Gaining Insights into Your Manufacturing Process

1. Gaining Insights into Your Manufacturing Process Jack Klasky CGS 16 Sept 2003

2. Some supply-chain terminology • Consumer – end-use buyer of soft-goods product • Retailer – entity selling to consumer • Manufacturer or Importer – designer/distributor • Supplier – fabricator (cutter/assembler/finisher) • Facilitator – shipper, service provider Some may fulfill one or more functions

3. Do you and your suppliers have a long-term Partnership or a Relationship? • Partnership • Relationship

4. Do you agree? “Fewer surprises can result in lower costs and happier customers” and “Increased visibility into the manufacturing process means fewer surprises”

5. Whether you manufacture in-house or use manufacturing partners • Unreliable deliveries contribute to lost profits • More cancelled orders • More markdowns • Fewer replenishment orders • Quality problems are less expensive to correct when they are identified at the source • Early detection…..fewer problems • Recurring problems reduced when supplier/fixes problems • Increased productivity significantly impacts manufacturing costs • More than most people realize • Manufacturing costs impact everyone’s bottom-line • Supplier and manufacturer

6. Manufacturing sources need systems for management control and cost performance • Plants without internal systems for productivity measurement and WIP tracking are “full of surprises” • Plants often lose money on specific orders • When bottlenecks cause problems, shuffling of cuts is a way to keep billings up • Some plants bid on work and then look for “get well” programs when cost, delivery or quality performance is bad • Low cost labor does not solve a plant’s problems • In fact, it can often exacerbate the reliability of a supplier

7. Manufacturers/Importers often ignore everything but the final result • Tracking is reduced to what is “shipped/invoiced” vs “not shipped/invoiced” • Quality is handled by return of goods to supplier or charge-backs • Productivity is not even a consideration…merely a given with which the supplier is left to deal

8. Are your suppliers part of a long-term Partnership or a Relationship? • Partnership • Work together to achieve joint objectives • Sharing of plans/information • Acknowledge problems look for best solutions • Don’t view success as having “put it” to the other guy • Relationship • Think of suppliers as independent • Relationship is a “zero-sum” game (I win, you lose) • Each order stands on its own

9. Surprises are reduced when WIP is tracked…Blue Cherry and ACS facilitate entry of WIP movement • Most rely on manual entry of WIP movement (e.g. cut progress at critical tracking points) • Is it feasible to get your suppliers to provide this info? • Accuracy depends on manual reporting of events which are not really discrete • Accuracy is questionable • Cuts don’t usually move intact through a tracking point • Not unusual for data reporting to be late or missed entirely • Result: WIP data is often not available….use actual shipping data instead (much reduced visibility)

10. Why does plant productivity impact your product’s cost? • Your product’s cost depends on the cost of production • Production cost is more than direct labor cost

11. Labor cost is not always the most dramatic determinant of product cost

12. Productivity should remain a big issue even for plants with low cost labor

13. Productivity is affected by many things Operator skills Motivation and efficiency Line balance issues Excess labor costs Quality problems Equipment issues Training Attendance problems Personnel turnover

14. A low bid is ephemeral if the factory cannot control costs • Large overhead costs in Latin America and Asia, are a leveling factor in competitiveness • Labor productivity plays a large role in remaining cost competitive • What are your plants doing to achieve higher levels of productivity? • Using meaningful incentives for productivity? • Motivating and encouraging productivity improvement? • Removing constraints which throttle productivity? • Maintain even workflow and production loading?

15. Accurate real-time WIP management accomplishes more than the obvious • Facilitates loading analysis and line balancing • Identifies bottlenecks in the manufacturing process – removal facilitates more production • Enables WIP control to keep cuts moving together – minimizes stragglers • Makes reporting WIP movement easier and more meaningful • Results in more on-time deliveries

16. Leadtec’s Blue Cherry Factory Control Solution provides automated low-cost real-time WIP reporting at key tracking points • Tracking at defined process points to scan WIP • Reports real-time WIP movement to factory personnel and simultaneously uploads info to BC/ACS • Requires minimal extra work by factory personnel • Gives everyone early warnings of lagging work before delivery dates are missed • Reported WIP accuracy and timeliness is much better than with manual reporting

17. Leadtec’s BC FCS provides real-time WIP and productivity enhancement to benefit all • Enables significant productivity improvement • Also provides complete WIP and line balancing to optimize production line efficiency • Includes T&A labor management and reporting • Facilitates SQC product management and improvement • Handles multiple incentive payment and motivational mechanisms • Provides actual product cost history, etc.

18. If your supplier has a complete BC FCS in its plant, they can…. • Achieve higher levels of productivity which result in lower overhead costs • Eliminate constraints as they occur, yielding more production and lower costs • Keep WIP moving according to schedules and priorities • Be better motivated to continually “measure” and “improve”

19. Savings from productivity improvementalone pays for a real-time plant system

20. Benefits of a real-time shop floor control system make cost justification easy • Lower cost of production • Productivity improvement is usually dramatic and has obvious cost savings (more units, less overhead cost per unit) • More reliable deliveries • Fewer bottlenecks, less WIP inventory, more control • Improved product quality • Immediate identification and responsibility at the source • Fewer surprises • Accurate and timely information at all levels

21. If your supplier is a partner, then consider the benefits of a complete system (top to bottom) • Automate the information flow, reduce work and increase visibility • Download cuts to the supplier • Upload WIP status during the manufacturing process • Identify quality issues before the product ships • Create a more productive manufacturing source

22. What can you do? • Do nothing…live with the problems • Get supplier(s) to collect and share WIP information • Move toward Partnerships • Motivate supplier(s) to become more productive and proactive about problems