Case Study #22

Situation

A Midlands factory, part of a large group, had always made to order. The market started demanding ex-stock supply, and the competition had stolen a march on our client.

The general manager felt he could assemble 'today's orders today', from common components, and ship direct. Previously, shipments had gone through the (erratic) central warehouse.

The initial vision was an entirely 'pull' schedule, with no finished goods stock.

Operations modelling on a micro scale

The Brief

The GM wanted help with the detail, but was also prepared to listen.

Modelling and Analysis

Working backwards from the customer service objectives, we modelled the microscopic detail of batch size, amount of labour day by day, number of changeovers, average size of run and so on.

The Results

True 'assemble on the fly' would have been a step too far for the organisation at that stage in its development. Given their history, 'lot size one' and 'zero changeover time/cost' were not on the immediate horizon.

We needed to step towards those objectives, perhaps never reaching them.

We designed a 'push/pull' system, which still met the customer needs but insulated assembly - which is very labour intensive - from the worst peaks and troughs of direct linking to demand.

We showed how they could use the order processing time to reduce fluctuations in daily man hours to a manageable ~15%.

We called this time 'virtual stock', and showed that 5 days 'stock' could be 3 days physical stock plus 2 days of virtual stock.

We designed the new on-site warehouse to cope with the immediate challenge, and the likely 5 year scenario once customers had regained faith in the factory's ability to supply.

We anticipated and modelled a continual increase in product variety, and sized the warehouse to cope.

We designed all the process controls, including specifying the IT changes to support virtual stock.

Unusually, we advised that the warehouse should not have a locator system. With only ~300 products, and true real time 'assemble to ship', the operators could remember what lay where without waiting for the putaways to be keyed.

The Outcome

Direct shipment started on the target day. Customers expressed delight, and the process of rebuilding confidence in the ability to supply is well underway. After a slow start, the pickers can find the stock. The (tiny) finished goods warehouse proved large enough. Total finished stock has dropped, despite the change from to order to ex-stock. The IT changes had not been completed at the time of writing.

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