CREATIVITY PEOPLE, EMPOWERMENT &

PROFITABILITY:
Excerpts From Some of the Experts...
http://www.mcts.com/people-power-profit.htm

An Excerpt from: "Creating the Sweet Spot of Success:

Operational Excellence in the 1990's" - Roger Brooks,
Oliver Wight Companies. In this article several important
points are provided regarding “Operational Excellence”.
“…During the 1980s, companies invested millions of
dollars in systems and machinery to improve their
operations, but ignored their people. Most of these
companies were disappointed with the results.
Improvements in productivity, quality, and cost savings
were marginal at best. Some companies, however,
attained spectacular results. What is the difference? The
manufacturing companies that appear to be "cruising to
victory" realize that the soft side of their business -- the
people side -- is where their companies' greatness lives.
Greatness and competitive advantage is achieved with
people - not brick and mortar, and capital equipment.
How companies educate, develop, deploy, and empower
their people determines whether they find the sweet
spot of success.
What Counts in Manufacturing Today
In today's economic environment, manufacturing
companies can only stay ahead by investing in their one
true competitive advantage -- their people. Think about
it. In manufacturing, the only thing that counts are our
customers -- and they want top quality, innovative
products, delivered quickly at a reasonable price. The
only way to address these issues is with people. Only
people can design new products, design manufacturing
processes, work with suppliers, and stay in tune with
customers to create long-term, loyal relationships that
will help business to succeed.
I look at it this way: You want to dance with the customer
and let him lead. This requires understanding what your
customer wants, anticipating his next move, and then
keeping in step. And even then, this is only the "price of
admission." It might get you through the first song, but
doesn't ensure that the customer will stay with you. The
competition wants to dance with your customers, too,
and will try to provide more innovative products, higher
quality, lower prices, and better service -- just to get on
the customer's dance card.
If you are going to keep the customer, you must continue
to improve. And improvement is borne through people.
Staying Ahead
Producing innovative products, quality, price, service,
and delivery is a tough act. It takes coordination and
synchronization of effort to accomplish all these things in
manufacturing today. Every person in the company must
know what they need to do and must work together to
perform their assignments to achieve the common goal.
That is the difference between achieving marginal results
and spectacular results.
The challenge is to understand your customers on the
one hand, know your company's business goals on the
other hand, and determine what every business process
in your company must do to meet those goals. This
becomes the performance expectation that drives every
function, every department, and every person in your
company.
Here's how an executive of a manufacturing company
defines this level of performance:
As a company, it means a synchronized application of
resources, from the top level all the way down to doing
the work, from the beginning of taking the order,
planning an order, to delivery to the customer. Resources
can be anything -- time, people, energy, and money.
When companies perform at this level of
synchronization, they have attained Operational
Excellence. This term is not just another buzzword. What
gives this term meaning is that there are benchmarks and
performance criteria, based on the highest industry
standards, for companies to determine their operational
proficiency. Operational Excellence means giving
customers more than is expected in a professional and
profitable manner.
To be operationally excellent, a company must be:

 Better than the competition in at least one, and

ideally all, of the important dimensions of
Operations -- flexibility, innovation, price, quality,
delivery, and service.

 Excellent in all the fundamentals -- asset

management, product introduction, demand
 management, etc.

 Continuously improving cycle times, operating

margins, asset returns, and customer satisfaction.
The alternative was expressed well in a recent Harvard
Business Review article:
Competitive purgatory is the sorry state of too many
formerly proud U.S. corporations. They are languishing
from the devastating effects of seven familiar sins:

1. Inconsistent product
quality,
2. Slow response to the
marketplace,
3. Lack of innovative,
competitive products,
4. Uncompetitive cost
structure,
5. Inadequate employee
involvement,
6. Unresponsive
customer service, and
7. Inefficient resource
 allocation.
HBR's remedy for overcoming this "sorry state" is
Operational Excellence:
What's needed is a total reinvention of the soft side of
the organization to produce a work environment that
stresses speed, Spartanism, innovation, and marketplace
focus. First, top managers must decide what their
company stands for and convince their employees of this
uniqueness. Second, they must set standards that drive
their business to world-class levels and be tough about
enforcing them and raising them. Third, they must push
constantly to ensure that enough innovations take place
to change the company's future significantly.
What Does Your Company Stand For?
The performance required to attain Operational
Excellence differs from company to company, depending
on markets served and competitive forces. However, the
target is always the same --the customer. Understanding
the markets you serve, the competitive forces you
compete against --all within the context of the customer
--results in a definition of what a company stands for. It
also is the first step toward achieving Operational
Excellence…”
An Excerpt From: "MRP II in the Year 2000 - APICS -
Performance Advantage, March, 1994" - Correll, Jim;
Goddard, Walter
When MRP II is utilized as an integrated management
process, there is a free, uninhibited flow of information
between departments and functions. The information is
expressed in terms and units of measure that each
function understands and can apply to their planning and
scheduling. What makes this information flow possible is
the introduction of Sales and Operations Planning (S&OP)
to the MRP II process. S&OP was developed in the mid-
1980s and is becoming more widely practiced by
companies. Many companies credit S&OP with being the
major factor in improving demand forecast accuracy,
better managing resource allocations, and better
executing the company's sales and production plans. We
foresee that S&OP will become a standard operating
practice in the years to come. The senior management
from all functions of the company -- sales, marketing,
product development, manufacturing, and finance --
participates in the S&OP process. They meet regularly,
usually monthly, to update the company-operating plan
by projecting future demand and analyzing the
company's resources and capacity.
During Sales and Operations Planning, the executive
management team makes the key decisions in how to
allocate the resources when projected demand and
supply plans are out of balance. They work together to
resolve any issues that will prevent the company from
achieving its operating plan. This results in a single plan
that all functions operate from in executing the plan.
Viewing the sales and production plans over at least an
18-month period gives senior management the ability to
anticipate and resolve problems before they occur. There
also is greater understanding throughout all functions in
the company of the implications of the decisions that are
made during S&OP.
John Campbell, Vice President of Operations for Gallo
Salame, explains: “Everything we do today has a reason.
Everything is tied together. Before, we would make a
change for what seemed to be the right reasons, and we
would cause many other things to happen that we hadn't
anticipated. Now when we make changes that cause
other things to happen, we aren't surprised -- we expect
it."
Major developments in software also will enable
companies to perform extremely rapid simulations to
predict the impact of changing conditions on the sales
and operations plans and the company's financial
performance. Companies now are able to perform
simulations, but the process is often cumbersome and
slow, limiting the number of simulations that can be
performed.
Many executives view S&OP as the process that enables
them to take charge of running the business. Bill Drees,
Vice President of Consumer Products and International
Sales for Pioneer Flour Mills, explains:
"MRP II, for us, is all encompassing; it is a way of life and
how we run our business. I don't understand companies
that approach it strictly from a manufacturing
standpoint. The main advantage is for marketing. It
enables you to understand the dynamics of the market
and the dynamics of your company. Everyone in the
company can see the sales plan through the forecasting
system. Everyone can see the production plan. It even
can be used to directly input your customers 'forecasts
into your planning system."
MRP II and Continual Improvement (see: The Continual
vs. Continuous Dilemma)
The advent of Continuous Improvement techniques also
is changing the way MRP II is applied in companies. In
most cases, it is resulting in a simplification of MRP II
planning techniques. There is great synergy from
combining the attributes of MRP II with the attributes of
Continuous Improvement. MRP II gives companies the
ability to effectively plan and control the business
environment; whereas Continuous Improvement changes
today's environment. Good controls make changes
easier; changes make planning and control more
effective, and so on. The purpose of Continuous
Improvement techniques, like Just-in-Time, kanbans, and
setup reduction, is to simplify the production process and
eliminate waste. As a result, Continuous Improvement
has helped to make easier many MRP II planning
techniques and eliminate some planning activities
altogether.
When companies utilize flow processes, for example,
routings are eliminated and the number of items in a bill
of material are frequently reduced. The fewer items to
plan, the more straightforward the planning process
becomes.
As flow lines are created, detailed capacity planning
often is no longer necessary; rough-cut capacity planning
at the S&OP and master schedule levels as well as finite
scheduling are sufficient and effective for those products
produced in the flow lines.
Shop floor control traditionally uses dispatching to
communicate what jobs to work on next. With kanbans,
however, a visual control is used to authorize production,
often eliminating the need for work orders as well.
Although a kanban is a powerful production control
technique, it is not a planning technique. The kanban can
communicate to the shop floor what to make, when to
make it, and how much to make -- but only for the time
frame. Kanbans cannot predict what materials nor how
much will be needed in future time periods. The visibility
of changes in future demands is the job of MRP II.
In a Continual Improvement environment, companies
make a conscious effort to eliminate anything that hides
problems. When the reliance on safety stock, scrap
factors, and yield factors is minimized -- or eliminated all
together -- the planning process is simplified. Also, as
cycle times are dramatically cut by reducing queues, the
need for replanning and communication of exception
action messages is lessened.
We believe that the practice of Continuous Improvement
will become commonplace in the next decade as
pressures mount to significantly reduce cycle times, cut
costs, and improve quality. The ramification will be
greater emphasis on front-end, long-term planning, using
Sales and Operations Planning, Master Scheduling,
Rough-Cut Capacity Planning, and Finite Scheduling.
Supply Chain Management
Another development that we predict will become more
widely utilized in the year 2000 is Supply Chain
Management. Some companies, like Zeneca Colours in
the United Kingdom and Pioneer Flour Mills of San
Antonio, TX, are already beginning to employ Supply
Chain Management.
Pioneer Flour Mills was recently asked to link up with one
customer, a major food supplier, through an Efficient
Customer Response (ECR) process, which is the food
industry term for Supply Chain Management. Eleven
trade industry groups, representing food retailers and
manufacturers, are participating in the development of
ECR industry wide. ECR involves directly tapping into
customers' inventory and forecast information, using
Electronic Data Interchange (EDI) and computer
networks, to determine when to produce and deliver
product to their customers.
The purpose is to better manage supply and demand
between customers and suppliers, just like MRP II
enables companies to better manage supply and demand
internally between sales and manufacturing. ECR is an
extension of MRP II's principles and techniques that
enables companies to reach beyond distribution centers
all the way to the ultimate consumers. Use of ECR is
expected to slash $30 billion in costs over the next five
years from the process of making, distributing, and
selling food.
Pioneer Flour Mills is one of five manufacturers asked by
the major food company to participate in its ECR process.
DeGregorio and others at Pioneer Flour Mills believe they
wouldn't have been asked to participate if they had not
implemented MRP II.
"MRP II gives you the ability to do ECR. Without being
proficient at scheduling, planning, capacity management,
inventory management, and inventory accuracy, you
couldn't begin to think about doing ECR. Trying to do ECR
without MRP II would add costs, rather than drive costs
out," DeGregorio states.
High Level of Operating Proficiency Required
To operate a business as described in this article -- using
MRP II as an integrated management process for the
entire business enterprise and adapting MRP II to a
Continuous Improvement environment -- implies a high
level of operating proficiency.
Achieving this level of operating proficiency is the driving
force behind the tradition of the Oliver Wight ABCD
Checklists. The checklist is now in its fourth edition; the
purpose of each edition has been to lead manufacturing
companies to a new level of operational excellence. The
Fourth Edition of the checklist provides benchmarks and
performance measurements for strategic planning,
people and teams, total quality and continuous
improvement, product development, and planning and
control. Class A companies, as measured by the 4th
Edition ABCD Checklist, reap the benefits from managing
all five processes. The benchmarks and measurements
for certifying a company Class A will be different in the
next decade than they are today. A fifth edition will be
developed when attainment of the fourth edition
standard starts to become more common; then we will
raise the high bar another level to reflect the competitive
requirements that will take companies beyond the year
2010…”
ERP-MRP Evolution…
ERP & Hoshin Kanri…
ERP Implementations… 
Profit-Ability Improvement... (¬Click here to see
definitions)
Profit-Ability Management Principles... (¬Click here to
see definitions)
People, Empowerment & Profit-Ability… (¬Click here to
access articles)
Hoshin Kanri & Deming's Plan-Do-Check-Act... (PDCA)
Cycle…