What is a perfect world? A perfect world for managers means that all demand is met on-time at minimal cost. This provides maximum cash flow and profit with perfect customer service. As a matter of fact as soon as the company makes a product it has never made before, the customer shows up and says, “That is exactly what I wanted.” Just as nice, suppliers show up to deliver raw materials just as they are needed. So there are always zero raw materials and zero finished goods inventory. Machines never break down, people always show up on time, and there are never any quality defects—maximum utilization with perfect quality. Sound good? When we describe this world to managers they either get a far-away wistful look in their eyes or they stare at us as if we were crazy. It would be a nice world to manage but unfortunately we live in the real world and wishing for or working toward achieving a perfect world is an exercise in frustration. There is one word that prevents managers from attaining the perfect world—variability—and there will always be variability. At Factory Physics Inc. we help managers understand and apply practical operations science to make the best of their world with all its variability in product mix, demand, people, and processes. The managers who have embraced the science say it is perfect for them, no more confusion about what's possible or about how to best improve performance.
Factory Physics Inc. provides consulting, education, and software to improve customer service, increase cash flow, optimize inventory, reduce cost, and ease management control of manufacturing and supply chain operations. We are not a lean or six sigma consulting company. Our practical, comprehensive approach is different because it defines the operations science anyone can use right now to establish better control and improve performance; the Factory Physics approach makes manufacturing and supply chain control easier. The science is based on the award-winning book Factory Physics and more recently on McGraw Hill’s lead business title Factory Physics for Managers. Check out the reviews on Amazon.com for both books. The Factory Physics approach enables you to:
- Determine the best strategic and tactical execution options for your company.
- Implement optimal management of your inventory, capacity, and response time buffers to get the best possible solution for your unique challenges.
- Meet your marketing and financial goals given your existing IT, labor, and capital resources.
With your goals in mind, we enable companies to focus and accelerate existing Lean Manufacturing or Six Sigma efforts--we don't advocate eliminating those resources. Factory Physics Inc. strongly supports Lean Manufacturing and Six Sigma efforts. We have personnel who are expert in the use of Lean, Six Sigma tools through years of industry experience. On the other hand, we have found that basing productivity improvements on a copycat approach leads to inconsistency, ambiguity, and redundancy in adapting those programs to a unique environment (your company). As briefly discussed below, the practical science provided through the Factory Physics approach gives you the information you need to resolve conflicts and solve your manufacturing and supply chain problems fast.
Companies are continually introducing ways to be more productive. Meanwhile, the drivers of productivity are fundamental laws of nature that never change. Companies constantly re-invent the wheel. In fairness, there are plenty of companies where years of neglect or a change of management warrants an initiative to get the company on course. On the other hand, it is a problem that industry in general tends to lurch from one consulting initiative to the next looking for the "system constraint," the "perfect value stream," "six sigma levels of quality," a "demand driven" supply chain, a new information technology solution, or any of a number of proposed silver bullets offered as "the answer."
Starting in 1986, research at Northwestern University and the Georgia Institute of Technology has led to a new paradigm that provides a comprehensive, scientific framework to control and optimize the fundamental operations of any manufacturing and supply chain system. The result is the Factory Physics approach providing a comprehensive, practical set of solutions for manufacturing and supply chain managers and executives. Factory Physics is the title of both an award winning book and of our company. Formed in 2001 by Dr. Mark L. Spearman, Factory Physics Inc., began providing training and consulting based on the Factory Physics approach to improve manufacturing and service operations. Since then, in a strong endorsement for the Factory Physics approach, the National Science Foundation awarded Factory Physics Inc. over $1,000,000 in grants to develop our CSUITE Operations Analytics software to standardize and advance the framework. This combination of consultation, training and software has been proven and tested relentlessly in application, saving millions of dollars and increasing competitiveness for our clients.
In the Factory Physics approach, the primary objective is to be as profitable as possible over the long term while being true to your values and ethics. Factory Physics principles and applications will provide you the means to most profitably meet your customer's demand and expectations. We call this matching transformation to demand. The laws of nature tell us that we will always have variability. In the presence of variability, it is impossible to have transformation exactly meet demand. If you don't believe this, try planning for customer demand without considering scrap losses, batching requirements, or seasonality.
In the presence of variability, trying to synchronize demand and transformation for minimal cost and maximum revenue requires the use of buffers. You will have buffers—it is not an option. Furthermore, there are only three types of buffers:
You can be responsive by keeping a stock of inventory, or you can have extra capacity to handle demand fluctuations or you can give up on responsiveness and make the customer wait a longer time. The only way to reduce the need for buffers is to reduce variability. However, it may benefit you to increase variability, e.g. introduce new products or technology, if you can increase profitability by doing so. In solving your management challenges, it is imperative that you determine and implement an optimal portfolio of buffers and variability to get the solution that works best for you and your company.
A key problem with current approaches to improving profitability by controlling manufacturing and supply chain operations is that they ignore random events that increase risk. The result is that a great deal of computer power is used to create a detailed schedule that becomes obsolete as soon as something unanticipated occurs within the production system or the supply chain. A supplier with a problem or a new large order coming in can completely wreck an "optimal" schedule.
Unfortunately, variability and risk are a fact of life and cannot be wished away. The practical Factory Physics approach explicitly considers variability and risk. The idea is to determine the best possible portfolio of buffers and variability reduction for your company's unique market position and your company's objectives. A company selects the level of demand and demand variability it expects or the level to which it is willing to respond; this is a strategic management decision. There is always a tradeoff between this range of demand and the cost of inventory, capacity, and response time required for a desired service level. The Factory Physics approach then enables managers to establish robust control for best possible profitability. This approach exploits the natural behavior of a company's operations and customers.
How do you apply this practical science to your company?
- Determine your most effective manufacturing and supply chain strategy.
- Understand where your company's performance is versus where it could be.
- Identify and implement improvements. Train your employees
- Adapt your planning and execution systems to the natural behavior of your operations for simplified management and improved control.
- Tune your existing MRP or ERP system to give you optimal, predictable results.
There are as many different combinations of these efforts as there are companies, but the Factory Physics approach enables your company to adapt the appropriate elements to solve your unique challenges. Contact Factory Physics Inc. to explore the benefits of the Factory Physics approach for you and your company.