Downtime is the ultimate disruption in productivity. It not only limits how much can be produced in a day, it also drains the energy and morale of your production teams. When you look at downtime, you have to consider the time that the machine spent down – and the loss in rate while approaching shutdown and starting back up. You can calculate your total labor cost per hour and easily add up what it cost your business for every hour of accumulated downtime. These are the more apparent costs of downtime. However, there are more destructive and insidious factors of downtime that are not as apparent. These are more around the subconscious and reactionary measures that are taken as a result of poor machine uptime and reliability.
The ultimate costs of poor reliability are poor customer service and high operating costs. There are several visible indicators of “out of control” downtime and poor reliability: Finished Inventory, Dis-jointed Processes, and Production Capacity Imbalance.
Finished goods inventory build-up
In a perfect world, factories would not carry finished goods inventory. In this case, when a customer places an order, the factory would quickly produce what is needed from start to finish and then ship within the customer’s expected delivery window. This would lead to a significant cost savings in itself in the form of reduced finished goods obsolescence, reduced administrative costs for forecasting, reduced finished goods damage, reduced finished goods management or handling costs, reduced finished goods storage space and many others. The reason that companies build finished goods inventory is because they don’t trust that their production systems can deliver “on-demand”. This is largely due to unpredictable downtime.
Dis-jointed processes and a lack of continuous flow
Manufacturers often try to “shield” a reliable process from an unreliable process by disconnecting process steps. By doing this, the reliable process can continue to produce while the unreliable process struggles to sustain flow. Subsequently, work-in-progress (WIP) inventory begins to build up after the reliable process as it waits for the unreliable one to get its act together. This WIP is essentially what I like to call “cash sitting on the floor.” It’s almost like a savings account that accrues no interest – only depreciation, and sometimes to the point of complete obsolescence. The value of the WIP is money that the business can’t use for more productive purposes, such as equipment upgrades, product marketing, or even employee bonuses. It also reduces the lead time, or the time required for an order to be processed from start to finish. Finally, it increases operating costs caused by additional material handling, staging, and storage. This is primarily caused by unplanned and unexpected downtime.
Un-level process capacities
When one process experiences more downtime, we tend to seek ways to increase the maximum speed, or line rate, through those processes through engineering efforts. This allows us to consume the huge stockpile of WIP that tends to accumulate whenever we can get these unreliable processes to run. When we increase the capacity through a process step, we incur extra labor, technology, and engineering cost; all this instead of fixing the real problem, which is to eliminate the downtime. Often times, we run these processes at unstainable rates trying to get “caught up” and end up doing further damage – resulting in more unreliability.
Why not take the time to understand the areas that are experiencing the most downtime and attack them head on. It may be best to start with the bottleneck process and then spread up and downstream from there. In the end, you want highly reliable and balanced capacities across all processes. At that point, your true lead time becomes predictable. This allows you to re-connect your production processes, establish true continuous flow, and start cutting back on your finished goods inventories.
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