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.
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Wide format digital DTG printer
| Every | garment can have a different print. |
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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
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| 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.
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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.
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On site garment printing can eliminate the
risk of size, color and print inventory mistakes
while providing instant consumer gratification. |
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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.
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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.
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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.
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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.
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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.
