1 Session 21 Implementing JIT Manufacturing Session 21 Implementing JIT Manufacturing John Striebich Copeland Corporation

2 CopelandCopeland

3 Copeland Worldwide 5 Plants14 Plants5 Plants Belgium Berlin, Welkenraedt, England Thatcham, Kolin, Germany Cookstown, N. Ireland Reynosa, Brantford, Ontario Rushville, Indiana Lebanon, Missouri Ava, Missouri Mexico Hartselle, Alabama Shelby, N. Carolina (2) Sidney, Ohio (4) Fishers, Indiana Natchitoches, Louisiana Shenyang,China Atit, India Karad, India Rayong,Thailand Suzhou,China 75 Suppliers 300 Suppliers

4 Planning and Scheduling Lean Operations Copeland Corporation Current Environment (FY99) MRP II System – Home Grown/Customized Weekly MRP Runs Nightly Batch Updates Of Transactions No Long Term Capacity Planning Short Term Capacity Planning – Push Out Orders Forecast Driven Suppliers Inventory Management – Hold PO’s At Month End PerformanceCustomer Metrics Requirements Delivery 70-90% 98+% Lead Time 3-5 WeeksConsignment Inventory 5-6 Turns Double in 5 Years

5 Planning and Scheduling Lean Operations Copeland Corporation Market Environment Customer Consolidation More Competitive Environment Competition Offering Consignment Pricing/Profit Pressure Customer’s Customers Waiting Until Last Minute To Order Tight Capital Spending Market We Had To Change To Meet These Requirements - Lean Was The Only Way - Priorities: 1. Stabilization 2. Responsiveness

6 Planning and Scheduling Lean Operations Copeland Corporation Stabilization And Responsiveness Sales And Operations Planning Stabilization – Use Of Pull Systems Manufacturing Cycle Time (MCT)/ Lead-time Reduction Supply Chain Management Metrics

7 Sales and Operations Planning Material Capacity Plan from Supplier Forecast Manpower Constraints/Flex Equipment Constraints/Flex Resource Analysis Marketing Forecast Plant Part Forecasts Inputs Available to Promise Report Auto-Acknowledge Takt Times/ Line Rates And Inv Plan Metrics Outputs Marketing Feedback

8 Planning and Scheduling Lean Operations Copeland Corporation Sales And Operations Planning Define Capacity/Resource Constraints Develop High Level Plan To Meet Forecasted Demand Within Constraints With Upside “Flex” Potential Use Planned Inventory Build-Up If Needed Develop Tactics And Obtain Approval For: - Labor Plan - Planned Line Rates (Set Takt Times) - Sales Programs, Promos, Etc.

9 Planning and Scheduling Lean Operations Copeland Corporation Forecasts Forecasts Are Inaccurate (Fact or Fiction?) Some Forecasts Are Accurate Customers Have To Schedule/Plan Lines Emergencies, New Demand, Surprises Will Still Occur Communication/Collaboration With Customers Is Key Mix Model Forecasting Stable Business – Repeatable, Predictable New Business – Volatile Demand, Unpredictable Small As % Of Total Business Minimal Impact To Overall Forecast

10 Planning and Scheduling Lean Operations Copeland Corporation Stabilization Develop System To Eliminate Need For Expediting Expediting Needed: - Customers Needed Product Inside of Planned LT - Customers Didn’t Order What Was Forecast - Plants Were Not Building What Customers Needed - Material Needed by Customers Not Available - Available Capacity Not Being Used Efficiently Pull System Established To Order Material Consumed - Stock Maintained To Support Most Customer Demand Purchased Part Ordering Decoupled From Customer Orders Key To Responsiveness

11 Planning and Scheduling Lean Operations Copeland Corporation Stabilization Sub-Assemblies - Sub-Assemblies Previously Scheduled By MRP - Heavily Forecast Dependent - Forecast Is Never Right - Extra Changeovers Needed When Forecast Wrong - Sub-Assemblies Now Scheduled By Pull Systems - Simplified Scheduling Of Subs - Shortages Virtually Eliminated, Less WIP - Visual Scheduling – Passed to Supervisor/Operator - Productivity Improved, MCT reduced - More Responsive, More Flexible

12 Planning and Scheduling Lean Operations Copeland Corporation Customers Demanding Shorter Lead-Times Step 1 – Change Customer Ordering Practices - MRP Frequency - Quantity Price Breaks - Communicate The Correct Lead-Time - Confidence In Delivery - Freight Issues Limit Responsiveness Once Customer Makes Changes, Reduce Lead-Time - Document The Value Generated - Customers Do Not Always Know - Can We Get Some Value In Return? - Use Metrics To Track Performance

13 Planning and Scheduling Lean Operations Copeland Corporation Benefits From Shorter Lead-Times Lower Customer Inventory - Less Storage/Handling Costs, Less Obsolescence, Etc Less Variability Impacting Delivery, Problems Resolved Faster Better Response Capability To Customer’s Customer Potentially More Business Opportunities In Supply Chain Fewer Changes To Schedules, Less Maintenance Productivity Improvements Possible

14 Planning and Scheduling Lean Operations Copeland Corporation Example - Three Tier Supply Chain (Internal) Customer Order DistributionManufacturing Customer Order DistributionManufacturing Monthly ScheduleDaily Pass ThroughDaily Orders 12 Days 20 Days 5 Days MCT7 Day MCT 20 Day MCT Daily OrdersDaily Pull Signals 5 Day MCT1 Day MCT5 Day MCT6 Days 10 Days 64 Days 27 Days

15 Planning and Scheduling Lean Operations Copeland Corporation Metrics On-Time Delivery Cost Per Piece MCT (Manufacturing Cycle Time) Lead Time First Pass Yield Inventory Turnover/ WIP Levels Shortage Tracking Purchase Exceptions Generally Metrics Are More Customer Focused

16 Planning and Scheduling Lean Operations Copeland Corporation Summary Customers Are Demanding More Value, Faster Response Competitive Pressures High To Offer More Value To Customers Stability Eliminates Many Costs Associated With Shortages Stability In Supply Enables More Responsiveness Responsiveness Increases Customer Satisfaction/ Loyalty Customers Value Shorter Lead-Times