Dec 15, 2015
By Dave Pytel, Founding Partner FlowVision. LLC.
To be a high volume manufacturer in the United States, you have to be lean. One might think that The Husqvarna Group, specifically the plant in Nashville, Arkansas, called on FlowVision, LLC ( a Colorado based consulting firm) to streamline manufacturing to stay alive in the highly competitive worldwide markets. This was not the case for Nashville. We came upon a well-oiled machine on the production floor. Floor kanban systems, a clean and well-organized environment, and lines that hummed to a 15 second beat were all in place and working well.
In short, we were not here to fix the machine, but to help them figure out how to feed the machine in a way that kept the production floor running smoothly, but also, and this was the key reason for our visit, to ensure that their customers had what they wanted, when they wanted it.
The Husqvarna Nashville plant makes chain saws, blowers, trimmers, and other related products. Many of the products are seasonal, and the plant services a wide variety of customer segments. A large volume, but relatively low number of configurations go to the big box stores like Lowes and Walmart. A much higher variety of products go through the dealer network, typically at lower volumes. In addition, this plant exports a large amount of items to other countries, a testament to the efficiency of this plant, and to the management team led by Tony Cochran (General Manager), and Steve Harvill (Plant Manager).
Getting back to feeding that machine, the production floor, we started with finished goods. Tony would agree that we wished we would have started with raw material first, starting at the roots of the tree instead of the fruit, but that didn’t come into scope until later. For finished goods, we had a simple distribution model, sending goods from Nashville to a warehouse in Shreveport, and our first task was to put this part of the supply chain on a pull system, with shipments driving what we build instead of a forecast that is always never quite right. Perhaps you can relate?
This is where we brought in ION, a tool developed by FlowVision when Excel just couldn’t keep up anymore, and when our customers expressed a need for a single planning solution for managing a pull process. ION is a cloud-based software solution that ties in all of the usual ERP system data, plus historical consumption data, forecasts, sales order data, and a host of other elements. In the end, it delivers the correct inventory sizing based upon real data, statistical analysis via our patented “lead time based” algorithms that truly consider all aspects of how an item should be managed.
Our ION implementation for finished goods gave Husqvarna Nashville a clear trigger to build the right product, at the right time, taking into account seasonality, promotions, and lead time expectations from customers (which varied by product). With ION, they can dial in a service level, see the inventory impact of that service level with easy simulations, and make the same decision every factory manager has to make to balance inventory and service level, but with information, not guesses.
Finished goods went great, with immediate improvements in customer service levels, but it quickly became clear that though we could tell the machine what to build via ION, that didn’t mean there would always be raw material and subassemblies available to build the products we needed. Call it ION, phase 2.
We put the raw material on a pull system as well, using ION to create orders to bring in our parts. Each part gets a full analysis in ION, every week, to determine the correct inventory needed to handle both normal usage, plus all of the variability we have seen the past, just like we did for finished goods. We also took into account package sizes, minimum order quantities, and many other attributes.
As we wrapped up our raw material work, management asked for even more savings in finished goods inventory. The worst inventory you can have is in finished goods. It has the most overhead, is not flexible (versus parts that can be used on many finished goods items), and is owned by you; whereas raw material might be owned by you and/or your suppliers. The approach we took was to look at the current factory lead time (from the time the warehouse signals for more, to the time they receive it) and put together a plan to cut this lead time by 33%. Lead time and inventory go hand in hand.
When you go after finished goods lead time reductions, you have to dig deep and see what is linked to a “fixed” production plan. We have designed supply chains for our customers who quote their customers response times of months, and others with lead times of hours. When we looked at Husqvarna Nashville, we found that a two week “frozen” build plan was being used by many upstream processes. We planned to cut this “frozen” build plan by a week, so there was lots of work to do. “Frozen” gets noted as such because even though the goal was to lock that build plan, it never really worked, which is true of most factories. They constantly had to change that schedule in the two week window, scrambling, expediting, and spending money and resources to get it done. Our plan was to DESIGN the process to support more real time changes, and cut that “Frozen” build plan to one week, ensuring that all supporting processes were in synch.
This took us to subassemblies and JIT (Just in Time) parts. We had left JIT parts alone up until now, as well as subassemblies built at Husqvarna plants nearby, but now that needed to change. These items could be built to order in a two-week period, but most could not be ready in a week, so we put another ROP (Reorder point) or Kanban system in place with ION. The key to shortening your lead time to customers is to have all the parts you need in place BEFORE you get the order. Forecast and MRP try to do this, but accuracy issues become customer delivery issues. A true pull system, with inventory sized in a data-based manner, will allow you to dial in your inventory to meet any desired customer service level.
At this point, Husqvarna Nashville has an end-to-end pull system in place, all managed by ION, with a shorter lead time, thus less inventory. They even have the ability to build some items to order, with no warehouse inventory. By putting subassemblies and raw material on a pull process, the factory is ready to build any product, anytime, in a way that will meet their customers’ needs with minimal inventory.
The Husqvarna Nashville plant is an outstanding example of how a supply chain design, managed with a highly flexible and integrated tool, ION can reshape a fulfillment process to meet any business need.
About FlowVision LLC.
FlowVision is a Lean Flow consulting company based in Colorado. We are the only business consulting company to offer a complete suite of products and services to ensure our customers’ success. We provide our clients with business analysis, plant site and warehouse design, consulting, education and the software products – everything they need to succeed. Our improvements to service level, productivity, quality, repeatability and freed-up cash usually provide a payback of at least 500% in the first full year.
I would breakdown our key services into two areas:
1. Operations redesign – where we re-engineer your manufacturing, distribution or office site to become lean operations
2. Lean Material Strategies (LMS) – where we use proprietary and patented algorithms to size the required inventory within each node of the supply chain and triggering logic to pull material through the supply chain as required utilizing the Inventory Optimization Network (ION)
In general, LMS is used by our customers like Cisco, HP, Husqvarna and Thermo Fisher who want to manage supply chain inventory at a single node, such as Finished Goods, or at every node throughout their supply chain. Operations redesign or factory design projects are used by customer like Alliance Laundry Systems, Foxconn, John Deere, Goodyear, Husqvarna, Cooper Crouse (Eaton) and other OEM’s who manufacture products. In all cases our customers get very dramatic benefits.
When companies engage with FlowVision they typically follow these steps:
Assessment – We review your operation and/or supply chain to define the benefits, resource requirements, timeframe, payback and cost
Education – We conduct customized training based on if our customer is going to implement Operational redesign, LMS, or both
Implementation – We help our customers implement Operational redesign and/or Lean Material Strategies.
LMS Software – Many customers who implement LMS want to formalize this with a software solution that we call ION (Inventory Optimization Network).