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Move over traditional MRP
Make way for demand driven manufacturing
Demand driven manufacturing is not a new concept as the Japanese went down this route back in the 80s. Europe, however, is slowly wakening up to moving away from batch production as demands from customers create too many demands on the inflexibility of traditional manufacturing methods.
To get more of an idea of how demand driven manufacturing solutions can helpmanufacturers we spoke to Olof Agervald, business analysis director for IBS, a leading provider of specialised business solutions that optimise and increase the efficiency of the entire supply chain.
Manufacturers are subject to massive pressures due to the need for driving down costs and increasing efficiency. Cost reduction and efficiency improvements are not bad things for any company to exercise, but these pressures invalidate the batch manufacturing product cost approach. Moreover, companies struggling to serve their customers using purely MRP methodology wont be able to meet the demands for agility and responsiveness that consumers at the end of the supply chain are issuing.
Agervald says that today, costs gathered throughout the supply chain are more important than optimising production within the four walls of the factory and with product lifecycles decreasing, it means that manufacturing is increasing in complexity. For the manufacturer, this translates into a need to manage customer demands/expectations and respond accordingly.
With short product lifecycles in vogue due to shifts in buying trends and marketers attempting to best guess what consumers will desire from season to season, the supply chain does not want items sitting on shelveswhether or not these items are finished products, components or subassemblies. Therefore, there is a real need to reduce inventory throughout the supply chain. If we look at carmakers, for example, we see an increase in supplying customised products, with consumers able to specify everything from the colour pallet for bodywork and interiors to choosing the latest electronic gadgetry to site in the dashboard. We even see customisation creeping into mass-produced goods too, where certain versions of items of wide ranging types being made available through different outletsbe it food, FMCG, etc.
Add to this is the need to reduce capital employed within the manufacturing enterprise and the trend of outsourcing manufacturing to lower-cost establishments overseas, which increases lead timessomething that customers dont wantresults in further sizeable obstacles being laid before the manufacturer. This means that customer management has to move up several rungs of the efficiency ladder, with the best companies staying very close to their customers; more stress than most want to cope with.
So, where do we go from here?
In reality, the way forward to overcome difficulties and better serve customers is to adopt demand driven manufacturing principlesmaking product as close to the point of order, anticipating needs, and delivering within an acceptable time frame.
If we review the manufacturing landscape, it looks something like this:
Optimising within the four walls of the factory is no longer a workable solution
Outsourcing may be seen as important in lowering price of the finished product because of reduced labour costs, but causes further problems by increasing lead times in a world where decreasing lead times are necessary to satisfy the customer
Demand driven manufacturing provides a way forward for taking control.
Reacting to demand
IBS offers a modular solution called ASW Manufacturing, which is the companys main supply chain package. ASW Manufacturing was invented with demand driven manufacturing in mind. The package includes IBS Virtual Enterprise (a collaborative commerce solution, with the ability of EAI [enterprise application integration] software and equipped with superior business logic) and IBS Integrator (a powerful tool for systems integration, data management, data replication and synchronisation) for connecting with various supply chain partners, including customers, subsuppliers and financial institutions.
Agervald stresses that ASW Manufacturing was developed as a demand-driven manufacturing solution geared to handle very fast manufacturing cycles and reportedly is well able to handle short lead times, small orders of custom products and other customer demands. This solution reportedly is a major advancement on MRP. This is because with MRP attaining and maintaining agility requires a lot of replanning to meet customer needs (IBS does offer flexible rescheduling tools that integrate with existing MRP systems for companies that have already invested in such systems).
The IBS solution has built-in event or alert management, with triggers in the system to warn users of problems in the supply chain, enabling them to respond accordingly before it impacts the customer. Agervald calls this manufacturing management by exception.
When you look into the supply chain says Agervald, business intelligence is very important. This system enables visibility of accurate data throughout the supply chain right down to sub-supply organisations. Traditional MRP systems reportedly cant do this.
Europes future in manufacturing
So why do manufacturers still buy traditional MRP systems? Agervald says its amazing that this still continues and he reiterates the fact that Japan changed the face of manufacturing theory and practice back in the 1980s, but, on the whole, Europe remains a closed, traditional environment.
Agervald says demand driven manufacturing, with some investment in plant, could save manufacturing in Europe. He reeled off some pertinent examples to support his opinion (all of these can be found in greater detail on the companys website www.ibs.net).
Lear Corporation, for example, supplies Volvo with plastic components and interior detailing such as dashboards. Lear does not know what is needed by Volvo before the car is ready for painting. It is at this point that the dashboard is specified. Lear then delivers the parts just-in-time for completion, and all within four hours of receiving the order.
Among its product portfolio Maxell Europe produces storage media ranging from tapes, CDs to DVDs. These are commodity products, but nevertheless customers require that the company has a flexible supply system.
Sardus is manufacturer of specialised foods, including pat and sandwich fillings. These are all fresh-food products that have short lead times and short product lives, and all are subject to seasonal demand too. From order to manufacture to delivery needs an agile process.
Galexis is a pharmaceutical distribution company dealing with its home market in Switzerland. This is a fast-moving business supplying local pharmacies up to several times per day.
In closing our conversation, we discussed the need for complete understanding of internal needsfrom operations to IT to board leveland how everyone has to be on the same wavelength. Agervald commented: collaboration throughout the supply chain is imperative, but collaboration within the company is just as important. Manufacturing & Logistics IT challenges subscribers to comment on the issues facing their organisations and whether or not they believe demand driven manufacturing offers a solution to them; email firstname.lastname@example.org