System strategies and the visual factory can handle rapid changes in demand.
Supply-chain disruption and Lean philosophy rarely go hand-in-hand. In some cases, however, systems created to support Lean manufacturing or principles themselves help mitigate the chaos the pandemic has created in the global supply chain.
SigmaTron has operations in the US, Mexico, China and Vietnam. As a result, we had a bird’s-eye view of the initial impact on manufacturing operations in China and used that as a roadmap for preparing operations in other locations for disruption, along with best in-plant practices for disease mitigation. While the ways different jurisdictions reacted to Covid-19 varied, the issues were somewhat similar. This column looks at some lessons learned in that process from this contract manufacturer’s perspective.
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There was a four-to-eight week gap in component supplies from China due to the national shutdown in late January/early February. But, the combination of inventory produced/stored in anticipation of the normal Lunar New Year shutdown, combined with decreased demand as the virus disrupted production outside of China, enabled most China component manufacturers to catch up. Consequently, the shortages present in previous unanticipated supply disruptions were not as severe this time. That said, some spot shortages are developing as the US Defense Production Act constrains components needed for essential products such as ventilators.
Issues also arose with trans-Pacific shipments, as the combination of shutdowns and reduced demand/travel impacted shipping and air freight. This is an area where Lean philosophy has a solution. We chose to ship freight less-than-load (LTL) in both directions as soon as parts became available, rather than consolidating in large shipping containers. Reducing shipment “lot size” eliminated bottlenecks taking place at most freight forwarders that were consolidating shipments into large container loads.
Visibility became critical as multiple variables were changing simultaneously. While we build several products deemed essential in all locations, some had temporary factory shutdowns as local governments issued blanket stay-at-home orders, which were then modified for essential product manufacturing. Most of these orders were put in place with little or no warning, and suppliers needed to be notified immediately to hold in-bound freight while the facility’s essential production status was appealed. Some customers reduced demand based on trends in their industries, and production was put on hold for products deemed nonessential. Material associated with those orders needed to be addressed. Finally, some customers saw increases in demand for essential products, necessitating increases in incoming raw material.
Just as visual factory techniques help personnel on the factory floor better understand bottlenecks in production driven by unanticipated variation, systems strategy is integral to mitigating the impact of this level of demand variation.
SigmaTron uses a combination of proprietary and internally developed systems for enterprise and shop floor management. All facilities utilize a common ERP system, plus third-party product lifecycle management (PLM) tools. An internally developed manufacturing execution system (MES) supports traceability and enforced routing.
The combination of an industry-standard ERP software with an internally developed suite of supply-chain management tools enables all stakeholders to track demand, material on order, inventory, work-in-process, finished goods and shipments. An MRP share program provides suppliers with complete customer forecast visibility, plus current inventory and material on order. When customers began to process pushouts with SigmaTron, our team could see that in our system and adjust the schedule with suppliers immediately. Additionally, the system highlighted any shortages in raw material for essential production that wasn’t being pushed out.
Customers had visibility into inventory status via a customer portal that includes:
This level of visibility enabled customers to integrate real-time product status into their inventory planning.
Kanban stocking strategies also played a role. In the case of one customer with an essential product whose demand unexpectedly tripled, a stocking program designed to keep a combination of one month’s worth of raw material and two months’ worth of finished goods inventory helped fill the pipeline. The one gating item was an LCD display. Although the customer thought they had followed the best practice of specifying multiple manufacturers for this item into their approved materials list (AML), it turned out one factory was supplying under its name, plus providing subcontracted units to the other two named suppliers. SigmaTron’s purchasing office in Taiwan used its relationships to convince the supplier to deliver the bulk of the required sub assemblies a month earlier than they were originally willing to commit to. The available inventory in the stocking program helped mitigate what otherwise could have been a significant shortfall as this shortage was addressed.
Another area where Kanban played a role was temporary facility closures. As various regions saw Covid-19 infections increasing, program managers were able to contact customers with essential products to determine if they wanted to take early delivery of consigned finished goods inventory to avoid any delays should a warehouse be shut down on short notice. This ability to pull in inventory enabled customers to eliminate the risk that a short notice shutdown or trucking disruption would lock down their product.
One other area where Lean principles ultimately came into play is workforce safety. The company’s facility in Suzhou was the first to shut down and restart during China’s infection. In restarting factories, Chinese inspectors did a good job of sharing best practices for mitigating infection as they inspected different factories. The result was a more robust process for all factories. While each of SigmaTron’s factories complies with the regulations in the area in which it operates, its China facility held weekly and later daily conference calls discussing which core best practices it felt should be standardized and implemented as core practices throughout the company. Examples included employee temperature screening, cardboard dividers between workstations (later replaced with plexiglass as that became available), a mask sterilization process that increased disposable mask life when supplies were limited, frequent use of hand sanitizers and soap, and social distancing for meals/breaks through an increase in staggered break times to reduce headcount in break areas at any one time. Employees were also allowed to make their own washable masks following CDC guidelines. By sharing the lessons learned by the China facility, other facilities were able to be ready ahead of infections utilizing practices developed in a facility that has had zero Covid-19 cases.
The Covid-19 pandemic created unprecedented disruption. However, in SigmaTron’s case the foundation laid in support of Lean manufacturing philosophy has provided tools for navigating this chaos. It is also important to note the willingness of customers and suppliers to pull together and work through challenges that are not well covered contractually has made solutions possible.