Beaver Engineering Group Robert Johnston Case date 1986 INTRODUCTION Beaver Engineering Group ple, founded in 1951, is based in Norwich in a purpose~ built headquarters and factory. Beaver makes a family of high-technology, high- performatice machine tools, in particular CNC machining centres. (Appendix 12.1 provides brief explanation of CNC machines.) Each machine is purpose built and made to customer's order. Beaver supplies machines throughout the BU and to many countries around the world. Jn 1986 the company, faced with an expanding and yet highly competitive market, was evaluating its products, computer systems and production control systems. By 1992, as a result of the developments in its systems and the continuing design and development of its products, Beaver had emerged as one of the world leaders in the field. BEAVER IN 1986 In 1986 Beaver had approximately 250 employees, about 80 of whom had been engaged over the previous 18 months. Figure (2.1 shows the company’s organisational chart. In 1985 the company’s turnover had been £7 million and was expected to be £8 million for 1986, A turnover of £11 million was forecast for 1987. Its product range consisted of 10 basic machines. All machines, however, were made to order and so every machine was different, as each customer required special feavures, for example special tool changers or handling devices. Figure 12.2 depicts the basic VS CNC milling machiné. ‘The basic product range was under constant review: The whole range had com- pletely changed in the previous three years. Also, modifications to components (of which there were about 2000 per machine) changed at the rate of six per day,parr 2» DESIGN ‘Yoyo uopestuEbv0 GujooulBury 1eneeg Zh “Bid foe) Gus (i) 2010 Kojag eae) (eH wonsouges ——_(g)eoveUeew (.81en086 (6 vos urine @)eo.e wed | te ees aes |ouoneas 1 | Lo | 1 _t Liason Beran (s).0040 uoRonpos (9) soxroweseicey {Game ue o pus someting ‘Suwa (@) exp ze Gi) puoaeg cowed Qu wmipyiomD W) wmndseeie —().6eu (a steoen 9960 lows {eis mncwoo emia (1) wsnOSEY Ise sede e910 song is 8: ii Kaierog cdsed (esdeuan eos (1) SBoumyt wana (0) 01001 SuyseuEN, (i) ueune4o,Fig. 12.2 V5 CNC milting machine THE MANUFACTURING PROCESS The manufacturing of each CNC machine took between 20 and 30 weeks. Final assembly of machines was a jobbing operation, though components were made in batches. The batch size was set at two months’ supply to try to achieve a stock turn of 6:1 (though the actual stock turn was about 3:1). Joe Booth, the Production Director, said that his intention was to improve stock turn by reducing the batch sizes. ‘The Manufacturing Department used a number of NC machines (see Appendix 12.1) and many cheap, second-hand machines that had been dedicated to onePARE 2 + DESIGN operation. joe believed that the plant was quite reliable, and he had the skills on site to mend and maintain all of the equipment. THE MARKET In 1985 about 10 per cent of the products had been exported. This was a rapidly ‘expanding area and was being held ac 40 per cent of expected rumover in 1986. ‘The reason for trying to hold the growth was the poor margins that were the result of the intense competition for machine tools, particularly from the United States. ‘The home market was slowly increasing, Figure 12.3 shows the growth in sales from 1987 to 1985 and the forecast sales for L986. Teste Vesa Se 78 voi ZIT SET ETO TI IFES 1860, 1860 s9r0 1980 ‘Actual sles 1057-05 Terget ies 1995 Fig, 12.9 Sales growth, 1957-66 Beaver tried to develop long-term relationships with customers as servicing and spares were required. As the company specialised in providing excellent after-sales servicing on all their products, customer loyalty was high. About a quarter of all its sales were repeat business, ‘Market lead times were typically 12 weeks, bur salesmen often quoted as low as four to gers sale. Forecasting of average build rates of the basic types was essential, though it wes difficult, if not impossible, to forecast the special options that each custome: would require. The size ofthis problema was ilustrated by the fact that they would normally expect to have about 20 machines being assembled. In fact, there ‘were often about 50 machines part-fnished, most of which were avrsting parts. The compary had about 500 ‘live’ customers. Most were customers whose machines were being serviced, About 50 were being invoiced for new machines, ‘Two hundred machines had been built in 1985. These had been delivered to about150 different customers. Two hundred and thirty machines were expected to be buik in 1986. ‘The company believed that its order-winning criteria were the ability to produce machines to customer specification and after-sales service. As the specifications \wereconstantlybeing improved, customers often gotabetter (.e.upgraded) machine than they contracted for because of modifications that may have been implemented between the order being taken and the completion of the machine. Beaver alo claimed that its servicing was second to none. Price and delivery were qualifying criteria. Though Beaver’s delivery schedule was several weeks behind, this, Joe claimed, was typical for the industry as a whole. SUPPLIERS Beaver had about 150 suppliers. All items were singie-sourced and the company’s relationships with suppliers were good. High usage-value item suppliers were chosen by price, delivery reliability, nearness to Norwich and willingness to work IIT (by ‘which was meantsuppliers should hold enough stocks to provide a two-week delivery of all items and be willing to deliver small quantities). As customers specified certain types of equipment that must be in the machine, Beaver often had to investigate where particular special items could be purchased. Lower usage-value items were sourced localiy if possible. Suppliers were chosen on price and the availability of large quantities of these items. Overall, suppliers seemed to be very willing and reliable, Joe Booth stated that he did not hesitate to re-source if there were reliability or quality problems. LABOUR “The machine operatives were relatively flexible but limited to one type of machine. NC machine operators, for example, would stay with NC machines but would ‘operate several such machines, ‘There were three shop-floor grades, though there was litte difference in pay between them, A group bonus scheme was in operation. There was no shortage of overtime available and there were no specific skill shortages OPERATING PRESSURES Cash flow was a major problem for Beaver because of the amount of semi-finished products tied up in final assembly. The company believed that the major factor Timiting profitabilicy was the constant changes of specification, which had repercussions in production planning, stores and ordering. A second factor was the costof poor quality: Themain quality problems concerned the quality of the bought- in castings and the problems caused by the accumulation of rolesance errors in thePART 2 + BESION complete and complex assembly, Joe Booth also felt that the methods employed by the company needed reviewing. ‘There was considerable pressure to deliver the machines on time, so machines ‘were often pur into the build programme in anticipation of customer demand in ‘order to try to reduce the actual lead time experienced by the customer. MANAGEMENT STYLE ‘The decision making in the company was totally centralised and was dominated by the two active owners, Victor Balding and his son Tony. Victor Balding was the ‘entrepreneur who had started the company end masterminded the investment, while ‘Tony — the modern menager with a flair for marketing, design and production — speatheaded the product growth. The directors and managers held few formal mectings. The noa-owner directors, for example the Production Director, had litle authority and only limited powers of influence. However, the owners had created an entrepreneurial spirit which drove the company and motivated management, Few managers had any qualifications. Despite the fact that most managers were relatively young, the emphasis in recruitment was on experience, COMPUTER-AIDED PRODUCTION MANAGEMENT SYSTEMS, (CAPM) ‘Beaverset up a computer departmentin.about 1980. The networked microcomputers which formed the basis of the CAPM system were bought then. Their link to production pianning and control is summarised in Fig. 12.4. The company’s investment in computing since 1980 had been predominantly in programming effort. All the CAPM systems had been developed in-house. This had provided Beaver with the flexibility that management felt was necessary. They admitted that they had znade many mistakes in developing the programs but maintained that this had helped them understand their needs better and thus develop more appropriate packages, ‘The company had considered using packaged software but none, except he accounting software, had met their requirements, The company’s computer-aided design (CAD) system and accounting systems were kept separate from the CAPM system. The company hed a policy of trying to integrate computer activities for different functions, primarily to reduce duplication of input for example cost data sentto the cost department from the CAPM was re-fnput to the costing programs. ‘This integration was expected to be ditficultto achieve because there were no means of co-ordinating the requirements of the different departments and flexibility was seen as essential by production cont Inventory control had been the initiating factor in the development of CAPM. ‘and it was still the central part of the database. The base of the CAPM system was‘Design Office bu Oravings-» Motcatora-+ Monten pan ‘Stores. Engingering atta wie is Sales Route os Fonte deust fee aa spss if — {PRODUCTION CONTROL air tea euuneangeamve| | | snaage report ‘Spares Parts: Extras a Se Lu pchoy 8 LoABUST 5 woke 2 ” oe a|_ tenes ‘7 so ned eee romeo eae g Bo, with r EB] sainme OP a [Safran so} aH raga ne Sie en Toye ee er pectoton ‘material usage Fig. 12.4 Summary of computer-aided production managementPART 2.» DESIGN a stock record. This had been developed into a material requirements pianning-type system with shop-floor data collection. This did not work well as it was difficult to forecast the parts required in the final product until very late inthe build programme. Also, although: the use of micros had met with litle rsistanee on he shop-floot, ‘the input error rate was high ~ about 30 per cent ~ and there was a problem in ‘motivating workers to input any data that was not linked to the payment system. “The CAPM system had real-time input and mainly avecnight batch working to create che output. It was hoped to develop the system to allow real-time enquities. In 1986 the Production Controller did not have direct access 0 a networked raicro PRODUCTION CONTROL AND CAPM “The Production Controller estimated the deinand forthe basic product fora period of time and tried to guess what options might be required. This formed the Build Programme (see Fig. 12.4). This was translated into parts requiced, along with the extras required from nowledge of acmual sales and a guess st sparet consumption. ‘This was compared to the computer-produced Periad I.oad List (PLL).’The PLL provided information on all parts: cost current stock, orders and average build ‘igures. All this information was inputted by Production Control. Stack Ggures were updated by Stores; raw material by Holding and Marshalling Stores (Marshalling ‘Stores put together kits for assembly). By bringing together the Build Programene, the PLL and the stock figures, the Production Controle wes able to identify what material was required and what was not available. Production Control decided ‘whether to make or buy, and either sent off an order to suppliers and updated the micro or instructed the machine shop witha drawing and a route card (@ card with {information on the sequence and timing of activities to be performed {see Appendix 12.2)). The route card information was fed into the micro and the operator in the rnachine shop reported the completion of each stage 70 the computer. This gave information on jeb status to Production Control so that the Produetion Controller could load machines, allocate and reallocate priorses, and find and expedite parts ~allof which was manual, “The Design Office provided the drawings for components and a bill of materials (BOM) for subassemblies and products, Stores would take these and amend them i conjunction with the fiters in order to create a kit list, which was the BOM. rewrite in assembly sequence, noting coramonalitics with other machines so that the Production Controller could amalgamate (manuslly) common components (in conjunction with his feeling of the probability oftheir being required), ‘The Matshalling Stores assembled the kits to the kit lists and releaced them to Assembly when Assembly had no more work that they were able to complete (not necessarily when the kit was complete) Along with the Kit weat the acinal customer order and a specification sheet — Showing all the options and the due date. If en order had not been received by thistime, an artificial order was created, Job status and time was recorded and fed to the microcomputer to provide cost and wage information and material usage information. The Assembly Superintende::: ¥as informed of all shortages as they ‘occurred. He checked with Stores to see if such items were available or could be made available from kits in the pipeline. Stores then reported the shortage to the Production Controller, who checked with the PLL, decided on make/buy, expedite or the reassignment of priorities. From the drawings from the Design Office, Engineering created the route cards, which were physically held by Production Contro! until that part was required. The Production Control system wes virtually isolated from the rest of the organisation. The only links were with Finance (the provision of job costing and payment information) and with the Drawing Office, who provided the Production Controller with drawings and route cards. Occasional meetings to discuss modifications were held and involved the Production Controller, the Manufaciuring Manager, the design stsff and engineers. Only very recently had copies of the Build Programme been sent to Sales, so that they had some idea of the capacity of the operation and the actual lead times. ‘This system, although it contained many sub-systems as detailed in Fig. 12.4, was notpartofa larger management information system and, indeed, provided no corporate information. If the Production Director or the owners wanted to know how well the production system was working, they would go to the Assembly Operation and count the number of part-built machines — often about 50, as compared with an operating capacity of 20 (there were about 30 near-finished machines all awaiting parts). There were no other reports produced by the computer. Alll the reports that existed simply aggregated and collated production information, which Production Control used to plan their activities rather than to control events. The only real control as such was by the Costing Department, who were able (with the use of the information from the micro) to compare actual product costs with estimates, so they could better judge (90 per cent accurate) which products would provide a profit and what the margin would be. THE FUTURE Joe Booth explained his concerns and plans for the future: “We are reappraising she CAPM system. To heep on top, it requires more inputting than ever before, as I try to move wards a batch size of one, Too much time is being spent just feeding the computer. We are already top heavy with indirect labour, so we must either move towards automatic inputandjor removal of duplication and more integration of systems. Originally (and naively), we thought that everything would be automatic ‘and all the files would talk to each other There are 100 marcy manual interfaces actually having to do this.RT 2 = DsSIGN “The largest benefit of this integration will be the benefit ofa beter costing system. We eail be able 10 assess tohether to take crtain orders or not ~ or at last that the consequences ollbe.Therseeiltalso bless production firefighting Stacks need1o decrease and we must be able to control our schadules bette. Hoaweoet; Fam concerned that the futegraton of the systems and Better managersnt information will nat necessarily help us get over products ox om time? Questions 1 How does Beaver compete? 2 What are the main steps in the manufacture of the company’s products? 33 Wher do you think ere the problems that are facing the Production Director? 4 What steps would you advise him to take to overcome them?APPENDIX 12.1 ADVANCED MANUFACTURING TECHNOLOGY (AMT) AMT is the umbrella term for the application of advanced technology (computer ower) to manufacturing, Such technology has been applied in many different ways toimprove, for example, machine speeds, machine control, decisionmaking, process flexibility and design process. Computer-aided desiga/computer-aided manufacture (CAD/CAM) ‘The use of computer graphics led to the development of computer-aided design initialiy for producing wo-dimensional drawings and, later, three-dimensional drawings. The link between computer-aided design and computer-aided manufacture ‘was the link between the design computer and the CNC computer. This meant it ‘was possible to design a component on computer and use this design to program the machine directly. Numerically controlled machinery (NC machines) NC machines have been in existence since the end of the nineteenth century when punch cards were used to control the activities of a machine, removing some of the need for skilled operators. The punch cards, or more recently paper or magnetic tapes, carry a set of coded instructions which tell the machine the sequence of steps to be followed, Computerised numerical control machines (CNC) ACNC machine is linked directly to a computer where the instructions are not only stored but are also created. This direct link removes the need for tapes and cards, and makes changes to the instructions easier and quicker. As a result, change-over times are speedy and process reliability is improved. Flexible manufacturing systems (FMS) An FMS isa collection of computerised numerical controlmachines (CNCs) brought ‘together to carry out sequential manufacturing stages controlled bya singlecomputer. ‘This integration allows a series of processes that are not usually carried out on the ‘samemachine to be controlled together. This increases the potential design complexity of the.component or product and increases the range of products that can pass through the sub-system. The FMS comprises several general-purpose CNC machines, usually arranged in a ‘cell’, interfaced with automatic materials handling, ‘equipment which provides raw castings or semi-finished parts from an input buffer for machining, loads and unloads the machine tool, and transports the finished piece to an output buffer for eventual removal to its destination. The scheduling of the different parts through the system, and the operations performed on them, is controlled and sequenced by computer.