By Jochen Lipp and Wally Johnson
Tuesday, 01 March 2005
A case study of a mid-size firm’s foray into Lean.
While several EMS providers have begun implementation of Lean manufacturing practices, the reality is that Lean manufacturing principles in their purest form do not adapt seamlessly into the EMS environment. An OEM adopting Lean principles can optimize its supply base to include only suppliers willing to support its Lean practices, optimize product designs to best fit production flow and develop very consistent scheduling practices across its product lines.
Conversely, EMS providers typically have 20 to 50 customers, each with specific needs, internal practices and directed suppliers that may not be optimized for Lean manufacturing. Key areas of potential conflict include:
- Integration of Lean principles into a supply chain that is capable of expanding with every new customer, most of which have unique documentation protocols.
- Optimizing processes in a manufacturing environment that reflects the scheduling needs of 20 or more customers with unique product lines, standards, specifications, etc.
- Effectively addressing the scheduling/forecasting practice variances of 20 or more customers in an economic environment likely to have unanticipated demand requirements across multiple industries (e.g., medical, industrial, automotive, etc.).
- Effectively integrating lean principles across multiple facilities, in an environment that includes cross-border logistics support.
- Developing a program flexible enough to address the needs of customers who reflect a wide range of Lean manufacturing implementation.
In implementing Lean, EPIC Technologies encountered many of these issues. We developed a synchronous flow manufacturing process that recognized the unique challenges inherent in adapting Lean manufacturing to the EMS environment. Here, we look at some of the ways we modified our processes to achieve the advantages of Lean manufacturing while continuing to meet the unique needs of a diverse customer base.
The approach involved four key areas:
- Detailed process mapping to understand the key processes involved in transforming production inputs to customer-desired outputs.
- Identification of constraints in key processes that limited flexibility.
- Development of strategies to eliminate constraints, which included working with equipment suppliers, material suppliers and employees to develop unique solutions for maximum flexibility.
- Development of simple tools that ensure rapid exchange of real-time information.
Supply Chain Management
Supply chain management and logistics was a key area of focus. Our strategic purchasing focus recognized several key factors:
- Strong focus must be placed on developing and qualifying suppliers that embrace Lean manufacturing principles of short cycle times, flexible batch sizes and high quality.
- Suppliers must be responsible for managing production to forecast, yet deliver to “pull signals” vs. requiring firm release dates over an extended lead time.
- Appropriate buffer sizes for current production rates must be established, maintained and continuously monitored for appropriateness.
- Material buffers should be maintained in close proximity to the manufacturing facilities to permit frequent release of small batches to the production floor and maximum flexibility in responding to changing demands.
- The material pipeline must be proactively and regularly monitored over the medium-to-long-term horizon through bond reports to identify and resolve potential supply disruptions.
EPIC has addressed that focus with a Kanban “pull” system, postponement of commitments and utilizing Electronic Data Interchange (EDI). Strategic suppliers produce to the MRP forecast and ship to EDI release signals. Buffers are established at key locations in the pipeline and are regularly reviewed and revised as market and demand conditions vary. Consignment, in-house stores and VMI programs are used with strategic suppliers to maintain buffers closest to the point of use. EPIC works with customers on new programs to ensure new suppliers on major components support this process, or direct them to suppliers that will.
Pipeline status or “bond” reports are regularly reviewed with supplier teams to ensure buffers and replenishment streams are able to support planned production within a range of variation levels based on past history and customer focus team plans.
On the factory floor, a two-bin system and color-coded cards identify raw material and WIP status. Material shortages are easily visible on a walk though the material area. In the company’s Juarez, Mexico, operation, an “E-Kanban” system permits employees to electronically view status of inbound material from suppliers as well as en-route from the U.S.-based receiving operation.
While OEMs can optimize product design to minimize variance in process profiles, EMS companies often deal with a wide range of production requirements due to variations in customer designs and industry requirements. This is exacerbated in the mid-tier EMS environment because many industrial products have longer life cycles and smaller lot sizes. Often these customers are reluctant to invest in redesigns because of the high mix of product types or the length of time needed to recover the cost of redesign on a lower volume product. Instead of attempting to force customers to redesign products to support a standardized production process, EPIC’s solution was to work with our equipment suppliers to redesign equipment to improve factory throughput by developing unique systems for rapid changeover.
For example, EPIC worked with our wave-solder supplier to develop equipment capable of changing process parameters on the fly, allowing multiple products to be run over a single wave solder machine simultaneously with zero change over time. The wave solder is linked to the conveyor system with a bar-code reader that transmits data to change process parameters dynamically based on each product’s characteristics. Multiple lines with a diverse range of products now feed into one wave solder system, permitting ultimate flexibility and efficient utilization of assets.
For reflow, a vapor-phase system was selected which uses an inert Teflon-based fog. Because the high moisture content atmosphere has superior thermal transfer properties compared to traditional IR or convection systems, the entire board reaches the same temperature at the same time. This eliminates shadowing effects or hot spots, and permits one profile to fit all. An additional benefit of this focus on equipment optimization was the vapor phase oven’s ability to support lead-free soldering at conventional reflow temperatures. We have been producing SMT assemblies with lead-free solder since January 2004 and can support use of tin/silver, tin/silver/copper or tin/silver bismuth leadfree alloys.
Training was also a key focus. All production operators are cross-trained in several production processes. Operators are certified to a range of skills in the company’s training matrix, and compensation is tied to certification levels achieved. As a result, a core group of production operators can be moved throughout the factory based on areas of highest demand.
Access to information is key to the overall flexibility of the system. Within each factory production order status is easily visible using simple color-coded card systems. However, employees also have access to a sophisticated intranet system that supports this environment of rapid response.
Any employee can access an intranet terminal and view his or her job description in a visual matrix which lists tools required, departments interfaced with, inputs received, processes performed, expected output, results measurement methodology and critical metrics used. This information is available in English and Spanish.
Work instructions are displayed on workstation monitors instead of being distributed on paper. This facilitates quick line changeover and documentation integrity, as all documentation can be stored in a central location. The result: As employees are moved to areas of highest demand, they have the ability to immediately access the information needed to perform assigned duties.
For EMS firms, customers pose one of the biggest challenges in implementing Lean manufacturing. EPIC’s customer base is no exception. While some customers are mature users of Lean manufacturing processes, others are just beginning their journey in this area. EPIC’s Customer-Focus Teams work with each customer to establish joint program goals and demonstrate the value of teaming in further implementing Lean practices by providing detailed tracking on key program metrics. We use a plant operating review (POR) system that monitors approximately 50 metrics company-wide, down to the floor level.
Key areas of focus for the OEM/EMS partnership include: supplier integration and education; development of mutually-agreed upon forecasting/order placement methodologies; and development of a strategy for product shipment either to the customer or its end market through direct-fulfillment programs.
Most customers see an immediate benefit in terms of schedule flexibility as standard order lead times in the synchronous flow environment are one to two days. However, truly optimizing the OEM-EMS relationship in the Lean environment requires focus from both parties. In cases where customers are optimizing their practices to support Lean manufacturing, results have been dramatic. One medical customer saw a $10 million reduction in working capital as a result of the improvement in inventory turns realized as part of a focused multi-year Lean teaming initiative. Customers also see improvement in firstpass quality yields and consistently high on-time delivery performance.
The results for EPIC have also been dramatic. While the journey has involved considerable time and effort over many years, accomplishments include:
- Reduction in setup/changeover times to an average of 13 minutes from over two hours.
- Average production cycle times reduced to less than one shift from four to five days in a high-mix environment producing 25 to 50 assembly types
- simultaneously in each work cell.
- Company-wide on-time delivery statistics routinely exceeding 99%.
- Double-digit inventory turns.
Lean manufacturing can be effectively implemented in the EMS environment. However, successful implementation involves strong focus on enhancing flexibility in internal processes, easy access to documentation and performance metrics, well-trained employees, strong emphasis on supply-base education and partnering arrangements and joint continuous improvement efforts with customers. In the current environment, the ultimate competition is not directly between OEMs but rather among their entire supply chains. The OEM/EMS partnership can be most successful through the broad implementation of Lean practices, where the contract manufacturer truly becomes an extension of the OEM’s business.
Jochen Lipp is vice president of operations and COO and Wally Johnson is vice president of supply chain management at Epic Technologies (epictech.com).
NATEL EMS is a major independent manufacturer of a wide variety of electronic products, providing low to high volume production for its customers. As one of the largest and oldest privately held EMS companies in the U.S., NATEL EMS is known for solving tough engineering problems that result in high-reliability, high-quality electronics for customers in medical, defense, transportation and industrial fields. NATEL EMS is favorably positioned among mid-tier EMS manufacturers to “make amazing things happen.” NATEL EMS holds and maintains industry specific certifications that include AS9100, ISO 13485, and ISO/TS 16949. Its MIL-PRF-38534 (DSCC) Class H and K certifications certify NATEL’s expertise in designing and manufacturing microelectronic assemblies for space and mission-critical defense programs placing it in an elite group of defense and aerospace industry manufacturers. NATEL EMS, headquartered in Chatsworth, CA, has manufacturing locations in California, Nevada, Ohio and Mexico. To learn more, visit www.NatelEMS.com or on Twitter, @NATEL.