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APICS e-NEWS

Vol. 3, No. 22

APICS e-NEWS
Your solutions for increasing workplace performance.

Vol. 3, No. 22, November 18, 2003
A semimonthly electronic newsletter published by
APICS--The Educational Society for Resource Management.

This issue sponsored by Exemplary Software.

CONTENTS
___________________________
ERP: TRULY SUPPORTING LEAN?
When updating your ERP system, unnecessary functionality and
upgrades may lead to a spiraling burden of activity.
_________________
TANGIBLE BENEFITS
Technology partnership delivers productivity gains.
_______________________
COMMUNITIES OF PRACTICE
Focus on Small Manufacturing
_________
SOLUTIONS
Programs to help you increase your workplace performance.
________________________
MESSAGE FROM OUR SPONSOR
Reduce inventory in weeks, not months! Test drive Exemplary's
pull-based replenishment for 45 days.
http://www.exemplary.com/products/cxquickstart.html.
__________________
ABOUT APICS e-NEWS
_________________________________
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ERP: TRULY SUPPORTING LEAN?

The consultants are packing up and the IT folks are busy updating
the system documents for those bells and whistles that were just
installed in your recent upgrade. This reconfiguration gives your
system expanded work-in-process (WIP) inventory tracking
capability and warehouse management. But what you didn't realize
is that this upgrade actually downgraded your pace to becoming lean.
Did you map your process and document your needs by way of a
clearly-defined user requirements document?

Beyond the following three key processes, little more is required
to support your journey to lean. In fact, anything beyond these
three is likely to slow you down and limit your agility.

The first is the buy/pay process. This provides the ability to
create purchase orders, receive material, record lot numbers, hold
product, and pay suppliers while charging specific cost centers.
Second is the order/ship process, which enables shipping,
inventory updates, and accounts receivable. Third is the financial/
reporting process, which enables balance sheet and income statement
reconciliation and product-focused cost roll up.

Unnecessary functionality and upgrades may lead to a spiraling
burden of activity, such as added storage locations, leading to
added reconciliations and exponentially more transactions. The
greater number of transactions inevitably will lead to increased
cycle count activity, and the spiral continues.

This is a step in the wrong direction because the strong majority
of your receipts pass inspection. It's wasteful to input a
transaction to support an exception. Before you know it, the added
transactions lead you to create a requisition for an
inventory analyst, whose sole purpose is to straighten out
transaction errors and adjust the books. Now the spirals are
actually affecting your bottom line and are constraining your
ability to build and ship at the fastest possible speed
(transactions can become a bottleneck). Is your customer really
willing to support an inventory analyst to reconcile unnecessary
transactions you've built into your process?

As your manufacturing team makes advances--bringing subassemblies
online, reducing batch sizes, balancing operations, implementing
pull systems and supplier kanbans--you have the opportunity to
eliminate all the unnecessary steps associated with traditional
shop floor activity. Huge amounts of waste are associated with
traditional shop floor control and traditional material
requirements planning (MRP), and each step has a large impact
on the transaction activity.

For example, kitting, WIP reporting, shop order creation, order
firming, reconciliation, spot purchase orders, and MRP regeneration
all represent a gold mine of opportunity if they can be avoided by
converting to a three-bin pull system kanban. In this arrangement,
the transaction burden drops at least tenfold in many cases along
with improving the response to the floor.

In a lean operation, the only transactions of value to the shop
floor are raw material issue to allow for cost center and product
roll up and finished good creation to allow inventory updates to
support order processing/shipping.

Too much system functionality actually threatens your throughput.
It's critical that system transactions do not constrain the
advancements made on the manufacturing floor. Therefore getting
involved early with information systems and finance to communicate
the need for only the necessary functionality in your ERP projects
will enable your processes to remain smooth, agile, and limited in
scope to service the three key processes.

Scrutinize the proposed upgrades and decide for yourself those
things you need to support your processes. And do this with a
clearly defined user requirements document that states the necessary
system inputs that meet the needs of the three key
processes. Finally, accept nothing additional without a clear
justification of the sacrifice and burden the additional input
requirements may place on your manufacturing throughput.

--Patrick Lynch, CPIM, CIRM, C.P.M.

Patrick Lynch, CPIM, CIRM, C.P.M., is in production and
materials organization at Guidant Corporation. He can be
contacted at plynch@guidant.com.

TANGIBLE BENEFITS

Makers of things such as automobiles, consumer package goods, or
electronic components are accustomed to seeing and handling their
products regularly as production goes along. In contrast,
manufacturers in the process industry often work with products
that are more difficult to get one's hands on--or even see--
products such as industrial gases.

But make no mistake: The need for accurate demand planning and
transportation of product is just as real. Ask the folks at
Malvern, Pennsylvania-based MG Industries, winner of the APICS
Corporate Awards of Excellence in the Technology Partnership
category. The award was presented recently to MG and its partners
SAP America and ILOG, Inc., at the 2003 APICS International
Conference and Exposition in Las Vegas.

MG Industries extracts nitrogen, oxygen, and argon from the
atmosphere and delivers it in gaseous form to customers near its
plant sites by pipeline. More distant customers are serviced by
transporting the gases as cryogenic liquids to their storage tanks.

MG Industries' Bulk Gases Division constructs and operates air
separation plants throughout the United States and distributes
product to more than 2,500 industrial customers. The division's
customers use gases to produce their end products, and they view MG
Industries as a utility, expecting a reliable supply source.
Because of the expense of liquefied gas storage, the company
maintains only small amounts of inventory. Thus, production and
distribution decisions are made daily to avoid customer outages.

According to Matthew Brown, vice president of supply chain
management, MG Industries needed technology partners who could
deliver quality solutions to complex production and distribution
problems. "We needed to replace our aging demand forecasting and
transportation management system," says Brown. "Before we undertook
this initiative, we had no systems in place for planning production
based on customer demand. We also needed a transportation tool that
could handle hauling bulk liquids with a private transportation
fleet and a system that could be responsive to a highly volatile
vendor-managed inventory environment."

MG Industries chose mySAP Supply Chain Management (SAP APO) and
ILOG ODF technology for its supply chain initiative. Three modules
of SAP APO were involved: demand planning, supply network planning,
and transportation planning-vehicle scheduling (TPSV). The ILOG ODF
software was configured to provide the transportation management
solution and was integrated directly into TPVS.

Brown says MG is now focused on gaining benefits from the
implementation. He states that tangible cost savings are being
realized and monitored and that weekly supply chain plans are being
used to align the objectives of all personnel to better meet the
needs of the customers.

MG Industries also gained the ability to optimize production and
distribution to achieve the lowest cost to the customer, and the
software also provided opportunities to better manage electricity
costs while meeting customer demand.

"MG Industries now has systems that meet its needs and have
positioned it to grow and stay competitive in its volatile industry,"
says Brown. "No one software company could provide the total solution
to accomplish what MG needed. Only through the joint effort of the
two vendors was MG able to meet all of the objectives. We now have
the solution that addresses the entire supply chain from demand
forecasting through transportation planning."

--Mary H. King, Senior Manager
APICS Communications Division
  

COMMUNITIES OF PRACTICE

Focus on Small Manufacturing

OSHA Offers Valuable Consultation Service to Small Manufacturers

Thinking about that routine inspection of your manufacturing
plant by the U.S. Occupational Safety and Health Administration
(OSHA)? What about not having to worry about it? Sounds like a
good idea, right?

OSHA offers a free consultation service enabling employers to
find out about potential hazards at their workplace and improve
occupational safety and health management systems. The service
is delivered by state governments and performed by a well-trained
professional staff.

The consultation, established specifically for smaller companies,
is confidential--no report is sent routinely to OSHA inspection
staff--giving the employer an opportunity to fix any problems
before the OSHA inspection staff visits. The employer's
obligation: Commitment to correcting serious job safety and
health hazards before the actual OSHA visit.

Employers must request the consultation by contacting their
State Consultation Program, the OSHA Regional Office, or the
office of the appropriate state agency responsible for the
state's worker safety and health program. An assigned consultant
will discuss the employer's specific needs and will set a site
visit date.

At the opening conference, the consultant will review the
consultation procedure and discuss the employer's obligations.
During the facility walkthrough, OSHA strongly encourages
maximum employee participation. According to OSHA, "the better
informed and alert employees can work with the consultant to
identify potential injury and illness hazards." The consultant
will study the workplace and discuss applicable OSHA standards,
pointing out the hazards and suggesting measures such as
self-inspection and safety and health training for the company.

At the closing conference, the consultant will discuss what the
employer is doing right, what needs improvement, possible
solutions, and abatement periods to eliminate or control the
hazards. During the abatement/follow-through period, the employer
receives a detailed written report explaining the findings and
confirming the agreed upon abatement periods. The consultant may
contact the employer to check progress and is available for
assistance.

According to OSHA, an employer knowledgeable of workplace hazards
and ways to eliminate them can improve operations and management
of the company. Professional advice, including how to correct the
hazards, is available. The consultant can help a company
establish or strengthen an employee safety and health program,
making safety and health activities routine considerations rather
than crisis-oriented responses.

The on-site consultants will not issue citations or propose
penalties for OSHA violations, nor will they report possible
violations to OSHA enforcement staff. There are no guarantees
that your workplace will "pass" an OSHA inspection, but the
benefits of what the consultants can provide are worth the
consultation.

According to OSHA, consultants will

--Help identify workplace hazards

--Suggest options for solving safety or health problems

--Identify available help as needed

--Provide a written report summarizing the findings

--Assist in development or maintenance of an effective safety
and health program

--Provide training and education to employees on workplace
safety.

And best of all, the consultant may recommend a one-year
exclusion from OSHA-programmed inspections once program
criteria have been met.

--Mary H. King, Senior Manager
APICS Communications Division

For more information about the OSHA Consultation Program,
visit OSHA's home page at http://www.osha.gov, Compliance
Assistance. Then click on the link to Consulting Services
for the Employer.

To join the APICS Small Manufacturing discussion list, visit Discussion Lists and click on "join" for the Small Manufacturing specific industry group (SIG).

SOLUTIONS

EDUCATIONAL TOOLS FOR ORGANIZATIONAL GROWTH

The APICS Educational and Research (E&R) Foundation in conjunction
with the APICS SIGs has developed three workshops on CD-ROM that are
designed for inventory and supply chain management professionals
interested in personal and professional development. The workshop
series include extensive education on the theory of constraints,
inventory control, and lean manufacturing. These workshops
are ideal for company seminars, chapter workshops, and self-study.
For additional information visit the APICS Web site at
.

UPCOMING APICS WEBINAR

Mark your calendar for the following specialized, convenient, and
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November 19, 2003, at 2:00 p.m. ET
Presented by A. Blanton Godfrey, Ph.D.

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Visit www.apics.org/webinars/ to register for this 60-minute online seminar. Enter campaign code ZDBA3B when registering.

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ABOUT APICS e-NEWS

APICS e-News is sent the first and third Tuesday of the
month. It is written and produced for APICS members and
others in the field of resource management. Viewpoints
and opinions expressed are those of the authors and do not
necessarily reflect the views of APICS. Publication in
APICS e-News does not constitute an endorsement of any
product, service, material, or philosophy mentioned.

APICS gladly accepts ideas and contributions. Please send
comments or article ideas to editorial@apics.org.

Vol. 3, No. 22 editor:
--Michael Nuckols, APICS Publications Manager

Newsletter editorial staff:
-Lisa M. Prats, CAE, APICS Director, Communications Division
-Douglas R. Kelly, Editor, APICS--The Performance Advantage
-Mary H. King, APICS Senior Manager, Communications Division
-Michael Nuckols, APICS Publications Manager

For sponsorship information, contact your advertising
account representative or send a message to
ads@apics.org.

(c) Copyright 2003. APICS--The Educational Society
for Resource Management.

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