Redesign of the control model at SEW-EURODRIVE B.V.-Herontwerp van het beheersingsmodel bij SEW-EURODRIVE B.V

Delft University of Technology

FACULTY OF MECHANICAL, MARITIME AND MATERIALS ENGINEERING

Department of Marine and Transport Technology Mekelweg 2 2628 CD Delft the Netherlands Phone +31 (0)15-2782889 Fax +31 (0)15-2781397 www.mtt.tudelft.nl

This report consists of 84 pages and 6 appendices. It may only be reproduced literally and as a whole. For commercial purposes only with written authorization of Delft University of Technology. Requests for consult are only taken into consideration under the condition that the applicant denies all legal rights on liabilities concerning the contents of the

Specialization: Transport Engineering and Logistics

Report number: 2014.TEL.7842

Title:

Redesign of the control model at

SEW-EURODRIVE B.V.

Author:

M.M. Crapts

Title (in Dutch) Herontwerp van het beheersingsmodel bij SEW-EURODRIVE B.V.

Assignment: Master thesis

Confidential: Yes (until April 3rd_{, 2019)} Initiator (university): prof.dr.ir. G. Lodewijks

Initiator (company): A. van der Ven (SEW-EURODRIVE B.V., Rotterdam) Supervisor: dr. ir. H.P.M. Veeke

S

UMMARY

SEW-EURODRIVE B.V. (SEW NL) is a manufacturer of drive products located in Rotterdam in The Netherlands and is a whole subsidiary of the German company SEW-EURODRIVE. SEW NL assembles drives and controllers. Each drive and controller is highly customizable according to the customers wishes and is assembled to order. Lead times are generally short (three workdays).

Parts required for assembly of drive products can roughly be divided into two categories: eKanban parts and MRP parts. eKanban parts are small and cheap parts that are put into bins in bulk that are located at places where they are required. Whenever a bin is empty it will be scanned and new parts are ordered. MRP parts are large, more expensive and located in the internal warehouse. These parts are picked before the production order starts.

Lead times of SEW NL are shorter than lead times of the supplier of SEW NL (SEW Germany), usually three workdays compared to two to four weeks of SEW Germany. Also, drives and controllers are assembled to order. Because of this, stock is required to meet the lead time requirements. In order to ensure parts never run out of stock, orders are only scheduled when all the required parts are available on the date for which the order is scheduled.

In the fiscal year 2012, 3,870 controllers and 39,935 drives have been produced. These products are usually ordered in small quantities (most often a quantity of 1). For this, a little more than 2,000 MRP parts are used that are always in stock in the internal warehouse.

Replenishment supplies for these stock MRP parts are ordered based on expected future usage and the current stock level. When the expected future stock level reaches the safety stock level, a replenishment supply is ordered to be delivered on that day. Safety stock levels are determined by the material planner based on experience, and parameters such as replenishment lead time, deviations in average consumption and price are used. There is no mathematical formula used for determining safety stock.

Of all the replenishment supplies delivered in FY2012, more than 95% were either on-time or too early. Of all the replenishment supplies delivered in FY2012, 95.1% of the deliveries were received from SEW Germany.

For controllers, there are 19 assembly parts for which SEW NL seeks relocation. These parts located at a large distance from the work cell where controllers are assembled and will be transferred to a new pallet live storage system . For these parts, SEW NL wishes to evaluate safety stock levels.

There are three main requirements for the SEW NL: lead time, time delivery and quality. Only on-time delivery and quality are controlled, lead on-time is not controlled. For control of lead on-time, it is necessary to know what the initial requested delivery date for orders is, so that lead time requirements are clear. Currently, only the scheduled delivery state is stored.

When the initial requested delivery cannot be met because not all the required parts for the order are in stock, parts are backordered or a later possible delivery date is used to schedule the delivery date. These orders are called backorders. The percentage of backorders is determined by the safety stock level. The higher the safety stock level, the smaller the percentage of backorders.

Based on the analysis of SEW NL, the following problems have been identified. First, it is not possible to evaluate lead time performance because initial requested delivery dates are not stored. Second, safety stock is an important parameter for influencing lead time performance, but no clear standards for safety stock are available, and lead time is not used for setting safety stock levels.

To solve these problems, first, the relationship between safety stock and lead time performance has been established. This has been done by simulation orders for part and replenishment supplies for parts. By doing so, the percentage of backorders for each safety stock level for each part has been determined.

Second, an optimization problem has been defined that is used to determine optimal safety stock levels. The optimization problem makes a trade-off between inventory holding costs and backorder costs. However, there is one degree of freedom in the optimization problem, so for each chosen value for this degree of freedom, different optimal safety stock values can be calculated. The degree of freedom represents the sense of importance for either backorder costs or inventory holding costs. It has been found that by using the lead time performance of current safety stock levels as a lower bound for choosing the degree of freedom, safety stock volume can be reduced by more than 27% with similar performance to current safety stock levels. By using current safety stock volume as an upper bound, it has been found that backorder costs can be reduced by more than 40% without adding safety stock volume.

Also, it has been found that improving lead times work three workdays to one workday comes at the expense of 15% more safety stock. Still, the optimal safety stock volume found for one workday lead time is still almost 15% lower than the current safety stock volume.

Now that the problems identified in the analysis have been resolved, it is possible to evaluate lead time performance. A redesigned control model has been proposed which uses the initial requested delivery dates for determining lead time performance. This lead time performance can be compared with the target lead time performance determined using the optimization problem. Now, it can be determined how much lower or higher safety stock should be to achieve lead time performance similar to target lead time performance.

S

UMMARY

(

IN

D

UTCH

)

SEW-EURODRIVE B.V. (SEW NL) is een fabricant van aandrijgproducten in Rotterdam, Nederland en is een onderdeel van het Duitse bedrijf SEW-EURODRIVE. SEW NL assembleert aandrijvingen en regelaars. Elke aandrijving en regelaar is in hoge maat klantspecifiek en wordt geassembleerd op order. Levertijden van de aandrijfproducten zijn circa drie werkdagen.

Onderdelen benodigd voor assemblage van aandrijfproducten kunnen onderverdeeld worden in grofweg twee categorieën: eKanban-onderdelen en MRP-onderdelen. eKanban-onderdelen zijn klein en goedkoop en worden in bakjes gestopt die op plekken staan waar de onderdelen benodigd zijn. Als een bakje leeg is wordt deze gescand en worden de onderdelen automatisch besteld. MRP-onderdelen zijn groot, duurder en zijn opgeslagen in het interne magazijn. Deze MRP-onderdelen worden gepickt als de productie-order gestart wordt.

Levertijden van SEW NL zijn korter dan de levertijden van de leverancier van SEW NL (SEW Duitsland), doorgaans drie werkdagen vergeleken met levertijden van van twee tot vier weken van SEW Duitsland. Hierom is voorraad benodigd zodat er voldaan kan worden aan eisen op het gebied van levertijd. Om te zorgen dat onderdelen altijd op vorraad zijn worden orders alleen ingepland als de benodigde onderdelen beschikbaar zijn op de datum waar de order voor wordt ingepland.

In het fiscal jaar 2012 zijn 3.870 regelaars en 39.935 aandrijvingen geproduceerd. Deze producten worden doorgaans besteld in kleine hoeveelheden (meestal een hoeveelheid van 1). Hiervoor zijn in totaal meer dan 2.000 MRP-onderdelen benodigd die altijd op voorraad zijn in het interne magazijn. Leveringen van MRP-onderdelen die altijd op voorraad zijn zijn gebaseerd op verwacht toekomstig verbruik en het huidige voorraadniveau. Als het toekomstig verwachte voorraadniveau het veiligheidsvoorraadniveau bereikt, dan worden er onderdelen besteld die geleverd worden op de dag dat het voorraadniveau verwacht wordt het veiligheidsvoorraadniveau te bereiken. Veiligheidsvoorraadniveaus worden bepaald door de materiaalplanner op basis van ervaring, door middel van parameters zoals levertijd, afwijkingen in verbruik t.o.v. het gemiddelde en de prijs van het onderdeel. Er is geen wiskundig verband dat gebruikt wordt om veiligheidsvoorraad te bepalen. Van alle leveringen van onderdelen in het fiscale jaar 2012 waren er meer dan 95% op tijd of te vroeg. Van alle leveringen waren ook meer dan 95% afkomstig van SEW Duitsland.

Voor de regelaars zijn er 19 onderdelen die SEW NL wenst te verplaatsen. Deze onderdelen staan nu opgeslagen op een geruime afstand van het werkeiland waar regelaars worden geassembleerd, en worden verplaatst naar een doorrolstelling. Van deze onderdelen wil SEW NL de veiligheidsvoorraad geëvalueerd hebben.

Er zijn drie eisen die aan SEW NL gesteld worden: levertijd, leverbetrouwbaarheid en kwaliteit. Enkel leverbetrouwbaarheid en kwaliteit worden momenteel beheerst, levertijd niet. For beheersing van levertijd is het noodzakelijk om te weten wat de initieel gewenste leverdatum van orders is zodat de levertijdeisen helder zijn. Momenteel wordt enkel de geplande leverdatum opgeslagen.

Wanneer de initieel gewenste leverdatum van de klant niet gehaald kan worden omdat niet alle benodigde onderdelen op voorraad zijn worden de onderdelen nabesteld of wordt een latere mogelijk leverdatum ingepland. Zulke orders zijn backorders. Het percentage backorders wordt bepaald door de veiligheidsvoorraad. Hoe hoger de veiligheidsvoorraad, hoe lager het percentage backorders.

Op basis van de analyse van SEW NL zijn de volgende problemen geïndentificeerd. Ten eerste is het niet mogelijk om levertijdprestaties te evalueren omdat initieel gewenste leverdata niet opgeslagen worden. Ten tweede is veiligheidsvoorraad een belangrijke parameter voor het beïnvloeden van levertijdprestaties, maar er zijn geen duidelijke standaarden voor veiligheidsvoorraad, en levertijd wordt niet gebruikt om veiligheidsvoorraad te bepalen.

Om deze problemen op te lossen is ten eerste de relatie tussen veiligheidsvoorraad en levertijdprestaties bepaald. Dit is gedaan door orders en leveringen van onderdelen te simuleren voor onderdelen. Door dit te doen kan bepaald worden hoe hoog het percentage backorders if voor elk veiligheidsvoorraadniveau.

Ten tweede is een optimalisatieprobleem opgesteld waarmee optimale veiligheidsvoorraadniveaus bepaald kunnen worden. Het optimalisatieprobleem maakte een afweging tussen voorraadkosten en backorderkosten. Er is echter wel een vrijheidsgraad aanwezig in het optimalisatieprobleem, dus voor elke waarde van de vrijheidsgraad worden andere optimale veiligheidsvoorraadniveaus bepaald. De vrijheidsgraad bepaalt de mate waarin backorderkosten of voorraadkosten belangrijk zijn.

Gebleken is dat door de huidige levertijdprestaties van de huidige veiligheidsvoorraadniveaus te nemen als ondergrens, het volume van veiligheidsvoorraad met meer dan 27% verlaagd kan worden zonder dat de levertijdprestaties verslechteren. Door het huidige volume als een bovengrens te nemen voor veiligheidsvoorraad is gebleken dat backorderkosten met meer dan 40% verminderd kunnen worden zonder dat er extra veiligheidsvoorraad nodig is.

Ook is gebleken dat het verkorten van levertijd van drie werkdagen naar één werkdagen ten koste gaat van 15% meer veiligheidsvoorraad. Echter moet gezegd worden dat het optimale veiligheidsvoorraadvolume voor een levertijd van één werkdag nog steeds 15% lager is dan het huidige veiligheidsvoorraadvolume.

Nu de problemen die geïdentificeerd zijn in de analyse zijn opgelost, is het mogelijk om levertijdprestaties te evalueren. Een herontwerp van het beheersingsmodel is voorgesteld waarmee initieel gewenste levertijden gebruikt worden levertijdprestaties te bepalen. Deze levertijdprestaties kunnen vergeleken worden met de met het optimalisatieprobleem bepaalde doelstellingen voor levertijdprestaties. Het is nu mogelijk om te bepalen hoeveel hoger veiligheidsvoorraad moet worden zodanig dat dat levertijdprestaties in overeenstemming zijn met de doelstellingen voor levertijdprestaties.

C

ONTENTS

1 Introduction ... 1

2 SEW-EURODRIVE B.V. company overview ... 3

2.1 Mission statement and core activities ... 3

2.2 Organizational structure of SEW NL ... 4

2.3 Customers and suppliers ... 4

2.4 Changes in the market and organization ... 5

2.5 Product range ... 5

2.6 Production of drive products ... 6

3 Analysis ... 13

3.1 Black box model of SEW NL ... 13

3.2 PROPER model of SEW NL ... 17

3.3 Order buffer and part buffer ... 22

3.4 Drive controller inventory ... 30

3.5 Control of the system SEW NL ... 34

3.6 Conclusions ... 36

4 Problem statement ... 37

5 Solutions ... 39

5.1 Relation between safety stock and lead time performance ... 39

5.2 Developing standards for safety stock ... 63

5.3 Redesign of control model for SEW NL ... 77

6 Implementation plan ... 81

6.1 Set safety stock levels ... 81

6.2 Evaluate lead time performance ... 81

6.3 Re-adjust safety stock levels ... 81

7 Conclusions and recommendations ... 83

8 References ... 85

Appendix A – Scientific paper ... 87

Appendix B – CATWOE analysis ... vii

Appendix C – Simulation log scenario 1 ... viii

Appendix D – Simulation log scenario 2 ...x

Appendix E – Simulation log scenario 3 ... xiii

1 I

NTRODUCTION

SEW-EURODRIVE B.V. is a manufacturer of drive products located in Rotterdam, The Netherlands and is part of a larger multinational named SEW-EURODRIVE. SEW-EURODRIVE B.V. (the Dutch subsidiary) aims to serve the Dutch and Belgian market with short lead times and high delivery reliability. All the products can be produced at other SEW-EURODRIVE subsidiaries (most notably in Germany), but with much higher lead times.

In order to serve the local market better and faster, SEW-EURODRIVE B.V. began to improve its core business processes (the assembly of drive products) in 2002. In the following years, lead times have been significantly reduced and the required work force for producing equal number of drive products has been reduced. As a result, the required amount of space for the assembly of drive products has also been reduced by more than half.

The focus of the continuous improvement at SEW-EURODRIVE B.V. has always been at the assembly processes (with significant results). However, because SEW-EURODRIVE B.V. assembles all drive products on order with a large degree of customization in specifications, and at the same time with a short lead time of 3 workdays, a lot of different parts have to be in stock. Inventory management is therefore an important aspect of SEW-EURODRIVE B.V.

Because of this, SEW-EURODRIVE B.V. set out this research assignment. The research assignment focuses on the analysis and optimization of stock levels for drive controllers in order to enable SEW-EURODRIVE B.V. to handle future growth in the segment.

First, the company SEW-EURODRIVE B.V. and its core processes will be reviewed to provide a clear context for the research assignment in Chapter 2. Then, the relations between the core process of SEW-EURODRIVE B.V. (the assembly of drive products) and the material flows and the material flow for drive controllers itself will be analyzed in Chapter 3. Based on this analysis, a problem statement will be presented in Chapter 4.

Solutions to the identified problems will be presented in Chapter 5. The solutions will be supported by quantitative data so that possible theoretical benefits can be shown based on the proposed solutions. In Chapter 6, an implementation will be presented which explains how the theoretical solutions can be used in practice. Finally, in Chapter 7, the report ends with conclusions and recommendations.

2 SEW-EURODRIVE

B.V.

COMPANY OVERVIEW

SEW-EURODRIVE B.V. (hereafter referred to as “SEW NL”) was founded in 1945 under the name of Vector Aandrijftechniek as a manufacturer of drive products, and gradually evolved to be the market leader in The Netherlands. Vector started co-operating with the German company SEW-EURODRIVE (also a manufacturer of drive products) in 1971 and eventually became a whole subsidiary of SEW-EURODRIVE, a German manufacturer of drive products, in 2001.

SEW NL has four office locations in The Netherlands: region West (headquarters, located in Rotterdam), region Northwest (located in Purmerend), region East (located in Zutphen) and region South (located in Grubbenvorst). The production facility of drive products (the core competency of SEW NL) is located at the headquarters of SEW NL in Rotterdam. All other offices are responsible for sales of drive products.

2.1 M

ISSION STATEMENT AND CORE ACTIVITIES

SEW’s mission statement is to “improve its competitive position by offering innovative knowledge, customer oriented support and quality products, with the lowest overall cost, in the area of Drive Technology”. In order to pursue this mission, SEW NL has set up goals for each of its activities.

2.1.1 D

Drive products is the core activity of SEW NL (most of the revenue is generated through sales of drive products). SEW NL produces roughly 160 drives (a drive is a combination of a motor and a gearbox) and 29 controllers each day (in 2012) and each drive can be customized according to specifications of the customer to such an extent that almost all drives produced in a single day are different to each other. All the parts assembled in Rotterdam can also be assembled in Germany, but this is at the expense of longer lead times.

SEW NL also provides customers the opportunity to place urgent orders for drives. These orders will be processed as soon as possible and have priority over regular orders. This service is provided 24 hours a day and 7 hours a week. In order to accommodate for this service, SEW NL has a special night shift for which its purpose is to produce only urgent orders.

Goal: Consolidating market leadership by delivering quality products with a short lead time as agreed with the customer.

2.1.2 D

Drive solutions is as a customer oriented activity in which SEW NL advises customers on (complex) drive systems and provides service with regard to the engineering of the system. Customers that make use of this activity of SEW NL usually require a complete solution of drive components and/or controllers and in some cases have little to no expertise in the area. SEW NL then advises these customers on what SEW components are able to fulfill the customer’s demand and propose a quotation that can be turned into an order for SEW components (all SEW components, not just the components that are assembled in The Netherlands).

Goal: Expanding market share in the area of large gearboxes, motion control and decentralized drive products.

2.1.3 D

The third activity of SEW NL is drive service. Drive service comprehends reassembly, repair, maintenance and revision of drives. SEW NL aims to expand these activities in the future by improving and simplifying the service processes, shortening the throughput time of drive service and minimalizing administrative processes. Drive service can also be responsible for the installation and set-up of a drive solution when necessary.

Goal: Improving usage of SEW products by providing customer oriented service and support.

2.2 O

RGANIZATIONAL STRUCTURE OF

SEW

NL

Figure 2-1: Organizational chart of SEW NL, number of employees for each department between brackets.

Each of the three main activities of SEW NL has its own department. The other departments are supporting departments.

It can be seen that the majority of the employees (66%) of SEW NL work in the drive products department, of which 49 work in production. Besides the manager, the other employees in this department work in sales and communication / training. The total number of employees is 137 (132.51 FTE).

2.3 C

USTOMERS AND SUPPLIERS

SEW NL primarily serves customers in The Netherlands. Also, a relatively small amount of customers originate from Belgium. In recent years, delivery of goods to customers and services to The Netherlands accounted for about 95% of net sales in fiscal year 2011. Customers of SEW NL generally value delivery reliability, short lead times, quality and high value for money.

Also, a small number of customers are responsible for a large portion of the net sales. About half of the net sales are generated by 2% of the customers, and about 80% of the net sales are generated by 10% of the customers (yearly about 2500 different customers).

An example of a large customer is Schiphol, where all of the 22.000 drives for the baggage handling system have been produced by SEW NL.

The parts required for the assembly of drive products are supplied by (mostly) SEW Germany. SEW Germany supplies almost all the parts (both small and large). Also, other subsidiaries supply several parts, such as standard electrical motors (supplied by SEW France) that do not require further assembly by SEW NL.

Director (1)

2.4

C

HANGES IN THE MARKET AND ORGANIZATION

In order to achieve the mission statement, SEW is constantly seeking to improve, simplify and standardize its processes in order to achieve lower integral costs and higher delivery reliability. As a result of this, in 2012 SEW NL moved its production facility to a smaller hall and now uses roughly half of the surface with the same production capacity as before. Also, since 2007, SEW has reduced its number of employees by 36% (in comparison with the number of employees as of April 2013).

SEW NL aims to improve net sales in the period from the fiscal year 2012 to fiscal year 2015 by 20% in comparison to FY2011. In order to accomplish this goal, SEW NL wants to increase the product range and options on each product that can be delivered within three days. Furthermore, SEW NL wants to expand value adding services such as processing urgent orders outside work hours and remanufacturing.

Also, by supporting (potential) customers with each of its three activities and making more use of the opportunities and knowledge that lies within the international SEW network, SEW NL tries to be a more attractive partner in comparison to (cheaper) competitors.

The financial crisis of 2008 had a severe impact on the orders for SEW products, although since 2010 the number of orders has recovered.

Figure 2-2: Numbers of orders for SEW products for fiscal year 2006 to 2012.

Besides drives, SEW NL also produces controllers for drives. Customers increasingly have the need for control of drives, and this increasing need is reflected in Figure 2-2. From 2006 to 2012, the share of orders for controllers increased from 4.6% to 8.55%, and this number is expected to grow in the coming years. This is one of the reasons for this research assignment to have been set up.

Net sales have been approximately yearly €60 million in the last few years.

2.5 P

RODUCT RANGE

At SEW NL, the following products are produced:

1.

2.

Orders are most often placed for a drive (combination of a motor and gearbox), though it also possible to order a motor or gearbox separately if necessary. Also, controllers can be ordered.

0 20 40 60 80 2006 2007 2008 2009 2010 2011 2012 T h o u sa n d s Fiscal year

Order volume for drives and controllers

Controllers make it possible to control the motion of motors. Controllers are assembled at SEW NL and are, just as gearboxes and motors, assembled on order.

Not all controllers do require assembly however. Some controllers are sold directly from stock and do not require any assembly activity. About half of the controllers are sold from stock; the other half is assembled at SEW NL.

2.6 P

RODUCTION OF DRIVE PRODUCTS

The production of drive products occurs at the production facility in Rotterdam. This production process can be divided into three distinct sub processes: Stocking the warehouse (1), entering orders (2) and assembling drive products (3).

Each drive product is either an assembly of a gearbox and motor or an assembly of parts for a controller. Each drive product consists of many parts. To make sure all the parts are available, the warehouse will be stocked with parts daily.

Orders for drive products are entered into the ERP system of SEW NL and converted into production orders so that each drive product will have its own production order. A production order is an order that is used in the production facility of Rotterdam, which contains all the information required for assembly of a drive or controller.

Assembling of a drive product will start when a production order has been printed (it will automatically be printed on the production start date) and the required parts for the drive product have been picked and put ready.

Each of these processes will be described in more detail in this chapter.

2.6.1 S

Since SEW NL is a whole subsidiary of SEW Germany, almost all parts originate from the SEW production facilities in Germany. Each day a truck with boxes containing parts arrives in the morning at the production facility in Rotterdam.

When the truck arrives it will first be fully unloaded. After the truck has been unloaded, all the boxes containing parts are put on to pallets. After each box has been scanned and confirmed as arrived, the pallet with the boxes is put onto a roller conveyor. Eventually, every box will be put onto a pallet and every pallet eventually will be put unto the roller conveyor.

A warehouse employee then puts the pallet on a stacker, and goes on to stock the parts at their respective shelves (each part has a designated shelf in the warehouse).

2.6.2 E

At the order entry department of SEW NL, orders for drive products are received from all Dutch customers. Orders are usually received by email, and are processed by three sub departments:

 Key accounts (handles the twenty biggest customers)  East (handles customers from the east of The Netherlands)  West (handles customers from the west of The Netherlands)

There is no standard order format that customers use to place orders, so customers use their own format to specify their order. Custom specifications include size, color, mounting position, and much

more. Because of all these custom specifications, order processers have to translate the need of customer into SEW production orders.

Not all drive products can be produced at the production facility in Rotterdam, so the order entry department can also create production orders for SEW Germany. This means that the order entry department is responsible of creating production orders for all Dutch customers at either SEW Germany or SEW NL, and not only for the production facility at SEW NL in Rotterdam.

When generating the production order (called “scheduling”), it is possible to specify a delivery date, the date at which the customer wants to receive the order. Taking into account the required time for production and transportation, a start date for production will be calculated. The computer system will check whether the required parts for production are available at the required production start date, and only for SEW Germany, check whether production capacity is sufficient. If not, a new feasible production start date will be calculated, and using the new production start date a new delivery date will be proposed to the customer. If necessary, when required parts are not available they sometimes can be backordered so that initial requested delivery date can still be met.

When a part required for the order is not available and has not already been ordered, the part will have to be ordered from SEW Germany. In this case, often the decision can be made to place the production order at SEW Germany (SEW Germany is able to produce everything that is produced at SEW NL) and send the order directly to the customer from SEW Germany.

However, lead times of SEW Germany are a lot higher than lead times of SEW NL. Therefore it is also possible to order required parts from the SEW service center in Germany if a short lead time is required by the customer. The service center has a stock of parts and is able to deliver these parts with a lead time of one day.

If the need of the customer for a drive product is more urgent, customers also have the option to request an urgent order at SEW NL in Rotterdam, at a price. The extra price depends on the nature of the urgency. The more a customer wants to advance the delivery date from the standard delivery date, the more the customer has to pay.

Also, if necessary, a courier will be used for transportation, for which the customer has to pay extra. Second, if a part required for production of the drive is not available, it is possible to backorder this part directly from the SEW Service Center in Germany, which has a stock of parts and has a lead time of one day. The costs that have to be made to order the part from the service center also have to be compensated by the customer. Feasibility of the order will then be checked with production planning to make sure that the production capacity is sufficient.

Finally, the production order will be saved and entered into the system. Assembly of the drive now will start at the calculated production start date.

2.6.3 A

SEW NL has (in total) 14 work cells for the assembly of drives, and one work cell for controllers. Each work cell specializes in a certain range of drives. The parts required for a drive will be brought to the work cell, where a gearbox and/or motor will be assembled. The gearbox will then be assembled onto the motor, and then the drive will be tested, painted and packaged.

Assembling of a drives starts with the printing of production order(s). Parts required for assembly of the drive product that are not located at the work cells will be picked by either a dedicated charger picker or the assembly employee himself. When the parts have been picked, the cart containing the parts will be docked onto the work cell where they will be used for assembly (see Figure 2-3).

Figure 2-3: Left: A cart with two tablets containing parts for two production orders. Right: An empty cart which be resupplied with part for two new production orders.

2.6.3.2 Assembly of drives

Depending on the required capacity (which may vary from day to day) for a work cell on a particular day, a capacity is planning is made. Sometimes a cell does not require more than a few work hours capacity, and other work cells require more capacity than can be provided by two production employees. Because of this, the capacity planning is continuously being updated and it often happens that employees work in multiple work cells during the day.

Assembly of the gearbox and motor may occur simultaneously if a cell is manned by two or more persons. When both the gearbox and motor are ready, they will be assembled to each other. After assembly has been completed, the tablet containing the drive will be transported to the testing area. Most cells have a conveyor belt where the tablet with the assembled drive can be put, the cells responsible for the large drive use an AGV for transportation.

2.6.3.3 Drive testing

Each drive will pass through the drive testing area, where the drive will be inspected and tested. The drive will be tested to see if the drive operates according to specifications. If the test fails, when possible the issue will be either resolved at the testing area or will be sent to the remanufacturing area where the drive will be reassembled. After testing the drive will be hung onto a hanging conveyor. 2.6.3.4 Painting

Customers have the option to specify a color of their choice. Because of this, the rail of the hanging conveyor splits in two right before the painting cabin: one rail for drives in the standard color, and one rail for drives in all other colors.

Figure 2-4: Left: Drive painted in standard color. Right: Drive painted in blue.

The drive remains on the hanging conveyor during painting. After painting, the painted drives will be transported to a dryer, where it will be treated with air at room temperature, but with a very low humidity. Afterwards, it will be transported to another dryer where the drive will be treated with hot air. When the paint has dried, the hanging conveyor will transport the drive to expedition, where the drive will be finished and packaged.

2.6.3.5 Assembling type plate

The first step of finishing the drive is the assembly of a type plate. Type plates for each drive are automatically produced when the drive arrives at the type plate assembly station. The drive will be removed from the hanging conveyor and the type plate will be assembled onto the drive, where also the color of the drive will be verified.

2.6.3.6 Packaging

Now the drive is ready for packaging. The drive will first be put in a plastic bag and then the drive will be put in a box, along with possible parts as ordered by the customer. If there are no other production orders from the same customer, the box will be closed and entered into the truck.

Printing of the transportation label will fail when the customer hasn’t paid for the order yet. In that case the order will be temporarily stored until the customer pays for the sales order.

2.6.4 A

Controllers for drives are also assembled at SEW NL. Controllers are available with a large variety of options, so the controller is assembled on order and not to stock. On average, each day 15 controllers are produced (in 2012). However, some controllers are sold from stock but they are delivered to SEW NL as an assembled unit, so no assembly steps are required. On average, 14 controllers are sold form stock each day, so in total 29 controllers are sold each day.

Assembly of a controller starts with the printing of a production order. The production order is printed along with a picking list for parts. The people responsible for assembling the controller will then gather the required parts for the controllers himself and return to the work cell with the parts to start assembly.

After assembly of the parts the controller will be tested, after which a label will be printed which will be stuck on the controller. Then the controller will be packaged (in the same box as the main unit of the

controller) and brought to the expedition area where the controller will be made ready for shipment and loaded onto the truck.

2.6.5 R

/

SEW NL also offers the service for repair, conversion or remanufacturing of existing SEW drives.  Repairing: Fixing the drive so that it operates according to specifications again.

 Conversion: Reassembly of the drive so that (for example) it can be physically mounted in a different way.

 Remanufacturing: Replacing small parts with new ones and repainting of the exterior so that the drive will both look and operate as new.

Although the required work on the drive that have been brought in for remanufacturing or repair is not known beforehand, the price for each of these three services have been set up as fixed. The fixed price can sometimes be risky when a drive requires a lot of work, but the throughput time will be lower because less customer contact is required.

Each drive that will be brought to SEW NL for servicing will be inspected and disassembled at the remanufacturing area. The (reusable) old parts (which parts are reusable depend on whether the drive needs to be repaired, converted or remanufactured), together with the new parts, will then be brought to a work cell where it will be reassembled and undergo the same treatment as new drives (as described in Chapter 2.6.3), and finally will be shipped to the customer.

2.6.6 I

SEW NL assembles a wide range of products, and aims to serve each customer with a lead time of three working days (from order placement to delivery). Almost all the parts are delivered from SEW Germany, and lead times for parts are generally much higher than the promised lead time of drive products at SEW NL (lead times for parts from SEW Germany usually are two to four weeks). These three factors combined make it a necessity to have an internal warehouse where all the parts required for assembly are have to be in stock, otherwise SEW NL will not be able to deliver within the promised three days. Ordering parts from the SEW Service Center is also a possibility, but the Service Center does not have all the parts in stock and is more expensive.

If a certain part (however small it may be) is out of stock, the drive product cannot be assembled and SEW NL will be unable to keep its promise. Because of this, adequate management of the inventory is essential for SEW NL in order to meet the promised delivery date. To prevent stock problems with production orders, production orders can only be scheduled when sufficient stock is available at the required production start date (see Chapter 2.6.2).

A large part of the surface of the production hall is therefore used as warehouse. The warehouse is mostly used for keeping stock of large parts. The area used as warehouse for stock keeping is marked in Figure 2-5. Also, not marked in Figure 2-5, stock for small parts is kept at the work cells.

Figure 2-5: Map of production hall with area used as warehouse marked in blue. As said before, parts required for assembly of drives can roughly be divided into two categories:

1. eKanban – used for small parts

2. MRP (material requirements planning) – used for large parts

eKanban is a signaling system that uses electronic signals to trigger an order for new parts. At SEW NL, this means that whenever a bin containing small parts is empty, it will be scanned and new parts will automatically be ordered in a quantity sufficient to refill the empty bin.

Orders for large parts are automated through the use of the MRP system. Orders for these parts are based on historical usage, and not triggered by empty bins or shelves such as with the eKanban system.

While eKanban with multiple bins ensure the availability of small parts, for (large) MRP parts availability is ensured only scheduling order when the required parts are available at the scheduled date. Demand for the large parts is forecasted based on historical usage, and replenishment supplies are ordered based on this expected demand. However, if the real demand is higher than the expected demand, it may occur that the stock level of a certain part will reach zero before the replenishment supply arrives, and then no production orders can be scheduled that use this part until a replenishment supply arrives.

3 A

NALYSIS

3.1 B

LACK BOX MODEL OF

SEW

NL

Before the analysis of SEW NL, first a root definition is composed for what the system SEW NL actually is:

SEW NL is a system that fulfills demand from companies in The Netherlands and Belgium for drive products by assembling and delivering drive products, supported by services on the area of engineering and repairs/remanufacturing, complying with the requirements set up by SEW NL and SEW Germany with respect to quality, lead time and delivery reliability, taking into account possible constraints of suppliers and transport companies.

Following the root definition, the assembly of parts for drive products into assembled drive products can be considered the primary function of the system SEW NL. This is supported by the fact that 66% of the employees work in the drive products department (Chapter 2.2) and that 95% of net sales (in fiscal year 2011, Chapter 2.3) are generated through the sale of drive products. Also stated in Chapter 2.3, customers in The Netherlands generally require a short lead time, high delivery reliability and high quality.

Using this information, a black box model for the system SEW NL can be composed (Figure 3-1).

Figure 3-1: Black box model of the main function of SEW NL, average input and output in red.

3.1.1 S

A clear system border is required for a correct analysis. Elements and (material) flows outside of the system border will not necessarily be ignored and will be (if necessary) acknowledged and treated as given. Elements and flows inside the system border however, will be thoroughly modeled and analyzed.

Parts used for the production enter the physical building of SEW NL and leave as assembled drive products. Therefore, in this analysis, the system border is drawn around the physical building of SEW NL.

Consequently, customers, transportation companies other SEW offices/facilities are not included in the analysis.

(RE)ASSEMBLE

parts, used drives _{drive products} assembled

Requirements on: lead time on-time delivery quality Performance on: lead time on-time delivery quality 170 drives / day 29 controllers / day ~16,000 parts / day

3.1.2 I

The output of the system SEW NL is assembled drive products. This output may contain any (combination) of the three products defined in Chapter 2.5:

1.

2.

3.

Almost all assembled drive products (more than 90%) are drives (an assembly of a gearbox and motor).

Each of these products is assembled at SEW NL, which means that for the assembly of each of these products, parts are required. The parts required for assembly therefore are the input of this system: the input (parts) will be transformed (assembled) into the output (assembled drive products).

Besides assembling new drives, existing drives also can be repaired or remanufactured. Therefore drives that have been sent in for repair or remanufacturing is also an input of the black box.

Input: parts, used drives

Output: motors, gearboxes, controllers

3.1.3 R

There are three primary requirements for the system SEW NL:

1.

2.

3.

This chapter will describe the requirements on the system SEW NL. How the system performance of these requirements is measured and evaluated is explained in Chapter 3.1.5.

3.1.3.1 Lead time

SEW NL is a whole subsidiary of SEW Germany and assembles a small part of the range of SEW products. The reason SEW NL also assembles a certain range of SEW products is to serve the market in The Netherlands and Belgium fast with short lead times. SEW products can also be assembled at SEW Germany, at the cost of much higher lead times. Because of this, lead time is an important requirement for the system. SEW NL wants to be able to deliver drive products within three days. The lead time for a drive product is dependent on the following parameters:

1. Requested delivery date (usually ‘as soon as possible’) 2. Availability of materials

3. Availability of production capacity

For production orders of SEW NL, the availability of materials is checked when the order is entered into the system. However, production capacity is not. Generally, the desired quantity of an order is low (roughly 80% of the orders have a desired quantity of 1). Only for large order quantities (desired quantity of 10 and higher), availability of production capacity is manually determined by contacting the production planner at SEW NL before entering the order into the system.

In FY2012, the average lead time was 9 workdays. Also, 80% of the orders have a lead time of 13 workdays or less. Only 20% of the orders have a lead time of 3 workdays or less.

Two reasons can be identified for longer lead times than the required three days: 1. The customer requested a lead time longer than three days.

2. The system was not able to handle the order with a lead time of three days or less.

When the order is entered into the system, a scheduled delivery date is determined to which the customer agrees. However, it is not clear whether the scheduled delivery date was proposed by the customer, or by SEW NL. Therefore, it is not possible to determine whether lead times longer than three days are caused by the customer, or by SEW NL.

3.1.3.2 On-time delivery

On-time delivery is also a requirement for the system. SEW NL has set up a requirement of 95% on time delivery and tries to be a reliable supplier for their customers (one of the core values of SEW NL is “a deal is a deal”).

Figure 3-2: On time delivery from March 2012 to March 2013.

In Figure 3-2, the on-time delivery is shown from March 2012 to March 2013. The on-time delivery is calculated by comparing the date on which the drive should have been shipped and the date on which the drive actually shipped.

% drive products

More than 1 day too early 0.03%

1 day too early 0.4%

On time 94.7%

1 day too late 3.6%

More than 1 day too late 1.3%

Table 3-1: Distribution of differences between requested and confirmed ship date from March 2012 to March 2013 for drive products.

60% 70% 80% 90% 100% P er ce n tage con fir med o n t ime deli v e re d Day

From Table 3-1 it can be seen that more than 5% of the drives are delivered too late, and less than 0.5% of the drive products are actually delivered too early. Too early deliveries are not considered as problematic, so on time delivery performance is according to the standards.

3.1.3.3 Quality

The third requirement quality can be derived from the mission statement of SEW NL (Chapter 2.1): quality is valued as an important aspect for improving the competitive position of SEW NL.

The quality of the drive product is largely determined by the quality of the parts for the drive products. SEW NL only assembles parts into a complete drive product, so SEW NL only has to make sure that the drive product is properly assembled and operates according to specifications, which is exactly what SEW NL does.

3.1.4 T

Inside the black box, parts are being transformed into assembled drive products. A detailed description for the assembly of drive products can be found in Chapter 2.6.

3.1.5 P

SEW

NL

Requirements (Chapter 3.1.3) are translated into standards for the system. The results of the system can be used as performance measures. Table 3-2 shows the standard and performance measure for each system requirement (the requirements are explained in Chapter 3.1.3.

Requirement Standard Result for measuring performance

Lead time Production start date Scheduled delivery date On time delivery Scheduled delivery date Actual delivery date Quality Assembly work procedures Rejected drive products

Table 3-2: Standards and results for measuring performance of the system requirements. Performance on the requirement lead time can be measured by monitoring the scheduled delivery date, and comparing these scheduled delivery dates with the order creation date for each order. This currently does not happen.

Performance on the requirement on time delivery can be measured by monitoring the actual delivery date and comparing these actual delivery dates with the scheduled delivery dates for each order. This currently does happen.

Performance on the requirement quality can be measured by evaluating the number of internally rejected drive products. This currently does happen.

3.2 PROPER

MODEL OF

SEW

NL

Although the black box model already provides a lot of information regarding inputs, outputs, requirements and performance of SEW NL, it does only show one aspect of the system: the material flow. However, the material flow is clearly related to the order flow because every product is assembled to order. Therefore, the PROPER model approach1 is useful for SEW NL. The PROPER model shows the relations between different aspects of a system.

Figure 3-3: Basic PROPER model for the aspect system drive production at SEW NL. Figure 3-3 shows the PROPER model for drive production at SEW NL. The figure shows the relations between the order flow and material flow: parts and used drives flow into the system daily and are stored in the warehouse of SEW NL. Whenever an order enters the system and is converted into a production order, parts stored in the warehouse will be used for assembly and assembly will start. When the assembly is ready for transportation, the order is considered handled.

The model in Figure 3-3 also shows the location of the customer order decoupling point: production orders initiate the function assemble: each drive product is assembled to order. Because the parts are almost always used from stock, the parts are ordered based on expected sales, and not on actual sales.

In the case of urgent orders, parts will be ordered specifically for the urgent order when necessary. Because urgent orders are responsible for only 3%of the total order volume, Figure 3-3 shows regular orders, and not urgent orders. Chapter 2.6.2 explains the handling of urgent orders in more detail.

1

(Veeke, Ottjes, & Lodewijks, 2008) order handled order requirements performance assembled product

CONTROL

production order handled

production order production planning, SAP

assemble

prepare

transport

stock

3.2.1 O

Because Figure 3-3 shows the order transformation as a black box, it is not immediately clear how the transformation actually occurs. Figure 3-4 opens this black box, and shows how the transformation from order to handled order occurs in more detail.

Figure 3-4: Order flow handling at SEW NL.

Checking of inventory and capacity will be done with the ERP system of SEW NL, SAP. Each production order will have a production start date, and on that start date the required parts for the production order will have to be available, along with sufficient production capacity for production orders for SEW Germany. Parts are automatically ordered by so that the required production start date is met. The ordering of parts is explained in detail in Chapter 3.3.2.1. If the delivery time of parts is too long so that the required delivery date cannot be met, a new production start date will be proposed. In 2012, 70.000 drive products were sold by SEW NL. Of these 70.000 drives, about 66% was produced at SEW NL, the other 36% at SEW Germany.

3.2.2 M

As stated in Chapter 2.5, SEW NL produces motors, gearboxes, and controllers. The process (as described in Chapter 2.6) is modeled in Figure 3-5.

Parts and used drives are first unloaded, transported to the warehouse and then stored. When a production order is started, parts for the drive product will be gathered and the assembly will start. After assembly, the drive will be checked for defects and will be painted. The drive product will then be transported to the expedition area where a type plate is automatically printed and mounted onto the drive product. The drive product is then packaged. After the drive product has been paid for and all of the drive products of the same sales order have been finished, the drive product is loaded onto the truck.

Production of controllers is similar to the production of drives, except for painting and printing type plates, which means that there is also less need for transportation. Controllers are assembled and checked if they operate according to specifications at the same place by one person, and afterwards are transported (manually using a cart) to expedition, where the controller will be packaged and shipped.

Production of drive products is divided over several work cells. There are 14 work cells for drives, where each cell produces a certain range of drives, and one work cell for controllers.

create production orders wait for payment handle order finalize production orders

production order for SEW Germany

order handled order check inventory check capacity

Figure 3-5: Model of drive production.

Figure 3-6 shows the map of the production hall where the work cells are marked in red. The layout of the assembly workplaces are therefore product oriented. After assembly for drives has been completed, all the drive products will go to the final drive check, painting cabin and expedition. The remaining activities of the production of a drive product after assembly are positioned in a functional (or process oriented) layout.

Figure 3-6: Map of production hall. Dark blue: goods entry, dark purple: warehouse, red: work cells, yellow: AGV, blue: conveyor belt, green: final check, orange: hanging conveyor, light

purple: painting cabin, cyan: expedition.

3.2.3 C

Combining Figure 3-4 and Figure 3-5 results in the following PROPER model: unload check drive product operate parts, used drives assembled drive products transport pick parts asssemble repair paint

transport finish load

print type plate

repair drives for

repair or remanufacturing controllers

transport

Figure 3-7: PROPER model with detailed order flow and material flow. The detailed model (Figure 3-7) shows three links between the order flow and material flow:

1. Initiation of assembly of drive products by initiating “pick parts” through a production order. 2. Payment verification when the drive product is being packaged.

3. Finalizing order when payment has been received and has been packaged.

order handled order

requirements performance

CONTROL

standards

finished production order

production planning, SAP

create production orders wait for payment check inventory check capacity finalize production orders results production order SEW Germany

print transportation label only when payment has been received

only load drive products with transportation label

unload check drive product parts, used drives assembled drive products transport pick parts repair paint transport finish print type plate repair drives for repair or remanufacturing package controllers load transport asssemble

For production planning, these links are especially important: the goal of production is to deliver the right product at the right time in the best economical way. To achieve this goal, it is important that both resources for assembly and the parts to assemble are available at the right time, the required production start date. If either resources for assembly or parts to assemble are not available at the right time, production cannot start. Therefore production orders can only be scheduled when the required parts are available on the scheduled production start date.

To make sure both resources and parts are available at the right time, for production planning (mostly automated by SAP), it is important to know all current future orders and all current and future available parts.

In both the order flow and material flow, buffers can be distinguished. The order flow has two buffers containing production orders. Both contain production orders, though the second buffer only contains production orders for which have been paid. Assembled drive products cannot leave the system unless the production order has been paid for.

The material flow also has two buffers. The first buffer is a buffer containing parts for drive products that need to be assembled. The second buffer contains assembled drive products that will be loaded onto a truck for transportation every day.

The relationship between the order flow and material flow also implies a relationship between the buffers in the order flow and the buffers in the material flow. Each production order has a scheduled start date, and on that day, all of the parts required for assembly of the drive product specified in the production have to be in stock.

On a given day, the part buffer has to contain parts for production orders scheduled to start on that given day. However, because order lead times are generally much shorter than replenishment lead times for parts, the part buffer also has to contain parts for orders that have not been scheduled yet, but are expected to be scheduled.

Now, the existence of the relationship between the buffers containing production orders and the buffer containing parts for assembly is clear. However, several questions can still be asked:

1. How large are the order buffers and material buffers? 2. What influences or determines the size of the buffers? 3. How do the order and material buffers relate to each other?

To provide answers to these questions, the material buffer, order buffer and the relationship between these buffers will be analyzed in Chapter 3.3.

3.3 O

RDER BUFFER AND PART BUFFER

3.3.1 O

3.3.1.1 Total production

The order buffer contains production orders SEW NL. Production orders are either orders for the assembly of new drive products or for the repair of existing (sent in) drive products. Each production order also belongs to a sales order. Several production orders can belong to the same sales order. Table 3-3 shows how much production orders and sales orders for the assembly of new drive products and the repair of existing drive products were handled in the fiscal year 2012 (from March 1st 2012 to February 28th 2013.

Number of orders Total produced [units]

Production orders (new) 31,100 45,429

Controllers 2,204 3,870

Drives 27,595 39,935

Remanufacturing 1,301 1,624

Production orders (repair) 1375 1437

Controllers 650 666

Drives 725 771

Total 32,475 46,866

Table 3-3: Handled production order data for the fiscal year 2012.

“Handled production orders” refers to production orders which have been produced, which may not necessarily have been loaded onto the truck for transportation. It is possible that loading finished drive products into the truck is halted when the drive products have not yet been paid for (as discussed in Chapter 3.2.3), but this no influence on the production start date of a production order, and therefore also has no influence on the parts buffer.

3.3.1.2 Daily production

Figure 3-8: Daily drive production in FY2012.

In Figure 3-8, the total production of drive products for each day in FY2012 can be seen. 0 50 100 150 200 250 300 350 400 Daily p ro d u ctio n o f d riv e produ c ts Day Controllers Drives

The average number of drive products produced each day (including remanufacturing) is:  167 drives (standard deviation σ = 45.6)

 15.5 controllers (standard deviation σ = 13.2)

The average is calculated using 249 production days. In reality, 255 days have been used for production. However, not all of these 255 days are regular production days. SEW NL also produces drive products out of regular working hours in case of customer emergencies, 6 days have been used for the production of drive products that are not regular production days.

3.3.1.3 Order quantity

The data in Table 3-3 also shows that, on average, each production order results in 1.46 drive products to be produced. This implies that most orders for drive products are in low quantities.

Figure 3-9 shows the distribution of order quantity for production orders for new drive products. Most of production orders (roughly 80%) ordered in a quantity of 1, but only account for 54% of the total number of drive products produced. The remaining 20% production orders (all with an order quantity of 2 or more) take up the remaining 56% of the total production of drive products.

Figure 3-9: Order quantity of production orders and total production for new drive products in FY2012.

3.3.1.4 Variation in drive products

As said before, almost all drive products produced differ from each other. Although the product type may sometimes be the same, the position in which the gearbox and motor are assembled onto each other and the color in which the drive product will be painted may differ. However, if one drive product compared to another drive product consists of exactly the same components (mounting position and paint color still may differ).

Using this definition of identical products, it can be determined that SEW NL produced 7,617 (of which 383 are controllers) drive products in FY2012 with an identical product description. The ten most produced drive products account for 9.4% of the total production of drive products. It should however be noted that a lot of different drive products are variations of the same type of drive product (the same gearbox and motor for example) that are very similar to each other. Also, drive products with an identical production description can still be different in mounting position, paint color and several others attributes. However, production orders with an identical product description have the same bill of materials. 0 5 10 15 20 25 30 1 2 3 4 5 6 7 8 9 10 >10 T o tal T h o u sa n d s

Order quantity of production orders Production orders Total produced

3.3.1.5 Order lead times

The time between the production order creation date and the order delivery date (tc,dl) can be defined as the time between the production order creation date and production start date (tc,st) plus the time between the production start date and the production shipping date (tst,sh). Also, one day for shipping is added:

(3.1)

Equation 3.1: Time between order creation and order delivery.

tc,sh can be defined both externally by the customer and internally by the availability of materials: the customer specifies the requested delivery date. If the requested delivery date is sooner than the earliest possible delivery date, the earliest possible delivery is used as the scheduled delivery date. tst,sh is determined internally by SEW NL: it is mainly influenced by the assembly time of the drive product.

Figure 3-10: Distribution of order lead time (tc,dl) in workdays (order creation date to scheduled delivery date)

In Figure 3-10 the distribution of production order lead times in work can be seen. Most orders (52%) are scheduled to be delivered within 5 workdays.

Figure 3-11: Distribution of working days between order creation date and planned production start date (tc,st)/

In Figure 3-11 the distribution of tc,st is shown. 55% of the production orders have a planned production start date within 4 working days after the order has been created. 54% of the production orders have a

0 1000 2000 3000 4000 5000 6000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 >20 Nu mb er o f prod u ctio n o rd er s

Order lead times in workdays

0 1000 2000 3000 4000 5000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 >15 Nu mb er o f prod u ctio n o rd er s

planned shipping date within a day after the production start date. On average, 84% of the planned time between the creation of the production order and the planned shipping date is spent waiting for the production start date (tc,st).

The time between order start date and planned shipping date that is influenced by SEW NL (tst,sh) is often less than one day. This is because the assembly times of drive products are short, ranging from one to several hours (depending on the drive product, large drives usually have longer assembly times). 89% of all the production orders are finished within one day.

For controllers, more than 99% of the controllers are finished on the same day as production is started. Sometimes controllers are ordered in large quantities; in this case the production finish date for the production order may be finished one day or more after the production start date.

For drive products, a little more than 50% of the orders are finished on the same day as production start date started and 30% a day after production start date. Reasons for more than one day between the production start date and production finish date are usually additional modifications that are required by the customer, such as a special coating or custom flange. Also, large quantity production orders are a reason for more than one day between production start date and production finish date. Production orders can be categorized into three categories:

1. Orders where the scheduled delivery date is equal to the initial requested delivery date without additional efforts.

2. Orders where the scheduled delivery date is equal to the initial requested delivery date, but parts have to be backordered.

3. Order where the scheduled delivery date is higher than the initial requested delivery date. Because only the scheduled delivery date is entered into the system, and not the initial requested delivery date, the performance on lead time can only be measured using the scheduled delivery times, and comparing those with the order creation date of the orders (see Chapter 3.1.5). However, for evaluating the performance of the system SEW NL, this result is not very useful. The result of the system “scheduled delivery date” can be determined by either the customer (externally determined) or by the availability of materials (internally determined).

If, for instance, the average lead time is calculated using this measure, this performance measure will be partially determined by customers. If all customers suddenly decided to order drive products one month before they actually need it, average lead times would increase dramatically and the system performance on lead time would appear to have worsened, even though there is nothing SEW NL can do about it.

Currently the time between the order creation date and production start date is a major influence in the total order lead time (84% of the time between order creation date and order shipping date is spent waiting for the production start date), and it is not known whether this time is either caused by external factors (the customer) or internal factors (availability of materials).

If the initial requested delivery date were to be known, it would be possible to determine the ratio of orders that need be delivered after three working days and orders that cannot be delivered within three working days without additional efforts. Now, by comparing the scheduled delivery date with the initial requested delivery date, it is possible to measure the performance on lead time effectively because external influences are removed from the performance measure.