LEAN PART 2 - ‘LEAN’ and IT (Information Technology)
1. Background
Last time we looked at some of the fundamental principles of LEAN and in particular how efficient planning practices were essential for the successful implementation of LEAN practices.
For a copy of the previous Management Briefing (‘Lean, Barriers to Lean & The Essential Role of Planning’) please email us or visit the Management Briefings section on www.fastreact.com.
This time let’s consider the role of IT in the LEAN process in more detail.
2. LEAN and IT
If you are studying LEAN or taking advice on LEAN, then it is quite likely that you will hear very little about IT.
You could be forgiven for thinking that there is little or no direct link between LEAN and IT. However, when you consider what LEAN demands, that is:
• fast response to customer demand
• rapid identification of problems
• the constant collection and analysis of KPI to measure performance and drive the continuous improvement process
Also, when we consider one of the TPS guiding principles, Autonomation (JIDOKA), which is the more effective use of human skill by technology/automation, then clearly there is no doubt that IT should be an important tool to enable and support the LEAN strategy.
3. LEAN and Enterprise Resource Planning (ERP) Systems
Most businesses today have implemented ERP systems (with the exception of perhaps some of those in the developing economies like Bangladesh and Vietnam who are also considering ERP).
Unfortunately, ERP systems have little to offer directly to a LEAN project. A quick study of where ERP came from will explain this. ERP has evolved from the material inventory and material requirement planning tools from the 1960s and 1970s and started to become known as ERP only in the 1990s.
So if we consider the Fashion industry in the period that ERP grew up... styles were fewer and simpler, orders larger, fashion trends more unified. Business plans were based on seasonal forecast 2 or 4 times per year and, as such, ERP was developed for a more stable and in ‘LEAN speak’ a “Push” environment.
This is, of course, quite different to today’s Fashion industry with constant reaction to the latest market/buyer trends and the ‘Pull’ system that LEAN demands.
4. Example of Normal ERP Practice vs. LEAN Requirements
Taking a more specific example of material requirement planning for a garment business:
The material requirements to satisfy a given production order are calculated as
• order quantity x material consumption per material item
However, if we consider the differences between how ERP calculates the demand and how LEAN needs the materials:
• ERP - Typically material demand will be calculated for each order based on the production month or delivery date and a ‘standard’ lead time will be applied.
So ERP will work on the assumption that all material (e.g. fabric) for the order is required, for example, 36 days before the delivery date allowing 30 days for production and 6 days for preparation.
Order 1 - Delivery date 31st July - therefore, fabric is required 26th June
Order 2 - Delivery date 31st July - therefore fabric is required 26th June
This assumes we will start production on 1st July for both orders, which is a fundamentally WRONG assumption!! Therefore, the calculation of when fabric is required in house is simply NOT realistic: The date when we actually start production and therefore the date when we will require the fabric will depend on many factors, such as:
• the product type and process requirements; for example does it need washing and printing so has a longer throughput time?
• the capacity available, when is there a space in the sewing line or lines?
• the order quantity and smv/sam and efficiency we expect to achieve
If we accept that production needs to start on different dates due to different factors, then it is logical to assume that materials are needed on different dates; therefore if we do not drive our materials requirements to take account of an accurate production plan, we are not adhering to LEAN principles. Sometimes, we will be asking for materials before they are needed, at the expense of other materials that we really need as soon as possible. Most of all, we give our suppliers a very UNCLEAR picture of priorities.
In reality, and to achieve LEAN goals, in the above example, we need to receive fabric 6 days before we want to cut… in which case we need our IT systems to calculate this for each order based on the plan.
5. Yes, but ‘It’s all down to Materials Available Date’
It is important to note that many garment businesses believe that in striving to be LEAN and to reduce lead times, they are entirely controlled by the date when materials are available from the material supplier. They consider this to be the restraining factor, which is entirely out of their hands. So what can they do?
To the extent that fabric availability determines when they can make the order, the above is true, but this is not entirely out of their hands. Often garment manufacturers do not help themselves. If we fail to give clear priorities to the material supplier in the first place, then how is the material supplier supposed to help if he doesn’t know what is really needed first?
Viewed objectively, it makes perfect logical sense that the only way to achieve minimum lead times, fastest speed of response and flexibility is to give suppliers clear priorities to work to, which consider also the garment manufacturing needs. This will avoid asking for material that is not as urgent.
Where possible, a closer strategic partnership between garment and fabric supplier is desirable to the above goals, which explains a recent trend for greater vertical and backward integration in the supply chain.
6. Progressive Improvement - How LEAN Can You Go?
We described LEAN as a ‘Journey’ and ‘Continuous Improvement’ of the most important LEAN concepts, so let’s look at the above example and consider some progressive options on how we could perhaps be more LEAN.
Weekly Deliveries - Rather than one delivery per order it could be desirable to have more partial deliveries at frequent intervals e.g. weekly. This will depend on distance, transport availability and cost but could be particularly useful for large orders, which may run in production for several weeks or where local material suppliers mean frequent deliveries can be cost effective.
Daily Deliveries - Even LEANER would be daily deliveries; this is certainly achievable where strong partnerships exist between buyer/supplier or where businesses are vertically integrated.
Delivery to Point of Consumption - Potentially, we can then become even LEANER by calculating material item demand based on point of consumption. For example, fabrics, lining etc. are required a few days before cutting, whereas bags, boxes and hangers are only required a few days before packing, which could be several days later than the start cut.
FastReact customer, Australian Country Spinners, talk about their own direct experience of what clearer prioritisation and co-ordination can achieve:
FastReact has been interfaced to the existing TIM manufacturing system. Overall, the company has achieved greater flexibility and speed of response. Successful order completion against target in 2004 were 10% up on 2003. In the areas where the use of FastReact is most focussed, from the Winding department through the Dyehouse and the Finishing area, lead times and work in progress levels have reduced by over 30% year on year.
“Previously, various people throughout the Business were making separate, planning decisions. The result was poor coordination and too much manual chasing of orders through the plant to rectify stock outs. We now work to focussed priorities, with each department buying into this process. FastReact has provided an essential management tool to improve visibility and communication, thereby facilitating our business improvement process. As demand increases for smaller production runs and greater flexibility, we are now better prepared than ever to cope.”
Ian Brimblecombe, Manufacturing Services Manager, Australian Country Spinners
7. FastReact - A Practical Tool To Enable LEAN
FastReact is a fashion industry specific planning tool that can support several key areas of LEAN Manufacturing as follows:
7.1 Creation of a Realistic Production Plan
An accurate plan, considering all real production factors, as opposed to assuming a ‘standard production lead time’ is essential in identifying true priorities and to minimise inefficient ‘fire-fighting’ to correct unforeseen problems.
By having an efficient plan, we eliminate waste in the production process (i.e. under or over booking of capacity, uneven flow due to style mix etc.)
7.2 Material Demand and Supply
The ability to quickly calculate Just in Time (JIT) material requirements (weekly or daily) at any time from the latest production schedule ensures unprecedented visibility of ‘cover’ and priorities or action.
Through this process, we ensure that materials are ordered and delivered in line on time, thereby absolutely minimising excess inventory (i.e. materials delivered too early) or late delivery.
In addition, the comparison of material supply vs. demand with a highly visible “traffic light” system provides a colour warning of any potential material shortages.
7.3 Pre-Production Critical Path or T & A
Pre-production activities should be clearly prioritised and sequenced directly in line with production priorities i.e. from the latest plan.
Too many companies still prioritise critical path from delivery date with standard lead time assumptions for production. This creates the same difficulties in identifying true priorities as discussed above with materials.
FastReact provides pre-production activities clearly prioritised in line with intended production start will ensure maximum ‘on time start’ and minimise non-productive time.
7.4 Capacity Management of ALL Supporting Processes
Capacity management of all processes is provided as standard, with highly visible colour coded warning of overloads to minimise bottlenecks.
‘What-if’ modelling allows most effective management of capacity to achieve the best workable plan, with controlled WIP and even workflow
7.5 Operation/Process Scheduling & WIP Control
As a fully integrated planning tool, FastReact provides “Pull” plans for cutting, embroidery etc. with WIP (KANBAN) control and monitoring.
The system also provides colour coded warnings of WIP shortages, thereby reducing the need for and reliance on excessive levels of WIP or Kanban.
7.6 KPI monitoring
In support of continuous monitoring and improvement, key LEAN parameters such as Lead Times, Delivery Performance, WIP levels and Inspection 1st Time pass rate can all be measured easily.
Through improved awareness of current performance, realistic action plans can be set in place for performance improvement.
8. FastReact Working With Your ERP To Provide LEAN Support
It’s important to understand that FastReact does not replace your existing ERP solution but complements it and adds much needed ‘LEAN support’.
What FastReact can do is help you align the existing IT systems with LEAN principles by providing the much needed JIT/PULL concepts in planning.
Through FastReact it is easy to see ‘early warnings’ of potential problems quickly. This is essential for your process to be truly LEAN, because in a truly LEAN environment, you have only days or hours to see and fix those issues.
Aside from the financial benefits and savings from reducing waste and increasing productivity, the available benefits include enhanced visibility across the supply chain, increased flexibility and responsiveness and lead time reduction.
Case Studies of FastReact interfaced with ERP to help drive LEAN Benefits.
“FastReact provides fully integrated supply chain planning, critical path management and raw materials visibility in a single coordinated system linked to and working with the existing JD Edwards business system. This combination allows the impact of changes in any one area, such as sample approvals, flow requirements, raw materials availability and current production performance to be immediately reflected in other areas, providing clear notification of priority changes and a clear warning of potential problems.”
“FastReact has enabled the closer coordination of functions within the business and this has facilitated a better materials planning process. This has directly resulted in the stockholding on materials being reduced by 40-50% (25- 30 days stockholding down to an average of 15 days)”
Glenn Walker, Finance Director at Dewhirst Menswear Tailoring
“Since implementation of FastReact, the business has been able to reduce their UK warehouse stock by approximately 15%. This was achieved by aligning the production plans to more closely suit the customer’s requirements”.
Carl Morley, Supply Chain Director at Crystal Martin, Sri Lanka
“We have been able to significantly reduce our material stockholding, whilst still being able to meet planned deliveries.”
Attila Kurdash, Managing Director at Gina Shoes, UK
“Direct, operational cost savings include an immediate £80K Sterling per annum saving, in addition to significant reductions in stock levels.”
Stewart MacDonald, Managing Director at Fogarty Filled Products Ltd, UK
