Lean Supply Chain and Logistics Management, page 20
Cessna E-Procurement Initiative
Cessna was a traditional, conservative culture when management announced a supply chain initiative they hoped would revolutionize purchasing processes and give them a competitive edge. Dave Oppenheim, then director of e-business, realized that electronic data interchange systems were critical for the company-to-company integration Cessna hoped to accomplish.
Cessna wanted to reduce or eliminate many purchasing-related expenses and to free up overworked buyers for more strategic tasks. To avoid upfront costs and development delays, they decided to outsource.
Recognizing that supplier acceptance is key to the success of any e-procurement system, Cessna looked for a system that was supplier-friendly and would not reduce their costs at the expense of pushing them back on suppliers. They also realized they needed a system that could accommodate all sizes of suppliers regardless of their technological capabilities.
In 1998, Cessna selected ESIS because of its large supplier base and its reputation as the largest working aerospace exchange. ESIS worked with Cessna and its 1,200 suppliers to get the system up and running in less than four months.
Since the beginning, ESIS and Cessna have worked together to address Cessna’s expanding procurement needs. Since the original implementation, inventory advice and shipment schedule modules have been added to fulfill Cessna’s receiving requirements. When Cessna implemented Ariba Buyer in 2000, they decided to use ESIS to deliver the purchase orders to the suppliers, enabling them to conduct business the same way for both direct and indirect procurement. As part of the Ariba implementation, ESIS added the capability to create a “spontaneous supplier” for Cessna, allowing them to send “spot buy” orders for new suppliers through ESIS.
Today the Cessna division of Textron is considered a model for e-procurement and has been featured widely in technology and supply chain management journals and at national conferences.
Value Proposition
Provide Cessna with supply chain management technology to advance its lean manufacturing objectives.
Greatly reduce time spent on purchasing while providing additional ROI from eliminated manual processes.
Overhaul the buyer/supplier communication process, making it interactive and more efficient.
Provide necessary information to suppliers automatically on an as-needed basis.
Improve JIT inventory processes.
Challenges
Reduce and eliminate costs.
Eliminate manual systems.
Free up personnel for strategic tasks.
Integrate suppliers into business processes.
Accommodate all sizes of suppliers.
Implement rapidly.
Solutions
Implement HOM system.
Communicate with suppliers online and via EDI.
Automate purchasing processes.
Share planning schedules with suppliers.
Automate advance ship notification and invoices.
Notify suppliers of approved ship dates.
Deliver POs for indirect purchases from Ariba Buyer.
Benefits
Fax, phone, and paper orders eliminated.
Supplier on-time delivery improved.
All suppliers accommodated.
Re-keying of data eliminated.
Orders/Change Orders, Acknowledgements automated.
Time to process PO greatly reduced.
Purchasing personnel freed up for more strategic assignments.
Purchasing personnel numbers remained flat while company production increased by 250 percent.
MAKE
Lean Case Study: Lean Kitting*
Overview
Kitting is the first step in printed circuit board assembly. It is initiated well in advance of the actual production start to be able to prepare and deliver the kit on time. Kitting involves the gathering of all the parts needed for a particular assembly from the stockroom and issuing the kit to the manufacturing line at the right time and in the right quantity. This paper discusses kitting, describes ways to eliminate waste in different phases of kitting, and illustrates lean kitting using a case study conducted in a major contract manufacturer site.
Introduction
Traditionally, kitting is initiated by the production control department based on the shop floor order as generated by the plant’s ERP/MRP system. Production control will first verify that adequate quantity is available for each part number. If there are parts shortages, parts are ordered. In general, the kit is not released to the stockroom until parts arrive, but in some special cases a shop order with a part shortage can be processed. Production control then releases the kit to the stockroom for picking. The kit is typically sent to the off line setup area within 48 hours. The time it takes to pick all parts depends on kit size and number and skill of employees.
When executed properly, benefits of kitting include:
Maximize value add time of operators
Easier operator training resulting in reduced training cost
Maximized machine utilization—no line stoppage due to part shortages or searching for parts
Reduced WIP
Reduced lead times
Reduced part damage due to excess handling
ERP/MRP systems are inherently inaccurate at maintaining on-hand inventory quantities as material is moved to and from the shop floor during kitting and restocking processes. Worse, ERP systems typically only know the total quantity of a part type and not how that material is delivered (i.e., 20,000 total components vs. 4 reels of 5,000 components). This inaccuracy and lack of granularity, combined with stockroom personnel mistakes, lead to kitting problems that include:
Insufficient quantity of components
Excessive quantity of components
Wrong components
Incomplete kits
Insufficient quantity of component packages (for example, insufficient quantity of reels for split parts)
These kitting problems will lead to increased machine downtime, lead times, and manpower.
Various shop floor supply schemes that vary the location of component storage units with or without kitting are used by electronic assembly plants. The following cases are the most typical:
ERP driven kitting from central stockroom. Production Control releases kits generated by the ERP system to the central stockroom. Production Control relies on the ERP system to ensure enough quantity is available in the stockroom. Inaccuracy of on-hand inventory counts in the ERP system is a major issue in this approach. In case part shortages occur during shop floor order runs, the operator must walk to the stockroom, fill out paperwork for additional parts, wait for parts, and then walk back to the assembly line to do changeover and continue production. This can take 15 to 45 minutes and represents waste and lost production. This approach is still very much in use, especially in large contract manufacturing sites.
ERP driven point of use kitting. This process is similar to central stockroom kitting, except inventories are located in storage units located on the shop floor close to the assembly lines. Storage units can be dedicated to a customer, to all SMT lines, to a set of assembly lines (for example, lines that place components on one side only), or to the entire shop floor. The advantage of this approach is reduced machine downtime and reduced stockroom manpower. The disadvantage is increased floor space requirement and an increased level of control required to ensure operator discipline in picking components. The issue of inaccurate on-hand inventory counts still remains. This approach is more likely to be found in OEM assembly plants.
In-house controlled supermarket-based kitting. Components are received and stored into the central stockroom. Supermarkets are placed throughout the shop-floor. The daily demand of parts and supplier lead times are used to determine the optimal inventory levels. Kanban cards are used to replenish supermarkets. Dedicated personnel are responsible for collecting and converting kanban cards into replenishment orders which are sent to the central stockroom. Kitting is performed directly from supermarkets by line operators. The advantage of this approach is reduced manpower. The disadvantages are operator training, lost inventories (if a reel is misplaced, a new one is ordered without locating lost one), and complex replenishment logic that requires advanced inventory control software. The issue of inaccurate on-hand inventory counts still remains because counts are still maintained by the ERP system. A variation of this approach is where only the most frequently used parts are stored in supermarkets and kitting is a combination of central stockroom kitting and supermarket kitting.
Supplier controlled supermarket based kitting. A central stockroom is not used. The ERP system-based component procurement is abolished. A contractor who can supply all types of components is used. On-hand quantity requirement for each component is established based on the ERP forecasts (weekly consumption), or even better, actual sales. Part consumption and attrition is maintained using an MES system. The component supplier gets (daily) data from the MES system on part consumption. The supplier restocks parts once a week based on MES supplied data. The advantages of this approach are reduced inventory cost, more accurate inventory counts, reduced manpower, reduced paperwork and purchase order cost. The disadvantage of this approach is initial implementation cost. Also, tying all inventory needs to one or a few suppliers may be risky.
Outsourced kitting. Component storage and kitting are pushed to the suppliers, as done by Toyota in the San Antonio Tundra plant. This is a way of reducing manpower and pushing waste to the suppliers. In the Toyota plant, suppliers deliver parts just-in-time and perform kitting for assembly lines. Toyota operators just assembly parts, which maximizes operator value added time and reduces manpower for Toyota. The same approach of outsourcing component storage and kitting is available to electronics assembly companies. Outsourcing kitting will result in a reduction of purchase orders, reduced administration costs, cash flow benefits from reduced inventory, reduced manpower, and reduced plant space requirement. Again, the disadvantage is the risk of loss of control of the materials management process.
Is Kitting a Waste and Should It Be Eliminated?
In a lean world, kitting is considered a waste. Following Toyota’s lean thoughts of the past, we should provide component storage racks, replenished using kanban signals, alongside assembly lines and have operators pick parts to set up the job when needed. In addition to that value added work, operators will also be responsible for locating parts, performing part verification, setting parts on feeders and setting feeders on machine. This approach, although eliminating kitting as a waste, may create waste in the area that does much more damage to the company’s bottom line—assembly line throughput and process quality. An attempt to eliminate kitting should not be undertaken without much consideration of how it may affect the overall process and assembly line efficiency.
Furthermore, it has been recently reported that Toyota has started using kitting in some of their plants for high volume assembly operations [Lean Enterprise Institute, 1997]. Toyota has implemented a new kitting process, called Set Pallet System (SPS), in their new production facility in San Antonio that makes Tundra full-size pickup trucks. Previously, lineside storage racks were used by operators to pick parts. Operators would walk from their assembly station to each rack and pick parts to install. SPS introduces kitting personnel that receive a signal with a list of parts to be kitted, pick parts from storage racks, and then deliver pallets of parts to the assembly stations. Assembly operators are not involved in the part picking process any longer. The advantage of this approach is more value added time by the operators, cleaner work areas with visual control, fewer part selection errors, and easier training of assembly operators. The disadvantage is increased manpower by adding kitting personnel.
This approach is equivalent to the supplier-driven supermarket kitting for PCB assembly, as explained in the previous section.
Lean Kitting
The approach taken in the kitting process improvement project described in this paper can be summarized as follows:
Eliminate waste related to machine downtime caused by invalid kitting
Kitting done right the first time
Eliminate waste in kitting
The priority is to eliminate waste on the assembly line by making sure machine downtime due to kitting problems does not happen. Next is to eliminate waste and make the kitting process as lean as possible.
This Lean Kitting project was implemented at a large electronics contract manufacturer’s site. The project involved an assembly line that included a new Fuji NXT pick-and-place line. The NXT machine is based on a new concept of modular, scalable, and reconfigurable pick and place machines. This NXT machine had 10 modules. Thus, the same part number may occur on different modules as a result of placement sequence optimization and load balancing.
In consultation with the plant management, the following goals were set:
Reduce kitting cycle time.
Reduce manpower.
Reduce number of partial material packages returned to stockroom.
Eliminate the issue of insufficient quantity of material packages (reels) for parts split between different modules on NXT machine.
Eliminate the possibility of wrong components being kitted by implementing electrical component test and component verification.
Kit quantities per part number calculated by the ERP system do not take into account that a part could be split between a number of modules during machine optimization. For example, if the kit requirement for a part that is split between two modules on a machine is 4,500, the stockroom may find a reel with 5,000 parts and kit it for that part, which will cover the BOM quantity plus estimated attrition. The single reel will be sent to off-line setup and it will need to be split, or another reel ordered, which delays off line and adds manpower related costs. Another case is when the stockroom does kit two reels, with quantities of 4,000 and 1,000. Let us assume that the quantity placed from the first module is 2,800 and from second module is 1,700. The off line setup personnel will have two reels to prepare for the run and production can be started, but there is not enough quantity on the second reel and the machine will stop until a new reel is provided, adding to the machine downtime.
In this project, all activities that lead to delivering the kit to the assembly line, were considered to be part of kitting, including:
Pulling enough quantity to place each part (including attrition)
Determining which reel will be used first
Verification of component electrical characteristics
Verification of component feeder type, feeder rotation, and height verification
Lead-free compliancy
Setup verification
Even though kitting can also include delivering the tooling kit to the line, it was considered out of the scope of this project.
Pre-improvement State
The line kit was prepared by stockroom personnel based on the kit released by production control. In case the kit was short, the stockroom would hold it until missing parts were provided. The line kit contained parts for all machines in the line. The parts needed to be separated by machine and by first and backup reels. For the NXT lines, the kit was separated by module by the operator visually checking license plates (also sometimes referred to as ReelIDs; a unique barcode identifier applied to each piece of material) and comparing them and their part numbers with the setup sheets. Separation of the NXT kit across modules took on average of 2.5 hours for the bottom side and 1.5 hours for the top side. For the NXT line with 10 modules, the kit was separated into 3 bins with 3 separations per module each, and the license plates for the 10th module were put into the last bin and marked as the 10th module.
The NXT kit was then moved across the plant to the NXT off line setup area. First, an operator was dispatched to start the electrical component verification, using an LCR meter (Inductance, Capacitance, Resistance). A second operator was sent after the first operator was given some time to test a certain amount of license plates. The second operator scanned license plates that were already LCR-verified and married them to feeders (via bar-coded feeder IDs) to complete offline setup verification. Component verification using an LCR meter was performed for the first license plates only and not for the backup license plates. Verification took on average of 55 seconds per component. Each license plate was tested, even if it had been previously tested. After the test, a “pass” sticker was put on the license plate. For components that could not be measured, license plates were put aside and another operator would verify those license plates visually, using component markings or manufacturing part numbers.
After the first license plate was verified on the feeder, it was placed on the feeder cart. After the entire setup was verified, feeder carts—one for each NXT module—were moved to the “NXT Supermarket/Kanban” area to wait for the online machine setup.
It took 3 people an average of 6.8 hours to process the kit that had been received from the central stockroom and deliver it to the NXT line. For components that had more than one component package kitted, it was important to maintain the order the packages were mounted on the machine, to minimize the number of partial packages that needed to be returned to the stockroom after the job was completed.
In the remainder of this paper, the term “license plate” will indicate a label attached to each piece of material that has a material ID and part number bar-coded on it.
