To hear Dorner Manufacturing Corp.’s John Kuhnz tell it, build-to-order manufacturing is the best thing since frictionless bearings at the southern Wisconsin firm.
The Hartland maker of conveyors embraced lean manufacturing in 2003 because lead times, order fulfillment rates and inventory levels weren’t where they needed to be. By scrapping the assemble-to-order approach previously used, on-time shipments improved to 98.9 percent last year from 90 percent previously. Inventories were slashed 45 percent, and order fulfillment went from two to three weeks to seven to ten days. Not surprisingly, customer satisfaction also spiked.
Cynics will dismiss Dorner’s build-to-order success as a discreet manufacturer seizing an opportunity not available to batch or continuous processing. But all manufacturers face pressure to customize their standard offerings. Whether they use a kanban card system like Dorner to track customer-specific orders or configurator software to electronically design and produce products and shipments in the way customers specify, manufacturers are trying to adopt demand-driven strategies. For high-volume, low-margin products like food and beverage, getting customers to actually specify the desired modifications might be the ultimate solution.
A notable example is My M&Ms, the Masterfoods USA program that gives consumers the ability to order bags of M&Ms printed with personalized messages. Weddings and other special events have proved to be popular occasions for ordering the personalized candies. At a minimum price of $47.96 for four 7-oz. bags, personalized M&Ms generate the equivalent of $30 a lb., compared to $3 for regular M&Ms, more than justifying the special handling required. Messages are keyed in by customers when they place an order at the interactive www.mymms.com site. The delivery-date promise automatically adjusts, depending on the number of orders in the queue.
“If you have a flexible printing head and you’re dealing with the same uniform-sized M&M, you have tremendous flexibility to produce a product like that,” one industrial engineer commented. “No system is infinitely flexible, but that’s a fairly straightforward customized manufacturing design.”
“The fact that we print on M&Ms late in the process, anyway, minimizes the disruption to automated processes,” notes John Helferich, a recently retired executive with Masterfoods USA. Customized printing wouldn’t mean much with a commodity product, however. “There has to be a connection with the product,” he says. “It depends on the emotional equity of the brand.”
Personalized M&Ms are a variation of mass customization Frank Piller calls delayed product differentiation (DPD). Piller, a founding faculty member of MIT’s Smart Customization Group, estimates 20 computer components can result in a stunning 8.8 trillion PC configurations. Yet PC suppliers can deliver the features customers want and still realize economies of scale in assembly through DPD.
Mass customization may play out differently at a food plant than an electronics- or auto-assembly plant, but all factories can realize big savings. In a recent analysis, Forrester Research estimated auto makers could reduce unit costs by $3,500 per vehicle by shifting to build to order. The savings on a frozen entrée wouldn’t be as dramatic, of course, but food processors also could benefit. Successful implementation can be difficult, however, as illustrated by JM Smucker Co.
Orrville, OH-based Smucker had build-to-order in mind when it commissioned a facility in Scottsville, KY, to make Uncrustables, a frozen peanut butter & jelly sandwich without a crust. Scheduling production for a line that demonstrated its flexibility when peanut butter sandwiches, peanut butter & honey on wheat and other variations were added didn’t derail the build-to-order effort. Instead, precise scheduling of trucks in and out of the rural community, along with a 36-hour CIP cycle, created a logistical nightmare. Ultimately, Smucker threw in the towel and built a frozen warehouse to store finished goods until they could be shipped.
Have it my waySpecial product and shipping requirements can undermine opportunities for automation. They also run counter to the efficiencies of mass production, and that can shrink the margins of any manufacturer.
“The tension between customization and volume production had created a monster for Houston Harvest,” Gay Burke flatly states. “We were trying to be all things to all customers.” Burke became chairman of the Franklin Park, IL, popcorn-tin and gift-products manufacturer in March after the firm was acquired by Blackstreet Capital Management. Too much customization had resulted in an underperforming company, and Burke is trying to “rebalance and simplify” sales and production to get it back on track.
“For a while, customization was just off the map, not just here but in manufacturing generally,” reflects Burke. “Customers realized they were taking away our economies of scale and our ability to maintain profitability and are now starting to work with us more.”
That may be wishful thinking, cautions Helferich. “Retailers need to distinguish their brand from other retailers,” and demands for customized products are likely to increase. The tab for customizing is being left for suppliers to pick up, however. He likens the situation to RFID shipping tags, with retailers reaping the rewards while suppliers bear the cost. “The incentives are misaligned,” Helferich concludes. “How do you design modular packaging and still make money?”
That’s an issue Burke and other food processors wrestle with on a daily basis. “Customers can ask for a mind-boggling assortment of pack-outs,” she acknowledges. Getting them to accept a standard assortment is difficult in today’s market. (See sidebar below.)
Creating a separate bill of material for every order poses database maintenance problems and is prone to error. Configurator software with logic capabilities addresses those issues by minimizing data entry and presenting customers with a menu of customization options. For example, customers might specify different ranges for fat content, salt level, total solids and other attributes of a dairy product that will be used as an ingredient in their formulation, says Jack Payne, director-solutions consulting at CDC Software Inc., Atlanta. In another scenario, a data-management system might help a manufacturer to deviate from a first-expire, first-out protocol for raw materials to meet the longer shelf-life demands of a particular customer. “Automated tracking allows you to dramatically scale the work order,” says Payne.
Product sequencing/scheduling, recipe management and packaging change-orders are customization issues that add complexity to ERP-plant floor integration. They also put a premium on real-time performance management. “Information has a shelf life,” Payne notes. “If you don’t know what happened in the process until tomorrow, it’s just a scorecard.”
In high speed, automated production, waste stacks up quickly. For a copacker or private-label manufacturer, nonconforming material reports can seriously erode profitability. As those companies take on more orders from an expanding pool of clients, real-time data management can key process improvement as well as help manage customization.
Dakota, IL-based Berner Foods Inc. has grown with the boom in private label. As recently as 2000, it made only 10 products. Today, Berner produces more than 500 SKUs. When pallet configurations, case packing requirements and other special requests are factored in, there are 1,062 variations to orders for Berner’s cheese toppings and other products, calculates Troy Grove, chief information officer. CDC’s Ross ERP system was installed in 2000, and two years ago MVI Technology’s real-time data reporting was added. (MVI was acquired by CDC and recently rolled into Ross ERP.)
“You’re dealing with a lot of configurator issues but also a lot of customer-specific requirements,” Grove says. “There are 14-20 different requirements to each order. It’s too intensive to get it done with a paper process.” Real-time data also complements Berner’s Lean/Six Sigma culture, with overall equipment effectiveness (OEE) the key metric. The organization goal is 85% OEE.
A bump in the automation road is rainbow pallets, configurations that combine multiple items on a single pallet. “We do it, but we don’t like to do it because it means re-doing two pallets of finished goods,” Grove says. Requests are infrequent, and pallet building is manual.
Rainbow pallets and other one-off requests can be arguments against automation. Why specify a specialized machine, after all, when the customer request can be met manually with little or no lead time? Some retailers will request end-caps that can be stripped from a cardboard container and display four or five different products. Letting a copacker meet those requirements makes more sense than disrupting a production facility’s normal routine.
Customers with cross-docking operations are the drivers for rainbow-pallet requests, and some firms have engineered automated systems to meet those material-handling challenges. “Machinery companies are working on those palletizing systems right now, and they’re delivering systems that can do it,” says Charley Rastle, food & beverage marketing manager with Rockwell Automation in Denver. Whether there are enough rainbow orders to justify the automation solution is a financial calculation.
Those calculations look less favorable as the lifecycle of new products shrinks. “Many of our new products are not going to be with us for 15-20 years,” Diane Wolf, Kraft Foods’ vice president-global engineering, pointed out at April’s Food Automation & Manufacturing Conference. “Should we automate or not?” Deli Creations, a product that bundles Kraft cheese, Oscar Meyer meat and Nabisco crackers into a meal kit, exemplifies the challenge. Finished goods from different plants must be recombined in a new package. A blend of flexible automation and manual involvement might be the most realistic solution.
“Even Fortune 50 companies that used to buy everything are starting to rent equipment,” suggests Jim Mallory, senior application engineer at Frain Group Inc., a Franklin Park, IL, supplier of used food processing and packaging equipment. “They’re finding new products don’t last or are gone after three years.” Specifying and commissioning new machines may take longer than lead times allow.
Two-way customizationPart of the objective of configurators is to make sure customized orders can actually be delivered. Just as food companies are installing configurators to meet customer demands for customized products, the technology firms that support them are using configurators to cut application engineering costs when delivering customized software solutions.
Configuring the FactoryTalk suite differently for food & beverage than other industries wasn’t sufficient, Rockwell’s Rastle observes. When integrating manufacturing and enterprise information systems, “customers want templates built in and ready to deploy for their specific application,” he says. “Once you build that module, it’s a lot cheaper to do in the future.”
In brewing, standard modules enable new software systems to work regardless of whether there are Siemens, Rockwell or other standard controllers on the shop floor. Building on that, technology providers are configuring software for S-88 batch compliance and around common applications, such as blending and mixing. “Whether you’re mixing a dough or a sauce, there are a lot of similarities,” Rastle points out.
Configurators also help simplify the specification process. CDC’s Payne cites the acidified-food manufacturer that reduced the number of recipes in its database from an unwieldy 5,000 to 50 with the software.
Configurators are credited with helping discreet manufacturers move from a make-to-order mode to build-to-order. “I never see food manufacturers going to a build-to-order model,” offers Brandon Henning, global industry leader-food & beverage at Charlottesville, VA’s GE Fanuc Automation. “I do see food manufacturers adopting a more demand-driven model,” provided the front office and production floor are integrated. The ERP can generate a production schedule, “but the way that schedule comes in isn’t necessarily how the plant will run a product,” Henning says. Stock on hand, raw materials status and other variables need to be factored if customized products are to be delivered.
“Customization goes against everything we’ve learned to do in production, which wants to make the same product two shifts a day, day after day,” reflects Lawson Software Inc.’s Olin Thompson, vice president-food & beverage strategy. “Changeover scheduling and staging issues become much more important as customization increases. On the other hand, if that’s what the customer wants, food manufacturers are going to deliver it.”
Delivering it profitably will dictate success in customized manufacturing. It may require more automation, more manual processes, or a blend of both, but it definitely will require a shift from yesterday’s one-size-fits-all approach. u
For more information:
Jack Payne, CDC Software, 770-351-9600
John Kuhnz, Dorner Manufacturing Corp., 262-369-1332, firstname.lastname@example.org
Jim Mallory, Frain Group Inc., 630-629-9900
Brandon Henning, GE Fanuc Automation, 434-978-6139, email@example.com
Olin Thompson, Lawson Inc., 651-767-4397, firstname.lastname@example.org
Charley Rastle, Rockwell Automation, 303-517-8914, email@example.com
Can the customization balloon be popped?How much customization could there be with a 3.5-gallon tin of popcorn? Quite a bit, as Jim Toby, executive vice president of operations at Houston Harvest, can attest.
The Franklin Park, IL, processor dominates the popcorn-tin niche, selling more than 11 million units a year through mass merchandisers, drug-store chains and specialty stores. The tins are ubiquitous during the Christmas season, and the container may be a bigger draw than the food inside: 70% of buyers collect or save the tin, according to Toby. But the 184 different tin designs are the easy part of Toby’s customization challenge.
“We’re sort of a semi-custom shop,” he says. “Our customers are asking us, ‘What’s new?’ and you have to be very flexible to deliver something different in the way they want to receive it.” A bill of material process and RF inventory- and finished-product control system help manage orders in different pallet configurations, in master cartons or display configurations, on slip sheets or pallets, and with various lid colors. Because production is seasonal, automation is difficult to justify. Instead, Toby relies on a small army of temporary workers: as many as 1,600 augment a core of 70 manufacturing professionals during peak periods at the 605,000-sq.-ft. facility.
Manual processes provide flexibility, but Houston Harvest is intent on “driving out complexity,” Toby says. Whether less customization is possible remains to be seen, however. “I want to see as much go through as possible, sales wants to give the customer just what they want,” he sighs.