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TABLE OF

CONTENTS
PAGE
A GUIDE TO LEVERAGING MES
AND OPTIMIZING WIP
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TABLE OF CONTENTS
Section 1: Understanding WIP in Complex Discrete Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2: A Narrow Approach is Just the Start . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3: A Comprehensive Approach to MES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Quality Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Planning, Scheduling, and Dispatch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Production Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4: Securing the Gains with Operational Excellence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A GUIDE TO LEVERAGING MES
AND OPTIMIZING WIP
SECTION 1
Understanding WIP in
Complex Discrete
Manufacturing
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Understanding WIP in Complex Discrete Manufacturing
Improving Work in Process (WIP) inventory through real-time
visibility into shop work orders to increase throughput, production
velocity, and inventory has been an issue faced by complex discrete
manufacturers for many years. With the launch of lean methodolo-
gies and the adoption of software solutions that provide real-time
WIP insight, companies have allocated considerable resources to
continually improve performance over the past several decades.
This focus and effort is not surprising considering the scope of
the problem and potential benets. In complex discrete manufac-
turing, there can be $10,000,000+ tied up in WIP inventory across
100+ plants, meaning even small improvements can generate sig-
nicant benets.
Unfortunately, as many companies can attest, improvements are
elusive and there is no silver bullet for success. When tackling a
challenge like WIP, many companies begin with an approach that
is narrow and focused but end up struggling. Luckily, as companies
experiment and learn, it becomes evident that a broader and more
comprehensive approach is best for driving benets.
In this eBook we will examine why a narrow technology approach
often doesnt work for improving WIP and how a broader, more
comprehensive approach can drive signicant benets.
UNDERSTANDING WIP IMPROVEMENTS
What does it mean to improve WIP?
Increase Tact Time or number of WIP inventory turns per period.
How can the number of WIP inventory turns
per year be improved?
Reduce WIP inventory levels and/or
increase the velocity of WIP inventory.
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Understanding WIP in Complex Discrete Manufacturing
In an area of complex discrete manufacturing like WIP, where
many companies have been focused for many years, there are some
interesting new trends emerging.
First, WIP is an issue and challenge that impacts a broad majority
of complex discrete manufacturers. There is clearly a large portion
of companies that still struggle with manual processes and the need
for visibility.
In the most recent LNS Research Manufacturing Operations
Management survey, 100% of complex discrete manufacturers had
in place some type of Operational Excellence program and 75% of
these programs had some type of WIP focused initiative like Lean
Manufacturing or Six Sigma.
Additionally, 80% of complex discrete manufacturing respondents
both measure WIP and know their companys current performance,
COMPLEX DISCRETE MANUFACTURERS:
80% measure WIP
Average WIP improvement target: 33%
Potential Working Capital Savings: $10,000,000+
COLOR BY INDUSTRY COLOR BY HQ LOCATION COLOR BY COMPANY REVENUE
Discrete Manufacturing
F&B / CPG
Life Sciences
Asia / Pacic
Europe
Large: $1BB+
Medium: $250MM - $1BB
Small: $0 - $250MM
indicating the importance so many companies place on WIP and
the belief in the well quoted axiom, you cant improve what you
dont measure.
Finally, and perhaps most surprisingly, companies that are
looking to improve WIP want to improve big. Of those companies
with a goal to improve WIP, the average improvement target is a
truly dramatic goal of 33%, highlighting how behind the 8-ball
companies can feel if they dont have a good handle on WIP.
Other
Process Manufacturing
North America
Rest of the World
Research Demographics: 303 Respondents
SECTION 2
A Narrow Approach
is Just the Start
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A Narrow Approach is Just the Start
When attempting to optimize WIP it is important to think bigger
than just inventory management
Narrow technology solutions like inventory management and
optimization typically focus only on the ow of WIP. Unfortunately
this narrow approach only impacts a few stages of the production
process and does little to better enable the work force to address
issues that impact inventory as production is occurring (2 and 3).
With such a limited approach, when there are issues with main-
tenance, customer orders, suppliers, quality, production, or more,
the plant is ill-equipped to deal with these dynamics effectively.
AVERAGE WIP INVENTORY TURNS PER YEAR
4.5 Currently Implemented
4.4 Not Implemented
Instead, these solutions should be thought of as foundational and
providing the ability to implement a more comprehensive solution.
Not surprisingly, the companies having adopted WIP inventory
management and optimization have seen very little
performance improvement:
1. RECEIVING
2. RAW MATERIAL INVENTORY
3. MATERIAL STAGING
4. SUB-ASSEMBLY
MANUFACTURING PROCESS
5. MACHINE OPERATOR
6. MAINTENANCE
7. SUPERVISOR
8. FINAL-ASSEMBLY
MANUFACTURING PROCESS
9. TEST EQUIPMENT
10. QUALITY ASSURANCE
11. FINISHED GOODS INVENTORY
12. SHIPPING
13. MANAGEMENT OFFICE
SECTION 3
A Comprehensive
Approach to MES
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A Comprehensive Approach to MES
With the ability to go well beyond just Inventory Management and
Optimization with a modern, full featured Manufacturing Execution
System (MES), complex discrete manufacturers have more options
than ever for optimizing WIP utilizing a comprehensive approach to
effectively managing operations.
It also quickly becomes apparent that the majority of manufac-
turers are looking to fully utilize their MES systems wherever possi-
ble, leveraging the extended functionality of these systems beyond
Production Execution into functional areas of Quality, Planning,
Scheduling and Dispatching, etc. In some cases, companies have
deployed separate systems and applications for these functions and
have integrated them with smaller scope MES systems.
However, it is clear that this comprehensive set of capabilities in
the chart below are required to address todays manufacturing oper-
ations challenges.
The latest research is now showing the majority of manufacturers
are adopting multiple application areas - with over 50% of manufac-
turers having the top 3, and nearly one-third adopting the top 6.
As opposed to narrow Inventory Management or Tracking appli-
cations, these more adopted applications like Quality Management,
and Planning, Scheduling, and Dispatch span a much broader set of
processes in complex discrete manufacturing environments, and as
each application is examined more deeply it becomes apparent how
this broader approach drives more benets in WIP performance
than Inventory Tracking or Optimization alone.
Top Software Applications Used by Companies That Effectively Manage Their Manufacturing Operations
Quality Management
Planning, Scheduling, & Dispatching
Production Execution
Document Management
Manufacturing Process Management/Workow/
Electronic Work Instructions
Operations Intelligence/
Manufacturing Intelligence
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Quality Management
Quality Management touches almost every area of discrete man-
ufacturing including almost all aspects of the factory oor (1, 4, 5, 6,
7, 8, 9, 10, 13).
In particular, Quality Management can help reduce WIP levels and
increase WIP velocity by:
Early detection and reduction of supplier defects
Improve design for quality and manufacturing
Reducing scrap and rework
More efficient quality sampling and testing
Higher finished product quality
AVERAGE WIP INVENTORY TURNS PER YEAR
4.8 Currently Implemented
3.5 Not Implemented
Companies with Quality Management software enjoy a
37% faster Tact Time
1. RECEIVING
2. RAW MATERIAL INVENTORY
3. MATERIAL STAGING
4. SUB-ASSEMBLY
MANUFACTURING PROCESS
5. MACHINE OPERATOR
6. MAINTENANCE
7. SUPERVISOR
8. FINAL-ASSEMBLY
MANUFACTURING PROCESS
9. TEST EQUIPMENT
10. QUALITY ASSURANCE
11. FINISHED GOODS INVENTORY
12. SHIPPING
13. MANAGEMENT OFFICE
TACT TIME PERFORMANCE
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Planning, Scheduling, and Dispatch
Planning, Scheduling, and Dispatch enables a complex discrete man-
ufacturer to allocate demand to the optimal production assets. It also
connects the shop oor with what the rest of the business and enables
responding to supply and demand change on the y. (1~8, 11~13 ).
In particular, Planning, Scheduling, and Dispatch can help reduce
WIP levels and increase WIP velocity by:
Balancing demand across production assets
Responding to changes in supply, demand, and capacity
Adapting to changes in asset and labor availability
Coordinating production across business and
manufacturing processes
AVERAGE WIP INVENTORY TURNS PER YEAR
5.3 Currently Implemented
3.3 Not Implemented
Companies with Planning, Scheduling, and Dispatch soft-
ware enjoy a 61% faster Tact Time
1. RECEIVING
2. RAW MATERIAL INVENTORY
3. MATERIAL STAGING
4. SUB-ASSEMBLY
MANUFACTURING PROCESS
5. MACHINE OPERATOR
6. MAINTENANCE
7. SUPERVISOR
8. FINAL-ASSEMBLY
MANUFACTURING PROCESS
9. TEST EQUIPMENT
10. QUALITY ASSURANCE
11. FINISHED GOODS INVENTORY
12. SHIPPING
13. MANAGEMENT OFFICE
TACT TIME PERFORMANCE
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Production Execution
Production Execution is the core application functionality of MES
and can help complex discrete manufactures move to a paper-less
shop oor environment, make connections with other enterprise
applications like PLM or ERP, establish a detailed manufacturing
data model, and enabling track and trace of products and product
components. (1~13).
In particular, effective Production Execution can help reduce WIP
levels and increase WIP velocity by:
Enforcing established manufacturing procedures
Dynamically adapting to changes in supply, demand,
and capacity
Responding to changes in demand and capacity
AVERAGE WIP INVENTORY TURNS PER YEAR
5.2 Currently Implemented
3.5 Not Implemented
Coordinating production across business and
manufacturing processes
Companies with Planning, Scheduling, and Dispatch software
enjoy a 49% faster Tact Time
1. RECEIVING
2. RAW MATERIAL INVENTORY
3. MATERIAL STAGING
4. SUB-ASSEMBLY
MANUFACTURING PROCESS
5. MACHINE OPERATOR
6. MAINTENANCE
7. SUPERVISOR
8. FINAL-ASSEMBLY
MANUFACTURING PROCESS
9. TEST EQUIPMENT
10. QUALITY ASSURANCE
11. FINISHED GOODS INVENTORY
12. SHIPPING
13. MANAGEMENT OFFICE
TACT TIME PERFORMANCE
SECTION 4
Securing the Gains with
Operational Excellence
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Securing the Gains with Operational Excellence
Many complex discrete manufacturers are investing heavily in
improving WIP performance and the heat is on to achieve dramatic
and timely improvements.
Based on this new research, narrowly focused WIP Inventory Man-
agement and Optimization applications have not been shown to be
effective in improving performance. Instead, complex discrete manu-
facturers will be better served by taking a comprehensive approach to
MES solutions that are more broadly focused on improving multiple
areas of their manufacturing operations including WIP. A great place
to start are the three most broadly adopted application areas:
Quality Management
Planning, Scheduling, and Dispatch,
Manufacturing Execution Systems (MES)
The effective, integrated combination of the above applications
has been directly linked to companies being more effective at man-
aging their production operations at the plant, business unit and
enterprise levels.
Finally, even though this eBook is focused on technology, technol-
ogy is never as effective as it can be if it isnt supported with the right
leadership and business process capabilities. To learn more about how
leading manufacturers are effectively combing leadership, business
process, and technology in a comprehensive Operational Excellence
program, please see these other LNS Research publications:
Manufacturing Operations Management Best Practices Guide
Accelerating Operational Excellence for Global and
Regional Manufacturers
Authors:
Matthew Littleeld
President and Principal Analyst
matthew.littleeld@lnsresearch.com
Mark Davidson
Principal Analyst
mark.davidson@lnsresearch.com
Presented by:
lnsresearch.com
Connect:
LNS Research, 2014. All Rights Reserved.

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