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As
JIT gives way to demand-based build-to-order, we face a
growing complication to the traditional sequenced flow of
orders: more frequent resequences. Resequences occur for a
variety of reasons including unexpected quality problems,
supplier delays and, increasingly, changing customer demands.
Continuous improvement efforts help with quality problems, but
changing customer demands can play havoc with the smooth flow
of orders. As production planning shifts away from forecasting
to demand driven, the cost of manufacturing will likely go up
due to increases in just-in-case inventory and capacity
misallocations unless the operation can provide a good
connection to the rest of the supply chain for the inevitable
resequences that will occur. To solve this dilemma, companies
often focus on real time, comprehensive communication support.
That support is often provided in the form of Information
Technology. But is it really the key?
Granted,
providing instant updates to sequence changes, priority
shifts, and flow disruptions is vital. However, even with that
we see too many suppliers making expensive reshuffles to their
production plans while scrambling to meet last minute changes.
There’s nothing cost effective when buffer inventory is
growing. Increasingly the supplier becomes locked in a
downward spiral of increased costs while being pressured to
decrease their selling prices. Something is missing.
Many
Manufacturers pride themselves on being good at sequenced
production flow. They are sequencing the flow of work through
their plants to reduce manufacturing cycle times and
work-in-process inventory levels. Nissan uses the term Douki
Seisan, “Sequenced and Simultaneous”, to describe the full
scope of its Nissan Production Way (NPW) manufacturing system
that achieves very high productivity. Many others have also
experienced increased productivity and better quality that
sequenced order flow provides. But all is not rosy. If
sequencing is so good, why are many still saddled with too
much inventory, slow response time, and low productivity?
Being good at sequencing is no longer enough. Now, a
manufacturer has to be a good sequencer as well as being
flexible when the sequence changes. Achieving flexibility with
lower inventory affects the very structure of an
organization.
While sequencing is often approached as
just an operational issue (making sure the mechanics of
sequencing processes are implemented) we think it a bigger
challenge organizationally. The ability to remain focused and
responsive without losing its cost effectiveness gets to the
core of how an organization enables the operational tactics
needed to be both sequenced and simultaneously resequenced.
Frequent schedule changes can be extremely demoralizing to
suppliers unless there’s a clear understanding of why they
occur and a well understood system to resequence the changes
without disruption. Just dealing with the organizational
challenges of collaboration requires more focus, training, and
structure than all the other aspects of sequenced work flow
implementations combined.
Before placing the emphasis
on technology to manage information that drives the sequenced
supply chain, the supply chain must be organized around the
collective benefit that faster response, lower costs, and
better quality will bring. Doing that in a structured way will
expand the dividends received from a demand-based
build-to-order manufacturing system implementation.
But
there’s more. For collaboration to work in a supply chain,
it must first be an integral part of YOUR organization’s
culture. Instilling it in an organization where it hasn’t
existed is problematic. It can be done but it requires
compelling focus.
In the adage, “You can lead a horse
to water, but you can’t make him drink”, it’s always
easier to get the horse to water than it is to get it to want
to drink. Many focus too much on the implementation of the
tools of demand-based build-to-order such as IT technology and
not enough on the implementation of a holistic demand-based
build-to-order strategy; the “wanting to drink” part. A
recent article in the Wall Street Journal stated that for
every $1 spent on technology, $5 must be spent on the
organizational side. Think about that the next time you
develop your IT budget or lean initiative effort.
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