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Source: Business-improvement.eu
QRM: Cellular organization

For more articles on QRM and/or POLCA, use the drop down menu in the top left corner. This is the introductory article about QRM, another article introduces POLCA

Introduction Quick Response Manufacturing
Quick Response Manufacturing (QRM) is a process improvement method developed from the standpoint of logistics, like Lean and the TOC. QRM focuses on gaining time from order to delivery. Reducing the Manufacturing Critical-path Time (MCT) is the holy grail, because this will result in shorter lead and delivery times. Less obvious is that the production costs will decrease. The reason: hidden costs are reduced. Costs are saved because of among others less work-in-progress, less mistakes, less telephone calls from customers about late deliveries, and less stock of products which possibly cannot be sold.

To implement QRM, adopting a process-oriented way of thinking is a condition. Higher costs during individual production steps should sometimes make done with, because this brings advantages in other departments. QRM and the accompanying Kanban-variant POLCA are already sucesfully applied for ten years in the US, mainly by companies that make customer-specific products. Examples are Harley-Davidson and JoyGlobal, a multinational that manufactures mining machines. During the last 5 years QRM also catches on in Europe. This is demonstrated by applications of QRM in Dutch companies like Interfocos and BOSCH Hinges.

The cellular organization
To reduce the Manufacturing Critical-path Time, it is needed to reform your business-organization drastically, from functional to cellular. One way to do that is to reorganize the complete company, from the office to the shop floor, by forming work cells. Each of those cells is staffed with three to ten persons, and each cell performs a group of similar tasks.

To keep the throughput time short, the work-in-progress per workcell should be kept small. Big product batches are therefore absolutely forbidden. In addition, each cell is staffed by a multidisciplinary team and, if necessary, group members can take over eachother's task.


Quick Response Manufacturing or QRM
 (introduction article)
Reducing the Manufacturing Critical-path Time
By Dr Jaap van Ede, editor-in-chief business-improvement.eu. 
The first version was published in a Dutch specialist journal, PT Industrial Management. Since then, the article is regularly updated.

In Quick Response Manufacturing (QRM) reducing the Manufacturing Critical-path Time (MCT) is the holy grail, because this will result in shorter lead and delivery times. Less obvious is that the production costs will decrease. The reason: hidden costs are reduced. Costs are saved because of among others less work-in-progress, less mistakes, less telephone calls from customers about late deliveries, and less stock of products which possibly cannot be sold.

Rajan Suri is not only a professor at the University of Wisconsin-Madison, he is also the founder of the method ‘Quick Response Manufacturing’ (QRM).

Rajan SuriAccording to Suri, reducing the lead-time should be the top priority in every company that makes or assembles ‘customer-specific’ products.  In that situation, lead time reduction not only means shorter delivery times, but also entails lower costs, due to less inventory, less mistakes, less telephone calls about late orders etcetera.

The result: an ideal competitive position for your company, because you can deliver customer-specific products fast and at a relatively low price!

Entire route
To reduce the throughput time, attention should be given to the entire route from order to delivery. The current generation of accounting systems don’t do that, these systems focus on the costs per department.

Wrong, says Suri. If you do that, applying QRM seems to increase the costs, which is not true. Take for example the shop floor. To increase the throughput there, the work-in-progress should be reduced. This means smaller batch sizes, and thus more changeovers.

To attain that, investments in extra people and/or machines maybe needed. On the other hand there are however huge savings, but those savings are realized in other departments such as warehouses.

Time is money
Suri expatiates on QRM during a workshop1, attended by 30 managers. In general those managers represent companies that either engineer or make their products to order. These companies are the ideal target group for Suri.  

In spite of his rather American approach, Suri holds his audience in suspense for hours. A lot of his sheets are filled with dollar signs, and a favorite slogan of Suri is:  “time is not money, time is a whole lot of money’.

Suri asks his workshop-participants to find potential savings by applying QRM. Some of the suggestions in my group are smaller warehouses and less handling. 

 ‘Ok, but is it possible to make those savings tangible’, aks a manager from a automotive company. ‘Can you make a business case for implementing QRM?’

‘That is a problem, because the current accounting methods only allocate costs during the time in which something is happening’, Suri admits. ‘Idle time seems to be for free, but that is not true. If you remove idle time, then a lot of existing activities become superfluous. However, it is difficult to provide hard evidence for that beforehand. Therefore, I recommend to start with a pilot-project, for one product segment. Then the advantages will emerge automatically. From my experiences in companies such as John Deere, National Oilwell Varco and Rockwell Automation, I can say that the savings are 25% on average.’

QRM overlaps with other methods to improve business processes. The focus on throughput, and the plea for an accounting method which looks at the overall costs is shared with the Theory of Constraints. Value Stream Mapping is used to identify wasteful activities, this technique is borrowed from Lean Manufacturing. Finally, an important tool within QRM is the formation of multidisciplinary teams, that ‘own’ certain business processes. This approach QRM shares with the improvement method Total Productive Maintenance.

‘Methods like Lean and Six Sigma remain valuable’, says Suri. ‘However, QRM adds an important aspect: focus. No matter what tool you use, the goal should always be to reduce the overall throughput time.’

Manufacturing Critical Path Time (MCT)
More precisely, QRM proclaims that minimization of the Manufacturing Critical-path Time (MCT) should be the Holy Grail.

The MCT is defined as:
The amount of calendar time from when a customer creates an order until the first piece of that order is delivered, through the critical path.

‘That addition is important’, Suri points out. ‘The MCT is not equal to the time to deliver a product from stock. Instead, you should take the time from buying raw materials until the delivery of your finished products. So, even processes at your suppliers contribute to the MCT. It is important that these suppliers don't mask inefficient working methods with big amounts of stock.’

QRM-planning within Alexandra Extrusion
An operator at Alexandra Extrusion (Minnesota) plans work with POLCA-cards, one of the QRM-tools.

Work Cells
To reduce the MCT it is needed to reform the business-organization drastically, from functional to cellular. One way to do that is to reorganize the complete company, from the office to the shop floor, by forming work cells. Each of those cells is staffed with three to ten persons, and each cell performs a group of similar tasks (such as the execution of similar manufacturing processes).

To keep the throughput time short, the amount of work-in-progress per workcell should be kept small. Big product batches are therefore absolutely forbidden. In addition, each cell is staffed by a multidisciplinary team and, if necessary, group members can take over each others task.
To cope with peaks in the demand, the average workload of man and machines may not exceed 85%. ‘If a worker has time to spare, he or she can use that time to think about process improvement’, says Suri.

Fine-tuning a workcell – how many people and/or machines are necessary, what is the optimal batch size – is not an easy task. If different processing steps needs to be taken care of, in varying order, system dynamics can lead to unexpected results. In that case, simulation might help to detect and remove bottlenecks.

It is a challenge to make the orders flow from workcell to workcell. One method to control this is the POLCA-system, which is a variant of Kanban.

Until 2007, implementations of POLCA and QRM were still rare in the EU. However, the tide is turning, as more and more companies are now struggling to produce tailor-made goods. Will QRM, ten years after the introduction by Rajan Suri, finally become popular worldwide?

One of the first signs: Danny Baijens, owner and general manager of the Dutch company Interfocos, became enthusiastic a few years ago. ‘We produce stoves’, he says. ‘20% of the components to built them we make ourselves, the rest we buy from suppliers.’

Interfocos makes 98 types of stoves. When you take into account that a customer can choose between several energy sources (wood, natural gas or propane), colors, and different types of interior work, then there are thousands of stove versions possible.

‘It is not possible to keep all those variants in stock, so we built them to order. However, the delivery time became too long. As a countermeasure, we had already started to apply Lean manufacturing. Soon, I noticed however that progress with Lean on the workfloor was frustrated, because other departments did not attune to our jobfloor-projects. Let me give you one example. When a specific component for a stove does not meet the expectations on the workfloor, engineering should change the drawings. However, that process could take as much as three weeks.’

Therefore, Baijens contacted Thomas Luiten, who at that time worked fulltime as self-employed consultant. Baijens: ‘Thomas had followed several courses about QRM in the US, given by Rajan Suri and others.  He explained to me that QRM can be used to give direction to department-exceeding improvement projects, because it takes the speed from order to delivery as a guide.’

Luiten adds: ‘Interfocos was looking for a executive manager, with knowledge of both Lean and QRM. That job, with as goal to implement QRM, was offered to me. It seemed a challenge to work in the field instead of from the sideline. Therefore, I decided to snap. Since then my activities for LeanLeam, a cooperative consultancy, were reduced to giving a few workshops each year.’

Polca-exercise at BOSCH Scharnieren
Cards for POLCA, a Kanban-variant for QRM. The cards shown here were used during an exercise in 2007, which preceded the implementation of QRM at “BOSCH Hinges”. This is a Dutch company which produces hinges.


Within Interfocos, Luiten started to reform the company to a process oriented organization, by creating multidisciplinary teams,. ‘For each group of products we composed a team, with sellers, engineers and production employees’, he explains. ‘Each team is responsible, for their product group, for the entire process from sales to delivery.’

Workcells passing work to each other are still missing within Interfocos. Therefore the question arises why the organizational change is flagged as QRM. After all, the are a lot of companies who introduced a process oriented way of working, but these do not call that QRM.

‘We have one workcell for each product group, which deals with the complete process from order to delivery’, Luiten reacts. ‘In addition, QRM-tools are used to accelerate processes. An example is applying Value Stream Maps, to find and eliminate non-value adding activities.’

Isn’t that simply Lean Manufacturing?. ‘Yes that is true, but there is an important difference: Within Interfocos there are no longer departments, which strongly reduces the risk of local optimization. In our situation it is possible to add working time on one spot, if that leads to a big gain in time elsewhere. A change is seen as profitable, if it leads to an overall reduction in the lead time.’

To find such improvement-opportunities, the teams consult every two weeks. ‘In the beginning that took some getting used to. The members had to learn to respect each others skills. To goal is a concerted action to reduce the Manufacturing Critical-path Time. Therefore, you have to make yourself familiar with process-oriented thinking.’ 

Luiten gives an example: ‘In the past, after the production of the stoves, two additional steps followed: packaging and shipping. Searching for accessories like manuals took an awful lot of time, and slowed down the packaging process significantly. As a countermeasure, we decided to close down the packaging department. Now, packaging has become part of the production process.  As a result, we gained days of time. In addition, much fewer products are delivered with parts missing in the box.’

Thanks to these kind of improvements, the delivery time of the stoves has already been cut in half. ‘Now, we are busy rolling out QRM to other product groups. In addition, we will investigate if we can use the Polca-system for some of our planning processes’, Luiten concludes.

POLCA within Bosch Hinges
It is also possible to implement the Kanban-variant Polca, disconnected from the rest of QRM. This is proven in the next case, BOSCH Hinges. This is a rather small Dutch company, which has no connection with Bosch in Germany.

Godfried Kaanen is the general manager. ‘We will get busy with QRM later’, he explains. ‘However, I think that we score already a lot of points on the quick response scale of Rajan Suri. Therefore we decided to focus on our main problem first: Flow production, controlled with Kanban-cards, was not possible in our situation.’

Godfried Kaanen, general manager of BOSCH Hinges: "When I believe in something, I take decisions quickly"

‘We are a company with thirty employees, and we make hinges’, Kaanen continues. ‘That are made-to-measure products, produced conform the specifications of our industrial customers. Our hinges are for example used in coffee machines and sun beds.’

The production of a hinge starts with a RVS plate. ‘First, we cut the desired form out of that plate with a laser. Then several treatments follow, like pressing and drilling holes. Every hinge we make is unique, and thus requires different treatments, as well as a unique routing along a selection of our 40 machines. That is the reason why we can’t produce in line.’

To get to grips with the production planning, a project was started. ‘We do not work with the same consulting partner all the time. We ask one party to solve one specific problem, and then another. In this case the problem was the conflict between our need for flexibility and the need for production control. In my opinion, new consulting parties bring new insights.’
For this project, Kaanen took his chance with a consultancy firm in the east of the Netherlands. ‘One of their people is Jacob Pieffers. He is an ex-student of Jan Riezebos, assistant professor at the university of Groningen. Jacob convinced me that Polca is ideal to control our work-in-progress per workcell. Probably this is the first implementation of the Polca-system in the Netherlands, but that didn’t frighten me. When I believe in something, I take decisions quickly’

The well-known Kanban-system, as developeed by Toyota, is widely used to gear the activities of work centers. After consumption of a small amount of certain items, a workcenter signals the need for replacement by sending a Kanban-card to the preceding workcenter. So, Kanban is essentially a pull-system. However, Kanban only works if the intermediate stock – which can be many items - is always the same. This is not the case with made-to-measure production, because then all products are different and so are the components needed to built them!

The use of Polca-cards instead of Kanban cards overcomes this drawback. A Polca-card does not signal the need to supply a specific item, but only sends a message to a preceding station that there is free capacity to receive and process semifinished products. Because a cell can't produce items for a workcell that didn’t send a Polca-card, it is prevented that workcells become overloaded with work.

‘Polca makes semifinished products dance across the working floor’, says Rajan Suri, who invented this system.

Exercise with POLCA at BOSCH Scharnieren (2)
In 2007, employees of “BOSCH Hinges” practiced with the Polca-system. Match boxes stood model for materials, to be exchanged between workcells.

Kaanen compares Polca with a system of traffic lights, that distributes and allocates work to workcells. ‘October 15th 2007 was our D-day, then we started’, Kaanen says. ‘First we shutted-down our factory for three days. We needed that time to regroup our machines in seven workcells. From that moment on, each of those cells was staffed with two to four persons, and the workload of the cells is balanced by the Polca-cards.’

After one year all production employees were fully acquainted with the new system. ‘Adding or replacing Polca-cards now goes flawless’, says Kaanen. ‘But more important, the cards do what they should: Signaling where there is free production capacity downstream. That way, no semi-finished products are made, unless these can be processed further.’

The Polca-system not only controls the workload per cell, it also provides a clear view on all processes and possible problems. In addition, the throughput times were significantly reduced. ‘That was not caused by a reduction of our work-in-progress. That was already low, since we had already implemented Lean manufacturing. The reason that the Polca-system increased the throughput rate further, is that our employees know immediately on what kind of orders they should work.’

Interfocos and BOSCH Hinges both consider QRM as supplementary to Lean Manufacturing. So, it can be concluded that QRM is a method to adapt Lean to a situation with customer-specific production, and/or high variety production, and/or short product lifecycles, and/or a very volatile demand.

To conclude, when you deal with one of those situations, it is certainly worth the effort to study QRM. That is even more the case, if your company can gain a competitive advantage if it can deliver products faster. Then, the question if QRM will lead to return on investment operationally, becomes less important.

1) The first version of this article, published in the Dutch specialist journal "PT Industrieel Management", was based on information gathered during a workshop QRM, given by Rajan Suri at LeanTeam consultancy. Additional information came from interviews (originally in 2007) with people from Interfocos en Bosch Hinges. The content of this article is regularly updated.

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