To be a competitive factory, good management is essential to lower costs, produce a quality product and do it within the established timeline. All this requires efficiently and continuously overseeing the production process and the logistics. Logistics is precisely one of the battlefields that can be key to increasing the efficiency of our processes while also improving our service rates by relying on the lean manufacturing philosophy.
Getting ahead of the curve is worth it
Good supply chain management that is able to shorten the delivery times of a product while also reducing stock requirements can make all the difference. This will occur as long as a company has the ability to organize itself and anticipate any incident that can occur in the production and supply chains, by allowing the production process to be adjusted to the maximum and eliminating, to the extent possible, all production waste (time and intermediate stock) and scrap. A good way to do this is by effectively applying the techniques considered in the lean manufacturing methodology, which attempt to eliminate everything that has no value to the client and focus resources exclusively on that which does.
As a result, thanks to the Lean Manufacturing methodology and its philosophy, the company will be able to improve its logistics processes and flows through a system of continuous improvement.
Indicators to stay alert
In a company, it's important not to let the value chain break. But what can we do to prevent this?
It's good practice to use indicators that keep a company alert and give it the ability to improve and react in time, or even ahead of time, and to avoid situations that, in the end, lead the company to higher costs, more stock and that, consequently, have a negative impact on its financial status.
There are some indicators that can be used to control and improve the oversight of a supply chain in an effort to provide the desired lead time. It's a matter of rhythms and continuous synchronization.
It is highly advisable, therefore, that the planning, manufacturing, sales and purchasing teams not only track these indicators every day, but that they have the necessary tools to do so. Like, for example, the improvement tools used by the lean manufacturing methodology.
Raw material inventories
- Raw material inventories: an increase in the stock of suppliers is an alarm bell and can be a relevant indicator. This increase means that the level of billing and purchases does not correlate with the specified production master plan; it's a warning that something is wrong.
- Inventories of semi-finished products: a growing inventory in the factory means that the pace of the supply chain has broken down. Either the supplier-factory pace or the factory-customer pace is out of sync.
The stock from suppliers goes up when purchases are excessive, when sales are lagging, when the production plan is not being adhered to… All these cases provide a signal that must not be ignored if the situation is to be corrected and improvements are to be made. These same symptoms are evident in the stocks of semi-finished products, and in some cases even of the final product. The synchronization of the value chain has to be monitored in order to resolve all these deviations in the shortest time and at the lowest cost. Hence the importance of implementing a lean manufacturing methodology that helps us and provides the necessary tools to carry out this synchronization and improvement process.
Proposed indicators: daily chart of € of raw material, € of semi-finished product, € of billing
Service provider rate
"The supplier isn't delivering on time." If this sentence is commonplace, the normal consequence in the organization would be that it should consider increasing the stock or delaying orders. Good management is essential since the impact of the service rate of our suppliers on our supply chain is critical.
The consequences: more stock, inability to adhere to the production plan, delay in customer orders and micromanaging stock with the supplier to guarantee the materials required in the production process.
All the work that is invested in developing these suppliers will have a positive impact on the company and its quality. We shouldn't be afraid to cooperate with them; they are a key part of our value chain. The work we do with them will positively affect our inventories and theirs.
From this point of view, and on the basis of the lean manufacturing philosophy, the involvement, knowledge and use of the skills of all the staff are the keys to making a company more competitive.
Indicators proposed: daily service rate of suppliers
Adherence to the production master plan
Another key indicator of a fault in the value chain is adherence to the production master plan. A lack of control over the assembly stations in a factory can lead to the incorrect execution in the number of lines that should be manufactured based on a customer's request.
The sooner we identify a lack of adherence, the better. A minor lack of adherence can be due to many factors: a broken tool, a health problem with a worker, a shortage of raw material, a maintenance problem...
If we let the imbalance grow, the amount of time and personnel working on solutions will quickly increase, as will the rate of internal replanning and the urgency we place on demands with suppliers; the amount of resources needed to restore the original pace will increase exponentially.
Therefore, tracking the situation more closely and quickly resolving any small imbalances in the production master plan will avoid a great deal of waste.
Indicators proposed: daily adherence rate to the production master plan.
Adherence of forecasts to actual orders
It's important to ensure adherence to the production plan, but also the adherence of forecasts to actual orders, in order to avoid waste. In other words, making sure that the supply forecasts coincide with the actual orders being received.
It's a way to make sure that the information we've given to the supplier and to our own factory is reliable and correct to avoid peaks and upset the proper pace of production and supply.
It's very common for our customers to work in uncertain environments where peaks and valleys in demand can occur. There are three factors that we have to take into account: the organic growth of the market, the sizing of the factory of our buyers and the implementation or deindustrialization of products in our customers.
A knowledge of these factors, together with constant monitoring of the demand and communication with the customer, can help us establish a better organization that will guide us to adjust the forecasts and processes correctly.
It sometimes happens that the buyer himself makes a mistake when placing an order. Because of this, having an up-to-date analysis can often help identify mistakes so they can be reported to the buyer to avoid future management problems.
Indicators proposed: comparative panel of those items that are representative of the families of products that account for 80% of the company's turnover.
Customer service rate
Failing in each of the previous indicators means failing completely in the area of customer service and requires a new approach. This situation creates a series of reactive actions that lead to significant inefficiencies. Doing analysis every day and reviewing all the indicators can help anticipate many of the deviations that may occur in a production and supply chain. Most often, a deviation will occur at the beginning of the supply chain, in the suppliers that are responsible for providing the most basic materials.
Indicators proposed: daily service rate to buyers
It has been shown that being able to anticipate any deviations that can occur in the production chain will make us more efficient when it comes to providing solutions.
Reviewing the indicators proposed every day within a team consisting of purchasing, planning, factory and commercial personnel improves communication, keeps everyone in the company on the same page and results in quick and coordinated decisions. This will allow us to maintain or improve our customer service rates while using fewer economic-financial resources.
Because of this, lean tools are good allies insofar as they help us eliminate waste and improve the quality of our processes and services, while reducing production time and cost.
Contingencies will happen, but as a consequence of monitoring indicators and improving communication, we'll be able to anticipate certain problems, which will give us time to propose solutions and reduce the expenses associated with them.