Using Lean principles to enhance productivity in lower-cost labor regions.

Labor markets evolve over time. Just as a contractor’s unit price fails to reflect the total cost of acquisition, a specific labor market’s wage rate seldom reflects the total cost of doing business. As markets mature and costs increase, there may be counterbalances in terms of access to a more experienced workforce, a more responsive supply chain and more efficient logistics. We have seen this pattern evolve in our China operations and are utilizing Lean principles to enhance productivity and worker quality of life in this maturing region.

From a Lean perspective, improvements have been focused in seven areas, outlined below. In terms of Lean philosophy, this approach is designed to:

  • Eliminate unnecessary labor and cut the time needed to launch new projects.
  • Minimize variation in processes.
  • Minimize transport within the facility.
  • Minimize production constraints through a flexible workforce with the concomitant benefit of minimizing turnover.
  • Minimize inventory.
  • Eliminate the possible manufacturing defects to minimize the future rework cost.
  • Continuously improve the manufacturing process to overcome manufacturability issues.
  • Continuously improve the testing process to enhance the fault spectrum.
  • Confront the facts and plan ahead to smooth out the operations to minimize the waste.

Lean philosophy integrated into systems focus. SigmaTron uses a combination of proprietary and internally developed systems for enterprise and shop floor management. All facilities utilize a common ERP system, plus Agile product lifecycle management (PLM) tools. To enhance traceability and shop floor control, the China team developed a manufacturing execution system (MES) system known as Tango, which will be launched in all facilities in 2014. We take a distributed approach to continuous improvement in our systems by letting teams at individual manufacturing facilities identify specific gaps in shared systems and develop appropriate software tools. These solutions are then tested at the facility that identified the need, and later transferred across all facilities. This combination of standardized core systems deployed through the corporate IT group and focused innovation, which taps the regional IT expertise at each facility, drives improvements faster than would be possible solely with a centralized IT function.

In China, the combination of these systems has created significant progress in becoming a paperless factory in terms of documentation creation and control, and work order scheduling and tracking.

Product documentation is transferred electronically from customers, eliminating potential errors associated with manual processes. Electronic work instructions are displayed on monitors at each workstation. These work instructions include a video showing the steps necessary to perform the designated operation, ensuring operators have clear examples of the optimum way to perform specific tasks. Product is barcoded and tracked through each operation. Real-time production status monitors display data in each work area, and customers can access production status remotely. The result is a production environment where all workers have access to real-time production metrics, and bottlenecks or quality issues become immediately apparent.

Equipment and process standardization. While equipment platforms may vary by facility, production line capabilities, processes and key consumables, such as solder paste, are standardized throughout the company. This makes it easier to transfer projects from one facility to another, or for engineering teams to work together seamlessly in supporting projects in multi-facility builds.

DfM/DfT analysis. SigmaTron’s team uses DfM tools and a component library to check the layout for design and manufacturability issues. If alternate parts are specified, those are checked as well. If requested, customers receive a DfM report with specific recommendations on issues to address prior to production start.

Design for testability is also evaluated, and customers can request reports. The analysis includes a look at test coverage and whether the correct solder mask openings are in place. Comprehensive test approaches such as x-ray, AOI, boundary scan and functional test are also considered for early defect detection. The goal is to create a robust verification process with as much coverage as possible. At the same time, customer preferences for cost of test are also considered.

Minimizing transport time and non-value-added activity. Where possible, the factory uses a continuous flow layout to minimize transport time between operations. The team also applies 5S principles in facility and workstation layout to minimize wasted motion.

Strong focus on automation. Facilities in lower cost labor markets often lack automation because equipment can cost more than manual labor. However, this can be false economy because it typically requires a greater number of workers and can contribute to greater variation in overall product quality. SigmaTron automates wherever possible, including through-hole assembly of mixed technology product. Odd-form parts are drop-loaded on paced lines. At the subassembly and box-build level, fixturing is used to minimize variation in manual assembly operations.

Worker cross-training. While most Lean companies cross-train workers to add flexibility in supporting varying demand for different production operations, in China there is an additional benefit to this practice. Younger workers in China are typically well-educated and interested in contributing their ideas. Companies that provide a clear career path, offer training in higher level skills, listen to their employees and give them opportunities to contribute ideas have lower turnover than companies that lack such job enrichment/job enlargement programs.

SigmaTron allows employees to train for every job in the process they were hired for and teams with the government to provide advanced training opportunities, enabling operators to become technicians or engineers. Skills competitions for prizes are run both internally and by the Chinese government.

Optimized supply-chain practices. From a supply-chain management standpoint, SigmaTron’s practices include:

  • Strong systems linkage with customers and suppliers.
  • An international purchasing office (in Taiwan) combined with dedicated local purchasing teams for each facility to optimize sourcing channels based on geography.
  • Automated replenishment systems to ensure rapid response to demand variations.
  • Stocking programs customized to customer needs.

SigmaTron’s ERP system is combined with a proprietary suite of supply-chain management tools known as iScore. An MRP Share program provides suppliers with complete customer forecast visibility, plus current inventory and material on order. The iScore system supports vendor-managed inventory (VMI) and production-driven replenishment (PDR) pull signals. Customers are given visibility into inventory status via the iScore customer portal.

VMI is used, as needed, with component suppliers. PDR is triggered automatically as shop orders are released. If a potential shortage is detected, a PDR pull signal is sent to the supplier.

The focus on access to real-time material status data and auto-replenishment reduces labor and transactions, while shortening the overall material pipeline. Once again, a centralized approach is supplemented with regional expertise.

As this overview shows, applying Lean philosophy in evolving labor markets improves productivity and enhances responsiveness by eliminating non-value-added lead-time throughout the product realization process. It also taps the expertise of employees and the supply base in creating more efficient processes. Additionally, an approach that focuses on centralized standardization yet also taps regional expertise drives faster innovation by enabling the personnel most familiar with the limitations of overall system to develop the solutions.

Hom-Ming Chang is vice president, China operations at SigmaTron International;

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