Agile Manufacturing Transitional Strategies

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1 Agile Manufacturing Transitional Strategies Ian Christian 1, Hossam Ismail 1, Jim Mooney 1, Simon Snowden 1, Martin Toward 1, David Zhang 2 1 Agile Manufacturing and Enterprise Centre, Department of Engineering, University of Liverpool PO Box 147, Liverpool L69 3GH, UK hsismail@liv.ac.uk 2 School of Engineering and Computer Science Department of Engineering, University of Exeter Harrison Building, North Park Road, Exeter EX4 4QF d.z.zhang@exeter.ac.uk Authors list is in alphabetical order Abstract This paper provides an overview of the framework and tools developed at the Agile Manufacturing and Enterprise Centre (AMEC) at the University of Liverpool to assist Merseyside SME s in embracing agility concepts. The framework is based on four main pillars; auditing of company, auditing of the operating environment, benchmarking and learning from best practice. This paper describes the overall structure of the framework, detailing the main elements of the auditing pillars. The paper also describes an agility implementation case study. Keywords Agile manufacturing, Auditing Tools, Benchmarking, Best Practice 1. Introduction The idea of Agile Manufacturing (AM) has now been around for nearly a decade. In 1991 the Iacocca Institute released its now famous document outlining their vision of manufacturing in the 21 st century. AM is the first major manufacturing theory that has a sense of history built into it, in fact integral to it. This historical perspective is tied to its acceptance of, and basis on, the notions of change, uncertainty and unpredictability. Kidd (1994) shows how much current manufacturing practice is still based upon Taylorism and the scientific management movement of the late 19 th century. He proceeds to explain how the world today is very different from the world of Taylor s era, and yet we still work to this paradigm. People are more educated, customers more sophisticated, and the business environment much more complex. This change in perspective, from economies of scale to economies of scope, can be seen in a variety of sources (Bunce 1996, Goldman et al 1993, Puttick et al 1993) underlining the importance of agility in manufacturing in the modern business environment. The AM paradigm provides the necessary strategic and tactical framework to allow companies to behave in an adaptive and flexible manner permitting continuous evolution in an increasingly demanding and competitive market. A number of sources (Gupta 1996, Hoyt et al 1997, Meade et al 1997, Meade at al 1999, Sharifi and Zhang (1999)) have already begun the process of more rigidly defining this framework. Extending the above work AMEC has developed a practical set of tools that fit the above requirements and provide the necessary guidance for SME s exploration of manufacturing agility. 2. Definitions and Boundaries The Forum at the Iacocca Institute defined Agile Manufacturing as: 1

2 The ability of an organisation to thrive in the competitive environment of continuous and unanticipated change and to respond quickly to rapidly changing markets driven by customer based valuing of products and services. (Nagel R, Dove R 1991). This definition has been widely quoted together with the Four Principal Dimensions of that are: Enriching customers with total solution products. Mastering change and uncertainty - Entrepreneurial Organisation. Co-operating to enhance competitiveness Virtual organisation. Knowledge-driven enterprise. AMEC places practical manufacturing requirements at the centre of agility strategies. Considering the potential of multiple business models, and the potential for multiple manufacturing strategies (especially within the same organisation), manufacturing agility is defined as a convenient vision and starting point for AM strategy. Manufacturing is the ability to respond to, and create new windows of opportunities in a turbulent market environment driven by individualising customer requirements cost effectively, rapidly and continuously. Essentially the customer, and more importantly the product requirements that they represent, are central to manufacturing profitability. These requirements must be met at the right price, to the right quality, and at the right time. However these requirements are not static, and the customers needs are in a state of permanent flux, which has an inevitable impact on a company, and requires greater flexibility of that company. However, due to changes in the business environment the ability to fulfil these requirements is under permanent pressure from environmental turbulence. AM is therefore the enabling technologies that permit the drive towards manufacturing agility as defined above. Agile Manufacturing sets out to identify and apply practical tools, methodologies, and best practices that enable companies to achieve manufacturing agility within a turbulent business environment. 3. Business Case The case for agility can be summarised in the following key interrelated factors: Intensified Global Competition: where companies are competing on the international stage means that an individual organisation now has to compete across a wider array of products and product features. Reduction in lead-time for product development and the life expectancy of a product as markets become rapidly more saturated with products. Shorter product life cycles require different enterprise structures focused on the customer, rapid innovation, rapid response, and good quality, all at the lowest cost. Diversification of demand for customers means that rather than simply greater choice of products, customers want the products they want. New technologies will always play a role in increasing competitive advantage, but technology alone is no longer the prime mover for improving competitiveness. The focus must now be on good technology, a good understanding of the technology, and good utilisation/integration of technology with business needs. 2

3 4. The Transition to Transitional strategies are those processes identified as best enabling change within the wider context of an organisation as a whole. In the world of AM this is the process of understanding the effects of change on the target organisation, what are the capabilities of the target organisation, and what are the relevant best practices chosen from a wide variety of industrial sectors. Many companies are already employing elements of agility because the realities of the competitive environment dictate these changes, but this is usually outside of any strategic vision and is approached in an ad hoc fashion. The lack of a systematic approach to agility doesn t allow companies to develop the necessary proficiency in change, a prerequisite for manufacturing agility. The proposed methodical approach to agile manufacturing and agility strategies is based on four sets of tools (see in figure 1): Tools to explore the business environment (Environment Turbulence Indicator ETI). Tools to identify an organisations current agility capability ( Capability Index ACI). Tools to evaluate current performance within the business environment ( Performance Index API). Tools for benchmarking and identifying best practice. Environment Turbulence Indicators Gap Analysis Capability Indicators Agile Performance Indicators Benchmarking Benchmarking Performance Measurements Road Map Transition Strategy Implementation Maturity Figure 1. The Route to Agile Manufacturing 3

4 The application of these tools to an organisation highlights the main areas for improvement and sets the main performance targets through a Gap Analysis. The second phase of the approach is the development of an agility road map. The agility road map is based on an iterative process consisting of five stages (figure 1). The first, which is based on the result of the gap analysis, is identifying the transitional strategy required to meet the agility targets. The second stage is to plan and implement this strategy. The third stage is agility maturity where the agility measures and procedures adopted become an established way in which the company operates. Since an agility strategy by its nature needs to be dynamic, the fourth stage is the constant measurement of the performance against changes in the business environment. Stage four acts as the driver for future changes through identifying new areas for improvement. Stage five, involves benchmarking against new and emerging best practice in the area. 5. Development and Implementation The approach to designing the Strategic Framework has been incremental and the initial research has focused on identifying and developing the measures for ETI, ACI and API. The tools have been tested in a number of organisations, both SME s and LE s. These companies form the AMEC steering committee and represent a variety of industrial sectors including: Precision Engineering Telecommunications Food Health Chemical High Tech White goods General Engineering The following sections provide an overview of how the various tools are grouped. 6. Turbulence in the Business Environment and Current Performance Indicators The first important step in navigating the turbulent road of competition is the need for senses with which to explore the environment, i.e. to assess change, and how rapidly change occurs within the business environment. This allows clear comprehension of the scope, magnitude, and intensity of the turbulence confronting a company. Business Environment Tubulence Assessment Changes in STEEP Intensity of Competition Dynamic Customer Requirements Supply Chain Turbulence Figure 2. Overview of the BETA tool Four key areas have been established that identify change, turbulence and disturbance for an organisation: Social, technological, environmental, economical, and political changes (STEEP) that affects the operation of all companies in a region or a sector, essentially macro-environment measures; the intensity of competition specific to an organisation; the dynamic changes in customer requirements, which affect an organisation; and turbulence in the supply chain. 4

5 Turbulence analysis is about understanding and measuring change. The key attributes of change to be calculated are trends, frequency, frequency acceleration, and magnitude. Comprehensive evaluation of these features provides insight into how violent is the change faced by a company and the possible vulnerabilities of a company. Coupled with each of these turbulence indicators are measurements which show how well a company is responding to these disturbance factors over time (performance indicators). These two sets of measurements can then be compared for correlation, identifying the key environmental drivers for a company, and to what extent they influence the company. These then provide decision support mechanisms that allow an organisation to more readily identify its individual route to manufacturing agility. 7. Agile Capability, Attributes and Capability Indicators The next stage in an organisations drive to agility is the assessment of its existing agile capabilities. Such capabilities arise from what we believe are the key areas or pillars (those components that support the ideal of agility) of agile integrity. The model of the Capability Indicators tool is shown in figure 3. This shows the key factors of an organisation and the relationship between these factors. It is intended that this model should not slavishly follow functional divisions, or processes, but encapsulate the idea of generic organisational relationships. As can be seen from figure 3, none of these pillars stands alone, and the crossover is crucial to ensure that all perspectives are taken into account, for example the processes can be seen from a products point of view, but similarly the products can be viewed from a process perspective. Product: What is required by a customer to fulfil specific needs. : This is how the product (a solution for customer needs) is made. People: This is the personnel factor involved in fulfilling customer requirements. Operation: This is how an organisation manages their response to customer demand. Organisation: This is the functional boundary which provides context to all of the above. Business Environment People Product Operations Organisation Figure 3. Index Model Within each pillar, there are sets of attributes that further define the pillar and shape its focus in terms of manufacturing agility. From these attributes, agility metrics may be derived, and an agility index established. 5

6 i) Product Flexibility This section measures the ability of a product/product range to be configured to produce a maximum number of variations with a minimum number of component types and the ability to use alternative component parts in case of unforeseen manufacturing/supply problems. It also covers the ability to source/manufacture the component from alternative suppliers/processes and the ability of the product to be adapted to achieve new goals such that individual customer requirements. This is measured within the framework of the most cost effective and efficient manner. Product Flexibility Product Configurability Product Adaptability Figure 4. Components of Product Flexibility ii) Flexibility This section measures the ability of the available processes to be configured to meet demand and product variations, to cope with unexpected problems, as well as to facilitate new product introduction in the most cost effective and efficient manner. Flexibility Diversity Sustainability Innovation Configurability Figure 5. Components of Flexibility iii) Operational This section measures the ability of a company and its supply/distribution network to respond to and take advantages of market opportunities in the shortest possible time and in the most cost effective and efficient manner. Operational Production Support Production Supply & Distribution New Product Introduction Figure 6. Components of Operational iv) People Flexibility This section covers the ability of the workforce to be multi skilled, to demonstrate high levels of motivation and exhibit a conscientious approach in terms of changes in roles responsibilities, time constraints, etc. The components of this measure are shown in figure 7. 6

7 People Flexibility Employee Skills Flexibility Skills Replaceability Employee Skills Utilisation Figure 7. Components of People Flexibility v) Organisational This is the ability of a company to make/implement effective strategies, communicate efficiently within its hierarchy, to be innovative, to create partnerships with customers and suppliers, and the ability to work with others to exploit/create market opportunities. The components of this measure are shown in figure 8. Organisational Strategic Communication Human Resource Flexibility Organisational Flexibility Figure 8. Components of Organisational 8. Case Study The development of the agility framework elements was carried out in parallel to an agility implementation project in which members of the AMEC team were directly involved. The project provided a good insight into the practical aspects of implementing agility. For reasons of confidentiality the name and details of the company are withheld. A summary of the project is given below. i) The company: The Company is an SME that produces shower enclosures and water deliver systems. It is considered a market leader in terms of the quality of product designs and sells through professional and special retail outlets. The company manufactures and assembles through traditional batch manufacturing systems with a mix of make to order and make to stock. The product is split into 9 family platforms with a degree of configuration resulting in over 3500 Bills of Materials to manage. ii) The market: Customer demand is moderately seasonal with an increasing trend. While the company retains an edge in terms of quality, competition in the middle range of the market is becoming more active and the signs that a shift to quality products by these competitors is the next move. Furthermore the customer needs are becoming more individually specific indicating a tendency to product customisation. iii) The need for agility: Varied customer demand resulted in wide fluctuations in demand for a mix of products. Subsequently, forecasting customer needs became more difficult and making to stock became more costly as products remained in stock for longer periods. The complexity of the current product structures resulted in manufacturing operations, while coping at the time, were quickly becoming overstretched. The effects of this were evident in terms of delays in delivery, lost market opportunities and low stockturn. iv) The approach: To react to market threats and the new customer needs, the company had to embark on a radical change in terms of product and production. An initial analysis was carried out to measure the company s performance externally in terms of meeting customer needs and internally in terms of production flexibility and responsiveness. This analysis was 7

8 followed by a review of best practice in parallel markets. As a result of these measures, the company identified two main targets for improvements. The first is to improve production techniques through the introduction of cellular manufacturing procedures in order to reduce manufacturing lead-time and improve stockturn, the second is to design new products with an emphasis towards mass customisation thus reducing product complexity while increasing variety. v) The implementation: The company decided that it was essential that operations in the production departments should be addressed first, and as signs of improvement become more evident the move to designing mass customised products would start. The implementation was carried out in three overlapping phases. The first involved restructuring the manufacturing operations into nine product focused assembly and machining cells operating with two-bin Kanban pull approach. Employees were retrained to operate as teams to manage and operate the cells and also trained in cell layout and simple visual management techniques based on 5s. Although the company purchased an MRP system two years earlier it was rapidly becoming difficult for it to cope with the change. Overall control of the cells was therefore carried out through simple cell based spreadsheets. A number of simulation models were developed to identify key control parameters and these were subsequently used in the spreadsheets. The restructuring took 12 months and resulted in doubling stockturn and reducing leadtime by 30% against a backdrop of increasing sales. The second phase involved designing new product platforms based on a mass customised philosophy. Component reuse and product similarity measures were devised to evaluate designs and were constantly applied during the design process. Three product platforms were designed to gradually replace existing product platforms while offering a wider variation. These were based on common components and standard interfaces and resulted in improving the reuse and similarity measures by a factor of 3. Improvement to the product development process was also introduced through product data management and improved engineering change control. The new approach to product design has reduced new product development leadtimes by over 50%. New cells were developed for the new product range, however due to the high commonality of components, these operated as product independent with multi-skilled teams. The third phase of the implementation was focused on introducing a new IT based tools, to support product design, and an ERP system to manage the introduction, processing and sales of the new product ranges. vi) The Future: The impact of the changes on the company has been highly effective. Through the process of change, the company has identified new markets for its products and embarked on a new policy of providing products in the mid-range through the OEM markets. 9. Conclusion From the above we may recognise aspects that may be shared by other manufacturing paradigms (e.g. World Class Manufacturing). It is not perceived that AM stands opposed to other manufacturing concepts. Elements and extensions of best practices documented in other manufacturing concepts may be incorporated to support AM, so long as they are integrated to achieve agility collectively. Concepts such as mass customisation, cellular manufacturing, lean principle etc. can be utilised as components of an AM strategy together with methodologies specific to agility, but individual elements should not be confused with AM. From evaluating an organisation s agile capabilities, the organisation s agility mix, i.e., a mixture of areas and metrics that best suit a specific organisations agility requirements at a specific time in a specific industrial sector and market, can be defined and continually used to monitor its agile status and guide agility transition strategies. If, at a later stage, aspects of the organisations business activities change, the organisations agility mix can be altered to match the new requirements. For example certain manufacturing organisations will have few design 8

9 capability s in-house, they may have their designs specified by the customer. These companies will have a limited interest in Product Flexibility, and would be primarily concerned with Flexibility. AMEC perceives companies as individuals, and a one size fits all approach will not work; customisation is the fundamental guiding principle in the strategic framework outlined in this paper. From the data collected a number of inferences have been drawn. Identification of exposure to disturbance is a key factor, and these weaknesses can be due to bottlenecks in the manufacturing process, vulnerability of key skills within manufacturing processes, or the limitations of suppliers of core raw materials. From the detection of these susceptibilities, recommendations and priorities have been drawn up in terms of agility strategies to build greater robustness into the individual companies. Other areas that have been identified have been within the design process, including standardisation of parts, and re-use as a method of reducing design time and therefore time to market. This framework and set of tools have proven invaluable in focusing a business on the market environment, how change can be built into the fabric of the business, and how behaviour of the organisation can be channelled in an agile direction. 10. References Adams S M, Sarkis J, Liles D. H., "Research on the Development of Strategically Relevant Activity Performance Metrics", 1995, 4 th Industrial Engineering Research Conference Proceedings, pp Bunce P, "From Lean to Agile Manufacturing, Next Generation Manufacturing: Future Trends in Manufacturing and Supply Chain Management", 1996, pp 3/1 3/5 DeVor R, Graves R., and Mills J, J, "Agile Manufacturing Research: Accomplishments and Opportunities, IIE Transactions", 1997, pp Gupta U. G., "A Quality, Time, and Innovation Based Performance Measurement System for Agile Manufacturing", Proceedings of the Annual Meeting of the Decision Science Institute, 1996, Vol. 3, pp Goldman S.L, and Nagel R N, "Management, Technology, and : The Emergence of a New Era in Manufacturing, International Journal of Technology Management", 1993, Vol. 8, pp Hoyt J., Huq F.,Liles D., "Design of a Study to Test the Statistical Significance of Five Enablers of Agile Manufacturing Organizations", 6 th Industrial Engineering Research Conference Proceedings, 1997, pp Nagel R, Dove R, "21 st Century Manufacturing Enterprise Strategy: An Industry Led View of Agile Manufacturing," Iococca Institute, Lehigh University, Volumes I and II, November Kidd P., "Agile Manufacturing: Forging New Frontiers", 1994, Addison-Wesley Meade L M, and Rogers K. J., "A Method for Analyzing Alternatives for Business es", 1997, 6 th Industrial Engineering Research Conference Proceedings, pp Meade L. M., and Sarkis J, "Analyzing organizational project alternatives for agile manufacturing processes: an analytical network approach", International Journal Prod. Res., 1999, Vol 37, No 2, pp Puttick P. and Gillis J., "Factory of the Future", 1993, DTI Publications Sharifi H, Zhang Z., "A Methodology for Achieving in Manufacturing Organisations: An Introduction", International Journal of Production Economics, 1999, pp 7-2 9