Posted by Diane Ramaglia on Tue, Aug 03, 2010 @ 08:40 AM
Some people do not realize the impact of what happens within an Enterprise Resource Planning (ERP) system when your inventory is not accurate. And when I say accurate; I mean at least 98% accurate.
A common issue at companies is they do not have the disciplines in place to assure inventory accuracy. Some common pitfalls of inventory inaccuracy would be that bills of material (BOM) are incorrect. I have a history working with plastic processing (along with other types of manufacturing) and one thing that throws off inventory is incorrect part and runner/sprue weights in the BOMs. A lot of manufacturers also do assembly/secondary processes and the quantity per could be incorrect in the BOMs. There are two different ways I have seen consumption of materials being completed during production reporting.
One is the function of back-flushing material based on parts produced based on your BOM. Many systems that I have used allow for the back-flushing of their materials when they report production. This is the time when you can catch inventory issues due to BOM inaccuracies. You can check your work center location inventory and verify at the end of shift if the computer matches the actual inventory counts. If not, start weighing your parts and checking your BOM.
The other type of system out there allows you to issue material to a job/work order. The downside to this is you can’t see this inventory since it is typically removed from any on-hand quantities. You have to reconcile at the end of the job/run.
Another common factor with inventory inaccuracy is that your users are not moving material to proper locations based on procedures. If your system allows a location to go negative, it's time to check a negative report and get to root cause of what may have cause this. It can come down to material not being moved or inaccurate BOMs. I hate repeating myself on the BOM issue but I have seen issues time and time again. In fact, I have recently worked with two customers who are struggling with negative locations. If a location is negative and other locations are positive, what is your true on-hand quantities? One can only guess.
What happens within your ERP when your inventory is inaccurate? The system might not generate work/job orders for customer orders if it thinks you have finished goods/work in process stock. If you don’t have the inventory or the work orders you will likely miss shipments. Customers won’t be too happy if you don’t have on-time shipments. In addition, if the work orders are not generated the system will not tell you to purchase material. It’s a downhill spiral from here.
Speaking of purchased material, let’s talk raw materials and purchased on-hand balances. If these are not correct, you will not have product to produce your manufactured parts. You will possibly be expediting material which can become very costly to your company. On top of that, it can cause havoc on the production floor. A scheduler has to decide to keep running parts that might not be due for over a month or lose costly production time by keeping the machine in downtime.
Think of the breakdown for downtime costs due to material inaccuracy in this way: If a machine rate if $50 per hour and your machines sits down for 48 hours, the cost is $2,400 for two days. If that happens weekly, the annual lost utilization is $124,800. That is more than a lot of peoples' salaries on the production floor. For this annual cost, you can justify hiring people to fix the inventory issues.
Add to this cost, other factors such as the cost to deal with machines that need to be changed over quickly to fill an order because your finished goods on-hand counts were inaccurate. How much does it cost your company when you have to switch over jobs that you were not thinking you had to run? What is the time it takes to switch over jobs? Depending on the jobs, setup times can range from one hour to ten hours. That is a lot of downtime for changeovers.
What can you do to start fixing these issues?
- Have the right people handle inventory management – they have to care and be analytical.
- Training/education– you need to make sure that people know what they are supposed to do in the system and what the impacts are if they don’t.
- Get to root cause of the inventory issues and have a corrective action to prevent this from happening again.
- Track the downtime costs due to inventory issues (waiting on material, changeover/setup)
- Create a process to validate bills of material.
- Ensure people are following their procedures.
I hope this helps some of you out there in the manufacturing world.
Posted by Liz Alflen on Mon, Apr 26, 2010 @ 09:45 AM
Advancements in ERP system technology provide us with tremendous visibility into our operations, and the 2.0 world is embracing transparency in all matters. Information is accessible about all aspects of our work and our lives: the scheduling of our manufacturing operations, the dimensions of the parts we make, the financial viability of our customers and suppliers, and details – personal as well as professional - about our employees and partners.
In HR we’re familiar with “don’t ask , don’t tell”: don’t ask if a candidate is married, don’t tell if an employee has a medical condition. Our ERP system provides access to the HR information we need: workforce (payroll and benefits) information, skills, training and certification; applicant tracking, job descriptions, work-related injury and illnesses. Social media (in the 2.0 world) has brought additional information about all our employees and applicants to our desktops, via any number of social and professional media sites.
We have visibility, but how much transparency is appropriate from an HR perspective?
HR professionals are hard-pressed to provide guidance on these topics. We have to consider:
- Employee media usage (do we want employees “tweeting” at work? how much so?
- Recruiting policies (to use or not to use information about candidates gained via the web?)
- Just what information can be told to the hiring managers (if it’s posted on the web, can we ask about it?)
Old rules don’t apply and new rules are vague; just a few months ago most pundits recommended great caution when doing an internet search for information about a candidate and to “not friend” employees. It was believed that information gleaned via these sources was unreliable, not intended for the HR audience, or subject to interpretation (an employee calls in to work “sick” and subsequently posts to their social media site that they are out and about).
A few years ago a hiring manager informed me that she had “Googled” a candidate and discarded this candidate based on the public information they had posted to their social media website. In another example, an executive was reviewing posts linked to the company name when he spotted a link to an employee who had posted information about a personal legal matter. It came up because the employee was linked to both the company name and the information they had posted, perhaps imprudently, about their legal problems. At the time, I cautioned both against sharing the fact that they had accessed this information at all.
Now, however, experts promote transparency, to accept this free-flowing of information and relationships as part of the new model, much like enterprise management systems allow visibility into every aspect of business operations. Participants (executives, employees, candidates) must be tacitly aware that information is available on a public forum, and they have a choice of whether to post information “publicly”, or more privately to “friends”. An individual can establish a “personal brand”, being personal and professional at the same time, allowing professional colleagues glimpses into a personal life, such as the music listened to or the books read, in order to build deeper relationships with business associates. According to Mitch Joel (“Six Pixels of Separation”), “the best connections are real and authentic”. In order to grow your business, “you are going to need a way to understand more about the individuals you are connecting to.” This philosophy promotes validity; participants are accountable for the information they post, about themselves, their company, and the products they represent. This requires a great deal of trust, diligence, and a degree of caution.
The growth of issues such as this in HR mirrors the growth of the enterprise-wide perspective. The more inclusive and integrated the perspective, the more all of our relationships promote ourselves as well as the enterprise.
What are your thoughts on this? Do you “friend” colleagues and business associates? Do you ever skip work and post on your social media that you went to the beach? On second thought, don’t answer that… Your HR manager doesn’t want to know.
Posted by Shannon Holloway on Tue, Mar 16, 2010 @ 09:56 AM
Now, more than ever, manufacturing companies are reviewing their budgets to identify areas where cuts can be made. All too often, employee training is among the expenses that fall "below the red line". However, those that consider training an investment, rather than an expense, realize that now is the time to develop employees and prepare for growth and better times to come. This is especially true when cuts have included personnel layoffs where remaining employees need the tools and knowledge necessary to efficiently do their job and take on new tasks as well.
Whether you are considering ERP software training or some other type of employee development, it is imperative that you review all available training options to ensure that your company is getting the most return on investment. The key points to consider are as simple as remembering the Five Ws: "What, When, Why, Where, & Who".
WHAT type of training is needed? Identify areas in the organization where process improvements can be made or where employees can benefit from improved skills. Regardless of whether your HR staff needs to get up to speed on the latest tax laws or learn about the additional features of their HR software; or if your warehouse staff needs to learn how to better utilize their WMS software package, outlining the specific challenges is the first step.
WHEN should training training be taken? Some needs are more immediate than others; while other types of training are best suited for specific times of the year. Make sure to consider, not only when the training is available, but also look at what times work best for the employees involved. For example, planning a five day training class for your accounting staff at the end of the fiscal year, probably isn't the best choice. Some training classes are offered on a pre-defined schedule, while others are flexible to your needs. If you don't see what you are looking for, WHEN you need it, don't be afraid to ask. Often times, companies are willing to move things around to meet your needs whenever possible.
WHY is training needed? You've already decided what areas need improvement. The next question is to determine what you are trying to achieve with the additional training. Is it improved processes, skill development, software knowledge, etc? Once you have determined your training needs and expectations, review the available course descriptions and agendas to find the classes that best suit your needs. When available, request to speak to a trainer that teaches the course to discuss your expectations and ensure your needs will be met by the class. A small amount of preparation up front can prevent wasted training dollars.
WHERE is training offered? In this day and age, "where" can be a physical location such as a training facility, your own facility where a trainer comes to you, or a virtual location where you are connecting to a live or pre-recorded training session via the web. Each "location" has pros and cons that must be weighed to identify what best suits the needs of your organization.
WHO should attend the training? Particular care should be taken when answering this question. Choosing the correct personnel to invest in, is critical. First, make sure to choose people who share information well. Using a "train the trainer" concept to develop internal experts can help lower costs and free up training dollars to be used elsewhere in the organization. Other things to consider are the expected longevity of the employee, displayed aptitude with current responsibilities, eagerness to learn and grow, and availability, just to name a few.
Overall, investing in your employee's continuing education will give them the confidence and knowledge to perform tasks more efficiently and effectively. Ultimately, the payoff can be seen internally with improved productivity and morale and can also reach outward to improved customer relationships and customer perception.
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