Using Lean principles to enhance productivity in lower-cost labor regions.

Labor markets evolve over time. Just as a contractor’s unit price fails to reflect the total cost of acquisition, a specific labor market’s wage rate seldom reflects the total cost of doing business. As markets mature and costs increase, there may be counterbalances in terms of access to a more experienced workforce, a more responsive supply chain and more efficient logistics. We have seen this pattern evolve in our China operations and are utilizing Lean principles to enhance productivity and worker quality of life in this maturing region.

From a Lean perspective, improvements have been focused in seven areas, outlined below. In terms of Lean philosophy, this approach is designed to:

• Eliminate unnecessary labor and cut the time needed to launch new projects.
• Minimize variation in processes.
• Minimize transport within the facility.
• Minimize production constraints through a flexible workforce with the concomitant benefit of minimizing turnover.
• Minimize inventory.
• Eliminate the possible manufacturing defects to minimize the future rework cost.
• Continuously improve the manufacturing process to overcome manufacturability issues.
• Continuously improve the testing process to enhance the fault spectrum.
• Confront the facts and plan ahead to smooth out the operations to minimize the waste.

Lean philosophy integrated into systems focus. SigmaTron uses a combination of proprietary and internally developed systems for enterprise and shop floor management. All facilities utilize a common ERP system, plus Agile product lifecycle management (PLM) tools. To enhance traceability and shop floor control, the China team developed a manufacturing execution system (MES) system known as Tango, which will be launched in all facilities in 2014. We take a distributed approach to continuous improvement in our systems by letting teams at individual manufacturing facilities identify specific gaps in shared systems and develop appropriate software tools. These solutions are then tested at the facility that identified the need, and later transferred across all facilities. This combination of standardized core systems deployed through the corporate IT group and focused innovation, which taps the regional IT expertise at each facility, drives improvements faster than would be possible solely with a centralized IT function.

In China, the combination of these systems has created significant progress in becoming a paperless factory in terms of documentation creation and control, and work order scheduling and tracking.

Product documentation is transferred electronically from customers, eliminating potential errors associated with manual processes. Electronic work instructions are displayed on monitors at each workstation. These work instructions include a video showing the steps necessary to perform the designated operation, ensuring operators have clear examples of the optimum way to perform specific tasks. Product is barcoded and tracked through each operation. Real-time production status monitors display data in each work area, and customers can access production status remotely. The result is a production environment where all workers have access to real-time production metrics, and bottlenecks or quality issues become immediately apparent.

Equipment and process standardization. While equipment platforms may vary by facility, production line capabilities, processes and key consumables, such as solder paste, are standardized throughout the company. This makes it easier to transfer projects from one facility to another, or for engineering teams to work together seamlessly in supporting projects in multi-facility builds.

DfM/DfT analysis. SigmaTron’s team uses DfM tools and a component library to check the layout for design and manufacturability issues. If alternate parts are specified, those are checked as well. If requested, customers receive a DfM report with specific recommendations on issues to address prior to production start.

Design for testability is also evaluated, and customers can request reports. The analysis includes a look at test coverage and whether the correct solder mask openings are in place. Comprehensive test approaches such as x-ray, AOI, boundary scan and functional test are also considered for early defect detection. The goal is to create a robust verification process with as much coverage as possible. At the same time, customer preferences for cost of test are also considered.

Minimizing transport time and non-value-added activity. Where possible, the factory uses a continuous flow layout to minimize transport time between operations. The team also applies 5S principles in facility and workstation layout to minimize wasted motion.

Strong focus on automation. Facilities in lower cost labor markets often lack automation because equipment can cost more than manual labor. However, this can be false economy because it typically requires a greater number of workers and can contribute to greater variation in overall product quality. SigmaTron automates wherever possible, including through-hole assembly of mixed technology product. Odd-form parts are drop-loaded on paced lines. At the subassembly and box-build level, fixturing is used to minimize variation in manual assembly operations.

Worker cross-training. While most Lean companies cross-train workers to add flexibility in supporting varying demand for different production operations, in China there is an additional benefit to this practice. Younger workers in China are typically well-educated and interested in contributing their ideas. Companies that provide a clear career path, offer training in higher level skills, listen to their employees and give them opportunities to contribute ideas have lower turnover than companies that lack such job enrichment/job enlargement programs.

SigmaTron allows employees to train for every job in the process they were hired for and teams with the government to provide advanced training opportunities, enabling operators to become technicians or engineers. Skills competitions for prizes are run both internally and by the Chinese government.

Optimized supply-chain practices. From a supply-chain management standpoint, SigmaTron’s practices include:

• Strong systems linkage with customers and suppliers.
• An international purchasing office (in Taiwan) combined with dedicated local purchasing teams for each facility to optimize sourcing channels based on geography.
• Automated replenishment systems to ensure rapid response to demand variations.
• Stocking programs customized to customer needs.

SigmaTron’s ERP system is combined with a proprietary suite of supply-chain management tools known as iScore. An MRP Share program provides suppliers with complete customer forecast visibility, plus current inventory and material on order. The iScore system supports vendor-managed inventory (VMI) and production-driven replenishment (PDR) pull signals. Customers are given visibility into inventory status via the iScore customer portal.

VMI is used, as needed, with component suppliers. PDR is triggered automatically as shop orders are released. If a potential shortage is detected, a PDR pull signal is sent to the supplier.

The focus on access to real-time material status data and auto-replenishment reduces labor and transactions, while shortening the overall material pipeline. Once again, a centralized approach is supplemented with regional expertise.

As this overview shows, applying Lean philosophy in evolving labor markets improves productivity and enhances responsiveness by eliminating non-value-added lead-time throughout the product realization process. It also taps the expertise of employees and the supply base in creating more efficient processes. Additionally, an approach that focuses on centralized standardization yet also taps regional expertise drives faster innovation by enabling the personnel most familiar with the limitations of overall system to develop the solutions.

Hom-Ming Chang is vice president, China operations at SigmaTron International; homming.chang@sigmatronintl.com.

Standardization is helpful but not always the best solution.

In the electronics manufacturing services environment, product design is “controlled” by 30 or more customers, plus the EMS company, which limits the degree to which Lean manufacturing initiatives can be implemented. In the EMS realm, there is often a need to tailor continuous improvement efforts based on individual customers’ products and objectives. Lean in this environment is more of a toolbox, where different groups of tools are used to support each customer. We’ve discussed many of these tools in our columns over the years. This month we look at how they can best be combined to deliver superior quality and service in a multi-customer environment.

Some disciplines are transparent to the customer and best applied holistically as the foundation for a Lean organization. These include:

• 5S or 5 Pillars philosophy (sorting, set in order, sweeping or shining, standardize and sustain). Setting up a clean factory and keeping it orderly are core concepts that drive efficiency and high quality by making inefficiency very visually obvious.

• Clear design guidelines. While not all customer designs will conform to best practices, every customer should be provided with design guidelines so they are aware of best practices. Guidelines that track closely to industry standards are more likely to be adopted than those that reflect a unique internal recipe.

• Lean practices in supply-chain management. At a holistic level, there should be a clear vision of optimum raw material lot sizes, a standardized forecasting methodology and a supply-chain management strategy that encourages suppliers to support Lean initiatives.
Personnel cross-training. Training personnel in multiple operations so that they can be shifted to various operations as needed helps optimize capacity by providing a fast way to eliminate bottlenecks.

• Continuous improvement training. Training in problem-solving disciplines such as Six Sigma can be done holistically; however, the application of these techniques may be very focused.

• Point of use stocking. Obtaining extra feeders and doing line side stocking to minimize changeover time can be beneficial across the board.

Other disciplines are best used in more focused approaches:

• Standardized equipment platforms. While standardizing on core equipment platforms throughout an organization can create highly efficient factories and reduce capital expenditure requirements, it can be impractical when a diverse mix of customers is present. Focusing on minimizing variation as a holistic goal, while configuring lines and work cells to best meet the needs of each facility’s customer base, can be more practical. Standardization of SMT equipment, rail widths and functional test platforms to the extent practical can increase schedule flexibility and minimize bottlenecks. Standardizing functional test platforms can minimize maintenance costs and reduce both fixturing costs and fixture lead-time.

• Application of Six Sigma techniques. While some companies make the search for kaizen events a mission in itself, in the EMS environment, Six Sigma techniques may be more powerful as a tool for addressing specific customer issues rapidly. For example, when one of our teams applied Six Sigma’s Define, Measure, Analyze, Improve, Control (DMAIC) approach to a quality issue in our facility in Juarez, Mexico, it was determined that the root cause was illumination values that were causing misaligned placement against the pads on certain BGAs and ICs. As a result, the team was able to rapidly correct the problem.

• DfM/DfT recommendations. Development of design guidelines should be done holistically. Specific DfM/DfT recommendations should be made on a customer-by-customer basis. EPIC Technologies uses a 5-point ranking scale to make it easier for customers to understand the level at which noncompliance will impact product quality.

• Lean supply chain management philosophy. The concept of setting material bonds for raw material with the supply base and holding finished goods kanbans for each customer is a good holistic practice, but the reality is that this will also need to be customized and often modified for each customer. Additionally, many customers will have some suppliers on their approved vendor list (AVL) not willing to comply with preferred Lean practices.

• Value Analysis Value Engineering (VAVE). This is perhaps the most powerful technique for applying Lean philosophy on a customer-by-customer basis, because it educates and motivates the customer’s team through a collaborative brain-storming improvement process with defined cost benefits over time.

Taking a customized approach to Lean manufacturing philosophy, and using some tools universally while tailoring others for customers willing to optimize their product design, supply base and product-ordering patterns, provides the best of both worlds. It provides immediate benefits to customers wishing to fully utilize the toolbox, while providing a scalable solution to those who may be willing to integrate Lean principles into their designs over time.

Todd Baggett is EPIC Technologies’ senior vice president, sales and account management; todd.baggett@epictech.com.

The value engineering process not only improves manufacturability, it improves relationships.

As discussed in our January 2013 column, Value Analysis Value Engineering is a formal problem-solving process that can help improve productivity and value. While it has benefits as a tactical tool in a Lean manufacturing toolbox, it is even more powerful when used strategically.

VAVE has several benefits from a strategic standpoint. When implemented early in the product development lifecycle, it can become a scheduled part of the product lifecycle roadmap, driving down cost and mitigating obsolescence risk as the product enters each new phase of its lifecycle. A good VAVE strategy creates a series of cost-reduction ladders that unlock value at specific points in time, similar to the way bond ladders spread risk and optimize returns by sequencing redemption at set points in time. Most important, this ensures a proactive focus that minimizes the likelihood or impact of supply-chain interruption.

From a management perspective, it is also a good tool for driving a collaborative process between OEM engineering teams and a contractor’s engineering teams. One of the biggest fears engineering teams have about outsourcing is the potential loss of control or product knowledge as the contractor takes over responsibilities. VAVE opens the door to greater communications between the OEM’s product design and manufacturing engineering teams and the contractor’s engineering and manufacturing teams. This ensures that critical data about the product’s manufacturability and testability issues resident at the contractor are fed back to the engineering team at the OEM and can be used to not only improve the current product, but also enhance future product generations. Similarly, the contractor’s materials expertise may drive improvements in component selection in future products.

Finally, from a marketing standpoint, it provides OEM product managers with a greater range of options in terms of extending the life of mature products that still have viable markets, particularly when a full redesign may not be cost-effective. As an example, a manufacturer of a long-lifecycle product with a large installed user base was facing increased competition from companies offering a lower price. The current market was saturated, making a full redesign or new generation of products unfeasible. Yet, failing to address the cost competition would cause erosion in the existing business base.

A VAVE workshop at EPIC Technologies yielded over $225,000 in savings for one 20-year-old design. The list of proposed changes generated through the workshop included:

• Change drawing requirements to reduce cost.
• Re-layout PCB for cost and reduced scrap loss.
• Eliminate connectors and solder direct to PCB.
• Identity lower cost component alternatives.
• Identify and eliminate end-of-life components.
• Change to lower-cost cable terminations.
• Modify test sequence for earlier fault detection and repair.
• Reduce test time.
• Redesign circuit with lower cost design.
• Improve tester audible and visual clues.
• Re-source component supplier.
• Change packaging to be more efficient.
• Change SMT component lead type to be more robust in the field.
• Review supplier negotiation strategy.
• Move component location, reducing cabling cost.
• Change screw torque requirements, allowing use of lower cost screws.

Each option was costed so that the customer could evaluate cost savings against tradeoffs. Following a feasibility workshop, the customer provided feasibility assessment of the ideas presented, and an evaluation plan was jointly developed. The Idea Report tracking worksheet was used to track the recommendation, approved plan and cost savings.

The VAVE session drove a brainstorming effort that looked across multiple disciplines for possible cost-reduction opportunities. Instead of cutting profit margins to compete on price, the customer was able to cut manufacturing cost. Plus, existing product life was extended and market position preserved.

A robust VAVE process goes far beyond the benefits of optimizing component sourcing, manufacturability or testability. When implemented as it is done at EPIC Technologies, it drives a much closer relationship among program stakeholders and changes the contractor’s position from that of supplier to that of an equal member of the product team. The result is better product competitiveness, which can lead to increased market share with concomitant benefits for both OEM and contractor. Done strategically, this process ensures a proactive approach to unlocking value at specific points over the product’s lifecycle. It also reduces the potential for production interruptions related to obsolescence issues or unanticipated supply-chain interruptions.

Steve McEuen is director, commodity management at EPIC Technologies. He can be reached at steve.mceuen@epictech.com.

An overlooked lean technique can identify new paths for continuous improvement.

Most contract manufacturing customers want continuous improvement initiatives that result in cost and quality improvements. Often it is the customer that has to drive these initiatives.