Flow Manufacturing: How to Achieve Superior Customer Response Flow manufacturing not only helps manufacturers achieve significant cost savings; it also helps boost revenue by enabling a deeper understanding of demand signals and customer response to tighter production cycles and on-time deliveries.

Executive SummaryIn today’s globally-leveled playing field, forces such as consumer activism, demographic change and technological evolution are forcing industry leaders to continuously evaluate their strategies to achieve or retain competitive advantage. These forces are even stronger in the manufac-turing industry, and they are exacerbated by the unintended consequences of accelerating global-ization. For instance, as manufacturers work to improve performance in contextual areas such as marketing, service and technology, they inadver-tently overlook the core function of their business — manufacturing — where competitors the world over are continuously making strides to increase capacity, cost efficiency, quality or some combi-nation thereof.

In the context of this white paper, “manufactur-ing” refers to the processes and entities that create and support products for customers. Manufacturing encompasses product develop-ment, design, production, production support and delivery.

Manufacturing has changed radically over the last 20 years, and rapid changes are certain to continue for the foreseeable future. As globaliza-

tion has extended the supply chain — and the dual focus of business growth and cost reduction has led manufacturers to seek increased operational efficiency — numerous questions have emerged:

• How can we become faster and more nimble while being the low-cost producer?

• How can we satisfy the ever-changing expecta-tions of customers for customized ordering and real-time tracking delivery at “Web speed?”

• How can we implement high-velocity, quick-response “order-to-delivery” processes to avoid losing business to faster-performing global competitors?

Typical answers to the above questions have focused on keeping finished goods inventory in stock and increasing distribution channel efficien-cy. By having products at the ready, shipment to customers can accelerate. However, the downside of finished goods inventory is the large amount of working capital required to establish it, the risk of obsolescence or non-moving products and the cost of storage and logistics. In many cases, even with a large inventory of finished goods, indus-try leaders don’t always have what the customer really wants.

• Cognizant 20-20 Insights

cognizant 20-20 insights | february 2013

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As a result, more manufacturers are turning to demand-driven flow manufacturing techniques (see definition below) as a way to dramatically improve cycle time and delivery. Flow manufac-turing can achieve significant cost savings in the

form of reduced inventory costs and improved pro-ductivity, but its more sig-nificant strategic advantage is derived from revenue-building opportunities as customers respond more favorably to short cycles and on-time deliveries. As such, flow manufacturers prefer to minimize manu-facturing lead times and build to customer orders directly, eliminating the need for finished goods.

As this white paper will demonstrate, almost every type of manufacturer can benefit from flow manufacturing methods; already, many are reaping significant benefits on several levels — financial, behavioral, strategic and tactical. While there are subtle differences in how flow manufac-turing is applied to discrete and process manufac-turing, both types of manufacturers can benefit from these techniques. A host of benefits, such as accelerated response time, minimized inventory, increased productivity, improved quality, elevated employee morale and reduced capital investment, have been realized by companies that adopt flow manufacturing techniques.

Flow Manufacturing OverviewFlow manufacturing is a strategy with roots dating to the early 1980s; it came of age in the U.S. with the advent of just-in-time production concepts. Throughout the early 1980s, U.S. manufactur-ers in major industries were in a state of panic over the loss of world market share to foreign companies, primarily those based in Japan. Steel, electronics and automobiles were the most visible industries suffering losses, sometimes declining 25% to 35% from historical heights. Such pre-cipitous losses resulted in a surge of U.S. business leaders visiting Japan to learn about flat organi-zation structures, dependent-demand scheduling, Kaizen, use of teams and a quality discipline that transformed into total quality control (TQC) and, later, total quality management (TQM) in the U.S.2

During the 1980s, TQM and just-in-time became the manufacturing strategies of the decade, and from these concepts evolved flow manufactur-ing, synchronous manufacturing, continuous flow manufacturing and lean manufacturing. The common driver for these new strategies is the imperative to reduce cycle time, eliminate waste and replace independent demand-driven scheduling with dependent-demand scheduling.

Flow Manufacturing Defined

Flow manufacturing is a methodology in which parts are pulled through the manufacturing process to produce a product that has a firm customer demand. Demand-driven “pull” of material through production contrasts with the traditional “push” production process that stocks inventory in locations that may not reflect customer requirements. Unlike discrete manufac-turing, where goods are manufactured in batch production mode, flow manufacturing is usually based on a single-unit production philosophy.

Flow manufacturing is in direct opposition to tra-ditional mass or batch production approaches, which are characterized by the use of economic order quantities (EOQ), high-capacity utilization, high-resource utilization, efficiency, zero idle time and high inventory. On the other hand, pure flow manufacturing is primarily (often solely) driven by customer demand and is characterized by single unit flow, low work in progress (WIP), low defects and shorter lead time. As such, applying flow manufacturing techniques helps manufac-turers adhere to a “build-to-ship” philosophy, with a focus on high on-time delivery and quick customer fulfillment rates.

Flow manufacturers may choose to regulate production line output to closely match the current mix and volume of customer demand. With a flow line designed to build product at a formulated TAKT time (or the frequency with which products need to move down the line in order to meet the demand at capacity), the flow manufacturer can regulate the rate of the line. The desired rate is identified each day based on that day’s customer orders. The rate of production is adjusted by changing labor resources on the line (i.e., adding or removing people), not by changing the physical design of the line itself. The ability to change output rate daily, driven by changes in customer order requirements, is a powerful tool for managing productivity, WIP and finished goods inventories.

Unlike traditional manufacturing, flow

manufacturing is characterized by

close alignment with actual customer

demand, single unit flow, low WIP,

low defects and shorter lead time.

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Flow Manufacturing’s Business BenefitsManufacturing business leaders are under increasing pressure on multiple fronts to keep their companies in customers’ good graces. This is true for industry leaders and laggards across all sectors (see Figure 1).

Companies have implemented flow manufactur-ing to achieve the benefits of higher productivity, operating cost reductions and quicker customer response in terms of order fulfillment (see Figure 2).

Primary Benefits

• Faster customer delivery: In its purest form, the flow environment is nothing but a single piece flow. When a product is built one at a time, without any wait time between operations or processes, the total time required for the product to flow through the manufacturing cycle will always be less than the time required to complete a product that is part of the batch process. While the time per operation is the same in both the flow and batch processes, the total elapsed time in a batch process is higher by a factor that is directly proportional to the batch size. So, the end result is a much shorter completion time for an individual order, which is the only way to earn competitive advantage for many businesses.

> Studies have shown that businesses have gained as much as a 50% improvement in order fulfillment time. Figure 3 (next page)

provides an easy way to visualize how flow process enables faster response to custom-er orders.

• Reduced inventory requirements: Flow practi-tioners have achieved up to a 90% reduction in inventory.2 By reducing WIP and finished goods (FG) inventory, businesses receive associated benefits by avoiding obsolescence, damage, warehouse space, cost of capital, interest, etc.

> Flow processes impact WIP and FG inven-tory in the following ways:

» WIP inventory declines are due primarily to shortened manufacturing cycle time and the result of a process layout that avoids material clogging, waiting, etc.

0 10 20 30 40 50

Globalization of MFG plant network

Increasing operational costs

Product quality

New product introduction

41%

38%

34%

28%

28%

20%

37%

39%

30%

14%

All others

Best in class

Percent of respondents

Customer demand for on-timeand complete delivery

Base: 150 Source: Aberdeen Group, 2011Figure 1

Top Manufacturing Operational Pressure Points

Figure 2

Projected Improvements Due to Flow

0 20% 40% 60% 80%

Percent improvement

100%

WIP

Customerresponse

Quality

Up to 50%

Up to 50%

Up to 90%

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» FG inventory reduction occurs because flow manufacturing works on a pull basis.

» Subassembly stock is also eliminated be-cause of the feeder design.

• Quality improvements: Quality benefits are the most important byproduct of flow imple-mentations. Quality costs are due to not only product defects but also scrap, rework and warranty costs. Initiatives such as TQM, Kaizen and rapid improvement initiatives (RII) are typically integral to flow implementations. These approaches help improve process quality, process discipline, active ownership and col-laboration among workers on the production line, resulting in a significant improvement in product and process quality. This directly results in a higher first-pass rate and lower rework and scrap costs, thereby reducing warranty cash outflow. Another important factor that contributes to quality improve-ment is the robust “measurement-review- correct” feedback loop that is followed in a flow environment.

• Operating cost reduction: An important advantage that is often overlooked is operating cost reduction. Flow manufacturing results in reduced lead time, lower inventory, simplifica-tion of material flow and material movement, fewer manual and system transactions, decreased waste, etc., which positively impacts the operating costs required to run a manufac-turing operation.

Secondary Benefits

• Improved labor productivity: A simple definition of labor productivity is (the number of units produced for a unit time) / (the

number of people). Flow manufacturing, by its nature, balances the work to be performed and eliminates waste, queue time, move time, wait time, etc. Hence, operators can spend more time building good products and adding value and spend less time on non-value-added activities, such as rework and delays.

• Simplified production planning and sequenc-ing: In its purest sense, the flow environment operates on a single-piece basis. Even when

Flow Environment in Discrete World

Wait Time

Wait Time

Nonflow Environment in Discrete World

Batch Material

Movement Time

Single-Piece Process Times

Batch Size

Single Piece Movement

Time

Single Piece

Process Time

Queue Time

Queue Time

Customer Delivery

Customer Delivery

Figure 3

Flow Impact on Customer Order Completion Time

Quick Take

• Flow scheduling: Activities that convert actual customer demand (SO demand) into a signal for manufacturing to inform production and fulfill demand.

• Flow execution: Activities that involve physically producing the product and shipping it to the end customer.

• TAKT time: The frequency with which products need to move down the line in order to meet the demand at capacity.

• TAKT time for a flow line: (Time available in a given day) / (projected daily average demand for the products in that line).

• Resources required: (ST) / (TAKT) time (where ST is standard time required for the process and TAKT is the frequency with which products need to move down the line to meet demand at capacity).

Flow Manufacturing: Key Things to Remember

businesses do not follow the purest flow concepts, demand is still driven by the final end-product, and in many cases, subassem-bly planning is eliminated by linking the pro-cesses together and creating feeder lines. This makes production planning much simpler and direct. Also, in many cases, the number of sub-assembly levels in the bill of materials (BOM) could be made “phantom,” as there is no need to transact at every BOM level (depending on the level of tracking/accounting that the business needs). This results in the elimination of planning for those subassemblies. The net result is highly simplified production planning and sequencing.

• Effective cost accounting: Cost-accounting methods can be simplified with flow manu-facturing. Because the lead time through a flow facility is consistent, repeatable and not volume sensitive, activity-based costing (ABC) can be more easily introduced. Labor costs for

the flow manufacturer can become an element of the overhead that is applied proportionally to each product.

• Better floor space utilization: By linking and balancing manufacturing processes into flow lines or cells — and the related reduction in WIP inventory and a thorough housekeeping effort — manufacturers can reduce factory floor space by 20%-plus, in our experience.

Characteristics of Successful Flow ImplementationThe following eight characteristics are common to successful manufacturing flow adoption, inde-pendent of the type and nature of the business:

1. Top-management commitment and involve-ment: Flow manufacturing is transformational on many levels and can lead to fundamental changes in the way success is measured (KPIs or metric changes). However, it is often difficult

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Quick Take

• Kanban, a material replenishment technique that works on the “pull” philosophy and perfectly complements flow manufacturing. Kanban can be implemented in many ways, ranging from physical cards to electronic light indicators. One of the main benefits of Kanban is that it limits the inventory build. By limiting inventory, less cash is tied up, less space is used, and WIP is significantly reduced, thereby reducing product lead time.

• Kaizen, which means “improvement” in Japanese. Anybody who has implemented flow manufacturing can vouch for the fact that, even with effective planning tools, a stable flow environment is usually the result of many small incremental improvements made during the first few years of implementation. With Kaizen, businesses undertake incremental quality improvements and waste reduction by listening to people with the best insights: the production workers on the front line.

• RII, another lean tool very similar to Kaizen but with a much faster pace and shorter time duration. It can be defined as hands-on,

service- or event-focused and aimed at achieving a real, immediate step change in per-formance through the practical implementation of change. It is highly structured and coached, with an aim of eliminating waste in processes or work areas by involving a small cross-func-tional team of employees for a short duration of time. RII events can generate tremendous savings in labor, cycle time and quality.

• TQM, another operational performance improvement philosophy to improve quality and performance of processes and products that will meet or exceed customer expec-tations. TQM looks at the overall quality measures used by a company, including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance. TQM takes into account all quality measures taken at all levels and involving all company employees.

• Total predictive maintenance (TPM) programs, which can result in dramatic improvements in equipment uptime, quality, change over time and capital expenditures.

Techniques Complementary to Flow Manufacturing

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to convince key members of the organization that an initiative can deliver transformative change unless it has the complete backing and involvement of top management. Ideally, a top executive in the C-suite, such as COO, CFO or CEO, will act as owner or sponsor of the flow manufacturing initiative.

A fundamental reason for failed flow manufac-turing implementations is lack of buy-in from top management. Many times, top management buys into the buzz associated with flow manu-facturing without completely understanding its business value/fit. Hence, a clear understand-ing of the ROI and business case is crucial.

2. A flow champion: The champion is someone who believes in flow and is passionate about its success. This individual needs to be the lynchpin of the flow project and can typically be found playing the role of launch coordinator or launch manager.

3. Involvement of the entire team: Successful flow implementations invariably reveal that teamwork and ownership by multiple stake-

holders leads to tangible business value. At the end of the day, the people in the line decide the success or failure of the implementation. Indi-viduals who operate the machines, move materials, measure and check and manage the lines will decide how well flow will be adopted on a daily basis. Therefore, it is important that they are involved from day one and be part of all communications.

4. Culture: Shop floor culture can single-hand-edly lead to flow adoption success or failure. Cultural factors critical to successful flow adoptions include:

> Non-hierarchical decision-making: The work culture fosters both bottom-up and top-down collaboration. Individuals in the line, both workers and supervisors, are em-powered to make decisions. Communica-tion is open and transparent.

> Multi-skilled line workers: Workers are also willing to be trained on new skills, as required.

Hence, a clear change management program is also critical for successful implementation of flow manufacturing.

5. The right enablers: An important enabler is the availability of information/ data to allow manufacturing to respond to customer demand changes as they happen. This calls for complete visibility among order management, engineering, manufacturing and shipping functions. This is why availability of a proper decision-making and information system is an essential prerequisite for implementing flow manufacturing. Enterprise resource planning (ERP) systems offer one approach because most off-the-shelf ERP systems already include transactions, analytical features and functions to support flow implementation. It is incumbent on any company to conduct a thorough fit analysis of their ERP systems to make sure the functions and features meet business needs to avoid massive customization in the future.

6. An understanding that software cannot implement flow: One of the main differences between businesses that implement flow suc-cessfully and those that do not is the approach to the implementation. Based on our obser-vations of industry practice and empirical research, two approaches stood out in the case of unsuccessful flow implementations:

> They approached it as a software imple-mentation.

> It was led by IT instead of the shop floor manager.

While there is no doubt that software is an important enabler in successful flow imple-mentations, more important are the people who understand key manufacturing processes and products and, moreover, exercise the required discipline and controls to execute effective flow design. It is these people who need to adjust their behavior and change their mindset with new measurements and incentives that are key to flow manufacturing’s success.

7. The right measurements: While the specific measurements used may vary from one operation to the other, one characteristic that is common to all successful flow adopters is institutionalizing the right metrics.

> Supplement monthly metrics with daily operational ones.

> Create a dashboard of key performance indicators and track them.

8. A proper physical layout: Another basic, but often ignored, characteristic of a successful flow implementation is the physical work

Successful flow implementations invariably reveal

that teamwork and ownership by

multiple stakeholders leads to tangible

business value.

7cognizant 20-20 insights

environment. Very similar to smooth traffic patterns, a successful flow process should minimize clutter that waylays effective func-tioning. This requires orderliness and neatness in and around flow lines. For example, all inventory and subinventory locations should be clearly designated and marked, and necessary tools, fixtures, gauges and other resources should be present at workstations and properly organized. Successful flow implementers pay special attention to the housekeeping disci-plines of “sort, set in order, shine, standardize and sustain.”

Technology Enablers As all flow manufacturing practitioners under-stand, the fundamental feature of this approach is its ability to react to actual customer demand, which can happen only when real-time (or very close to real-time) information integration exists between demand (orders) and supply (stock, schedules and WIP). Activities such as inventory management of intermediate-stage subassem-blies, configuration management of finished goods, and production order management tied to actual customer orders cannot be efficiently executed without proper technology enablement. Equally important is the accuracy or quality of the data. These informational expectations require technological help.

There are various tools and systems that support and enable successful flow manufacturing adoption. These vary from a specific manufac-turing system to all-encompassing ERP systems and everything in between. While every business must decide the right technology enabler for its situation, empirical evidence points to ERP. As ERP systems provide much more than flow manufacturing functions, the decision to use ERP must consider the overall system needs across the enterprise. Almost all top-tier ERP systems provide fairly well-developed flow manufacturing modules and functions. (See sidebar below for a list of important criteria to be considered when selecting the right technology enabler.)

Beyond the general flow modules and functions that are provided by ERP, manufacturing execution systems (MES) or advance planning systems (APS), additional features and function-alities are essential for creating actionable intel-ligence for production personnel to act upon. Automated KPI dashboards, ad hoc broadcast systems, workflows and non-conformance alerts can provide decision-makers with the right information at the right time to make informed decisions that improve operational execution.

Transitioning to Flow ManufacturingWhile there is no cookie-cutter approach for successful implementation of flow manufactur-

Quick Take

• Conduct an internal study to understand the gap between what you have and what you need for flow manufacturing:

> Features and functions.

> Integration needs.

• Compare multiple products:

> Use industry reports from Gartner, Aberdeen, Forrester, IDC, etc.

> Talk to customers using these products in a flow manufacturing setting.

• Perform fit analysis between your needs and the product‘s out-of-the box features:

> Leverage vendor functional experts but develop a custom decision matrix.

> Engage third-party product-agnostic con-sultants if resources are available.

• Don’t buy products based on future promises. The industry is too dynamic for predictions to be accurate.

• Estimate the level of customization needed. Every product will need some customization to suit your specific business needs.

• Develop insights into product support and ease of use.

• Ask the product vendor to conduct a pilot dem-onstration using your organization’s data.

Tips for Selecting Technology Enablers

cognizant 20-20 insights 8

ing, the following recommended sequence and steps have been found to be critical success factors (see Figure 4):

• Rationalize: Case studies point to a common reason why flow manufacturing projects fail. Typically, it is a lack of conviction (i.e., the business is not really sure why it needs flow manufacturing but still makes a case for its adoption). Flow manufacturing adoption cannot be based on an executive’s excitement about a popular buzzword or a strategy of “management by imitation.” At minimum, man-ufacturers must perform the following checks before deciding to adopt flow manufacturing:

> Determine the need for flow: Make an hon-est assessment of the goals that your com-pany wants to achieve and identify the gaps

with current manufacturing operations that inhibit success. Develop a clear matrix (see Figure 5) to verify whether flow answers each of those issues, both individually and as a whole.

> Create a business case: Develop a busi-ness rationale that clearly lays out the cost and benefits in terms of dollar value, time and resources. Also, lay out the intangible costs and benefits of adoption. Wherever possible, try to assign a dollar value to the intangibles so emotions and perceptions can be eliminated from the decision-making process.

> Rationalize and decide: Review the busi-ness case with company leadership, as well as with the other functional groups that

Figure 4

Approach to Flow Manufacturing Implementation

• Select line for pilot implementation

• Train workers

• Select technology enablers

• Assess need

• Develop business case

• Rationalize

• Roll out to entire manufacturing shop

• Get buy-in from management and shopfloor

• Review process and measure output

• Review KPIs/metrics

• Launch pilot (3-6 months)

• Record results

• Redo, based on findings from the review step

• Change line setup

• Establish new KPIs/metrics

• Set up the system

Repeat Step 4 if review is not satisfactory

Rol

l Out

Rationalize Select

Set U

pBuy-In

Review Pilo

t

Flo

w Im

plementation

12

3

45

6

7

Figure 5

Illustrative Flow Suitability Evaluation Matrix

Current Issues Flow Solution Comments

Can Flow Help? How Flow Will Help

Low labor utilization

High WIP

Big batch

Finished inventory

Capacity constraints

High rework

cognizant 20-20 insights 9

will be impacted and make a collective de-cision. Most often, the affected functional groups include finance, order management (OM), shop floor management, material planning, etc.

• Select scope: The next step is to select the scope of the flow implementation. While an organization can attempt a big bang adoption covering the entire manufacturing operation, an incremental approach is often better. Companies should select a specific product line rather than a specific production line (unless they are the same) and use this initial learning to iron out wrinkles before converting the entire manufacturing operation to flow. The following steps are recommended for selecting the pilot candidate:

> Identify the product. The selected product should exhibit fairly stable demand. (Avoid the cash cow and the dog of the company to avoid extra pressure or the “nobody cares” scenario.)

> Document the manufacturing process-es that produce the product, from start to finish.

> Calculate total throughput volume, re-sources required and TAKT time to achieve the sales volume for the selected product.

> Create the flow line layout and use this as the reference point for making any TAKT time adjustments or line balancing.

Two other important considerations must be applied at this juncture:

> Select the right technology enabler: Whether it is an ERP or a specific flow manufacturing package, it is essential to have the right system before adopting flow manufacturing. In today’s world, quality, accuracy and speed of information are absolutely essential, and this can’t be achieved without the right system to sup-port the process.

> Education: An important factor in a suc-cessful adoption of flow manufacturing is the level of awareness and acceptance by shopfloor personnel. More than anything, flow manufacturing requires mindset and cultural changes across all levels in the organization. Classroom pilot or challenge workshop sessions are the best way to ac-complish this. We recommend that manu-facturers use an external consultant to pro-vide this educational service.

• Setup: The degree of preparation will determine how smooth the flow manufacturing launch will be. Multiple prerequisites need to be in place for an effective launch.

Depending on product type, whether your organization is a job or made-to-order shop, the extent of the line setup will vary. In a job shop world, machines performing the same process would have been located together to maximize productivity. However, in a flow world, machines should be arranged to enable a continuous product flow; hence, they need to be positioned next to each other in a manner that resembles the process hand-off.

As an example, instead of having each drilling, grinding and assembly machine in a line of its own (characteristic of a batch shop), the flow line should place drilling, grinding, burnishing and assembly operations in the same line to facilitate minimum material movement, minimum WIP accumulation, etc.

> At minimum, pay particular attention to verifying the following flow line character-istics:

» Are the processes and machines in the line flexible and responsive?

» Are the work cells set up to provide con-tinuous flow?

» Are the machines and equipment re-quired to complete the entire process collocated?

» Is the staff multi-skilled?

If the targeted product line has character-istics that are completely opposite to what has been described above, the line should be reexamined and changes introduced to more easily transition to a flow environment.

> Metrics/KPIs setup: Incentives and mea-surements drive expected behavior, and this applies to the shop floor, too. As flow manufacturing objectives are much dif-ferent from traditional discrete batch job manufacturing or process manufacturing requirements, organizations cannot main-tain the same KPIs and metrics to measure the performance of flow lines. For example: Instead of using conventional metrics such as machine utilization or total productivity, create metrics around ‘‘on-time delivery” and “cycle time” (see Figure 6, next page).

> System setup: For a system to behave as the right enabler, it needs to be set up

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with the correct information. Flow-specific data elements include flow routing, maxi-mum and minimum flow line capacity, flow resources, BOM, shift capacity, inventory rules, etc. The decision-support systems should be integrated with flow transaction systems to provide real-time information and alerts to flow line managers.

• Pilot launch: The fourth key step is to actually run the pilot for the selected line(s). The pilot should be kick-started in non-critical financial-ending periods such as year- or quarter-end. This will avoid the extra pressure of meeting revenue numbers while learning to adjust to the new way of functioning in a flow environment.

During the pilot, frequently gather data related to process time, setup changes, material movement, wait times, rework, defects/scrap, etc. While there is no rule of thumb on the frequency of data collection, data should be compiled multiple times during a shift to generate a representative sample size for further analysis and review. Data collection can be performed either by line employees or with the help of process/value engineers using normal data collection techniques such as a stop watch, data sheet, etc.

• Review: This step can be viewed as part of step four. Data can be reviewed on its own or be used to generate the relevant metrics/KPIs. Reviews should happen on a regular basis, and corrective actions should be instituted immedi-ately in the line. Many times, corrective actions

could be developed through Kaizen or RII ini-tiatives. The review process should be trans-parent and involve people responsible for the specific process or operation. Depending on the review results, the pilot launch duration could be extended or shortened.

• Buy-in: As flow implementation is more of a mindset and cultural transformation than anything else, it is absolutely necessary to conduct a formal review of the pilot results with all stakeholders and address every concern. Before starting the full implementation, make sure to obtain:

> Buy-in from the leadership/management team.

> 100% backing from the production lines/shop floor team.

• Roll-out: Once the pilot is successful, there are four important activities to complete before the actual rollout commences.

1. Set up the flow lines for the full-blown pro-duction roll-out:

» Start with the product that has reason-ably stable demand. If not already avail-able, map out the current manufacturing process steps for each product.

» Perform value engineering to determine the value-added steps. Eliminate non-val-ue-added steps.

» Determine if there is commonality across product families such that multiple fami-

Figure 6

A Change in Metrics

Metric Metric Definition Calculation

On-time delivery

Measures the percent of time an order is delivered to the customer within the promised time. (Note: The promised date is expected to be strictly the total cycle time plus total shipping time. No buffers are expected to be included. )

Orders delivered on time/ Total number of orders shipped

First-time pass yield

Measures the first-time pass rate. This can be calculated either for a specific operation or specific line. (The numerator considers the number of defects and hence it will always be a number either equal to or less than the denominator.)

Total number of units produced — Number of defective units/Total number of units produced

TAKT time adherence

Measures the actual operational cycle time in line with the TAKT time calculated for that line. (Note: TAKT time is calculated based on the projected average daily demand for the products on that line.)

Actual operational cycle time/TAKT time calculated for that line

WIP inventory Measures the total value of WIP inventory in the flow line. Inventory quantity for each item

type x Value of the item

Process discipline conformance rate

Measures the percent of time the process discipline was not followed and hence deviation occurred in the line.

Number of process deviations recorded/Number of FG items produced

cognizant 20-20 insights 11

lies could be built on the same flow line. The more products built on the same line, the more flexible the process will be.

» Once the products per line are deter-mined, calculate the TAKT time for the line, based on the projected average daily demand of products in that line.

» Once this is done, physically rearrange the shop floor to create the flow lines.

Note: Once actual production starts, there will be a need for making changes based on actual observation of the line. This can be addressed through RIIs.

2. Training and education is 100% complete.

3. Required resources (people, processes, etc.) are in place.

4. IT systems are fully enabled.

Flow Manufacturing Moving Forward To deliver customer orders at the right time, right price and with the right quality, the first step is to synchronize customer demand with manufac-turing execution. To accomplish this, a couple of fundamental changes must happen:

• Manufacturers must become customer centric by measuring against on-time delivery metrics.

• Manufacturers must focus on a holistic collab-orative pull approach, instead of a siloed push

approach, and rely on real-time manufactur-ing data, bottleneck constraints, inventory and actual consumption to drive production decisions.

One proven way to make these changes is to adopt flow manufacturing and the related com-plementary techniques. There are many examples of companies doing this.

If there is one thing that industry captains have learned, it is that the cookie-cutter approach does not work; in reality, there is no single solution that fits all business scenarios, and flow manufactur-ing is no exception. Just as with any other process change, flow manufacturing is not a panacea, nor should it be embraced as a religion. So, never try to force-fit a solution.

We can guarantee that minimal to no benefits will be achieved if flow manufacturing is treated as a “fad of the month.” It is an operational strategy that needs to be carefully reviewed for applicability.

Given the long list of benefits, it is not surprising that flow manufacturing has become a competi-tive necessity for most industries. The extension of flow methods to non-manufacturing processes is happening rapidly, and industries such as banking, software development, healthcare and construction are leading the way.

References

• R. Michael Donovan, “Demand-Based Flow Manufacturing For High Velocity Order-to-Delivery Perfor-mance,” Performance Improvement, May 23, 2001, http://www.idii.com/wp/donovan_demand.pdf.

• Gerard Leone and Richard Rahn, Fundamentals of Flow Manufacturing, Flow Pub, 2002.

• “Demand Driven Manufacturing,”Aberdeen Group, November 2007, http://www.nmetric.com/pdfs/4172-RA-DDMManufacturing-ML-SPF.pdf.

• James Womack and Daniel Jones, Lean Thinking, Free Press, June 2003.

• Definition of “rapid improvement,” Kaufman Global, http://www.kaufmanglobal.com/glossary-pages-61.php.

• “Manufacturing Readiness and New Product Introduction,” Aberdeen, May 2012, http://www.aberdeen.com/Aberdeen-Library/7902/AI-manufacturing-readiness-operations.aspx.

• “Transitioning to Lean with Oracle Flow Manufacturing,” Technology Evaluation Centers, April 2006.

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About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

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About the AuthorDeepak Mavatoor is a Manager within Cognizant’s Manufacturing and Logistics Consulting Practice. He has over 15 years of experience in the supply chain, manufacturing, logistics and technology domains. Deepak has rich experience in the automotive, manufacturing, high technology, consumer electronics and IT sectors. He has an M.B.A., with Beta Gamma Sigma honors, from the Stephen M. Ross School of Business, University of Michigan, and a degree in mechanical engineering from Mysore University, India. He can be reached at Deepak.Mavatoor@cognizant.com.

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• Fredrik Nordstrom, Piotr Gawad and Adam Nowarski, “The Science of Manufacturing,” ABB Review, 2006.