Supply chain management may sound easy on the surface: Provide the right product in the right amount to the right place at the right time. But the things that must execute flawlessly at each step to achieve those four goals can get complicated — and fast.
Couple those challenges with the fact that manufacturing industry customers increasingly demand greater responsiveness and efficiency. In this landscape, the better manufacturing businesses are at managing their resources, the better they’ll be at reacting quickly and consistently to customer requirements and the more they can expect to grow. Companies that don’t find a way to more efficiently produce and deliver parts in a time frame that conforms to customer expectations, on the other hand, risk falling behind their competitors.
As a result, more manufacturing companies are focusing on, and partnering with, their suppliers in order to achieve a stronger service focus. Strategic partnerships help manufacturers reduce the risks associated with inventory management and control; in-house fabrication; and capital and labor investments required to support faster, leaner operations. By offloading this risk, manufacturers can focus on their customers and what they do best: developing innovative products.
Brookville, Pennsylvania-based Miller Fabrication Solutions is among the companies working to align operations with real-time fluctuations in customer demand. In mid-2019, the original equipment manufacturer implemented a kanban system to regulate component supply through the use of visual signs to trigger an action. Typically, these take the form of hard-copy or electronic instruction cards.
For example, every parts shipment comes with an instruction card, or sign. Each part type has its own sign, which is sent along the manufacturer’s production line. When that set of parts is nearly depleted, the sign prompts the company to notify the supplier, which then ships new parts. The kanban system supports just-in-time manufacturing in a lean production environment.
The path to kanban
In 2012, as the Great Recession began to wane, Miller started seeing sales rebound to pre-recession levels. The company, having operated with slim staffing levels during the downturn, wasn’t prepared for the quick and significant growth. The metal fabricator was late on deliveries, and customers were communicating that the quality of parts was no longer acceptable. At the same time, Miller couldn’t hire skilled laborers quickly enough to meet demand.
Some of its suppliers attempted to help the company develop business and prioritize change in key areas, but customers couldn’t see adequate benefits from the alterations made in isolated buckets. Problem areas persisted even after some significant improvements were made.
Although Miller had anticipated that masterful planning and scheduling would allow the company to meet customer needs, things don’t always go as planned. A machine would break down, a quality problem would arise or the number of parts a customer needed might unexpectedly increase and there wouldn’t be enough stock to respond. Any of those changes could stop the upstream process. No scheduling system can account for every variable that happens on the manufacturing floor, and the company found itself in a constant cycle of overproducing or underproducing.
Miller brought on a consulting firm to apply lean, six sigma and business process management approaches. That relationship — which focused on standardizing work, streamlining parts flow and other improvements — launched the transformation. Over time, Miller leadership became involved in attending lean conferences and summits and ultimately traveled to Japan to visit a Toyota supplier and see its kanban system firsthand.
A key portion of Miller’s fabrication business is the production of nine types of turntables for boom lifts. Feeding into those nine turntables are 192 unique, single-level parts. At the beginning of the kanban deployment, Miller partnered with a supplier that provides parts for one of the turntables, identifying 18 parts and two production lines that would be included in this pilot project. Miller determined that the signal for replenishing parts would be driven by a simple, laminated note card system, with each corresponding card printed with its relevant part number.
The supplier agreed to daily replenishment of the component parts that had been consumed the previous day. By marrying the kanban card system, which tracked the parts used each day in the manufacture of the turntables, with the Miller scheduling process, Miller was able to alert the supplier to replenish the depleted parts. As a buffer, Miller maintained a three-day supply of each part.
Within a couple of weeks, Miller was caught up on the backlog of turntables. Production lines no longer ran out of the parts that were included in the kanban pilot project, and the company had eliminated overstocking. After 90 days and several more implementation phases, Miller incorporated all 192 component turntable parts. By late 2019, a third production line had joined the first two in operating under the kanban system.
Results and lessons learned
Before kanban was deployed, when parts ran out for one turntable but were available for another, Miller supervisors instructed employees to overbuild the second turntable so they could keep working. That response was inefficient for the company and frustrating for workers — and it offered no benefit for customers.
Besides now being able to ensure, in tandem with the supplier, that parts consistently are available when and in the precise quantities they’re needed, Miller’s kanban implementation has provided work clarity for employees. For example, welders can begin their shift knowing they will be welding three of a certain turntable type, then switch to welding two of another type and so forth. Based on previous work completed, Miller now can rely on the sales and operations planning schedule to provide shop floor workers with clear, daily expectations.
Good scheduling results are not the only benefits derived from using the kanban system. Miller has seen work-in-process velocity drop from 10 days to seven, and overall inventory has been lowered from $2.3 million to $1.6 million.
Kanban has reduced the variance in machining production from employee to employee and has initiated a new way of thinking among departments and supervisors and between the company’s three facilities. One machinist discovered that work could be simplified by having grinders place a certain part in an opposite direction on pallets. This suggestion was accepted and rolled out on the shop floor.
Miller didn’t anticipate those types of interactions, but now highly values them. They have spurred the company to more intentionally connect departments to each other. The kanban system has opened the company as a whole to investigation and evaluation about how Miller might, in partnership with suppliers, better serve customers by becoming a leaner company from the plant level to the corporate level.
Having now used the system for nearly a year and expanding it across all nine of its turntables, Miller also has learned that modification of certain aspects of Toyota’s daily parts supply model can work effectively for its fabricator model. In some cases — especially for select parts that either are very large or very small or require long setup or cycle times — the company can just as effectively take delivery on a weekly, rather than a daily, basis. In those cases, parts are taken off the shelf each day and then, once a week, a signal is sent to the supplier to replenish.
Impact on suppliers
The industry’s mounting demand for greater efficiency and responsiveness is a big challenge faced by manufacturing companies and suppliers alike. To navigate this changing landscape, manufacturers and suppliers must work together more strategically to meet end-user needs. Suppliers that understand this new paradigm and are willing to engage with manufacturing companies in implementing kanban can be a key part of the solution. Specifically, they can benefit by
- gaining a clearer understanding of customer needs
- exposing and addressing problems within the supply system more easily
- ensuring that limited resources are applied in such a way to provide only what customers want
- enhancing market competitiveness
- rooting and maintaining long-term, mutually beneficial customer relationships based on shared expectations.
The implementation of lean systems such as kanban are not necessarily an easy feat. They may make suppliers’ lives more difficult for a time because of the need to determine how to provide materials more frequently than they have in the past — perhaps even daily. However, the outcome can be well worth the effort. When customer requirements increased, Miller responded with a journey that ultimately strengthened operations, drove greater efficiency and focused the organization on continuous improvement.