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in order to succeed in the world of manufacturing there are a number of terms and concepts that are critical to understand and i want to talk about what those top 10 terms and definitions here are today [Music] my name is eric kimberling i'm the ceo of third stage consulting we're an independent consulting firm that helps clients through their digital transformation journeys and as i mentioned manufacturing has a lot of unique terms and definitions that are critical to understand in order to be successful in the world of manufacturing it's an industry that i happen to love it's where i started my consulting career was in the manufacturing space so it's a space i enjoy working in but i also understand there's a lot of complex topics that may or may not make a lot of sense if you're new to the industry or if you're just trying to brush up on what some of those key concepts are so what i want to talk about today are those top 10 definitions that are most important for you to understand in your career in manufacturing [Music] one of the first things to understand is the type of manufacturing that you're doing or that your organization does and there's two primary types of manufacturing you have discreet manufacturing and you have process manufacturing discrete manufacturing is probably the more common or the more traditional type of manufacturing it's the production of widgets or tangible things that are units of one or actual objects when you talk about process manufacturing on the other hand that's related more to things like food and beverage so they're things that involve a recipe or mixing materials to create something that can't be reversed and that's probably the best way to think about it is process manufacturing you can't undo whereas discrete manufacturing you could technically take apart all the different pieces and components of that discrete product process manufacturing you're blending a bunch of things together to create a finished product that you can't undo so something like food or a beverage alcohol whatever the case may be those are things that would fall in the space of process manufacturing [Music] depending on the type of manufacturing firm you work for you're probably going to see either make to stock types of environments or make to order or you may see both actually so make to stock is when you produce your products and you store them in a warehouse until you get the orders and then you ship them out that's the simplest way to put it make to order would be you don't build anything until you get the order from the customers or at least you have projected demand from a customer that you're building for so make to order would be to build something that's either for an existing customer order or it could be that you're also producing it for anticipated demand that you think you'll ship very quickly whereas make the stock is you're going to let it sit on a shelf until the orders come in and you'll let it let it ship whenever it comes in now make to order is more common with larger more complex products so when you have a highly engineered or highly configurable type of product that's more likely to be make to order in some cases there's another step within make to order or another version or variation which is actually engineer to order which is sort of a subset of make to order and that is because it involves more complex engineering but the general concept is the same whereas make to stock is going to be things that are more high volume commodity types of things that you may not have clear demand or it's not very predictable as far as what the demand is or it may be that you have to stockpile inventory just to make sure you're satisfying your customers so in those cases that might be more of a make to stock environment [Music] material resource planning is one of the most critical components and really the heart of manufacturing in fact this is the area that i actually first learned within manufacturing was the whole concept of mrp and mrp is essentially the way that you translate anticipated demand or anticipated needs for production you're translating that into an actual production schedule so you're trying to figure out what do i think i need to produce when do i have to produce it by and then how does that translate into my production schedule and it's not just scheduling the production on the shop floor within the manufacturing plant it's also anticipating when you might need to order raw materials to support that production so it's a very complex process it requires a lot of data a lot of assumptions a lot of projections and a lot of systems and human intervention to make sure that you've got the right mrp process to ensure that you're building the right product at the right time for the right customers so mrp is something that's critical to understand and it's a critical part of any sort of technology that might automate your manufacturing operations [Music] the building block of any product that your organization might manufacture is going to be your bill of material the bill of material is a sort of master data that resides within a system that defines exactly how the product is made so at the top level you have your finished product and then underneath that you have a hierarchy of different components and raw materials that go into that finished product and the reason this is so important is that's the diagram or the blueprint for how you're going to build the product and it also defines how you're going to order raw materials and how you're going to route the manufacturing on the shop floor and so it really defines how the manufacturing processes and the materials are all going to come together to create the finished product it will also capture costing information too so it will capture the estimated or the actual cost of all the different components and materials and even the labor that goes into building that final product and that's important too because that ultimately should trickle back to your finance and your accounting so that you can track your work in progress you can track your profitability you can track your overall cost all that good stuff so the bill of material is a critical part of any manufacturing process billa materials go hand in hand with something called routing and routing is what takes the bill of materials and it routes what the steps in the manufacturing process are so typically you would have a technology that would define for the machine shop operators on what the steps in the process are it would define when something should move to the next step and where it should go and that way people don't have to go off memory or go look up papers to figure out what to do next after they've done a step in the process so the routing is what defines what happens to that build materials and what the steps are to get through the manufacturing process to end up with that final product and so in the case of both routings and build materials those are both considered master data elements within the manufacturing world those are things that are sort of the parameters of the guard rails the diagram or the blueprint for how products are made and how they're routed through the entire operations there's also a concept called machine shop and what a machine shop is essentially is most people understand or see the really cool manufacturing conveyor belts that go down a line and everyone's assembling or adding things along the way and that's good for high volume commodity type products where it's a very repeatable process you're running high volumes through a good example would be like a food manufacturer that produces candy bars you know hershey's you're going to see an assembly line that kind of goes down the line and it's going to crank massive amounts of product down that assembly line but when you have lower volume environments or more custom environments you tend to have more of a machine shop environment where you have one self-contained machine shop area where you're doing a number of steps to configure or tailor a product for specific customer needs now this isn't common or as common in the food and beverage or the consumer product type of manufacturing environments it's more common in industrial or business to business type of manufacturing so if someone is buying you know sheet metal or wood products it might be that you have a machine shop to cut the wood to tailor it for however you need to sand it to to stain it to paint it whatever the steps might be a lot of times that might be a self-contained machine shop for some of those steps and it the product can go from one machine shop to another but generally it's more human intervention it's more highly targeted types of processes and it's usually lower volumes and more custom environments [Music] another critical concept for manufacturers is this whole concept of warehouse management and warehouses are usually attached to or right next to a manufacturing plant or at least very close and generally what happens is once you've completed a product it goes back to the warehouse either to go straight out the door to a customer or to go on the shelf if you're a make to stock type of producer and so the warehouse is very important and the warehouse management concept is keeping track of where those products go where they've been placed where they should go and ultimately when it comes time to pick pack and ship and ship the products out the door to the customers a system will typically keep track of where you've kept those finished products now warehouses are also used to store raw materials so your raw materials will typically come in the door from your supplier gets put on a shelf and stored in the system so you can track where it's at so that when it comes time to produce and convert those raw materials into finished products people know where to get the product so that whole concept of warehouse management all the nuances and logistics that go into that that's essentially what warehouse management means and there's specific technologies out there that handle warehouse management but it's important to understand the general concept another very common concept in manufacturing these days is lean manufacturing lean manufacturing essentially is being fast reducing cost and minimizing inventory it's broad generalization but in general that's what lean manufacturing is and lean manufacturing actually originated back in the 70s and 80s when a lot of japanese companies introduced the concept to american companies via their total quality management and they also brought kaizen and lean manufacturing six sigma a lot of those other related concepts to america and lean manufacturing is sort of a general umbrella of concept that focuses on reducing cost reducing inventory reducing waste and ultimately streamlining the overall manufacturing process something that's very important to understand within manufacturing processes is the whole concept of bottlenecks and bottlenecks are a common problem with manufacturers most organizations have them most of them are on a never-ending quest to eliminate all bottlenecks although i'd argue it's impossible to eliminate them all because once you've eliminated one oftentimes you create another or another one pops up elsewhere but the whole concept of bottleneck is that you might have slack or extra capacity in certain areas of your manufacturing operations or certain steps in your manufacturing process but there might be some where you're constrained you don't have enough people you don't have enough machines your processes are moving too slow so you might be producing high volumes of certain components and certain steps in the process and then it hits a step in the process it slows down because you don't have enough capacity or enough efficiency to be able to process it all so organizations are constantly looking for ways to eliminate and minimize those bottlenecks and it's really a key core competency of good manufacturing organizations they understand this concept of bottlenecks and they understand how to eliminate them now the last thing i'll talk about today is sales and operations planning that's a key part of manufacturing because it really ties together manufacturing to the rest of the organization and not only does it tie together other parts of the organization it's actually tying back to the sales process and back to the customers so sales and operations planning is really looking at what we think our demand is in forecasting that demand and then planning our production in our operations and our manufacturing around that anticipated demand and the idea is that in a perfect world you predict with great accuracy when the orders are going to come in and what customer demand is going to look like you've anticipated it so you've produced just in time to be able to get the products out the door and ship the product right when the customer actually places an order obviously that utopia never happens 100 accuracy but that's really what we're all striving for is figuring out how can we improve our snop processes to where we get better predicting demand and ultimately we're getting better at translating that sales and demand into production that matches that sales and demand so i hope this has given you a high level overview of some of the common key concepts that you need to understand within the world of manufacturing if you're looking for more information i've included a couple of white papers and blogs below that cover technology and other concepts within manufacturing i encourage you to download those via the link below so i hope you found this information useful and hope you have a great day