Supply Chain Council of European Union |

The ‘Modern’ Factory Remains a Dream for Many Manufacturers

When it comes to running the modern-day factory, there’s a yawning gap between theory and reality.

Manufacturers are under intense pressure to adjust to the demands of today’s global supply chains. Customization is a must; gone are the days of extended production runs of a single part, with the intention of maximizing the use of fixed resources. Now it’s all about the ability to turn out a variety of colors and styles, to satisfy consumers’ ever-changing tastes and desire for novelty.

The stakes are even higher when it comes to industrial production for big-ticket industries such as aerospace, automotive and medical devices. Original equipment manufacturers, with their growing reliance on outsourced assembly and multiple supplier tiers, are introducing an unprecedented degree of complexity to the process.

Much of the technology needed to keep pace with those changes is theoretically available today; the question is, how many manufacturers are embracing it? Far too many operations continue to rely on spreadsheets to meet demand, creating a disconnect between planning and execution on the factory floor.

For most manufacturers of complex products, just figuring out whether they have the parts on hand to keep the line running is a significant challenge. They lack “clear-to-build” capability, which highlights the impact of every partner throughout a multi-tier supply chain.

Traditional planning processes, which set procurement targets once a quarter or perhaps even once a year, are inadequate for the purpose of optimizing inventory levels in times of volatile demand. A shortage of the most minor part can bring an assembly line to a halt, while excess inventory weighs down the balance sheet and can erase already-thin profit margins.

What’s needed is a visual tool to enable line of balance, which allows the manufacturer to conform existing inventories and parts flow with the original plan. It sets reorder points based on purchase-order history and use, and can even project shortages a year into the future, according to Richard Lebovitz, chief executive officer of LeanDNA.

Companies struggling to make the jump from Excel to automation can run up against opposition from old-line planners. “If you’re offering something totally new, it could be difficult,” says Lebovitz. The trick is to introduce technology that mirrors traditional workflows and creates dashboards that users can relate to.

With the right technology in place, manufacturers can drill down to the root cause of inventory overs and shortages. The cancellation of a single order can have a ripple effect up the supply chain, but new tools are necessary to expose the relevant data, Lebovitz says.

Upstream suppliers need a portal through which they can view inventory, potential shortages and open POs at the factory level. Or, if necessary, suppliers can proactively transmit data about parts availability to the line, so that the OEM can anticipate problems and taking corrective action.

The idea is to enact those new capabilities with “minimal change to the business process of the supplier,” Lebovitz says. For all the apparent complexities of modern-day technology, the tools should be geared toward making the job of suppliers and the factory simpler.

“Factories feel frustrated today because they’re managed top-down, from corporate to the global supply chain,” says Lebovitz. “They’re almost treated as black boxes. Nobody is giving them a solution just for them.”

The technology is especially vital for industries with a high degree of configurability, extensive range of procured materials, and need for tight synchronization of production. That’s why LeanDNA is initially targeting aerospace and defense, specialty automotive, and medical devices. But the value of the technology also reaches into consumer packaged goods (CPG) producers, which have experienced an explosion of SKU variety over the past two decades.

LeanDNA is beginning to expand its production line to address work in progress and finished-goods work for CPG manufacturers, “but if you can’t get control over the procurement side, you can’t start production,” Lebovitz says. “That’s the reason we focused on the buy side first.”

The arrival of the truly modern factory might be slow in coming, but the realities of global supply chains and marketplaces demand it. “You can have outsourced suppliers,” says Lebovitz, “but you have to get control over inventory and on-time delivery at the factory level.”

Next: The coming of the “smart factory.”

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