School of hard knocks: their first MRP system only starts some manufacturers up the learning curve - manufacturing resource planning

Software Magazine, April, 1988 by Sharon Brady

As a bike moves through the production line, parts and subassemblies arrive as needed. When a bike is fully assembled it exits the line and an operator scans the unit's bar code, sending a signal to the plant computer system.

At the end of the day the AS/6630 compiles a report on the total number of units manufactured. Each bar code identification number stored in the system's database is processed through the bill of material module back into inventory. The purpose is to backflush the computer system and subtract from inventory the parts and subassemblies consumed. The inventory count is relayed to purchasing so that department can evaluate its orders.

Periodically, managers evaluate reports generated by the system to determine if the production level needs to be changed.

If it needs to be increased, the computer will issue more MAN cards to add parts to production flow. If production needs to be slowed, production managers will remove some of the cards, which will reduce the amount of material released onto the floor.

In addition to using the NAS/6630 for MRP-like functions, Harley-Davidson uses it for all financial operations, including payroll and accounting. The only computer function not sharing the mainframe is the preventive maintenance operation.

Supplier relations are critical to the success of a JIT operation. Since Harley relies on outside suppliers for 50% of its bike components, its managers are constantly working to bring suppliers in line with the company's inventory control program.

The company single-sources parts where it can, and also offers its suppliers free training in SPC and zero inventories. Approximately 14 of Harley's 240 suppliers have gone to a JIT system, and 70% of the rest are moving in that direction.

Instead of burdening suppliers with inflated materials orders which may or may not be cut, Harley-Davidson now places one blanket order with each supplier for the year, and then develops rolling forecasts. The forecasts are frozen at one month, but are subject to a 10% change at two months out and 30% at three.

Management's attention, however, is not completely reserved for suppliers. "You can't underestimate the importance of employees in implementing Just-in-Time," emphasizes VP and GM Bob Miller. "We wouldn't be training every employee in statistical quality if they weren't pivotal in making us a world competitor."

Every company employee is encouraged to take a 40-hour statistical process control course on company time. This is the hub of the employee involvement program. Clearly, this has paid off. As of 1986, rejection of raw materials is down by 66%, internal scrap cost is down 52%, and rework is down 80%. The number of defects per unit is down 53% and the number of defect-free bikes is up 165%.

Harley-Davidson's MAN program has put the company back on track. "Just-in-Time, statistical process control, and employee involvement have turned this company around and made us cost-competitive. Any company in the U.S. that implements these types of programs will put their competitors out of business if they aren't using the same programs. Period," says Miller.