A management guide to logistics engineering

139 Pages·1989·8.68 MB·English

by  Beal, K

A MANAGEMENT GUIDE
TO
LOGISTICS ENGINEERING
THE INSTITUTION OF PRODUCTION ENGINEERS
A MANAGEMENT GUIDE TO
LOGISTICS ENGINEERING
Edited by
K.Beal.
IBM (UK) Ltd.
With a foreword by
Lord Young of Graff ham
© The Institution of Production Engineers
Published 1989
by The Institution of Production Engineers
66 Little Ealing Lane,
London W5 4XX
ISBN 0 85510 036 2
All Rights Reserved. No part of this publication may
be reproduced, stored in a retrieval system, or
transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise,
without the prior permission of the Institution of
Production Engineers.
Printed by Specialised Printing Services Ltd.,
Loughton, Essex
the department for Enterprise
The word "logistics" has strong military overtones - not
surprising, for its dictionary definition is the art of moving
and supplying troops and equipment. Today, we see the word being
used more and more in business and in particular, to describe the
management of the flow of materials from the supplier, through
the manufacturing process, to the customer.
Like their military counterparts, those in industry need to
understand the importance of logistics. They also need to
acquire the necessary skills and knowledge to apply it
effectively as an integral part of a whole business operation.
Sound logistics management will be crucial if manufacturers are
to the meet challenge of the greater competitive pressures we
can expect in the 1990s.
Integration is one of the key issues in DTI's "Managing into
the '90s" campaign launched in January of this year. It
stresses the need for a strategic approach to the running of
ones whole business operation, regardless of its size.
Logistics engineering has much to contribute to this more
structured approach. So I welcome the attention that the
Institution of Production Engineers is giving to this subject
and in particular their publishing of this "Management Guide
to Manufacturing Logistics".
I am sure the guide will prove a great help to businesses in
providing the practical advice that will enable them to master
the art of logistics so it can be used to their best business
advantage.
MM2AC0
III
EDITOR
K.A. Beal IBM (UK) Ltd., Havant.
CONTRIBUTERS.
LOGISTICS ENGINEERING WORKING PARTY.
Chairman:
C.E. Cross UKHS IT Investment Manager, IBM (UK) Ltd.
Members:
K.A. Beal CIM Architecture Manager, IBM (UK) Ltd., Havant.
J. Crampton Director, Ingersoll Engineers.
DrR.I Mills Industry Manager, Software Project Group,
SDRC Engineering Services Ltd.
Dr J.T Southall Faculty of Engineering & Computer Technology,
City of Birmingham Polytechnic.
A. Taylor Senior Consultant, Price Waterhouse.
M. Wyatt Technical Manager, Lucas Engineering & Systems Ltd.
S. Young Senior Consultant, A.T.Kearney Ltd.
Past Members:
R. Blightman Director, TM Information Systems Ltd.
M. Robinson Production Controller, BREL Ltd.
S. Steiner Department of Manufacturing Systems,
Coventry Lanchester Polytechnic.
CASE STUDIES.
K. A. Beal CIM Architecture Manager, IBM (UK) Ltd., Havant.
J. Booth Director of Manufacturing - York International Ltd.
J. Crampton Director, Ingersoll Engineers.
C. Hull Plant Manager, Lucas Diesel Systems Ltd., Sudbury.
S. Young Senior Consultant, A.T.Kearney Ltd.
DESIGN and PRODUCTION
K.Beal
Further acknowledgement is given to C.Varley and R.Webb - The Institution of
Production Engineers - for their assistance in the production of this guide. Special
thanks to T. Giles of IBM Havant who assisted with the Desk Top Publishing
layout.
IV
CONTENTS
1. INTRODUCTION
1.1 -History. 1
1.2 -Scope. 2
1.3 - Competitive manufacturing and logistics. 3
1.4 - Supplier/Customer relationships. 3
1.5 - Logistics Processes. 4
2. PRINCIPLES & THEORY of LOGISTICS ENGINEERING. 5
2.1 THE RIGHT GOODS. 6
2.1.1 - Material Supply. 6
2.1.2 - Part and Product Packaging. 6
2.1.3-Quality. 7
2.1.4-Quantity. 7
2.1.5 - Supplier Network Planning. 12
2.1.6 - Documentation. 14
2.1.7 - Cost/Economics. 16
2.2 THE RIGHT PLACE 16
2.2.1 - Production Philosophy & Process. 16
2.2.2 - Location of production. 17
2.2.3 - Factory Layout. 18
2.2.4 - Warehouse/Storage layout. 20
2.2.5 - Distribution Philosophy & Process. 21
2.2.6 - Location of Distribution. 22
2.2.7 - Material Handling. 24
2.3 THE RIGHT TIME 28
2.3.1 - Inventory and Pipeline effects. 28
2.3.2 - Scheduling. 30
2.3.3 - Delays/Disturbances in the Supply Line. 34
2.3.4 - Lead Times. 36
2.3.5 - Security of Supply. 41
3. ENABLING TECHNOLOGIES. 42
3.1 OVERVIEW. 42
3.2 PRODUCTION. 42
3.2.1 - Classes of Production. 42
3.2.2 - Industry Sectors. 43
3.2.3 - Manufacturing System types. 45
3.3 STORAGE. 48
3.3.1 - Classes of storage. 48
3.3.2 - Storage methods. 49
3.3.3 - Pick/Place techniques. 50
3.3.4 - Economic Factors. 51
3.4 TRANSPORTATION 52
3.4.1 - Classes of transportation. 52
3.4.2 - Economic Factors. 53
3.5 PLANNING. 54
3.5.1 - Computer Aided Process Planning. 54
3.5.2 - Material Requirements Planning. 56
3.5.3 - Inventory Planning. 57
3.5.4 - Analysis techniques. 58
3.6 SCHEDULING. 59
3.6.1 - Master Production Schedule. 59
3.6.2 - PUSH vs PULL systems. 59
3.6.3 - Manufacturing Resource Planning. 60
3.6.4 - Optimised Production Technology. 61
3.6.5 - Transportation/Distribution Scheduling. 61
3.6.6 - Analysis techniques. 62
3.7 CONTROL 62
3.7.1 - Just-In-Time manufacturing (JIT). 62
3.7.2 - Frugal manufacturing. 64
3.7.3 - Shop Floor Control (Logistics). 64
4. IMPLEMENTATION. 66
4.1 The Structured Approach. 66
4.1.1 -Introduction. 66
4.1.2 - Development of the Strategy. 66
4.1.3- Architectural Principles. 67
4.1.4 - Classification of tasks. 69
4.1.5 - Logistics development structure. 70
4.1.6- Implementation Management. 71
4.1.7 - Implementation Case Studies. 72
4.2 MK ELECTRIC JIT in a Multi-Site Environment. 73
4.3 MOUNTFIELD The Mountfield Road to JIT. 75
4.4 YORK INTERNATIONAL After the Chaos. 77
4.5 ICL Achieving a Material Advantage, 88
4.6 IBM Integrated Material Logistics. 97
4.7 LUCAS World Class Manufacturing at Low Cost. 106
5. LOGISTICS AND 1992 111
5.1 Physical Barriers 111
5.2 Technical Barriers 112
5.3 Fiscal Barriers 112
5.4 Competitive opportunities 112
5.5 Logistics Implications 113
6. CONCLUSIONS 114
6.1 Benefits Achieved 114
6.2 The Future of Logistics Engineering 114
6.3 Summary 115
BIBLIOGRAPHY 116
GLOSSARY 117
INDEX 129
VI
A MANAGEMENT GUIDE TO
LOGISTICS ENGINEERING
1. INTRODUCTION
- Basic Definitions
- History.
- Applicability to different production systems.
- Competitive manufacturing and logistics.
- Supplier/Customer relationships.
- Logistics processes.
Basic Definitions.
Logistics is probably not a word that production engineers and managers use on
an everyday basis. Many will be unsure about the definition of the word, and
others will limit it to the process which takes the final product from the factory to
the customer, in other words the distribution operation.
The Concise Oxford Dictionary defines it as the "art of moving, lodging and
supplying troops and equipment". A translation to the business environment could
be the "art of getting the right goods, in the right quantity, to the right place, at the
right time, and at the right cost". In this context, it is obvious that Logistics
Engineering is an important element of many of the activities of most organisa-
tions.
We define Material Logistics as the function of directing and regulating the or-
derly movement of material and related information through the entire manufac-
turing cycle - from acquisition of raw material to delivery of finished product.
Logistics entails planning, ordering, procurement, manufacture and management
of the resulting inventory of material.
The role of Logistics Engineering is to provide logistics capabilities that achieve
100% parts/product availability at the point of use and at minimum cost.
1.1 HISTORY OF LOGISTICS
Centuries ago, engineers discovered that moving material directly from each
operation to the next afforded a logical sequence for control and reduced the cost
of handling materials.
Henry Ford felt that if he had paid good money for material then he didn't want it
sitting around when it should be earning profit. So was born a continuous flow
line that turned iron ore into Model "T" Fords in 72 hours.
The art of logistics was further improved during the frugal years of WWII, when
dependable supply became crucial to survival. The total population learnt not to
waste. Techniques for planning, acquisition and distribution evolved and achieved
maturity after the war.
In the 1950's and 1960's the best and brightest people turned away from manufac-
turing as emphasis was placed on product innovation and marketing.
The efficiency of manufacture and distribution became secondary to developing
new products and stimulating demand. Growing inefficiency in the logistics
process was tolerated.
Then the oil shock threw Japanese industry back into an era of frugality and the
principles learnt in WWII were expanded, improved and re-applied. They called it
Japanese Production Technology, and it focused on the integration of people's
skill, reliable production methods and a perceptive financial structure.
Technology is defined as the science of the industrial arts. Given that the defini-
tion gives equal weight to the knowledge of principles and the skills in applying
them, it is surprising that Western Manufacturing came to believe that technology
could exclude people. It has taken the demonstrable success of Japanese produc-
tion technology to redress the balance. Now at last world class manufacturers seek
the right blend of people's skill and machines' capability.
1.2 SCOPE
The application of Manufacturing Logistics strategy should be tailored to the
production system employed. These production systems range from those that
cater for High Volume/Low Cost commodities to those that cater for High Vol-
ume/Low Cost capital goods.
1.2.1 BUILD TO STOCK
Product is made according to a sales forecast and stored in a warehouse. Level of
stock is determined by the service level given to the customer. Typically applies
to products that exhibit highly uncertain demand, or seasonal demand.
For example; lawnmowers are mainly sold in spring and summer.
1.2.2 BUILD FOR DISTRIBUTION
Product is made according to a sales forecast and shipped to be held at distributers
or dealers. Typically used to prime the market outlets prior to and during product
launch.
For example; personal computers.
1.2.3 ASSEMBLE TO ORDER
Parts and subassemblies are acquired or made according to a market forecast. The
final assembly and test of products is delayed until customer orders are received.
This approach is applicable when components' leadtimes are long relative to the
assembly and test time, and there is a large degree of commonality or standardisa-
tion among the products.
For example; automobiles.
1.2.4 BUILD TO CUSTOMER ORDER
Production is initiated on receipt of a customer's order. Often the order involves
customisation of a design and delivery of a fixed quantity. Frequently associated
with low volume/high cost capital goods, that have long leadtimes.
For example; major defence equipment.
1.2.5 ASSEMBLY OF KITS
Parts and subassemblies are acquired or made according to a market forecast and
kitted. The kit is shipped to a third party manufacturer for final assembly. Used
primarily for technology transfer, second sourcing, or opening up a closed/imma-
ture market
1.2.6 HOLLOW MANUFACTURING
The purchase of a completed product that is superficially customised, to differen-
tiate from the supplier's (and presumeably a competitor's) product. Normally
involves a licensing agreement.The net result is usually to fund the competitors^
product development and improve his competitive advantage.
1.3 COMPETITIVE MANUFACTURING and LOGISTICS
A natural consequence of the growth in manufacturing of the Pacific Rim coun-
tries over the past ten years has been the birth of global manufacturing. The
attributes of a global manufacturer are varied but include the successful manage-
ment of international logistics. An efficient and effective logistics process is a pre-
requisite to success in the international manufacturing arena. Exemplary perform-
ance in international parts supply and product distribution is fundamental, without
it, companies cannot even begin to compete. Clearly there is an opportunity to
gain a competitive advantage if innovation in logistics is achievable.
One consequence of the major advances in production technology now taking
place is the steady erosion of the price per unit. Since the production technology
is available at the same price to all manufacturers worldwide, success in the future
will depend on our ability to select, integrate and operate this technology. A home
market is only safe if the cost of manufacture is less than the competitors cost for
export-transport-import.
So competitive Material Logistics is essential, not only to gain advantage, but
also to sustain it.
Competitive Material Logistics is the integration of both materials and informa-
tion flow into an effective and efficient total system.
1.4 SUPPLIER/CUSTOMER RELATIONSHIPS
A major difference between the Japanese and Western manufacturing philosophies
has been the approach to the relationship between suppliers and their customers.
The Western approach has been primarily adversarial, whereas the Japanese have
taken a participative approach.
Since obtaining dependable supplies of material is a critical factor for successful
competitive manufacture, why do business with undependable suppliers? And if
your suppliers are dependable, why not establish the best working partnership for
mutual benefit? By consciously working to understand mutual business problems,
the particpative approach creates a culture of continuous improvement that leave
companies far more resilient and less vulnerable to change.
Periodic economic swings are inevitable and increasingly dangerous in the manu-
facturing sector. The end result of time delays, planning distortions and inventory
movements throughout the supply chain magnifies a company's vulnerability.
International trade, with its extended supply lines, can experience greater swings
in demand than the more simple case of local production and distribution. Action
to reduce the effects of delay and distortion, and to optimise inventory holdings,
requires close co-operation by all of the participants in the supply chain.