Challenges in Indonesian Manufacturing and Systemization Solutions

In Indonesia's manufacturing industry, production methods are diversifying to respond to fluctuations in domestic market supply and demand. Therefore, it is important to appropriately revise plans according to order changes and to visualize the progress of production instructions on the shop floor.

Chapter 1: Company Introduction

Hello, my name is Yamamoto from Bahtera High System. Thank you very much for attending during this busy end-of-year period.

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Earlier in the first session, we had a talk from Mr. Kunie of Kunie Corporation about "Improving Production Efficiency." I will explain how to concretely systematize this based on experience and case studies.

First, let me introduce our company. Bahtera High System is located in West Bekasi, past the Outer Ring Toll, and if you turn left after exiting Bekasi Barat, you will find the Summarecon development area, where our office is located in a Ruko.

In my previous job, I was responsible for implementing the production scheduler Asprova for about 10 years, so at the new company Bahtera, I am also active as an agent for Asprova with the business card "Asprova Indonesia Office." The company was established in February 2018 and mainly develops and implements manufacturing systems. I have been in Indonesia for 21 years, during which I have been involved in system development and furniture export in Jakarta and Bali.

The company name Bahtera comes from the Portuguese word, similar to the pressed mackerel sushi "battera," and in Indonesian, it means ark. Noah's Ark in the Old Testament is called Bahtera Nuh in Indonesian. This is where it comes from.

One of the means to achieve business improvement is through systems. By systematizing,

can be realized, and information from the shop floor can generate the company's competitiveness. To produce visible effects through system implementation, after thoroughly hearing the customer's requirements,

we propose systems that focus on these aspects.

Chapter 2 Challenges Faced by Indonesian Factories

Let's first look at the "Challenges Faced by Indonesian Factories." Those of you who are close to daily production may be more familiar with this, but here we focus on challenges that can be improved by systematizing production planning and process management.

The trend of high-mix low-volume production has been discussed for years, and it is no longer an era where you only need to think about stably delivering limited varieties to large customers. As the number of customers increases, so does the variety of products.

It would be ideal to receive orders according to the capacity of each company's equipment, but Chinese and Indonesian rival companies are entering the market with improved quality and lower prices, making the business environment in Indonesia tough. To increase sales, it seems inevitable to accumulate small-lot orders.

To handle high-mix low-volume production with limited equipment, production lines need to be subdivided, and shared lines increased to raise the overall operating rate. However, with small lots, lead times for each process become shorter, increasing setup changes such as mold changes and cleaning. As a result, the following issues arise:

As the number of customers increases, so do their circumstances, leading to challenges not faced when producing for stable supply to large customers.

Such fluctuations occurring upstream in the supply chain cause the bullwhip effect, where the range of fluctuations widens as it moves downstream to production and purchasing. Conversely, purchasing fluctuations have a significant impact on upstream demand, known as the reverse bullwhip effect.

When internal forecasts fluctuate due to high-mix low-volume production, the responsibility of decision-makers in the factory becomes increasingly important. In the factory, orders are received, materials are procured, products are manufactured, and shipped. Within this internal supply chain, decision-making occurs at "manufacturing instructions (when and how many to produce)" and "ordering (when and how many to order)."

In these crucial decision-making moments, there are generally two considerations. For the manufacturing department, it is problematic if production does not meet shipping deadlines or if overproduction leads to excess. For the purchasing department, it is problematic if materials are insufficient for production or if excessive purchasing leads to stockpiling.

For the purchasing department:

These are essentially opportunity loss costs and inventory costs, which are indeed challenging issues but must be overcome. Positively speaking, it means "overcome the fear of inventory costs and opportunity loss costs during manufacturing instructions or ordering with demand forecasting."

As you know, the minimum wage in 2018 exceeded 3.9 juta in Karawang and Bekasi, which is twice that of Central Java. As labor costs rise, so do wage rates. To maintain previous output levels at the increased wage rate, options include increasing the ratio of direct labor, improving efficiency (reducing man-hours), or working unpaid overtime (not recommended as it is exploitative). Overtime becomes a cost, so efforts are needed to reduce the ratio of indirect labor through business improvement or to increase efficiency.

Chapter 3: Effects of Time Reduction and Inventory Reduction

The theme of this chapter is how to concretely implement business improvements into the system. Based on the risks seen in Chapter 2, the direction of business improvement is decided, and based on that, the direction of systemization is determined. Here, we broadly categorize into two systems: a process management system based on business improvement and a production planning system for formulating future production plans. Both systems are tools to achieve business improvement, not the means.

Business systems such as process management, inventory management, sales management, and purchasing management are systems for partial optimization to accurately record quantities and time within departments. However, to overcome risks such as demand fluctuations and interruptions from urgent orders, a perspective of overall optimization that comprehensively views and optimizes the operations of each department is necessary.

One of the challenges for factories in Indonesia is the rising labor costs, making efficiency improvement (reduction of man-hours) important. Within the internal supply chain from purchasing to manufacturing and shipping, time reduction increases the added value of internal resources. However, if only the efficiency of the previous process increases and the subsequent process cannot keep up, it will only increase work-in-progress inventory. Optimization of only one department may not lead to overall optimization.

To reflect time reduction in production planning, it is necessary to plan based on cycle time and tact time for each combination of item and machine, rather than fixed lead time. Without considering machine capacity and setup, the plan may become unmanageable on the shop floor. Setup does not occur if the same item lot is produced continuously, but producing too continuously will result in unnecessary inventory.

For example, constraints such as "if the order is within a week of the delivery date, produce the same item lot continuously" need to be reflected in the production plan. There are limitations to creating production plans with Excel.

We consider the appropriate inventory necessary for overall optimization. There are two reasons for holding inventory.

It is common to hold two days' worth of inventory for shipment to prevent delivery delays. If the tact of the bottleneck process is delayed, it affects the overall tact and output.

To maximize the operation rate of the bottleneck process, first plan the bottleneck process, then create plans by backward scheduling for the previous process and forward scheduling for the subsequent process.

By maximizing the operation rate of the bottleneck process and planning the preceding and subsequent processes, a production plan can be created that minimizes the overall manufacturing lead time while maintaining appropriate inventory. By procuring only the materials necessary for production in line with the bottleneck tact, and producing according to the bottleneck, work-in-progress inventory in the previous process is reduced.

When appropriate inventory is achieved through time reduction and maximizing the operation rate of the bottleneck process, cash can be held equivalent to the amount of materials and work-in-progress that were previously accumulated as inventory. Additionally, by delaying purchasing to the necessary timing in line with the factory's overall tact time, even more cash can be held. The process of business improvement is linked to cash flow effects.

Chapter 4: Case of Systemization Considering Overall Optimization

This section introduces an example of implementing the policy of "lead time reduction" and "appropriate inventory" for overall optimization into a system, as discussed in the previous chapters. The way factory planners create production plans is likely similar to this.

Following a fixed lead time to shift lead times is called infinite capacity loading, assuming machine capacity is infinite, which can result in over 100% loading on certain days. The APS function automatically moves overloaded lots to another day on the same machine or to another machine's available day, synchronizing production and procurement plans while considering machine load, aiming for overall optimization.

Case: There are two common issues in production planning in Indonesia. One is that despite being a production plan aimed at fulfilling customer needs, the PPIC personnel often create plans based solely on the manufacturing site at their discretion, leading to partial optimization. This results in delays in reporting to customers and responding to order quantity and delivery date changes, as well as urgent orders.

Takeaway: It is important to create production plans that consider customer needs and aim for overall optimization.

The second issue is performing lead time shifting and load leveling separately by process. Without considering the production capacity and load status of preceding and succeeding processes, optimizing lot grouping for one's own process and performing load leveling based on simple manufacturing lead time shifting can lead to partial optimization, potentially resulting in delays in subsequent processes and increased waiting time and inventory.

By linking order information from sales with the PPC department's production plan, and visualizing the entire process from order to manufacturing and purchasing, a flow in production can be created, reducing lead time and preventing inventory stagnation.

The limitation of manual work with Excel is setting workdays for preceding processes based on the standard production plan by lead time shifting, and advancing work or moving it to another facility if equipment capacity overflows. Performing this seamlessly results in overall optimization.

In this Cikarang factory, based on order information from sales, a standard production plan is automatically created considering product inventory, importing item, order quantity, and order delivery date into the production scheduler Asprova. Simultaneously, lead time shifting based on cycle time is performed, and automatic leveling of work on days when equipment capacity is exceeded is conducted.

Operators input results from processes using familiar Excel, uploading them to a designated folder on the server from each line terminal after shift end, where the system processes them into Asprova's actual data.

Frequently Asked Questions | Challenges and Solutions in Indonesian Manufacturing

This article summarizes recurring questions in a concise manner.

What are the main challenges faced by the Indonesian manufacturing industry?

The Indonesian manufacturing industry faces challenges due to the trend of high-mix, low-volume production, leading to complexities in production planning and process management. Particularly, the bullwhip effect caused by fluctuations in delivery schedules and interruptions from rush orders impacts production. This results in variations in manufacturing lead times and a tendency towards excessive inventory.

What are the benefits of systematization in manufacturing?

Systematization is expected to improve the efficiency and accuracy of data entry. Additionally, visualization and sharing of information can generate competitive advantage from shop floor information. This leads to business improvements and enhances overall production efficiency.

What perspectives are necessary for the overall optimization of production planning?

Overall optimization of production planning requires a perspective that comprehensively views and optimizes the operations of each department. It is particularly important to maximize the operating rate of bottleneck processes and plan preceding and subsequent processes to minimize overall manufacturing lead time and maintain appropriate inventory levels.