Business Excellence with Mfg/Pro at Thermo VG Scientific case study about a technology driven, engineering business that needed to improve its business performance

by Phil Robinson (BPIC) - Comments to : phil@bpic.co.uk
URL : http://www.bpic.co.uk

Thermo VG Scientific are manufacturers of high vacuum surface inspection equipment for industries such as integrated circuit manufacture. VG implemented the manufacturing planning system Mfg/Pro many years ago but were not getting the most from it. Their initial thoughts on how to improve their business performance involved changing their planning system. In March 1999 the Director of Operations, Colin Petts, came back from MRP Ltd's 5 day Business Excellence Fundamentals convinced that many of their planning and control problems were not their system but the way they were using it. Like many companies using Mfg/Pro, they had some serious problems as the MfgPro vendor QAD chose not to support their customised version of the package in the millennium-proof version. Having survived the millennium transition, they made the decision to stay with Mfg/Pro but get some education on how to improve their very poor on time delivery record and long lead times. Better use of Mfg/Pro would be a part of this solution.

Jargon Warning If this case study uses terms with which you are unfamiliar, you can look them up in the Jargon Buster at http://www.bpic.co.uk/jargon.htm. For more details see Business Excellence (ISBN 0-952-8885-05) by Phil Robinson.

 

At the start of the project most orders went out late, manufacturing was overloaded and costs were too high. At a meeting at the end of January 2000 with the senior team of Thermo VG Scientific including Nicholas Ryan, VG's Managing Director, and myself (Phil Robinson) the objectives of the business improvement project were laid out as well as the urgency of the project. A critical success factor in such a project is undoubtedly the appointment of a full time project leader. In February 2000 Phil Edwards attended our 5 day Business Excellence course and then started to draw up plans for implementation. At the start of April he was freed up from his engineering role to lead the improvement project.

Project planning
Phil Edwards's first job was to take the 3 year "strategy for change" which Nicholas and the other managers had prepared in mid-1999 and to combine the over-arching goals of that strategy into the Business Excellence project. The strategy covered many issues from customer issues down to many detailed internal process concerns. The project was named "Renaissance" to give it a distinctive handle and the sense of a new beginning. Following this presentation a number of task forces were set up to tackle specific areas as follows :

1) Demand/supply management

2) Design for manufacture/service

3) Data accuracy

4) Manufacturing

5) Purchasing

6) Performance measures

Sales and Operations Planning was already underway (see below) so this task force was not needed.

Brainstorming sessions were organised for each task force. These sessions produced a huge amount of detail, which the task forces initially got bogged down in. Whilst it is important to get some quick wins, it is also important not to fall into the trap of fixing symptoms before establishing the causes of the problems. Phil Edwards got the teams to step back from the detail and contribute to a "Company II" vision document so that everyone could see not only what they had to do but how it all fitted into the big picture of overall company performance improvement. Another benefit of this was to start to define clear lines of responsibility for each group. Over the years of merger and de-merger it had become rather blurred as to who did what, with consequent gaps in the process. Many times staff did not know who to turn to for advice with the result that a core of people seemed to be forever called upon to solve all manner of problems. The high level objectives of customer service, lead time reduction, spares and service policy, time fences and the rules for changing within these fences, safety stock policy and so on, needed to be established before getting into the detail.

It took until July to produce their Company II vision statement but it was an excellent document and provides to this day a reference point for their vision of excellence.

Quite a few people in the company had already attended Business Excellence courses, but the need to implement the Company II vision identified some education deficiencies. BPIC private, in-house courses on bills of material, data accuracy and performance measures were set-up and run in June 2000 for these people. Because the courses were just for VG, they could be constructed to address their particular issues as a technology based engineering company.

Sales and Operations Planning
Implementation of Sales and Operations Planning had started following Colin's attendance on our March 1999 fundamentals course and 4 other managers on a subsequent Sales and Operations Planning course in November 1999. The first run through of the process was a serious reality test. Not only was it realised that it would be hard to meet existing orders, but some forecast errors were also picked up. The key factor that VG struggled with for a while was to balance supply and demand. The early plans showed what was planned to be made but not how to address the shortfall in production capability compared to forecast demand.

The history of VG, where the company had been split and later re-combined; resulted in twin cultures. The Sales and Operations Planning Process served to assist the merging of these two cultures into a single company plan.

Planning
Once into the mechanics of implementing the vision, it was identified that there was a lack of understanding of the software package Mfg/Pro itself. Training for the package had been on a "need to know" basis which only works if those that are trained (often called "super-users") cascade their training to other members of the company who need to interact with the system. The end result at VG was that only a small number of people understood how to use Mfg/Pro and one of these, the planner André Wright, was heavily overloaded.

It had been decided to use a configurator as a part of the planning process. The planner selected a base model and then added and subtracted modules as required by the customer. The resultant bill of material with negative quantities and many modules was extremely hard to follow. VG produced a relatively small number of units. Each configuration was tendered for in advance but was often adjusted a number of times during the period before the sale was confirmed (and often again after the sale was confirmed). There was also a very complicated product catalogue, which added to the confusion. The end result was that entering an order for a product that had been accurately forecast well in advance could take many weeks. Even repeat orders took weeks to get onto the planning system as all orders went through the same process. With relatively few orders and a predictable configuration, a simple top down bill of material would be much easier to use and understand than a configurator.

It is easier for outsiders to cut through the complexity that companies often surround themselves with more easily than the people in the company. Seeing the problem is a long way towards solving it. The eventual new product catalogue, forecasting and order entry processes made everyone's job simpler and easier as well as reducing frustration levels.

It had become a habit for the plans on Mfg/Pro to show overdue orders and exceed manufacturing's demonstrated capacity. A programme was implemented to eliminate this bad practice and ensure that the plans for all work centres were in line with their demonstrated capacity to give purchasing, planning and manufacturing realistic plans for everyone to work to. Pretty revolutionary stuff!

Purchasing
The principle of simplicity was also applied effectively in the purchasing area. Initially Adrian Weller, the Purchasing Manager, was keen to implement a vendor performance system that he hoped would interface with Mfg/Pro. In practice most purchasing managers know who their good and bad suppliers are, the best vendor performance system just supports this view and gives them a stick to beat suppliers with. A better approach is to spend the time working with a smaller number of good suppliers delivering what you want, when you want it and preferably to the point of use.

Adrian took to the idea of kanban purchasing with enthusiasm. The first area that was tackled was fixtures and fittings followed by gaskets. By eliminating the purchasing effort on the large number of repeat purchases, their effort could be directed to expensive and/or strategically important areas. The overall object was 98% on time purchases.

Manufacturing
Initially there was a very large amount of work in progress and overdue orders which inevitably resulted in "back door jobs", which were often not planned so did not have properly allocated material and capacity. Most orders were already overdue before they even went to test. Serious material supply problems stemmed in part from the traditional habit of "kit robbing". Kits would be issued from stores that were incomplete but had enough parts to make a start. Parts would be "borrowed" for other kits that were also in progress. There was a paperwork loan system but it was informal and hard to police. Poor inventory record and bill of material accuracy compounded the manufacturing problems.

The manufacturing improvement process started with a 1 day Just in Time course for supervisors, engineers and some assemblers. Following this course the manufacturing task force was keen to radically change their traditional ways of working.

A decision was taken early on (earlier than I would dare to have recommended!) not to release kits that were short of any parts. The effect was dramatic. In the short term no kits were released but there was sufficient work in progress to keep production going. Manufacturing quickly built up a confidence that a complete kit would be issued rather than grabbing a part from another job if they could not easily spot it in the kit. The end result was a faster turnaround of jobs, more efficiency in the factory and a reduction of frustration all round.

Once the manufacturing process had been simplified, it then became clear that the practice of moving the complex assembly from manufacture to test was inefficient and often led to queues and delays. A cellular manufacturing approach was adopted where the assembly was allocated a manufacturing bay and the processes brought to the bay as required.

The manufacturing unit also developed a skills matrix and is now moving to implement Six Sigma ideas.

Demand management
I was in a meeting with the Managing Director when he received a call from the Sales Director to say that they had an "abnormal demand". It was an important order from a key customer but it had not been forecast. In a traditional company, an unexpected order is treated in sales as an excellent result. In this brave new world the sales team recognised that, because this order had not been forecast, there may not be either material or capacity to fit this order into the schedule inside the cumulative lead time. This is breakthrough in company thinking where departments thinks not just of their own performance but the effect on other parts of the company. The key to Business Excellence is one agenda for the whole company.

It was now the responsibility of the whole team to do the best they could to meet this unexpected order. There may be commercial and strategic decisions to delay other orders, work extra hours, sub-contract etc. A Business Excellence company handles the routine things excellently freeing up executive and management time to focus on a small number of important incidents that make the difference between success and merely staying alive.

Demand management is not a skill that comes naturally to sales people, it has to be taught in the context of the whole planning process. This demand management training is a critical success factor.

Bills of material
It is very common in technically driven companies that the technical staff are not sufficiently aware of the importance of the bill of material information held on the planning system. As the originators of much of the information, they must take responsibility for the accuracy of this bill of material information. At VG there were over 100 outstanding engineering change notes and it took a year on average to process an engineering change. The result was that no-one trusted the bills of material, costs were wrong, there was obsolete material and many shortages and so serious delivery problems.

An early job was to recruit a bill of material administrator. Initially a technical person was being sought which was hard to find. The job, however is not technical, the person appointed needs to be able to "nag" the technical people to provide the information rather than provide technical solutions themselves. It was also recognised that the majority of changes could be "fast tracked" leaving more time for the more complicated suggested changes.

Other areas tackled by the bill of material task force was to create and manage a single CAD library, look at simplifying the part numbering system, use the description fields consistently, and to include all scheduled parts on the bills of material.

The results achieved in this area are that many engineering change requests are completed in a week and the backlog is down from years to months; not there yet but heading in the right direction. There has been an unfortunate consequence; now that people expect the bills to be correct, the number of changes has increased!

The task force also looked at Design for Manufacture with some success. Their latest new product was not only planned in advance using Sales and Operations Planning but also came with complete documentation and was ahead of time; a first!

Performance measures
Nicholas Ryan was particularly keen to improve VG's performance measures. First priority was to measure the percentage on time of customer orders, repair orders, works orders and purchase orders and the accuracy of inventory record and bill of material. Once these measures had been implemented, the task force started looking at the 2nd. tier measures that helped deliver the first measures. The 2nd. tier measures included the %age of overloaded work centres, time to process change orders, % of works orders started on time, average time to close a service call etc.. Lastly there are 3rd. tier performance measures many of which are just required from time to time such as changes within the time fences, service stock as a % of total stock, number of bills of material with more than 4 levels, etc..

The key concept is to set up owners of each measure. The owner is responsible for reporting the measure and putting in place corrective actions. The measures must promote and encourage the change to the Company II vision.

Repairs
Repair work in the past took advantage of slack in the old system. Fitting repair jobs into an overloaded schedule was unsatisfactory all round as it not only disrupted the build programme but repairs generally took too long. As systems and procedures were tightened up, it became necessary to formalise the important and profitable repair work to ensure it did not get squeezed out. This means there needed to be a spares and repair forecast and formal processes for planning this work. The standard order administration process would take too long for a repair order so streamlining the administration was also necessary.

Data accuracy
Running through all the above task forces was the need for a higher standard of data accuracy. The difficulty of maintaining 100% stock record accuracy on a "control group" of just 100 parts was an eye opener to everyone. It always seemed to be the same parts that had the problem and these were the inexpensive parts held in an open store area. The reluctant decision had to be taken to restrict access to all stock parts, at least for a time, to establish a culture of data accuracy. Having some parts on kanban did help in this transition.

VG's history had also resulted in many parts having 2 part numbers. Also, their stores was cluttered by obsolete inventory held in stock along with active parts. This dead stock increased the time to pick items and took up valuable resources of space and time. VG cleared out a lot of obsolete stock and dead items on the system.

Eliminating obsolete stock and part numbers also resulted in the MRP run, which used to take 6 hours, to be significantly reduced. MRP is now run daily instead of weekly.

Bar coding was investigated. At the time of writing it has not been implemented but is still on Adrian's agenda as a further improvement.

Conclusion
There is no quick or simple fix for complex companies with planning and control problems. The path that VG has taken has involved a lot of time and some difficult decisions. Innumerable small frustrations have been resolved and some important fundamental changes have been put in place. The end result is a company that knows where it is going and has an ongoing commitment to the principle of continuous improvement towards Business Excellence.

Comments from Phil Edwards - Thermo VG Scientific Project Leader
One of the major benefits coming out of the process has been the re-education of the staff. Nicholas (MD) made a huge commitment to training with MRP Ltd., such that all staff received a minimum of 6 hours on the fundamentals of Business Excellence. In total we allocated over 200 man-days of training throughout the early stages of Renaissance, to a workforce that at that time numbered 120. This ensured that everyone understood the overall objectives and the management commitment of freeing up my time for a minimum of 9 months demonstrated that this really was more than the latest fad.

As with any of these programmes there were a few doubters, but more importantly a critical mass of staff really agreed with the principles and wanted to help make the project a success. Their contributions ensured that we did make progress and still continue to do so.

There were some real eye-openers - for example it was quite amazing how we couldn't hold stock levels on a sample of 100 items at 100% from one week to the next. Every time during the course of the week something went missing and these simple measures made excellent references in the training sessions. If 100 common items kept going wrong what was happening to the other 26,900 parts on the computer? It was putting these measures in place that started to focus on how even the simplest of our processes had faults.

A problem that staff had to tackle initially was that they were being asked to define how they should operate. Many found this difficult and were looking for guidance. Once everyone got to grips with the idea that they were in the best position to determine the processes and I'm sure that we achieved better results by allowing the individuals to design the processes, rather than imposing them.

Another simple success was the implementation of kanban. Initially there was a struggle, partly due to the fact that we had implemented the full accounting package of Mfg/Pro and so careful account had to be taken of how transactions would be covered for bookings etc. Again though, discussing these issues between the Finance and Engineering groups provided a real insight for both parties as to how the others work. Many items are now on kanban with more suggestions still coming.

The final outcome of the project was a re-structuring of the company to realise the new processes and to ensure that there were clear lines of responsibility.

As with a project of this nature it's never actually complete and we are all still seeking improvements. For a large percentage of the company the cultural shift has remained in place ensuring that we have a common goal.