Enterprise Apps Special: Supply Chain Management

Yuken India streamlines its Kanban system

SoftBrands’ DemandStream solution has helped streamline the entire Kanban system at Yuken India, resulting in immense benefits for the company, says Abhinav Singh

For a medium-sized company like Yuken India, the adoption of a just-in-time Japanese Kanban system was no easy task. But the hard work has paid off—the implementation has resulted in increased efficiency and productivity. Yuken’s sagging revenues have risen sharply and things are looking up for the company. The Kanban system was introduced in 2002 to drive the lean manufacturing process. It had to be streamlined to attain optimal benefits, which is where DemandStream, the SCM solution from SoftBrands, came into the picture and helped in not only streamlining the system but was also successfully integrated with Yuken India’s in-house ERP system. This is the first implementation of its kind in the world by SoftBrands featuring DemandStream, which involves integrating the solution with a customised ERP system developed in-house.

According to Narayan Rao, thanks to DemandStream Yuken was able to have a system that integrated with the existing in-house ERP system and could also be customised as per Yuken’s manufacturing environment

Yuken established its presence in India in 1976. It has a technical and financial collaboration with Yuken Kogyo of Japan. The company generated annual revenues of Rs 40 crore during 2002-03. It manufactures hydraulic equipment, including hydraulic pumps for industrial and mobile applications, hydraulic valves, mobile valves and complete hydraulic systems made to meet customer-specific requirements. The company has 220 employees in India and its zonal offices are spread across the country. It has 44 dealers who operate in 31 cities.

Lean manufacturing and Kanban

The Kanban system in manufacturing was introduced as part of a re-engineering exercise. The company had seen a sharp decline in its revenues from 1998 to 2000. In the financial year ending 1999 its revenues had dipped to Rs 24 crore from Rs 29 crore in the year ending 1997. One of the major reasons for low profitability was the large amount of unused finished inventory stock. Yuken India introduced lean manufacturing in 2000 to deal with this problem. One thing led to another and the just-in-time Kanban system was introduced. Lean manufacturing streamlined the process and lifted the company’s prospects. It primarily involves specifying product value from the point of view of the customer, identifying the value stream (identifying the sequence of processes involved from the raw material to the final customer), making that value stream flow, having a pull system in place (to avoid overproduction) and striving for perfection. The goal is to produce exactly what the customer wants and when he wants it, at a fair price and with minimum wastage.

Inventory as part of Kanban

John jagadesh J says DemandStream was selected due to its functionality, openness, integration, portability, multi-lingual and multi-currency support and its capability to support the pull system successfully

Kanban drove the lean manufacturing system to run the pull system more efficiently. As part of the Kanban system, three major inventory management systems were introduced. This had three aspects—CONWIP, a two-bin system and a fixed-time variable quantity system. In a CONWIP (Constant Work In Progress) trays are used as Kanban. Each tray containing spare parts for manufacturing has a unique number and is identified by a laminated bar-coded label with a photograph of the item. When trays are ready for movement to the next operation, a sheet containing all tray IDs is used to identify the trays to be moved. Scanning the tray ID barcode enables the identification of material requirements for manufacturing for the current and the next operation.

In a two-bin system, two bins, one upon the other, are placed, containing spare parts in the manufacturing area. Material required for manufacturing is drawn from the upper bin when required. When the upper bin is empty, the bar-coded plastic slot for the lower bin is removed and the location of the bins is reversed so that the empty bin becomes the lower bin. The removed bar-code label is scanned, which immediately generates two more slips—one having a requisition slip schedule for the supplier and a slip which is attached to the plastic slot and put into the empty bin. The supplier in turn attaches the schedule slip along with his despatch card. Scanning the bar code enables checking the items in stock and also generation of the bill of material required. As a result of the two-bin system received material is filled into the lower bin and the label is put back in the plastic slot.

The FTVQ (Fixed Time Variable Quantity system) is used for long lead-time items like imported spare parts. A monthly stock of items is taken in and cards are filled in. Orders are placed for items consumed in the previous months as replenishment of imported items might take three to four months.

The results of both the lean manufacturing and the Kanban system were dramatic considering the fact that the finished goods inventory, which stood at around Rs 2.2 crore in 2000, has come down to Rs 30 lakh worth of finished goods. Yuken India’s revenues have shot up to Rs 40 crore in 2003 from Rs 28 crore in 2000.

Streamlining the systems

The need was felt to streamline lean manufacturing and the Kanban system running on a customised ERP solution. Although the system had positive implications it also had a set of limitations. Narayan Rao, vice president, operations, Yuken India says, “When you are administering three to four thousand components through the system there is always a chance that demands might fluctuate. As a result fluctuation in demand would not evenly cope with the uneven growth in certain product ranges.”

It was observed that the bin and tray sizes in a two-bin system and CONWIP system are fixed and cannot cope up with the fluctuations in demand and the continuous push for growth. Manual re-configuration of bin sizes and trays is cumbersome, complex, time consuming and prone to error. Broadly, the fluctuation in demand might just affect overall productivity.

DemandStream comes into the picture

Yuken needed a system to effectively enhance its lean manufacturing and Kanban system and to do away with the limitations. Rao of Yuken India says, “One of the most challenging aspects was to have a system that would integrate into our existing in-house ERP system and could also be customised as per our manufacturing environment. With DemandStream we were successfully able to achieve that.” But integrating DemandStream with the in-house ERP system and customising it as per Yuken India’s requirements wasn’t easy. It involved thoroughly understanding the manufacturing environment and the customised solution. A special team from SoftBrands worked closely with the Yuken team to achieve integration and customisation. John Jagadesh J, assistant general manager, IT and materials at Yuken India says, “We selected DemandStream due to its functionality, openness, integration, portability, multi-lingual and multi-currency support and due to its capability to support our pull system successfully.”

The implementation of DemandStream kicked off in June 2003 and was completed by the end of August 2003. The whole exercise was a fairly comprehensive one and involved a team of seven people, with four from Yuken and three specialists from SoftBrands. A through plan was chalked out and a demo of DemandStream and its mapping with the customised ERP was conducted. The SoftBrands team conducted research on the existing system and an interface was developed between the customised ERP system and the DemandStream solution.

The SoftBrands team then ran a conference room pilot. It involved four people from Yuken who came from the inventory, stores and the manufacturing departments. A simulated environment was created in the conference room, which helped SoftBrands demonstrate the capabilities of DemandStream in real-time. Besides this, a two-day training session was undertaken by the SoftBrands team to train staff from Yuken.

Binu Mathews, director, SAARC Countries, SoftBrands says, “There was active involvement of two specialists from our corporate headquarters in the US who were specially flown in to help the Indian team implement this project. This is the first implementation undertaken by SoftBrands of its DemandStream solution sitting over a customised in-house developed ERP solution. DemandStream implementations are on standardised ERP solutions across the world.”

Advantage DemandStream

The DemandStream solution has resulted in drastic reduction in inventory levels and has facilitated a smooth flow of operations due to its online supply chain and shop floor execution communication capability. DemandStream has resulted in zero stock outs because it dynamically reacts to any component shortages, which are immediately replenished. There has been an integration of data across Yuken’s various departments with its existing ERP system. The implementation has also resulted in dynamic Kanban calculation. Rao of Yuken explains, “DemandStream dynamically recalculates the bins and trays sizes in the CONWIP and the two-bin system and reconfigures the order of spare parts as per the day-to-day demand, controlling inventory successfully. DemandStream has also helped us enhance the capability of our pull system. It has resulted in a smoother flow of operations.”

Major challenges during the implementation

Integration with the in-house ERP of Yuken. The Yuken and the SoftBrands team developed scripts. Data mapping and importing Bill of Material. Special programs were written by Yuken, which were used by SoftBrands in the script. Design of Schedule Board. Yuken wrote the program with support from SoftBrands. Timely updation of inventory during various stages. Educated users on the importance of keeping the stock data live and current.