Erp Optimization Marino

COPYRIGHT MARINO ASSOCIATES, LLC, 2006

ERP OPTIMIZATION


processes to reduce waste and to

achieve dramatic improvements in

critical measures of performance,

such as speed, cost, quality, and

service.

LEAN/AGILE BUSINESS

Lean/Agile is the fundamental rethinking and

radical redesign of business & supply chain


FIVE LEAN PRINCIPLES

1. Specify what creates value from the customer’s perspective

2. Identify all steps across the whole value stream

3. Make those actions that create value, flow

4. Only make what is pulled by the customer, Just In Time

5. Strive for perfection, by continually removing successive layers of waste


The Seven Wastes

1. Transportation Material movement

2. Inventory Raw, WIP, and Finished

goods

3. Movement Human (hands, feet, or body)

4. Waiting Human, Material, or Machine

5. Over Processing Inefficiencies and rework

6. Overproduction Production > demand

7. Defects Scrap, rework, warrantee

“Mr.

Waste”!

“Tim Wood”

Copyright Robert Abair Associates, Inc., 2006 - 4


YOUR MISSIONTo radically change your manufacturing, distribution, and supply chain processes …

both internally and at your suppliers

ReduceInventory!

Reduce

Cost!

ReduceLead time!

Establish Seamless Business Processes!

Balanced Lean


ERP SUCCESSES?

Seventy percent of all companies, that have installed an ERP system, failed to achieve any significant return on investment.

Seventy five percent of all ERP implementations fail to optimize the benefits and promises associated with successful ERP.


ERP SYSTEMS HAVE BEEN PLAGUED BY A LONG LIST OF PROBLEMS

1. ERP software was installed to mirror a set of existing, often inadequate, business processes.

2. Organizations were ill-prepared to conform to “Best in Industry” practices.

3. Management did not take the time to answer the question, “How do we want to run the business?”

4. Pre-implementation activities were not well understood and often not done.


ERP SYSTEMS HAVE BEEN PLAGUES BY A LONG LIST OF PROBLEMS

5. IT concentration may have been on technical wizardry and not focused on business excellence issues.

6. Education and training was rushed and did not bridge the gap from software, to the day-to-day requirements of the operation.

7. Mapping of the old legacy systems to the new system was done based on technology requirements, not users’ current and future needs.


RETURN ON INVESTMENTERP MID-MARKET


GLOBAL ISSUES/TRENDS DRIVING NEXT GENERATION MANUFACTURING (NGM)

1. Increasing customer expectations

2. SKU's proliferating

Broader product ranges Small lot sizes Short model life cycle

3. Ease of access to global production networks (the dramatic rise of Chinese juggernaut)

4. Outsourcing

5. Everything is a commodity

6. Massive disinflation in the marketplace

7. Environmental and recycling issues becoming more complex


8. Ability to process information to treat masses of customers as individuals

9. Serious increases in energy costs and basic commodity items, such as steel, paper, resin, etc.

10. Constant training and retraining caused by complex technology, complex business practices or downsizing

11. Computer networking, telecommunications, and internet accelerating pace of change in technology

12. The rise and power of the Euro, foreign trade agreements, etc.

13. Regulatory and compliance issues, such as RFID

GLOBAL ISSUES/TRENDS DRIVING NEXT GENERATION MANUFACTURING (cont.)


CRITICAL ATTENTION MUST BE PAID TO RETHINKING BUSINESS PROCESSES

“Order to Cash”

Front end Quotations Order entry Customer Relationship Management Demand Planning Sales force automation

Execution (Lean ERP) Planning/Inventory Purchasing Shop Floor Receiving, Warehousing, Shipping


CRITICAL ATTENTION MUST BE PAID TO RETHINKING BUSINESS PROCESSES

“Order to Cash”

Support

Rapid database build

Part numbers, BOM’s, Routings

Compliance

New Product Introduction (NPI)

Rapid customization of product

Product rationalization

Financials


DO YOU NEED TO OPTIMIZE YOUR ERP SYSTEM?

1. Is ERP helping you to improve customer satisfaction?

2. Is ERP contributing to increased market share?

3. Did ERP help decrease your operational expenses?

4. Is ERP managing and lowering your inventory?

5. Has ERP shortened your order-to-delivery cycle time?

6. Has ERP shortened your time-to-market?

7. Has ERP helped you achieve a competitive advantage?

8. Is ERP giving you the information & metrics you need?

If your answer to some of these questions is “no”, then ERP optimization should be on your critical path


OPTIMIZING ERP BEGINS WITH A DETAILED ERP BUSINESS PROCESS ASSESSMENT

1. Conduct in-depth interviews with all key users

2. Review all business processes from “order to cash”

3. Review business processes in relationship to software and best business practices

4. Review level of basic ERP knowledge in all key areas

5. Conduct detailed review of all systems “order modifiers”

6. Prepare detailed value maps of all key business processes

7. Prepare a departmental review of systems functionality

8. Assess systems parameters and their ability to meet business and departmental goals


HOW CAN YOU ORGANIZE YOUR ERP OPTIMIZATION ASSESSMENT PROCESS?

1. Define your “order to cash” process

2. Establish 90 day “FAST TRACK” team

3. Conduct “basic training” training

4. Define “We will be Lean and Agile When… company statement

5. Define “We will be Lean and Agile When… key department statements

6. Prepare detailed plan for team tasks

7. Prepare an ABC analysis


ABC ANALYSIS OF ADVANCED MANUFACTURING STRATEGIES

Primary Purpose:Inventory philosophy

Customer service philosophy

Manufacturing strategy (mixed-model matrix)

Expediting or priority planning strategy

Purchasing and supply chain strategy

Distribution strategy

Sales and Marketing strategy

Inventory Class

Dollar Volume

Number of Units

“A” 80% 20% “B” 15% 30% “C” 5% 50%


HOW CAN YOU ORGANIZE YOUR ERP OPTIMIZATION ASSESSMENT PROCESS? (cont.)

8. Document “as is“ baselines

9. Establish user interview schedule

10. Prepare value stream maps (flow charts of product and information flow)

11. Brainstorm policies, procedures, and business rules to support “today's” business needs, as well as, “tomorrow’s” vision

12. Conduct new education and training

13. Populate ERP order modifiers

14. Document sustaining processes


AT ABC COMPANY, PURCHASING WILL BE LEAN AND AGILE WHEN…

1. All “A” suppliers have been value stream mapped and non-value added activities eliminated

2. No buyer involvement for “A” supplier releasing

3. All “A” suppliers have service agreements

VMI Consignment Productivity

Evergreen Schedule Agreements

4. All “A” suppliers – short-term demand is “work center 1 consumption schedule” or “Kanban supermarket”

5. Same day or next day delivery for “A” supplier demand


AT ABC COMPANY, PURCHASING WILL BE LEAN AND AGILE WHEN…

6. Key suppliers feed “supermarket” or point-of-consumption buffer areas

7. All pallets are pre labeled

8. All key “A” suppliers are all certified

No inspection No counting

9. All “A” suppliers have qualified specifications

10. All key “A” suppliers have standard delivery schedule

11. “B” suppliers will use “auto” MRP

12. “C” suppliers will use “bread man” deliveries


SOURCING FROM DISTRIBUTORS

• Cost Reduction• Inventory Reduction• Warehouse Stocking• Complex Systems• Quotes• Lead Times

• Supplier Reduction• Inventory Elimination• Bin Servicing• Seamless/paperless• Evergreen contracts• Transparent

Non-TraditionalTraditional


COMMON MATERIAL FLOW PROCESS:

Cycle Counted

Requisitioned

Sourced

Ordered

Received

Transacted to stock

Kit line stocked

Work Order Prints

Parts collected

Parts Kitted

Inventory Transacted to kit

Kit Moved to assembly$20 item is handled

the same asa

$0.02 item


NEW MATERIAL FLOW OPTIMIZATION

Cycle Counted

Requisitioned

Sourced

Ordered

Received

Transacted to stock

Kit line stocked

Work Order Prints

Parts collected

Parts Kitted

Inventory Transacted to kit

Kit Moved to assemblyYou now add real value!


WORLD CLASS DISTRIBUTION REQUIRES NONTRADITIONAL THINKING

Your customer’s focus must shift… from what they will buy from you…to what they want you to manage for them…

Your focus then, must shift… from what you can sell to your customer…to what you can remove from your customers process…

Your systems must become a key enabler!


CASE STUDYCASE STUDY

OPTIMIZING THE BOARD OPTIMIZING THE BOARD REPAIR PROCESSREPAIR PROCESS


8.59 days8.59 days8.59 days

6.8 hours

New Production - North Reading Rework & Solectron Test Board Value Stream Map

BoardInventory

PE32QSB

DPE32

Process Time

MateH-2

.25 days

.25 days

.25 days

.17 hours

DPG TestH-3


1 hour

ShippingHarrison

H-1

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

DPGTroubleShootH-3


8 hours

De-mateH-2


.17 hours

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

ReceivingNorth

Reading

ReworkNorth

Reading

ShippingNorth

Reading

ReceivingSolectron

B

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

5 days5 days5 days

4 Hours

.06 days

.06 days

.06 days

.09 hours

.19 days

.19 days

.19 days

1 hour

Transactions

PE32QSB

DPE32

Process Time

Transactions

A

.06 days

.06 days

.06 days

.09 hours

PE32QSB

DPE32

Process Time

Transactions

B

RetestICT

@Solectron

ShippingSolectron

ReceivingNorth

ReadingStockroom

ShippingNorth

Reading

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

Bo

ard

de

liv

ery

.17 h

rs

.5 days

.5 days

.5 days

.17 hours

3 days3 days3 days

.5 hours

ReceivingHarrison

H-1C

Bo

ard

de

liv

ery

.17 h

rs

A

PartInv

Total Total Process Cycle Time Execution TimePE32 15.4 days 23 .54 hrsQSB 17.4 days 23.54 hrsDPE32 16.9 days 23.54 hrs

BW

Traveller Traveller

BW

Email

BW

Traveller

BW

Traveller

OracleOracle

Oracle MRP

MRP

BW

Oracle MRP

QDS


9.94 hours


2.57 hours

PartInv

PassTest

.06 days

.06 days

.06 days

.09 hours

.19 days

.19 days

.19 days

1 hour

.06 days

.06 days

.06 days

.09 hours

.19 days

.19 days

.19 days

1 hour

.19 days

.19 days

.19 days

1 hour

.06 days

.06 days

.06 days

.09 hours

.06 days

.06 days

.06 days

.09 hours

.06 days

.06 days

.06 days

.09 hours

.06 days

.06 days

.06 days

.09 hours

FailTest

Oracle


4.23 hours

ThicknessTest

.01 days

.01 days

.01 days

.17 hours

Squish &Re-torque


.6 hours

SystemScreen

0 days0 days

0.5 days

1 hour

HVM-EBoston

Stock Room

Bo

ard

de

liv

ery

.17

hrs

Bo

ard

de

liv

ery

.17

hrs

HSPAssembly

H-2


1.25 hours

Bo

ard

de

liv

ery

.17

hrs

MateH-2

DPG TestH-3

Bo

ard

de

liv

ery

.17

hrs

C

PE32QSB

DPE32

Process Time

Transactions

PassTest

BW

Traveller Oracle

BW

Traveller

BW

Traveller TravellerTravellerTraveller

PartInv

PartInv

.25 days

.25 days

.25 days

.17 hours


1 hour

Oracle

All shaded items depict valueadded activities

1 day = Two 8 hour shifts

Process Time includesTransaction Time

BW = Board Watch

Oracle = Oracle 11i

Traveller = Operational RoutingChecklist

QDS = Quality Data System

Board Repair Team: “AS IS” VALUE STREAM MAP

Total Cycle Time: 17.4 DaysTotal Process Time: 23.54 Hrs

COPYRIGHT ROBERT ABAIR ASSOCIATES, INC., 2006ABC INC. Value Stream Mapping - 26


New Production - Solectron Rework & Solectron Instrument Board Test Value Stream To Be Map

BoardInventory

Cycle Time

Process Time

MateH2

DPG TestH2

ShippingHarrison

DPGTroubleShoot

H2

De-mateH2

Bo

ard

del

iver

y.1

7 h

rs

ReceivingHarrison

SolectronRework

SolectronShipping

SolectronReceiving B

Bo

ard

del

iver

y.1

7 h

rs

Bo

ard

del

iver

y.1

7 h

rsTransactions

Cycle Time

Process Time

Transactions

A

Cycle Time

Process Time

B

SolectronRetest

HSP, Thick,Squish,

Re-TorqueH2

A

PartInv

PassTest

FailTest

PwrBd Inv

PartInv

PartInv

MateH2

DPG TestH2

HVM-EBoston

Stock Room

.01 days

.17 hours

.5 days

1 hour

.5 days

8 hours

.01 days

.17 hours

.18 days

.09 hours

.19 days

.09 hours

.30 days

2 hours

.30 days

.5 hours

.19 days

.09 hours

.18 days

.09 hours

Transactions

.01 days

.17 hours

.5 days

1 hours

.25 days

2 hours

QSB Instrument Board

.18 days

1 hour

.18 days

1 hour

All shaded items depict valueadded activities

1 day = Two 8 hour shifts

Process Time includesTransaction Time

BW = Board Watch

Oracle = Oracle 11i

Traveller = Operational RoutingChecklist

QDS = Quality Data System

BW

Traveller

Bo

ard

del

iver

y.1

7 h

rs

BW

Traveller

BW

Traveller Traveller

MRP MRP

QDS

MRP Oracle

Oracle

BW

Traveller

BW

Traveller Traveller

3.52 days

18.05 hours

Total Cycle Total Process Time Execution Time 3.52 Days 18.05 Hours

Total Cycle Time: 3.52 DaysTotal Process Time: 18.05 Hrs

Board Repair Team: “TO BE” VALUE STREAM MAP



Board WIP / Inventory History(PE32, DPE32, QSB)

0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39

Week (last day of week)

# o

f B

oar

ds

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

Total in Workcell Shipped from Workcell

-Cut MRP lead time in Oracle from 10 days to 5 days.-Consolidate w ork cell on 2nd floor.-Implement large racks and boxes.

-Conducted lean manufacturing training.-Implement local rew ork repair part and pow er board kanbans.

-Combined assembly process steps.

-Implemented goal of 1 w eek's inventory metric to influence behavior.-Reduce kit sizes coming to w orkcell.-Implemented quick -turn local rew ork.

-Implement daily kit deliveries and daily adjustments if needed.

Board Repair Team: Benefits Realized



EXAMPLE OFEXAMPLE OF

ERP – LEAN SUPPLY CHAIN ERP – LEAN SUPPLY CHAIN OPTIMIZATIONOPTIMIZATION


Company 2 (OLP) Lean Supply Chain

Current State

MRP Push Process Performance Metric

Future State

Lean ERP Process

Percent Improvement

$270.2K Liability $144.2K 47%

14 Number of Systems in Pipeline 14 Same

14 weeks Lead Time 2 weeks 86%

6.5 days Manufacturing Lead Time 4.6 days 29%

5 items Reduced unique parts over 55 days L/T 3 items 40%

14 weeks Power Controller L/T Reduction 6 weeks 57%

$64.9K Value of Power Controller Reduction $37.1K 42%

13 wk L/T @ $.5K per unit

Block Assy Liability Eliminated $0 Liability

- Cost Savings -