Forensics Case Summary

Executive summary
First for Forensics (FfF) is a high tech company operating in the forensic science market. The undisputed success that the company has had in the last decade, is now challenged by the entrance of a competitor able to provide low cost versions of the two main First for Forensics products: F1 Basic and F1 Total. The lack of competiveness is due to unsatisfactory delivery performance as a consequence of the long finished goods holding period in the warehouse. The MPC system currently employed is the MRP system based on monthly forecast. Despite the two main products present a high level of commonality the complexity is raised by a large range of specified options offered to customers. In order to reinforce the ability to
compete
the company needs to rethink and reset the manufacturing operations that are currently facing several issues. The main aims of this report are to investigate how potential improvements could be brought to the company, with particular regard to increase consumer service levels, decrease overall lead time and reduce operating cost.
Background considerations
This report focuses on the MPC system employed and on what can be done to improve its performance. As mentioned above, the method currently used is the
MRP that can be defined as “an approach to calculating how many parts or materials of particular types are require and what time they are required” [1]. It is, basically, a push system in which materials flow is made in anticipation of future demand. [2].
This system presents some operational issues that deserve to be briefly treated. It assumes that lead-time never varies, costs are always constant and lot sizes are optimal [3]. Moreover, being mainly based on forecast demand, susceptible to errors, it requires a greater inventory level than possible alternative systems [4].
High level of inventories are undesirable for several reasons, such us they adsorb working capital, they increase overhead costs and if not sold quickly they could incur the risk to become deteriorated or damaged [5]. Inventories are strongly correlated to lead-times, longer lead-times require longer inventories and vice versa [6].
Generally speaking, the real world is based on uncertainty and the gap between MRP deterministic nature and uncertain of operations are the main reason why MRP alone does not work effectively [7].
The different problems faced by FfF require a re-thinking process based on JIT philosophy. Fundamentally, it must be studied if and how the introduction of pull system could improve the company performance. Pull system is intended as an approach in which “a work center is authorized to produce only when it has been signaled that there is a need for more parts in a downstream department” [8]. Based

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on these definitions JIT could be defined as “all the materials and components flow as smooth as a single stream of water” [9].
In the JIT environment the driver targets are [10]:
-

Reducing inventory and lead-time;
Quality without defect.
Reducing setup times and lot sizes;
Focusing on continual improvement;
Worker involvement;
Cellular manufacturing.

Despite the potencies benefits that JIT could bring a complete changeover from the conventional manufacturing system to the pure JIT production system does not seem to be sustainable due to cultural and managerial resistances that have general been observed in western companies [11]. Moreover, even if low level of inventories are advisable, any difference in rate or timing between supply and demand would require a certain level of stock for compensative reasons [12].
Short-term recommendation
The solution proposed is based on integration between the two systems so that the
MRP would be employed for planning activities and the JIT for controlling purposes
[13]. More specifically, it is suggested to adopt the JIT philosophy as a guide for the whole manufacturing environment, while confining the JIT operation system to the assembly lines, at least in the short term. In other worlds, the push system should be adopted in production area and the pull system in the assembly area (driven by
Kanban). Consequently, assuming that assembly times meet D-times, it would be employed an assembly to order system. The reasons behind this suggestion could be explained by observing that the product flow meets a bottleneck in the Electronic
Fabrication Centre (EFC), caused by high setup times and financial constraints.
According to Olhager and Ostlund (1990) “the bottleneck in the production network is the critical point where the pull and push techniques can be divided” [14].
Furthermore, the postponement of final transformation processes is justified by high level of commonality of the two main products. In this way, it would ideally be possible to reduce finished goods inventory up to zero, allowing decrease of FG inventory costs and lead times, and elimination of WIP buffers between workstations. This approach would be supported by the reasonable accurate forecast for the total number of sales, solving the problems related to the forecast of individual orders. However, even if ideally possible, a pure pull system and a zero FG stock in and after the assembly area would not be achievable because the quarterly target sells strategy. The pull system, driven by order and employed in normal circumstances, must be associated with a push system, driven by forecast and
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employed for satisfy the demand in the last two weeks of each quarter.
Consequently an adequate level of FG stock is required, but its production schedule should be arrange so that its production should start as late as possible without harm the FfF ability to satisfy the regular demand, in order to minimize FG inventory, costs and lead-times.
As stated above JIT philosophy should drive the entire manufacturing environment.
In a logical of continuous improvement the lack of visibility proven by the incognizance of the reasons why lead times are so long should be improved. It could be done though the introduction of 5S method that could bring a deeper understanding of operational issues [15]. Moreover, visibility could be improved though the introduction, when possible, of production leveled schedules. This practice could have a huge impact on EFC inventory though a rational reduction of batch sizes. Every effort must be put in reducing waste. The value stream mapping could be used to draw a “big picture” of material and information flows in order to distinguish value-adding from not value-adding activities. It requires the identification of value stream, the physical mapping of processes, the diagnostic of problems, the analysis of solutions and the implementation of changes. Deserve special attention setup-times, especially in EFC area. In order to reduce setup-times it could be employed the SMED method, based on identification of internal and outer setups and preparation, conversion of as many internal setups as possible into outer ones and improvement of internal and outer setups. [16]. In addition,
quality improvement analysis should focus not only in repair faults but also in understanding where these faults come from. In a medium term it could be possible have a deeper understanding of quality problem causes so that it could be possible involve all interested parts to remove that causes instead of just repair goods when problems are found.
Moreover, quality standards should be stated and shared in all manufacturing environmental. They could be affixed in each workstation and employees should be aware of them, so that quality levels could be analyzed as part of the production flow. It could decrease costs and lead-times [17]. The inventory, moreover, should be arranged according to ABC inventory control, in which different usage values (usage rate * individual value) are assigned to different stocks [18]. This approach could allow a better control of slow-moving goods that, even if accounting for only 20% of sales value (Pareto low), usually occupying more than 1/2 of the totally stocking space [19]. Regarding RM inventory, in particular, the ABC inventory control should be associated with uncertainty of supply criteria, in order to reduce lead-times variance risk [20].

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Long term Recommendation
As JIT approach will gradually be absorbed by the organization and cultural resistance will disappear, further steps could be made in the direction of a deeper JIT implementation. JIT system works better in a stable environment where parts are produced regularly [21]. Conversely, MRP system is preferable for
requirement predictions in case of irregular demand [22]. As a result, JIT could be implemented for planning and control of common parts, while MRP could be used for what is left
[23]. Moreover, as JIT will provide outcomes in term of inventory and lead times improvements, and though the clearer visibility that tools such as 5S will bring, it would be possible decrease the discrepancies between data system and real life.
This reduction could constitute the start point for building strongly relationships with suppliers, allowing RM lead-times improvements. Its achievability would depend on employment of opportune management model such as Vendor Manager Inventory
(VMI). Here, suppliers, and not consumers, are responsible for replenishing activities
[24]. Ideally, RM of common goods would be supplied only when needed, and would sticky be processed in the sub-assembling area first and in the EFC then. Once WIP are manufactured, they will be stocked in their reserved area, where they would wait until required from the pull system employed downstream (this inventory is required because the flow could not be constant since the bottleneck machine). The
FG would then be directly dispatched or stocked for satisfy quarter sales target demand. The RM would be reduced up to an ideal zero stock, while WIP and FG inventories would be significantly reduced, with positive consequence for lead times and costs. If not RM are necessary needed for common goods, it should be predispose an adequate inventory level for uncommon products as they would be driven by push system based on forecast (Uncommon goods would then follow the same processes as common goods). However, VMI required a long-term relationship with suppliers (in contrast with current relationships), high data integrity and adequate technology support, such as Electronic Data Interchange [25]. Finally, regarding to factory layout, Cellular manufacturing (CM) is the most sustainable layout for JIT environmental. It promotes continues flow, reduces WIP, improves visibility, simplify quality controls and enforces employees integration [26].
Nevertheless, a careful cost-benefit analysis is needed because layout rearrange could be costly and because FfF could not fully beneficiate of the continuous flow that CM could allow since the impossibility of duplicate the machine in the EFC. It could be, however, possible that SMED implementation and smaller sized rescheduling will remove the bottleneck
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Current layout

RMRM

Replenishment

WIP
Sub-assembly area
WIP buffers

FG

Simple material flow

EFC

Q.C.

Assembly area

Packing and dispatch Reworking

New layout
Replenishment

RM
WIP
Simple material flow

FG
EFC
C
Assembly Area
Packing and dispatch As can be observed from the two layouts above, the new configuration will improve continuous flow, reduce RM, WIP and FG inventories, eliminate WIP buffets in assembly area and allow the removal of quality check and reworking area.
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Short-term recommendation list:
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JIT and MRP integration;
MRP employed for production area (push upstream);
JIT philosophy gradually employed as guide for the whole factory;
JIT operation system employed for assembly area: assembly to order (pull downstream); Production scheduled method introduction;
5S introduction;
SMED introduction;
Focus on waste reduction;
Value stream mapping introduction;
ABC Inventory Control associated with uncertain of supply for RM;
Widespread focus on quality.

Long-term recommendation list:
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Deeper JIT philosophy implementation;
JIT for common parts;
MRP for uncommon parts;
Focus on strong relations with suppliers;
Vendor Manger Inventory introduction;
Electronic Data Interchange introduction;
Cellular Manufacturing analysis.

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References

[1 pp. 449, 2, 5, 6, 17, 18, 19, 20] Slack, N., Chambers, S., Johnston, R., (1995)
Operation Management. (Sixth edn). Harlow: Pearson Education Limited, pp. 449.
[6, 21, 22, 23, 24, 25] Harrison, A., van Hoek, R., Skipworth, H. (2002) Logistics
Management and Strategy: competing though the supply chain. (Fifth edn). Harlow:
Pearson Education Limited.
[10] Vollmann, T., Berry, W., Whybark, C., Jacobs, R., (1984) Manufacturing Planning and Control for Supply Chain Management. (Fifth edn). New York: McGraw-Hill
/Irwin.
[3, 4, 15, 16, 25] Chiarini, A., (2013) Lean Organization: from the tools of the Toyota
Production System to Lean Office. (First edn). Milan: Springer-Verlag Italia.
[7, 8, 9 pp. 421, 11, 13, 14 pp. 429] Benton, W. C., Shin, H., (1998)."Manufacturing planning and control: The evolution of MRP and JIT integration," European Journal of
Operational Research, Elsevier, vol. 110(3), pages 411-440, November.

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