As global competition continues to challenge U.S. manufacturers, OEM’s are recognizing speed and flexibility in their supply chains is key to reducing their supply chain risk. OEM’s are realizing what’s fundamental to flexibility is time-based competitiveness with a robust, cost-effective, U.S. supply chain. Domestic suppliers can win! But only if they optimize their value streams to their OEM and drive out waste.

OEM’s want improved quality, delivery, and cost reductions. “Traditional approaches to supplier development have had mixed success,” said Roxanne Baumann, WMEP director of OEM supplier initiatives. Suppliers are often asked to improve, and have tried to comply, but without a clear roadmap and enterprise- wide view, results are uneven and often not sustained.

Some have deployed their supplier development teams with good intentions within their suppliers’ plants to implement Lean. “Suppliers feel obligated to comply but lack ownership in the change,” said Baumann. “It’s uncomfortable having their best customer in the plant, and once the team leaves, things sometimes go back to the way they were.”

Traditional methods not only sub-optimize results, but the spirit of collaboration, trust, and competing together is often missing. Supplier ownership is essential to drive and sustain change generating stronger, bottom line results. To overcome problems with traditional strategies, WMEP, in cooperation with several leading Wisconsin OEM’s, developed Accelerate, a supplier improvement solution, now emerging as a national model.

The Accelerate model begins when an OEM nominates a supplier to participate. The supplier recommends a value stream to optimize and the supplier and OEM agree and sign a project charter that defines roles, responsibilities and a timeline. “The charter is extremely important,” said Mike Schmitt, WMEP manager, supply chain group.

WMEP is a neutral coach and mentor, providing support when the supplier’s Lean-ness gap is determined, i.e. where Lean methods could be applied. Value Stream Mapping (VSM) is used to identify areas for improvement and to establish the existing MCT, or Manufacturing Critical-path Time, the typical amount of calendar time from when a manufacturing order is created through the critical-path, until the first single piece of the order is delivered to the customer. It’s measured in calendar days and includes all order entry, manufacturing, and logistics shipments. A future VSM and MCT is also established as a goal along with an action plan.

MCT has been developed and proven with nationally known OEM’s over the past decade. “It’s a robust metric to drive all other traditional supplier metrics of quality, delivery and pricing,” said Baumann. “Traditional metrics don’t typically reveal problems like shipping from finished goods inventories or costs reductions from margin (very risky!).” A short MCT means the supplier is Lean, flexible, and can shift and respond quickly to demand changes. “MCT is a time-based, universal measurement,” said Schmitt, “that can relieve suppliers of having to deal with multiple measures and different OEM measurement systems.”

The next step is to close the Lean-ness gap by applying Lean tools to achieve the future MCT. The supplier takes ownership of the project, deciding what Lean changes to make and implementing those changes. WMEP assists and guides the supplier with the identification of the Lean-ness gap and implementation. WMEP maintains complete confidentiality, and the supplier chooses what is shared with the OEM. Establishing a Lean Culture ensures the improvements are sustained.

In the past year, 106 suppliers and seven OEM’s have participated in Accelerate, with an average reduction in MCT of 53%. “We’ve seen phenomenal bottom line results!“ said Baumann.

Here are two Wisconsin suppliers who have been successful with Accelerate: 

• Milsco Manufacturing Co., a seating manufacturer. Their Redgranite facility created a Value Stream Map for an OEM’s part. “We identified the steps in our process with excess inventory,” said Jay Ondra, Milsco focus factory manager for offroad seating. They discovered that up to 95% of the process time was non-value-added. They completed several Lean projects using 5S, Changeover Reduction, Kanban and Layout Optimization. They added a new glue line, created FIFO lanes and developed a new scheduling system. 
    
  Results include 60% reduction in MCT, 65% reduction in lead time, 60% reduction in WIP, on-time delivery improvement (from 73% to 98%), 35% reduction in purchase inventory and 20% reduction in scrap.
    
• D&S Manufacturing, a Black River Falls custom metal fabricator and contract manufacturer. Their Value Stream Map for an OEM’s part pointed to business processes that needed revision. “We found that many of the problems related to overbooking our capacity,” said Mike Dougherty, D&S president. When they realized some products consuming large amounts of capacity were being sold below cost, they decided to stop making those parts.
    
  They also examined how they were releasing work orders to the floor. “There were way too many work orders in process,” said Dougherty, creating bottlenecks and confusion about priorities. They identified operations that were “pacesetters,” and work orders were released to match the capacity of those operations. 
   
  Project results include reductions in MCT by 30%, late shipments by 26%, customer defects by 32% and number of open work orders by 50%.

The benefits to suppliers of the Accelerate model include:

• Focus on implementation and results for the supplier;
• Co-investment by all parties-everyone has a stake in it;
• Freedom for the supplier to decide what changes to make and where to make them;
• Use of a charter to delineate responsibilities and expectations of all parties;
• Confidentiality, with the supplier choosing what information to share with the OEM;
• Creation of a collaborative, strategic relationship with the OEM that allows both to compete globally;
• Use of a single time-based metric, instead of being based on margin;
• Joining in a national model with WMEP support/expertise;
• Lean Culture to sustain improvements and spread continuous improvement to all other areas.

Accelerate creates “strong, robust Lean supply chains within the United States that are responsive, flexible and can really compete,” said Baumann. Suppliers and OEM’s “are finally working together on their competitive edge.”