Saturday, March 25, 2017

Principle Two: Efficiency= Manufacturing Agility

Efficiency = Manufacturing Agility
Manufacturing agility must match variable demand in speed, scale and choice…

For many the concepts of manufacturing efficiency and mass production will be difficult to change. To understand the requirement for change we need to first understand the theoretical basis for efficiency in mass manufacturing. For Henry Ford, who is often given credit for developing the first highly efficient assembly line, the underlying motive was to capture total control. Workers banked at the Ford bank, lived in Ford housing shopped at Ford stores. Ford controlled everything, from control of the sales force to control of the suppliers to ultimately control and uniformity of the product. The final outcome of this universal control approach was a high degree of efficiency and ultimately a low-priced product.
As we all know the limitation was you could have any Model T you wanted as long as it was black. This high degree of efficiency became the model for assembly lines all over the world. These assembly lines became the embodiment of the industrial revolution they produced massive amounts of product for constantly expanding markets, and that was the key, the markets were expanding.
Now 100 years later the expanding market basis for the mass production assembly line as for the most part run its course. New expanding markets are mostly driven by new technology opportunities and the huge retail base and online marketing makes access to these technologies universally available, which shortens the period of time that they are in a phase of expansion. Once a product is finished its expansion phase it enters a share phase, a phase, which is described as a pie of a known size which is divided into pieces which constantly change in size based on the popularity of a version of the original product. Each version of the original product must demonstrate some kind of differentiation in order to capture a larger share of the pie. This need for product differentiation conflicts directly with the underlying philosophy of the traditional assembly line where efficiency was designed around the sameness of product and the controlled cost of repetitive movements in manufacturing.

The Computer is not a Copying Machine

The quest for lower labor costs and production efficiency has lead to a misguided romance with the computer and single task robotic automation and an extension of the rules of mass production. Building data driven single task robotic automation to replace humans on the assembly line is an extension of the Industrial Revolution deep into the Information Age. Vast amounts of money have been spent to harness the power of the computer to group and measure predetermined automated manufacturing actions to creating the simulated information driven manufacturing system. Although experts have coin numerous names like “Digital”, “Lean” or even variations of “Demand” the process is still tied us firmly to pre sale inventory and the accompanying risks and costs. Back in the 1960’s the first attempt at demand manufacturing was euphemistically called, ”just in time” (JIT) production. Although JIT seemed to integrate much more efficient communication systems through the supply lines, and ultimately the Internet, the goal was to reduce inventory to a few “days-of-supply” (DOS) for the final manufacturer.  The basic purpose of JIT was to reduce the cost and risk of inventory on hand for large corporations. Since the smaller sub assembly and parts manufacturers were required to meet the product specifications dictated by their contract and hold the inventory until needed. There was no real reduction in either the cost or risk in sourcing or new opportunity for truly quick response. In fact, they put an undue burden on the sub-assembly and small manufacturers who now have to hold inventory in order to supply the final assembly point “just in time” components. If the specs changed the smaller players were left holding the inventory.  This inherent cost of inventory losses forced these companies to become importers rather than manufacturers costing millions of manufacturing jobs and erasing a major segment of the economy.

Self Inflicted Wounds

In 1992 the DOE and Wall Street spent hundreds of millions of taxpayer and investment dollars on developing the B2B communication systems, the infrastructure and ultimately the software that spanned oceans and borders. Expenditures like the Demand Activated Manufacturing for Apparel (DAMA Project) spent $220,000,000 taxpayer dollars to create an internet driven sourcing system. The tragedy was that in the end this shortsighted 1990’s government expenditure promoted the movement of small manufacturing and sub assembly jobs including 90% of apparel manufacturing offshore.   Breakthroughs in efficiency produce less cost and could produce more profits if they had been linked to full price sales, but since there was such a major fundamental disconnect between the supply side and the sales side bulk retailers and financiers use this new found importing efficiency and cost reduction to support even more promotional discounting and sameness and product. 
No matter how much money was spent on developing their communications and better analytical software the inventory dinosaur was still in the room. Developing faster time-to-market software did not relieve either actual production time or the risk of inventory forecasting, in fact, it increase the pressure to create more products. The net effect of these internet and communication advances was even more aggressive pursuit of cost reduction and a whole new requirement for dumping excess product. Since almost all of these projects dealt with cost and risk there was little incentive for the industry to make the massive change from supply to demand-based manufacturing. What was needed was a new initiative that was based on product value profit not discount sale margin.

Efficiency = Agility

True efficiency and manufacturing can be defined in two words, “no minimum. The capability to build individual product or multiple products without slowing down the assembly line is true efficiency and that efficiency comes from the agility of the technology you employ. The ability to substantially change the product on-the-fly is the key ingredient to linking the agility of the virtual world with the reality of the physical world. Any technology, which promotes this link, is an important piece of creating the ultimate efficiency of agility. Unfortunately most of these technologies were created independent from each other and often unknown to each other. Finding a way to link these silos of opportunity is the key to creating an integrated PAM.
Wide format digital DTG printer
Every garment can have a different print.
The word integration in this case does not just refer to the assembly line but to the development of the software that links the customer’s virtual inventory choices produced through modern DTG, CAD and 3-D technology with the physical inventory produced for sale from the PAM site. That key software bridge can allow a direct link to consumers or to buyers which because of the agility of the manufacturing system can provide exact replenishment or individual product that provides ultimate value in the form of profit to the buyer and perfect fit, color, print and shape for the consumer. Since the manufacturing plant is capable of producing one or hundreds the assembly line can be tied directly to purchases at both retail and the individual level.

Sell-Through is True Efficiency

Efficiency can always be measured in time and motion but the true measurement requires that the total production is measured against the source of income and how much it satisfies that source.  Satisfying that source of income, the consumer, is an individual task requiring levels of production agility that are generally available only through online services.   One exception is the aforementioned paint counter at your local hardware/home center. The development of the digital inventory of millions of colors and the ability to access and produce that inventory through low-cost spectrophotometry has changed the paint and industry from a high inventory risk to the efficient profit engine it is today.   Everyday consumers buy paint to match their personal taste instead of settling for premixed colors dictated by cost and trend analysis at the brand or manufacture. This consumer demand final assembly creates profit and consumer value for the retailer and the supplier’s brand and saves the manufacturer millions in regulatory, environmental and production costs. This strategy capitalizes on establishing a key building block of demand manufacturing close to the consumer as thereby allowing consumer participation to increase intrinsic product value.

The Key is the POA

 This building block called the “point of agility” or POA is the critical determinant of the efficiency of marketing and manufacturing integration. Without a clear and disciplined POA there is loss of production focus and the merchandising chaos that follows causes almost certain failure of purchase integration and collapse of the virtual inventory. The book definition of the product POA is that it is the last point in the production process where a generic raw product can be customized to fit the demand of an individual consumer.  In accounting terms this is the point when low risk multi-use inventory becomes a high risk SKU awaiting sale.  In the textile and apparel supply chain it is when white fabric is colored or printed.  It is important to remember that the POA can only be defined by the intersection of generic mass produced product and integrated “change-on-the-fly” technology linked to virtual inventory, purchase activated by a B2B customer or retail consumer. Understanding the POA is easiest by examining three different current business examples each of these examples as a unique demand integration point between marketing and manufacturing.

Onsite Consumer PAM

At the paint counter the consumer creates the SKU awaiting sale.
First, is the example of the previously cited consumer driven paint counter. Matching colors with the personal choice of a consumer can be a tricky proposition. Oddly enough this capability is the perfect integration of two widely diverse silos of technology. The story behind this development integrates low-cost spectrophotometers originally designed to detect counterfeit currency and the highly accurate pumps used in lifesaving surgical procedures. Integrating these two technologies and adding color identification software along with stored virtual inventory mixing recipes created a massive virtual inventory of colors that could be detected or requested and manufactured at the consumers demand.
Once the digital detect and mix on demand manufacturing counter was installed the inventory was reduced to supply of primary and secondary colors stored in the machine. The only requirement for space was the anonymous white base that provided much of the volume to the paint being sold. This anonymous white base was the last point in the manufacturing path where mass production made sense. So the process of providing just the color paint the consumer wanted on demand became a customization of the white paint base, which made it the POA of the paint manufacturing business. This establishment of the basic POA allowed the industry to focus on other features beyond just color such as durability, application ease and other features we see today in the indoor and outdoor paint market. In addition the merchandising side of the paint industry was now free to license any color or any emotional hook from Disney to Martha Stewart and have the capability without inventory risk to provide a unique and differentiated product to the market. This unleashing of the constraints on product design and merchandising themes without the risk of guessing wrong is one of the most important side benefits of creating retail, supplier (brand) and manufacturing demand integration.

Virtual inventory frees designers
and marketers to create product
difference without inventory risk.
Often the selection is emotional and complicated and depends on a previous color or previous attitude about color. The ability for the paint counter mixing station to match the exact demand of the consumer depended on the ability to either detect or mix (from an obscure description) the exact color that satisfied the consumer and possibly other parties involved in the decision. Before the digital detection and mixing station was invented, hardware stores had to stock pre mixed white base and primary colors as well as many seasonal and trend colors. This process of stocking the shelves was often the product of trend analysis, sales history, and simply guessing what hot color should be produced in this round of production. The stocking level and the shelf life of the paint inventory created a huge loss of selling space and ultimately a loss in unsold inventory. Stores that sold paint and agreed to mix custom colors were often defined by the expertise and the personal selling relationship of the person who mixed the paint. This skill set and the dependent relationship with the huge dedicated inventory space made the paint section of any hardware store a required but high-risk department.

 Third Party Post Sale POA

Second, is the example of the smart phone with its unique POA that integrates customization with third party vendors. The smart phone represented a huge risk in inventory because it depends on expensive high technology to produce a consumer interface, which could easily become the key competitive feature as the market became one of shared expansion. This ability to control the key variables that would determine long-term survivability in a viciously competitive share-market required innovative integration design between manufacturer’s base unit and the applications that would drive consumers to purchase the product. So in the smartphone market the POA is the basic phone and the custom element that drive sales is often the applications that third parties have provided to be used on the phone. Building these applications into the basic phone or POA can be a risky business but using third parties to test the viability of a feature reduces that risk. A perfect example of this is the map feature that is built into almost every phone. Specialized third-party GPS application producers developed the intrinsic capabilities of the map application. Attempts by the base producers of the phones to capture and update their own version of these map applications before the application was clearly defined by consumer use often required huge R&D outlays and produced a number of embarrassing errors exploited by competitors.
  These integration hiccups with huge amounts of capital on the line where the result of a dangerous agile-manufacturing pitfall. This is the case of “ we’re going to make it because we can!” this loss of discipline can destroy the integration between manufacture, supplier and seller. One company (Apple) that survived these growing pains built a structure of integration because they were the manufacture, the supplier and the seller. Ultimately, even Apple suffered from over production as competitors divided the market into shares. Other companies which were unable to control their application customization have suffered a number of both financially and reputation embarrassing failures. One example is the recent attempt to add more features to the POA (base phone) instead of tightly controlled vendor supplied applications. Many believe this overloads the basic phone structure and in at least one product recall case caused dangerous and explosive life-threatening repercussions. Keeping a tight rein on changes in the POA protects the efficiency of the manufacturing process and reduces risk from a fundamental failure that can affect a multitude of products which are produced as a customization of the POA. The unique case of the smartphone and its ability to produce a cornucopia of features at the user’s demand is a perfect example of moving the POA as close to the consumer as possible. The distance between the POA and the final consumer product has a direct relationship to risk and ultimately loss of profit, the closer, the safer and the higher the consumer value and profit.

Customer Design Activated POA

The third example of manufacturing agility occurs in one of the most immobile and complex industries to adapt. The apparel industry is characterized by massive inventories driven by the variables of color, pattern design, prints, fabric selection, sizes and fashion trends. The traditional mass manufacturing solution to creating a profit while dealing with these complex variables is to try to predict trends and colors then present them to potential consumers as “the look” through the vehicles of fashion shows, lifestyle magazines, and more recently online fashion blogs. By creating this demand in the market merchandisers hope to protect the inventories they had to buy to cover minimums or get the lowest possible cost per unit.  As the industry has moved to more casual apparel and away from off-the-shelf fashion the opportunity to apply purchase activated manufacturing has intersected with new technologies in manufacturing and new opportunities to reach the consumer in online merchandising.
Retailers in specialty apparel shops, are closing all over the country, over 1400 are listed in a Forbes, March 22, article.  Many of these stores are dying from inventory “constipation” because they can’t turn the volume of inventory are forced to by months in advance to hit cost targets.  In short the have nothing new to offer because the can’t create value other than price reduction and subsequent profit loss.
“The answer lies in one critical point, which is that consumers are looking for personal style,” says Richard Passikoff, founder of marketing research firm Brand Keys.
On site garment printing can eliminate the
risk of size, color and print inventory mistakes
while providing instant consumer gratification.

With a simple display and touchscreen retailer could
offer unlimited choice with instant on site product from
digital printers,
Retailers have dictated the market through trend merchandising for years while the requirement for personalization slowly erodes their base.  Now consumers can buy direct using their own choices, causes and style from “Direct To Garment” (DTG) and other digital demand printers of apparel.  The shame is that any one of these collapsing retail icons could have dedicated a space the size of the paint counter at a local home canter and produced purchase activated product from a huge virtual inventory while the customer is shopping.  DTG printers and sublimation stations can produce fully printed apparel in minutes with just the decoration the customer has selected on a touch screen on a purchase the consumer can take home immediately.  Retail stores can offer instant gratification a selling feature that online sellers cannot match but retailers remain mired in the “supply, discount and dump economic model.

Building a PAM Supply Chain

Making apparel is a complex process often involving many different manufacturers in many different locales. A recent NPR feature tracking the production of a white T-shirt move through five continents from cotton fields to the retail sale. Making this chain of events into agile integrated manufacturing is a huge undertaking that requires more than a linear time-to-market solution. The current approach is to focus on the design prototype, sample, production and market time segment. This focus has produced some progress but is still similar to the JIT strategy of other large brands and retail solutions in that it punishes the supplier by increasing risk without sharing benefits. This solution does not address transportation cost, labor conditions or environmental impact, which are all contributors to the fundamental risk of overproduction and profit loss through clearance and dumping.
The apparel industry is like many other manufacturing segments is incredulously resistant to fundamental change. Part of this resistance is based on the inability to link the manufacturing stations on the track from raw production to the sale of the finished goods. Some companies have worked diligently to coordinate a vertical production/retail path only to meet regulatory and tariff barriers that block the process with impossible standards or unreasonable costs. One example is the Clean Water Act of 1972 and the evolving standards, which it make it very difficult to traditionally color or print fabric in the US, the EU and other countries concerned about pollution and water use. This reasonable concern is based on the excessive use of water and the resulting toxic waste created by conventional textile dye and printing processes.
 Another barrier to change is the huge amount of sunk capital and process protocols dedicated to reducing cost through aggressive sourcing and reducing risk through trend and market forecasting. These jobs represent the human cost of the fundamental system change to true demand manufacturing. The reality facing the defenders of these barriers is that, change is happening piece-by-piece all around them every day and will eventually erode the current unsustainable structure at every level, not just the retail failures occurring today.
 The apparel industry like many others is in the eye of the perfect storm. The combination of instant information, new manufacturing technologies and multi-platform selling strategies has eroded the dominance of retail control. Retailers no longer own the only place where the consumer meets the product, brands are selling through factory outlet stores and manufacturers are beginning to realize that they can reach the consumer directly online. This new multi-platform and multi-source selling environment demands an overall change in the relationship between sellers, suppliers and manufacturers.  Strategically the players need to recognize the change in leverage that is a result of consumer access at all three levels of the production/sales path.
In this chapter the focus is on the manufacturer and the changes and opportunities of adopting agile Purchase Activated Manufacturing (PAM). The first step is to review all the materials and functions of the manufacturing path especially the timelines and actual costs of outside services that add time and transportation to the product production.  The purpose of this review is to establish what materials can continue to be produced in mass and which materials and production steps will contribute the most to reducing inventory and promoting consumer value. This process is extremely complex and may require outside help to avoid the entry of company politics and change friction that can influence the information required to implement change. Identifying the production path will require detailed knowledge of sourcing, transportation, manufacturing technology, distribution, outside contractors and consumer or customer fulfillment. Mapping this path and the associated actions with an accurate and detailed status of the product at each location will provide a diagram all the actions required to produce your finished product.

The Complete Production Path

Most of the key management personnel in the apparel trades have very little idea what it takes to make a garment.  Even sourcing managers often have little knowledge about the processes outside of their direct purview.  This lack of detailed knowledge makes it difficult to compare new technology without intimate knowledge of the current methods.  An important example is the printing of fabric.  Printers or converters as they are often called in the industry operate with special charges for minimum runs and/or surcharges to color fabric.  Coloring and specifically printing fabric requires a number of time consuming and costly prepress tasks before the first meter of fabric can be printed. 
Each color requires a separate printing station.  Separation of colors
from the original composite design is a major cost in prepress.
Proofing the initial test print also can involve all the prepress tasks of color separation, cylinder exposing or engraving, fabric prep, image registration, drying and post treatment. 
Individual color cylinders must be made,
installed and registered for each print job.
Remember if your print multiple colors each one must be separated, imaged on a cylinder, placed
in the printer and registered with all the other colors before you can see the first test print.  Once the printer is loaded and registered it can take hours to setup the next print job.  All these time and materials cost contribute to the calculation of minimums and surcharges.  Since there is one setup that can be amortized over thousands of meters of printed fabric, cost is calculated on the basis of volume.  The more you print the lower the cost per meter.  If however these thousands of meters of fabric don’t sell the total cost of all that printing can be a huge loss.  This relation to volume/cost/income is the risk equation of mass manufacturing.  If you win the production bet you can be rich if you forecast wrong your gone.
The comparison is digital printing with very little prepress cost, no separation, no color cylinders, one setup to start the day and no stoppage between printing jobs. 
Digital textile and apparel printers come in
all sizes and technologies. Choosing the correct
equipment is the last step in planning a
PAM structure.
Cost is based on area of print and there are no minimums.  Capital expense is much less but volume is set to match direct purchases or distribution system days of supply or orders in hand.  The important detail is that digital printing is completely different than conventional volume printing, the main difference is the color in the printer never changes, but the color you see on the fabric is unlimited.  Digital printing gets its change-on-the-fly capability from using a technique called process color just like the printer on your desktop never changes ink color but the output can be any color.  The logical question is why don’t we use digital printing now?  The two main reasons other that resistance to change are: first, our current supply and demand structure rewards volume as a measure of productivity and digital printing is designed to support a demand and supply structure based on high sales volume not just production volume cost savings.  The second disconnect, is sunk capital in current equipment and experience supporting mass production at every level from retail to supplier to manufacturer. 
Consistent color reproduction in digital
printing requires understanding and
control of all of the variable that produce
the final color.
Digital printing is not difficult but is does require training and discipline, when a device can make any color it takes knowledge to make the color you want consistently.  It sometime difficult for experience in one technology to transfer to a new approach, but moving from spot color to process color shares many common steps as illustrated in this Color Cone training representation of the steps needed to reproduce the desired process color consistently.
 Knowing this path in detail is critical to establishing the POA at a point in the path that will allow the most efficient application of technology and marketing skills to reduce the inventory to zero or at least the minimum that can be delivered in a timely manner. After you have identified and plotted product path it is possible to then apply both cost and marketing information to identify the most strategic point to locate the POA on the product map. There are many points along the path that can be used as a POA, remember the afore mentioned examples of the paint counter, the smart phone and apparel. The paint counter was closest to the consumer and therefore reduced requirement for variety in the inventory and left the final decision and therefore value in the hands of the consumer. The smart phone however did not reduce the manufacturing technology required however it did simplify the inventory and therefore lower risk because even though the manufacturing cost was still significant the final value of the product was added by the consumer through the form of apps which they chose that were not required to be inventoried but still provided some income. The comparison between these two, the paint counter with its low-cost and simple production of white base and tints added on demand versus the high cost smart phone which still may only have one base version with multiple memory chips seems to create very different POA’s. The advantage of both of these examples is however fulfillment and delivery time both create almost instant value and gratification through the participation of the consumer. The apparel example is much more complicated because it occurs farther away from the consumer and requires much more activity to create a product differentiation and therefore the personal value to the consumer. Remember, value to the consumer the ultimate source of all funds is a key ingredient to producing the demand to sustain an inventory free consumer demand PAM production strategy. By establishing POA as close to the consumer as possible you can be assured of the most agile manufacturing and the most flexible value-producing product.
Establishing a product POA is only part of creating maximum manufacturing agility. Finding and integrating agile manufacturing equipment is also a key to the agility required for consumer demand manufacturing. Reducing preparation time by finding equipment that requires only digital information to perform a task is a key ingredient to creating the virtual inventory required to feed agile manufacturing. This can take the form of digital optical cutting which does not require detailed patternmaking or peace placement or it could be digitally driven assembly robots which can create custom finished products by selecting different parts and assembling individual products. One of the most common agile tools is digital printing used every day in home and office environments. This tool is taken for granted today but not so long ago typing and typesetting as well as page makeup, stencil making and volume pagination were all prepress steps required to produce a printed page in volume. As digital printing, evolved to new substrates beyond paper it became a critical piece of point-of-purchase advertising, book printing, labeling and now textiles and apparel.  The latest breakthrough is the development of 3-D printing. Although it is now in its earliest stages of development 3-D printing offers huge opportunities to expand the reach of virtual inventories through both finished product and key assembly pieces. From car parts the buttons to finish shoes 3-D printing can provide a critical link in expanding the reach of consumer driven manufacturing. 
Finding the POA is the responsibility of a cross functional team made up of sourcing, production/manufacturing, marketing, merchandising, accounting and sales. With the team as diverse as this group reaching a decision would require setting a priority to the key elements of the POA. The first task is to find the point where the greatest number of individual products can be created from a dependable technology modifying a common source. Once you’ve determined the point of greatest variety the second element is to look at that point from the point of view of the consumer and the value of their participation in making the product unique for themselves. Once those two points have been determined the next step is to determine the technological feasibility. The mistake many companies make is to focus on technology instead of value. Technology especially in the digital age is a constantly moving target, finding the technology that can be adapted to create the most valuable for products from your POA is often a product of research of the marketplace and adaption and integration of current tools that may be used to create other products. In summary, first look for choice, second look for consumer participation value, then, look for the technology to produce the product.
Manufacturing agility allows companies to focus on product differentiation without the risk of meeting mass production minimums and the resulting risk of losses from dumping an unsuccessful product variation.  Adopting agile manufacturing machinery and technology also allows a company to test product for success and scale production and investment to meet product success.  It is important to remember however, that successful agile production must be driven by demand from the ultimate source of funds, the consumer.  One of the dangerous aspects of agile manufacturing is that it is easy to loose focus and loose the production/profit emphasis and chase product because you can make it not because it’s what the system was designed to make.  Agility can become production chaos if the demand based system becomes pure product testing.  Agility produces significantly higher profits if production and quality discipline is built into the design and integration of the demand process.
Lessons Learned about “Efficiency through Manufacturing Agility”
Four basic structures must be built into the agile manufacturing design:
Step One: Using a cross functional team establish the critical Point of Agility “POA” for the product.
Step Two:  Integrate purchase and production information with virtual inventory product selection.
Step Three:  Select manufacturing equipment that is Mass-parallel scale-able.
Scale-able workforce:  Build a production path that requires minimum high tech training and facilitates flexible employee movement between production stations.

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