The manufacturing industry is reaping fantastic growth. The Institute for Supply Management’s (ISM) monthly Manufacturing Report on Business uses the PMI to measure growth in the industry. The February 2017 PMI was the highest monthly PMI since August of 2014. (Read more details about the report here.)
The growth is worthy of celebration, but it does not come without setbacks. According to the article linked above, supplier deliveries slowed at a faster rate, and for the tenth consecutive month. Clearly, growth will cause manufacturers to make adjustments to meet increasing demands. When they can’t, they as suppliers have longer lead times, but also, if their suppliers aren’t delivering parts on time, their own operations are affected. The question is:
How can a manufacturer take control of its own lead times if it depends on a supplier that struggles to deliver on time?
Joseph H. Berk of J.H. Berk and Associates, a company of process and design improvement specialists, authored “Delivery Performance Improvement.” It goes into great detail of six delivery performance shortfalls and how to address them. In our two-part article series, we will focus on two of the six “Ps” that manufacturers can consider to compensate for late supplier deliveries. This first part will focus on procurement.
Procurement addresses hidden problems that may exist in the manufacturer’s method of planning and purchasing needed supplies. Berk focuses on the use of Manufacturing Resource Planning (MRP) systems. MRPs are an efficient way to keep track of everything happening in a factory, but the information that managers use from its reports and findings are only useful if operations run at 100% efficiency. If a plant isn’t running at a perfect rate, it falls behind the MRP schedule, which results in delinquencies. For this reason, it is important to also incorporate the human perspective. Only humans can anticipate and adjust based on information like supply and demand.
When it comes to late deliveries, Berk states, “Our experience indicates, however, that supplier failures frequently are not the reason materials are missing when needed. Usually, the failures are induced by the buying organization.”
Of course, supplier lead times are indeed a valid factor during a climate of growth. However, if the above statement is true, we can also apply Berk’s advice on the matter to ensure that as a buying organization, you are doing everything within your control to receive shipments on time.
Generally speaking, the buyer should A) track the performance of suppliers and deliveries – not only whether the supplier meets the purchase order date, but also whether the material arrives on time, and B) remain aware of conditions that will influence the supplier’s ability to deliver on time, and adjust buying schedules accordingly.
Berk describes these improvements as low-hanging fruit for improving delivery performance. In other words, managing this process can be an effective and easy fix. Here are recommendations that Berk’s company makes for those who want to eliminate buyer and material planner mistakes:
- “Define and publish internal lead times for planned requisition review, requisition release, and purchase order placement.
- Develop a report that shows all instances in which the above lead times are being violated, and identify and correct the causes of the violations. We recommend developing these reports and tracking the data from both company and individual buyer and planner perspectives.
- Develop a report that shows all instances in which purchase orders have due dates that do not support the MRP need date, and identify and correct the issues inducing such non-supporting purchase orders. We recommend developing this report and tracking the data from both company and individual buyer perspectives.
- Develop a report that shows all unplaced purchase orders. We recommend developing this report and tracking the data from both company and individual buyer perspectives.
- Constantly track supplier lead times and immediately modify the MRP data base to show changes as they occur.”
In essence, you use all of your resources available,- MRP data, supplier data, and knowledge of the industry – to make informed decisions when purchasing supplies. This will help manufacturers gain control of the deliveries they depend on to maintain their own lead times.
This is one of many suggestions that support Berk’s overall solution, which is to implement standards across the board. Standardization (like Lean, QRM, etc) has helped manufactures gain visibility that results in efficiency and improved productivity.
Load Mover Inc. helps manufacturers identify opportunities to improve manual processes with battery-powered tugs. If you’re looking to improve productivity on the plant floor, talk to us about your processes. We will help you determine if this equipment will make an impact on your performance. Call us at 952-767-1720, or email firstname.lastname@example.org.