(Hover to enlarge)
20 FPCl Long-Term Historical Analysis
20 Typical Long-Term Historical Analysis
Figure 21 Inventory Stage Profile
Figure 21 Inventory Stage Profile
Fig 22 Inventory History-Stage
18 Typical Long-Term Historical Analysis
Fluid Products Corporation
The client in this project was an old firm with a long history. They built large, highly specialized pumps and certain critical fittings
and controls to match those pumps. The objective of the project was a new
plant layout that emphasized Cellular Manufacturing. Of necessity,
material storage played a large role in this layout project.
Historical Analysis
A long-term historical analysis, figure 20, brought forth two major conclusions:
Note::
This example comes from
a Strategos consulting project. We have changed names and
specifics to disguise the client's identity.
The essentials, however, come directly from the project.
• There was a downward trend in turnover that had persisted for at least eleven years and probably much
longer.
• At the beginning of this period, turnover was near the lower bounds of industry averages but by the time of the study had fallen significantly below those averages.
From figure 20 it was evident that inventory was increasing faster than sales.
Where Was This Inventory?
The next reasonable question was “where is this inventory going?” Figure 21 and figure 22 provide the answer. Figure 21 shows that 82% of the current inventory is in WIP. Figure 22 shows that the growth of inventory has been
almost entirely in WIP.
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(Hover to enlarge)
Fig 23 Industry Average Comparison
Fig 23 Industry Average Comparison
Fig 24 Inventory by Product
Fig 23 Industry Average Comparison
Figure 23 shows how the relative proportions of FPC’s
production stage inventory compares with industry
averages. Since there were few industry groups that
fitted FPC’s products exactly, the proportions shown in
figure 23 are approximate. This approximation makes
little difference, as it is clear that FPC’s WIP is
significantly out of line.
Three
distinct product lines existed. Figure 24 shows the
inventory associated with each product line. The Valve
product and Pumps represented the majority of the
inventory. However, valves were a highly seasonal
product and much of that inventory was in Finished
Goods. We might have displayed the data differently, for
example, calculating turnover by product line.
It seemed clear to everyone at this point that pump WIP
was the primary culprit and that the amount of this
inventory was extremely high.
The Root Causes
When the proportion of WIP is too large, it indicates
problems on the shop floor or the scheduling and support
systems for the shop. Material flow diagrams and process
charts verified the casual, visual observation that
confusion reigned on the shop floor and material
movement was excessive, confused and erratic. This, in
turn, necessitated complex scheduling and other elements
that amplified the negative effects.
How did this situation develop? The root causes of
this problem were in the firm’s Manufacturing Strategy
or rather their lack of Manufacturing Strategy. Decades
prior to this project, the company operated with
functional machining departments. Equipment was simple
and small-scale but required highly skilled machinists.
As the firm grew, each functional department became
more specialized, more inward-looking and more
disconnected from the others. Then, Numerical Control
machining was introduced. These machines were expensive
and required high utilization to show profitability.
Schedules were arranged to load the new NC machines,
scheduling became more complex and queues grew to ensure
that the NC machines always ran. WIP increased
accordingly.
The solution was a Manufacturing Strategy that
emphasized Cellular Manufacturing. Most workcells were
designed around one of the new NC machines which became
the "key machine" for that cell. Many other aspects of
Lean such as teams and Kanban were also used.
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