ARC's Ralph Rio's Lean MES at ARC's 2008 Industry Forum

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ARC's Ralph Rio's Lean MES at ARC's 2008 Industry Forum in Orlnado, FL.

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  • This presentation will review recent research into the management of new product introduction. The data comes from a websurvey and follow-up personal interviews. Both discrete and process manufacturers participated. The full report was published in November . This presentation provides some of the highlights.
  • Two slides will set-up what drove the thinking that there is a connection between Lean and MES.The rest of the presentation will provide survey results and conclusions.
  • The survey was promoted via MESA’s email list and ARC’s ARCwire newsletter which provided a total of 135 responses. This included 29 from sales & marketing types working for suppliers which removed to focus analysis on the manufacturers. The charts that follow are based on the remaining 106 responses and the lessons learned during follow-up interviews with 9 of the manufacturers who volunteered to be personally interviewed.After responses were segregated into Leaders, Competitors and Followers we checked the demographics of these groups. They had similar profiles for revenue, industry, styles of manufacturing, and primary improvement program. The differences we identified in performance and Best practices are not therefore due to these factors.Here is a note about the responses for “Primary Improvement Program.” In other surveys on continuous improvement programs conducted by ARC, respondents were asked to list all of their programs and the sum of the percentages exceeded 100%. The survey conducted in Q1 2007 provided the 69% referred to previously in this report. The survey for this report asked for only the primary program. Since there is only one primary program, the total of the percentages is 100%. With 61% stating that Lean is their prime program, this further substantiates the strength of Lean adoption.
  • ARC’s model for Collaborative Manufacturing Management provides a framework to visualize the domain area for our research. This model has three axis's - top to bottom is the enterprise domain, left to right is the supply chain domain, and front to back through the screen is the product lifecycle domain.<Click>The scope of this research includes development through to production management. It touches on the plant operations and on sourcing of materials. These functions are directly affected by the introduction of new products.<Click>Questions where asked along the dimensions of People, Processes, Technology and Metrics. They align with the major concerns for managing a business.<Click>The responses from manufacturers where rated and categorized into Leaders, Competitors and Followers. Categorizing the responses identified distinct differences along each of the dimensions.The next four slides address each of the four dimensions and contrast the practices used by Leaders and Followers - the good vs. the poor practices.
  • The pages that follow compare Leaders with Followers to contrast best vs. poor practices. First, this report addresses the people dimension. Here is an explanation of the chart above: Dark blue is when the respondent checked “Fully” i.e. over 75% of the people in that area are involved in their continuous improvement program. Light blue is for “Partially” with 50 to 75% of the people involved. The total of the two (Fully and Partially) is the number at the end of the barAs we saw previously, Leaders and Followers had similar rates of adoption of the various continuous improvement programs. But, notice the difference in the application of the programs. Followers focus on the plant floor. Leaders include all those involved in the value stream - from ordering, through manufacturing, and to cash received.
  • The chart on the previous page focused on those internal to a company - the employees. This chart focuses on the broader, extended enterprise by including those in the external value stream.To explain the chart on this page, the bar represents the portion of respondents with 25% or more of the external entities involved in the continuous improvement program. For example, among Leaders, 59% have a quarter or more of their suppliers involved in their program. Interpreting the chart tells us that 59% of the Leaders involve their suppliers. The corresponding percent for Followers is 13%. The difference is a clear. The same contrast applies for outsourced manufacturing operations and their distribution channels. Leaders have broad involvement with over half (average is 58%) including their extended enterprise. Only 8% of Followers include external entities in their continuous improvement program.
  • The question read “How are business processes managed (routing, procedures, setup, etc.)? Choose all that apply.” It is unusual to get this stark a contrast from a survey. Leaders embed their business processes in their IT systems and use these systems to manage them. This ensures consistency (reduce variation) among all those involved in the process (across shifts, buildings and departments). Followers have a much different profile. They depend heavily on “Institutional Knowledge” which basically equates to something like “what the person learned when they started their job.” This approach leads to inconsistency and variation - aspects that are contrary to a continuous improvement program.
  • A follow-up question from the previous page identified which systems were used for business process management. Leaders use an array of systems, leading with MES, for the variety of their business processes. Since the title of the survey included the word MES, the results for MES may be a bit larger than they should be. But, it is clear that all 4 types of systems - MES, ERP, Automation and Custom - are often used by Leaders to manage their business processes. In all cases, Followers lag far behind.
  • We are now moving to the area of technology. The charts on this page are fairly benign and are shown here to set the stage for the next set of charts.Indirect Exempt includes people like yourself. Indirect non-exempt applies to hourly people. Direct labor is time applied to making or assembling the product that is sold. Among the Leaders and Competitors, all have reasonably good access to a computer. In this case, Competitors appear to be slightly ahead of Leaders. Followers are a little behind, but the differences are not as dramatic as in other pages.
  • Compared to the previous page, these charts paint a very different picture with more clear divergence between Leaders, Competitors and Followers. The previous slide told us that people have access to computers on a daily basis. This slide tells us about the usefulness of the software applications on those computers.For Indirect Exempt, Among leaders, 69% have access to the information needed to perform their job. Among followers, this is only 24%. Meaning 76% of the time they are using tribal knowledge or just guessing.All provide reasonably good access to computers for their people. Leaders have useful and accessible information in their applications. Unfortunately, Followers do not. Involving the people who do the work - particularly the non-exempts - with fact-based decision making is a key tenet of Lean and Six Sigma. The Leaders typically empower their people. The Followers have not.The charts on the previous page and this one have another inference for the application selection process. Since all have computers, they must also have applications. One could infer that the Leaders have a better process for selecting and developing their applications.
  • The survey asked “Do you have a production management or MES system? Select all that apply.” “Custom Application” is one that was written to their specifications by in-house staff or a systems integrator. “ERP Module” is a software option provided by their ERP supplier “Standalone Application” is an independent “Best of Breed” (BOB) software supplier “Automation System” is software supplied by the automation supplier and usually tightly coupled with the process controllersThe number of custom applications is a surprise. Further research by ARC is planned for more insight into their footprint (functionality) and technologies. From this data, one could infer that Leaders average roughly 2.5 times as many MES systems as Followers ( 2.5 = sum for Leaders (.86+.68+.68+.64) / sum for Followers (.25 +.31+.28+.28) ).The yellow represents future intentions for acquisition of systems. It is interesting to note that, among the Leaders, more are planning to expand their automation system then the other types of systems.
  • The survey bluntly asked, “Bottom line, are these technologies viewed as an impediment or aid to your continuous improvement program?” Choices included ERP, MES, Automation Systems, Supplier Relations Mgt. (SRM), Product Lifecycle Mgt. (PLM) and “other”. For this report, the focus is on MES along with the closely related ERP and Automation systems. All the Leaders said MES helps or accelerates their CI program. Followers had more inconsistent results. A similar divergence is seen for both ERP and Automation systems. The Leaders are more successful with their selection and application of technology.
  • This page begins a discussion of our investigation into the area of metrics.First Pass Yield is an accepted and important metric commonly used for a Lean or Six Sigma program. First Pass Yield is the number of good units produced prior to rework divided by the total units going into the process. Rework, inspection and the corresponding inventory buffers are “waste” from a Lean manufacturing perspective. Also, the “Define” phase for the Six Sigma DMAIC (Define, Measure, Analyze, Improve, Control) process is there to define a defect for elimination. A high First Pass Yield measures the success at removing these wastes and defects. It measures the ability to “get it right the first time” versus the “inspecting quality into the product” approach. Leaders use MES systems to calculate this metric. Since this calculation is automated for Leaders, they can determine the metric frequently and can take corrective action before an issue becomes a major source of defects and waste.Followers mainly use manual systems with a calculator or spreadsheet software to calculate the metric. With this manual means of calculation, the metric is often available too late to alert people to investigate and identify the root cause. With daily or weekly alerts, the materials have left the area for further processing - too late to prevent more waste.
  • Overall Equipment Effectiveness (OEE) is a metric that brings together machine uptime, production scheduling, and product quality.Leaders mainly use their MES for this metric. Again, Followers use manual methods if they measure it at all. This metric has a particularly large difference between Leaders and Followers for the use of this metric - 100% of the Leaders apply this metric while only 38% of the Followers use it.
  • Measuring scrap and rework is a commonly used metric to manage costs and operational performance for manufacturing operations. Leaders often use their MES systems to automatically calculate this metric. Followers mainly used manual methods to calculate the metric. Again, because it is automated, Leaders make this measurement more often. Scrap and rework usually occur after some evaluation is made. They are not as timely an indicator of a problem as is First Pass Yield. Thus, the need for urgency is not nearly as acute and we see this becoming a weekly or monthly report.
  • Lean and Six Sigma have bottom-up attributes. They involve the individual contributors who perform the tasks with their intimate understanding of the work processes. Leaders involve the broad spectrum of employees who are part of the value stream from the time the order is entered, through manufacturing, and including processing payment. They also “empower” these people by giving them access to the information they need to perform their job and improve it.A core methodology for a Lean program is value stream mapping. The Value Stream Map is used to graphically display the process and identify waste. The “low hanging fruit” for improvement is commonly found between operations - particularly between organizational silos like sales, production and accounting. By including the broad spectrum of employees who are involved in the extended value stream, this waste can be identified and corrected.Another core tenet of a Lean or Six Sigma program is fact-based decision making and not tribal knowledge, opinion, or “gut” feelings. To be empowered, people need access to information. MES systems provide the real-time visibility they need to manage the process and determine improvements. Author’s note: While Jack Welch was CEO of GE, he became a strong proponent of Six Sigma. But soon after retiring, he wrote the book “Straight from the Gut“ which repudiates the key tenet of Six Sigma, i.e. fact-based decision making. Yet, he remains a proponent of Six Sigma. During my GE career, I met Mr. Welch and highly respect him. This dichotomy between thought and action is unusual for him.
  • Al, thank you for the introduction. This presentation will review recent research into the management of new product introduction. The data comes from a websurvey and follow-up personal interviews. Both discrete and process manufacturers participated. The full report is being published in June and a copy is in your binder. This presentation provides some of the highlights.
  • ARC's Ralph Rio's Lean MES at ARC's 2008 Industry Forum

    1. 1. This presentation is copyrighted by ARC Advisory Group (ARC). The information is proprietary to ARC and it may be not be reproduced without prior permission from ARC. Intersection of Lean and MES Best Practices Ralph Rio Research Director ARC Advisory Group rrio@arcweb.com Agenda •Research Findings •Recommendations
    2. 2. 2 © ARC Advisory Group Where Lean & MES Intersect Agenda:  Lean and MES Trends  Best Practice Study Process  Survey Results  Recommendations
    3. 3. 3 © ARC Advisory Group Market Trends Is there a connection? Improvement Programs:  Lean Adoption Nearly Doubles MES Market:  Visibility to Manage • Agility • Speed „05 to „06 Market Grew 27.2% 0.0 0.5 1.0 1.5 2.0 '06 '07 '08 '09 '10 '11 Forecasted CAGR = 14.5% Billions Source: ARC Advisory Group “CPM Systems Worldwide Outlook for Discrete Manufacturing” 0% 2% 52% 69% 0% 25% 50% 75% TOC TQM Six Sigma Lean Mfg. Q1 2007 Survey 8% 18% 34% 35% 0% 25% 50% 75% TOC TQM Six Sigma Lean Mfg. Q4 2005 Q4 2005 Q1 2007
    4. 4. 4 © ARC Advisory Group Lean and MES Survey 21% 31% 18% 30% 0% 20% 40% Under $25 million $25 to $250 million $250 million to $1 billion Over $1 billion Revenue 20% 21% 29% 38% 49% 0% 20% 40% 60% Packaging Job Shop Continuous Assembly Lines Batch/Lot Styles of Manufacturing 106 Survey Respondents 1% 12% 23% 64% 0% 20% 40% 60% 80% Utilities Process Hybrid Discrete Primary Industry 2% 12% 11% 14% 22% 39% 0% 20% 40% 60% No Program Other TQM Six Sigma Lean Six Sigma Lean/TPS Continuous Improvement Program Lean 61% Primary Improvement Program Sum = 100% For these attributes, the Leaders, Competitors and Followers have similar profiles Respondent Profile
    5. 5. 5 © ARC Advisory Group Scope of Research Lean and MES  Dimensions • People • Processes • Technology • Metrics  Categories • Leader • Competitor • Follower Production Management Maturity Matrix People Processes Technology Metrics Leader Best Practices Competitor Common Practices Follower Poor Practices
    6. 6. 6 © ARC Advisory Group Best Practices Lean and MES 19% 21% 27 25 2 0% 20% Accounting & Finance Sales & Marketing Customer Support IT Product Development Recv, Stock, & Shipping Mfg. Support Plant Floor Fully: Over 75% 19% 21% 27% 25% 29% 32% 52% 59% 0% 20% 40% 60% 80% Accounting & Finance Sales & Marketing Customer Support IT Product Development Recv, Stock, & Shipping Mfg. Support Plant Floor Fully: Over 75% Partially: 50 to 75% of people Leaders have Broad Involvement 36% 41% 50% 55% 59% 64% 68% 77% 0% 20% 40% 60% 80% Accounting & Finance Recv, Stock, & Shipping Customer Support Sales & Marketing Product Development IT Plant Floor Mfg. Support Leaders 9% 13% 16% 6% 9% 3% 41% 22% 0% 20% 40% 60% 80% Accounting & Finance Recv, Stock, & Shipping Customer Support Sales & Marketing Product Development IT Plant Floor Mfg. Support Followers People Who is Involved in the CI Program? Internal
    7. 7. 7 © ARC Advisory Group People Best Practices Lean and MES 64% 50% 59% 0% 20% 40% 60% 80% Distribution to Customers Outsourced Mfg. Operations Suppliers Leaders 3% 9% 13% 0% 20% 40% 60% 80% Distribution to Customers Outsourced Mfg. Operations Suppliers Followers 19% 21% 27% 25% 29% 32% 0% 20% 40% Accounting & Finance Sales & Marketing Customer Support IT Product Development Recv, Stock, & Shipping Mfg. Support Plant Floor Fully: Over 75%25% or more Who is Involved in the CI Program? External Leaders have Broad Involvement
    8. 8. 8 © ARC Advisory Group Best Practices Lean and MES How are Business Processes Managed? (routing, procedures, setup, etc.) Leaders Use IT Systems for BPM 9% 23% 32% 59% 86% 0% 20% 40% 60% 80% 100% Ad Hoc Verbal Instruction Institutional Knowledge Written Documents IT Systems Leaders 16% 28% 53% 41% 16% 0% 20% 40% 60% 80% 100% Ad Hoc Verbal Instruction Institutional Knowledge Written Documents IT Systems Followers 16% 27% 86% 0% 25% 50% 75% 100% Follower Competitor Leader Business Process Mgt. in IT Systems Primary IT Systems More Detail Process
    9. 9. 9 © ARC Advisory Group Best Practices Lean and MES If BPM is "Embedded in IT systems", which IT systems? 6% 22% 25% 31% 16% 0% 25% 50% 75% 100% Separate BPM Application Custom Application Automation Systems ERP System Production Mgt. (MES) Followers 27% 68% 77% 77% 82% 0% 25% 50% 75% 100% Separate BPM Application Custom Application Automation Systems ERP System Production Mgt. (MES) Leaders Process Leaders Use IT Systems for BPM
    10. 10. 10 © ARC Advisory Group Best Practices Lean and MES Portion of Employees who Access a Computer Daily All have Good Access to a Computer 49% 68% 77% 0% 20% 40% 60% 80% 100% Direct Labor Non-exempt Indirect Non-exempt Indirect Exempt Leader 51% 77% 87% 0% 20% 40% 60% 80% 100% Direct Labor Non-exempt Indirect Non-exempt Indirect Exempt Competitor 25% 41% 63% 0% 20% 40% 60% 80% 100% Direct Labor Non-exempt Indirect Non-exempt Indirect Exempt Followers Technology
    11. 11. 11 © ARC Advisory Group Best Practices Lean and MES Access to Information Needed to Perform their Job 67% 72% 69% 0% 25% 50% 75% Indirect Non-exempt Direct Labor Non-exempt Indirect Exempt Leaders 19% 35% 24% 0% 25% 50% 75% Indirect Non-exempt Direct Labor Non-exempt Indirect Exempt Followers Leaders Do Better Application Selection 47% 43% 47% 0% 25% 50% 75% Indirect Non-exempt Direct Labor Non-exempt Indirect Exempt Competitors Technology
    12. 12. 12 © ARC Advisory Group Best Practices Lean and MES What are Your MES Systems? Leaders Use More MES 28% 28% 31% 25% 6% 6% 0% 6% 0% 20% 40% 60% 80% 100% Automation System Sandalone Application ERP Module Custom Application Followers Current Future 64% 68% 68% 86% 9% 5% 5% 5% 0% 20% 40% 60% 80% 100% Automation System Standalone Application ERP Module Custom Application Leaders Current Future Technology
    13. 13. 13 © ARC Advisory Group Best Practices Lean and MES Bottom line, is Technology an Impediment or Aid to your CI Program? 0% 0% 0% 18% 77% 0% 20% 40% 60% 80% Major Impediment Detraction No effect Helps Accelerates MES Leaders 6% 3% 9% 19% 9% 0% 20% 40% 60% 80% Major Impediment Detraction No effect Helps Accelerates MES Followers Leaders Successfully Apply Technology 0% 0% 14% 41% 32% 0% 25% 50% Major Impediment Detraction No effect Helps Accelerates ERP 9% 19% 16% 25% 6% 0% 25% 50% Major Impediment Detraction No effect Helps Accelerates ERP Leaders Followers 0% 0% 5% 32% 59% 0% 20% 40% 60% 80% Major Impediment Detraction No effect Helps Accelerates Automation 3% 3% 9% 22% 9% 0% 20% 40% 60% 80% Major Impediment Detraction No effect Helps Accelerates Automation Leaders Followers Technology
    14. 14. 14 © ARC Advisory Group Best Practices Lean and MES How and When are Metrics Calculated? First Pass Yield All Responses 0% 14% 5% 14% 14% 5% 23% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. First Pass Yield 0% 3% 9% 16% 6% 3% 0% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. First Pass Yield When is First Pass Yield Calculated? Leaders Followers How is First Pass Yield Calculated? Leaders Followers 5% 14% 45% 9% 14% 0% 20% 40% Automation System ERP MES Manually Calculated Spreadsheet Software First Pass Yield Sum = 87% 0% 3% 0% 28% 16% 0% 20% 40% Automation System ERP MES Manually Calculated Spreadsheet Software First Pass Yield Sum = 47% Leaders use More Metrics More Often Metrics
    15. 15. 15 © ARC Advisory Group Best Practices Lean and MES How and When are Metrics Calculated? Overall Equipment Effectiveness - OEE 0% 18% 27% 14% 5% 5% 23% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. OEE 0% 9% 6% 3% 3% 3% 0% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. OEE When is OEE Calculated? Leaders Followers 9% 0% 59% 9% 23% 0% 20% 40% 60% Automation System ERP MES Manually Calculated Spreadsheet Software OEE 0% 3% 6% 13% 16% 0% 20% 40% 60% Automation System ERP MES Manually Calculated Spreadsheet Software OEE Sum = 38%Sum = 100% How is OEE Calculated? Leaders Followers Leaders use More Metrics More Often Metrics
    16. 16. 16 © ARC Advisory Group Best Practices Lean and MES How and When are Metrics Calculated? Scrap and Rework 0% 23% 18% 18% 23% 0% 9% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. Scrap and Rework 0% 28% 9% 19% 3% 3% 0% 0% 20% 40% Quarterly Monthly Weekly Daily By shift Each hour About 15 min. Scrap and Rework When is Scrap & Rework Calculated? Leaders Followers 3% 6% 0% 25% 31% 0% 20% 40% Automation System ERP MES Manually Calculated Spreadsheet Software Scrap and Rework Sum = 65%5% 18% 45% 0% 23% 0% 20% 40% Automation System ERP MES Manually Calculated Spreadsheet Software Scrap and Rework Sum = 81% How is Scrap & Rework Calculated? Leaders Followers Leaders use More Metrics More Often Metrics
    17. 17. 17 © ARC Advisory Group Conclusions Embed BPM in Your MES & IT systems Automate Business Processes  Consistency  Change Sticks Manual Business Process Embedded Business Process Begin Analysis Identify Improvement Change Complete Performance Time Make Improvement Continuous What are the impediments to your continuous improvement program? All 106 Survey Respondents Source: Lean Institute Survey of Members 2/04 Primary Obstacle: 36% “Sliding back to old ways”
    18. 18. 18 © ARC Advisory Group Conclusions Empower the People who do the Work  Involve people throughout the enterprise‟s value stream  Provide real-time visibility and metrics Value Stream Map “Order to Cash” Identify in real-time when and where to “Go and See” 25% 26% 31% 34% 39% 59% 0% 20% 40% 60% Functions for Lean Six Sigma Quality/Safety Enforcement Build Based on Consumption Historical Data Flexibility for Changing Demand Real-time Visibility Primary Reasons for MES Primary Why did you buy a MES? All 106 Survey Respondents
    19. 19. This presentation is copyrighted by ARC Advisory Group (ARC). The information is proprietary to ARC and it may be not be reproduced without prior permission from ARC. Intersection of Lean and MES Best Practices Ralph Rio Research Director ARC Advisory Group rrio@arcweb.com Agenda •Research Findings •Recommendations

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