Where information flows more freely, costs come down. Economists cite this as the benefit of our increasingly networked economy, in which interconnected computers bypass traditional barriers to information flow. On the scale of an entire marketplace, the concept can be a little abstract. But on the scale of one 70-employee automatic machining contractor outside Mansfield, Ohio, improved information flow has translated into savings that are substantial and concrete. By removing long-standing barriers between its own departments—barriers almost any shop this size will recognize—Mansfield Screw Machine Products Co. (Lexington, Ohio) realized substantial payback. In some cases, this payback came from efficiency gains the company had not even anticipated before it made the change.
That change was toward a new information management system, one in which the information necessary to run the company on a day-to-day or month-to-month basis all resides in one place—a common database. Departments including Accounting, Purchasing, Receiving, Scheduling, Engineering, Quality, and Production all draw from this common database, and supply information to it, information which is shared throughout the company. From desktop PCs, each employee now has instant access to the current information he or she needs to perform the job at hand effectively.
This represents a radical departure from the system—or collection of systems—the company used to have in place. Previously, each department managed its own information. Departments were computerized, but they were not necessarily integrated. Some used software tools incompatible with other systems in the company. As a result, paper was the conduit by which data flowed from department to department. The information had to be manually routed or re-keyed at various points throughout this flow, and each such juncture created an opportunity for delay or human error.
Even so, this classic system worked quite well. This was the information management process that had evolved naturally over the decades the shop has been in business. No one in the company would have argued that this process was ideal, but why change? The shop was turning a profit and pleasing customers. Meanwhile, implementing a new company-wide system would translate to significant expense. The system the company ultimately did purchase required software and hardware (including some new PCs, and bar code readers for collecting data on the shop floor), as well as a large investment in training and transition costs. The company had to weigh all of these costs to decide whether it was time to make a change.
The determination would have been easier if it involved a process that governed work flow instead of information flow. That is, a process on the shop floor instead of one that also involved the office. On the shop floor, there are visible symptoms. It's time to change the work flow process when machine time is in demand, but machine tools are nevertheless sitting idle for long periods. But, what clues can suggest that it's time for the information process to change?
Mansfield Screw Machine chose to see one clue in escalating customer demand. The company's niche is the higher precision high-volume work. This shop supplies automatically machined parts to industries like semiconductor manufacturing, aerospace and pharmaceuticals, and to applications including the handling of volatile gasses. Increased demand across these markets has contributed to a doubling of the shop's sales volume over the last five years. Along the way, the shop has been reviewing procedures both on and off the shop floor, with an eye toward ensuring processes are in place that won't stand in the way of meeting the demand if business continues to grow along this track.
The company decided it could justify a large share of the cost of its new information system just in terms of reduced data-entry time. In the old process, the task of re-entering data into one system which had already been entered into a system in another department largely fell to two employees (or "associates," the company's preferred term). These two associates were spending a total of about ten hours per week on this work. Eliminating this effort was the first visible benefit of switching to an integrated system. And according to company system administrator Sherry Stockmaster, the more subtle and potentially more profitable benefits of the change came soon after that.
The Streamlined System
Ms. Stockmaster was one of the company associates most significantly involved in managing the switch from the old process. She says, "Data entry was one source of inefficiency in the old system, but data retrieval was another."
Individual departments had efficient and effective systems in place for managing their own information, but navigating these separate systems to obtain any unified picture of the process often required a series of complex steps. For example, finding the status of any job currently in-process meant first visiting a filing cabinet to find the job number, because a job number and sales order number are not related. Armed with the job number, one could find out how many parts had been machined by accessing the production database, but not how many parts had been shipped. Finding that datum meant consulting the shipping department's system, which was paper-based.
Another problem involved coordination and cooperation between departments. Paper was the sole medium by which all of the decision-makers with influence over the production process gave their input to any new job. Very rarely—but just often enough—this dependence on paper led to expensive errors. Engineering, Purchasing, Scheduling, and Quality all had to sign off on a hard-copy router, but in a few cases, simple human error could cause routed jobs to be released to the shop floor before every department had given its final approval.
The new system guards against that particular mistake. There is still a hard-copy router, but there is also a software mechanism by which each department enters its approval into the system. The software never makes the mistake of sending a router document to the wrong part of the company. Instead, the software releases jobs to the shop floor when and only when it has received all of the approvals it has been configured to require.
The new system also makes it easy for any company associate to track down information. The system features a relational database. One common database is used to manage information entered throughout the company, allowing the software to coordinate and update the information in ways specifically relevant to each department. Thus, determining how many pieces from a given job have been machined, versus how many have been shipped, no longer requires a physical trip from department to department to department. Instead, the information is available from any point on the company network.
However, effective information handling is only one component of a system like this. There also has to be an assurance that current data will be entered in the system. This is not so difficult to achieve in the office, where entering data is routine. But on the production floor, operators are busy at machines instead of computers. This fact can make basic, timely information about the production process—job status, what jobs each operator is working on, and how many machine and labor hours have been devoted to each job—difficult to obtain. That is why Mansfield Screw Machine's information system requires not only software tools, but hardware tools as well.
The production floor includes eight data collection stations with bar code readers. These stations make it easy to log into or out of a job. The operator swipes the bar code on his own ID and the bar code on the job's traveler document. A station near the shipping area makes it just as easy to log a job as shipped as soon as it is packaged and sent on for delivery. In addition, the company has done away with printed time cards for hourly personnel, because bar codes can also track clock-in and clock-out times.
This complete system—the software, plus the hardware for making use of it on the shop floor—came from Made2Manage Systems (Indianapolis, Indiana). The system makes Mansfield Screw Machine more efficient in numerous ways. However, the savings that result can be attributed to three general sources: time, reliability, and inventory reduction.
When paper was all that let information flow between departments, every piece of paper had to be stored in some stationary location. That is, if the paper was not on your desk, then the information could not be accessed from your desktop. Because of this basic limitation of paper, those associates formerly engaged in data re-entry are not the only ones who save time with the new process. Almost everyone in the office does, because there is no more searching through file cabinets in search of information.
Another limitation of the paper-driven process was that it depended on human beings to carry just the right piece of paper to just the right place. Errors did occur. One example was when a new job—or the wrong revision of a new job—would be released to the shop floor before all of the affected departments had seen and approved it. But another example involved the not-uncommon case in which there are two consecutive orders for quantities of a single part. In such a case, an operator logging finished parts to one job number may miss the point when that order has been filled, and continue to log parts to the old job number even though material prices had changed between orders.
When errors like these occurred, significant time and expense could be lost to correcting them.
The software-driven system does not do away with error, but it does offer safeguards against the errors described here. The new system has a "permissions" feature, guaranteeing that only a few people can change a job to release status. The software also tracks the count for a job, prompting the operator to switch to the new job number once the previous job's quantity has been met.
3. Inventory reduction
These first two sources of inefficiency in the old system—lost time and certain types of errors—did cost Mansfield Screw Machine money, but the exact cost would have been hard to measure. Not so with the third source—inventory. Nowhere was the price the company paid for barriers to information flow more visible than in the receiving area.
Here, the company stockpiled raw material, just because shipments arrived before the production area was ready to use them. Before information management was integrated, there was no other choice. With some 300 jobs open at any given time—most of them still awaiting their turn in the production area—the purchasing department had no practical way to coordinate material deliveries with the work schedule. Instead, Purchasing ordered material for prompt delivery essentially when it was informed about a coming job, and Receiving held on to that material until the job came up in the queue. Thus the company was always left with a large buffer of material. This cost the company money so long as the material sat there, not only because the inventory had to be stored and tracked, but also because it represented tied-up capital.
Now, that excess inventory has been significantly reduced. The new, relational system bridges the production schedule with the material purchasing function. The system generates material orders automatically, with delivery dates specified such that each shipment is slated to arrive only just before the production schedule calls for it.
"In effect, we have no material inventory now," says Sherry Stockmaster. "The only extra material we do carry is overage from our suppliers."
Beyond this small amount, any material stockpile is gone, and the overhead it once required is gone with it. And soon, the company will go one short step further. It will add a fax modem to the network, along with the functionality to allow the software simply to send each material order automatically to the correct supplier.
Mansfield Screw Machine's new information management system went fully into operation over the Fourth of July weekend, 1997. During the holiday shutdown, data for the 300 or so open orders existing at that moment were input to the system. What the scheduled shutdown offered the company was a "launch window" of sorts—a brief span of time in which Ms. Stockmaster and others could bring the new system up without compromising the company's productivity. To prepare for the weekend in which they would populate the system, the associates involved gathered all necessary vendor and customer information in advance, adding this to the results of a physical inventory that was conducted specifically for this transition.
In multiple ways, Mansfield Screw Machine made this upgrade the hard way. The company did not need to input all of the data manually. As an alternative, the system vendor had offered to perform a migration of the company's existing data. However, to ensure data integrity, Mansfield Screw Machine opted to have the hands of its own employees input every number.
Another hard choice was just to opt for this new system itself. This was not the first choice. In the beginning, when Mansfield Screw Machine first resolved to address the information barriers in its process, the company assumed it would be able to get by with an incremental upgrade. It planned to have a programmer integrate all of its existing systems, instead of purchasing a new one. However, the company soon came to see problems with this approach.
"All we would get is a mediocre system at a high price. That was one problem," says Ms. Stockmaster. "Another was that no one vendor would own that system. Service would be difficult, and no one would offer us regular upgrades."
So Mansfield Screw Machine decided on a more radical change. It purchased its all-new, company-wide system some six months before putting it into effect. That six months was spent largely on training. Ms. Stockmaster describes what it takes for a 70-employee manufacturer to make such a transition:
"You need just one or two people in the company who will take responsibility for the transition, and who will become the company's first experts on how the new system works."
She and one other company associate attended regular classes offered by Made2Manage. The classes consisted of five monthly sessions of two or three days each. After each class, Ms. Stockmaster worked on translating her knowledge into internal procedures related to the software module that the class had covered.
"It was also important that we kept the rest of the company informed about the transition," she says. "We held monthly meetings for the company on the progress of the transition, and we made ourselves available for questions. And toward the end, we began instructing key associates in the software as part of our data gathering prior to the holiday shutdown." For the six months in question, Ms. Stockmaster was devoted essentially full-time to the smooth implementation of this new system.
In this way, the time savings, reliability improvements, and inventory reductions are benefits she helped to usher in. And as the company looks forward, she says, it sees benefits beyond these three. A fourth benefit will be self-knowledge—information about the shop's capabilities that is more precise than any the company has had before.
Body Of Knowledge
Up to and including today, the company has done as well as it has at evaluating its own capacity by relying on the judgment of a production manager. Looking at the production schedule, he makes an expert guess as to whether or not the shop can fit a given job into its schedule, or what delivery date the shop can commit to. However, the expert guesswork is guesswork nonetheless, and it sometimes leaves the shop overcommitted and therefore scrambling, or undercommitted and therefore leaving productive capacity unused. And until now, company management had assumed this was just a fact of life in contract machining.
Now, maybe it no longer has to be. For the first time, the company has precise, consistent production data continually being fed into a single database. Operators used to make their best guesses—at the end of the day—as to how much time they had spent on each job. But now, operators swipe in to log the exact times when they begin and end the setup of each job, and the exact times when they begin and end the actual machining of each job. Thus, Mansfield Screw Machine is accumulating a history of production times for various jobs, which the company will one day use to predict, with far more accuracy than it can achieve today, how much time a prospective job will require.
This is one more example of how costs come down when information flows more freely. In this case, information that was never captured before now flows to a central pool from which it can be retrieved for future analysis. The cost savings? Armed with specific data about its capacity, and the capacity requirements of each job, Mansfield Screw Machine will no longer have to play it quite so safe when committing to jobs. Improved information flow will allow the shop to reduce the danger of being overly conservative. The shop will be less likely to turn away a job which it actually had just enough open time to run.