Show notes
Jonathan Schwartz discusses how to analyze a manufacturing company. Jonathan's background includes working in operations improvement, starting with manufacturing and then transitioning to banking and non-manufacturing roles. He has worked with private equity firms and has been a lean champion at a private equity firm. Sales and Operations Planning Process One of the first types of analysis Jonathan talks about is the sales and operations planning process (SOP), which involves integrating what is being told to the sales team with what is being produced. This alignment and match is based on the equipment and production capabilities of the company. The main idea is to align what is going to make the plant the most money with how it is incentivizing the sales team.The main idea is to align what is being sold with what is being produced, and to charge more based on the value added services provided by the company. This aligns with the company's goals and equipment to make the most money. Production Scheduling Process Jonathan explains that the production scheduling process in a company can be complex, with different tools used for larger plants and more complex situations. For example, a simple company might schedule production in batches, depending on the flexibility of their equipment and the economic batch size. This helps avoid having a large amount of inventory sitting in inventory when orders are placed for other parts. In some cases, private label products may not be suitable for production, while others may require make to stock or make to order processes. Delays in customization can affect the capacity to build up inventory. To assess the quality of a factory's production scheduling, it is important to consider the number of changes in the schedule over time and overall on-time delivery. An assessment of inventory levels can help identify bottlenecks, quality problems, equipment downtime, or matching schedules from pre-production steps to middle production steps. Visualizing the inventory levels and identifying visible metrics or schedules can help identify areas for improvement. Jonathan shares a couple of war stories as examples. New Process Implementation and Change Management The conversation turns to implementing a new process. In manufacturing, while some change management communications can be done ahead of time, training should be done right before the team starts using the new process, rather than a week or two weeks ahead of time. As soon as you implement something that makes their jobs easier, employees become a fountain of ideas and improvements, which can lead to quick changes in morale and overall productivity. Jonathan states that a clear production schedule is crucial for ensuring everyone knows what's up next for their line and is prepared for any changes. By implementing a two-bin system and addressing stockouts, organizations can improve on-time delivery numbers and predictability. He suggests that steady usage can help determine the appropriate amount of inventory to hold, while unpredictable demand can lead to overstocking. He explains how to avoid stock outs and also emphasizes the importance of supplier quality evaluation, which involves ensuring parts are qualified for new products before they are released to production. Jonathan shares an example from a Motorola plant in Atlanta. Supplier Quality Management Jonathan discusses the importance of supplier quality management in a manufacturing plant. He emphasizes the need for a sophisticated system to identify and address problems in parts and suppliers. This system involves intake department workers, who need to know whether a part goes into income inspection or goes straight to stock. Inspectors need to be trained to identify and address issues, as it is costly to inspect parts and impossible to inspect 100% of everything. When assessing a manufacturing plant's supplier quality management program, Jonathan talks about the metrics in place and how they are used. These metrics include the percentage of bad parts and good parts when present. He stresses that the system should be communication-intensive, with production line personnel communicating with materials managers when a part is bad or a whole set of parts is bad. Incoming receiving clerks should know which parts from which suppliers are flagged for inspection. Inspectors should track the issues and communicate them back to the supplier. Efficiency in Manufacturing ERP Systems Jonathan explains that this involves implementing Kanban and minimizing touches on work-in-process inventory. The conversation turns to the plant layout, including the dock, incoming warehouse, and presentation of parts to the line. Jonathan explains that traditional cost accounting practices can lead to mismeasurements. He provides an example where a plant manager was measured on absorption, which is the amount of overhead he could absorb based on the accounting cost per unit; this led to a lack of inventory quality and poor on-time delivery and productivity. He mentions that traditional measures may not be relevant to workers on the factory floor. Lean Improvements in a Production Line Jonathan shares an example of implementing lean improvements in a production line with 180 employees. He emphasizes the importance of minimizing the WIP (work-in-process inventory), ensuring that people only work as much as needed, not as much as possible, thus minimizing inventory levels and the amount of rework when a problem arises. This approach improved quality and throughput, as it reduced the number of reworked items and improved throughput. He also highlights the importance of using fixtures that ensured that tasks were done correctly, even if it took more time. This approach also improved visibility and communication throughout the line. By minimizing the WIP, rebalancing the line, and ensuring that tasks were done correctly, the company achieved significant improvements in quality and output metrics. Timestamps: 02:23: Overview of Production Scheduling and Sales and Operations Planning 04:47: Complexities of Production Scheduling 07:32: Assessing Production Scheduling Effectiveness 12:44: Implementing Lean Improvements and Supplier Quality Management 12:59: Evaluating Supplier Quality Management Programs 27:05: Material Handling and Internal Logistics Efficiency 33:27: Celebrating Victories and Improving Morale Links: Resource: https://umbrex.com/resources/how-to-analyze-a-manufacturing-company/ LinkedIn: https://linkedin.com/in/jonathandschwartz Email: [email protected] Unleashed is produced by Umbrex, which has a mission of connecting independent management consultants with one another, creating opportunities for members to meet, build relationships, and share lessons learned. Learn more at www.umbrex.com.