IndustryWeek Forums - Manufacturing Talk

Why Lean Doesn't Work

GStocker — Thu, 05 Nov 2009 21:47:51 GMT

Just to be clear, I am a huge fan of lean. I am a huge fan of Toyota and have seen some great results from projects over the years. Lately it seems, though, that lean in the United States and Europe is turning into just another overused, misunderstood concept that everybody does but few actually do well.

Read more at http://corporatedeathspiral.blogspot.com

Video: New Zealand's Lean Manufacturing Initiative

Frank Chloupek — Mon, 19 Oct 2009 23:15:50 GMT

Posted on youtube by Tigadee00.

A description of New Zealand's efforts -- through their Heavy Engineering Research Association (HERA) -- to increase productivity in their heavy metals engineering industry. The speaker is HERA Director Dr Wolfgang Scholz.

Manufacturers Need To Manage Inventories in a Changing Economy

DHowardell — Mon, 12 Oct 2009 00:33:39 GMT

During the current economic downturn many manufacturing and distribution companies are discovering that a small drop in sales can result in a much larger drop in inventory turns. As planners, buyers and managers whose performance is often measured by inventory turns, we need to understand why this happens and what we can do to avoid it.

First, most companies will admit that they had too much inventory to begin with and that they din’t react to changes quickly enough. But even when we do react well to a drop in demand, our systems are typically using the same replenishment parameters that they were programmed with months or even years before.

Using one popular measure of inventory performance, IQR, confirms this fact. The IQR for most of the over 400 companies we have surveyed is in the 30% to 45% range. The Inventory Quality Ratio is the ratio of the active inventory dollars to total inventory dollars. In a theoretically perfect situation (i.e., with no excess, slow moving or no moving inventories), the IQR would be 100%. So an IQR in the range revealed in the survey means that approximately 60% of inventory dollars are tied up in excess, slow or no moving items.

The major reasons that inventories go up in a down economy are:
• Our inventory systems and metrics, like turns and Days Inventory Outstanding, are backward looking.
• Our ABC classifications are out of date.
• Our order quantities and safety stock levels are based on past usage.
• We are still planning part quantities rather than managing inventory dollars.

To manage inventories effectively – in any economy, but particularly with changing demand – we need systems that are dynamically demand driven and that provide a dollar focus. Forward-looking demand-driven ABC classifications are needed to revise our order quantities and safety stock levels. Most importantly, we need to focus on the value of the inventory so that planners and buyers can be more effective in choosing the most important issues to work on first. Since we have limited time to work the issues, we need to make it easy to identify the ones with the biggest dollar returns.

Here again, many companies have found IQR helpful. The Inventory Quality Ratio methodology provides an effective way to manage inventory dollars and improve inventory performance. The IQR technique and tools help; to prioritize improvement opportunities, to set meaningful inventory targets, and to revise safety stocks and order quantities consistent with current demand, all of which make the planners’ and buyers’ jobs easier.

Whatever tools we use, in any economy we can do a better job of managing inventory levels and working capital by using demand-driven inventory logic and having a dollar focus. This will allow us to respond more quickly and effectively in dealing with the inevitable changes in demand for raw materials, purchased parts and our finished goods.

Furniture Manufacturer Uses 'Made in the U.S.A.' to Lift Sales

Frank Chloupek — Thu, 08 Oct 2009 00:26:49 GMT

Interesting case study from MarketingSherpa on how Indiana furniture manufacturer Foamiture used promotion of it's American-made products to boost their sales 10%.

The study is available at http://www.marketingsherpa.com/article.php?ident=31383 (free for 10 days, costs thereafter).

The details are in the study, but in short after first verifying their claims (not necessarily a simple task) they launched the messaging on their Web home page, on individual product descriptions, packaging, and phone contacts.

The results after 6 months were impressive.

19.1% increase in orders per day
4.6% increase in order value
10.1% increase in total sales

(taken from the case study cited above)

Anyone know of any made in the USA case studies? either positive or not?

Penske Cancels Plans to Buy Saturn

industrialuser — Wed, 30 Sep 2009 22:00:19 GMT

So it seems that the Saturn brand will end, according to this article. Boy, I remember when Saturn was trumpeted as all that was right about General Motors. And according to the Kansas City Business Journal, "Penske cited concerns about the future supply of vehicles beyond the supply period it negotiated with GM. After that supply period was over, Penske needed to find another manufacturer to produce Saturn vehicles."

It looks like about 13,000 jobs will be lost at Saturn with this decision, although I can't tell if that includes the dealer network or not. Bad news however you look at it.

Toyota's Largest-Ever U.S. Recall Over Floor Mats

Jon Katz — Tue, 29 Sep 2009 23:17:04 GMT

A month ago it was reported that Toyota was being sued for allegedly withholding evidence relating to over 300 rollover accidents involving roof crush issues. Read about it in this forum post from last month.

Now, the automaker has issued its largest-ever U.S. recall -- over floor mats. (Read about it here).What in the name of Taiichi Ohno is going on?

Hummer Sale in Trouble?

Frank Chloupek — Tue, 29 Sep 2009 01:03:48 GMT

Time reports that the sale of GM's Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery will not finish according to schedule and if the deal cannot be closed that the brand may fold.

Full story at http://www.time.com/time/business/ar...wsletter-daily

Supplier Pricing Mistake

Jerry Bernstein — Thu, 24 Sep 2009 16:10:00 GMT

This is an excerpt from a recently published article "Use Supplier Pricing Mistakes: Put Dollars In Your Pocket."

Mistake: Weak or No Discount Controls
Unnecessary discounting is perhaps the largest source of profit loss for a supplier, and one of your biggest opportunities to get a better price. Some suppliers have a discount policy, but these policies are often ignored. Test your suppliers for opportunities. For example, once you have negotiated an initial price with your sales rep and are now placing regular orders, call the customer service or order entry department and tell them you need a better price. If the supplier has little or no oversight, you might get the price you want or at least more discount on the order.

Download this article at: http://valuepg.com/Articles/Use Supp...kes online.pdf

How To Reduce Inventory Levels in a Hurry

DHowardell — Tue, 22 Sep 2009 04:29:37 GMT

It’s a normal part of business for companies to periodically look at their inventories and determine that they are too high and need to be reduced. There are standard steps we do to reduce the inventory. These include looking at inventory that is slow moving or non-moving and either reduce its price to spur sales or to write it off and scrap it. A survey of 400 companies conducted by IQR revealed that slow moving & non-moving inventory comprised about 10% of the total inventory value. If you could dispose of all that inventory you could make a meaningful improvement in your cash flow but 10% is hardly radical.
To bring real change, we need to do something radical. We need a way to reduce inventory 20, 30 or 40%. Below we identified four steps to radically reduce inventory.
1. Understand what you’ve got
The first step is to understand what you have in inventory. There are only two reasons to have inventory; you are either going to sell it or you are going to transform it into something you can sell. Understanding what you have means you understand how likely you are to sell the parts in the near term. So you want to categorize your inventory into one of three categories: 1. active - meaning you have either near term requirements or recent past usage; 2. excess – meaning you have requirements or history but you have more of it than you need in the short term; 3. slow/non-move – meaning there are no requirements and no recent usage history.
The next step in understanding what you have is to segment the categorized inventory into meaningful elements. Typical segments would include product line, warehouse and or plant, planner, buyer or vendor.
2. Set Targets
Now that you understand what you have, you need to analyze the real potential for reduction. If your requirements are valid and your usage history is accurate, you need all the active inventory. You should not plan on reduction of that material. Look at your slow move, non-move inventory and estimate how much of that you can dispose of through quick price reductions or by throwing it away. Next look at your excess inventory; this is where you will find the biggest potential for reduction. The same IQR study mentioned earlier found that excess, material with valid requirements, made up 30-50% of the total inventory dollars. Estimate how much of the excess you reduce by carefully managing it. For example if you have material here too soon you should make sure you do not have any more coming in anytime soon. This means cancelling or deferring purchase orders and manufacturing orders.
We’ve been told countless times about the power of setting goals. All of those reasons apply here and setting a goal will help make the kind of radical reductions you seek. You may want different goals for different categories of inventory. For example you might want a zero percent reduction of active inventory, a 25% reduction of slow move and a 60 % reduction in excess. Your goals may vary by segment based on your analysis too.
Part of setting targets is analyzing the potential financial impact of reduction,
To motivate management and from there the inventory planners to make the kind of radical reductions you want, you need to define how the bottom line will be affected by the reductions. Getting rid of existing inventory saves carrying cost. Burning off existing excess while deferring open orders improves cash flow and preventing additional excess from coming in at all puts money directly to the bottom line. You should define such measures as contribution to profit, reduction of financial reserves, and impact to cash flow.
3. Take the actions necessary to meet your goals
It’s time to quite analyzing and start taking action. Paretoize the part numbers so that you work the part numbers with the greatest reduction for potential first. Define the actions that you need to take on each part number and take those actions. Look for circumstances where you can take quick action. Do you have parts that are identified as excess but have open orders? Do you have parts that have unusually high safety stock or lead times? Each planner and/or buyer should document specific actions that they will take to reduce the excess in their part numbers.
4. Track performance & take corrective action
Keep track of the monetary value of the reduction you are achieving. Graph your progress no less than weekly. Track by segment so you know where you are meeting your goals and where you need to take other action.

Reducing inventory levels remains one if the best ways to free up working capital, improve cash flow and improve bottom line performance. The current recession can be used as a reason to make real, even radical change. Follow these four steps to make a big improvement in your inventory performance.