Agile Manufacturing

This article describes key attributes required for you to become "Agile". (The phrases "Efficient Consumer Response" in the food industry and "Quick Response" in the clothing industry have been used to describe similar features).

• Do you think your customers make unreasonable demands on you?
• Have you tried "Lean manufacturing" and find you now have shortages?
• Do you need a well stocked finished goods warehouse or distribution centre to match customer required lead-times?
• Do you have obsolescence, or obsolete stock?

If you are seeking the keys to agility and the solutions to the above problems, read the article and then help us in our research on this subject and request a free copy of our "Agile Manufacturing Self Diagnosis". (Because it probably means that your Agility is inadequate!)

Links to other best practices and training at bottom of page.

Agile manufacturing is a concept designed to make your business more flexible, with many themes. It attempts to satisfy customer needs, however unreasonable these may at first seem in relation to your ability to achieve them, based on the three principles:

1. "Customers do not want choice. They want what they want" (& generally now) ("Agile Product Development for Mass Customisation"; David M Anderson & Joseph B Pine II).
2. "EOQ should be what the customer wants" (See Previous Malpractice of the Week 005: "Economic Batch Quantity EBQ / EOQ: The worst way to set batch sizes")
3. "Enriching the customer" (solving their unique problem by (if necessary) modifying your product or service)

("Agile Competitors and Virtual Organisations: Strategies for enriching customers", Goldman Nagel & Preiss)

"Agility" includes "leanness" because a high stock or spare capacity method of providing flexibility to changing customer demands or adversity is not a viable financial option. In the UK at the moment we are witnessing an unprecedented growth in warehousing to store the off-shore manufactured goods, (which have been manufactured "Just In Time"). Agile Manufacturing demands the near elimination of finished goods by increased flexibility in terms of the ability:

• To determine customer needs quickly and continuously reposition the company against it's competitors
• To design things quickly based on those individual needs
• To put them into full scale, quality, production quickly
• To respond to changing volumes and mix quickly
• To respond to a crisis quickly

This overcomes an opposite problem of lean manufacturing, namely shortages. I.e. if there is little stock in the system and demand grows in volume or mix, above the design parameters of the system, shortages will occur. Integrated MRP / JIT systems (see Materials Management and Stock Control) partially solved this problem by adding back a forecast, but did not really tackle the need to forecast by specifically targeting lead-time. Leanness should not be viewed as a prerequisite to agility since this would miss the opportunity to start work on the additional agile requirements. But agility has major implications for:

• Organisation
• Business processes
• Production processes and equipment
• People versatility and mobility
• Recruitment and training

This level of flexibility cannot be achieved without:

• Some degree of Leanness.
• Specific individual customer focus.
• Regular Business Process Re-engineering re-segmenting the business processes including the operations processes into "virtual" transient organisations or teams with individual or small customer group aligned objectives.
• Partnering with other organisations to enable this, from a pre-qualified group of potential partners (so that start-up issues are minimal). This is a logical extension of "lean" supplier relationships, which in practice generally last for the life of the product. The difference here is that the product life cycles are shorter.
• Selective, flexible use of performance management.
• Flexible manufacturing processes.
• Flexible business processes, particularly sales, production planning, purchasing.
• Almost no work in process.
• Standardisation of products processes and tools.
• Skill management processes.
• Empowered, innovative, flexible multi-skilled, well trained, mobile people, and / or the ability to sub-contract or hire temporary labour quickly for less demanding jobs and to train all people quickly at all skill levels.
• Low absenteeism levels.
• Low equipment breakdown levels.
• Simultaneous engineering of product and process including customer and supplier involvement in the product development process.
• Capable, reliable processes.
• Rapid response, supply chain which may include key supplier systems integration. I.e. direct links between the customer’s customer demand and the production planning process of the supplier.
• Pull systems based on this demand. (See Materials Management and Stock Control)
• Regular customer feedback into the design process.
• Rethinking the management accounting systems and making them appropriate, accurate, but not necessarily precise.
• Excellent communications channels and maintenance of flexible communications network.
• Resolution of legal, ethical and confidentiality issues involved in partnering.
• Simulation and modelling.
• Comprehensive lot traceability.
• IS / IT used with the specific aim of reducing response times, or not at all. It has been argued that the transparency of demand through the supply chain via portals, supply chain integration tools and speed of communication afforded by modern computer systems etc. aids this process. Our experience of these tools is that they can be a barrier to Agility because of their complexity and their inherent inflexibility. For example one of our clients visited 4 differently formatted customer internet scheduling portals, printed and analysed the contents, only to find that schedule changes were often within their manufacturing lead-time. Computers are great at repeating identical tasks at great speed and not thinking about it. Agility requires doing new things quickly and thinking about it. Not quite the same thing! Our solution in this case was to provide an interface to each portal which imported the demand into a spreadsheet, which then analysed the current schedule verses the previous and highlighted short term changes within lead-time for immediate action.
• The management processes to organise these things. The process has been likened to managing a hospital accident and emergency department.

A more comprehensive list is contained in our 92 point "Agile Manufacturing Self Diagnosis".

Examples of agile supply chain developments under this banner include:

• Universal product codes, which were used throughout the supply chain and bar coded. This avoids the problem of interpreting the sales data provided by your customer from their item numbers to your item numbers. If for example you are selling through several outlets it can be extremely difficult to consolidate demand data provided by them, because of the translation process required.
• Electronic Point of Sale (EPOS) equipment captured the sales data and communicated that back to the next tier in the supply chain electronically where demand is consolidated. In effect the notification of the sale becomes a purchase order.
• An alternative method of notification is returnable packaging, which simply acts as a Kanban.
• Because the point of sale determined the destination, the supplier was able to replenish stock at the appropriate outlet (not via the central warehouse).
• Direct scheduling links between manufacturing and suppliers bypassing purchasing (who have previously arranged contracts with pre-qualified suppliers).
• "Demand management" which is discussed in detail elsewhere. There are many industries where agility is vital such as where genuine seasonal or short product life demand is exhibited. However there are more examples where uncertain demand could be managed better to reduce artificial demand fluctuation.

Agile materials / capacity planning and control systems are a must. For this reason it is unlikely that over-sophisticated computer-based approaches will succeed over simple approaches. One of the mechanisms to achieve agility is the ability to provide forecasts throughout the supply chain of forthcoming demand without the buffering encountered in current supply chains. This is a significant challenge to the transparency of demand through the supply chain, without the intervention of inventory planners. For example the whole ethic of production planning is to create a stable plan for manufacturing to produce efficiently. Agility requires, not constant changes of plan to satisfy changing customer requirements, but very short lead-times. There is a switch of emphasis here from factory stability, to the customer need (not to be confused with the sales manager’s wishes). This has a major impact also on production planning and control whereby a product is earmarked for a particular customer fairly early on in the process so that customisation may proceed from that point. This is opposed to the techniques of aggregation connected with MRP systems and is more akin to a make-to-order environment albeit that one product may be very similar to the preceding one. An obvious prerequisite of course is that lead-times are short.

To join our research project on this subject and receive a free copy of our "Agile Manufacturing Self Diagnosis" Contact Us. (This service is only available to manufacturing businesses.)

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The following further best practice articles were also mentioned in this paper:

A number of our training workshops deal with these topics individually, but the following courses provide solutions to Agile Manufacturing and Agile Supply Chain Management:

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To discuss your consulting or training needs with one of our independent consultants or trainers please Contact Us.

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Ó SM Thacker & Associates (Consultancy and Training Specialists) April 2000 v5 August 2007