AX production Module

Chapter 1: Lean Manufacturing Concepts and Overview

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CHAPTER 1: LEAN MANUFACTURING CONCEPTS AND OVERVIEW Objectives

The objectives are:

• Explain Lean basic concepts. • Explain the Value Stream theory. • Describe the production flow concept and how it is used in Microsoft

Dynamics® AX 2012. • Explain the Kanban concept and how it is used in Microsoft

Dynamics AX 2012. • Describe the Simple Production Flow example and introduce the

Contoso scenario. • Describe the High Level Production Flow example and introduce the

Contoso scenario. • Set up time units to be used in Microsoft Dynamics AX 2012. • Set up the production flow model and explain the capacity settings. • Set up work cells as resource groups. • Set up Lean schedule groups. • Describe the new inventory breakdown concept for Lean

manufacturing in Microsoft Dynamics AX 2012. • Describe standard costing and backflush costing and how they are

used for Lean manufacturing in Microsoft Dynamics AX 2012.

Introduction Lean Manufacturing Concepts and Overview is designed to introduce students to Lean principles and how Lean manufacturing for Microsoft Dynamics AX 2012 can be implemented to support those principles. The topics discussed are:

• Lean basic concepts • Value Stream theory • Introduction to production flows • Introduction to Kanbans • Setup specific to Lean manufacturing and interconnectivity with

other modules

Microsoft Official Training Materials for Microsoft Dynamics®

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Lean Manufacturing in Microsoft Dynamics® AX 2012

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Scenario

As a systems developer and consultant for Microsoft Dynamics AX 2012, you are embarking on a new project for Contoso Entertainment Systems (C.E.S.), a manufacturer of home entertainment systems. Recognizing that their existing ERP system is outdated, slow, and costly to maintain, Contoso has decided to replace it with a new system. The new system must be able to support the company in its transformation from traditional manufacturing to Lean manufacturing to remain competitive in the world market.

Your company specializes in Lean manufacturing, and your intention is to implement the value of Lean manufacturing for Microsoft Dynamics AX 2012 to support C.E.S. in their initiative to transform their business.

You and the Value Stream Manager, Pierre, go through the process of modeling Contoso's Value Streams within Lean manufacturing for Microsoft Dynamics AX 2012 and architecting a solution to support their Lean processes now and in the future.

Core Concepts The core concepts for Lean manufacturing in Microsoft Dynamics AX 2012 provide a base level understanding of Lean concepts necessary to understand the system functionality within Microsoft Dynamics AX 2012.

Five Lean Principles

In their fundamental work for Lean, Womack and Jones defined the five Lean principles:

• Customer Value • Identify the Value Stream • Flow • Pull • Perfection

(Womack & Jones, 2003)

Lean Principle: Identifying Value

When identifying the value, you would specify what creates value from the customer's perspective.

• The customer defines the value of product in a Lean supply chain. • Value-adding activities transform the product closer to what the

customer actually wants. • An activity that does not add value is considered to be waste.




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Lean Principle: Understanding the Value Stream

The Value Stream is the sequence of processes all the way from raw material to final customer or from product concept to market launch. If possible, look at the whole supply chain.

• The Value Stream is the sequence of processes from raw material to the product provided to the customer that creates value.

• The Value Stream can include the complete supply chain.

Value Stream Mapping is an important tool to help model the Lean transformation.

“The Value Stream is those set of tasks and activities required to design and make a family of products or services that are undertaken with a group of linked functions or companies from the point of customer specification right back to the raw material source.”

(Hines et al., 2000)

Lean Principle: Creating Flow

Create flow wherever possible in the process.

• Make the value process flow. • Using one piece flow by linking all the activities and processes into

the most efficient combinations to maximize value-added content while minimizing waste.

• The waiting time of work in progress between processes is eliminated; hence, adding value more quickly.

Lean Principle: Introducing Pull

Make only what is needed by the customer (short term response to the customer’s rate of demand).

Pull: response to the customer’s rate of demand, that is, the actual customer demand that drives the supply chain.

With a pull concept, based on a supply chain view from downstream to upstream activities, nothing is produced by the upstream supplier until the downstream customer signals a need.

Lean Principle: Striving for Perfection

The last Lean principle is to strive for perfection. In striving for perfection, Lean is a journey of continuous improvement. The goal is to produce exactly what the customer wants, exactly when the customer wants, economically. Perfection is an aspiration, anything and everything is able to be improved.




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Lean Enterprise

The Lean enterprise is defined as “[a] group of individuals, functions, and sometimes legally separate but operationally synchronized organizations” (The Association for Operations Management [APICS], 2005, p.60)

Lean Enterprise: Value Stream

The objectives of the Lean enterprise are to correctly specify value to the ultimate customer, and to analyze and focus the Value Stream so that it does everything from product development and production to sales and service in a way that actions that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer. (APICS, 2005, p.60)

Therefore, the Value Stream, alongside a new concept of the production flow, is used to model the structure of the Lean enterprise in Microsoft Dynamics AX 2012. It is used to support these operations of the Lean enterprise:

• Lean planning and forecasting (takt, cycle time, throughput, schedules)

• Cellular manufacturing • Flow manufacturing • Lean accounting /Value Stream costing • Six Sigma

Cell and Line Design

In The New Lean Toolbox, John Bicheno describes the process for cell and line design:

Cell and line design is a hierarchical process, from factory layout to detailed workstation ergonomics:

• Product family or Value Stream identification • Value Stream Mapping • Strategy and subcontract issues • Plant layout and location of supermarkets • Activity timings and sampling • Calculate takt and cell cycle time • Identify any constraints • Paper kaizen • Theoretical minimum activity times • Theoretical minimum operators • Cell reference cost and savings calculation




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• Cardboard simulation • Cell layout design • Operator balancing • Workstation ergonomics • Pull system design

(Bicheno, 2004, p. 31)

In opposition to the classical MRP approach, where individual items are linked to individual and independent resources or resource groups (work centers, groups), the Value Stream unifies the process for a product family in a top down approach, before defining (or possibly eliminating) exceptions on the item level.

Lean Terminology

There are ten basic Lean core elements that will be used throughout the training course. These are:

• Value Stream • Kaizen • (Work) Cell • Cycle time • Takt time • Supermarket • Production flow • Backflush costing • Kanban • Heijunka leveling

Definitions of these core elements are presented in these sections:

• Lean Terminology: Value Stream, Kaizen, and (Work) Cell • Lean Terminology: Cycle Time and Takt Time • Lean Terminology: Supermarket and Production Flow • Lean Terminology: Backflush Costing, Kanban, and Heijunka

Leveling




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Lean Terminology: Value Stream, Kaizen, and (Work) Cell

These are the definitions of the Lean core elements of Value Stream, Kaizen, and (Work) Cell.

Core elements Definition

Value Stream A Value Stream is "the processes of creating, producing and delivering a good or service to the market" (APICS, 2005, p.121). In Microsoft Dynamics AX 2012, the Value Stream is represented by one or multiple production flows. It can also be modeled as an operating unit costing purposes.

Kaizen Japanese for "continuous improvement." Kaizen is a management philosophy emphasizing employee participation, where every process is continuously evaluated and re-evaluated to eliminate waste.

(Work) Cell A (work) cell is a “manufacturing or service unit consisting of a number of workstations and the materials transport mechanisms and storage buffers that interconnect them” (APICS, 2005, p. 16). In Microsoft Dynamics AX 2012, a work cell is a resource group, where resources are grouped to execute a process flow. The work cell represents the effective capability of all resources assigned to the cell. It is handled as a black box, meaning that the internal structure of the cell is not documented in the system.




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Lean Terminology: Cycle Time and Takt Time

These are the definitions of the Lean core elements of Cycle time and Takt time.


Cycle time The cycle time of a product refers to the “time between completion of two discrete units of production. For example, the cycle time of motors assembled at a rate of 120 per hour would be 30 seconds. In materials management, it refers to the length of time from when material enters a production facility until it exits” (APICS, 2005, p. 27). In Microsoft Dynamics AX 2012, the average cycle times for each activity of a production flow are determined at the validation of a production flow version based on the takt requirement of a production flow version. The actual cycle times are calculated for a defined period and compared to the average through the cycle time performance control.

Takt time Takt time "sets the pace of production to match the rate of customer demand and becomes the heartbeat of any Lean production system. It is computed as the available production time divided by the rate of customer demand. For example, assume demand is 10,000 units per month, or 500 units per day and planned available capacity are 420 minutes per day. The takt time = 420 minutes per day/ 500 units per day = 0.84 minutes per unit. This takt time means that a unit should be planned to exit the production system on average every 0.84 minutes” (APICS, 2005, p. 115). In Microsoft Dynamics AX 2012, the takt requirements are defined on a production flow version. For production flows that feed into other flows, the takt requirements can be calculated based on the target cycle times of the consuming activities.




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Lean Terminology: Supermarket and Production Flow

These are the definitions of the Lean core elements of Supermarket and Production flow.


Supermarket "In essence, a supermarket is a central storage location where (raw) materials are stored near their point-of-use so customers (or consumers) can pull them as needed. Supermarkets are used to: • Minimize transaction costs • Facilitate visual management • Establish the framework for a point-of-use Kanban

system (pull)" (Gross & McInnis, 2003, p. 185). Supermarket areas should be grouped together to enable the material handler to visit on his or her regular routes. It is called a supermarket because that is where the material handler “goes shopping” for parts (Bicheno, 2004, p. 104).

Production flow

The production flow is a part of a Value Stream that “covers the ‘door to door’ production flow inside a plant, including shipment to the plant’s customers and delivery of supplied parts and material” (Rother & Shook, 2003, p. 3). The flow of material and products throughout work cells and locations for a specific production or supply scenario can be described as a sequence or small network of process or transfer activities, called a production flow. In Microsoft Dynamics AX 2012, a production flow is linked to an operating unit that plays the role of the Value Stream.




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Lean Terminology: Backflush Costing, Kanban, and Heijunka Leveling

These are the definitions of the Lean core elements of Backflush costing, Kanban, and Heijunka leveling.


Backflush costing

“A cost accumulation method where the application of costs is based on the output of a process. Backflush costing is usually associated with repetitive manufacturing environments” (APICS, 2005, p. 8). Backflush costing omits recording some or all of the journal entries that relate to the stages from the purchase of direct materials to the sale of finished goods. Since some stages are omitted, the journal entries for a subsequent stage use normal or standard costs to work backward to “flush out” the costs in the cycle for which journal entries were not made.

Kanban Japanese for “visible record.” Kanbans have been adopted by many industries as a method of controlling production and internal supply. A Kanban can apply to a paper ticket or a physical container. A Kanban is “[a] method of Just-in-Time production that uses standard containers or lot sizes with a single card attached to each. It is a pull system in which work centers signal with a card or other device that they wish to withdraw parts from feeding operations or suppliers. The Japanese word Kanban, loosely translated, means card, billboard, or sign, but other signaling devices such as colored golf balls have also been used. The term is often used synonymously for the specific scheduling system developed and used by the Toyota Corporation in Japan” (APICS, 2005, p. 58). In Microsoft Dynamics AX 2012, a Kanban is a pull signal that represents demand and triggers process and transfer activities for a unit of a specific item or item family.

Heijunka leveling

A production leveling technique using either volume or product mix. In Microsoft Dynamics AX 2012, the Kanban schedule board is designed to be used as a Heijunka board to level production load on a cell




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Supported Lean Principles in Microsoft Dynamics AX 2012

This section helps you understand how Lean manufacturing for Microsoft Dynamics AX supports Lean principles and processes.

Supported Lean Principle: Value Streams

The future state Value Stream can be modeled in Microsoft Dynamics AX as a production flow. All processes of the Value Stream are modeled as process activities. Movements or transfers can be modeled as transfer activities, if the transfer status has to be registered or if an integration to inventory picking or consolidated shipments is required.

The Value Stream is modeled as an operating unit in Microsoft Dynamics AX. This allows the use of the Value Stream as a financial dimension.

Supported Lean Principle: Production Flows

To establish a production and cost context for the various Kanban scenarios that are proposed in Microsoft Dynamics AX 2012, the activity-based production flows are introduced as the backbone of Lean manufacturing. All Kanban rules refer to this pre-defined structure. The activity-based model allows the setup of a wider range of scenarios than supported by previous versions of Lean manufacturing for Microsoft Dynamics AX, without adding complexity for the shop floor workers, because all scenarios use the same activity-based user interface.

Supported Lean Principle: Lean Accounting - Production Flow Costing

Lean manufacturing disrupts the traditional cost concepts of job costing, because the context of a production order is not available. Lean manufacturing for Microsoft Dynamics AX 2012 uses the production flow as the cost accumulator. Cost of material, and semi-finished and finished products are tracked for each item and cost group. Work in process (WIP) is tracked for every production flow.

Supported Lean Principle: Pull Based Manufacturing - Kanban

In Microsoft Dynamics AX 2012, Kanban is implemented as a framework to plan, track, and process based on pull signals. The Kanban framework supports Lean processes in combination with the other Lean modules:

• Value Stream, Production flow, and Cell • Visual planning boards (Heijunka) • Kanban schedules




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Supported Lean Principle: Semi-Finished Products

In previous versions of Microsoft Dynamics AX, Kanban rules cannot be set up for semi-finished products. A common mitigation for this issue is to introduce additional BOM levels, which in the worst case, results in a non-Lean explosion of BOM levels and thereby inventory transactions. Lean manufacturing for Microsoft Dynamics AX integrates Kanbans for inventoried products and semi-finished products in a single framework, offering a unified user experience for all use-cases.

Supported Lean Principle: Capable to Promise

The Capable to Promise (CTP) functionality provides the order takers with accurate information at the point of order entry about the availability of products, material, and resources needed to satisfy a specific customer demand.

This is implemented with two sub-features:

• Delivery date control CTP: The CTP delivery date control helps in verifying the requested ship date and potential of updating the confirmed ship date on a sales line. This is enabled by extending the existing delivery control with a CTP option that will trigger a Master Scheduling explosion and the returned futures date is used as the suggested ship date.

• Sales event Kanbans with CTP check on the work cell schedule: In Lean manufacturing, the availability of resources can be determined by loading the Kanban jobs on the Kanban job schedule that are related to a work cell. The availability of material is determined by explosion and pegging within Microsoft Dynamics AX 2012.

Supported Lean Principle: Kanban Quantity Calculation

Determining the Kanban quantity is one of the most important tasks of Kanban planning. Microsoft Dynamics AX 2012 provides the capability to calculate the Kanban quantity by taking forecast, material demands from open orders, and historical demands into account.

Supported Lean Principle: Barcoding

The Kanban boards integrate standard barcoding operations with Lean manufacturing. Barcodes can be used to manage Kanban transactions and provide visibility of material flow.




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Supported Lean Principle: Mixed Mode Manufacturing

Lean manufacturing can be introduced in different ways. While some companies start with the Lean philosophy and try to apply the Lean principles, Value Stream by Value Stream, others take a more local approach and start from specific work cells where resources and demand structure allow or even require a Lean approach.

Microsoft Dynamics AX 2012 supports mixed mode manufacturing environments where both Lean manufacturing and traditional manufacturing exist. Mixed mode scheduling within Microsoft Dynamics AX 2012 uses Master Planning to reconcile and manage master planning approaches where a mixture of traditional production orders and Kanbans are used.

Where Lean transformations are currently in progress, the concept of the pull point is supported throughout the Kanban architecture. Within the pull point, the buffer is the limit of “push” and its size and method of fulfillment are under the control of traditional techniques, such as forecasting and MRP. Beyond the buffer, inventory will be pulled through Lean processes. Microsoft Dynamics AX 2012 has provided various Kanban scenarios to help link traditional push and Lean pull systems.

The Value Stream The Value Stream is defined as the sequence of processes from raw material to final customer or from product concept to market launch. The Value Stream should encompass the entire supply chain.

In Microsoft Dynamics AX 2012, the Value Stream is represented by one or multiple production flows. It is also represented as an operating unit in the organization hierarchy of the enterprise. The Value Stream should be analyzed to eliminate any non-value adding activities. Value Stream mapping is the process of identifying and charting the flows of information, processes, and physical items across the entire supply chain, from the raw material supplier to the possession of the customer.

Value Stream mapping is not part of Microsoft Dynamics AX 2012 functionality, but provides the needed setup inputs into Lean manufacturing for Microsoft Dynamics AX 2012.

Support of Operations

In Microsoft Dynamics AX 2012, the Value Stream is used to support these operations of the Lean Enterprise:

• Lean planning and forecasting (takt, cycle time, throughput, schedules)

• Cellular manufacturing • Flow manufacturing




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• Lean accounting/Value Stream accounting • Six Sigma

When you are considering an implementation of Lean manufacturing in Microsoft Dynamics AX 2012, the ground work must be laid through defining the Value Streams, mapping them, and eventually setting this up within the system.

In Microsoft Dynamics AX 2012, the Value Stream is configured as an operating unit. This allows you to use the Value Stream as a financial dimension. Multiple production flows can exist for a company that uses this operating unit for each company.

Demonstration 1.1: Setting up Value Streams

Scenario: After defining and mapping the Lean Production Value Stream for one of the C.E.S. companies, Contoso Entertainment United States (CEU), Pierre, the Value Stream Manager, creates the Value Stream within Microsoft Dynamics AX 2012.

To set up a Value Stream as an operation unit, use this procedure:

1. Click Production Control > Setup > Organization > Value Streams.

2. Click the New button to create a new Value Stream. 3. Enter the Name of Value Stream (for example, Lean Production). 4. Enter the Search Name for the Value Stream (for example, Lean

Production).




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5. Select the Value Stream Manager in the Manager field (for example, Allison Brown).

6. Enter address and contact information if applicable in the Addresses and Contact information FastTabs.

FIGURE 1.1 VALUE STREAM OPERATING UNIT

Introduction to Production Flows A Lean manufacturing scenario is usually more than an accumulation of unrelated Kanban rules or material-supply policies. The flow of material and products throughout work cells and locations for a specific production or supply scenario can be described as a sequence or small network of process or transfer activities, called a production flow.

Value Stream and Production Flow

The result of the mapping process, the future state Value Stream, can then be modeled in Microsoft Dynamics AX 2012 as a production flow version. All processes of the Value Stream are modeled as process activities. Movements or transfers can be modeled as transfer activities, if the transfer status has to be registered or if an integration to inventory picking or consolidated shipments is required.

Many production flows can make up the Value Stream. The production flow can produce products for consumers or other production flows. In the case where the products of a production flow are used in another flow, this is called a “Feeder Flow.”




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Production Flow Function

Production flows are introduced as the backbone of Lean manufacturing, as they perform these functions:

• Define the process and transfer activities of the Value Stream. • Support the Kanban rules in defining the activities a Kanban goes

through. • Provide an activity-based context for the planning and production

processes. • Establish a cost context for the various Kanban production scenarios.

Continuous Improvement

To support continuous improvement, the production flows are implemented in time-effective versions. This allows you to copy an existing production flow version—including all related Kanban rules—to a draft version of the production flow, and model the future-state production flow before validating and activating it for production.

Semi-Finished Products (Non BOM levels)

In many inventory transaction-based Kanban solutions, Kanban rules cannot be set up for semi-finished products. A common mitigation for this issue is to introduce additional BOM levels, which in the worst case results in a non-Lean explosion of BOM-levels and thereby inventory transactions. Lean manufacturing for Microsoft Dynamics AX 2012 integrates Kanbans for inventoried products and semi-finished products in a single framework, offering a unified user experience for all cases.

Products and Materials in Work in Progress

The reduction of batch sizes down to the ideal state of a single piece flow in Lean manufacturing can cause a dramatic increase of inventory transactions if each picking process or Kanban registration causes transactions for the consumed items.

The production flow architecture allows the transfer of material to the production flow with withdrawal Kanbans in storage or transport handling unit sizes. The value of the issued material is added to the Work in Progress (WIP) account that is related to the production flow, similar to material that is issued to a production order. The same principle can be applied for products and semi-finished products—unless they are created, transferred, or consumed within a production flow; inventory transactions are optional, not mandatory. Once the products are posted to inventory, the WIP account to the production flow is deducted by the related standard cost.




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Introduction to Kanbans The word “Kanban” means “visible record” in Japanese. Kanban has been adopted by many industries as a method of controlling production and internal supply.

Kanban is an essential part of a pull system of supply, which is a critical element of Lean production/supply. When a Kanban has been consumed, it should be passed (triggered) to the source of supply to replenish it. This source of supply is defined through the production flow activities that the Kanban is linked to, providing the definition of how the Kanban is filled. Kanban rules in Microsoft Dynamics AX 2012 are essential to production flows, as they define the activities that a Kanban rule goes through.

Kanban Types

Lean manufacturing in Microsoft Dynamics AX provides two Kanban types that are used to define how the empty signal is filled: manufacturing and withdrawal.

Kanban Type: Manufacturing

A Kanban of the type “manufacturing” is assigned to at least one process that adds value. The Kanban is assigned to a production flow activity and thus a resource group with the role of a work cell, where the value is added. Manufacturing Kanbans relate to at least one process activity. The first activity of a manufacturing Kanban must be a process activity. A process activity can be followed by a transfer or another process activity, allowing a Kanban to span multiple activities.

Kanban Type: Withdrawal

A Kanban with the type “withdrawal” creates a transfer job that is based on a single transfer activity. Withdrawal Kanbans are used to move a Kanban of a specific item between supermarkets, warehouses, and production locations. Withdrawal Kanbans do not add value.

Kanban Replenishment Strategies

Microsoft Dynamics AX 2012 Kanban rules can be set up to support a variety of make-to-stock and make-to-order scenarios through various Kanban replenishment scenarios:

• Fixed quantity Kanbans to support traditional fixed card and two bin type systems.

• Several Kanban types to support variable quantity scenarios including: o Minimum on-hand inventory triggered Kanbans o Planned Kanbans calculated by Master Scheduling from

requirements




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o Sales order entry triggered Kanban generation o Kanbans generated from production order BOM line

requirements o Kanbans generated from Kanban line requirements

Fixed Quantity Kanbans

A fixed quantity Kanban rule relates to a fixed number of bins or Kanban cards, meaning that the number of active Kanbans is constant. Whenever a material handling unit related to a Kanban is consumed (emptied), a new Kanban of the same type is recreated. Fixed quantity Kanbans are often used with fixed circulating cards, but can also be used with single use cards. When circulating cards are used, the card is detached from the consumed Kanban and assigned to the new created Kanban.

Single Use Kanbans: A fixed quantity Kanban is a “make-to-stock” scenario. Additional single use Kanbans can be used to cover additional demand to level specific exceptional demand. Single use Kanbans are only (and always) based on fixed quantity rules and no specific rules need to be created for this replenishment strategy. Instead, the Kanbans have a flag that marks them as manual. You can also use event Kanbans for exceptional demand above a certain quantity to maintain the buffer stock of a fixed Kanban.

Scheduled Kanbans

Master Planning creates scheduled Kanbans automatically for planned Kanban orders to cover the requirements within the firm horizon of the production forecast. Scheduled Kanbans can also be manually created.

Event Kanbans

Event Kanbans are only created out of the related demand, so event Kanbans belong to the category “make-to-order”. The creation of event Kanbans is initiated when certain events occur. In Microsoft Dynamics AX 2012, these events include when you create sales lines, when estimating production orders, upon creation of upper level Kanban demand, or when reaching a certain level of on hand inventory.

Event: Sales Line and BOM Line Events

The descriptions of the Kanban events of sales line and BOM line events are:

• Sales line event: This event creates the pull for final assembly, packaging, or simply shipping out of the sales orders. When a sales order is entered, the Kanbans that are needed to produce or withdraw the goods to satisfy the customer order are created automatically or by the pegging event processing batch job.




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• BOM line event: In a mixed mode environment (that is, a company is using Kanbans and production orders in the same facility), a picking list is created based on a production order to withdraw material from warehouses or other upstream processes. If the warehouse or the upstream process is controlled by event Kanbans, the picking list creates the related Kanbans (manufacturing or withdrawal) of the related item source.

Event: Kanban Line Event and Stock Replenishment Event

The descriptions of the Kanban events Kanban line and stock replenishment events are:

• Kanban line event: Similar to a picking list, the creation of Kanbans that pull components to Kanbans is used to pull the required material to a downstream manufacturing process. This is only needed when the material is varying by event and a high number of variants (strangers) are required (otherwise, a fixed quantity Kanban environment is recommended).

• Stock replenishment event: Whenever on-hand inventory is reduced for an item on a coverage dimension that is covered by an event Kanban rule, and inventory falls under the minimum stock as designated on the item's coverage, an event Kanban is created to replenish that minimum stock. The pegging event processing in Lean manufacturing checks minimum inventory for selected Kanban rules and creates the needed Kanbans to replenish.

Diagram: Kanban Type/Replenishment Strategy

This diagram shows the Kanban types and replenishment strategies available in Microsoft Dynamics AX 2012.

FIGURE 1.2 KANBAN TYPE/REPLENISHMENT STRATEGY




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Kanban Boards

Visual planning and implementation is important for companies that are on the Lean journey. Many companies spend considerable time and effort updating the data on manually-created visual boards on the shop floor (Kanban boards, Kaizen boards). The Kanban boards, which are available within Microsoft Dynamics AX 2012, are designed to automate many of the manual and time-consuming visual systems by leveraging the data within the enterprise system and integrating Lean concepts into system generated visuals.

Kanban Schedule Board

The Kanban schedule board is designed to be used as a Heijunka board to level production load on a cell. The planner drags and drops the Kanbans on the desired production day or week depending on the period type related to the Lean production flow model. The work cell capacity is shown and decremented as additional Kanbans are added to a bucket on the schedule. Once planned, Kanban jobs will be available to process on the Kanban board for process jobs form. Kanbans that are automatically scheduled do not require manual dragging and dropping, but rather will load onto the period.

This figure shows an example of the Kanban schedule board.

FIGURE 1.3 KANBAN SCHEDULE BOARD




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Kanban Board for Process Jobs

Manufacturing Kanbans are performed on the shop floor using the Kanban board for process jobs. Once planned, the Kanbans will appear on this board.

Specifically for the shop floor in Lean manufacturing, three user profiles have been evaluated in an extensive customer field research that included visits to a variety of different manufacturing companies in Europe, the United States, and Canada.

• The shop floor supervisor – needs a complete overview of what goes on in a specific work cell, and decides on priorities and sequences of jobs.

• The waterspider – replenishes supermarkets on the shop floor, prepares handling units and picks material for Kanbans or production orders, puts away finished products, or moves semi-finished products to the next work cell or supermarket.

• The machine operator / shop floor worker – is reporting the start and end of jobs.

In the manufacturing floor, these three roles often have some overlap. Dependent on throughput and importance, waterspiders have been found to be dedicated for a single work cell or for a group of work cells. Some Lean organizations remove the system interaction for the machine operators and use the waterspiders to report the finished goods.




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Kanban Board for Process Jobs: User Interface

The result of this research is a new user interface for Lean manufacturing that combines all requirements for the three manufacturing roles into a single, configurable, and scalable user interface.

This figure shows an example of the Kanban board for process jobs.

FIGURE 1.4 KANBAN BOARD FOR PROCESS JOBS

Kanban Board for Transfer Jobs

Withdrawal Kanbans are performed on the shop floor using the Kanban board for transfer jobs.

The Kanban board for transfer jobs form is designed to enable a waterspider the visibility to gather materials to replenish line side supermarkets and to support the picking of materials from supermarkets. Physical traceability requirements are also supported. The waterspider can filter the board in a variety of ways, including:

• Production flow • Activity name • Transfer from: site, warehouse, and location • Transfer to: site, warehouse, and location




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An example of the Kanban board for transfer jobs is shown in this figure.

FIGURE 1.5 KANBAN BOARD FOR TRANSFER JOBS

Simple Production Flow The simplest form of a production scenario for Lean manufacturing is a production flow where all operations are grouped to a single process activity in a single work cell.




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Scenario: Simple Production Flow

Scenario: Pierre has set up a production flow to model the process of painting covers. The speaker cover paint shop is picking unpainted covers from the warehouse. The painted covers are supplied to a supermarket where they can be picked for other manufacturing processes or for sales.

FIGURE 1.6 SIMPLE PRODUCTION FLOW

Scenario: Simple Production Flow: Setup

The production flow is set up for the general activity “painting,” no matter what item variant, color, or specific painting process is applied, providing it is happening in the same group of resources at the same physical location. The activity times and cycle times for a production flow activity are initially set for an average process.

A fixed quantity Kanban rule is then created for the process activity for “painting,” which manages the Kanban signal for the painted speaker covers that replenish the painted speaker cover supermarket.




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High Level Production Flow The high level production flow introduced in this topic provides a more detailed production scenario of assembling and packaging car speakers. The high level production flow shows the interconnection between activities and Kanbans.

Scenario: High Level Production Flow

Scenario: Pierre has set up a production flow and Kanban rules for CEU to model the process of assembling and packaging car speakers to be sold to the customer. Pierre now goes through the production flow together with you to review the basic setup of the process activities, transfer activities, and Kanban rule relationships to understand the basic scenario.

FIGURE 1.7 CEU SPEAKER ASSEMBLY AND PACKAGING PRODUCTION FLOW




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Scenario: High Level Production Flow - Replenish the VMI Warehouse

Beginning with the customer pull in Figure 1.7 CEU Speaker Assembly and Packaging Production Flow, the various elements of the production flow are broken down in Figure 1.8 CEU Packaging and Transfer to VMI Activities. There are two scenarios for the end pull to the customer. The first scenario (shown in this figure) replenishes the VMI warehouse where material is packaged and transferred to the customer.

FIGURE 1.8 CEU PACKAGING AND TRANSFER TO VMI ACTIVITIES

A process activity controls the packaging and a transfer activity controls the transfer to VMI. A sales event Kanban is used to trigger the Kanban based on sales order demand and pulls the finished good through the Packaging process to the VMI warehouse.

Scenario: High Level Production Flow - Replenish the Sales Warehouse

The second scenario shown in Figure 1.9: CEU Packaging and Transfer to VMI Activities replenishes the Sales warehouse where material is packaged to fill the Sales warehouse to be sold to the customer.

FIGURE 1.9 CEU PACKAGING AND TRANSFER TO SALES ACTIVITIES




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A process activity controls the packaging, and a transfer activity controls the transfer to the Sales warehouse. A scheduled Kanban is used to trigger the Kanban based on demand and pulls the finished good through the Packaging process to the Sales warehouse.

Scenario: High Level Production Flow - Packaging Materials Replenishment

The Packaging process requires packaging materials stored in another warehouse to be used in the process. A transfer activity moves the packaging parts from a Packaging material warehouse to the Packaging work cell. A fixed quantity withdrawal Kanban is used to control this movement.

FIGURE 1.10 CEU PACKAGING MATERIALS REPLENISHMENT




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Scenario: High Level Production Flow - Assembly and Packaging Activities

A process activity controls the car speaker assembly process that is performed before the packaging process. A sales line event Kanban is used to trigger the Kanban based on the upper level sales demand to perform the assembly.

FIGURE 1.11 CEU CAR ASSEMBLY AND PACKAGING ACTIVITIES

Scenario: High Level Production Flow - Mechanical Parts Replenishment

The Car Speaker Assembly process requires Mechanical parts that are stored in another warehouse to be used in the process. A transfer activity moves the packaging parts from a Mechanical parts warehouse to the Car speaker assembly work cell. A fixed quantity withdrawal Kanban is used to control this movement.

FIGURE 1.12 CEU MECHANICAL PARTS REPLENISHMENT




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Scenario: High Level Production Flow - Electrical and Speaker Assembly

The Electrical Assembly process supplies a supermarket in WIP for the Car Speaker Assembly process. The parts are not posted in inventory. A fixed quantity manufacturing Kanban replenishes the supermarket for these mechanical pre-assembly parts. The Car Speaker Assembly process posts this material to WIP.

FIGURE 1.13 CEU ELECTRICAL ASSEMBLY AND CAR SPEAKER ASSEMBLY WIP ACTIVITIES

Setup and Interconnectivity As with all modules in Microsoft Dynamics AX 2012, there is a high degree of integration and interconnectivity between the Lean manufacturing functionality and other modules. This interconnectivity allows the production flow to act as the mainstay for Lean manufacturing and maintain important relationships for the planning, scheduling, and implementation pieces of the production process. The processes described in this lesson are listed in the order that they need to be conducted.

Time Units

As production flow activities and resource group capacity settings require definition in time units, these must be set up properly as a unit with a new concept in Microsoft Dynamics AX 2012 of Unit class referring to Time.

Time units for days, hours, minutes and seconds should be present with the Unit class of Time. Proper unit conversions should also be created for these time units.




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These time units can then be set up as the defaults within the production parameters Unit of Measure tab to establish the default units of measure that are used to define activity times and lead times. The Default time unit for production flows should be set on the Lean manufacturing tab of the Production Parameters.

Production Flow Model

The production flow model predefines the calendar and capacity usage for a group of work cells and for the detailed settings in the production flow processes. It also predefines the structure and behavior of the Kanban schedule for the cells. A unique production flow model should be defined for a category of work cells that have similar behavior.

FIGURE 1.14 CEU CAR SPEAKER PRODUCTION FLOW MODEL

Production Flow Model: Model Type

The most important property of the production flow model is the model type, which selects the method to measure capacity for the work cell. The production flow model defines the capacity settings for the work cell. The options are:

• Throughput: The capacity and load of a work cell are measured in quantities of product that are produced.

• Hours: The capacity and load of a work cell are measured in periods of hours and minutes.

NOTE: After you create a production flow model, you cannot change the value of this field.




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Production Flow Model: EPE Cycle in Days

Every Product Every (EPE) defines the number of days within the EPE cycle that is used in automatic planning. The value in this field is used to calculate the period when a Kanban job is scheduled:

Start date = Due date – EPE cycle.

NOTE: After you create a production flow model, you can change the value of this field. The change does not affect jobs that were previously created.

Production Flow Model: Capacity Shortage Reaction

The Capacity shortage reaction defines the method of Kanban scheduling to use if there is no capacity available during the required period. This parameter is only used when the Kanban auto planning is used for Process jobs. The options are:

• Postpone: The job is postponed until the day that throughput becomes available.

• Cancel: Automatic planning of the Kanban job is cancelled. • Add to the requested period: The job is added to the scheduled

period of the required date. The result is that the work cell is overloaded during the scheduled period.

• Distribute: The Kanbans of a single event are distributed to the available production periods, starting with the first available period.

Production Flow Model: Planning Period Type

The planning period is used for planning Kanbans automatically and using the Kanban schedule board. The options are:

• Day: The Kanban schedule consists of periods of calendar days. The Kanban schedule board displays days for each column for scheduling.

• Week: The Kanban schedule consists of periods of weeks. The Kanban schedule board displays weeks for each column for scheduling.

Production Flow Model: Planning Time Fence

The Planning time fence defines the number of planning periods that are defined in the Planning period type to use in the planning time fence. Planning periods can be either days or weeks. The Kanban schedule board displays the Kanban jobs that are scheduled during the defined planning time fence. Kanbans can only be scheduled within this planning time fence.




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NOTE: The Capable to promise (CTP) based on the work cell schedule only covers the schedule horizon that is set in the Planning time fence field of the production flow model. Outside of this horizon, only CTP Explosion applies.

Demonstration 1.2: Creating A Production Flow Model

Scenario: Pierre has come to a logical grouping of work cell capacity that has similar behavior in capacity load for the work cells that are used to model his Car Speaker production flow.

Use this procedure to create a production flow model:

1. Click Production Control > Setup > Lean manufacturing > Production flow models.

2. Select New button or select CTRL+N to create a new line. 3. In the Production flow model field, enter an alphanumeric identifier

up to fifty characters in length (for example, PFModel). 4. In the Model type field, select Throughput or Hours (for example,

select Throughput). 5. In the EPE Cycle in days, enter a numeric value (for example, enter

1). 6. In the Capacity shortage reaction field, select Postpone, Cancel,

Add to the requested period or Distribute (for example, select Add to the request period).

7. In the Planning period type field, select Day or Week (for example, select Day).

8. In the Planning time fence field, enter a numeric value (for example, enter 10).

Work Cells

Lean work cells are modeled in Microsoft Dynamics AX 2012 using resource groups, where resources are grouped to initiate a process flow. Activities within a production flow are assigned to a work cell.

A work cell has a determined capacity that is typically expressed in throughput. All manufactured items can be mapped to that throughput by setting a ratio within the Lean schedule groups, which is described further in this topic.

The work cell represents the effective capability of all resources that are assigned to the cell. It is handled as a black box, meaning that the internal structure of the work cell is not documented in the system.

NOTE: Resource groups that are designated as work cells cannot be used for long term capacity planning. To model long term capacity planning, a route must be set up using resource groups that are not designated as work cells.




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Example: Creating Resource Groups as Work Cells

To create a resource group as a work cell, these actions are performed:

1. The resource group is marked as a Work cell. 2. Input and Output Warehouses and Locations are specified. 3. A Run time category is defined if direct labor is tracked in costing. 4. A Calendar is assigned to the resource group. 5. The work cell capacity is defined using a Model type to define

capacity as Hours or Throughput to define the throughput capacity of the work cell.

6. Work cells managed by a subcontractor are marked as resource type Vendor.

Work Cells: Input/Output Warehouses and Locations

Default Input and Output warehouses and locations are placed on the work cell. The default Input warehouse and Input location define warehouses and locations to use as the supplying warehouse and location for the work cell. The default Output warehouse and Output location define warehouses and locations that designate the target warehouse and location for items produced in this work cell.

Work Cells: Calendar

Calendars are assigned to the selected work cell. You can also set the expiration and start dates for the assigned calendars. The active calendars are used for calculating capacity. Depending on the Model type of Throughput or Hours, the calendar is used in calculating capacity in different ways.

A new concept called Standard workday has been added to the calendar to help define the capacity for Throughput. Standard workday defines the length of a standard workday in hours for a work cell.

The standard workday hours describe the length of a workday related to the given throughput (capacity) of a work cell. According to the working time template, every day could have a different length.

The standard workday also defines the scaling range of a workday in the Kanban schedule board.

Work Cells: Work Cell Capacity

The work cell capacity defines the capacity settings for the work cell. The production flow model is attached to the work cell and defines the basic capacity settings discussed in "Chapter 1: Lean Manufacturing Concepts and Overview: Production Flows: Setup and Interconnectivity: Production Flow Model: Model Type".




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Work Cells: Work Cell Capacity - Model Type

When you are defining the work cell capacity, the Model type selected from the production flow model is how capacity is expressed for the work cell. A work cell can be of two different capacity models:

• Throughput - the average throughput capacity of the work cell for the capacity period.

• Hours – if this option is chosen, the Capacity period and Average throughput quantity and unit are inactive. The related capacity is then determined through the calendar.

Work Cells: Work Cell Capacity - Throughput Model Settings

If the capacity model is Throughput, the Capacity period is used to define the period that is related to the given capacity. If the capacity model is hours, this is not defined.

• Standard workday – The capacity is the quantity produced during a standard workday (related to the hours given in the Standard workday hours field on the Calendar).

• Week – The capacity is the quantity produced in one week. The available hours of a week can be determined through the calendar assigned to the production flow model.

• Month – The capacity is the quantity produced in one month.

The Average throughput quantity defines the quantity that is produced in the work cell during the selected Capacity period. If the capacity model is Hours, this is not defined. The Unit of measure defines the unit of measure to use with the Average throughput quantity.

To calculate the actual throughput of a specific day, the available working hours of this day need to be determined out of the calendar. The actual throughput is calculated by:

Actual throughput = Average throughput * actual working hours / available hours (capacity period)




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Work Cells: Work Cell Capacity - Cell Capacity Period Effective and Expiration Date

The time periods defined by the Effective date to the Expires date, where a resource group has a cell capacity assigned, are the periods where the resource group is effectively acting as a work cell. The periods cannot overlap, but the periods do not have to be consecutive.

FIGURE 1.15 EFFECTIVE DATES ON CELL CAPACITY

Demonstration 1.3: Creating a Work Cell

Scenario: Pierre uses these steps to begin setting up the resource groups that define the work cells to model his Car Speaker production flow.

To designate a work cell from a resource group, follow these steps:

1. Navigate to Organization Administration > Common > Resources > Resource Groups.

2. Create a new resource group (select the New button or Ctrl+N). 3. Enter an identifier for the Resource group in the Resource group

field (for example, enter WCell). 4. Enter a Site for the work cell (for example, select 2). 5. On the General FastTab, check the Work cell check box to

designate the resource group as a work cell. 6. Select the Input warehouse and location, designating the supplying

warehouse and location for this cell (for example, select Warehouse PaCovers and Location Supermarke).

7. Select the Output warehouse and location, designating the target warehouse and location for items produced in this cell (for example, select Warehouse PaCovers and Location Supermarke).

8. Select the Calendars FastTab. 9. Select the Add button. 10. Choose a Calendar for the work cell (for example, select Standard). 11. Select the Work cell capacity FastTab. 12. Create a new line (select the Add button or Ctrl+N). 13. Select the Production flow model to use with the work cell (for

example, PF Model). The Model Type will default to Throughput or Hours based on the selection on the Production Flow Model.

14. Choose the Capacity period type (for example, select Standard workday).

15. Enter the Average throughput quantity if using Throughput Model (for example, enter 100).




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16. Enter the Unit of measure to use with the Average throughput quantity (for example, select Pcs).

17. Enter an Effective start date and time (for example, enter today's date).

Lean Schedule Groups

A work cell has a determined capacity that is typically expressed in Throughput, as described in the Work cell capacity settings. All manufactured items can be mapped to that throughput by setting a ratio within the Lean schedule groups. The default ratio is 1. A ratio > 1 indicates the part is consuming more throughput than a standard part, a ratio < 1 indicates the part consumes less throughput.

Example: Creating a Lean Schedule Group

Scenario: Pierre has decided to use these steps to create a Lean schedule group for his speaker covers to provide a throughput ratio to a specific item, in addition to having the Kanban show up on the board with a color.

To create a Lean schedule group, these steps are performed:

1. Open the form Operations Resource Group from Production control > Setup > Lean manufacturing > Lean schedule groups.

2. Create a new Schedule Group by selecting the New button or press Ctrl+N.

3. Name the new Schedule group. 4. Assign the Schedule color to the schedule group. 5. Save the record by pressing Ctrl+S or the File> Save button and

accepting the infolog. 6. Select the Assign items to group button. 7. Create a new line (New button or Ctrl+N), select the Item relation

type Item. 8. Enter the Item number.




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9. Select the appropriate Color dimension for the item. 10. Set the Throughput ratio for the item.

FIGURE 1.16 LEAN SCHEDULE GROUP

Warehouses

A new concept has been created within the warehouse location structure in Microsoft Dynamics AX 2012. This concept, a Kanban supermarket, is a special location type that has the inventory deduction policy “on empty of the material handling unit.”

This type of supermarket is used for material—that is, inventory controlled in the supermarket—but will not be deducted by an inventory backflushing or manual picking or transfer processes, but rather a Kanban empty signal that is registered separately.

From a costing point of view, this behavior is similar to a supermarket in WIP, with the exception that on-hand is shown in the supermarket.

Standard Costing and Backflush Costing

Costing for Lean manufacturing in Microsoft Dynamics AX 2012 is implemented through backflush costing based on the standard cost framework. The production flow is used as the cost accumulator for a costing period.

NOTE: For Lean manufacturing in Microsoft Dynamics AX 2012, items must be set up as standard cost.




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Backflush costing is defined as a cost accumulation method where the application of cost is based on the output of the process. Backflush costing is usually associated with repetitive manufacturing environments. Backflush costing omits recording some or all of the journal entries relating to stages from the purchase of direct materials to the sale of finished goods. Since some stages are omitted, the journal entries for subsequent stages use normal or standard cost to work backward to “flush-out” the cost for the activity where the journal entry was not made.

Standard Costing and Backflush Costing: WIP

The material consumed by the production flow is added to WIP. The products received from the production flow are deducted from WIP at their standard cost.

The periodic backflush costing determines the effective value of WIP to the end of the period based on the Kanban handling units and the Kanban job status. The deviation between the effective values and the actual WIP values for each cost group and item are accounted and displayed as variances.

NOTE: When you are using multiple activities, it only records the cost transaction on the final activity transaction.

Traditional cost accounting systems do not fit within a Lean environment without some type of modification. The move to backflush costing integrates Lean manufacturing’s production flow reporting system based off of Kanban execution signals, and cost accounting under full absorption (direct and indirect manufacturing cost) for the production flow, which simplifies reporting procedures for direct resource usage.

References

Bicheno, J. (2004). The New Lean Toolbox (3rd ed.). Buckingham: Piscie Books.

Blackstone, J., & Cox, J. (Eds.). (2005). APICS Dictionary (11th ed.). Alexandria, VA: APICS The Association for Operations Management.

Gross J. M. & McInnis K. R. (2003). Kanban Made Simple: Demystifying and Applying Toyota’s Legendary Manufacturing Process. New York, NY: AMAZOM, a division of American Management Association.

Rother, M. & Shook J. (2003). Learning to See: Value stream mapping to create value and eliminate muda. Brookline, MA: The Lean Enterprise Institute, Inc.

Womack, J. P. & Jones, D. T. (2003) Lean Thinking: Banish Waste and create Wealth in your Corporation. New York, NY: Free Press.




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Summary Lean Manufacturing Concepts and Overview provided a broad overview of some of the main characteristics of Lean manufacturing and the functionality within Microsoft Dynamics AX 2012 that supports Lean manufacturing. It included these key points:

• Lean manufacturing is a way of manufacturing that is based on the five Lean principles.

• It is important in Lean manufacturing implementations to understand the Value Stream and map it to provide the proper inputs into the system configuration.

• The production flow is a new concept that is the mainstay of Lean manufacturing in Microsoft Dynamics AX 2012.

• Various types of Kanbans and replenishment strategies are used to support Lean manufacturing processes in Microsoft Dynamics AX 2012.

• The work cell is modeled as a resource group and provides different mechanisms for understanding capacity with Lean manufacturing processes.

• Costing for Lean manufacturing in Microsoft Dynamics AX 2012 is implemented through backflush costing based on the standard cost framework.

• Lean manufacturing in Microsoft Dynamics AX is highly interactive, drawing upon information from other modules.

This lesson also introduced the Contoso scenario that will be used throughout the course to help understand Lean manufacturing for Microsoft Dynamics AX 2012. This lesson also summarized the ways in which Lean manufacturing in Microsoft Dynamics AX 2012 supports Lean manufacturing processes.




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Test Your Knowledge Use these short answer questions to test your overall understanding of the course. It would be beneficial to place each question into a familiar context and relate it to a company or industry with which you are familiar.

1. List three Lean terms.

2. What are the five Lean principles?

3. What is a Value Stream, why is it important, and how is it modeled in Microsoft Dynamics AX 2012?




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4. What is a production flow and how is it connected to Kanban rules?

5. How is a work cell modeled in Microsoft Dynamics AX 2012?

6. Describe the two options for modeling capacity in Lean manufacturing for Microsoft Dynamics AX 2012.




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Quick Interaction: Lessons Learned Take a moment and write down three key points you have learned from this chapter

1.

2.

3.




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Solutions Test Your Knowledge

1. List three Lean terms.

MODEL ANSWER:

Any three terms from the chapter, such as: Value Stream - the set of all actions (both value added and non-value added) that are required to bring a specific product(s) or service from raw material through to the customer; Kanban - Japanese for “visible record.” Kanbans have been adopted by many industries as a method of controlling production and internal supply. It can apply to a paper ticket or a physical container; Kaizen - Japanese for “continuous improvement.” Kaizen is a management philosophy, which emphasizes employee participation, and in which every process is continuously evaluated and re-evaluated for the elimination of waste.

2. What are the five Lean principles?

MODEL ANSWER:

1. Identify value 2. Understand the Value Stream 3. Create flow 4. Introduce pull 5. Strive for perfection

3. What is a Value Stream, why is it important, and how is it modeled in Microsoft Dynamics AX 2012?

MODEL ANSWER:

A Value Stream is the set of all actions (both value added and non-value added) that are required to bring a specific product(s) or service from raw material through to the customer. This is important because the Value Stream has to be understood to eliminate any non-value added activities. When you are considering an implementation of Lean manufacturing in Microsoft Dynamics AX 2012, the ground work must be laid through defining the Value Streams, mapping them, and eventually setting this up within the system. Value Streams are modeled as an operating unit for costing purposes and can be modeled as one or many production flow versions to enable the activity-based planning, production, and costing in a Lean manufacturing environment.




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4. What is a production flow and how is it connected to Kanban rules?

MODEL ANSWER:

A production flow is the mainstay of Lean manufacturing in Microsoft Dynamics AX 2012, it defines the flow of material and products throughout work cells and locations for a specific production or supply scenario and can be described as a sequence or small network of process or transfer activities. In Microsoft Dynamics AX 2012, a production flow provides the activity basis that Kanban rules are set up to be planned and initiated against.

5. How is a work cell modeled in Microsoft Dynamics AX 2012?

MODEL ANSWER:

Work cells are modeled in Microsoft Dynamics AX 2012 using resource groups, where resources are grouped to initiate a process activity.

6. Describe the two options for modeling capacity in Lean manufacturing for Microsoft Dynamics AX 2012.

MODEL ANSWER:

The two ways of modeling capacity are set up on the production flow model and resource groups. These are: 1. Throughput: The capacity and load of a work cell are measured in quantities of product that are produced. 2. Hours: The capacity and load of a work cell are measured in periods of hours and minutes.




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AX production Module

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Transcript of AX production Module