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Warehouse Management Systems (WMS) and Lean Manufacturing

Your manufacturing operations are not as lean as they could be if you're not employing a good WMS!

by Martin Kosiak, VP Sales and Marketing, wmsVision, inc.

What is Lean Manufacturing? According to APICS……..

Lean manufacturing/production….
"A philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products potentially enormous variety."
APICSŪ Dictionary, 9th Edition

Traditional manufacturing is characterized by production schedules that are based upon forecasts, or achievement of preset inventory levels. Frequently, large batch orders are processed through multiple departments, based on work functions. These methods tend to create excessive inventories, and an overabundance of parts, and WIP on the factory floor. The impact on the operation is wasted warehouse and factory floor space, excessive inventory, tracking costs, labor inefficiencies, and high cycle times.

"A lean manufacturing initiative launched without careful consideration of the implications for upstream and downstream logistics is a recipe for supply chain gridlock." John M. Hill-eSync International

So how does a warehouse management system (WMS) contribute to lean manufacturing? A WMS directs materials and personnel in the most accurate and efficient means possible, thereby eliminating waste.

Warehousing operations are an integral part of the supply chain and directly impact all manufacturing activities. The heart of the modern warehouse operation is the Warehouse Management System (WMS). It directs all activities from incoming material processing, to manufacturing, and through order fulfillment, assuring that the correct materials are getting to the right place, at the right time, in the proper quantities to satisfy customer orders, or demand. Labor is system directed in an optimized manner, based upon general or customer specific business rules. An effective WMS will provide for a wide range of user specific configurability that allows users to apply their preferences and priorities, thereby avoiding the need for costly software customization. Activities are recorded on a real-time basis to assure current information is always available in the form of reports, proactive notifications, and general information sharing. The paperless environment assures improved accuracy (no transcription, reading or writing errors) and elimination of lost, or damaged documents, thereby eliminating wasted effort and timing errors. Data entered is crosschecked automatically by the system to ensure validity. The accurate, real-time warehouse information facilitates superior management decision-making, and effective collaboration with suppliers and customers.

The WMS employs a database of information captured from both keyed entry, and electronic entry (EDI, scanning, email, fax, web enabled, etc.). Data capture is performed at every "hand-off" point (Figure 1 ), where materials are either moved from one location to another, or the material status is changed. Data entry includes basic critical information including, but not limited to, SKU, time stamp, user ID, from and to locations, lot number, serial number, etc..

The system then directs activities, provides applicable reports, alerts, and notifications to designated users throughout the enterprise. Electronic transmission of information ensures timely dissemination of instructions and direction to all enterprise participants. A solid WMS integrates seamlessly with TMS, MES, MRP, ERP, or legacy systems to enable enterprise-wide real-time visibility of all materials and activities.(Figure 2.)

Case Study

Our example is that of a Fortune 100 telecommunications electronics manufacturer. Typically, the manufacturer placed blanket orders for materials based on anticipated demand. When vendor materials were delivered they were received and put away into the stock room (warehouse). Materials were then pulled from the warehouse by manufacturing to fill production orders, and either returned to the semi-finished goods stockroom awaiting orders or instructions for assembly operations or testing operations, or were sent to the finished goods (FG) warehouse for customer shipment. Despite the fact that the company employed RF-based bar code scanning, and a "high level" ERP warehouse management module, several problems prevented true "lean manufacturing" support.

The Problems:

Problem1 - Vendor materials were very expensive. The vendors delivered products according to predetermined supply schedules based upon forecasts. In times when the actual demand for product was low, the manufacturer was overstocked, thereby tying up too much capital in inventory.

Problem 2 - In times when demand for product exceeded forecasts the manufacturer found itself in an out of stock situation with long lead times on the replenishment purchase orders issued to meet the increased demand. Vendor relations were strained.

Problem 3 - When vendor materials were received they were put away into the storeroom (warehouse) instead of being moved directly to the work cells where they were required. In addition, there were times when the materials were needed to fill repair parts backorders and could have been sent directly to packaging or shipping. The result was increased cycle times and wasted labor.

Problem 4 - As finished products, or WIP were produced, they were put away into the finished goods warehouse, awaiting disposition. In some cases the materials would sit in the warehouse for long periods of time due to low demand. Not only did this scenario tie-up excess capital in inventory, it also ate into available warehouse capacity for faster moving products. When demand was high, compared to forecast, in-process materials could have been sent directly to other work cells for subsequent operations or testing, or directly to packaging or shipping to fill customer orders as opposed to returning them to the warehouse before the next step. Cycle times were too long, labor was wasted on unnecessary and redundant tasks, and throughput suffered.

Solution Discussions

The traditional manufacturing techniques used by the company created excess inventories, unnecessarily long cycle times and non-value added activities that were remedied by implementing a WMS that employed daily demand-pull subroutines (DPS), wherein the system reacted to new or changed customer orders that created the actual demand for product. This subroutine gave the suppliers precise descriptions and quantities of what to deliver to meet the next day's demands. The DPS is particularly effective in reducing capital commitments for expensive, short lead-time materials. Expensive, long lead-time, and inexpensive items require safety stock levels to be maintained according to min/max (measured in days worth of inventory) methodologies that are usually defined by the lead-time characteristics and economic ordering parameters for those items. DPS resulted in lower inventory levels, thereby freeing up capital for other business needs. Additional benefits included reduced space requirements in the warehouse and on the manufacturing floor. DPS effectively solved Problem 1, above.

Low value inventory items required the use of eKanban and stock hunting subroutines that enabled the system to pull materials as needed from the most efficient and convenient locations. When production line personnel detected a low material level, they scanned the SKU's bar code label to transfer the item description and location to the WMS. The system then displayed open deliveries and orders for that material. It also calculated changes in usage patterns for that material so that appropriate adjustments could be made to order quantities or delivery schedules. After the users confirmed the requirements, the system determined the best course of action, with all steps documented for management tracing and audit requirements.

SKUs that had internally available inventory, due to returns, or cancelled orders, were detected by the system's stock hunting subroutine in a predetermined priority sequence. One example of the sequence was a search for an SKU in the production line-side bin location first, and then the consignment warehouse location. In addition to stock hunting, the stock was then allocated to a particular manufacturing order, and personnel were directed to the specific inventory locations to perform pick, pack, and ship operations.(Figure 3.)

At times, there were SKUs that did not have available internal inventory or sufficient quantities to meet demand. The system would first determine whether there was an open blanket purchase order, and then issued a pull order (or eKanban card) to the supplier via EDI, web services, email, or fax to trigger delivery activities. In the event that an open order for the SKU did not exist, or that an existing order was insufficient to cover the demand, the system provided alerts and notifications to purchasing that an additional purchase order was required. Suppliers were required to provide electronic or manual acknowledgements. In conjunction with the delivery of the materials, the supplier was required to send an electronic Advance Ship Notice (ASN) to facilitate one-step receiving by the user. Smaller, less sophisticated suppliers were provided ASN software on the web, to give them the ability to perform these tasks. The eKanban effectively solved Problem 2, above. (Figure 4.)

The WMS employed system directed subroutines (SDS) that were extremely effective in dynamically directing personnel activities in receiving, put away, picking, and WIP movement. When materials were received, the system immediately allocated them (or portions of them) directly to where they were needed to meet demand. The SDS balanced labor requirements and directed personnel to bring the materials to work cells, packaging, shipping, or put away in the storeroom as required, thereby eliminating the double handling identified in Problem 3, above.

When materials were already put away in storeroom locations, and identified through the stock hunting subroutine, the WMS began SDS activities that balanced the labor requirements to efficiently direct personnel in picking the materials and delivering them to the manufacturing work cell locations where they were needed.

When WIP was created in work cells, the SDS would instruct personnel to bring the WIP directly to testing stations, other work cells for subsequent operations, packaging, or shipping as required to meet requirements.

When manufacturing created finished goods, the SDS would direct personnel to bring them directly to packaging or shipping as required to fill orders. The system allowed authorized management to override the default parameters for special circumstances at any point throughout the cycle, thereby allowing maximum flexibility and adaptability.

SDS activities provided major efficiency gains in the use of labor, and reduced cycle times, thereby solving Problems 3 and 4, above. (Figure 5.)

The system provided real-time, accurate information that enabled enterprise participants to make accurate inventory availability, and delivery promises to customers. The system also provided Advance Ship Notices (ASN) to customers, thereby preparing them for impending deliveries. Superior customer relations and satisfaction were the natural results.

Exception reporting and notification of errors or deviations were an important function of the system. They alerted enterprise participants to conditions that could have had an adverse effect on subsequent activities. Examples included materials not delivered on time, wrong quantities delivered at receiving, wrong items delivered at receiving, quality problems, engineering problems, stock shortages, errors discovered in cycle counting, etc. The information provided was critical, allowing proactive corrective actions on the part of management that prevented the compounding of problems down the line.

Completion of each activity or subsequent action taken was reported back to the system via keyed or electronic entry, thereby completing the cycle. All system users had access to real-time, accurate statuses of all activities across the entire enterprise.

The WMS employed demand-pull, stock hunting, system direction, and eKanban subroutines to assure that only required materials were purchased, stored, placed on the production floor, moved through manufacturing processes, and processed through to shipping to satisfy customer demand in an efficient and timely manner. The WMS allowed the clients to reduce inventory and WIP levels, reduce cycle times, and improve both vendor relations and customer satisfaction.

Elimination of wasted effort, and maximization of asset utilization are the keys to achieving success in lean manufacturing. Deployment of a fully integrated WMS will greatly enhance performance by providing real-time, accurate information and dynamic systemic instructions throughout the enterprise. Successful WMS implementation results in superior levels of waste elimination, and improved vendor and customer relations that cannot otherwise be attained. These benefits are necessary elements in achieving the inherent goals of Lean Manufacturing. The WMS/Lean Manufacturing partnership achieves success for modern manufacturers.





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