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Toward World Class Excellence: The People Side of MRP

Author(s):

Terry Lunn, CFPIM, CIRM
Terry Lunn, CFPIM, CIRM, Terry Lunn Enterprises, Memphis, TN 38018, 901-373-6616.

79th Annual International Conference Proceedings - 1994 - Atlanta, GA

INTRODUCTION
MRP systems have been around for a long time, and we have all heard stories about companies whose MRP implementations were not as successful as those companies had hoped they would be. There are, we think, two underlying causes for this problem. One is that we tend to look at the MRP as a complex computer system that will answer all of our needs (or most of them). The second is that people tend to become slaves of the system, trying to feed it the "right" information in an attempt to analyze the mountains of data that the system generates.

What is happening in the companies that successfully use an MRP system is that the people have learned to use the system as an effective tool. This is done by people just like you and me looking at the underlying process flow in our business organizations. There are two basic actions that we need to examine. We must reduce the lead time that is required to take our product through the process, and we must simplify that process as much as we possibly can. We are going to examine a couple of companies that have done these two things very successfully, with the outcome that both companies improved their schedule adherence. Their processes were simplified to the point that they could produce their products very quickly, making their schedules so dependable that there was marked improvement in customer satisfaction. Of course, one of the chief objectives of any MRP implementation should be enhanced customer satisfaction.

REDUCE LEAD TIMES
There is an old saying that tells us that no matter how short our lead time is today, it should be shorter. Lead time is not a fixed, scientifically-derived quantity. Rather, it is a variable number, and it depends a great deal upon how our people manage it. Lead time is a function of the priority and the queue, or wait time. Both of these can be minimized by keeping the queues short and having the smallest possible amount of product on the shop floor at a given time. To do this with an MRP system, we should have short planned lead times and release our paperwork at the last possible moment. The information listed as "planned order releases" is used to tell us what future actions are needed without actually releasing the orders to work in process.

We must look at ways to increase our throughput rate on each of our shop operations by reducing setups, organizing the workplace, and other techniques such as preventive maintenance to optimize machine usage. Teams of our people should be working on set-up reduction, material movement efficiency, and building quality into the product (as opposed to scheduling inspection time).

One other method of reducing queues and reducing throughput time in the shop is to look at processes from the viewpoint of synchronizing our operations, combining like operations into functional groupings, such as a U-cell or a flow line. We should look at the processes from the point of view of the product as opposed to a functional layout. Rather than becoming more sophisticated with our MRP calculations of capacity loads or the accuracy of our capacity planning logic, we materials professionals must focus on keeping our lead times short and the work-in-process queues small.

One of the best examples of this is a major manufacturer of orthopedic implants --"spare parts" for the human body, such as hips, knees, and bones. Several of these items are single component products that are the best example of the combination of operations into a flow line to reduce lead time. When the company had a functional plant layout, parts of one product family took ninety days of shop lead time. The reason for this was that the work centers were spread out to such an extent that the average product travelled more than nine miles. This situation meant that at any given time, there were more than 20,000 pieces in the various stages of work-in-process. Not only did it take a long time to get the product through, it was likely that sometime during that time, priorities for a particular order were likely to change. This caused an enormous amount of schedule changing, and the resulting scurrying around that we know as expediting. Attempts to reduce the expediting by creating an increasingly sophisticated MRP system had only marginal results. A quantum leap occurred when the company looked at the manufacturing process and consolidated the work centers into a Just-in-Time flow line. Now, the products only travel about 100 yards down the line, with something less than 2,000 pieces of work-in-process. Concurrent with the consolidation effort they also focussed attention on the organization of each work center, and worked to reduce set-ups. The planned lead time, as a result, was cut to fifteen days. Instead of focussing the MRP system on the dynamics of work-in-process, the people now concentrate on getting the signals out to vendors to match the flow rate of production. The people who work with the MRP system are concerned more with the aggregate output demand rate than with the dynamic priority updating inherent in most MRP systems. This all happens because the lead time is short and the queue is small.

SIMPLIFY THE PROCESS
The next step on the journey to improved schedule adherence is to simplify the MRP process to match our simplified shop process. There are several techniques that can be employed to reduce the amount of paperwork generated by the MRP system and the resulting transactions needed to keep it up to date. If we have reduced our process to a flow line, we might want to schedule all of our components as inputs to the flow line, with any intermediate subassemblies taken out of the MRP logic altogether. We can now release only one work order to make a completed assembly. This is known as "flattening the bill". A companion concept is known as backflushing. This consists of setting up an assembly line where the components are stored at the line itself, readily available to the operators for whatever assembly they are making at the time. Rather than process transactions for each component for each order, parts are issued from the stockroom to the assembly area in large quantities. At the end of the line, we process transactions showing the quantity of assemblies produced. By looking up the bill of material in the MRP system, we determine what components must have been used to build these assemblies. We can then subtract that usage from the quantity which was issued and stored at the work-in-process location. Of course, we must focus our attention on the accuracy of our bill of material so that the bill as it resides in the computer matches exactly with the way the shop puts the parts together. only under this condition will backflushing be effective.

The main advantage of this technique is that we have minimized the number of transactions and work orders processed through our MRP system. Many companies create huge numbers of work orders and transactions because the MRP system "requires" it, and the company gets bogged down in paperwork. By flattening the bill and using the computer to calculate the quantity of parts that must have been used, much of this needless detail is eliminated. Therefore, we should focus our efforts on the flow of parts, not on the MRP level-by-level processing.

One of the best examples of this process that we know about is a major manufacturer of material handling equipment. They manufacture belt conveyor systems that utilize rollers to support the belt while the material flows along it. These rollers are made of steel tubes with appropriate bearings, grease seals, and nuts. They are manufactured on an assembly line that stretches the full length of the plant. The components are delivered to work-in-process locations at the various assembly points along the line. Transactions are used to transfer inventory from stores locations to these work-in-process locations. At the end of the day (or the end of the order, whichever comes first), the credit transaction is generated for the assemblies produced, crediting the assemblies into finished goods. The MRP backflushes to issue the components from the work-in-process locations. This is done even for the raw material steel tubing, which arrives at the cutting machines in full bundle quantities. This simplification of the process caused their MRP scheduling system to create only one work order for any particular size of roller. There were no orders for individual pieces, although the engineering bill of material called for individual subcomponents.

This resulted in a drastic reduction in the number of work orders and transactions that needed to be processed through the MRP, allowing the people to focus their efforts on supplying products and components to satisfy customers. This is a far better use of time than shuffling paper to appease the MRP system.

A companion process is known as modularizing the bill of material. This is usually employed when a product can be sold with a number of different configurations or options, such as an automobile. Rather than stocking every possible permutation and combination of assembled automobile, it makes more sense to master schedule major components and subassemblies. One of the better examples we know of for this is a major manufacturer of hydraulic motors. They make six different types of motors, but within each type there are virtually an infinite combination of shaft, rotor, housing, and other configurations. As they focussed on the flow of parts within their manufacturing process, they decided to stock just the major components, master scheduling them using the MRP system. When a customer orders a specific configuration, they create one final assembly order, a flat bill of material one level deep that processes the components down the assembly line. Component parts are issued by backflushing the customer order. By using these techniques, this company can effectively manage the total flow of work in the plant using six modular bills of material. This again simplifies the MRP process to allow the people to focus on the flow of parts and not the cumbersome transactions of the computer.

SCHEDULE ADHERENCE
There are thousand of things we can do to improve on the MRP system, but we know that the two steps of reducing lead time and simplifying process both yield improvement in schedule adherence. Schedule adherence is one thing that must be achieved in order to satisfy our customers. With MRP systems, we tend to focus on making the due date match the need date as priorities change. This is an important requirement in the maintenance of a valid priority management system. But when we can reduce the lead times and simplify the process to the point where orders are produced very quickly, we can drastically reduce the number of schedule changes required by the dynamics of the marketplace. We find that companies tend to become more reliable in their production when using very short schedules.

This means, simply, that we have the assurance when we start an assembly down one of our assembly lines that we can depend on when that assembly will be completed. Figure 5 emphasizes that we must motivate all our people toward dependable schedule adherence. Once we have this mindset established throughout every level of our company, we can see significant improvement in customer satisfaction -- with both the internal and the external customer.

The conveyer manufacturer is one good example of this mindset that we can identify. Every member of the organization knows that their final assembly schedule for their configured roller-and-frame assemblies will be shipped within four hours of order entry. The production process is set up to support this speed, the planning process is set up to support it, and the familiar name for one of these four-hour orders is a "green" order, indicating that the green light is on for it to flow through the shop unimpeded. They could do this because their process was simplified by flattening the bill of material, minimizing the paperwork, and focussing on quick throughput at the assembly operations.

Our orthopedic manufacturer, on the other hand, communicates very effectively how well we adhere to our schedules for all work orders travelling down the Just-in-Time line. This is done by time-stamping each order on its entry into the work line and logging its completion time. A member of the team then goes to the big whiteboard at the head of the production line and records the lead time it took. The data is plotted on a very prominent graph, communicating to the entire world how well we're doing. (See Figure 6] This graph has become the focal point of the team's ownership of the objective to reduce lead time to meet or beat the plan. Right now, they are discussing the reduction of the planned lead time to under ten days.

CONCLUSION
We can see from these examples that the real key to a successful MRP system is that the people look at the process of delivering the product to the customer. We focus on simplifying the process and reducing the amount of time that it takes for the product to move through our operations. Then we can look at the MRP paperwork system and streamline it to match.

Real progress is made when people can use the MRP tool more effectively, and that can be done by looking at our processes and instituting improvements like the ones we have described here. Think about what you can do to apply the techniques that will work in your own business to reduce lead time, shorten the process, and improve your schedule adherence.


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