Draft a response to this students original Discussion Board Post. MUST INCLUDE 3 References. Here is the students post that you are responding to:
Lead Time Issues
Why are the lead times so long?
H.C Starck, Inc. has a number of potential improvements that can be made to correct the issue of long lead times. The case study defines lead time as “the time from when the customer places the order, until the product is shipped.” (Simchi-Levi, Kaminsky, & Simchi-Levi, 2008) Currently, according to the text, this is taking anywhere from 8 to 14 weeks. Upon further investigation, the actual lead time for manufacturing of a product was closer to 2.3 weeks. The issue, as indicated in the text, are from the sales order to manufacturing. One of the issues that is readily apparent is the lack of trust in the newly implemented ERP system and the mentality of “we have always done it this way”. It is clear from the text that the ERP system is not being leveraged to its fullest. Jim McMahon, the supervisor in production, is still doing several things by hand including production forecast, capacity allocation of departments and labor, as well as, production orders. During the discussion with Mr. McMahon, it was evident that if something wasn’t due right away, it would sit until closer to delivery.
Another issue that is causing lead time extension is that of inventory minimalization. Per the text, several of the products go through the same sizes, indicating that an inventory of common sizes could be held to make production faster. The shop is currently operating on a reactive basis instead of trying to get ahead of demand.
Potential ideas for reduction
How might Starck reduce or affect the lead times?
Resource allocation is a must for this company. This is done through supply chain master planning. “Supply chain master planning is defined as the process of coordinating and allocating production and distribution strategies and resources to profit and minimize systemwide cost.” (Simchi-Levi, Kaminsky, & Simchi-Levi, 2008)
First, I would suggest getting the ERP online. From the case, it sounds like that pieces of the ERP are working correctly, and others are not; specifically, the recipes needed to run the main production component of the company. The recipes, with Mr. McMahon’s assistance, need to be correct. I state with his help simply because if you want him to use the system, you need his buy in, which you will not get as long as he doesn’t trust the system. Once he has some understanding of how and what it is supposed to do, he will see that he can use the ERP system to do a lot of the scheduling, etc. and still be the guy who “just knows what is going on…” Longevity of employees can be an issue with new systems, and they should always be a part of the implementation process.
Second, purchase orders should not be held until closer to delivery date. If properly planned, orders that are not of a special nature should be able to be in production once received with very little lead time between sales order and production. Capacity planning to ensure that like products on production orders are made during similar processes would be advantageous, especially since one process change takes 8 hours.
Third, increase inventory to include common items to reduce lead times in manufacturing. Developing a base-stock level would be a good start in developing a usable inventory. This can be calculated by preforming an analysis on past orders over the last three years.
Costs and Rewards
What are the costs from reducing the lead times? What are the benefits from reducing the lead times?
The inventory build will cost the company labor and raw materials. Along with the normal production, additional items will be made to build stock, although some items, like the tubing can be made with a few minor adjustments which will hopefully cut down on waste. Additional training may be needed to properly implement the ERP system for production. This will cost not only the money associated with the training, if it is not included in a maintenance agreement, but also man hours to attend.
Reducing the lead time will ensure a happier customer base as well as alleviate the fear of customers choosing a cheaper alternative because the lead time is less. It will also reduce lost hours due to lack of streamlining the work force.
Chern, C.-C., Lei, S. T., & Huang, K.-L. (2014). Solving a multi-objective master planning problem with substitution and recycling process for a capacitated multi-commodity supply chain network. Journal of Intelligent Manufacturing.
Sievers, S., Seifert, T., Franzen, M., Schembecker, G., & Bramsiepe, C. (2017). Lead time estimation for modular production plants. Chemical Engineering Research and Design: Transactions of the Institution of Chemical Engineers Part A.
Simchi-Levi, D., Kaminsky, P., & Simchi-Levi, E. (2008). Designing and Managing the Supply Chain: Concerpts, sTrategies, and Case Studies. New York: McGraw-Hill Irwin.
***This post was related to answering questions at the end of the case study. I have attached the original case study to assist you.