Preface to The Top Ten Steps To Ship On Time
Editor’s Comment: Years ago I started writing a book defining how to ship on time. It;s rather lengthy and it was never published. I did use what I wrote to build to separate consulkting company’s into multi million dollar business’s
C H Diaz 1980′s
In the past twenty four hours, every person who works with or for a manufacturing company has probably been involved with finding out why something didn’t ship on time. It doesn’t matter what part of a manufacturing company that person works in. It could be Materials, Purchasing, Sales, Engineering, Accounting, Quality Control, the Shop or Assembly areas or you could be a supplier. The life of these people consists of finding out why something didn’t ship on time and the ability to consistently ship on time is directly related to a company’s ability to successfully implement its overall business system. I say “overall business system” because so many companies think the automated “computer” manufacturing software system is the only one. It’s not and that’s the problem.
The Top Ten Steps To Ship On Time addresses the problem from a point of view that separates the implementation of an automated manufacturing system and the overall business system that is the method a manufacturing company’s uses to achieve its primary goal. We all know any companies primary goal is to make money. The method used to make the money is to ship a quality product, on time, and make a profit doing so. For the remainder of this book this will be considered the company’s primary goal.
To the downfall of many, the implementation of a automated manufacturing system has been considered the primary goal and confused as the business system. In fact many books and articles have been written about what it takes to successfully implement an automated manufacturing system. (Sometimes called an MRP system). How many times must we read, your bills of materials must be 100% accurate, your inventory must be 98% accurate etc. etc. They all tell you what you need to do, not how to do it. What is also interesting is how many different ways they can tell you that software education is the key and the users must accept ownership of the “system.”
I am not belittling the importance of ownership and software education, I’m pointing out what they do not tell you is there is more education other than software education. I don’t think many of them know what the other kind of education is.
The Top Ten Steps to Ship On Time will start by showing you what education is needed and why understanding the difference is important. To understand how we got in the mess we’re in, we need to take a brief look at the history of computers and the manufacturing industry.
After World War II, the United States was number one in manufacturing in the world. Considering there wasn’t anything left of the rest of the world, at that time, we may have been a little self-possessed about how we accomplished this marvelous task. Nonetheless we didn’t care if there wasn’t anyone around to fill second place, we knew we were number one.
In the fifties, if you wanted to buy anything in the world from steel to tires, you had to buy it from the U.S.A. And if you didn’t like the deal, you could always go somewhere else, which didn’t leave you with any choice.
As time passed, the rest of the world started to recover from the disaster of World War II and, with our help, entered the manufacturing game. The rules were simple, find out what is needed, build it cheaper and better than anyone else and you’re in business.
I can remember when the first “Made in Japan” items came to the U.S., they were the brunt of every joke on quality. The first Japanese automobiles sold in America seemed like small wind-up toys.
In the sixties, there was a machine tool company that was a leader in multiple spindle drilling machines. They were so proud of the uniqueness of their trade their entire thinking revolved around how unique they were. The owner had invented the rotary-head multiple- spindle drill press. They were so unique they would import tool makers from Europe for their assembly line. They were so unique some machines had a six month to a year or even longer assembly leadtime before delivery. They were so unique they had an eighteen month backlog and they could name their own price for their machines. And if the customer didn’t like it, they could go somewhere else. Then the Japanese decided to get into the machine tool business.
No one told the Japanese you couldn’t build these machines in less than six months. No one told them you had to have European tool makers to build them. No one told them that the industry was unique in any way. Mostly, no one told them you could treat customers badly and get away with it.
So as the Japanese got into the various businesses they introduced new concepts in manufacturing. They introduced lower prices at first, then came superior quality and all along they held their customers on very high pedestals.
The American machine tool company doesn’t have to worry about being unique anymore, or competitive. They’re out of business. But they didn’t go out without a fight. In one of their last feeble attempts to compete, they asked Uncle Sam to impose trade restrictions so they could continue being unique.
When the Japanese first started to hurt us on the open market, U.S. industry was so busy yelling “FOUL,” because of the perceived unfair labor advantage, that we could not see the truth. We were too arrogant to ever consider we may have been doing something wrong. We didn’t have time, or care, to look for the real causes of our removal from number one status.
Then the Japanese let us in on a couple of secrets called “Just In Time” (JIT) and “Total Quality Management” (TQM). It came via the automobile industry and the Toyota plant. It made a mockery of the traditional American automobile manufacturer. The ironic part of JIT and TQC is that the Japanese learned these concepts from an American.
For years we had read about the great manufacturing systems used by the auto industry. They were the epitome of American efficiency and productivity. That is, until the Japanese got into the ballgame.
Using the automobile industry as an model for American manufacturers has been a mistake that has been made by too many companies and consultants. No one can argue with the basic concepts of reducing inventory or increasing quality. But to try and mirror the automobile industry could lead to disaster. The auto industry has one unique advantage in its assembly process that very few, if any, other industries have. Which is, how the product is sold.
The concept used of course, is to sell the customer a car that is already on the dealers lot. But if a car is ordered by a customer the following applies.
Let’s assume you ordered a car with power seats and your car is on the assembly line at the point where there power seat is installed and there are no power seats. What happens? Does the assembly line stop? Is the car pulled off the line and held until a power seat is available? No, none of the above.
The car gets a manual seat and it goes on its way, still having satisfied the requirement generated by the customer who ordered a power seat. This may seem to be an insignificant point, but instead it is what separates the auto industry from any manufacturer that builds to customer requirements. The ability to ship what is available and still satisfy the requirement. The customer who ordered the car with a power seat is the next factor in the difference between most manufacturing companies and the auto industry.
When the car arrives at the auto dealer, the salesman then has the duty of talking the buyer into accepting the car without a power seat. Depending on how good of a salesman he is, the salesman may be able to convince the customer that in the last four years the average driver changed his seat an average of twice a year, and with so little use he really doesn’t need a power seat. If there is enough gross profit in the sale he may offer to lower the price of the car by much more than the retail price of the power seat to get the customer to accept delivery.
If the customer doesn’t go along with it, and this is a rarity, he has the option of placing another order and waiting another eight weeks, or going somewhere else because he’s mad at this dealer.
The key here is, the auto industry doesn’t have to deliver a product configured the way it was ordered. Try that in any other industry. So in the automobile industry a “Just In Time” philosophy can actually be “Almost In Time” and still ship product. Shideo Shingo’s book didn’t tell you that.
In the past the American auto manufacturer offered far more options when a customer wanted to “order” his car. But the whole concept of how cars are sold reduces the need to satisfy that particular customer. When the Japanese entered the picture they brought the whole process down to a reality.
When buying a Japanese car there is no such thing as a factory order. They, the Japanese, eliminated the factory order and at the same time reduced the number of options you could order. A customer is led to believe he is placing a factory order for his Japanese car but in truth he is placing an order to have the dealer try and get a car as close to what was ordered from the thousands that are dropped off on the dock in Long Beach .
Because the Japanese reduced the number of options, the likelihood of the exact configuration is fairly good, but not one hundred percent. In this case it is again left to our fearless salesman to talk the customer into accepting what the dealer received.
The whole system works because of two factors. The first is obvious, auto manufacturers would go nuts trying to make a specific car to a specific order. The second is how easy it is to convince a customer who has waited eight weeks for his “dream car” to accept a discount of four hundred dollars, to make up for the missing power seat when the power seat was only a one hundred and fifty dollar option.
Unless your company can ship product almost configured to the way it was ordered, I would move very cautiously while learning what a JIT philosophy can bring. I would however, move in that direction.
I never have bought into the idea that JIT and TQM are new concepts. I believe the problem is, the quality levels and inventory turns U.S. manufacturers thought as acceptable evolved over a period of time out of shear complacency.
We believed it was human to err therefore we couldn’t expect 100% quality. We believed our material ordering policy, which over the years had evolved from “Just In Time” to “Just In Case,” was acceptable. But just as JIT and TQC could be defined as good solid common sense business practice, there is much more that goes into the implementation of a Manufacturing System and what it takes to make it a success.
Just before we, as a nation, started losing our grip something else also affected U.S. manufacturers. The computer.
I believe, had the computer not come of age when it did, or maybe the way it did, the management of U.S. companies would have responded to the threat of competition much sooner. We would have made a better fight of it before losing our number one status. When the computer became a reality in the U.S., it was introduced as a business tool to help us be more productive. Meanwhile the Japanese were being more productive using pencils.
In the sixties and early seventies programming schools were popping up all over the U.S. Becoming a programmer was a sure way the average guy could gain that security he always wanted. As for computer hardware companies, specifically IBM, they were telling us this was the way we had to compete. This is what we needed to become more productive, more efficient, to lower costs, to speed up deliveries, to run our companies, to do our thinking, to do our managing for us.
In the final analysis, all they did accomplish was cause the first line management of a company to back down or lose their jobs. I believe computer companies success in shoving computers down our throats helped, to some degree, speed the downfall of American manufacturing.
In the early days no one other than a programmer knew anything about the black box. Companies bought computers and then didn’t know what to do with them. They hired the programmers, fresh out of programming school, who tried to program things to help us.
As a result, these new programmers were forced, by default, into the center of a new manufacturing tenet. It deemed programmers knew everything there was about all functions of the company. This one individual would now be the company’s expert on every function within a manufacturing company.
Some of the things they programmed were fairly standard things, like accounting. Ah! accounting. There we found a place where we could use all of the power of the computer to increase productivity, to increase efficiency and to help us compete on a world-wide scale. Just like IBM said.
To accomplish this great task we programmed Accounts Payable, Accounts Receivable and General Ledger. And to secure the competitive success we were sure to gain with our newly found tool, we put the entire computer operation under the experts of manufacturing, , , our Company Controller. As other applications were developed by the data processing departments of America, line management gave way to the rules and regulations of the computer and its programmers.
Because programmers were human and didn’t know everything about all things, they had a tendency to confuse management with “computer lingo” answers when confronted with a problem they themselves didn’t understand. They didn’t do this consciously, to undermine the company, they did it to survive.
How can we expect one person to know everything there is to know about Bills of Material, MRP, Shop Floor Control, Capacity Planning, Order Entry, Shipping, Receiving, Accounting, Purchasing, Marketing, Material Planning, and Inventory Control? To know it not only from a technical I/O and flowchart perspective, but from the philosophical policy world of how we want to conduct business in the first place. Management policy does that and management policy is not determined by data processing. Some companies are still making that mistake today.
Later, with computer systems that were developed, like MRP (Material Requirements Planning), more rules and regulations, demanded by the system, pushed back the line manager’s role to the point that they were seldom heard. As time went by, the “SYSTEMS” needs were the company’s needs. We went from having a system to run our business to a business of running our system.
In meeting after meeting you could hear it said, “The system won’t allow you to do that,” or, “Yes we can program it, but it will take two million man days. . . . etc. etc.” Managers got pushed back because they didn’t know that they could fight back. They didn’t know that to use the computer you must look at it as you would a new adding machine. They didn’t know that “ownership” of anything starts when YOU buy it.
In those early days we had material order generation systems that were basically order point systems. Then came MRP and during the sixties and seventies ninety percent of the companies who attempted to install MRP systems failed to accomplish their perceived goals. They just didn’t know what it took to successfully install an MRP system.
As time passed computer systems got better but they were departmentalized. By that I mean Accounting had their system, material planning had theirs, engineering had theirs and so on. Then one day in the seventies total company systems started to appear.
These new packages didn’t need a sophisticated programming staff or a long implementation period. More importantly, the system was not confined within the four walls of a data processing department. Terminals now were installed in the users departments and they had to become part of the operation again. Users would replace data entry personnel and the day of the key punch operator came to an end.
As time went by, more manufacturing application software packages were being created and before you knew it almost every manufacturing company in America was looking to buy one of them. In-house programmers, for the purpose of programming a home -grown system, have become a thing of the past and now no self-respecting data processing manager would be caught dead designing one.
There are at least two hundred and fifty manufacturing application products on the market today. They all probably don’t vary ten percent, but to hear their marketing words they would have you believing they each came up with a way of insuring your success because they came up with a new way of doing something.
How many different ways can you account for something? Who has come up with a new accounts payable method since the last ice age? How many different ways can you view a bill of material file? What programming miracle does a software package have to increase your inventory accuracy? Has the formula used for exploding a bill of material file netting out the requirements and taking into consideration the stock on hand and work in process, been changed in the last century? Does anyone today believe there was a day when we did all these things manually, using the same formulas that all of the packages use today?
I recently watched a tape of an APICS-certified manufacturing software consultant teaching a class where he implied the only way you could have an accurate, efficient, productive shop floor control system was with a computer. Wrong! The only thing the computer is designed to do is help us accomplish the SAME THING more efficiently. I’ve seen some dynamite and accurate manual shop floor systems. But if you listen to the software companies, you would believe they each have found the Holy Grail.
Because the packages were complicated, they were still considered part of the data processing department and walls started being built between data processing and the users. Implementation of the system had been perceived as a data processing event and line managers were still hesitant to give their full support.
Then one day a strange thing happened. A thing that would lead to a marriage between the user and the data processing type.
An electronic game was introduced to the nation. It soon was everywhere, and we all started playing it. The game was PONG, the first of what would become millions of computer games was on the street for our kids to get their hands on. Later, with the introduction of the home personal computer the line managers of America started talking to the data processing manager over a morning cup of coffee. After all, they had something in common, they now could talk computerese.
As the eighties came on, attempts to tear down the walls between the user and data processing ground on. A new found reality was coming to light. It said that the best way to succeed in implementing a computer system was to educate the user and for all to understand the computer system belongs to the user.
Twenty years after the user lost control of managing the company the realization had started to set in that the running of the company belongs to the user. There are those who still fight that thought today. But the real problem that exists today is not understanding that there is more than one Manufacturing System that needs to be addressed. The computer and its software is one. The other is made up of the manual system and procedures and management policies that have been long forgotten.