren't organizational 'peanuts'. However, certain questions must be answered:
-- Are the methods applied (for ages...) suitable?
-- Are there better alternatives or competitors?
-- Is it possible to express the desired solution as a goal or a term of reference in order to define a project?
-- Which are the parameters to be changed in order to measure the possible success?
-- Do management and employees really have the courage and the staying power to reach common goals together?
Each enterprise must be aware of the consequences of changing to a made-to-order production as far as the following criteria are concerned:
-- Processing time and period of delivery
-- Changes in the current capital, liquidity
-- Space required
-- Qualification of employees, staff required
-- Trade guarantees, completeness, availability of the finished goods
Object of the necessary preliminary examinations within the scope of the project are all criteria which will be technically or organizationally influenced or which serve as measuring units. These are mainly:
The range of products and components according to the ABC-analysis sorted according to family of parts or similar operating processes.
Change-over-time and production cycle of the machinery concerned, waiting time of the material, processing time, space allocation, material flow, ways of transport, space required for stocks, situation of current capital, storage capacity of representative parts and total production cycle for components. (How many workdays are being united to one operational unit? How are the average repetitive cycles for the production of representative parts of the ABC-spectrum?)
The figures and data determined that way give the bare facts of the actual situation of a manufacturing enterprise which must be evaluated critically. This analysis must be based on an expressive period which allows for interpolations due to its representative character. Normally it is not difficult gaining this information from this industrial data. It will be expensive if the data inherent to a MS-Excel-format is not possible.
Security By Simulation
It is important to base the analysis on orders with a fixed date in a planned real cycle with all data of the parts according to the bill of material explosion instead of analyzing worked off orders of any period. That is, a complete made-to-order production is being simulated and the result tells us what would have happened if we had really made it that way.
The rising part volume will be analyzed within the respective family of parts by means of the ABC-analysis, while the same method will be used for the supplied parts and for each supplier. The result allows the allocation to the existing processing possibilities and helps the material management and control with the conclusion of framework contracts with suppliers. After the accumulation of the demands to the machining possibilities, the time and machining capacities required are being determined. An indispensable condition for this is an expressive and realistic time schedule. If this is missing, assumptions or consistent data acquisition are necessary by experts of REFA, an institute for work studies and organizational matters. The results are not really representative, but the ratios we get are quite consistent within themselves and are useful for the comparison of the actual situation with the desired condition. The data material must be worked off in a way that, considering different assumptions, statements for different sectors are possible:
-- cycle time (1 week, ½ week, 1 day?)
It might be surprising that a change of cycle time hardly affects the parts' position in the ABC-analysis: A-parts remain A-parts, B-parts remain B-parts, C-parts respectively. Then, all possibilities are being checked critically to make clear where the operational requirements concerning technology and organization are fulfilled or where there is a deficit in equipment. It can be assumed that the existing equipment is able to work off the range of parts as this was possible previously with a different arrangement of the production volume. The required manufacturing time for the arranged production is still unknown due to a totally changed setup time . If this is acceptable considering the increased employment costs can only be decided in connection with the new cost situation as essential savings in other sectors and subjective assessment criteria are to be added. This results in the next project measures:
Comparison of the actual cost situation with the possible target situation (Feasibility Study)
The complete financial year is the most suitable period of account as the (scheduled) statement of earnings and the budgeted balance sheet contain all occurring costs in business. Not only the manufacturing costs are interesting, but also the capital expenditures. It is quite clear that the assumptions for the project cause a change of the single cost types, as for example the labor costs, the new current capital requirements and so on. On the other hand, this means that in the case of a decision in favor of the project the above mentioned assumptions must be put into action if the expected success shall arise. Only determination matters! Comparing the two situations it may come out that the production volume in consideration does not offer any advantage now, but only after a considerable increase in turnover exceeding the current situation. Nevertheless, subjective positive effects can be decisive as all measures concerning market and customers must be taken into consideration. Higher flexibility in the product development, for example, can be an important competitive advantage even if there are no cost advantages.
With these figures, the entrepreneurial decision of sticking to the anonymous made-to-stock production or changing to made-to-order production can be taken. The same applies to make-or-buy considerations. Comparing prices is not enough! The great advantage of this method is that it does not require expensive measures which won't get us anywhere. Before the realization, there are only data to be shifted and procedures to be simulated; i.e. all operations are under close scrutiny.
Mental opposition: Turn people concerned into people involved.
A structural transformation to such an extent requires a critical situation audit of all creative resources of the enterprise as it affects all operative sectors. At first it is important to locate the internal opposition and above this to neutralize the heads of the skeptics or even better to make them the driving force of the project.
We must not forget that anxiety and imminent changes disturb the natural need for security of the employees and thus opposition is an absolutely normal reaction. It is evident that the terms of reference must be the responsibility of a 'project team'. The complexity of this project does not allow isolated acts of individuals even if they were reasonable.
Structure Of The Project Team
All enterprise functions which have an effect on the cost situation of the operative business have a firm place in the project team
-- marketing department (responsible for the product range and the prices)
-- materials management and control (considers a too high inventory level as still insufficient)
-- production planning (prefers to run a part only once a year)
-- engineering department (placed the highest investments in production processes with the least real net output)
Goal setting and project management is the responsibility of the company management as they must sign the balance sheet.
Realization Only Possible With An Efficient ERP-System
The necessity of linking the organization with the engineering by means of an efficient system is undisputed. The extension of the application to the supply side and to the trade is the object of all e-commerce projects.
The complexity of modern ERP-systems for the furniture industry has two reasons:
-- the problem of variation of articles and components
-- the mixing of production of anonymous variations with made-to-order effects by vehicle routing and scheduling for the control of the final manufacturing.
From this we can deduce the counter conclusion that EDP-merchandise information systems could be less complicated if there were not anonymous primary products or goods would be produced only if they are already sold. It is worth considering this.
The future projects, however, are still complex:
-- the conversion of particular customer's order from the order entry system into directly applicable CNC-programs for the manufacturing (optimization of cutting, milling, boring, surface treatment, metal fittings)
The Human Point Of View
A content employee sees himself fairly paid. Contentment and motivation no longer result from fussy payment-by-results systems. On the contrary - they only provoke distrust. The number of top performers who are willing to do their duties reluctantly is diminishing. Flexible and very involved employees react to a straight management, recognition, fair treatment, promotion and time instead of money with high motivation and sense of responsibility. In the end it will be obvious that an enterprise competes not only with the quality of the products but also with the efficiency of the employees. We talk about delivery times, costs and quality which in effect are only the result of innovation potential, learning capacity and flexibility - the real factors of competition. As a consequence, the 'classical' systems of task wages or bonus schemes are obsolete. We must think of new ways, as for example the real and direct participation in the company profit - whatever may be the adequate form.
Changing Of Policy - The Sooner The Better!
In view of the radically changing customer requirements and the trade which is more and more under pressure and is therefore requiring more services and flexibility by the industry, a changing of policy in the manufacturing organization as described above is inevitable - against the backdrop of the electronic possibilities from logistics to the customer. The matters discussed previously support the evaluation of a project concerning the scope, the risks and costs. Also in this case the motto applies: 'It is the fast one who comes in first, not the great one!'