Tuesday, January 18, 2011

ERP For Manufacturing - The Nine Great Benefits

Synchronicity. It is something every organization hopes to achieve, but more often than not falls a bit short of attaining. When we talk about synchronicity we are speaking of principles of connection, where the parts work in total alliance with the whole. Historically, synchronicity has been of particular importance in manufacturing where the quest is always for a seamless connectivity between product planning, product development, material sourcing, and shop management. Indeed, synchronicity in manufacturing is a direct result of the knowledge (data) that any one part of the system has about the whole facility at any one moment.

To achieve synchronicity in manufacturing, enterprise resource planning systems (ERPs) have been developed to integrate all data of an organization into a unified system. Typically, ERP systems use multiple components of computer software and hardware to achieve the desired integration of a manufacturing system. A primary part of most ERP systems is the use of a real-time, connected database structure to store information for use by the various system modules.

In short, ERP systems combine hardware and software in a single functional package that covers two or more systems in the manufacturing operation. What are some of the benefits for the use of an ERP system in manufacturing? Though the list is long, here are nine great reasons for implementing ERP in a manufacturing operation:

1) Synchronicity: Again, the greatest benefit to be gained from ERP integration is having everyone in the production operation on the same page looking at the same real-time data.

2) Data Input Only Once: When data is input in one part of the system, the whole system has access to it. From estimates to work orders, from payroll to shipping, any input data is available to everyone. This, then, leads to the next point of...

3) Less Spreadsheets: Since all data is in the single-source system, production information does not have to be reproduced on traveling (and often out-of-date) spreadsheets.

4) Orderliness: When ERP is used to replace two or more independent applications, it eliminates the need for the external interfaces that used to be required between systems in non-ERP operations.

5) Shortened Cycle Times: ERP works well with just-in-time pull-production, increasing inventory turnover and reducing inventory cycle times.

6) Efficient Direct Labor: Direct labor costs are reduced through more precise and real-time production data. For example, routers might give clear and concise production instructions. As well, clocking on and off a job is made easier through the use of integrated recording systems such as Graphic User Interfaces (GUI).

7) Less In-Direct Labor: Through integrated GUI time clocks, in-direct and non-productive labor time is accounted for by employees, and production is measured in terms of output relative to time spent.

8) Reduced Set-Up Times: In ERP, scheduling is tailored to build production around standardization, repetitive processes, and other lean manufacturing principles to reduce machine set-up and break-down times.

9) On-Time Delivery: Ultimately, the primary goal of on-time delivery is achieved through the efficiencies gained in ERP system unification. Production contingencies are anticipated and built into the scheduling system as a result of continuous data flow.

In conclusion, these nine great benefits realized through ERP integration are the result of one thing-synchronicity in the total operation. Manufacturers who chose to utilize ERP principles, as well as robust software and hardware within the system, can expect greater productivity through enhanced efficiencies, as well as better bottom-line profits.

Increase the Productivity and Profitability Through ERP

Enterprise resource planning (ERP) is an enterprise level information system that is designed to coordinate all the resources, information, and activities required to complete business processes. It can be consider as an integrated management of business which covers the techniques and concepts required.

Traditional stand-alone applications were designed for specific needs, with limited functionality, and isolated from other departments. On the other hand, ERP is a concept to consider many departments and combining their unique systems into a single unit, enabling seamless communication between these departments, clients and management.

Initially ERP package was consider a costly affair, so it was only possible for very large Multi National Companies to implement it. Today many companies over the world have gone in for implementation of ERP and it is expected in the near future that 60% of the companies will be implementing one or the other ERP packages since this will become a must for gaining competitive advantage.

Modern ERP Solutions are highly customized, covers almost everything that you need to run your organization whether it may be small enterprise or a full fledged multinational firm. It includes the system starting from the employee's entry inside the gate to final product to customer for a product manufacturing company. All facilities like customer complaints, accounting & finance, HR, sales & marketing, purchase, inventory, tax details like excise, sales tax etc including export & VAT documentation will also be handled by the system. To maintain all this it has high degree of security/access control. Ultimate result is that it helps in increasing productivity and better profits.

Benefits of ERP

* ERP ensures timely completion of all business activities and increases customer service satisfaction. Helps you to analyze, plan and forecast the business activities by giving you clear view from any angle.

* ERP facilitates information flow across different departments or sections of the organization. It can connect your every business premises and give you consolidated and complete view.

* ERP bridges the gap between business partners, suppliers and customers allowing ongoing collaboration.

* It helps you efficiently and cost-effectively manage Man Power, Money flow, Stock and Machinery.

* With ERP, achieve high security and privacy protection along with the sharing of data by proper access rights and roles definition for users.

* ERP also provides important user friendly information to the company. When changes occur the system will update accordingly, also allowing individuals to work more effectively and decrease redundant data.

* ERP also provides some high-end business intelligence tools like Decision Support Systems (DSS), Executive Information System (EIS), Reporting, Data Mining and Early Warning Systems (Robots) to enable for better decisions and hence improve business processes.

In today's dynamic business environment there is a strong need for the business to become globally competitive. The key for success lies in customer satisfaction, through understanding customer needs, and providing quality goods and services in the shortest time possible. ERP is now proved to be a better solution for project management.

ERP and SAP ERP Understanding the Basic Concept

Historical Background
Around 1860, during the first wave of the Industrial Revolution of the late 18th century, companies around the world became interested in improving operations as a response to market changes. In the early 19th century, companies operated in a supplier's market (vendors would produce and clients would buy this production)., Later,mid-1800s, as companies became more numerous, larger and increasingly complex, competition increased, turning the marketplace into one in which the consumer had more power (clients determine more what the companies need to produce). This new, consumer-oriented market demanded productivity, cost controls and marketing strategies. In this new environment, productivity became the new focal point as companies attempted to improve on their core manufacturing processes to gain an edge over their competitors.

IT Background
On the other hand, in the late 1950s, information technology appeared in a material way in the workplace. The term software engineering was used to describe that era's initial programming-development efforts, while the concepts off databases and applications started to mature rapidly. Software engineers and hardware manufacturers started to integrate IT within businesses the business. One of the pioneer software applications built to assist businesses' needs was the manufacturing control systems, which reached a mature stage in 1975 when material requirements planning (MRP) software entered the marketplace. MRP systems were designed to support control on the shop floor and overall manufacturing operations as well as production planning based on sales forecasts. Later, a more complete version, MRP2, was delivered, which including capacity planning functionalities. Both versions focused on manufacturing, albeit with poor integration of other areas like human resources, finance and marketing.

Business and IT
When integration was identified as a key success factor in business-support software, ERP systems were developed to fulfill this key requirement. ERP systems now attempt to integrate all the basic functions of an enterprise, regardless of the organization's business or industrial sector. ERP systems can be built in-house or acquired from such world-class software companies as SAP and Oracle as well as from smaller, lesser known ones.

Why Would Organizations be Inclined toward ERP?
In the our data-centered economy, information is considered a competitive advantage, and, therefore, the issue of obtaining reliable and timely information is absolutely critical to a company's success. Consequently, organizations need to base there operations on information systems like ERP. By implementing this kind of tool, a company will obtain different benefits in terms of processes, people and technology. Specifically,

  • Control: Automation, monitoring alarms.
  • Integration: All information is integrated so processes are cross-company instead of isolated activities.
  • Opportunity: Timely reports and data analysis.
  • Productivity: As an integrated tool, it decreases rework and errors.
  • Security: User Administration, profiles and authorization.
  • Scalability: Having a solid base that can grow with the incorporation of new, compatible software solutions.

The issue of implementing ERP can be broken into different stages according to methodologies of software projects. The first stage is to find a consulting partner to guide the company in the project phases listed below:

  • Planning: Project plan and project charter definition.
  • Blueprint: Technical and process design based on business needs.
  • Testing: Individual and integrated testing of processes and data.
  • Training: Plan and execute training and knowledge transfer sessions.
  • Cut-over and Production: Data load and operation of the new system.

The key factor for successful implementation is to understand that ERP is the integration of all areas in the company and not as an isolated IT initiative.

This means that the implementation project should include three dimensions: People, Technology and Processes, all of them aligned to the business strategy.

How will Implementations Vary between Older Businesses and Start-ups?

As explained before, an ERP implementation project is a combined effort between IT and the business as a whole. It starts and ends with the business' needs. The business needs from a new company differ a lot from those of one firmly established in the marketplace. Relevant differences in terms of ERP implementations can be summarized as follows:

Business Process Design: Older businesses normally have already defined processes; while new businesses need to identify them. This will represent much more complex scenario higher complexity for new business implementations because it will take longer to develop the process blueprint and detailed specifications.

Master Data: For a newly formed company, data cleaning activities, which normally are highly complex, are not required. Data load for new businesses is simpler, lowering the risks for the project as well as costs and implementation time.

Testing: Since new businesses have not operated for a long time under real conditions, special scenarios are difficult to foresee affecting the quality of testing. Special circumstances can appear later in the production environment and will represent a risk since they were not tested in the developmental phase. This will affect the business because it can take some time to understand how to configure the system to fulfill these new requirements.

A Prescription For the New Economy

By now certain concepts have been widely accepted about the recession of 2008, almost like the diagnosis of a disease. One prognosis about recovery is that we are moving into a new economy rather than returning to what once was. We are advised by the doctors (the so called experts and the business media) that to avoid coming down with another case of the economic flu in the near future we need to be inoculated with a healthy dose of innovation before venturing too far out into this new economic reality. But what type of innovation will boost our business immune system sufficiently in a new economy where viral bugs like costs, regulations and competition seem to be mutating rapidly?

Well, first I can tell you that it's not the kind of innovation that has made the term little more than a buzzword for many of us. In this article we will explore a common sense process for understanding exactly what type of innovation is prescribed for this new economy, and some proven strategies to get it done.

In the past, the term innovation has most commonly described new products or services that create new markets or leverage untapped opportunity in existing markets. The innovation needed to thrive in the new economy will likely go well beyond new offerings to involve changes to your entire business model in order to be effective.

In a recent edition of Trends Magazine an article featured a list of questions that every business should ask about their business model in order to insure they succeed in this new economy. While discussing that concept with a colleague, we began to put together a similar list for small and medium sized wood products manufacturing businesses. Here are five key questions we came up with:

· First, what is main thing your business must do in the new economy to assure that you are paid the highest price in a timely manner for your products and services?

· Second, is there anything about how you produce your products that a customer can understand that would justify paying you more than your competition?

· Third, what can be done to reduce the cost of producing your products that will not reduce quality, value, competitiveness or profit?

· Fourth, what can be done to reduce the costs of keeping, managing and training employees?

· Fifth, if your primary customer base were reduced by half next month what would you do immediately to replace that lost revenue?

If you can confidently provide the answers to those questions you are well on your way to grooming your business model to insure growth and stability in the next decade. If you cannot answer some or all of those questions... well, you are probably already well aware that some changes need to be made. So how do you begin the process of improving your business model so it can thrive in the new economy?

Let's consider the best or at least the most profitable answers to the five questions above. You might even consider each one as a category by which to evaluate your business model for possible innovation that is compatible with the new economy.

First, the best way to be paid a fair amount in a timely manner for your products and services is to deliver a flawless product consistently and more quickly than your competitors, or at least in line with the customer's best expectations. If this is not currently possible for you to accomplish then you will constantly be chasing market share in the new economy.

Second, unless you are in a very unique market, there is virtually nothing about how you produce your product that most customers would understand, that would compel them to pay you more than one of your competitors that is offering a product that is similar in functionality and appearance.

Cabinetry and wood products have been trending in this direction for years but in the new economy it will be a given. In many cases previously rigid architectural specifications have conceded to this reality in most parts of the country and on many jobs, resulting in stapled cabinets hanging right down the hall from cabinets with traditional high quality dowel construction.

Third, the most effective ways to reduce production costs without suffering any negative impact on your products or market share can be divided into two categories: automation and standardization of all processes that are high value or high profit and elimination or outsourcing of all processes that are not. If any of the processes that your business model requires to move a job from contract to final payment are not adding significant value or effectively expediting completion you have a weakness that is either reducing your profit or your ability to compete in the new economy.

Fourth, the only practical way to reduce employee related costs is to reduce the number of employees and the overall skill levels required. This can factor heavily into the decisions you make with respect to the third category of innovation above. As badly as this country needs more high paying jobs, most wood products manufacturers are not going to be able to provide them and remain competitive in the next decade.

It is truly sad for me to accept this reality, being a lifelong woodworker and cabinetmaker that started as an apprentice at the age of 14, but this is now an inescapable truth. Between the unknown costs that are being created by new laws, insurance requirements, etc, the decline of skilled craftsmen in the workforce combined with low interest in the skilled trades among young people, your ability to retain quality employees and control related costs is decreasing at an alarming rate. Ironically, your best shot at being able to create new jobs in the future may depend on how effectively you can reduce these costs now in order to adapt to the new economy.

The fifth and final answer is perhaps the most dynamic. What would you do if there is a second bump in the economy for your niche market or what if a large high-volume competitor decides to expand market share and cuts your prices in order to get your customers? The answer to survival in such situations is often not about where to look for the new customers but how quickly you can adapt to service them competitively and profitably when you find them.

The key is having a business model behind your products and services that can shift into another gear quickly so you can secure that new business by delivering flawless products on time when you get a shot at a new opportunity. That requires a finely tuned chain of processes that can take a job from contract through design and into production for a wide variety of products without major rework on a first run.

If that all sounds like a tall order I can tell you that the worst part is over as soon as you have completed a well thought out plan for changing your business - but here's the secret - don't skimp on the plan! Nobody wants self serve discount flu vaccine, right? In order to formulate the right vaccine to ward off the economic bugs of the new economy it will need to match the strain of the new threats. I haven't seen in depth clinical trials on the solutions offered in this article but I can verify that they are working quite well for our customers in a wide variety of shops in the wood products industry.

It is my sincere hope that this article will be helpful in your efforts to develop an innovative business model and see your business thrive in the new economy.

Software Testing - Software Development Life Cycle

SDLC or Software Development Life Cycle is a software engineering term, which includes all the processes in Software development and deployment. It includes methodologies that are used to design and develop systems. In software engineering the SDLC concept underpins many kinds of software development methodologies. The methodologies referred are the one that help in creating a framework that can be used as a base for developing larger information systems

Testing is sometimes interpreted wrongly. People think that testing should be done after the programming is done for a system or software. In fact testing should be performed at every level of the development cycle.

The most common types of testing involved in the development process are:

o Unit Test: This is the first level of testing in cycle of software testing. The overall product is divided into small units. Testing of these units individuals are termed as Unit Testing.

o System Test: System level is the upper level of unit testing. Whenever there is a large system and different programmers are coding over different units, they are combined and testing done over the combined system is system testing Integration Test.

o Functional Test: When the system is integrated it is tested over its functionality. To test the function of the system I termed as functional testing.

o Automated Testing: It is one of finest way to increase efficiency, productivity and accuracy of the software product. It simplifies the testing practice by reducing the human effort involved. In this we create automated test cases and perform those using automated tools. Automated testing tool repeats the predefined steps and results more accuracy than the manual testing.

Alpha Testing: Alpha Testing is done after the code is competed to check most of its functionalities before actual user start using it. Sometimes a select group of users are involved in the testing. More often this testing will be performed in-house/small scale. or by an outside testing firm in close cooperation with the software engineering department.

o Performance Test: This testing is done when the product is fully developed. Its main objective is to identify the performance of the software as par the customer guidelines.

o Acceptance Test: Testing the system of the software with the intent of confirming accurateness and efficiency of the product and customer acceptance.

Sometimes the software is so complex and big that it is practically impossible to test it completely. Before ending software testing we should keep certain points in mind:

- Testing guidelines should be met
- Test cases should cover every aspect of the software.
- Bugs found in the software should be minimum.
- All the defined test cases should be run at least once.

Once the complete software testing is done the system or software is introduced in the market for the user.

Managing Change - An Occupational Health and Safety Perspective

OHSAS stands for Occupational Health and Safety Assessment Series. It was developed to help organizations control and minimize Occupation Hazards and Risks. The 2007 version of OHSAS 18001 lays a strong emphasis on Change. Occupational Health, Safety Assurance Standards are today adopted by many organizations as part of their corporate governance requirements. Managing the change is not a simple exercise. Change can hit an organization all of sudden or it can sometime be regulated and planned. An agile and a flexible organization will respond to change in much more positive way than an organization with rigid and straight jacketed setup.

It is often said that only thing which is permanent in this world is change. One like it or one don't like, change will take place. If we are prepared, we can take them in our stride and move on and if we are not prepared then change will get over us and we will be doomed. So the best way to tackle the change is to keep ourselves informed and updated. An updated person will be more aware about the world dynamics and can weather the storm in a much sober and calm way.

OHSAS 18001:2007 devotes substantial portion of its written standards on change. When an organization gets certification under OHSAS 18001 standards, it is deemed that the particular organization has an Occupational Health and safety Management system in place.

Any change will require a reassessment of operations and activities which are associated with occupational hazards. Controls are required to be reassessed so that OHS risks arising out of change can be addressed.

These New Requirements of 4.3.1 in OHSAS 18001:2007 covers the Four Important Concepts.

  • Identification of Hazard(s) associated with "Change".
  • Assessment of Risks Associated with "Change"
  • Consideration of the OH&S Hazards and Risks Prior to the Introduction of "Change".
  • Implementation of the Controls needed to address the hazards and Risks associated with the "Change".

Ineffective management of change is a leading cause of accidents in workplace. To quote US Chemical Safety and Hazard Investigation Board (CSB):

In Industry, as elsewhere, Change Often Brings Progress.

But it can also increase Risks that, if not properly managed, Create Conditions that may lead to Injuries, Property Damage or even Death. Ineffective Management of change is one of the Major Contributing Factors in many of the Incident Investigations conducted by CSB.

How to Make Sure Your Time Management System Is Working

Is your time management system failing?

Does it seem to take more effort than it is worth?

Does it regularly breakdown?

If your system is failing, then it's time to re-evaluate.

First we need to assess why it's not working:

Is your time management system is too complex? - This is actually the most common problem that causes systems to fail. Is it cumbersome or time-consuming? Do you use multiple tools or require a plan just to plan? If it takes more time to organize than it does to do the work then it is too complex.

Is it redundant? - Do you have multiple lists? Do you use more than one calendar? Are you duplicating work? Use one central planning tool, list and calendar.

Is it portable? - Where do you keep your time management system? Can you take it with you and have access to it at all times? You need to be able to capture ideas and retrieve information in real-time or your system fails.

Does it match your personality or work patterns? - If you are tech savvy, then en electronic organizing system is most efficient. If you are more comfortable with traditional pen and paper then carry your notebook and don't force yourself to struggle with a PDA. The best time management system is the one that works for you!

Tips to keep in mind:

  • The simpler the better - Choose the simplest, most direct method to get the job done.
  • Keep it centralized - Whatever your system, keep it in one place.
  • Make it accessible - Make sure that you can get to your information and capture thoughts and tasks easily in real-time.
  • Choose your tools carefully - Select the tools that accomplish what you need without additional bells and whistles that will distract you.
  • You are the most important consideration - Your system must suit you, your personality, your work style and your way of thinking or processing information.
An effective time management system should save you time and effort. It should help you make the most efficient use of your time. It should not be a struggle to use. It should feel comfortable. Maybe not initially, but after using it for a bit, if it's still uncomfortable - re-assess, tweak it or ditch it and start over.

Inventory Accuracy in 60 Days

INTRODUCTION

Do you have inventory accuracy problems? Typical symptoms:

o Lots of inventory errors

o Surprise backorders, unplanned shortages, "lost material"

o Nobody believes the records-- numerous calls to "check" on availability

o Air freight bill exceeds the national debt

o Nasty financial reporting "surprises"

o Lack of consensus on importance of accuracy

o Lack of consensus on how to measure it

o Inability to reconcile inventories, cycle counts

o Error causes largely unknown

o Weak/no company tradition of data accuracy

o New systems/software implementation causing more confusion

Solution recommendations are presented as follows...

ORGANIZE PROJECT

Results are usually best when there is a bit of a crisis atmosphere established. Business as usual won't usually serve to get serious inventory accuracy problems fixed within two months. Sometimes a humbling blow, such as losing millions in an inventory "write-down", or an unfavorable "write-up" by a customer, is helpful to shatter the status quo and energize an organization to begin work in earnest on a solution. Top level executive action works best to motivate and mobilize people. At a minimum, perception of a costly problem is needed, with some realization of a need to correct it.

Custom Coding Basics And More

Internet has changed the way we read, perceive and understand the world through our computer screens. Even if you are not directly affected by something like custom coding, you should be conversant about it. It is better to know about coding for website design layout, search options for beginning an online business or to get accustomed with how things work for the more curious intellectuals.

Custom coding is an object oriented PHP coding of high quality. The fusion of supporting tools and product can provide an efficient Content Management System (CMS) platform or custom code for the website.

Writing a customized code for your website can be easy. Code based on the minimum requirements is much prompt when compared to a customized CMS. Added functionality to the website with help of this customized coding is a bonus. Modification of a well written and documented code can be changed easily. The programmed code has the most important features of speed and functionality.

The coding, based on changing technology can be changed quickly. Clear know-how of your website program is possible with custom code only. Different section or pages of website can be given diverse styles with the custom programming method. Accommodating coding format can provide the required layout and even the appearance of the website. Before you start the project, scribbling down points for customized coding proves to be a better option.

  • What is your requirement-who will write the code?
  • Use of the code for website and hosting conditions.
  • Features you need for an efficient site.
  • Number of users coming to the website.
  • Site maintenance and updating

The applications like Customer Relationship Manager (CRM), data mining and Enterprise Resource Planning (ERP) were more rigid and costly in last decades. As the speed of internet has improved, the users expect quick business online.

Web programming has improved considerably and affordable web development is available to everyone interested in e-commerce. Bill Schrader quoted "almost overnight the internet's gone from a technical wonder to a business must".

Many companies offer to do the daunting task of coding for your website at nominal rates. You need to plan out your requirements and the desired strategy and tools for best PHP application development. Make sure you research properly and then give your project to a company for PHP coding. The web world is very vast to accommodate all businesses and hence we need to capture the attention of our clients for better trade prospects.

JIT Vs JIC

Many manufacturers are realizing the benefits of lean manufacturing within their facilities through application of lean concepts and principles. They understand the importance of eliminating waste and practicing the JIT (Just-in-Time) philosophy. But has the time come where JIT inventory levels should be increased to JIC (Just-In-Case) inventory levels considering the current volatility of the economy? You'll find the answer hidden deep within your supply base.

In a lean manufacturing environment, inventory is considered one of the seven major wastes. It can be defined as any material over and above what is currently required and/or in process. The ideal situation in a JIT environment is piece per process, which equates to one piece delivered, one piece processed and one piece shipped. All inventory held over and above this quantity is regarded as waste. Although this concept may be viewed as the ideal situation, it's not very practical for most, if any, companies.

Due to the impracticality of operating under the ideal situation, inventory is carried. This inventory must be kept to a minimum to avoid excess storage requirements, carrying costs, increased material handling and risk of obsolescence, among other things. Realistically, just about every company will have to carry inventory. This inventory may be kept as sub-assemblies, finished goods and/or raw components. The finished goods and internal sub-assemblies are not the major areas of concern. These inventory levels are within your control and should be set based on the level of customer service and on-time delivery you wish to provide your customer. The real concern lies within your raw component inventory levels. This is where your highest risk resides for potentially missing customer shipments, or worse yet, shutting down your customer.

In the past few months, many small companies (as well as some larger ones) have been forced to close their doors for good. If you've been a victim to this type of situation you probably understand the need for JIC inventory, as you've felt the effect a primary supplier shutdown can have on your delivery performance. Or maybe it was a secondary or tertiary supplier that caused you to shut down? Either way, the ultimate effect could be devastating to your business. If you haven't done so yet, it's time to take a look at your inventory strategy and review your just-in-time levels.

In order to understand the greatest area of concern or highest risk potential in your company, consider the following questions; how well do you know your first, second and third tier suppliers? Are any of them at risk of closing their doors and catching you off guard? Have you looked at their financial health lately? Maybe it's time you get to know them a little better. A small ripple in an upstream process can have a major effect downstream. For example, a tier three supplier that provides heat-treating for your bolt supplier can cause major disruptions down the pipeline if they go out of business unexpectedly and there are no other heat-treating companies in the vicinity. In this case, it might be a good idea to carry a few weeks inventory (or as much stock as it may take for you to recover from a critical situation) of this small, relatively inexpensive part, to protect yourself until you get a chance to evaluate your risk potential with this supplier. You will need to dig deep into your supply base, deeper than your primary suppliers, to understand how solid their foundation is. A small investment made on a visit to a supplier or sub-supplier could help you avoid much higher future costs due to shutting down a customer.

Start by reviewing some of your more vulnerable suppliers. If you are in the automotive industry, start by checking the financial health and stability of suppliers that you share with North American automakers. Many suppliers that rely on these O.E.M.'s for their bread and butter may soon find themselves looking elsewhere for business if they haven't already. Once you've chosen your starting point, you need to determine how much JIC inventory you should carry.

In order to determine how much to carry and what inventory to focus on, ask yourself these questions; how difficult is it to find replacement parts? How long does it take to get customer approval to move tooling? How much testing is required if a new supplier is needed in an emergency situation? How long can you delay shipping before it affects your customer relations? How much space will be required to carry enough stock in case of emergency? These questions should start to take you down the path towards determining your on-hand inventory levels. Your planning strategy and rules should also help determine which components are at the greatest risk based on lead-time and commodity type.

If you are going to carry JIC inventory, you will want to carry it on small, inexpensive parts, but they may not be the parts that hold the highest risk. A shelf item may not be of great concern if another company down the road is selling the same part, so consider that fact when you develop your own risk potential chart and focus on your most critical suppliers first. Allow yourself enough time to react to moving a tool, or some equipment, to a new supplier.

Remember, this is a temporary solution to a temporary problem and I strongly encourage you to address this as quickly as possible. It would be extremely expensive to carry JIC inventory for every part, so the decision needs to be made as to which parts are the most critical. Your carrying costs may increase in the short term so consider this like an insurance policy; nobody wants to pay for it but they sure are glad they did when it comes time to cash in on it. I am a huge advocate of lean manufacturing and the JIT philosophy so the sooner you understand the situation of your supply base and get back to JIT, the better.