ENGINEERING-TO-ORDER VERSUS MAKE-TO-STOCK STRATEGY: AN ANALYSIS AT TWO PRINTING COMPANIES
MSc. Paulo César Chagas
Rodrigues
Universidade do Sagrado
Coração (USC) - Brazil
E-mail: paulo.rodrigues@usc.br
Dr. Otávio J. Oliveira
São Paulo State University -
Brazil
E-mail: otavio@feb.unesp.br
Submission: 04/17/2010
Accept: 25/10/2010
Organizations are adopting
industrial production models with priority given to reducing costs and
increasing the quality of their processes and products. Optimizing and
rationalization the inventory management is a great opportunity for these
companies conquer these goals. The objective of this paper is to analyze
inventory management at two printing companies located in the region of Bauru,
where one adopts the Engineering-To-Order
(ETO) production system and the other the Make-To-Stock
(MTS) production system, highlighting their convergences and oppositions.
For their achievement was chosen by the methodology of study of multiple cases
(two cases). Data were collected through the intersection of the following
tools: semi-structure, document analysis and observation in loco. Revisions are
made in theoretical work on the following topics: logistics, management of
materials and production planning and control. These themes guided the search,
allowing a greatest criticism about the collected data and information
generated. The two case studies were presented together with a comparative
table of the main aspects of the influence of demand management strategy on the
inventory management in two companies. Although the companies adopt different
production strategies, there was no significant change observed in inventory
management strategy.
Keywords: Inventory
management; logistics; make-to-stock, engineering-to-order.
The
inventory-management models are differentiated by the degree to which the variables
represent the reality, such as volume and size of the cargo stored, economic
lot of buying and production and forecasting demand.
The
companies most concerned with the management of inventories take into account
issues such as rate of production / receipt of materials, uncertainties in
demand and in time, changes in price / cost, depending on the quantity
purchased / produced, number of distribution centers, among other factors.
The
management of inventory has strategic importance for the success of companies
since it gives support to production systems Engineer-To-Order (ETO) and
Make-To-Stock (MTS), using the increase or reduction in inventories as a factor
generator of earnings productive and financial.
The
printing industry can be considered one of the most important industries in the
world due to its importance as a fundamental element in disseminating knowledge
that is documented, as well as its capacity for economic mobilization or its
diversification in relation to the economic sectors it serves (ABIGRAF, 2007).
With
the objective of reducing costs, increasing production gains and adapting
product and production process characteristics to market needs, the
organizations are under pressure to review their production models so they can
provide greater profitability and reliability.
Besides
that, many raw materials have relatively short expiration periods because they
are perishable, and thus deteriorate. This will generate a loss in commercial
value and may represent a waste. Inventory management seeks to minimize these
possible losses through rational use, and is thus a fundamental tool in
production planning.
This
research is restricted to the management review of inventory in production
systems Engineer-To-Order (ETO) and Make-To-Stock (MTS) which are used in two
companies in the graphics industry, whose plants are located in the city of
Bauru . Thus, we tried to define the scope of analysis in relation to the
object being studied (inventory management), in relation to the productive sector
(graphics industry), and also in relation to the geographic focus (Bauru city /
SP).
According to ABIGRAF (2007), the
printing industry is a very significant segment throughout the world, whether
due to its importance as a fundamental element in disseminating the printed
page, or its capacity for economic mobilization and/or its diversification in
relation to the economic sectors it serves. With a production worth
approximately R$ 17 billion, a 0.86% share of Brazil’s GDP, it exported
approximately US$ 279 million and imported around US$ 319 million, generating a
trade balance deficit in 2007 for the printing industry of US$ 40 million.
Since exports are responsible for around 2% of all production, ABIGRAF
estimates it should close 2008 with production growth in the order of 4% to 5%.
Inventory
management is an important strategic function for a company’s economic success,
because it administers the raw material transformation process through several
flow control mechanisms that have been developed by several companies; by the
difficulty in understanding its behavior when seen as a whole, and by the
empirical forms in which inventory management is applied at companies, falling
on two fundamental aspects of decision-making: production scheduling and the control
of material flows.
Inventory
management can generate benefits to local society, because when poorly planned,
it can hide problems and even increase costs, resulting in debt, dismissals and
even company insolvency. Thus, any job that scientifically contributes towards
improvement in inventory management will also contribute, to a greater or
lesser degree, towards minimizing the region’s social problems where the study
is carried out, due to improvements at the companies.
The issue will be addressed in this
research is the discussion of how and if the production systems
Engineer-To-Order (ETO) and Make-To-Stock (MTS) influence the management of
stock in two companies in the graphics sector.
This paper is structured as follows:
in sections 2 and
The
activity is the management of stocks held by the need to control the products
and their waste. This type of activity is justified in relation to the
advantages and disadvantages inherent in the existence of levels of stock. On
the others hand, this action induces positive characteristics such as to allow
the regulation and decomposition of the production process, providing a range
of options to the customer, purchasing discounts depending on the quantity and
protection against high prices (HEIZER; RENDER, 2001; PIZZOCARO, 2003).
For
Haller, Peikert and Thoma (2003), the management of inventories down clear
rules of how to control the flow of material when inexpected situation happen,
as the unexpectedly low processing, tools setbacks or when the line stops. If
the flow of material worked is as it was planned, the management of inventories
does not limit the flow, but it is active to work with in future emergency.
Only the management of inventories in line is supplemented as long as there is
a control of the material started inside the chain of proceedings.
Shingo
(2001) notes that for an effective reduction in production costs, waste must be
analyzed and considered weighed because they are interrelated and are easily
hidden by the complexity of a large organization.
The
concept of an economic lot EOQ (Economic Order Quantity) was developed by Ford
and Harris in 1913 and based in the logic that the optimum amount to be
produced is the one that has both a lower cost of application and stock
recognizing the factor trade-off between the size and application, if the size
of the lot increases, the stock increases and the frequency of deliveries and
setup are reduced. The cost of application is the process of preparing the
product (setup), transportation (freight) and issuing the request. Therefore,
the bigger the amount produced, the lower the cost of preparation due to gains
in scale. Conversely, the cost of stock is related to the capital invested in
stock and thus the greater the amount of stock, greater is cost (CASTRO, 2005;
HOPP; SPEARMAN, 2000).
The
authors also cite the following types of lots, as the most used by the
organizations: economic lot of buying, production, with allowed absences, with
discounts for volume and with restrictions.
The
economic models of lots should be developed by taking into account the varying
estimates of demand as a way to be closer to the reality. Forecasts are basic
inputs for many types of decisions in the planning of effective demand which is
mainly responsible for the success of the supply chain and is of vital
importance in the proper use of the equipment, to carry out the replacement of
materials at the time and in the right quantity and for all other necessary
activities for the industrial process are properly programmed (RITZMAN;
KRAJEWSKI, 2003; MARTINS; LAUGENI, 2005; STEVENSON, 2005; ARNOLD; CHAPMAN,
2004).
Can
emphasize that it is never sure of the amount being requested by customers and
the amount to be sent to storage, can not expect that the applications are actually
received before starting to plan what to produce. Are used for both qualitative
and quantitative techniques as a way to prepare the estimates (CHING, 2001;
ARNOLD; CHAPMAN, 2004).
According to Darú (2005), a decision
reflected in the positioning of the production is its policy of stock with
respect to their finished items. This can be basically of four types: to
produce for stock (Make-To-Stock - MTS), produce custom (Make-To-Order - MTO),
assemble to order (Assembly-To-Order - ATO) or custom design
(Engineering-To-Order - ETO). The possibility of keeping stocks in each
production system is presented as separate, having its own interaction with
customers.
According to Godinho Filho (2004),
the literature on management of production presents basically four ways to a
production system to meet demand: MTO, ATO, MTO and ETO. Figure 1 shows these
four basic forms of response to the demand, showing two ways to MTO strategy,
whether they buy or not their ordered supplies. It can be noted in Figure 1
that these strategies can define the size and types of lead time of the
production systems, it can also set the response time.
Figure 1: The
ways of responding to the demand of production systems
Source: Godinho Filho (2004).
According to Pacheco and Candido
(2001), in MTS the product has its manufacturing started based on a forecast of
demand with. The application arrival the service is done almost immediately. It
is suitable for products with expected demand and may have a high cost of
stock.
Darú and Lacerda (2005) describe
that manufacturing for stock is a common practice, whenever you can predict the
demand and using time-season to produce, using the resources letter and
carrying then on a more balanced way. But this policy has some disadvantages,
which is the high cost of storage and the difficulty to predict what will be
sold.
According to Jemaï, Karaesmen
(2007), the MTS model requires the existence of finished products in stock to
meet all the sale orders that the company receives, this model is used to
forecast the demand on the applications approved and sent to the warehouse, a
measurement of the volume of stock needed.
According to Rother (2005), in the
MTO model sales orders start the entire production process of product that
there isn´t in stock which should be available to customers in a pre-determined
time, this model seems ideal when there is a high variation of product and when
the situations of production are considered unsuitable for the continuous flow
of production.
In the ATO, the main components of a
specific product is produced to stock based on a forecast of demand. When the
request arrives, the assembly of the product is run, using the components
previously produced. The advantage is to reduce the lead time of request, since
the time of final assembly is reduced. It is appropriate when a small group of
components is used to produce a large number of the finished products, so a
product is different from another in terms of inclusion or the changing of one
or a few components (BERTRAND; ZUIJDERWIJK; HEGGE, 2000).
The ETO model can be regarded as an
extension of MTO strategy, in which the design stage of the product is made to
order and based on the client`s needs. In this model the products tend to be
highly influenced by the interaction with customers. The order of the main
business processes in this strategy is very similar to the MTO case, with the
inclusion of the "product design" after the "selling"
process(MEREDITH; AKINC, 2007).
According Welzel (2002), the
planning and control of production (PCP) determine the course of production,
following the procedure realigned that was scheduled and exerting their
respective control. Inside the function "production" one can sort the
managerial decisions in strategic (long term), tactical (medium term) and
operational planning and control (short term) (CHASE, et al., 2004). These
decisions will influence how to plan, schedule and control the production
(RUSSOMANO, 2000; ERDMANN, 2000).
An efficient PCP system improves the
use of productive resources, providing the production flow, and also having the
function to manage the customer`s needs, from the sales department, creating
one or more orders for production services, minimizing delays, effectively
managing the use of stocks, and thus better serving the customers, and so
managing and controlling the production. In general, Figure 2 shows the
inter-relationship of the PCP activities (SALOMON et al., 2002).
Figura 2: Overview of the
activities of PCP Fonte: Salomon (2002). |
Company "A" employs nearly
a thousand professionals in the city of Bauru, SP, which are distributed among
the plant that has a built area of 40 thousand square meters, where the two
plants are installed, which are called unit I and II and distribution center
that has approximately 11 thousand square meters, to where all the production
is transported.
The delimited study in the company a
is the school material product line, which we will analyze the process of
manufacturing of the product model spiral notebook.
Two ways to plan the production are
used: the first one is through the planning the materials in process,
inventory, routes of production, time of production. The second is through the
dedication of the lines in a particular product category.
The company started its activities
in the year of 1985 in the city of Campinas, as the regional logistics favored
the operation both in terms of supplies, and in commercial terms. In 1989 its
operation was transferred to the city of Bauru, whose potential had excellent
prospects for the development of business in a long term.
The
company is currently working with four categories of products, each with
particularities in relation to inventory management, and they are classified as
follows: (a) daily planners, (b) school, (c) office and (d) home.
As a
means to exemplify the manufacturing of university notebooks, a sequence of
photos will be shown beginning with the processing of rolls of paper that
arrive at the factory and which weigh about one ton.
|
The
company has the capacity to produce about 700 thousand notebooks per month.
Manufacturing begins in September to serve the back-to-school season at the
beginning of the school year, which in Brazil runs from January to March. At
the end of the back-to-school period, the entire production focuses on demand
from the northern hemisphere.
There
will be about 1000 product models that make up the product line for 2008,
divided as shown in Table 1, which also presents their representativeness.
Figure 4 shows a graph of the distribution of product models and their
representativeness. The models that comprise the product lines are not managed
in a single manner, first because the company developed a planning approach by
product line, and second, it respects each product category’s seasonality and
criticalness.
In
the school category, of the 450 models produced, approximately 250 are exported
to serve external clients and holding companies, when they are called
intercompany sales.
Table 01: List of number of models per product
Number of models |
Representativeness % |
|
School |
450 |
46,20 |
Office |
240 |
24,64 |
Daily Planners |
104 |
10,68 |
Home |
180 |
18,48 |
Figure 4: Representativeness
in % of model quantities
The delimitation of the study at company A will be the
school product line. Since it is a line with seasonality and the Make-To-Stock
production system is adopted, the manufacturing process for the spiral notebook
will be analyzed.
Based
on seasonality, production capacity and the information system, top management,
with the support of marketing, commercial, production, finance and supplies
managers formulate demand projections.
For
formulating an economic production and purchase lot, top management and
production and supplies managers work with models described by some authors in
section 2.1 of this study and who are inserting them in the information system
as a means to speed up decision making and avoid possible usage failures.
Two
means to plan production are adopted: the first is through planning materials
in process, inventory, production scripts and production times. The second is
through the relative dedication of lines to a specific product category.
The
production area has a Production Times and Methods (PTM) team that participates
in product development. The team’s objective is to technically assess the
product, and together with marketing personnel, develop it, elaborating a
feasibility study to see if it is possible to produce the product following
that script and determining cost, losses and material used.
The
PTM team has elaborated new procedures aimed at reducing losses, thus avoiding
a product leaving marketing with a very high loss level, which may result from
time, setup, script and raw material.
All
possible product compositions are documented to assess costs and formulate a
measurement standard. This documentation is comprised of product design, list
of materials, machine efficiency, setup time and production time for a specific
minimum lot of a product.
The
“ABC” classification method is used with the objective of defining production
cycles, associated with stock volume, based on the classification of raw
material inventory size, intermediate inventory, impact on cost and how to produce
and improve processes.
This
classification method proved adequate for product categories without
seasonality when all items classified as “A” have monthly replacement cycles
and can impact production; items classified as “B” have bimonthly replacement
cycles and can have a moderate impact on production; and items classified as
“C” have quarterly replacement cycles and low impact on production.
In
relation to products affected by seasonality and that are closely tied to the
back-to-school period at the start of the school year, the ABC classification
method had to be reformulated to work with a classification by production
volume. In other words, products classified as “A” have a volume of 100,000
units, which will be produced in minimum lots of 25,000 units;
products classified as “B” have a volume of 50,000 units, which may be produced
in minimum lots of 25,000 units; and products classified as “C” have an average
volume of 5,000 units, which are produced in a single lot.
The
PCP team uses the 80-20 concept described in section 2.2 of this study as a
means to define minimum lots to be produced each month, in which those
classified as “A” shall have the smallest lots possible, but will be processed
all month. Products classified as “B” and “C” will have larger lots, but will
not be processed all month.
The
spiral notebook, with high raw material turnover, tends to have relatively few
weeks of raw material in stock and in process. It uses the FIFO concept for
paper, undulated cardboard, varnish and paint raw materials and LIFO for the
others (wire, plastic, accessories), for both inventory management and
accounting purposes. Since this is a very large volume of material and since
there is no proportional area for storage, stock coverage varies between three
and six weeks.
In
relation to the finished product, production to inventory is used, where the
products are stored in the distribution center and FIFO is used. Finished
products are packed in boxes, then pallets, and after placed on stands that
will be labeled for identification.
The
main function of the PCP team is to analyze the quantity of existing raw
material in stock, production capacity, what should be produced and in what
time, thus triggering raw material purchases. There is a team dedicated to
sales projections that observes the market and projects sales for the next
month, and from that information determines how much to produce.
Using
the general sales plan, PCP elaborates the production plan, capacity analysis,
critical resource analysis, critical material analysis and best script
analysis, creating a plan with shorter deadlines, that is a monthly plan, as a
means to measure volume produced that will determine the volume of acquired raw
material, downtime due to lack of product, setup, maintenance, that is, if the
time spent on production of the spiral notebook was not high. This is checked
on a weekly basis.
Monthly
planning is broken down into four weeks so the factory can receive weekly
planning, once the material to be used has been studied and manufacturing
scripts and possible breaks have been defined.
Monthly
planning also projects setup times per equipment and assembly as a means to
take better advantage of downtimes.
The
notebook manufacturing process is carried out in two different parts of the
factory since there is equipment with different technologies. The process
described in Figure 5 is located in unit I.
Figure 5: Notebook manufacturing process at Unit I
The
notebook manufacturing process described in Figure 6 is executed at Unit II
since the equipment has different production capacity and flexibility. The
entire supply process is manual, whereas the spiraling process is automatic,
occurring right after quality control and the packing of notebooks in plastic
packages and then in boxes. Each plastic package can contain up to five
notebooks and each box up to six packages.
The
Make-to-Stock production strategy for the spiral notebook aims at hiding
possible planning failures, thus ensuring there is no lack of supply of the
product in the market during the demand period, which would be January to
March, defined by the company as the back-to-school period.
Comparing
the MTS production strategy adopted by the company and the one author Godinho
Filho (2004) describes in section 2.4, a difference can be observed in the
inventory formation point, because for the company it is interesting to form
raw material inventory before the transformation and finished product process
after distribution. The flow is shown in Figure 7 as a means to ensure
compliance with requirements production may make and that become necessary.
Figure
6: Notebook manufacturing process at Unit II
Figure 7: Company’s Make-To-Stock process flow
The
company began its activities in
Four
years later, the acquisition of new imported equipment drove the operation and
made the company an important competitor in the sector. Operations were
transferred to the city of Bauru, since the region’s potential for development
offered excellent perspectives for long-term business growth. The company has a
formally established organizational structure where administrative activities
are delegated.
The
company’s main products are: forms in general, simple and continuous, adhesive
labels and tags, rolls for commercial operations and variable data forms for
product personalization.
The delimitation of the study in
Company B will be the product line of variable data form, which will be
analyzed the manufacturing process that occurs in the unit located in the
industrial district.
The production planning of of
variable data forms (invoices, tickets etc.) is done based, mainly in the,
applications and supplemented by information on the amount of material in
process, inventory, production routes, production time and through the dedication
lines of a certain product category, according to the volume to be produced,
the quality level and delivery criticality.
Variable
data form production planning (invoices, travel tickets etc.) is conducted
based on orders and considering information about the quantity of materials in
process, inventory, production scripts, production times and the relative
dedication of lines to a specific product category, according to volume to be
produced and quality level and criticalness in delivery. As an example, we
cite: the printing line for variable data forms has four offset machines, which
are classified as micro, small, medium and large printing volume.
After
printing, they go to the collating equipment, that is, the equipment that will
make the invoice with all its copies and number the invoices as released by the
federal internal revenue.
Every
possible composition of the product is documented to assess costs, which may be
used as a means to measure performance. This documentation is comprised of
product design, list of materials, machine efficiency, setup time and
production time and minimum production lot.
Due
to a stock coverage that ranges between three and four weeks, there are
normally few weeks of raw materials in stock and in process. So FIFO is used
for both inventory and accounting management. Due to the high volume of raw
materials, possibly around 100 tons, the storage area measures approximately
three meters in width by nine meters in length and five meters in height, for
about
The
production strategy adopted by this company is Engineering-To-Order, because
before releasing the product manufacturing order to production, it is necessary
to develop the project. This encompasses everything from elaborating the design
of the form to measuring production cost, getting approval from the inspection
body, in this case the Secretary of the Treasury, and then engraving the plates
that will print the forms.
The
main function of the PCP team is to analyze the quantity of existing raw material
in stock, available production capacity, what should be produced and in what
time, and then raw materials are purchased. There is a team dedicated to sales
projections and its main function is to observe the market and its variations.
Some of the variables observed are: sales volume for the internal and external
markets; domestic and international economic policies; final consumer
purchasing power, among others, and from that information determine the volume
of raw materials to stock.
Demand
projections are elaborated by top management based on information provided by
the marketing department, sales, PCP, storeroom and production. This projection
is made every four months and may suffer alterations during the period because
it is continuously monitored by the PCP team. Elaboration is based on some
variables, like: current and past demand, annual production capacity, etc.
Part
of raw material inventory stays with the supplier and it is made available as
needed. If there is any error in projections, over or under, purchasing adjusts
next month’s purchases so there is no stoppage in production.
From
the general sales plan, PCP plans production, analyzes capacity, resources and
critical materials, best script, and then it elaborates a plan with shorter
periods (weekly). In other words, a monthly plan is broken down into four weeks
as a means to accompany volume produced and to purchase raw materials,
measuring total cost and equipment availability. This check is carried out
daily.
The
monthly plan is broken down into four weeks to inform the factory of the daily
plan, after studying the material to be used, defining manufacturing scripts
and possible breaks, so if there is any urgent order, it can be processed
without compromising what is already being produced.
The
manufacturing process for variable data forms that will be printed on offset
and collating machines according to order volume is shown in Figure 8.
Figure 8: Invoice manufacturing process
Stock in process is calculated in Kilograms. Calculation
is based on number of copies, quantity, specific weight of the paper used and
its dimensions; as per equation 06.
|
(06) |
Where:
Kg – Kilograms;
C – Length;
L – Width;
Gr – Specific Weight;
Nv – Number of Copies;
Q – Quantity.
The
objective of this calculation is to have a uniform understanding between
production, sales, marketing and accounting, thus permitting a simplified
visualization of the produced volume and even to measure idle capacity in
percent over the final months, as per equation 07.
|
(07) |
Where:
CO – Idle Capacity;
CP – Productive Capacity; and
VP – Volume Produced.
Comparing
the ETO production strategy with the strategy adopted by the company, it is
possible to observe a difference in the stock formation point, because for the
company it is interesting to form raw material stock before the project
process, so the company can quickly fill the order. In cases where there is a
project that should use very specific products, raw material stock formation
will occur before manufacturing and stock in process before assembly. Figure 9
shows the Engineering-To-Order process flow as a means to ensure meeting
requests production may make and that may prove necessary.
Figure 9: Company’s Engineering-To-Order
process flow
At
this stage, the research will be an intersection of the main features from the
various processes that consist the management of the companie`s stocks studied.
The two companies studied are considered to be large and, in consequence, they
have a well-defined organizational structure, in concern to the definition of
responsibilities between the productive activities, which are performed under
the control of industrial managers with clear definition of technical and
administrative functions.
Company
"A" has as production strategy "to make stock"
(Make-To-Stock) because the in product "notebook" has seasonality, a
limited production capacity and it has a peak demand increased in the period
when studies are returning to school, January-March. Its production begins in
June, reaching its heighost productivity in the months from October to
December, when production starts to work twenty-four hours a day.
Already
Company "B" has as strategy of production "to develop on
request" (Engineer-To-Order) for the product "form of variable
data", since this product is customized according to the customer's need
and it is not affected by seasonality, but with the need for customization
which is required by the company`s customer who is willing to wait for a reasonable
period of time, or up to five days and to be ready and to be dispatched. In
this period of time includes the evaluation process and the acceptance by the
tax department of the government.
The
layout of company "A" is by process or functional, since the resources
are pretty similar. This layout is used because the same equipment can be used
to manufacture different types of
products, due to the characteristic of the same equipment that can be used to
manufacture of "n" other products.
The
layout and the simulation of possible productive routes are structured with
reference to the productive strategy Make-To-Stock. Therefore, there should be
the size of storage areas between the various transformation processes of raw
materials and the manufacture of the finished product.
Company
"B" has a mixed layout, because it adopts both the functional and the
linear. Equipment transformers are located close to each other, having an area
of storage before and after each process, ie, there is a stock before off-set
printing, another stock between the process printing and collation, and after
collation, when the product is sent to the dispatch.
Within
this linear format, the off-set equipment, are positioned to work
simultaneously, alloing to process than more an application, or an application
in more than one printer, according to its criticality or volume. The collation
equipments are also close to each other and working in parallel, to meet the
entire volume production, defined by the PCP team.
The
layout is structured according to the productive strategy Engineering-To-Order.
This occurs because the resources processors are in the process and functional
models having, between them an area of storage, which has the lung function
between the processes, since they are arranged in a linear fashion.
Company
"A" works the management of stocks using the methodology of the first
to enter is the first to leave, since the turn of raw material in process is
very high and the measurement of these stocks is made after the ABC classification.
This measurement is made for backwards, or classify the final product, and from
it, the decomposition and classification of the products are made according to
their criticality in the process.
It
also works with the measurement of the economic lot of production because,
there are two lines of spiral notebooks production, and the line of the unit I
has low flexibility and a high volume production, because almost all the
process is automated. The only processes that are not automated are the power of
the cover, the cover and accessories.
Already
the production line of unit II has low production volume and high flexibility,
according to the product`s composition. This occurs because in this production
line almost everything is allowing a manual, greater human interference, being
the only automated processes to espiralização and the packaging.
A
system to identify the lots is used during all the transformation process of
raw materials, in order to monitor and know in which stage certain production
order is.
The
volume of stocks in process can be considered high, given that the final
product is influenced by the market whose demand is seasonal, for approximately
three months, based on the demand the strategy of production MTS.
Company
"B" works the management of inventories also focusing on the
methodology that which comes first is the first to leave, because the spin in
the process of inventory is very high, the measurement of these stocks is given
by the average cost of classification. This occurs as a way to link the
discourse between the production, the warehouse, purchasing and accounting,
since these departments are key pieces when defining the economic lot of
buying, being defined after the volume of sales, production capacity and the
volume of raw materials in stock.
The
inventories in process occur in three different stages during the production of
custom form. These stocks in process are possible because of the high
production capacity of the equipment off-set, and so we can observe a volume of
raw materials to be processed before the press and soon after that because the
collation equipments have a less productive capacity. These stocks stay between
four to six hours to collect (printed) sheets for binding.
The
management of inventory follows the guidelines that are based in the strategy
of production ETO, so there won`t be an unnecessary generation of inventory and
costs increased of storage and depreciation.
In
company "A", the stocks valuation is given by the ABC classification,
to define the most important raw material in the final product, because if they
leave oulett the production unsupplied, there will be loss and the rising of
production costs.
It
was noted that the company has been developing quantitative models in order to
measure the idle capacity from the business unit and equipment, the calculation
of the batch production as a way to
validate the idle capacity. This model aims to generate a measurement parameter
that compared with the last n months will tell how a product was processed and
allowed to generate rough estimates of how the overall performance has been.
The
company works with scheduled deliveries of raw material, since about 80% of the
month stocks are stored in the provider that, along with the purchasing staff,
PCP and warehouse, choose an interval time between the deliveries.
The alignment of the stocks assessment with the strategy of production
Make-To-Stock aims to regulate the volumes of stocks in process, raw material
and finished product.
In
company "B", the valuation of stocks is given with the strategy
Engineer-To-Order as a way to allow the measurement of volumes of raw stock and
stock in process, approved and
implemented requests that, are running or will run.
The
alignment of the assessment of stocks with the strategy Engineer-To-Order also
allows to define the volume of stock that will be stored in the company and in
the supplier, as well as supporting in the definintions in the ranges of
delivery.
In
companies A and B ", the supply of raw material by the supplier is in a
continuous manner and within a period. Deliveries are made by trucks and have
an area for loading and unloading inside the plants. The inventories in the
companies are sized to last at least from of three to six weeks of production,
as they seek to state in the contracts with suppliers the form and time of
delivery which can be adjusted during the contract`s period of time.
For
both companies, the main suppliers are defined based the product`s quality, delivery time, storage
capacity, reliability in care of requests, among others.
For
company "A", the supply process of the raw material from the supplier
to the company and from the stock to the production are aligned with the
production strategy Make-To-Stock, since the volumes may not be very high,
because they may create disturbances on the storage of raw materials that are
being processed.
As
for company "B", the supply process of the raw material from the
supplier to the company and from the stock to the production are aligned with
the production strategy Engineer-To-Order. This occurs because the raw material
willgo from out the storage area, when there isan order to manufacture, because
the finish product has unique characteristics according to its quality, forms
of production and design.
Company
"A" has several facilities in which the setup occurs in an isolated
way and at different times during the manufacturing of the product "spiral
notebook." The main setups occur in the equipments cut the sheet, which
come in rolls to the pre-determined size in that equipments off-set in
flexographic, in equipments to mount spiral notebooks according to the number
of sheets that they should have, and the accessories they will have.
The
production strategy Make-To-Stock does not influence the setup time of the
equipments, because there will always be storage areas between the processes
changing that should be keeping stocks volumes that will generate a lead time
for the setup.
In
"B" the off-set equipment setup has an average time of twenty
minutes, for changing the printing plates the ink supply system, the slides
adjustment and printing rolls for the speeddefinition and the printing quality.
In
the collation equipment the setup occurs according to the number of lanes of
forms, sizes and settings of the pressure rolls, not allowing placement tests.
These
processes are the two most important ones and impacting production and
operating results of the company since it works with a pre-determined time and
any unexpected fact can mean a loss in the productive income.
The
strategy Engineer-To-Order influences the setup time, because there may not
occur delays because the supplies have a very light delivery lead time.
Therefore, the setup stops should be scheduled to occur between an application
and another, never during a request execution.
In
company "A", the forecast for a demand is prepared by the marketing
department, based on the informations given by the production, sales, warehouse
and PCP. This prediction has a duration of one year and it may suffer changes
in the period elapsed, because it is a dynamic forecast that follows the trend
market, being supported by all the departments involved.
Its
preparation is made from the selection of some variables, such as: the previous
year's demand, the future demand, the productive capacity. The political
environment. These variables will help to form the storage strategy of the raw
material production, determining when the production should start and what
should be the volume produced.
In
"B", the board prepares the estimates of demand based on the
information given by the production, marketing, sales, warehouse and PCP, which
are discussed in meetins with the departments. This forecast is prepared for
the quarter and may suffer changes in the time elapsed since the PCP team has a
responsibility to monitor its progress.
Will
be an influent factor from the production strategy ETO, since from the forecast
of demand, will be defined the variables that will comprise the production
strategy.
It
son preparation is made from the following variables: demand in the previous
period, current and future, productive capacity, political environment etc.
These aspects issues will guide the management strategy of stocks, since all
the production follows the ETO model, which influences all the processes.
The
distribution of the finished product in company "A" is done by their
own trucks, which run a pre-determined route between the factory and the
distribution center.
In
this distribution center, the products are packed in order to reduce the risks
of damage. When the sale is completed, depending on distance, volume and the
delivery time, the product can travel by trucks, by logistics operators or by
air, and they can be packed in boxes, which are grouped in pallets and / or
containers.
The
productive strategy Make-To-Stock does not influence the distribution, because
the volume of applications only begins to improve in in the months of october
and november reachind its peak in december and decreasing again in the next
year allowing them to be met almost immediately.
In
company "B", the distribution of the finished product takes place
almost simultaneously to its finalization and, depending on the location of the
customer and its level of priority, it will be transported by trucks from the
company, by logistics operators, or by mail. Thisoccurs because the company
chose the strategy engineering-to-order.
Table
2 shows a comparison of the main features analysed in the two companies.
Table 2: Summary of the main characteristics of the
companies studied
Features |
Company A |
Company B |
Founded |
1928 |
1985 |
Number
of workers |
|
|
Market
|
School materials, agends, office and house. |
Variable data forms (invoices, tickets etc). |
Production
strategy |
Make-To-Stock (MTS). |
Engineer-To-Order (ETO). |
Forecast
preview |
Executives consensus and anuually
extrapolation. |
Executives consensus and four. |
Layout |
Por processo ou funcional. |
Misto de linear e funcional. |
Setup |
Not influence the production system. |
Influences the production system. |
supplies |
Occurs before the beginning of production. |
Can occurs in parallel to the project. |
Distribution |
There is a distribution center to attend its
production strategy. |
Occurs at the moment that the product is
released to expedition having up to 2 hours lead time. |
The
printing industry has the characteristic of being very diverse, as it should
have flexibility to meet from the public services to the manufacturing industry
as a whole.
The
objective of this research was to analyse the influence of production systems
Make-To-Stock and Engineer-To-Order on the management of stocks in the graphics
sector in the region of Bauru city, through cross-analysis of information
obtained during both studied cases and the theoretical framework.
The
purpose of defining the spectrum of the research is to not allow the loss
of the focus, maintaining one of the
main qualities that is to analyse the influence of the production Make-To-Stock
and Engineer-To-Order on the inventory management.
The
definition allows the adoption of methods that enhance the research of
influencing the way it should be guided, always observing and analyzing the
results so all the variables can be answered, Goldenberg (2002) points out that
the researcher should prepare questions related to the objectives of his study.
After
the analysis of the production system used in each of the companies presented
in the case studies, its was prepared the cross-examination of the cases where
it is possible to identify common procedures between them and those individuals
and confections, in a condensed and simplified way, a table-summary containing
its main components. After these procedures, it was developed the analyse
of the influence of the production
system on the management of inventories.
During
the data cross-examination, we could observe some differences in relation to
the literature research, which are presented below:
a) production system
Make-To-Stock: Godinho Filho (2004) observes
that the response time is the distribution lead time, but what was found was
the existence of the lead time for supplies and manufacturing, even though it
was be produced for stocking there should be the measurement of time which in
turn will generate the costs of production which should be visible throughout
the process.
Godinho Filho
(2004) in Figure 1 doesn`t show the point of training of the inventories before
the transformation process, but that must be displayed, because if there is no
point of training of lead time and inventory of supplies, how will the
production system Make-To-Stock happen?
In Figure 10 is show a model that has the aim being against to what
Godinho Filho (2004) describes in his work, which is presented the lead time
for supplies, which should be measured in the formation of the response time.
Figure 10: Process flow of Make-To-Stock
company's
b)
production system Engineer-To-Order: Godinho Filho (2004), Machado Neto (2003) and
Pessoti and Souza (2005) describe that it is an extension of the MTO system,
which is given its emphasis on the design phase, where there is no point of
formation of inventory lead time of
supplies should only occur after the project, but it was possible to observe
two distinct models, which may be adopted according to the specificity of the
customer's request:
a) In the first case the client has make an order an
application where you must use specific raw materials considered which has not
in stock, the lead time of supplies might occur in parallel to the lead time of
project or shortly after in case the supplier is ready for delivery;
b) In the second case, the client ordered where the raw
materials used are considered normal, i.e. not specific, the ones already in
stock, if the volume in stock is sufficient to initiate the process the lead
time of supplies may occur after the project and it will have the function of
recovery stocks; and
c) In both cases there should be the formation point of
stocks after the production, since there may be a lead time between the
manufacturing and assembly processes as a result of other applications that
have already been processed, as described in Figure 11.
Figure 11:
Process
flow of Engineering-To-Order company's
The
completion of case studies and came to ratify outline the thought of how the
management of stocks is influenced by the production system in the companies
surveyed, and vice versa.
The
cases described in this study enabled observations and conclusions on the
subject researched, as two companies of the graphic sector were studied that
havin management strategies different demand and that, obviously, have
similiarity in the way of managing their inventory.
We
also to had the opportunity note that currently the companies are very worried
to maintain the production system synchronized with the management of stocks
and vice versa, as a way to better meet the market requirements.
Because
this research has been conducted in only two companies in the graphics sector
with distinct management strategies demand, one of the limitations is the
generalize the procedures statistically and geographically impediment to
generalize the findings to other productive sectors, not being possible to
culture and hand - of the workforce with local characteristics.
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