Learn how rapidly growing MKS Instruments, a leading worldwide provider of process control solutions, relies on Oracle E-Business applications to maintain its long-term commitment to lean principles. The Massachusetts-based company had to translate and standardize successful processes across several new divisions, a diverse global spread, and disparate technical platforms. Read how MKS: Overhauled its business processes before cementing them into new technology. Conducted gap analyses on status quo versus desired state for each unit. Unified disparate ERP systems with Oracle Supply Chain Management.

As Published In February 2005

Getting Lean
By Carol Hildebrand and the staff of CXO Media

MKS Instruments Turns to Technology to Standardize Business Practices Across Its Company.

The trick about growing up is doing it and still staying agile. For MKS Instruments, the challenge was to keep the growing enterprise aligned with its Lean manufacturing principles. In its quest, it turned to technology.

A Wilmington, Massachusetts-based manufacturer of process control solutions for advanced manufacturing processes such as semiconductor device manufacturing, MKS had embarked on a string of acquisitions over the past several years, and executives were determined to retain the Lean manufacturing principles so important to its success.

MKS got the "Lean religion" in 1987, when a consultant analyzed the company en route to implementing materials requirements planning. "The consultant walked through and said, 'Straighten out your business processes first, and then implement the technology,'" says Gerald Colella, vice president of global business and customer service operations. MKS took the advice to heart. In fact, in 2001 Industryweek magazine named an MKS plant one of the 10 best in the U.S., based in large part on the company's devotion to Lean manufacturing.

But the disruption inherent in any acquisition had the potential to derail MKS's Lean initiatives. The challenge was to translate and standardize these successful processes across a company that had several new divisions, a diverse global spread, and disparate technical platforms.

Snapshot MKS Instruments Wilmington, Massachusetts www.mksinst.com Employees: 2,144 Annual revenues: US$337.3 million Oracle products and services: Oracle E-Business Suite, Oracle Database

"We went public in 1999 and over the past four years have acquired multiple companies with the technologies to support our research-and-development efforts and expand our process control solutions," says Colella. "It was our growth strategy, but we also wanted to seamlessly integrate acquisitions into our business processes and implement Lean manufacturing as a business model, as well as provide a more effective tool to enhance communication with our customers and suppliers."

MKS started by overhauling its business processes before cementing them into new technology. "We wanted to spend time getting our business processes running properly before integrating them into one enterprise resource planning system, All running in a Lean supply chain," Colella says.

So MKS put each acquisition through a Lean assessment process based on the company's model. For example, MKS looked at such issues as how the shop floor was laid out, how much was outsourced, and how the company managed contracts with suppliers, as well as employee, system, and supply chain management.

After conducting a gap analysis on status quo versus desired state, Colella gave each business unit a road map with a timeline to get to the new model. "The average conversion to a Lean operations model was about 18 months, and we did it pretty successfully," he says. For example, new business units Astex and ENI (now known as the PRG product group) cut their manufacturing lead time, from order to shipment, from 14-16 weeks to 2-4 weeks.

Once MKS was confident that the company's Lean model had been successfully inculcated across the new units, it took it a step up. The company's business units were still running on a variety of disparate enterprise-resource-planning (ERP) platforms, a legacy of the acquisition phase, and MKS decided to standardize on one ERP package companywide.

"We recognized that to improve the efficiency of running a global-business supply chain, we needed to get away from disparate ERP systems," Colella says. "We wanted to go back to basics and implement good Lean business processes. Once the processes were straightened out, we would then automate them in ERP and across the entire business in a standard process."

After assessing several ERP packages for their ability to run Lean business processes most effectively, the MKS task force chose Oracle E-Business Suite "We were looking for ease of use, a good global supplier portal, flexibility, kanban [just-in-time] reporting, supply chain reporting—essentially, a supply chain model that supports Lean practices," says Colella.

The company is in midlaunch for the first of its business units and plans to stagger the rollout across each of them, a process Colella estimates will take until the end of 2006.

Although the company is still in the early stages of implementation, Colella says he expects to reap significant benefits in terms of increases in inventory turns, better coordination of supply management and contract administration, and lower overall administrative processes. He also hopes for more-accurate, timely information at the managerial level—data that can be aggregated across the business units.

"We'll have the ability to seamlessly collect information and make good business decisions fast," he says. "With Oracle, we'll have more information at our fingertips, versus having to wait for the business units to generate reports and send them to us." Finally, Oracle's solution will aid MKS Instruments in security and Sarbanes-Oxley Act compliance. "We'll have better systems control and just overall better efficiency in running the business," Colella adds. "I think that with our accomplishments in Lean operations, the fact that we chose Oracle is a pretty good validation of the Oracle product."

Q & A: Bill Swanton of AMR Research talks about the meaning of Lean. How do companies learn to run Lean? We spoke with Bill Swanton, vice president at Boston-based AMR Research. PROFIT: How did the idea of Lean supply chains get started? SWANTON: For the past 20 years, companies have been "leaning" themselves out. Most people start in the manufacturing plant: simplifying lines, reorganizing equipment for faster work, eliminating unnecessary steps in the process. PROFIT: If this has been going on for 20 years, what's new about it now? SWANTON: The time spent in the manufacturing plant has scrunched to almost nothing, but there are still plenty of ways to take time out of the materials-supply side and the distribution channel. So companies are looking outside to the supply chain to get even leaner. Another thing we learned was in the 1980s, when many companies went to just-in-time manufacturing, if you just forced inventory onto suppliers, it didn't actually take it out of the supply chain or cut actual costs. Manufacturers had to work on ways of reducing inventory in the supply chain. PROFIT: What does that look like? SWANTON: A lot of Lean mechanics in a plant involves visual signals known as kanban that help people know how to do things. Kanban helps companies know when they need to supply the process with new parts. For example, if there's an empty bin on the line, the kanban process would be to take a card and send it to the guy on the floor to tell him to make new parts, which lets him know how much is being used and how quickly, depending on the mix and the models being made. People are now using the cues to make electronic kanban, from original equipment manufacturers to suppliers. Instead of generating purchase orders, people are using electronic signals to replenish parts from the line side. It may be e-mail, or visibility on a supplier-portal Web site, or an electronic-data-interchange (EDI) message, but the signals are tied to actual consumption on the part of the line. PROFIT: Can Lean technologies help bring companies closer to real-time replenishment? SWANTON: Yes. The actual inventory of parts you need in any given part of the supply network will depend a lot on exactly what volume of product you're making today and what mix of products is being made. This changes over time. Most often, companies create replenishment rules and policies based on history and forecasting. Now companies are also calculating and adjusting inventory-replenishment policies, based on what they're seeing right in the factory. And they are looking at actual usage and giving signals to suppliers based on that. For example, a container might be bar-coded, and when it's empty, it can be scanned into the enterprise resource planning [ERP] system, which will automatically send an order to the supplier. ERP, in the past, had a model that assumed 1950s-style procurement. For years, people were doing Lean manufacturing and bypassing ERP. Now, as companies such as Oracle add Lean features to their existing manufacturing and procurement modules, ERP is actually coming into the fray to help support Lean processes. PROFIT: What else are you seeing? SWANTON: A lot is being done with supplier portals to adapt e-procurement to the Lean supply chain. The key idea of supplier portals is to simplify and make electronic most of the interactions with suppliers. In the past, you could set up EDI only with your largest suppliers, because it was so expensive. But some small suppliers may actually sell some of the highest-value components in the product, and this left them out of the process. Now, companies can work with them without EDI. Inventory levels, shipping dates—suppliers can see them through the portal. Another thing is scorecarding via the portal, so suppliers can see how well they are doing. Scorecards can measure things such as on-time delivery and product quality. PROFIT: Are you seeing this mostly in large companies? SWANTON: No, a lot of midsize manufacturers jumped onto it first, because it was the only way they were going to survive. They had to really figure out how to take costs out and be more responsive to customers. You can do it at a small-business or midsize level without a lot of technological support, but once you get big enough, the technology tools become critical, because so many people are involved and the process is so spread out. It's a matter of how big the supply network is. Technology is a great way to scale things.

CXO RESOURCES To learn more about Lean manufacturing, please check out these resources, courtesy of CXO Media and IDG. To read these stories, go to www.cxo.com/profit-resources. From Tech Smart to Business Wise How one CIO turned his IT staff into business advisers. Just five years ago, the ability to nurture the information assets of the company we worked for was considered the main metric of success for CIOs. Today, we need to excel in business areas and functions such as supply chain management, customer relationship management, and shared services. Understanding and deploying technology is table stakes. GM CTO Sees More Code on Future Cars Although the average car had about 1 million lines of software code in 1990, that number will jump to 100 million by 2010, according to Anthony Scott, chief technology officer of GM's information systems and information services organization. Why IT Will Continue to Matter The cost squeeze is on. Automobile companies are racing to get slimmer. According to the New York Times, automakers are now ranked according to how few hours they spend building a car. For instance, General Motors, at only 35.2 hours per vehicle, claims to be the overall leader; Chrysler puts in 37.42 hours, and Ford takes 38.6 hours. However, they're all keeping an eye on the efficiencies of Toyota, which assembles cars in Fremont, California, in only 21.92 hours while continuing to gain market share. Find Out More For more information about Oracle's solutions, visit oracle.com/lean/index.html or oracle.com/products/applications.html