Insourcing and Competing With Advanced Manufacturing Techniques Sharon Ward May 14,2011

Insourcing and Competing With Advanced Manufacturing Techniques

Sharon Ward May 14,2011

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The following is intended to outline QAD’s general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, functional capabilities, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functional capabilities described for QAD’s products remains at the sole discretion of QAD.

Safe Harbor Statement

QAD Planning and Scheduling Workbenches

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Manufacturing is essential to America’s economic well-being. It accounts for the bulk of United States exports, is key for

innovation, and provides many high-wage jobs……

You All Know This

Competing With Advanced Manufacturing Techniques

Brookings Institute: Strengthening American Manufacturing: A New federal Approach by Susan Helper and Howard Wial

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A Government Study Proves It.


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• Between 2000 and 2009, The US lost 31% of its manufacturing jobs

• Along with the jobs, the ability to innovate was compromised – manufacturing employs 36% of engineers

• By exporting manufacturing expertise, the ability to compete in emerging industries like solar panels was jeopardized

Asleep At The Wheel



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• A focus on “core competencies” was perceived as the way to become world class

• Some companies decided their core competency was idea creation or marketing, not manufacturing

• The assumption that outsourcing manufacturing always results in lower costs, making companies more competitive, became widely accepted

The Manufacturing Exodus


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• Companies have ALWAYS outsourced some work

• Lower wage regions start to develop manufacturing based economies

• Some companies begin to off-shore• Competition and cost pressures increase• Rush to off-shoring in late 20th and early

21st century as a result of increased competition from emerging regions

How Did We Get Here?


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• Difficult to evaluate all costs – additional inventories, communications, tracking, loss of control, longer lead times, quality, IP protection, customer satisfaction

• Meanwhile, our outsourcers took what they learned and used it to launch their own products/companies

• Companies found that it’s easy to copy ideas and marketing but harder to develop process skills

Flies In The Ointment


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Understanding The Basis Of Wealth


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• It’s easy to copy ideas – even product features

• Engineering talent is no longer co-located with manufacturing

• Real innovation requires immersion in processes, products, and customers

• It’s the manufacturing process that delivers real value and irreplaceable expertise

Ideas and Services Don’t Lead To Wealth


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Activity Your Wealth My Wealth

Starting wealth $20 $20

I buy a shirt from you $30 $10

We both buy groceries

$20 $0

You buy a haircut from me

$10 $10

I buy another shirt from you

$20 $0

We both buy groceries

$10 I’m using plastic and hoping your hair grows really fast

Services Don’t Grow Wealth


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Activity Your Wealth My wealth

Starting wealth (includes finished goods)

$20 $20

We each manufacture and buy high quality goods and have a 10% margin

$21 $21


$22 $22


$23 $23

Manufacturing Grows Wealth


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Manufacturing Keeps the Economy Balanced


Economic

Balance

Manufacturing

Other Economics

Factors

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Without Manufacturing There Is No Balance


Economic

Balance

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The United States is caught in the middle in international competition: Stuck between high-wage countries competing on the basis of new products and processes, and developing countries competing on the basis of low wages.

A Rock and A Hard Place



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• The recent political/economic situation has led to a more fervent patriotism

• The realization that marketing skill or service skills alone are not a sound basis for competition finally sank in

• Companies increasingly turn to lean/six sigma and similar programs to compete

Why Manufacturing Will Come Back


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• Emerging areas have started with a “clean slate” so they could set up production in the most efficient ways

• More developed nations had aging infrastructures with inherent inefficiencies

• How can we level the playing field?

Established Companies Need To Compete


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• Significantly less than half of small U.S. manufacturers (those with less than $10 million revenues) rate themselves at or near world-class status in each of the NGM strategies, with the highest percentage for superior process improvement (38% of small firms.)

It’s Not Easy In The Middle


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• World class companies achieve better results than their competitors

• World class companies invariably utilize one or more advanced manufacturing techniques (Lean, six sigma, TQM, etc.)

• Surprise….It doesn’t matter which technique they use

• What matters is that the company is committed to an improvement methodology

Advanced Manufacturing


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When whole-heartedly embraced, these programs allow companies to compete on COST and quality, gave more flexibility, lower inventory, shorter lead times

Lean Gets Results


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A Simple View Of Lean


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A More Complex House of Lean


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Layers Of Complexity


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Seven out of 10 U.S. manufacturers report that their facilities follow a lean manufacturing methodology and/or the Toyota Production System (TPS).

Embracing Lean


Source: George Taninecz, VP of Research, The MPI Group 2010 MPI Manufacturing Study

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• Only about half have a majority of their employees involved in lean initiatives

• Only about 70% had applied lean to the majority of their production processes

• Only ¾ had an initiative to eliminate waste from processes

• Only 34% use PDCA (plan, do, check, act)• Fewer than half include strategy deployment in

their lean initiatives• Only 10% practice value-stream mapping• Only 8% use Kaizen events and blitzes

However….. Not Really


Source: George Taninecz, VP of Research, The MPI Group 2010 MPI Manufacturing Study

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So Who’s REALLY Using Lean?


>16%Source: George Taninecz, VP of Research, The MPI Group 2010 MPI Manufacturing Study

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constantly striving to align all business processes, to work at peak efficiency, and to

deliver the strategic goals of the organization

The Effective Enterprise Is…


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• Companies began rebuilding manufacturing facilities and expertise

• Began as a trickle, but now reaching a stream, will soon become a torrent

Manufacturing Pride Re-Emerges


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• Management support• Start slow• Persevere• Examine ALL costs, including hidden costs

Embracing Lean To Compete


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Achieving Management Support

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• Research the results similar companies have achieved with Lean/six sigma

• MPI• Industry Week, Managing Automation• Industry Analysts• APICS

Do Your Research


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Lean Gets Results


Metric Lean Companies

Not Lean Companies

Sales per employee

$176,000 $37,000 to $54,000

On time delivery

95.6% 85% - 90%

Inventory turns

66% increased

36% increase

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How Can QAD Help?


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• Kanban• Every Part Every Item calculations• Bar code and RFID support• Average demand and safety stock

calculations• New MSW/PSW workbenches

Lean Manufacturing


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• Supply Chain Portal- Speeds communication

• Process maps- Simplify and eliminate steps- Search for non-value add

Simplify Business Processes


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• Bar code and RFID support• PLM support• Quality management support

QAD Partners Contribute


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• Capture true total costs- Extra inventory to cover transit times

• (beyond standard safety stock)

- Extra inventory to meet short term demand fluctuations

- Business loss due to longer lead times/ lack of schedule flexibility

- Communications and travel costs- Increased shrinkage and errors- Quality issues and rework- Training- Translation delays/costs

Enlist Your Accounting Team


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• Landed costs• Logistics cost• Multiple cost sets• Cost simulations

Accounting Support


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• Project typical industry results on in-house numbers

• Be conservative – the numbers can look too good to be true

• Cover all your bases – include inventory, quality, on-time delivery

• Be equally rigorous for both alternatives

Unbiased Analysis


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• Be prepared for initial resistance or disbelief if management strongly embraced off shoring

• Petition for a pilot parallel production trial• Start with one line, one product, one step• Make sure it works flawlessly• Suggest using similar techniques in

non―manufacturing processes to demonstrate benefits

Take Baby Steps


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• 23 % use lean in finance and accounting• 26 % in customer relations• 29 % in administration.• Only 60% of overall processes have been

addressed with lean

Lean Can Get Results Everywhere


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And Now..A Little Good News

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From Managing Automation


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ISM Agrees


6 Months and Counting!

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SUGAR LAND--January 13, 2011--Researched by Industrial Info Resources (Sugar Land, Texas)--Cold storage specialist Preferred Freezer Services (Elizabeth, New Jersey) has begun site work for a new cold storage facility. The building will be adjacent to the company's headquarters and existing facilities, which were opened in 2008 in Elizabeth, New Jersey.

More Manufacturing Good News


May 11, 2011: GM Chairman Dan Akerson said in addition to the investment in the Toledo plant, the automaker in the coming months will invest $2 billion for upgrades at 17 factories that will create or preserve 4,000 U.S. jobs.As many as 2,000 jobs reportedly could be added at the Detroit-Hamtramck plant, where the Chevy Volt is built.

Ford Motor Co. will increase factory production 13 percent in the first quarter because of higher demand for Ford and Lincoln brand cars and trucks, and further increases are likely through the year, company executives said Sunday.

Intel plans new US factory, upgrading others to 22nm tech

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Metrics Affected


Process Benefit Value

Supermarket management with multiple methods for calculating and setting supermarket quantities using a variety of flexible, user-defined parameters

•Inventory reduction

•Improve data integrity

•Reduce operating costs

•30% - 50%

•99%

•10% to 20%

Kanban workbench for recalculating EPEI, safety stock, buffer, Kanban & Kanban loop sizes using historical and projected supermarket performance with simulations.

•Reduce inventory

•Improve demand accuracy

•30% to 50%

•10% to 20%

Single ‘click’ transactions to record purchase receipts, item movement and production receipts of Kanban-controlled items

Transact Kanban cards via barcode scanners or direct entry

•Reduce admin burden •40% – 70%

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• Sharon Ward [email protected]

Questions?

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www.qad.com© 2010 QAD Inc

http://www.qad.com/

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Insourcing and Competing With Advanced Manufacturing Techniques Sharon Ward May 14,2011