Capital Projects - Do We Minimize Initial Outlay?

Frequently when a capital investment or other large modification project is proposed in a manufacturing plant, discussions focus on how to minimize the cost of a capital project. This makes a lot of sense - why spend more than we have to? The typical tension is the plant wants to "gold plate" everything, install redundancy, capitalize spare parts and so on - the project managers only worry about "on time and on budget" and they walk away after start up - the financial types think about time value of money DCF-ROI and see any lower cost option as a better project based on the financials.

We agree with all of these perspectives, but believe the best solution is to take a step back and look beyond the cost of the project. I have frequently said that I don't care how much a capital project costs! After people recover, and assuming they have not thrown me out of the room; I make the point that what I think is important is the total life cycle cost of a project vs just the initial capital outlay. Which would you prefer - a project that costs $200 with an annual operating cost of $20, or a project that costs $150 with an annual operating cost of $75? Hmm... The initial cost of a capital project is only one part of the overall evaluation.

Synchronous LLC has discontinued on site consultations, and we regret that we are currently unable to accept new clients. We are however, strongly committed to maintaining a dialogue on operational excellence for the process industry - so check this space! Please send us an information request at Sales@SynchronousLLC or send us a note to our web site www.SynchronousLLC.com and we will be happy to recommend a highly competent practitioner to assist you. We do not recommend or refer anyone that we do not know well, and any referral of ours meets our standards for excellence.

Supplier Partnerships - part 2!

Yesterday we wrote about "supplier selection to support reliability." Suppliers have a key role to play in your plants reliability efforts - but beyond reliability, what criteria should we use to select and manage supplier partnerships? Consistent with our philosophy of "keep it simple" here are eight key performance indicators and objectives:

- Partnership agreements should be documented and should detail the basis for the agreement.
- Supplier stocking and consignment terms and methods for reducing physical inventory and costs should be in place.
- Use blanket orders to the maximum extent possible.
- Maintainability and reliability requirements should be specified (see yesterday!)
- A feedback process for resolving problems should be documented. I know this seems obvious, but this can be easily overlooked.
- Use electronic communications, data transfer, order entry, etc to the maximum extent possible.
- Measurement- with the goal of minimizing emergency, spot, or "out of agreement" orders.
- Measurement of stock items and types.

We also think that "partner" suppliers should routinely provide spare part recommendations, and the frequency of preventive maintenance requirements (PM, PdM, CBM, etc). Synchronous experts are prepared to assist you in developing your key, and critical supplier partnership relationships. For additional information send us an information request to Sales@SynchronousLLC.com, or review our complete portfolio of service offerings at our web site www.SynchronousLLC.com .

Please be advised that effective 1 September 2007 we will transform our service offering to providing industry and operational excellence concepts and advice, but we will no longer provide on-site consultations or engage new clients. Current customers can continue to expect the same fully dedicated support and advice, but on limited hours of availability as we have already communicated to designated company contacts - usually the project manager. Thanks to all of our loyal and dedicated clients, who have allowed and honored us to be part of their transformation efforts...

Thanks my friends, Rob Baldwin, Managing Principal

Supplier Selection to Support Reliability

A typical approach for manufacturing companies to control expenses and help assure reliability is supplier consolidation, and equipment standardization. Any strategic supplier selection should include key metrics like equipment life - mean time between repairs (MTBR) and overall life; monetary losses from equipment failures; production losses and repair costs; and annual maintenance costs including preventive maintenance, overhaul, and repair costs.

Best practice is to factor these elements into a RCA/FMEA analysis for defining spare parts and preventive maintenance efforts. Frequently you can tie your operating and maintenance efforts to a supplier commitment for equipment life. If you operate and maintain equipment properly - they will warranty a certain life cycle. A great agreement can include the supplier keeping (owning) critical, and expensive spare parts in a readily available warehouse location close to your plant. Once confidence in the relationship is established, you can even move critical spares to be available on consignment in your stores warehouse.

Synchronous experts are deeply experienced in optimizing the intersection of supplier selection, standardization, reliability, and plant performance. Send us an information request to Sales@SynchronousLLC.com, or review our complete portfolio of service offerings at our web site at www.SynchronousLLC.com

Batch vs Continuous Manufacturers

We frequently hear about how different continuous manufacturers are from batch/discrete manufacturing plants. Having experience with both, we fully agree. We shouldn't let these differences deter us from pursuing operational excellence in any type of manufacturing plant. The goal of operational excellence remains the same - what is ideal performance, and how far away from ideal is my plant?

Studies have shown that the people that operate continuous plants report their performance as much closer to ideal than operators of batch plants do. We are not sure if this is truly the case, but it may be the result of operators of batch plants feeling they can always make up for lost production with the next batch - not fully appreciating that time lost is lost forever. In a continuous manufacturing plant mistakes are always highly visible - there is no place to hide when production is down.

Synchronous experts are experienced in both batch/discrete and continuous manufacturing plants. We can help you define your ideal performance and develop a plan to get as close as economically possible. Send us an information request to Sales@SynchronousLLC.com or review our complete portfolio of services at our web site www.SynchronousLLC.com

Production Bottlenecks - A Dynamic View

Bottlenecks occur in every manufacturing plant. We usually find that everyone from site managers to production operators know what the bottleneck "is." The problem is that frequently - different people believe the bottleneck is in different locations. With an inconsistent view on production bottlenecks, various parts of the organization may take nonconstructive or even detrimental actions to the overall production rate.

Bottlenecks can be dynamic and change on a daily basis. One day a lack of a raw material may be the bottleneck, on another day unscheduled downtime in a production area, on another day a rate reduction in another area, the more complex the manufacturing process the greater number of potential bottlenecks.

The limiting factor of production on any given day depends on which equipment is down, which processes are difficult to control, quality of incoming raw materials, the most recent production requirement from sales. This effect is further compounded when one process feeds another in a manufacturing plant.

Synchronous experts are well positioned to help you understand the factors that affect your overall equipment effectiveness (OEE), and to map and manage your dynamic bottlenecks. Send us an information request to Sales@SynchronousLLC.com or visit our complete portfolio of service offerings at our web site www.SynchronousLLC.com

Leadership - Management, or Both?

Which is more important, leadership or management? Organizations tend to focus more on leadership because management is easier to teach, and most companies need far more managers than leaders. We feel that both leadership and management are necessary to achieve operational excellence. In our engagements we ask our clients: "What can you do to lead your organization to operational excellence, and still manage day-to-day operations?"

Leaders challenge the status quo; trust the organization; innovate and develop; ask what and why; do the right things; watch the horizon; and set the example.

Managers accept the status quo; control; administer and maintain; ask when and how; do things right; watch the bottom line; and occasionally make public examples.

There are lots of models for leadership. We think it usually comes down to vision, reality, courage, and ethics. Leading your organization to operational excellence is hard work that almost always pays off. Synchronous experts are well positioned to help you develop and implement your programs. Send us an information request to Sales@SynchronousLLC.com or review our complete portfolio of services at our web site www.SynchronousLLC.com

Worst Practices - Let's get Maintenance Right!

In a manufacturing environment, reactive maintenance beyond 20 - 30% of total labor hours should be considered pretty bad. We would call that a "worst practice." Reactive maintenance costs at least double than maintenance in a "planned" environment. Worse that that - reactive maintenance results in longer periods of downtime. Even worse, when machinery runs to failure, a plant needs to expend resources on frequent overtime, and extraordinary resources to get "everything back on line."

We believe that plants that operate with "best practices" have a strong reliability culture. The middle ground is companies that have a "repair" culture. Our view is that manufacturing plants that have the view that maintenance is a reliability function, not a repair function have the best performance. We believe in a fix forever vs a forever fix mentality.

Synchronous experts have a seasoned perspective on maintenance and reliability in the real world manufacturing environment. Send us an information request to Sales@SynchronousLLC.com, or please consult our complete portfolio of services at our web site www.SyncronousLLC.com

What do we do with obsolete inventory?

Inventory is critical to every business. Inventory is money, and most executives would rather have money in liquid assets rather than inventory - especially if it is inventory that is slow moving or worse - inventory that cannot be sold. Many managers are reluctant (afraid?) to deal with obsolete inventory. Who wants to take a major financial hit on their shift? When you have obsolete inventory, we feel you have three basic options:

- Sell the obsolete inventory: Getting something for inventory you would otherwise write off it a good choice.

- Physically dispose of obsolete inventory and write it off: Wow - who wants to do this? If a particular quarter is a good one, we recommend taking the opportunity to re-evaluate your dead inventory.

- Keep the inventory: Hey - maybe you will actually sell it some day! But this path leads manufacturing companies down the negative path - including bankruptcies. Inventories consume a Corporations cash.

Synchronous experts can help your manufacturing enterprise deal with inventory planning, and dealing in particular with off-grade, out of date, or obsolete inventory items. Send us an information request to Sales@SynchronousLLC.com or review our complete portfolio of services at www.SynchronousLLC.com

Manufacturing Planning

We write and speak a lot about manufacturing planning. It is very tough to do well, but done well it can make a manufacturing enterprise much more efficient, and provide significant benefits to the company's bottom line. We frequently pause to say "what does good manufacturing planning look like?" We think there are five key elements:

- Provide rapid and timely simulation capabilities so that the impact of new business initiatives, promotions, and changes in market conditions can be assessed.
- Identify and manage all constraints associated with production processes.
- Create plans that lead to optimized, synchronous schedules across bulk and packaged operations.
- Improve inventory turns by coordinating material receipts with planned production.
- Enhance customer service levels.

Benefits of good manufacturing planning are many. Service level improvements, inventory reductions, etc but can also impact related areas like allowing procurement to better collaborate with key suppliers by sharing production forecasts, or allowing sales to commit to new customers based on accurate forecasting of available capacity.

Synchronous experts are well positioned to help you implement or improve your manufacturing planning processes. Send us an information request to Sales@SynchronousLLC.com or review our complete service portfolio at out web site www.SynchronousLLC.com

Skillful Global Sourcing

Global sourcing seems to be on the agenda of almost every manufacturing enterprise. The benefits seem obvious - at least at at first - lower labor costs and lower overall total costs. Global sourcing is however very, very different from the traditional arms-length purchase order transactions. As we have seen in the news recently, there are some serious pitfalls if global sourcing is not managed properly - quality and safety are implied from domestic suppliers, but can be subject to misinterpretation if not specifically addressed and managed with overseas suppliers. Sourcing complex product components instead of commodities takes much more time and careful planning.

There are a number of principles to keep in mind whilst pursuing a global sourcing effort:

- Define the company's operational strategy in order to guide global sourcing activities.
- Communicate and align operational strategy with the goals of the organization - focus relentlessly on execution.
-Use the right processes, resources, and tools - and just as importantly - integrate your techniques with your suppliers.
- Establish supply chain performance metrics to help measure and motivate everyone involved.
- Hire, train, develop, and reward the best workers, and make sure supply chain managers have a seat at the executive table.

Synchronous experts have proficiency and experience in all of the total supply chain work processes. Send us an information request to Sales@SynchronousLLC.com or review our complete portfolio of services at our web site www.SynchronousLLC.com
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RFP - Request for Proposal, Or Something Else?

The RFP - request for proposal is a core work process in most (all?) procurement organizations. The goal of any RFP should be for the procurement organization to achieve the highest quality responses from the most qualified suppliers. If handled well, the RFP process should make all vendors feel they were treated fairly, respectfully, and that makes them want to submit high quality responses, both for this RFP as well as future offerings.

We believe that a hasty RFP process will almost always result in fewer, and lower quality responses.

Determine your evaluation criteria up front. Minimize or eliminate "change orders." We believe in providing complete transparency to vendors - if they understand your timing, and criteria for selection, you will get better, higher quality bids - better RFPs. Eliminate or disregard "boilerplate" in their responses - focus on the specifics and let your own procurement organization handle the core contractual specifications.

Synchronous experts are fully versed in all supply chain disciplines - not the least to focus on procurement best practices! Send us an information request to Sales@SynchronousLLC.com , or review our complete service offering on our web site at www.SynchronousLLC.com

Manufacturing in a High SKU "Customized" World

As we have observed many times, forecasting is very difficult for standard products - and it is almost impossible for specialized or "customized" products. It seems to us that manufacturing companies are increasingly being asked to provide customized products and services to customers - which adds value to the shared supply chain - but makes for more than a few headaches as a manufacturing supplier. Companies have to determine if their customers care about more customized products, but more importantly do they value them more - and are they prepared to pay more for them?

In earlier days we looked at manufacturing approaches like product and process standardization, employee specialization, and increasing machine speeds to achieve "mass production" measured by cost and quality. Today we must focus on approaches like product modularity, process flexibility, employee versatility, programmable equipment, and customer input to achieve customized solutions measured by flexibility and response time.

Synchronous experts are perfectly positioned to help you evolve your manufacturing processes to adapt to the highly customized demands of 21st century customers. Send us an information request to Sales@SynchronousLLC.com , or review our complete service portfolio on our web site www.SynchronousLLC.com

How Do I Make My Company World Class?

What does it take for a company to become a world-class manufacturing firm? More importantly than that, how does a firm assess itself against that goal? We like to focus on three areas:

- Know Your Customers: You must continually ask what do customers want in this industry segment? If there is no market demand for a particular product - the manufacturer will hardly be world class, even though they may be the "best" manufacturer.

- Know Your Abilities: How should the business consistently deliver these products and services to the customer? Focus on areas like zero-defects, fast and responsive, lean, flexible, and environmentally friendly.

- Know Your Metrics: This is an absolute must, even if you do great on the first two dimensions. The perfect business strategies or manufacturing capabilities do not matter if a company cannot execute - and has poor performance results.

Synchronous experts are well positioned and fully prepared to help you achieve world class performance. Operational excellence is what we do! Send us an information request to Sales@SynchronousLLC.com , or review our complete services portfolio at our web site www.SynchronousLLC.com

Operations Excellence Tool #1 - Root Cause Analysis

Implementing operational excellence has many dimensions, and may tools along the journey to success. Sometimes manufacturing operations get caught up in the "flavor of the month," fancy buzz words, or other hybrid tools (lean-six sigma) based on the latest book published on the subject. As always, we like to focus on the problem at hand and use the appropriate tools rather than implement a specific tool or program - "we are going to implement lean this year" never made much sense to us.

With that said, there is one tool that we believe is the most effective way of achieving operational excellence, and frequently overlooked in the search for a more "sexy" approach. The most powerful tool for achieving operational excellence, proactive operations, and effective design is root cause analysis. There are numerous methodologies for performing root cause analysis. Each has their own advantages, but the most important aspect is the formalized, structured approach rather than the specific investigative tools. Sure, we have our preferences, but if an organization has already trained personnel and is already using a root cause analysis methodology we say great - as long is it is done well, use it as a cornerstone to your preventive and operational excellence efforts.

The basic steps in an effective root cause analysis should include:

- What happened? Describe the effects.
- Why did it happen? Describe at least two potential causes.
- Repeat the process until the root cause is determined (usually five cycles).

Some of our suggestions for insuring an effective analysis are:

- Causes may not present themselves in order of occurrence - so don't expect it.
- The sequence of causes will likely branch, so chart the cause/effect. Wishbone charting is useful for this.
- Each event may have many causes, but eliminating the root cause will prevent the event.
- It may be useful to work backward from the event.
- Document acceptances and rejections of root causes.
- Correlate primary effect to causes.

Most root causes can be boiled down to three areas - people, equipment, and procedures. Improve the people through training and leadership; the equipment through better design, operation, and maintenance practices; and the procedures; and good things will happen! If you don't, bad things will happen.

Synchronous experts are ready to help you set a solid foundation for your root cause analysis efforts in your organization. Send us an information request to Sales@SynchronousLLC.com , or review our complete portfolio of services at our web site www.SynchronousLLC.com

A Great Supply Chain Benchmarking Opportunity!

I am very proud to report that the premier supply chain organization - APICS the Association for Operations Management - has lined up with SAP North America to announce and offer a great benchmarking opportunity for all manufacturing and supply chain organizations. Firms can take an on-line survey from the proprietary APICS web site (either a condensed or comprehensive version) to assess their supply chain and ERP system performance. You can then determine - is your team at the same level as your competitors?

As a thank you, and reward for participating in the survey your firm will receive a FREE customized comparison results report that companies normally spend big bucks to get their hands on.

Given our strong affiliation with APICS, we are happy to assist your firm with taking advantage of this unique opportunity. Send us an information request to Sales@SynchronousLLC.com , or please review our complete service portfolio at www.SynchronousLLC.com

How Much Effort Should We Put Into Forecasting?

There is no business process as full as unnecessary costs and wasted efforts as forecasting. However, forecasting can have a hugely positive effect on business performance, customer service, and the bottom line.

The simplest forecasting method is "the random walk" which uses the most recent observation available as the forecast, ie if you sold 10 units last week, the new forecast is 10. If you sell 12 units this week, the new forecast is 12. If demand in your business has seasonality, you can use a seasonal random walk which uses the observed value from last year as the forecast for the time period (or season) this year.

The random walk is one of many very simple forecasting models, and uses the minimum amount of effort and manipulation to prepare a forecast. The accuracy of a random walk forecast is what professionals can achieve by essentially doing nothing. The performance of more sophisticated forecasting models should always be compared to the performance of a "no effort" model like the random walk. If more sophisticated - and costly forecasting methods do not beat a simple model like the random walk - why invest the effort and cost they require?

Synchronous experts maintain a complete supply chain perspective, and can help your organization get the benefits of forecasting without going overboard for the sake of forecasting. Send us an information request to Sales@SynchronousLLC.com or review our portfolio of service offerings on our web site www.SynchronousLLC.com

Lean Manufacturing: New or Recycled Approach?

Many companies are talking about lean manufacturing, implementing lean, or incorporating lean concepts into other productivity efforts - notice the rise of "lean six sigma." We always avoid generic solutions, and typically prefer to select tools to solve a particular problem rather than implementing a "solution in search of a problem." That said, lean manufacturing is a terrific approach to solving a lot of real world manufacturing problems.

Lean manufacturing burst onto the scene with the 1991 book "The Machine That Changed the World, The Story of Lean Production" by Womac, Jones, and Roos. The book was based on the Toyota production system, but was scant on the real world details of how to implement lean.

Our approach to implementing lean manufacturing concepts involves integrating lean with your factory physics, and manufacturing strategies. We focus on:

- Reducing process variability
- Reducing system cycle times
- Minimizing delay times between process steps
- Reducing waste in manufacturing
- Reducing waste in the total supply chain from receipt of order to delivery of product and payment.

For most manufacturers, measuring system cycle time from receipt of order to delivery, and minimizing delay times between processes are critical to achieving operational excellence. Typically cycle times are far more important than the efficiency of any given machine.

Synchronous experts aren't wedded to lean or any other operational excellence tools - we know them all. We like to select the most appropriate, and often blended solutions. Send us an information request to Sales@SynchronousLLC.com or review our complete service portfolio on our web site www.SynchronousLLC.com

Maintenance Effectiveness

The objective of maintenance is to ensure that any physical asset continues to fulfill its intended functions to the standard of performance desired by the user. Therefore, any assessment of maintenance effectiveness must include an assessment of how well the assets are continuing to fulfill their functions to the desired standard. This assessment must consider three issues:

- Continuity can be measured in several different ways
There are many ways in which we can measure how effectively an asset is fulfilling its functions including how often it fails, how long it lasts, how long it is out of service when it fails, how likely is it to fail in the next time period, and efficiency.

- Users have different expectations of different functions
We need a thorough understanding of all possible failure modes to be able to design, operate, and maintain an asset effectively. We also feel it is unreasonable to hold the maintainer of an asset alone accountable for achievement of its continuity targets. Continuity frequently is a function of how the asset is designed, built, maintained, and operated.

- Individual assets can have more than one, and often several functions
A unique set of continuity expectations is associated with each function. If an asset has ten functions, then the effectiveness with which the asset being maintained can be measured in (at least) ten different ways. Before it is possible to develop a comprehensive maintenance effectiveness reporting system, we need to know all of these functions, and establish what the user thinks is acceptable in each case.

Maintenance is a critical function to plant performance, and can be a tremendous source of competitive advantage. Synchronous experts are uniquely positioned to help you integrate your maintenance, reliability, and operational excellence strategies. Send us an information request to Sales@SynchronousLLC.com or check out our complete service portfolio at our web site www.SynchronousLLC.com

Quality Improvement: Symptoms vs Root Causes

When your company resolves to achieve its "entitlement" level of Quality, your cross functional team's brainstorming sessions will uncover problems of first-pass yield, rework, and scrap that appear to be major barriers to improved performance and quality. These are the types of problems that total quality management programs try to address on all fronts.

However, for the most part, such problems are symptoms of poor performance, not root causes, and they should be dealt with accordingly. If the root causes of process dysfunction are treated, many symptomatic barriers will go away on their own.

The key to success is to learn the difference between a symptomatic barrier, and a root cause barrier - which is not always easy. The truth is that most managers, quality specialists, and consultants are unskilled at differentiating symptoms from root causes.

We like to take a list of barriers to achieving a company's quality entitlement, and categorize each barrier into one of three categories: Is is a cost problem, is it a quality problem? or is it a cycle time problem? Typically, most of the major problems on managers minds prove to be the "squeakiest wheels" and the most painful distractions: cost and quality issues, not cycle time. Then take the barrier list and ask the question "If cycle time were cut in half and your loop of activity could start later - how many of those cost and quality problems would simply disappear?" Some of the barriers on the list will do exactly that. These problems are symptoms of underlying performance barriers, not barriers themselves. The next question is "If cycle time were cut in half and your loop could start later, which barriers would not be affected?" Those are the real, root cause barriers.

Synchronous experts are well positioned to help you improve your quality performance, and to identify and address root causes without getting bogged down in symptoms. Send us an information request to Sales@SynchronousLLC.com or review our complete portfolio of service offerings at our web site www.SynchronousLLC.com