You’re not in automotive, so make lean work with IT

Does IT go hand-in-hand with lean thinking and business improvement for manufacturing SMEs? Bet your life it does – and even more for companies outside industries like automotive supply, where relatively level flow of customer requirement is less assured. But there are three important pointers for success: you need to be absolutely serious about changing for the better using the power of lean methodologies; you need to champion it from the top down; and you need the right IT. That's the advice from David Millard, finance director and chief executive at Dudley Tool and Engineering, a £2.2m presswork shop based in Wordsley West Midlands. The company designs and builds metal components at its 20,000sqft factory for a wide range of industries, about half to sell from stock and half to-order, and is deliberately harnessing big system ERP in tandem with lean thinking to make that flow. It's doing so to deal effectively with the dual challenges of managing an increasingly complex and growing business, while also servicing multiple customers that demand ever smaller quantities of product more frequently to tighter deadlines – and by the way, at lower cost. "No-one can afford to continue with the old ways of doing things," says Millard. "We have to find ways to make smaller batches of higher variety on-demand, and make businesses pay." His verdict on lean: "It's resulted in enormous changes," he says. "Before this, we were a very traditional family press company, like hundreds of others that used to be in the West Midlands. Now, we're tightly run, flexible and efficient: everybody has the time and the opportunity to make the right decisions because we've got such good processes and visibility, and we're getting better all the time… But there's no way we could have done this without the IT." His choice was Microsoft Navision, through local reseller Technology Management. Looking specifically at its lean work first, Millard says Dudley has been on that journey for around 12 months, starting with formal lean training for its cross functional steering team (with assistance from the DTI's Manufacturing Advisory Service and a Local Business Link loan), and continuing today with lean mentoring for everyone from the shopfloor to himself. He refers to the simple things like 5S in the workplace so that everything is in the right place, in the right condition, and constantly subject to improvement. And he says that by doing it piecemeal, the firm has seen attitudes and motivation change for the better. "We started in the toolroom: we thought 'let's whip this into shape'. Then the principles started to filter through to the rest of the factory." But it's not been about classic kanbans: "We don't need kanbans, basically because of what we make and the number of customers. A lot of our product comes off the press complete, or goes for one finishing process, rarely more. Also, we're not like a company in the automotive market with maybe three or four main customers and a nice stable schedule. We've got a huge number of customers and around 2,000 products, when you consider all the metals and finishes. We're shipping about 4 million components a month and there's a lot of material cost and low labour content." So materials, production and order management depend on good and flexible planning – and that's managed by the ERP system. Beyond 5S and sorting through the seven wastes in production, lean for Dudley has been about introducing more appropriate production methods, ensuring agility and making the best of what it has. "Our stock production, for example, is now very different. Batches are still relatively large but we make better use of time and we pass on great discounts for volume. For some customers that works; for others, especially other manufacturers, it doesn't. They've really tightened down, wanting much smaller batches much more frequently. But with our lean work, that now suits us better: we can engineer a more level flow that also lets us flex our operations." It seems to have been a bit of a 'runners, repeaters and strangers' exercise, with the bespoke side of the business being treated quite differently. Indeed, for orders going through engineering, Millard says candidly: "We have to use a whole bunch of tools to make that work… For everything we get asked to do we use lean thinking to sort out the obstacles, find what's holding us back. That may not look like regular lean, but it's what works for SME manufacturers in the real world." Lean agility on IT And that real world, he says, also demands a lot from your IT. For Dudley, apart from the obvious financials and sales order processing, achieving lean agility meant getting inventory and production information accurate, joined up and visible. And that in turn meant turning away from a legacy system that had focused on accounts – with aspects of production bolted on but requiring rewriting for the annual upgrade – and going for an integrated system with functionality, he concedes, beyond the company's immediate requirements. "We eventually went for Microsoft Navision, from Technology Management. It's inherently integrated and very flexible: there are so many modules and variants that you can add standard functionality for just about anything. And that meant that we could make the system work the way we work, and add functionality at our own pace," he explains. Navision went in with financials and sales order processing first in March 2002, followed over the next two years by the production, stock and purchasing management modules. The company is now working on MRP as part of its end-to-end lean value stream mapping exercise. "In the past, planning was all done by paper, fingers in the air, who shouts loudest, who can we afford to let down without upsetting them. Now, with this system we can re-run the plan every day, every hour if we need to. We know what we're doing, what the status is and we don't have to spend half a day finding out. We absolutely depend on having up to date information." And by way of example, he points to the inventory and production overview screens. "They've got everything I need to know, all in real time and accurate. So I can see what products are in stock, what production are making, what sales that's for, the potential inventory requirement and so on. Then I can drill down and see the BoMs [bills of materials] and routings, and take that through to see that we're meeting our material requirements and the machine loadings. It's all there any time I want to look. "It's the same for everyone that has access – although with the different roles seeing information appropriate to them, and with authorisation to different levels. We couldn't do without this. For example, when an enquiry comes in, we can see what materials we need for the job and tell straight away what we have to do to meet the due date. Before, knowledge was locked in people's heads. Now it's on the system, and the mystique has gone out of the processes and planning." As for the hard benefits, Millard says that in the last two years production volume has increased by 30% and turnover by 25%, and that the firm has maintained gross profit margin and overall profitability without increasing its workforce. He insists that he had no option but to take on the new system and the lean programme in order to survive, but adds: "I reckon we've already paid for the cost of the system and all the consultancy twice over. Stock alone, for example, is down 25% and that's not just a capital investment saving: it's also a substantial space saving. And then you have to factor in improved customer service and our ability to take on new business." What's more, he says he's ready to take on whatever the industry throws at him. "We've heard some noises about supplier portals from a couple of our customers, for example, but we're not afraid of that. We have a very comprehensive system here and we'll be able to link into any electronic requirement."