MAKE-TO-ORDER KANBAN

INTRODUCTION

Most managers of non-repetitive shops look with envy on the ease of scheduling the repetitive shop with Kanbans. The benefits of Kanban pull systems in the repetitive shop have been significant and well-documented. Unfortunately, these same benefits have been elusive for the job shop, where departments are functionally organized, where work orders are required, or where many jobs are one-time production. Until now, that is.

SYNCHRONOUS MANAGEMENT has developed and implemented an approach we call MTO KANBAN, which "pulls" orders through the job shop based on the demonstrated ability of the shop to produce. The following describes the development of MTO KANBAN for a product and process Development Operation. Development Operations (DO), an engineering prototype shop. employs about 300 direct labor personnel on each of two shifts, operating about 183 functionally organized machining, fabricating and metal treating work centers. The DO shop completes approximately 10,000 work orders per year (200 per week), usually in quantities of one each, with up to 350 operations on a routing. Forecasting is non-existent, and priorities are set via an infinite-reverse scheduling system. Priorities are communicated via operation due dates and critical ratios, plus a management "priority code" override.

At the beginning of the engagement, about 2300 work orders (11 weeks' worth, and increasing) were in work-in-process (WIP), with another 1800 orders (9 weeks' worth) awaiting release. The 2300 orders in WIP represented over seven times the number of jobs which could be worked on at any point in time (2300 orders/300 operators). The average work/wait ratio (actual hands-on time vs. total cycle time through the shop) was about 8%, and declining. On about 900 (40%) of the orders in the shop, the operation due dates and critical ratios were being overridden by the management priority code. In addition, shop management was spending up to three hours per day in expedite and shortage meetings.

The goals were to reduce the shop lead time to six weeks and to improve the work/wait ratio to 15%. The challenge was to provide a mechanism for reducing the multiple of orders to operators to a minimum, while still fully utilizing DO's critical resources. The results would be a corresponding reduction in shop lead times, and an increase in the work/wait ratio. With fewer orders in WIP, orders could be matched more closely to actual needs, improving the effectiveness of the existing shop load and priority scheduling systems.


METHODOLOGY

The approach decided upon was a "pull" system which would throttle the release of work to the shop based on the actual completion of work. Since the non-repetitive nature of the shop precluded using a standard Kanban approach based on the repetitive consumption of inventory, we focused instead on the repetitive consumption of critical capacity.

Our methodology involved several major steps, including:

Identifying critical resources through a combination of flow and capacity analysis.

Categorizing work based on flow through these critical resources.

Establishing required throughput and wip inventory levels for each category.

Reducing work in process to the minimum levels required to utilize key resources.

Instituting order release and flow control mechanisms to identify and resolve bottlenecks.

The MTO KANBAN system supplements, rather than replaces, the existing shop scheduling system. As the number of orders on the floor is reduced, new orders can be released much closer to actual requirements. Since orders are released only if they are needed, and only if they can be worked to completion, the priorities set by the scheduling system for individual work centers are now seldom overridden. In addition, existing shop load reports are now better able to provide visibility for controlling backlogs at individual work centers.

Because the approach was vigorously supported by upper level management through changes in policy, and because the users were involved in its design and implementation, the result has been a significant improvement in control over work in process. Within a year, shop cycle times were down from 11 weeks to about 7 weeks (and eventually to 5 weeks), a 45% reduction. That is, the number of open orders in the shop was down to about 1000, and critical resources were still being fully utilized. At the same time, the overall work/wait ratio in the shop increased to over 15%, and the number of orders overridden with special priority codes dropped from 40% of all open orders to less than 2%. Finally, because shop labor was going into throughput rather than inventory, the shop was completing over 200 orders per week, with about 10% more labor content per order. Plant management considered the MTO KANBAN system an unqualified success.

Of course, the MTO KANBAN approach has also been successfully implemented in a number of shops which are far less complicated than Development Operations, and with similar results. MTO KANBAN is being used for the control of low-volume "specials" in conjunction with repetitive Kanbans for high-volume work. It is also applied to finish-to-order products, where the demand for common component parts is repetitive enough for the conventional Kanban approach. In any event, it is clear that every manufacturing business, whether repetitive or make-to-order, or anywhere in-between, can now benefit from the control of work flow through the application of the pull signals methodology.