Disassembling the Assembly Line

• 05/22/2000

You may not yet be aware of it, but a battle is brewing that could redefine the role of resource planning. It is being fought out among those who say ERP is the business manager’s cure-all and those who say the all-encompassing system is never going to solve all of a company’s operational woes. Nowhere is this battle being waged more openly than in the manufacturing sphere, where an alternative model is already making a name for itself.

Today, leading-edge manufacturers are looking less to mass production and stockpiled inventory and more to made-to-order and just-in-time production methods. This movement is known by several terms—“lean,” “pull” and “flow” manufacturing are the most common. But some would like to call it the next Industrial Revolution.

“This is a worldwide phenomenon right now,” says Arlie Hall, a professor and early developer of the lean manufacturing program at the University of Kentucky’s College of Engineering, who spent five years teaching the model at IBM facilities. “What businesses have to do is they have to change their accounting system, change their management model, and radically change their culture. This is a radical way of thinking about manufacturing in American companies.”

The most fundamental aspect of the lean manufacturing strategy is that it is demand-driven. Rather than depending on demand forecasting, ultimately, a pure “lean” shop will synchronize production with the true rate of customer demand, thus eliminating product and materials backlogs. Demand and production requirements are calculated on a daily—not long-term—basis, completed project data is logically linked with inventory, material and labor information, and workers use graphical method sheets to illustrate the work and inspection steps involved in their part of the process.

Each of these components is related to the “pull manufacturing” concept of production line design, which marks a significant change from traditional MRP planning. Instead of pushing materials for component products through production in batches, the focus is on constructing whole products to meet customer specifications and pulling along only the materials needed given current demand. Production engineering is usually geared to produce a mix of products efficiently by using primary and feeder manufacturing lines, with the primary line handling the manufacturing processes common to all products and feeder lines contributing customized components. Line workers are often trained and paid based on their flexibility to do a variety of tasks, generally handling more varied but less complex individual tasks in a clearly defined amount of time.

In 1996, NACCO Materials Handling group, a leading global forklift manufacturer, began implementing a lean manufacturing model throughout its European and North American plants. A year later, the Portland, Ore.-based company went looking for an automated solution and chose American Software’s Flow Manufacturing product on AS/400 for a test-run in its Craigavon, Northern Ireland plant. NACCO CIO Sal Tramaglini says retraining employees for the new model proved to be possibly the most difficult—and worthwhile—change the company had to undertake in implementing flow.

“In a conventional assembly line, as opposed to a flow manufacturing line, everyone is trained to do a task. If you are the person who is responsible for putting hubcaps on wheels, you’re the best hubcap putter-on-er in the world, but that’s all you do. … So if someone is sick, and I say I’m going to put you over to where they put mirrors on, there’s all kinds of problems with that,” Tramaglini explains. “In the past, at each station they used to have a lot of things to do. In flow you can only do what you can do in 10 minutes. So there’s a lot less to learn. As a worker who works on a line, you know what’s going on at your station, at one station after yours and one station back. You’re not paid for specifically what you do, you’re paid for what you know. So now you’ve got incentive for your workers to be more flexible.”

Going with Flow: The Lean Culture
While lean manufacturing has been studied for a decade and a half, manufacturers have generally been slow—if they are willing at all—to warm up to it. In a February 1999 AMR Research (Boston) article entitled “ERP and Flow: The Status Quo Meets Its Replacement,” analyst Tom Grace writes that many manufacturers see the benefits of the demand-flow model, but resist the idea of giving up their decades-old MRP methods. Grace believes that conservative attitude has combined with increasing emphasis on ERP to stifle real innovation in manufacturing processes.

“Manufacturers implementing ERP commonly refer to it as their fourth- or fifth-generation MRP system,” Grace writes. “And the expectations for its impact on shop-floor productivity are equivalent to the average desk jockey’s for the Office 2000 version of Microsoft Word.”

Kevin Prouty, AMR’s senior research analyst for discrete industries, suggests that the flow line design model is just one reason many manufacturers are hesitant to go lean. In short, he says, it is a change that requires a leap of faith.

“Once the order gets into the shop, you really just have to have faith that a product is going to get out on time,” he says. “We don’t need to know the bloody, gory details of how a product is manufactured. We just need to know when it’s ordered and how long it takes.”

However, a fundamental redesign of production lines is not the only philosophical issue that has to be addressed for plants looking to implement the demand-oriented model. While systems retooling is an important element of implementing a new kind of manufacturing process, analysts and users alike agree the most drastic change that has to occur is in a manufacturer’s mindset.

“The belief was that if you operated on the standard model—essentially batch process manufacturing—they thought that was the fastest way to do it, that everybody was specialized,” says University of Kentucky’s professor Hall. “… That’s the way the mental model of manufacturing has basically been done for over 100 years. They can’t change the mental model.”

The problem is with resistance to the kinds of changes the new model requires on the corporate side, Hall continues.

“What the managers and the manufacturing engineers are trying to do is to take the tools and put it under the old management model. And you know what the result is. It’s not working at all,” Hall says. “So they try it out for a few years, and when it’s not working, they abandon it.”

Prouty shares Hall’s assessment regarding the cultural implications of going lean.

“You can’t have a manufacturing engineer who says, ‘I want to do flow,’” he explains. “That’s not going to work. It usually has to be a small to medium business and really come from pretty high up in the executive level. …The whole plant really has to be on board.”

Revolution or Revolutionary Hype?
While employee retraining and production design were time consuming and at times daunting, Tramaglini says, overall, the transition went fairly smoothly and the results, for NACCO, more than justified the investment.

Since 1997, the 11 NACCO Materials Handling plants which have implemented flow manufacturing have seen a 60 percent reduction in average lead time, a 32 percent increase in on-time delivery, a 48 percent drop in WIP inventory and 59 percent fewer errors.

“That’s hard dollars, right to the bottom line,” Tramaglini says. “It’s difficult to understand what it means to be a flow manufacturing plant without actually seeing the plant, seeing how the lines are set up, how people are working. I haven’t had a single person—no exception—come into our plant and see how it works and not say, ‘It’s so obvious how come we haven’t been doing this all along?’ It’s so obvious, the benefits are there, and they’re just undeniable.”

Despite its early successes, however, the forklift manufacturer is in no rush to implement American’s Flow Manufacturing product in all of its plants. According to Tramaglini, NACCO chose the American solution because it ran on AS/400, which Tramaglini says is, for his purposes, “far superior” to a comparable Unix or NT platform. However, he says the software’s major shortcoming is insufficient flexibility for dealing with customized products.

“Our product is totally configurable. We don’t make a standard vanilla truck. Because of that, whatever gets ordered from the customer goes into the line, and every truck that comes off is different. And that’s going to affect your lines,” he explains. “That is why, as we speak, today we have not implemented this in all our plants. In 1997 there were only two companies in the world who were offering flow manufacturing technology, and only one of those was actually able to demonstrate that they had a working solution. Now there are half a dozen, and to this day none of them—and we’ve looked at them all—address the configurable product.”

Kelley Jones, president of Real Resolution (Austin, Texas), a consulting firm specializing in AS/400 manufacturing technology, cautions against the idea that the lean model is a “silver bullet” for IT in manufacturing, adding that for some companies using customized systems, it may not always be the most appropriate solution.

“It’s a valid tool, but it’s not the ultimate solution. It won’t work for everybody.”

In his report on ERP and flow, AMR’s Grace expresses the belief that most companies are unlikely to either completely abandon their traditional MRP and ERP products, but they are also unlikely to ignore the flow manufacturing trend. He believes ERP vendors have made a serious error in telling customers a single across-the-board product can serve all of their needs. At the same time, he argues, supporters of flow should not try to eliminate the existing technology and strategies manufacturers have come to depend on.

“Just as corporate IT is trying to help plants bring flow into the fold, vendors are arguing over untenable positions,” he writes. “ERP vendors have refused to acknowledge that users need additional flow-related functionality. Flow advocates have made delusional pronouncements about the wholesale replacement of ERP. Neither is going to make flow software a robust, reliable component of the enterprise applications suite.”

Jones believes the really revolutionary development will occur if and when software vendors can achieve industry-wide standards governing lean manufacturing technology that could make such practices easier to implement and understandable for new comers.

“That would be a breakthrough that would really require a new acronym because it really does something new, rather than just a new acronym to sell software,” he says. “Everybody will say they’re doing it, but until there’s a central industry standard that’s really followed, it just won’t be possible.”

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