A3 Strategy Deployment Links The Lean Manufacturing Initiative From The Boardroom To The Factory Floor:

A3 Strategy Deployment Links The Lean Manufacturing Initiative From The Boardroom To The Factory Floor

Virtually all of Buker, Inc. client companies are engaged in pursuing Best in Class performance through the implementation of Lean Manufacturing practices.  Linking a company’s senior leadership strategic direction to the execution throughout the organization is the use of strategy deployment and A3 planning and execution.

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Many people think that Lean Manufacturing means coordinating schedules so that parts and materials arrive at their point of use “just in time” to avoid inventory and the space it consumes.

Indeed, that is part of Lean Manufacturing – an important part. But there is considerably more than that to Lean Manufacturing. That’s because Lean Manufacturing is a strategy for achieving significant, continuous improvement in performance through elimination of all waste of time and resources in the total business process.

For most companies, improving performance means change – dramatic change – in the way they do business. Change can be unsettling as people

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Enterprise Resource Planning Performance Measurements:

Financial performance has been the primary measure of success in most manufacturing companies. Manufacturing companies have developed financial planning systems and financial statements for measuring their performance on a regular monthly, quarterly, and annual basis. Financial plans are generally stated in terms of Sales, Gross margin, Income, Investment and Return on Investment (ROI). These financial performance measurements have been developed and documented by the accounting profession and are well accepted by management and stockholders of manufacturing companies.

Manufacturing companies have not, however, done as well at developing effective operating systems and operating performance measurements. Today, manufacturing companies need to establish effective operating systems and operating performance
measurements to enable them to effectively manage business operations and meet business and financial objectives.

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Very few industries are unaffected by global competition. With higher levels of competitiveness it follows that the consumer will ultimately decide upon the products which meet their needs in the areas of product features, dependability,
availability and overall value. No business can afford to stand still. If a company is successful today it can be certain there is someone who is preparing to take all or part of the marketplace in the future.

In today’s business environment it is no longer good enough to be better than the competition down the street or in the local marketplace. Each company must strive to meet and beat the best from anywhere in the world. A business enterprise can no
longer think that failure to make it in world markets will not affect business in local markets. The very opportunity to compete in world markets carries with it the explicit threat that the same opposition experienced overseas can indeed knock the
company out of its local markets.

The response to this challenge of global competition is through the ideal of World Class Manufacturing. World Class Manufacturing is the term used to describe the very best manufacturers in the world. These World Class companies recognize the importance of manufacturing as a strategic weapon. Manufacturing plays a fundamental role in developing and sustaining customer satisfaction through the elements of quality, cost flexibility, reliability and innovation.

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Your company has decided it may be time to toss out that antiquated legacy system you’ve been struggling with for the past 10-15 years and get one of the new integrated software packages you’ve been reading about. Well, just like any other major capital investment, this means that someone will have to compile and document a cost vs. benefit analysis to justify the project. The formidable task of putting together such a justification document is not for the faint of heart. It is a complex job with extremely serious consequences lurking in the weeds. What if your assumptions are wrong? What if your cost estimates miss the mark completely? How do you know if you’ve found all the hidden costs? What if projected cost savings fail to materialize? How is anyone going to believe the numbers?

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A Step Above Just-In-Time and Lean Manufacturing

Over the years as companies strived to improve their business operations to World Class competitiveness or best of class performance, it became apparent there were three basic levels of understanding in striving for this new level of competitiveness. The first and most basic level was of frequent supplier deliveries. Companies began to work with their suppliers to get the right material in the right amount at the right time and at the right place. The focus was on getting the material to the factory just in time. This typically was accomplished by getting the supplier to warehouse material just in case the customer placed an order. In other words, the supplier carried the inventory.

The second step in the drive for World Class competitiveness was bringing manufacturing and logistics into the initiative. The focus was on everything it took to move from just in case to just in time deliveries. This meant solving numerous problems with the objective of receiving exactly the right material in the right amount at just the right time and in precisely the right place. To overcome these problems, companies began to work on problems dealing with poor habits such as housekeeping, work place organization and deficient processes that yield quality problems in terms of scrap and rework or substandard policies regarding preventative maintenance.

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The roots of Enterprise Resource Planning (ERP) started in the late 1960s and early 1970s with the use of computers and computer systems in manufacturing companies. Those early applications of the computer as a tool to manipulate and store data began in the finance area. Finance used the computer to reduce manual record keeping and filing systems for payables, receivables, general ledger and payroll. The logical progression of the computer as a tool to help run the business was to apply computer capabilities on the operations side of the business, specifically to help plan, schedule and order material. This technique was called Material Requirements Planning (MRP). By the end of the 1970s, with computers now affordable for almost all businesses, thousands of companies began MRP implementations to better manage their businesses. Companies rushed to implement this new tool to help them better manage inventories, improve material shortage conditions on the factory floor, reduce purchasing costs and improve on-time customer delivery.

As more companies began to implement and use MRP to plan, schedule and order material a select few companies began to realize that to yield the full benefit of MRP, it must be viewed and managed as a company operating system. This second generation of MRP, known as Manufacturing Resource Planning (MRPII) provided an expanded range of functional tools. This improved capability meant that all functions in the business, including senior management, sales, engineering, finance and quality, now began to utilize an integrated set of tools to help manage their operations.

The latest version of business system software is Enterprise Resource Planning. The ERP model (Figure 1) is a method to effectively manage the total resources in a business enterprise. Today, with the capability of current ERP systems, business system integration has been extended to the customer and the supply chain.

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Enterprise Resource Planning Business System Readiness Assessment

Your company is making a substantial investment in computers and software for better tools to help run the business. The intent is to put your company on the path to becoming a tough, profitable World Class competitor in today’s global markets.

The implementation of a new business system helps provide the structural discipline to effectively manage the total resources in your business enterprise. The business model most often used to depict this formal way to manage a manufacturing company is depicted below. Every manufacturing company, regardless of size, process or product, uses these Generally Accepted Business Management Activities to run their manufacturing operations. The issue is not whether or not these activities take place. The issue is how well they take place. Is the data accurate? Are the proper policies, procedures and practices in place and followed? Are these necessary functions integrated so that supplier, factory and customer delivery schedules are derived from the same sheet of music as the financial plans? Again, the issue is information quality and how well these business processes are performed and integrated. Excess inventory, excessive product costs, high cost of quality, erratic customer deliveries and surprises on the monthly and quarterly financial statements are inevitable if they are not done well.

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Critical Success Factors of Selecting and Implementing a New Business System:

One of the most challenging events in a person’s business career is being faced with the task of selecting and implementing new ERP, WMS, CRM, or other business systems. In most companies, the challenge or some people may call it a nightmare, comes along only once every 7-10 years. Best-of-breed or niche market software projects seem to be coming at a more frequent rate as technology changes almost daily.  This would also depend upon the scope of the software project. The infrequency of this event means that few people are truly skilled at doing it, not understanding what elements within the system project are critical and if not managed properly can cause the project to fail. This certainly can have an unfavorable impact on the business from a financial basis and can certainly impact an individual’s career path within a company.

Our focus will be on the Critical Success Factors that will keep the project and your career path on course. Software systems projects have two things in common “they start off with wild enthusiasm” and “over time things will go wrong”. We need to understand and try to manage both of these elements.

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