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MRP-II, CIM, JIT/TQC, AND OTHER FASCINATING VE APPLICATIONS

Lance J. B a c h l i , PE, CVS, CPIM President

Lance B a c h l i & Associates, L t d . Des P l a i n e s , I l l i n o i s

ABSTRACT VALUE ANALYSIS IN MANUFACTURING

This paper describes how any company can be a World-Class c o m p e t i t o r by usi n g Value A n a l y s i s (VA). I t notes where VA can be used i n manufacturing companies, but most o f the paper e x p l a i n s how VA i s used t o s e l e c t or develop o t h e r t o o l s , namely MRP, MRP-II, J I T , CIM, CIE, DRPS, Robotics and AGVS.

COMPETITIVE MANUFACTURING IN THE WORLD MARKET

Every manufacturing company i n t h i s c o u n t r y must a g g r e s s i v e l y work a t l e a d i n g t h e w o r l d i n p r o d u c t design, manufacture, d i s t r i b u t i o n and s e r v i c e i f they want t o compete i n today's w o r l d economy. World c o m p e t i t i o n i s c o n t i n u o u s l y doing reverse e n g i n e e r i n g on our produ c t s , procedures and methods. Many can j u s t d u p l i c a t e our products using t h e i r lower-cost resources and c l a i m our markets. Others make b e t t e r use of t h e i r resources by using i n g e n u i t y and some t o o l s t o improve upon what we have done and, a g a i n , c l a i m our markets.

Both of these processes take t i m e . Time i s the key t o U.S. manufacturing's s u r v i v a l . We must use t h i s time t o our advantage. Our pri m a r y means f o r com-p e t i n g i s t o c o n t i n u o u s l y s t a y ahead of ot h e r s by g e t t i n g t he g r e a t e s t p o s s i b l e value from our resources i n doing what we do best; c r e a t i n g new ideas, techniques, processes, p r o d u c t s , e t c . We must do t h i s o f t e n and q u i c k l y . The process of VA i s the most powe r f u l t o o l a v a i l a b l e t o help manufacturing companies do j u s t t h a t .

A l l p o r t i o n s of a manufacturing company's resources can be b e t t e r u t i l i z e d t o produce more and b e t t e r o u t p u t w i t h the a i d of VA. VA also works w e l l w i t h other processes, systems, techniques and methods.

PRODUCTION OUTSIDE PRODUCTION SUPPLIERS

DEVELOPMENT/OPERATING CYCLE FOR MANUFACTURING ORGANIZATIONS

Figure 1.

Figure 1 represents the development, and o p e r a t i n g c y c l e of a manufacturing company i n s i m p l i f i e d form. Each o r g a n i -z a t i o n has one or more f u n c t i o n s which c o n t r i b u t e t o the o v e r a l l goal of making a s u b s t a n t i a l p r o f i t f o r t h e stockholders through t h e manufacture and sale of products.

VA can be used i n each area of the company, sometimes i n s e v e r a l ways. Where i t i s a p p l i e d depends upon the needs of the p a r t i c u l a r company i n v o l v e d . The general r u l e i s t o use VA wherever resources are too c o s t l y f o r the value of the r e s u l t s being achieved.

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1989 SAVE CONFERENCE PROCEEDINGS

Many papers have been w r i t t e n about VA a p p l i c a t i o n s f o r Market Research (one i s re f e r e n c e d , 3 . ) , Product Design and Purchasing groups, so these areas w i l l n ot be discussed. Other areas of manufac-t u r i n g i n e f f i c i e n c i e s have been approached by o t h e r systems and processes. The remainder o f t h i s paper w i l l look a t some of these.

PRODUCTION PRODUCTIVITY IMgROVEMENT

The p r o d u c t i o n groups of a manu-f a c t u r i n g company t y p i c a l l y c o n t a i n t he l a r g e s t amount of resources. Therefore, they o f f e r t h e b i g g e s t area f o r maximizing o u t p u t and m i n i m i z i n g c o s t s . VA has o f t e n been used as a t o o l f o r improving p r o d u c t -i v i t y by l a r g e amounts, t y p i c a l l y 50% and sometimes c o n s i d e r a b l y more.

The p r e f e r r e d approach i s t o do a VA study on t h e e n t i r e manufacturing opera-t i o n t o organize a p l a n t w i t h regard t o the b i g p i c t u r e , and t o p i n p o i n t areas t h a t are worth f u r t h e r i n - d e p t h s t u d i e s . During the i n i t i a l study t he whole o p e r a t i o n can be analyzed based upon any c o n d i t i o n s t h a t may be im p o r t a n t t o t h a t company. For example:

- planned f u t u r e p r o d u c t s . - F l e x i b l e Manufacturing. - Just-In-Time o p e r a t i o n s . - Group Technology. - make versus buy. - any ot h e r c o n s i d e r a t i o n s .

The f o l l o w - u p s t u d i e s on sub-opera-t i o n s can be performed c o n s i d e r i n g :

- a l l of the preceeding. - o v e r a l l study r e s u l t s . - value mismatch. - o u t - o f - d a t e methods. - o t h e r s of importance.

This approach not on l y improves p r o d u c t i v i t y , but o f t e n reduces many o t h e r costs of manufacturing such as, energy, m a t e r i a l , equipment, support, overhead, and more.

PRODUCTION SELECTING OTHER SYSTEMS

Many systems have been a p p l i e d , many more have been t h e o r i z e d , and s t i l l more w i l l evolve i n the f u t u r e . Examples of systems t h a t companies are c o n s i d e r i n g are MRP, MRP-II, JIT/TQC, KANBAN, SPC, Q u a l i t y C i r c l e s , Q u a l i t y programs from Deming, Juran, Crosby, Taguchi, e t c . , FMS, SMED, EMI, CAD/CAM/CAE, CIM, CIE, DRPS, AGVS, Robotics, and the l i s t goes on.

With a l l of the systems, techniques and methods a v a i l a b l e t o manufacturing companies, which are best f o r yours? How do you s e l e c t t he r i g h t one(s)? Which combination w i l l g i v e the b i g g e s t bang f o r the buck?

Many of these systems accomplish what they were intended t o do and many have not. Sometimes expe c t a t i o n s are too h i g h , but o f t e n the cause i s a lack of having a sound procedure f o r s e l e c t i n g and i n s t a l l -i n g systems.

Here again. Value Analyzing the needs, wants and resources of the company i s a s u p e r i o r method f o r d e c i d i n g . Using the VA process provides the means t o analyze systems so o r g a n i z a t i o n s can choose and implement the system(s) t h a t p r o v i d e the g r e a t e s t value f o r the company.

Gen e r a l l y , t he steps f o r a n a l y z i n g systems t o g e t t h e best value a re:

Define the g o a l ( s ) t o be achieved by the study.

E s t a b l i s h a scope or framework f o r t he study.

Determine r e s t r i c t i o n s (none i s b e s t ) . Determine the f i n a n c i a l c o n s i d e r a t i o n s :

- C a p i t a l i z a t i o n l i m i t s and i t s c o s t s . - Operating l i m i t s (people & d o l l a r s ) . - Return On Investment requirements.

Determine customers, users, and the c h i e f buying i n f l u e n c e s .

Determine and get the best people f o r the study. I n c l u d e as many system implementers as p o s s i b l e .

Develop a schedule t h a t w i l l f i t every person i n v o l v e d .

Reserve the l o c a t i o n f o r the study t h a t i s removed from i n t e r r u p t i o n s .

Determine and f i l l a l i s t of a l l of the necessary items f o r the study.

N o t i f y a l l team members, t h e i r bosses and upper management t h a t team member attendance i s mandatory, and e x p l a i n a l l aspects of the study.

Begin the study by deter m i n i n g the company f u n c t i o n s t o be accomplished r e g a r d l e s s of the systems being e v a l u a t e d .

Develop a FAST diagram f o r the above. I d e n t i f y needs and wants f u n c t i o n s f o r

the system(s) being s t u d i e d . Set a value on a l l of the f u n c t i o n s .

Normally, t h i s i s the lowest c o s t t o r e l i a b l y perform the f u n c t i o n s .

Evaluate the performance of the systems t h a t s a t i s f y t h e needs and wants f u n c t i o n s .

E s t a b l i s h the f u n c t i o n costs (both f o r purchase and ope r a t i o n ) f o r each of the systems being evaluated.

Compare the a l t e r n a t i v e s and s e l e c t the best t h r e e .

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Report the s e l e c t i o n s t o management w i t h s u f f i c i e n t d e t a i l of perform-ance, q u a l i t y , c o s t s , e t c . and the proposed implementation p l a n ( s ) .

Press f o r a management d e c i s i o n t o proceed w i t h i m p l m e n t a t i o n .

Implement the s y s t e m ( s ) , using as many of the VA team members as p o s s i b l e .

This approach helps t o organize everyone's t h i n k i n g so t h a t the best p o s s i b l e s o l u t i o n s can be obta i n e d i n the s h o r t e s t time w i t h t he l e a s t use of resources. F o l l o w i n g are d e s c r i p t i o n s of a few ot h e r t o o l s and how t h i s VA process i s used t o s e l e c t t he best f o r i n d i v i d u a l companies.

MRP

M a t e r i a l Requirements Planning (MRP) i s a time-phased p r i o r i t y , p l a n n i n g and scheduling system t h a t uses product s t r u c t u r e data, i n v e n t o r y s t a t u s data, open order data and master p r o d u c t i o n schedule i n f o r m a t i o n t o c a l c u l a t e r e q u i r e -ments f o r m a t e r i a l s .

MRP was i n t r o d u c e d i n the l a t e 1960's. I t was a major step forward over p r e v i o u s methods f o r p r o v i d i n g b e t t e r c o n t r o l over m a t e r i a l requirements f o r t he manufacturing process o f any company. I t was o r i g i n a l l y a manual system, which became computerized. There are many ve r s i o n s of MRP on the market from which companies may choose i f they decide t o implement such a system.

MRP systems can be implemented as a stand-alone system or as a p a r t of a l a r g e r system c a l l e d MRP-II.

MRP-II i s a closed loop system t h a t c o n t a i n s the f o l l o w i n g sub-systems shown i n Figure 2.

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Waste i s a n y t h i n g o t h e r than t he minimum amount of equipment, m a t e r i a l s , p a r t s , space, and worker's t i m e , which are a b s o l u t e l y e s s e n t i a l t o add value t o the p r o d u c t .

To achieve an e f f e c t i v e l e v e l o f JIT o p e r a t i o n s takes a l o t of tim e , t r i a l s , e r r o r s and c o r r e c t i o n s , and i s never q u i t e f i n i s h e d . I t i s , t h e r e f o r e , a continuous improvement program.

1. The o v e r a l l CIM o p e r a t i o n . 2. A separate VA study f o r each of the

th r e e a b o v e - l i s t e d areas plus a study of the s o f t w a r e , hardware and data-bases i n v o l v e d .

3. The above s t u d i e s may r e q u i r e more VA st u d i e s i n separate areas under each category, depending upon co m p l e x i t y .

CIE

U n l i k e most MRP-type systems, JIT i s not a set of computer programs. However, t h e r e are some JIT techniques used by some companies t h a t may be a p p l i e d t o o t h e r s . The remainder must be developed in-house f o r each p a r t i c u l a r company's needs.

Here, again u s i n g the VA s e l e c t i o n process, along w i t h Value-Added s e n s i -t i z i n g , can produce the best r e s u l t s f o r i n s t i t u t i n g JIT i n any company. Normal VA s t u d i e s are al s o u s e f u l f o r e s t a b l i s h i n g J I T .

Value-Added s e n s i t i z i n g can al s o be c l a s s i f i e d as the e l i m i n a t i o n of waste. Shigeo Shingo c l a s s i f i e d the seven wastes t h a t should be e l i m i n a t e d .

1. Waste of o v e r p r o d u c t i o n . 2. Waste of w a i t i n g . 3. Waste of t r a n s p o r t a t i o n . 4. Waste of processing i t s e l f . 5. Waste of sto c k s . 6. Waste of motion. 7. Waste of making d e f e c t i v e products.

The e i g h t h waste has been described as t he "waste of managing the seven wastes." Much of the time of f i r s t and second l e v e l s u p e r v i s o r s i s spent doing j u s t t h a t .

Computer I n t e g r a t e d E n t e r p r i s e (CIE) i s the i n t e r f a c i n g of most of the computer systems of a business t o op t i m i z e resource u t i l i z a t i o n and b e t t e r c o n t r o l t he b u s i -ness. This allows the best combination of a c t i v i t i e s t o :

A. Maximize customer s e r v i c e .

B. Maximize the e f f i c i e n c y and e f f e c t n e s s of company o p e r a t i o n s .

C. Minimize resource investment.

The VA approach i s the same as f o r CIM except t h e r e are more items t o con s i d e r , which make i t more complex. However, the VA approach organizes and s i m p l i f i e s the process so t h a t the best s o l u t i o n s are o b t a i n a b l e .

AGVS

Automated Guided V e h i c l e Systems (AGVS) are computer c o n t r o l l e d p i l o t l e s s v e h i c l e s used f o r t r a n s p o r t i n g m a t e r i a l and u s u a l l y l o a d i n g and unloading m a t e r i a l or p a r t s f o r processing a t automated w o r k s t a t i o n s .

CIM

Computer I n t e g r a t e d Manufacturing (CIM) i s the o r d e r l y i n t e g r a t i o n of computer-based o p e r a t i o n s t o o p t i m i z e resource u t i l i z a t i o n . Areas t h a t are t y p i c a l l y i n v o l v e d are:

Product and Process Design.

Manufacturing Planning and C o n t r o l .

Production Process.

The VA process f o r de t e r m i n i n g the best approach f o r developing a CIM system t h a t best f i t s a companies needs, i s t o have s e v e r a l VA s t u d i e s t h a t examines items i n the f o l l o w i n g o r d e r :

AGVS systems t y p i c a l l y r e p l a c e con-veyors and/or t r a n s p o r t equipment, and load i n g / u n l o a d i n g equipment. They o f f e r g r e a t f l e x i b i l i t y , and pr o v i d e u s e f u l experience f o r f u t u r e automation. On the nega t i v e s i d e , they are c o s t l y and t y p i c a l l y r e q u i r e balanced p r o d u c t i o n .

To make an AGVS system work e f f e c -t i v e l y r e q u i r e s c a r e f u l p l a n n i n g , changes t o h i s t o r i c management and o p e r a t i o n a l p h i l o s o p h y , worker m o t i v a t i o n and t r u e teamwork. Operator i n t e r f a c e w i i 1 i n f l u -ence system performance.

When doing a VA s e l e c t i o n of an AGVS, compare:

Performance improvements achieved by

the systems.

Costs.

Q u a l i t y r e q u i r e d of ou t p u t .

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Ergonomics of a p p l i c a t i o n s .

F l e x i b i l i t y requirements.

Future Automation.

ROBOTICS

I n d u s t r i a l Robots can do more than AGVS. The r e f o r e , they are c o s t l i e r , and they are f a r c o s t l i e r than people. The use of Robots r e q u i r e s e x p e r t s i n computer science, communications and data base technology.

Robots are very u s e f u l , and o f t e n c o s t e f f e c t i v e , when used i n hazardous areas such as i n : Areas t h a t are too hot or c o l d f o r

humans t o be e f f e c t i v e . Areas c o n t a i n i n g t o x i c fumes and/or

chemicals. High r a d i a t i o n areas. Outer space.

Robots are al s o used when: Planning f o r automation. Developing s k i l l s . Developing r o b o t i c technology. Encouraging long-term and/or h i g h - r i s k

p r o j e c t s .

Items t o con s i d e r : Determine i f t h i s i s a h i g h - c o s t i t e m . I s the h i g h c o s t due t o human hazard? Develop a master p l a n . Combine manufacturing and design e n g i -

neers on the p r o j e c t . Perform s i m u l a t i o n s t u d i e s on the im-

pact of u s i n g Robots. Develop a team of Robotics e x p e r t s . Learn and b u i l d upon past experience.

When doing a VA s e l e c t i o n of Robots, compare:

Performance ( P r o d u c t i v i t y ) .

Costs ( i n c l u d i n g h a z a r d s ) .

Q u a l i t y r e q u i r e d of o u t p u t .

Ergonomics.

Future automation.

DELIVERY

The d i s t r i b u t i o n systems of manu-f a c t u r i n g companies have f o r many years been an o p p o r t u n i t y area f o r VA s t u d i e s . Results have been j u s t as good here as i n the o t h e r areas o f companies. I n a d d i -t i o n , commercially a v a i l a b l e d i s t r i b u t i o n systems have been analyzed f o r best v a l u e .

DRPS

D i s t r i b u t i o n Requirements Planning Systems (DRPS) are a v a i l a b l e t h a t d e t e r -mine the needs t o r e p l e n i s h i n v e n t o r y a branch warehouses. F r e q u e n t l y , a t i m e -phased order p o i n t approach i s used where the planned orders a t the branch warehouse l e v e l are "exploded" v i a MRP l o g i c t o become gross requirements on the s u p p l y i n g source.

When doing a VA s e l e c t i o n of DRP systems, compare:

Performance.

Costs.

The MRP/MRP-II system used.

Push or p u l l d i s t r i b u t i o n .

Product markets: c u r r e n t and f u t u r e .

System growth p o t e n t i a l .

SERVICE

Service groups have customer c o n t a c t even more than Marketing. Determining the values t h a t customers place on the s e r v i c e f u n c t i o n s can be acquired u s i n g t h e same techniques as done i n VA f o r marketing. I n f a c t , the same market research session w i t h d i r e c t customer c o n t a c t can al s o be used f o r g e t t i n g i n p u t about customers' value o f s e r v i c e f u n c t i o n s . The r e s u l t s can be used as i n p u t f o r VA s t u d i e s i n Design, P r o d u c t i o n and D i s t r i b u t i o n .

STRATEGIC PLANNING DOING THINGS RIGHT VS. DOING RIGHT THINGS

S t r a t e g i c p l a n n i n g has been done using VA by many companies. The process i s the same but the r e s u l t s are f a r g r e a t e r r e g a r d i n g the o v e r a l l h e a l t h o f the company. Here's why.

A business w i l l probably d e c l i n e i f i t o n l y improves i t s e f f i c i e n c y (doing t h i n g s r i g h t ) .

A business w i l l probably s u r v i v e i f i t o n l y improves i t s e f f e c t i v e n e s s (doing the r i g h t t h i n g s ) .

A business w i l l probably grow i f i t improves both e f f e c t i v e n e s s and e f f i c i e n c y (doing the r i g h t t h i n g s r i g h t the f i r s t t i m e ) . This i s the goal o f VA as d e f i n e d by L a r r y M i l e s and as used i n p r a c t i c e .

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Using VA a t top l e v e l s f o r s t r a t e g i c p l a n n i n g , along w i t h c u r r e n t processes, can be the d r i v i n g f o r c e f o r making companies w o r l d - c l a s s c o m p e t i t o r s .

MARKET RESEARCH

/ \ \ \ PRODUCT H DESIGN

PRODUCTION OUTSIDE PRODUCTION SUPPLIERS

VALUE ANALYSIS IN THE DEVELOPMENT/OPERATING CYCLE

FOR MANUFACTURING ORGANIZATIONS

Figure 3.

CONCLUSION

Figure 3 g r a p h i c a l l y works i n the development c y c l e of a manufacturing c very p o w e r f u l t o o l whose bottom l i n e i s dra m a t i c , company can reduce costs p r o d u c t s , processes, e t c . help your people generate ideas and s e l e c t the ot h e r stay ahead of c o m p e t i t i o n .

shows how VA and p r o d u c t i o n

ompany. VA i s a e f f e c t on the With VA, your

w h i l e improving , and i t w i l l

c r e a t i v e , new t o o l s needed t o

REFERENCES

1. Thomas E. Vollmann, W i l l i a m L. Berry , D. Clay Whybark, Manufacturing Plan-n i n g and C o n t r o l Systems, Richard D. I r w i n , I n c . , Homewood, I l l i n o i s , 1984.

2. Robert W. H a l l , A t t a i n i n g Manufac-t u r i n g E x c e l l e n c e , Dow J o n e s - I r w i n , Homewood, I l l i n o i s , 1987.

3. Thomas F. Cook, CVS, Determine Value Mis-Match by Measuring User/Customer A t t i t u d e s , SAVE Proceedings, 1986 I n t e r n a t i o n a l Conference, p. 145-152.

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