1. 1 Session 22 Planning and Scheduling JIT Operations Session 22 Planning and Scheduling JIT Operations John Striebich Copeland Corporation

2. 2 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

3. 3 Planning and Scheduling Lean Operations Copeland Corporation Copeland MRP II System Supports Three Divisions - Copeland A/C - Standard MRP II User - Copeland Refrigeration – Lean Manufacturing - Copeland Asia - Standard MRP II User With Specific Lean Applications Must Support 23 Hour Operation Interface With e-Business Tools Standardize Unique Operations - Widespread Customization

4. 4 COPELAND MRP II MATERIALS SYSTEM - CONCEPTUAL DESIGN Sales Forecast Backlog - Order Inventory Service Parts Fcst & Interplant Demand Inventory Control Forecast By Planning BOM MRP Supplier Scheduling Materials Inventories Shop Floor Control Financial Analysis Cash Flow Projection Cash Forecast Consumption Load Report Machining Schedule Order Acknowledgment Customer Order Entry MPS Machine Shop Scheduling Assembly Area Scheduling Net ProfitsROI Prod Reporting Material Labor Overhead Ending Cash Income Starting Cash To Financial Analysis Shipments

5. 5 Planning and Scheduling Lean Operations Copeland Corporation MRPII Systems MRP Systems Today Rigid MRP Schedule Limited Updating Between Scheduled Runs Structured To Support Complex BOM’s Often Mainframe Or Central Control Forecast Driven (Inaccurate) Supports Long Lead-times Beyond MRP Run Frequency Infinite Capacity Complex

6. 6 Planning and Scheduling Lean Operations Copeland Corporation MRP II/Lean Systems MRP Systems Today JIT/Lean Enterprise Rigid MRP ScheduleHigh Flexibility Limited Updating Between SchedulesFast Response Structured To Support Complex BOM’sFlattened BOM’s To Reduce Transactions Often Mainframe Or Central ControlDecentralization Of Processes - Ownership Forecast Driven (Inaccurate)Consumption Driven Supports Long Lead-times BeyondSupports Lead-times Inside of MRP Run Frequency Infinite CapacityPlanned Capacity - Takt Times ComplexSimple (Usually)

7. 7 Planning and Scheduling Lean Operations Copeland Corporation Closing The Gaps – MRP vs Lean Lean Material Systems Must: - Be Highly Flexible (Daily Capability) - Exception Based - “Expected” Demand Covered By Pull Systems/ POU - Require Minimal Transactions To Support - Flat Bills - Backflushing Essential - Support Much Less Inventory/ Safety Stock - Inventory Accuracy IS Critical - Cycle Count Program Essential – Cause and Effect Focused - PC Based, Can Not Wait For Overnight Runs/ Updates

8. 8 Planning and Scheduling Lean Operations Copeland Corporation Analysis MRP Function Changes - Long Term Forecast To Supplier - Transaction Processor/Collector - Data Warehouse – Download Of Static Data To PC - Develop Daily “Kanban” Capability MRP Is Separated From Shop Floor/Purchasing Activity - Responsiveness No Longer Limited To MRP Run Frequency

9. 9 COPELAND MRP II MATERIALS SYSTEM - CONCEPTUAL DESIGN IN LEAN ENVIRONMENT Sales Forecast Sales And Operations Planning Backlog - Order Inventory Service Parts Fcst & Interplant Demand Inventory Control Forecast By Planning BOM MRP Supplier Scheduling Materials Inventories Shop Floor Control Financial Analysis Cash Flow Projection Cash Forecast Consumption Load Report Order Acknowledgment Customer Order Entry MPS Machine Shop Scheduling Assembly Area Scheduling Net ProfitsROI Prod Reporting Material Labor Overhead Ending Cash Income Starting Cash To Financial Analysis Shipments Supplier Forecast E - Kanban Kanban

10. 10 Planning and Scheduling Lean Operations Copeland Corporation Integrating e-Business Supplier Portal -Replace Faxed Kanban Signal With e-Kanban - Increase Speed Of Orders To Suppliers - Increase Speed Of Response From Suppliers - Facilitate Expediting, Exception Based Customer Portal - Increase Speed Of Customer Order Into System - Auto-Acknowledge Capability - Customer Ease Of Use, Exception Expediting

11. Before Flow Copeland Refrigeration Flow Enterprise/e-Business Integration Days Next Steps:- Convert Order To Production Schedule Real Time - Supplier Lead Time Reductions Receive Order Weekly MRP Distribute MRP Assemble & Ship 0 2468101214161820 Flow & Portal 0 2 9 Flow 0 24 10 Pull Signal Manual Expedite To Pull Order In Supplier Lead Time

12. 12 Planning and Scheduling Lean Operations Copeland Corporation Flow Results On Time Delivery (Pre-Flow) –1997 94% On Time Delivery to Customers –199886% –199983% Since Flow Implementation –200090% –200195% (98% 2 nd Half of Year) Lead Time Reduction – Up To 66% (So Far) Inventory - First Higher (Stabilization) - Now Dropping Productivity – Pockets of Improvement Expanding Rapidly

13. 13 Planning and Scheduling Lean Operations Copeland Corporation Issues Lumpy Actual Demand - Often Caused By Process, Shortages, Pulls/Pushes - When Actual Demand Exceeds Pull Sizing - Utilize MRP To Recover Changing Old Habits/Mindset Issues – Across Supply Chain Maintaining Labor Efficiencies Operating With Less Backlog (Safety Blanket) Right Sizing Inventory – Short Term Increase Old Metrics No Longer Valid – New Metrics Needed

14. 14 Planning and Scheduling Lean Operations Copeland Corporation Supply Chain Management Some Suppliers Unable To Reduce Lead-Time - Offshore Sourcing - Consignment, VMI, Right Sizing Work With Strategic Suppliers - Set Up Reduction, Pull Systems - EDI, B2B Ordering - Cycle Time Reduction - More Responsive/Competitive Change Expectations, Incorporate into Contracts

15. 15 Planning and Scheduling Lean Operations Copeland Corporation Next Steps Full e-Business Implementation Database Warehouse B2B Data Transfer Supply Chain Development - Supplier – MCT/Lead-time Reduction - Customer – Point of Sale Replenishment - Daily Ordering - Freight Management

16. 16 Planning and Scheduling Lean Operations Copeland Corporation Summary Companies Are Implementing Lean Concepts To: Increase Responsiveness Improve Productivity MRP Systems Must Adjust To New Requirements From Lean Operations Less Complexity More Frequent Updates, Exception Based Support Flatter BOM’s, Fewer Transactions Better Metrics And Data Collection/Download Capabilities e-Business Support Even With Less Complexity, Some ERP Modules May Be Eliminated Visual Systems, Hands On Management