10 Non-Negotiable Principles

by Dave Garwood

Some things never seem to change.

What's the point? After a decade of Total Quality, Re-engineering and a host of other hot ideas, the same symptoms still appear. And Mack Truck and Boeing are not exceptions. Parts shortages continue to top the Pareto chart in many companies. Is this a people problem? I don't think so. I have never seen a group huddled in the parking lot developing a mission to go to work today and make the wrong parts or material. It isn't likely a lack of inventory, either. Companies with excessive shortages almost always have excess inventory.
Chronic shortages are symptoms of fundamental weaknesses in the process of balancing supply and demand. The problem is unlikely to be solved with new software, Y2K compliant or not! The solution is to understand and honor these 10 non-negotiable principles.

The 10 Non-Negotiable Principles!

1. Credible Schedules. Getting results means making the right items. The schedule should communicate the "right" items to be making and when they are needed. Meeting the schedule depends on clear accountability for meeting the schedule. Accountability is a joke unless schedules have credibility. Schedules that are 4-5 weeks or more past due and no one is looking for the items destroys schedule credibility.

2. One Schedule Only. Confusion reigns when the suppliers and the plant floor are trying to react to a multitude of schedules -- hot lists, super hot lists, must-have lists, bosses-favorite-customer list, etc.

3. Due Date = Need Date. The key to insuring credibility is to satisfy this equation.....always! Due dates (or sometimes expressed as rates ) come from the formal system, usually supported by the software. Need dates are real. If the date the part is due is not the date it is really needed, the troops are forced to develop informal systems to find out what is really needed and when. Accountability is lost and the process is out of control.

4. Past Due Less than One Week's Equivalent Production. Nothing can be made last week. Once an item is past due, it must be rescheduled to a new date it will be completed and the impact on other items assessed to maintain credibility in all schedules.

5. Heartfelt Accountability to Meet Schedules. Heartfelt accountability is when the job gets done because people believe it is the right thing to do. They get very creative in finding solutions to overcome obstacles. Think about the miracles performed at the end of the Quarter to meet monthly shipment quotas. Heartfelt accountability is there for making the financial numbers and creatively to get the material we need.

6. Six Sigma Execution of Schedules. Good planning is both fundamental and essential. Execution of the plan is what gets results. A Zero Defects mindset to meet schedules is critical to avoiding shortages.

7. Demonstrated Capacity = Required Capacity. Making the "hot " items but not making everything on time, i.e. required, guarantees perpetual shortages. Beware if suppliers or the plant floor ask for the work to be "prioritized." This likely means," I am not going to make everything when needed, so tell me which ones to let go late!" We need to make everything as scheduled -- on time.

8. Accurate Data. Schedules are based on a foundation of basic data, such as bills of material and inventory records. If the foundation is weak and poor, so are the schedules. Credibility will crumble fast and the process will spin out of control.

9. Manage Both Supply and Demand. What do you call a plant manger who does not make as much as he or she promised to make? Unemployed! We have historically expected supply to be managed, i.e. no surprises. Make very close to what you committed to make. Demand has been another story. We accepted huge surprises in the difference between forecast and actual demand. We have historically rationalized the delta with lame excuses such as "can't forecast our type of business," "our customers are never sure what they want," "we don't have time to plan, too busy selling." Avoiding shortages demands that BOTH supply and demand are managed. No surprises!

10. Customer Delivery and Manufacturing Schedules are Aligned. Over 50% of customer service delivery problems are created at the time of order entry. We commit a delivery promise to the customer that manufacturing never planned to meet.

The customer has a date they want the product. Manufacturing was in the process of scheduling purchased material, producing items in WIP, planning capacity and making products when the customer order arrived. When should the schedules be compared and differences discovered? At order entry time! The resolution may be ugly, but it is worse after we miss the promise.

These principles are obviously very interdependent. Making customer commitments based on a manufacturing schedule that has no credibility and is seldom met is an exercise in futility. Take a few minutes and ask yourself how well you conform to these principles. Focus on areas that are weakest. Shortages will fade into the past and become just a bad memory. Guaranteed!