Class A Lesson 9:Use the Formal Systems.

20 Lessons From Implementing Class A Manufacturing

Lesson 9: Use the Formal Systems.

The Planner, Kevin, encounters the Production Supervisor, Kathy, in the hallway with the following conversation -

Kevin: Hi Kathy, hey you’re starting on that order of photometers today, right?

Kathy: Yes, Kevin. We’ll have all 20 units put to stock by tomorrow.

Kevin: Well I just got word that the European warehouse is out of stock, so pull the parts and make 40, please. I’ll forward you the email I got from the European warehouse.

Kathy: Sure, Kevin, we’re all about serving the customer on time.

Two weeks later at plant metrics review –

Materials Manager: Well, we missed our inventory accuracy goal this month. About 30 part numbers were short by more than tolerance allows. We’ve spent several man-days re-counting and searching for the cause.

Finance Manager: I don’t understand why, but we really had unfavorable labor and material variances this month.

Purchasing Manager: We’ve just been notified by one of our suppliers that the parts they make for the photometer will be delayed. It’s a good thing we keep some inventory or we’d miss some end-of-quarter shipments.

Are you starting to feel queasy? Have you lived this experience before? What’s about to happen?

Hours of labor wasted, quarter-end shipments and revenue targets missed, financial performance deteriorates, customers get angry, and it just gets worse…

Why?

The Planner and Production Supervisor failed to use a Formal System.

The planner should have entered MRP and revised the Work Order or issued a one for a second batch. That’s the Formal way to communicate to Production what they need to do. It will also make sure that inventory is accounted for properly in terms of quantities and dollars, labor is accounted for, and it would alert the planner about the potential shortage from consuming additional parts.

The Production Supervisor didn’t demand a Formal order. She allowed resources to be consumed on a verbal interaction and then didn’t make sure that all the right transactions occurred.

Now if you think this only happens in MRP, what about other Formal Systems like Change Control, Safety, Financial Control, Quality Control, …?

And if Management doesn’t follow the Formal Systems, they set an example that undermines the accountability of all participants, leading to a vicious cycle.

Follow the Formal Systems to keep your plant and business predictable. If someone believes they can’t follow the formal system, that’s a time for management to get involved, investigate and either train the person or change the Formal System.