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Executive Summary tion has extended the supply chain and the dual
focus of business growth and cost reduction has
In todays globally-leveled playing field, forces
led manufacturers to seek increased operational
such as consumer activism, demographic change
efficiency numerous questions have emerged:
and technological evolution are forcing industry
leaders to continuously evaluate their strategies
to achieve or retain competitive advantage.
How can we become faster and more nimble
while being the low-cost producer?
These forces are even stronger in the manufac-
turing industry, and they are exacerbated by the How can we satisfy the ever-changing expecta-
unintended consequences of accelerating global- tions of customers for customized ordering and
ization. For instance, as manufacturers work to real-time tracking delivery at Web speed?
improve performance in contextual areas such as How can we implement high-velocity, quick-
marketing, service and technology, they inadver- response order-to-delivery processes to
tently overlook the core function of their business avoid losing business to faster-performing
manufacturing where competitors the world global competitors?
over are continuously making strides to increase
capacity, cost efficiency, quality or some combi- Typical answers to the above questions have
nation thereof. focused on keeping finished goods inventory in
stock and increasing distribution channel efficien-
In the context of this white paper, manufactur- cy. By having products at the ready, shipment to
ing refers to the processes and entities that customers can accelerate. However, the downside
create and support products for customers. of finished goods inventory is the large amount of
Manufacturing encompasses product develop- working capital required to establish it, the risk
ment, design, production, production support and of obsolescence or non-moving products and the
delivery. cost of storage and logistics. In many cases, even
with a large inventory of finished goods, indus-
Manufacturing has changed radically over the try leaders dont always have what the customer
last 20 years, and rapid changes are certain to really wants.
continue for the foreseeable future. As globaliza-
14%
New product introduction
28%
30%
Product quality
28%
39%
Increasing operational costs
34%
0 10 20 30 40 50
Percent of respondents
Base: 150
Source: Aberdeen Group, 2011
Figure 1
Single-Piece Batch
Customer Process Queue Material
Delivery Times Wait Time Movement
Time
Batch Size Time
Single
Customer Single Piece
Piece Queue
Delivery Process Wait Time Movement
Time
Time Time
Figure 3
businesses do not follow the purest flow the flow manufacturer can become an element
concepts, demand is still driven by the final of the overhead that is applied proportionally
end-product, and in many cases, subassem- to each product.
bly planning is eliminated by linking the pro-
cesses together and creating feeder lines. This
Better floor space utilization: By linking and
balancing manufacturing processes into flow
makes production planning much simpler and lines or cells and the related reduction in WIP
direct. Also, in many cases, the number of sub- inventory and a thorough housekeeping effort
assembly levels in the bill of materials (BOM) manufacturers can reduce factory floor space
could be made phantom, as there is no need by 20%-plus, in our experience.
to transact at every BOM level (depending
on the level of tracking/accounting that the Characteristics of Successful Flow
business needs). This results in the elimination Implementation
of planning for those subassemblies. The net
The following eight characteristics are common
result is highly simplified production planning
to successful manufacturing flow adoption, inde-
and sequencing.
pendent of the type and nature of the business:
Effective cost accounting: Cost-accounting
methods can be simplified with flow manu- 1. Top-management commitment and involve-
facturing. Because the lead time through a ment: Flow manufacturing is transformational
flow facility is consistent, repeatable and not on many levels and can lead to fundamental
volume sensitive, activity-based costing (ABC) changes in the way success is measured (KPIs
can be more easily introduced. Labor costs for or metric changes). However, it is often difficult
>> Non-hierarchical decision-making: The 7. The right measurements: While the specific
work culture fosters both bottom-up and measurements used may vary from one
top-down collaboration. Individuals in the operation to the other, one characteristic that
line, both workers and supervisors, are em- is common to all successful flow adopters is
powered to make decisions. Communica- institutionalizing the right metrics.
tion is open and transparent.
>> Supplement monthly metrics with daily
>> Multi-skilled line workers: Workers are operational ones.
also willing to be trained on new skills, as
required.
>> Create a dashboard of key performance
indicators and track them.
Hence, a clear change management program 8. A proper physical layout: Another basic, but
is also critical for successful implementation of often ignored, characteristic of a successful
flow manufacturing. flow implementation is the physical work
Quick Take
Tips for Selecting Technology Enablers
Conduct an internal study to understand the >> Engage third-party product-agnostic con-
gap between what you have and what you need sultants if resources are available.
for flow manufacturing:
Dont buy products based on future promises.
>> Features and functions. The industry is too dynamic for predictions to
>> Integration needs. be accurate.
Assess need
Develop business case Select line for pilot implementation
Rationalize Train workers
Select technology enablers
ionalize
Rat Se
Roll out to entire 1 le
manufacturing shop 2
ct
ut
lemen
lO
mp
Rol
7
ta
I
Change line setup
Flow
tion
3 Establish new KPIs/metrics
Set Up
Set up the system
B u y-
6
In
Get buy-in from 4
management 5 ot
Re
and shopfloor vie w Pil
Figure 4
ing, the following recommended sequence and with current manufacturing operations that
steps have been found to be critical success inhibit success. Develop a clear matrix (see
factors (see Figure 4): Figure 5) to verify whether flow answers
each of those issues, both individually and
Rationalize: Case studies point to a common as a whole.
reason why flow manufacturing projects
fail. Typically, it is a lack of conviction (i.e., >> Create a business case: Develop a busi-
ness rationale that clearly lays out the cost
the business is not really sure why it needs
and benefits in terms of dollar value, time
flow manufacturing but still makes a case for
and resources. Also, lay out the intangible
its adoption). Flow manufacturing adoption
costs and benefits of adoption. Wherever
cannot be based on an executives excitement
possible, try to assign a dollar value to the
about a popular buzzword or a strategy of
intangibles so emotions and perceptions
management by imitation. At minimum, man-
can be eliminated from the decision-making
ufacturers must perform the following checks
process.
before deciding to adopt flow manufacturing:
>> Determine the need for flow: Make an hon- >> Rationalize and decide: Review the busi-
ness case with company leadership, as well
est assessment of the goals that your com-
as with the other functional groups that
pany wants to achieve and identify the gaps
Figure 5
A Change in Metrics
Metric Metric Definition Calculation
Measures the percent of time an order is delivered to the Orders delivered on time/
customer within the promised time. (Note: The promised Total number of orders shipped
On-time delivery
date is expected to be strictly the total cycle time plus total
shipping time. No buffers are expected to be included. )
Measures the first-time pass rate. This can be calculated Total number of units produced
First-time either for a specific operation or specific line. (The numerator Number of defective units/Total
pass yield considers the number of defects and hence it will always be a number of units produced
number either equal to or less than the denominator.)
Measures the actual operational cycle time in line with Actual operational cycle time/TAKT
TAKT time the TAKT time calculated for that line. (Note: TAKT time is time calculated for that line
adherence calculated based on the projected average daily demand for
the products on that line.)
Measures the total value of WIP inventory in the flow line. Inventory quantity for each item
WIP inventory
type x Value of the item
Measures the percent of time the process discipline was not Number of process deviations
Process discipline
followed and hence deviation occurred in the line. recorded/Number of FG items
conformance rate
produced
Figure 6
References
R. Michael Donovan, Demand-Based Flow Manufacturing For High Velocity Order-to-Delivery Perfor-
mance, Performance Improvement, May 23, 2001, http://www.idii.com/wp/donovan_demand.pdf.
Gerard Leone and Richard Rahn, Fundamentals of Flow Manufacturing, Flow Pub, 2002.
Demand Driven Manufacturing,Aberdeen Group, November 2007,
http://www.nmetric.com/pdfs/4172-RA-DDMManufacturing-ML-SPF.pdf.
James Womack and Daniel Jones, Lean Thinking, Free Press, June 2003.
Definition of rapid improvement, Kaufman Global, http://www.kaufmanglobal.com/glossary-pages-61.php.
Manufacturing Readiness and New Product Introduction, Aberdeen, May 2012,
http://www.aberdeen.com/Aberdeen-Library/7902/AI-manufacturing-readiness-operations.aspx.
Transitioning to Lean with Oracle Flow Manufacturing, Technology Evaluation Centers, April 2006.
Visionary Manufacturing Challenges 2020, National Academy Press, 1998.
Design for the Environment, U.S. Environmental Protection Agency,
http://www.epa.gov/dfe/pubs/pwb/tech_rep/usecluster/pr_pt2-1.htm.
Jon Duane, Nazgol Moussavi and Nick Santhanum, A Better Way to Measuring Shop Floor Costs,
McKinsey Quarterly, August 2010, http://www.mckinseyquarterly.com/A_better_way_to_measure_shop_
floor_costs_2664.
Marshall Fisher, Janice Hammond, Walter Obermeyer and Ananth Raman, Making Supply Meet Demand
in an Uncertain World, Harvard Business Review, May-June 1994, http://homepages.rpi.edu/home/37/
neubed/public_html/Stuff/Classes/Supply%20Chain/Sport%20Obermeyer%20Reading.PDF.
Fredrik Nordstrom, Piotr Gawad and Adam Nowarski, The Science of Manufacturing,
ABB Review, 2006.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-
sourcing services, dedicated to helping the worlds leading companies build stronger businesses. Headquartered in
Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry
and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 156,700 employees as of December 31, 2012, Cognizant is a member of
the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing
and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.
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