- 24 April 2013
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With the economic upturn, the times of low volume and rationalization are over. Volume is steadily rising for many, and manufacturers are now dealing with a different problem than cost-cutting—how to meet increasing demand after resource cuts and no new investments in productivity improvement in recent years.
With your manufacturing operations already running close to capacity, the traditional ways of gaining new capacity is to make large capital investments, or to outsource some of the new manufacturing demand. These are challenging tactics as getting new resources in line will take time and there’s no guarantee that the numbers will continue to climb.
You do, however, have a third option available to you. You can meet the increased demand by freeing up needed resources within your current operations. The key is identifying areas of improvement within your existing operations by accessing real-time manufacturing information, and utilizing actionable insight for manufacturing improvements.
Step 1: Reduce Unplanned & Operational Downtime
In an industry where reliability is key, and unplanned downtime can cost thousands of dollars per minute, reducing unplanned and operational downtime can yield great results. In addition to financial savings, reducing changeover time and operational downtime leads to proportional increases in manufacturing capacity. Best practices implemented on a single line can be easily transferred to other similar lines, multiplying the impact, and resulting in creating even more needed capacity. Efforts to reduce unplanned and operational downtime are routinely have a high probability of success. Sometimes it is possible to eliminate an entire loss category with a simple change in work practice. For example, many companies have discovered that it can be very effective to stagger break and lunch intervals; others have eliminated a specific loss category entirely by replacing small parts, or increasing the frequency of routine maintenance.
Step 2: Reduce Minor Stops
Minor stops are short-duration hesitations and stops, usually less than five minutes— short enough to be “unnoticed” but long enough to disrupt the business and productivity. These can add up to significant loss of manufacturing time, especially if you don’t have visibility into the number of and reasons for minor stops. If you have the necessary tools in place, it is reasonable to expect a high level of success when attacking minor stops: 50-75% reduction. However, remain cautious because minor stops can reappear. To sustain gains, world-class manufacturers use root-cause analysis and continue to make adjustments as necessary.
Step 3: Eliminate Production Variability & Quality Loss
Production consistency translates into a more reliable and predictable supply chain, increasing the rate of first time ‘perfect orders’ while cutting time lost due to rework. Stable lines run at higher production rates consistently, resulting in higher volume. Quality loss and rejected product has a double impact: material and labor. A standard overall equipment effectiveness (OEE) calculation includes a production reject as a lost opportunity for production which impacts on capacity. Therefore, when calculating OEE, it is important to consider the cost of both material and labor. There is no “typical” operation, and the range of quality variation can be from 1% to 5% or even as much as 10% of total production. Consider this: the cost of material can be four times the cost of labor. From a pure cost perspective, a 1% first-pass reject rate translates to 4% loss. You can vary the analysis to reflect production improvement, cost reduction and probability of success.
Step 4: Establish Improvement Priorities in a Financial Context
It is important to realize that not all downtime is equal. Applying cost information with the same analysis may reveal an entirely different perspective—the cost of downtime. A cost-of-downtime analysis can be used to establish priorities with a financial context. Moreover, a probability of success analysis across loss categories will prepare operations professionals to prioritize efforts, and achieve sustainable improvements. Operations excellence professionals generally focus on lean practices to establish production priorities. When they consider cost factors as part of the evaluation, they have the ability to focus on those areas that will have the highest impact on the financial performance of the company. To quantify the financial impact of each category, it is necessary to understand material and labor cost components. Labor-intensive operations have a greater risk of downtime throughout the entire manufacturing process. Meanwhile, operations with high material costs usually experience significant material loss near the end of the production line. Waste and material loss due to rework may be more significant than the cost of labor.
The best and easiest way to create capacity is to scrutinize operations with manufacturing intelligence applications that monitor and analyze manufacturing operations in real-time. These applications provide crucial information to help you quickly find the capacity you need, without costly investments for new machinery, additional labor cost, or contract manufacturing.
From an Epicor White Paper
Epicor Software Corporation is a global leader delivering business software solutions to the manufacturing, distribution, retail, and service industries. With more than 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. Epicor solutions enable companies to drive increased efficiency and improve profitability. With a history of innovation, industry expertise, and passion for excellence, Epicor inspires customers to build lasting competitive advantage. Epicor provides the single point of accountability that local, regional, and global businesses demand. For more information, visit www.epicor.com.