587. Jonathan Schwartz, How to Analyze a Manufacturing Company

Key takeaways

Align production goals with sales incentives to enhance profitability.
Effective production scheduling must incorporate tools that adapt to changing demands.
Implement training for new processes immediately before their launch for best results.
Supplier quality management requires ongoing monitoring and effective communication systems.
Plant layout and internal logistics significantly impact manufacturing efficiency.
Lean improvements in production can lead to significant gains in quality and output.

Summary

Overview and Background of Jonathan Schwartz

In this episode of Unleashed, host Will Bachman welcomes Jonathan Schwartz, a member of Umbrex and a seasoned expert in operations improvement. Jonathan shares his extensive background in manufacturing, starting with industrial engineering at Stanford and furthering his education with a manufacturing graduate program at MIT. He has worked at companies like Hewlett-Packard and Motorola, focusing on lean improvements, including the introduction of supplier quality groups in manufacturing environments.

Sales and Operations Planning Process

Jonathan discusses the significance of aligning production goals with sales strategies. He describes the Sales and Operations Planning process (SOP) as critical for understanding how production capabilities match sales incentives. A clear alignment can help companies maximize profitability by ensuring that the sales team is incentivized based on what can actually be produced effectively with the available equipment.

Complexities of Production Scheduling

The conversation turns to production scheduling, with Jonathan explaining its complexities, particularly in companies dealing with multiple product lines and production modes. He highlights the importance of flexible scheduling tools, efficient changeover practices, and the need to match production scheduling to demand effectively. He emphasizes assessing production effectiveness through on-time delivery rates and visible metrics.

Implementing New Processes and Change Management

Jonathan stresses the importance of immediate training when implementing new processes in manufacturing. Instead of waiting weeks, he advises that training should happen just before the new processes start. By implementing a two-bin system to manage inventory, Jonathan illustrates how immediate changes can lead to improved morale and increased productivity as employees begin to see the benefits of new practices.

Supplier Quality Management

Delving into supplier quality management, Jonathan outlines processes for ensuring that parts are qualified before entering production. He emphasizes the necessity of tracking supplier performance metrics and how communication flows between different team members are vital in addressing quality issues. Metrics should focus on the percentage of good versus bad parts, guiding a system that integrates inspections and supplier feedback.

Material Handling and Internal Logistics

Jonathan discusses the significance of an efficient layout regarding material handling and logistics in manufacturing. He illustrates how plant layout can impact productivity and inventory quality, stressing that traditional cost accounting measures might not reflect the true efficiency of operations. Jonathan uses an example involving a plant manager's incentives that unintentionally led to poor inventory management.

Lean Improvements on the Production Line

Jonathan concludes with examples from his past role as a production manager, showcasing how lean improvements can drastically enhance production quality and throughput. By limiting work-in-progress (WIP) inventory and implementing fixtures to ensure correct assembly, substantial gains were achieved in both quality and efficiency, leading to quicker problem identification and resolution on the production floor.

Show notes

Jonathan Schwartz discusses how to analyze a manufacturing company. Jonathan's background includes working in operations improvement, starting with manufacturing and then transitioning to banking and non-manufacturing roles. He has worked with private equity firms and has been a lean champion at a private equity firm.

Sales and Operations Planning Process

One of the first types of analysis Jonathan talks about is the sales and operations planning process (SOP), which involves integrating what is being told to the sales team with what is being produced. This alignment and match is based on the equipment and production capabilities of the company. The main idea is to align what is going to make the plant the most money with how it is incentivizing the sales team.The main idea is to align what is being sold with what is being produced, and to charge more based on the value added services provided by the company. This aligns with the company's goals and equipment to make the most money.

Production Scheduling Process

Jonathan explains that the production scheduling process in a company can be complex, with different tools used for larger plants and more complex situations. For example, a simple company might schedule production in batches, depending on the flexibility of their equipment and the economic batch size. This helps avoid having a large amount of inventory sitting in inventory when orders are placed for other parts. In some cases, private label products may not be suitable for production, while others may require make to stock or make to order processes. Delays in customization can affect the capacity to build up inventory. To assess the quality of a factory's production scheduling, it is important to consider the number of changes in the schedule over time and overall on-time delivery. An assessment of inventory levels can help identify bottlenecks, quality problems, equipment downtime, or matching schedules from pre-production steps to middle production steps. Visualizing the inventory levels and identifying visible metrics or schedules can help identify areas for improvement. Jonathan shares a couple of war stories as examples.

New Process Implementation and Change Management

The conversation turns to implementing a new process. In manufacturing, while some change management communications can be done ahead of time, training should be done right before the team starts using the new process, rather than a week or two weeks ahead of time. As soon as you implement something that makes their jobs easier, employees become a fountain of ideas and improvements, which can lead to quick changes in morale and overall productivity. Jonathan states that a clear production schedule is crucial for ensuring everyone knows what's up next for their line and is prepared for any changes. By implementing a two-bin system and addressing stockouts, organizations can improve on-time delivery numbers and predictability. He suggests that steady usage can help determine the appropriate amount of inventory to hold, while unpredictable demand can lead to overstocking. He explains how to avoid stock outs and also emphasizes the importance of supplier quality evaluation, which involves ensuring parts are qualified for new products before they are released to production. Jonathan shares an example from a Motorola plant in Atlanta.

Supplier Quality Management

Jonathan discusses the importance of supplier quality management in a manufacturing plant. He emphasizes the need for a sophisticated system to identify and address problems in parts and suppliers. This system involves intake department workers, who need to know whether a part goes into income inspection or goes straight to stock. Inspectors need to be trained to identify and address issues, as it is costly to inspect parts and impossible to inspect 100% of everything. When assessing a manufacturing plant's supplier quality management program, Jonathan talks about the metrics in place and how they are used. These metrics include the percentage of bad parts and good parts when present. He stresses that the system should be communication-intensive, with production line personnel communicating with materials managers when a part is bad or a whole set of parts is bad. Incoming receiving clerks should know which parts from which suppliers are flagged for inspection. Inspectors should track the issues and communicate them back to the supplier.

Efficiency in Manufacturing ERP Systems

Jonathan explains that this involves implementing Kanban and minimizing touches on work-in-process inventory. The conversation turns to the plant layout, including the dock, incoming warehouse, and presentation of parts to the line. Jonathan explains that traditional cost accounting practices can lead to mismeasurements. He provides an example where a plant manager was measured on absorption, which is the amount of overhead he could absorb based on the accounting cost per unit; this led to a lack of inventory quality and poor on-time delivery and productivity. He mentions that traditional measures may not be relevant to workers on the factory floor.

Lean Improvements in a Production Line

Jonathan shares an example of implementing lean improvements in a production line with 180 employees. He emphasizes the importance of minimizing the WIP (work-in-process inventory), ensuring that people only work as much as needed, not as much as possible, thus minimizing inventory levels and the amount of rework when a problem arises. This approach improved quality and throughput, as it reduced the number of reworked items and improved throughput. He also highlights the importance of using fixtures that ensured that tasks were done correctly, even if it took more time. This approach also improved visibility and communication throughout the line. By minimizing the WIP, rebalancing the line, and ensuring that tasks were done correctly, the company achieved significant improvements in quality and output metrics.

Timestamps:

02:23: Overview of Production Scheduling and Sales and Operations Planning

04:47: Complexities of Production Scheduling

07:32: Assessing Production Scheduling Effectiveness

12:44: Implementing Lean Improvements and Supplier Quality Management

12:59: Evaluating Supplier Quality Management Programs

27:05: Material Handling and Internal Logistics Efficiency

33:27: Celebrating Victories and Improving Morale

Links:

Resource: https://umbrex.com/resources/how-to-analyze-a-manufacturing-company/

LinkedIn: https://linkedin.com/in/jonathandschwartz

Email: jonathanschwartz13@gmail.com

Unleashed is produced by Umbrex, which has a mission of connecting independent management consultants with one another, creating opportunities for members to meet, build relationships, and share lessons learned. Learn more at www.umbrex.com.