Factory Re-Design: A Problem or an Opportunity?

Posted by Patrick Maroney

in SAP for Industrial Machinery & Components on Jan 2, 2013 5:00:50 PM

It was nice to see Manufacturing ended the year with net expansion. It was also nice to see an increase of “in-sourcing” or “re-shoring” to American manufacturers. According to a 2012 survey published in Forbes “40% of companies indicated that they have won new manufacturing business this year that had been previously offshored.” As this trend is predicted to continue to increase, many manufacturers will need to improve their processes and/or build new manufacturing capacities. How are you planning to address the challenges outlined below?

Since my early professional days as an Industrial Engineer helping companies to improve their shop floor operations, I have witnessed a countless number or production executives view the redesigning of their factory layout as an expensive, labor intensive, and risky problem. “Sure,” they’d say, “better factory layout could help me improve through-put and better exploit our production planning capabilities, but it’s time consuming and expensive to move equipment and difficult to efficiently build a realistic simulation model in advance.” Perhaps you share this point of view, or are you more like the recent manufacturing leaders I’ve had the pleasure of working with, who, are choosing to attack this challenge with new tools and techniques and treat it as an opportunity?

Interview with Mid-Sized U.S. Manufacturer

Recently, I had the pleasure of speaking with an operationally focused and savvy CFO of a mid-sized manufacturer in the South Eastern United States.

WHY DO SOMETHING – in their case, through the economic downturn rationalization they eliminated 2 of their 5 major production lines. They needed to consolidate their manufacturing footprint to make effective use of the remaining factory. This gave them the opportunity to re-engineer their processes and implement a long term goal of one piece flow from receipt of raw material to packaging of finished goods. They decided to start with one plant which impacted 2400 parts and 36 machining/finishing work centers that would need to be moved / rearranged. Doing nothing wasn’t really an option and the business opportunity appeared to be significant.

THE MAIN CHALLENGES - they faced 4 main challenges during their redesign and rearrangement process:

Where to begin?
- Had to determine which parts to run on which machines
- Had to determine which machines could be moved and where they could be moved
- Estimate cost impact of moving and consolidating machines
What layout will provide the optimal benefit?
- Had to determine which machines to move and where to move relative to routings and value mapping rules
- Had to estimate how layouts with routings would impact through-put and WIP
What tools to use (what were available)?
- ERP, Excel, Access, Lean tools, Value Maps, and manual effort
Where to next?
- Train engineers on approach
- Develop templates to make adjustments (new machinery, routes, parts, etc.)
- Execute plan and evaluate results verses plan
- Develop continuous improvement process based on lessons learned

OUTCOME & LESSONS LEARNED – they spent over $2.0m in rearrangement and consumed 4 of their engineers time full-time for over 6 months. Part of the high cost was due, in part, to layout rework required at the time of execution because initial plans didn’t properly take into account certain building constraints such as support walls and electrical outlet availability. Value stream mapping identified machines to move but not impact . Their SAP ERP provided an adequate system of record for Bills of Materials, Routings, and cost structure, but true to the nature of an ERP solution, the ERP did not act as a simulation comparison tool for various layout what ifs. Their factory layout CAD tools were not integrated to ERP and could not act as a simulation for various layouts. Visualization of their design relative to ERP data was virtually impossible. To visualize layouts they had to use drawings pulled from building schematics and tool vendor cad diagrams; they made physical models and a table, but this did not allow for adequate integration and simulation to the vast amount of input data in the ERP system. They wound up making analytical models in Excel; it took them thousands of error-prone lines in Excel to evaluate ad-hoc analysis. It became nearly impossible to use Excel to adequately compare mix changes, volume changes, and before and after cost structures. They also found that their plant cost structure shifted dramatically due to the elimination of 2 product lines; historical cost & allocations became irrelevant with these eliminations. During the execution of the plan, they found out that some machines were too far apart. In the end, their efforts were based on trial and error. The CFO told me that with better tools for Visualization that considered the spacial constraints of the equipment, parts and building, integrated with ERP BOM, routing and cost data, along with advanced analytics, he could have saved a tremendous amount of time and eliminated manual trial and error rework of up to potentially half of his total costs (over $1 Million); and that’s just for 1 plant. Despite their challenges they will be continuing with factory redesign efforts at their other plants as the business benefits outweigh the costs.

And he is not alone. A COO from a large Mid-West industrial equipment manufacturer recently told me,

“We have to periodically rearrange our factory equipment and because some of this equipment can cost up to $250,000 to move once, we would very much like to be able to quickly and effectively simulate the impacts of those moves on through-put as well as the impacts of changes to our BOMs, routings, etc on existing layouts”.

In a new report in The Atlantic, Charles Fishman describes how the “insourcing” boom is bringing back manufacturing to North American shores. In his blog entitled “The Radical Redesign of Business”, Alan Moore writes about a car manufacturer who leverages state of the art 3D fabrication tools, combined with networked participatory cultures and tools, insights into rapid innovation and build practices, to build cars five times faster at one hundred times less the capital cost.

CALL TO ACTION – Let us Know Your Thoughts (below)

Please add a comment below and let us know about your factory redesign challenges, goals, and wish lists:

Does your organization view ReDesign as a pressing problem that needs solving?
What’s holding back your organization today from solving this challenge (technology, costs, risks, other)?
What is the Value (the opportunity) to your organization if this challenge could be addressed (large, small, unkown) ?
In your opinion, what else do you require in a technical solution that was not addressed above (namely the integration of
ERP routings, BOMS, costing data, with visualization, spacial interpretation and advanced analytics)?

Further Reading

About the Author

Patrick Maroney is a Principal within SAP America’s Industry Solution Group. In this role, he works closely with SAP manufacturing customers to help understand the impacts of business trends on their processes and the use of technology in order to help drive business improvements. Patrick has a background in industrial engineering and business transformation consulting. Since 1992, Patrick has been working with the management teams of leading manufacturing companies on improving their processes and leading business transformation initiatives.

Patrick Maroney in a 2012 interview on key trends in manufacturing and how customers can engage with an SAP Industry Principal.

Source: http://www.youtube.com/watch?v=mTTOIih6fkA

Topics: Business Intelligence
Industries: Industrial Machinery & Components

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