process improvement

Can OEE be Used to Reduce Operating Cost?

OEE or Overall Equipment Effectiveness measures manufacturing performance against perfection. It is regarded as the global benchmark for managing and improving manufacturing efficiency. Any deviation from perfection drives up operating cost. OEE looks at three different losses and multiplies them across to assess total losses. Those losses are:

Availability – This is a measure of downtime (both planned and unplanned)

Throughput – This measures rate loss against the theoretical maximum run rate

Yield – This measures the amount of efficiency lost due to quality issues

Each of these factors has a cost impact. There are measurable financial and other costs associated with having people at work, the lights on, and machines operating. Anytime these things are happening and you aren’t producing at theoretical maximum levels, you are suffering efficiency and financial losses. Most factories are operating at or below 60% OEE but have no idea. Additionally, most factories do not measure productivity, and many who do, use methods that exclude significant losses such as changeover times, start-ups, throughput loss and many others. Again, anytime you have people on the clock and product yet to be made, anything less than the theoretical max output is a loss…for whatever reason – controllable or uncontrollable. At the end of the day, all aspects of running your business are controllable; the only real question is: are you willing to do what it takes to “fix” something that is perceived as “uncontrollable”. I’ve worked with manufacturers who, for years, wrote off “bad raw material” as uncontrollable but have never talked with the supplier about fixing the problem or investigated sourcing with other suppliers. In almost all cases, uncontrollable is synonymous for “we don’t want to deal with it”.

The Logic

For a factory with a direct operating cost of $10M annually and an OEE of 60%, the total efficiency losses are 40%. Therefore 40% of the direct operating costs are also losses, or $4M in this case. At 100% efficiency, the operating cost would be $6M.

World-class execution is 85% OEE, which equates to a direct operating cost of $8.5M in the example above. For the same factory, there is a $2.5M savings opportunity for improving from 60% to 85% OEE. What would you do with an extra $2.5M dollars per year? Expand production? Pay bonuses? Acquire a new business? Buy a small yacht and sail around the world?

Achieving 85% OEE is challenging but attainable for the vast majority of manufacturers. Click the link below to receive a free report on how much savings opportunity you might have based on your direct operating costs and efficiency performance:

My Total Savings Opportunity

If you don’t know your OEE, we can get you up in going on fOS in less than a month. It will help you track OEE by product, line, shift, team, and even individual. It’s a great tool for highlighting exactly where to focus improvement efforts. For the sake of the tool mentioned in the above link, input 60% as a reference point and see what you get for a savings opportunity if you’re unsure of your current OEE.

 

 

The fOS is the New North Star for Continuous Improvement Programs Around the World

fOS Hompage Header2

The fOS, or the Factory Operating System, is a game changer for manufacturers and the Continuous Improvement movement. It is a powerfully disruptive technology and is a wake-up call for many who believe they are running a World-Class operation. The truth is that a vast majority of manufacturers, including those who believe they have “implemented Lean”, are less than 60% as efficient as they could be. Prior to the fOS, anyone could say they were World-Class because there was no truly objective way to measure performance across various factories and industries. Those days are over – and so are the days of using productivity and efficiency as a vanity metric. There are any number of ways to measure productivity; and due to this un-standardization, manufacturers all over the world have chosen different measures. This creates 2 problems: 1) It’s very difficult to measure one factory against another and 2) it’s easy to omit efficiency losses to avoid dealing with difficult issues. As a result, performance and efficiency often gets deprioritized behind more pressing crisis. The fOS solves these problems by measuring manufacturers against perfection, ie, absolute-zero efficiency losses. This provides manufacturing leaders with a compass, or North Star, for where they are in their journey to Operational Perfection. It also lends itself to the actions needed to make significant progress in the journey, especially when coupled with the Percent Perfect Methodology®

What is the fOS? It is a cloud-based Continuous Performance Improvement (CI) system leveraged on the power of OEE, the global benchmark in managing manufacturing productivity. No matter where you are in your CI journey, the fOS will make you better – faster. It is a private system that only allows people within the same company to view, add, edit, or delete performance data unless special permissions are provided. The fOS is loaded with features to cultivate a professional sports-like environment regarding manufacturing performance. This includes:

  • Success Stories – When someone sets a Personal Record, Raises the Bar (outperforms the standard), or achieves a Record Breaking Week, this achievement gets broadcast automatically across your network. Other users can easily give “Hi 5s” and recognize their outstanding results.
  • Efficiency Rankings – Top performers, or those operators, supervisors, and managers, who achieve the highest efficiencies are recognized daily. All others on the chain of command are also ranked based on their performance numbers. For example, if there are 50 people in your ops team, you might be ranked anywhere from 1 to 50 in your network. The question becomes: what can you do to become number 1?
  • Better Everyday Wall – This is sort of like a Linkedin or Facebook wall (or ESPN News feed) except the site automatically and exclusively publishes Success Stories there. Then people can recognize, comment and collaborate on how to drive organization-wide excellence.

The fOS is loaded with features that make capturing data, calculating efficiency, and reporting performance a piece of cake, minimizing the burden of using this super-powerful Continuous Improvement system. Another ground-breaking feature is that it automatically sets and updates production standards based on the maximum demonstrated historical run rate. The standard is adjusted every time someone Raises the Bar. This automates a task that could otherwise take an Industrial Engineer months to complete. Yet another invaluable feature is that it allows users to calculate the savings opportunity on a line, team, shift, or product in one click for the selected date range. Again, automating something that usually takes quite a while to determine. It’s an all-around phenomenal tool with beyond bank-level security to keep your data safe and private. Additionally, very little, if any, confidential data is even required to use the system to begin with.

Every manufacturer on the planet and their suppliers should be using this system. Then start receiving automated reports everyday showing exactly where you are in your journey to Operational Perfection.

Click here to have us setup your user accounts and get it rolling for you today.

Check out the fOS Videos link for more information.

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Systematization: The Teeth in the Gears of Continuous Improvement

Manuficient - People & Gears

Systematization is standardizing a sequence of events through automation or verifiable reaction protocols designed to produce consistent outcomes. It’s also where the rubber hits the road for the Percent Perfect Methodology® (PPM), which is designed to achieve rapid and sustained results in operating efficiency and manufacturing profitability. We see systematization everywhere we look, especially in manufacturing. For example, every factory has a system for tracking and managing when and how much an employee should get paid based on the hours they worked each payment cycle. If an employee wants to take a day off or works an extra shift, there are usually well defined protocols in place to make sure that employee is compensated accordingly. The reason just about every company has gotten this particular process down to such a science is because failing to fairly compensate employees could land them in some serious hot water. In this case, the motivation is fear of a lawsuit or disenfranchising workers; it’s also just outright unprofessional when people aren’t getting paid on time and in full.

Manuficient Methodology1.1 SystematizeSystematize is the fourth and final phase of the PPM. In Phase 1, we defined perfection for your manufacturing operation. Phase 2 assessed where exactly you are in your journey to Operational Perfection (OP). In Phase 3, we prioritized 3 – 5 critical initiatives needed to make substantial progress toward your potential. In Phase 4, Systematize, we look closely at how to fully integrate the 3 – 5 critical initiatives identified in Phase 3 into your operating model, or the way you do business, to close the gap between your current state and OP. This produces rapid results and ensures that improvements are sustained.

There are a several key elements required for an initiative to be systematized:

  1. An event or trigger to indicate that waste has occurred.
  2. A method or technique for making the waste or inefficiency visible and/or highly detectable.
  3. A reaction protocol – This could be an automatic or manual series of steps to be taken to remediate and eliminate the opportunity of re-occurrence of waste.
  4. A method or technique to track, quantify, and report waste events and their impact on operating cost and service levels. There also needs to be a way to evaluate the quality of response from element 3.
  5. A method or technique for allocating the appropriate resources to minimize or eliminate chronic process waste – This is to continuously improve processes where the greatest ongoing opportunities exist.

An overwhelming majority of Continuous Improvement initiatives fail to sustain because the organization gradually (and sometimes instantly) rejects the changes needed to make progress. For example, I’ve seen organizations do kaizen events to reduce changeover times (called SMED events) but fail to systematize the initiative to see and effectively respond when there is a deviation from the new procedure – and thus waste is allowed to creep back into the process. In other words, the organization rejects the initiative. If this backsliding were to happen with the payroll system and people were not being paid on time and in full, the reaction would be swift and possibly quite extreme. For this SMED event to sustain, there should have been techniques installed to ensure that the new process was being executed as specified and detailed reaction protocols to address any deviation from standard. One tool for achieving this would be something like a changeover clock that alarms or sends an alert if the allotted timeframe is exceeded, indicating that waste is occurring. Then the alarm or alert triggers waste elimination protocols. Generally speaking, lights and sounds are great tools for highlighting that waste is occurring. These are called andon systems.

Tools of Systematization

Automated Response tools:

  1. Poka Yoke – If waste could be eliminated automatically then it should. The tool for this is called poka yoke, or error-proofing. This is a technique for preventing or limiting any activity that produces waste. It is also the most effective tool to Systematize improvement. Examples are guides that ensure perfect assembly on the first attempt or an outlet designed to prevent the wrong device from being plugged in.
  2. Autonomation – The close cousin of poka yoke is autonomation, which automatically detects and rejects bad parts or waste in order to minimize the impact to production. An example would include an opening on the production line that removes parts that do not fit through it. In this case, the defective unit would be swept aside as not to interrupt production.Non-automated Response tools
  3. 5S – Finally, 5S which stands for Sort, Set in order, Shine, Standardize, and Sustain can be used as a tool for making waste highly visible. 5S is a technique to organize a workstation to increase efficiency and make so that wasteful activity becomes visualized. For example, if cleaning tools are to be staged near the production line, an area should be designated for those cleaning tools. If the tools are not in use or in their designated space, waste is likely occurring because the line operator will end up needing to wait or walk to another workstation to get the supplies they need.
  4. Performance Reports – The purpose of performance reports is to highlight the amount of and other details about the waste that has occurred. The more real-time and actionable these reports are, the more waste can be eliminated from the process. This is ranked last on the list of Response tools because it’s the least reactive method of eliminating waste. The interval between reports indicates the window that inefficiency is allowed to fester before it can be identified and addressed. For example, up to a week may go by before you become aware of an issue if you’re using a weekly report. The rule of thumb for Performance Report effectiveness is visibility. The objective is to make waste very obvious and public, which has to do with how the report is formatted. It also has to do with how the report is presented. For example, huge boards or screens that highlight opportunities positioned in the main entrance where everyone can easily see are going to be a lot more effective than a report that gets saved on a hard drive and left there. The fOS at http://factoryoperatingsystem.com is a great tool for reporting performance since it automates the data synthesis and disseminates performance reports along with success stories to appropriate personnel within the operations chain of command.

There are many other great tools to systemize improvement but these are the Big 4. For any of these tools to work, they need to be coupled with reaction or escalation protocols. There are two types of escalation protocols:

  1. Immanent Issue Escalation – This is the sequence of steps to be taken when waste occurs that threatens the ability to meet the immediate objectives, such as attaining schedule for the day. An example of an Imminent Escalation protocol might be:
    T=0 mins – Begin 5 Why / Troubleshooting Analysis
    T=5 mins – Notify production lead or mechanic to continue 5 Why / Troubleshooting Analysis
    T=10 mins – Notify production and maintenance supervisor to continue troubleshooting and deploy additional resources if needed; also to coordinate production to minimize waste in other areas
    T=15 mins – Notify Operations Manager to support coordination of other production activities to minimize impact of waste; also to deploy additional methods of analysis or technical resources
    T=20 mins – Notify Plant Manager to engage necessary resources including but not limited to reaching out to other facilities for ideas and supportThis protocol would be executed until the issue is resolved. For example, if the issue is resolved after 10 minutes, the Operations and Plant Manager would never be engaged. However, the issue would still be presented in Performance Reports and followed up on to ensure absolute resolution.
  2. Chronic Issue Escalation – This process is used for issues that impact performance but not to the extent of threatening schedule attainment. For example, a date coder system that kicks out one unit out of hundreds every 20 minutes would probably be a chronic issue. A Chronic Escalation protocol might be structured as follows:
    Day 0 – 1 = Line operators are given an opportunity to resolve the issue through Root Cause Analysis (RCA) or other CI tools.
    Day 2 – 7 = A mechanic or other administrative personnel is assigned to the issue to continue the RCA process and deploy additional resources
    Day 8 – 30 = A Staff member or Manager is assigned the issue to drive it to resolution by deploying tools and resources as needed
    >Day 30 – The Plant Manager takes the necessary measures to completely resolve the issue including but not limited to engaging outside resources

The Plant Manager is the last point of accountability for ensuring that the escalation protocols are being used and are working as expected. He or she should apply downward pressure to resolve issues before they reach the Plant Manager level. Again, this only applies to issues that do not use Automated Response tools; and thus is why the Automated Response tools are superior. At each phase in escalation, a specific person and due date needs to be assigned. There also needs to be a set of rewards / consequences for resolving or allowing issues to escalate. This set of rewards and consequences will vary by organization and company culture. Lastly, before items can be removed from the escalation process, there needs to be a method to ensure that the issue has been resolved effectively.

MIC_Lean - Systematic

In the Systematize phase of the Percent Perfect Methodology®, the 3 – 5 initiatives identified in the Prioritize phase are “systematized” into your operations model. Automated waste identification / prevention and correction tools are deployed to reduce or eliminate inefficiency. Escalation protocols are also implemented to make sure that systemic process failures are effectively managed and eventually eliminated for key initiatives. This also includes training internal resources to see the waste and to develop proficiency in the tools that are best fit to eliminate it. The fOS gives you a good indication of where you are in your journey to Operational Perfection by team, product, production line and other factors. A Plant Manager should also be mindful of how many issues are being escalated to their level because this indicates how competent the management team is. A highly competent team would resolve more issues at lower levels and prevent escalation. Frequent escalations indicate that additional training is needed to increase operational discipline.

A manufacturing efficiency expert such as those at Manuficient can help to systematize improvement initiatives and ensure sustainment of improvement efforts.

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The Compounding Benefits of Prioritizing in Continuous Improvement

Manuficient - Compounding

Albert Einstein once said that the most powerful force in the universe is compounding. Just as in finance, this is true for managing a manufacturing operation. New problems, big and small, arise everyday. When a problem goes unresolved, it behaves like a disease on your productivity. Additionally, new problems are added to old ones, which creates a snowball effect, and thus the compounding dynamic takes effect. At some point in the life cycle of a manufacturing operating, it takes what Grant Cardone calls “massive action” to reverse this momentum and get into a position where compounding is working in your favor. To do this, you must develop a thorough understanding of what specific wastes are driving inefficiency and pick them apart with well orchestrated and massive action. The 85/15 rule (a variation of the 80/20 rule) definitely applies here. In other words, 85% of your inefficiency is probably being driven by 15% of the issues. The key is to systematically identify the 15% of issues and prioritize the fewest number of initiatives needed to eliminate 85% of inefficiency, which will result in substantial profitability increases.

Manuficient Methodology1.1 PrioritizePrioritizing is the act of deliberately ranking needed activities, then allocating time and other resources in the order of greatest to least significance. Prioritize is the 3rd Phase in the Percent Perfect Methodology® (PPM), which identifies the 3 – 5 tools and initiatives needed to capture the greatest gains toward achieving your operating potential. In Phase 1 of the PPM, we looked at how to define perfection for a manufacturing operation. In Phase 2, we reviewed how to Assess where you are in your journey to Operational Perfection (OP). In this phase, we look at how to determine which specific initiatives will have the greatest impact on closing the gap between current state and perfection.

There are hundreds and perhaps thousands of Lean Six Sigma and other Continuous Improvement tools out there to be applied depending on the specific application. In fact, any repeatable activity that makes a process more efficient can be classified as a tool, which makes the list virtually limitless. The challenge is knowing a) which tool(s) should be applied and b) how to most effectively apply the tool(s) selected. Just like a mechanic needs to have the right tools for a given job and know how to use them without completely mucking up the project, so do manufacturing leaders. This takes resourcefulness, knowledge, and skills – which are all a function of having the right quantity and quality of experiences.

You can identify the appropriate tool to apply based on the type of waste that is occurring. The 8 lean wastes are: defects; overproduction; waiting; non-utilized talent & ideas; transporting; inventory; motion; and excessive processing.

There is a 6 Step Process for determining which tools will have the greatest impact on closing the gap to OP for your manufacturing operation:

Step 1: Determine what perfection would be for your manufacturing operation. Use the Factory Operating System (fOS) to achieve this. It’s a free tool and provides the best way to set and establish your theoretical maximum productivity levels.

Step 2: Analyze where you are in your journey to Operational Perfection. The fOS will also help you complete this step. It provides a user-friendly interface to track, aggregate, and report production performance. It also helps to cultivate employee motivation around CI by disseminating success stories such as personal records and breakthrough performances across your manufacturing network.

Step 3: For each of the three significant types of loss (availability, throughput, and yield), further categorize each type into the 8 wastes.

Step 4: Quantify the total losses being driven by each type of the 8 wastes and perform a Pareto Analysis grouped by type of waste and total annualized losses (in dollars or other currency).

Step 5: Select the set of tools or processes that are best fit for eliminating or reducing the types of wastes that are resulting in the greatest losses. The objective here is to identify the fewest number of tools that will cut waste to within 15% of Operational Perfection, which is widely considered to be World-Class execution. For example, motion waste is best address through time and motion studies; and transporting waste is minimized through process layout re-design and a technique called Point of Use Supply (POUS) among others.

Step 6: Develop the specific initiatives needed to best leverage the selected tools for maximum effect. This may mean customizing or combining tools to refine an ideal set for your specific needs.

Once you’ve gotten this far, you’ve won more than half of the battle. Abraham Lincoln once said that “If you give me 6 hours to cut down a tree, I’ll spend the first 4 sharpening my ax.” After Phase 3 of the PPM, the axe is razor sharp and you’re just about ready to deliver a swift blow to your manufacturing operation’s inefficiency. Unfortunately, many companies skip this phase and consequently, this is where they go wrong with their CI program implementations. Instead, they often mistakenly approach it as either a beautification or fire-fighting program. They start with something like 5S because it’s very visual and friendly or they go with problem-solving / kaizen events just so they can pull their CI resources into the weeds of daily operations with them. This isn’t necessarily a bad thing, it’s just not the most effective use of time and resources. They rarely take the time (and it usually doesn’t take much time) to assess exactly where the greatest gains can be achieved, then prioritize effort and resources. As a result of this and other factors, 70% of improvement programs fail in their first couple of years according to a study completed by the McKinsey & Company consulting firm. Furthermore, having the prioritized list of initiatives on hand helps to recruit / promote the ideal talent for manufacturing leadership roles. For example, if your greatest opportunity for improvement is to reduce changeover times, the optimal talent for a director or plant manager role would have a tremendous track record for implementing the SMED tool (Single-Minute Exchange of a Die) for minimizing changeover times. You can see how having a rock solid CI playbook changes your entire approach to how you play the game. Can you imagine how many major decisions are made everyday without taking any of these factors into account?

MIC_World Class Mfg

I can assure you that the powerful dynamics of compounding are either working for or against you. If you’re not taking deliberate action to leverage this phenomena to your advantage, then it’s most likely working against you. The key to changing the trajectory of your manufacturing operation’s performance is to prioritize the small set of CI initiatives that will produce the greatest impact on closing the gap to Operational Perfection. Defining perfection provides the North Star for manufacturing leaders to navigate the complex maze of day to day manufacturing operations. Assessing the current state helps you to gauge exactly where you are in your journey. The fOS tool at http://factoryoperatingsystem.com is the best tool available to define and assess where you are against operational perfection on an ongoing basis. Finally, prioritizing provides a clear and executable roadmap to World-Class execution. From here, you have laid the groundwork to capture rapid gains in productivity and profitability.

A manufacturing efficiency expert such as those at Manuficient can help you to prioritize your CI initiatives and gain immediate results in performance.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2016]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

 

How to Define Perfection for Manufacturing Performance

Manuficient - 100%

Perfection for a manufacturing operation is the absence of inefficiency, or process waste. It is seamless execution. It is spending every minute of every day in a state of operational bliss where everything and everyone is in the zone of impenetrable harmony. Product quality is flawless; machines run like an impeccable script; manufacturing teams perform like a masterfully orchestrated symphony; and the supply chain delivers like clockwork.  The first step in the Percent Perfect Methodology® (PPM) is to paint a clear picture of a manufacturer’s operating parameters in a state of absolute zero losses such as profitability, operating costs, lead time, capacity, material costs, and others. The PPM is a methodology designed to determine and systematize the few critical operational disciplines needed make dramatic progress toward perfection. There is a powerful psychological and motivating effect to beginning the PPM methodology with defining perfection. This approach quickly shows the difference between ‘how good you could be’ and ‘how good you currently are’. This creates an intense motivation to get better because defending the status quo becomes completely unacceptable by anyone’s standards, especially for an organization with great opportunity for improvement. It also provides some insight to how much more efficient your competitors might be by presenting your performance on a spectrum of 0 – 100% using OEE, which is the global benchmark for managing manufacturing efficiency.

Manuficient Methodology1.1 Define

Operational Perfection (OP) is achieved when the following types of process waste are completely eliminated:

 

In this state, your operating costs are reduced to the minimum needed for creating the necessary value while retaining the capability to meet the changing demands of daily operations. This has a profound effect on profitability and just about every other key measure of execution. Here are a few of the capabilities needed to achieve OP:

  • Exclusively value-added activity (no downtime, changeover time, or start-up time; maximum run rates only; and no quality / yield losses)
  • Zero raw, finished, or work in progress (WIP) inventory
  • Perfectly balanced capacity between workstations (no waiting time in or between stations)
  • Lead time equal to the duration of sequential value-added steps (no transporting, motion, or other losses)

Additionally, the customer receives their 6 Rights – 100% of the time. This means the right product, at the right time, at the right place, in the right quantity, in the right quality, and at the right price.

Continuous Improvement, in its purest essence, means closing the gap between your current state of execution and OP. It’s a fantasy to think this can happen overnight. In fact, getting within 15% of perfection is considered World-Class execution, which can take years and most will never even come close. The point here is to define the true north for factory performance; and set the objective of your Continuous Improvement initiative, which is to eventually achieve OP, or to reach the North Star. Whether you are doing Lean, Six Sigma, Re-engineering, ISO 9000, Agile Operations, TPM, TQM, or any other Continuous Improvement program, it’s important to know and understand your OP just like a navigator and the North Star. It’s also important to know that perfection is theoretically unachievable. Hence, Continuous Improvement is just that…improvement that continues into perpetuity. In other words, everyday, your manufacturing operation should be inching (or sprinting – why not?) toward perfection, or OP.

Manuficient - Perfection

So here are a few steps to define perfection for your manufacturing organization:

Step 1: Determine your maximum theoretical run rates. These are the greatest rates that your production equipment or teams can achieve before reaching the point of diminishing returns, which is when increasing speeds result in declining quality or system damage.

Step 2: Determine the total runtime needed to execute your product mix at theoretical maximum run rates. All startup, changeover, shutdown, unplanned downtime, rate losses, and yield losses should be excluded.

This gets you to your optimal runtime for a given product mix and provides the basis for defining perfection for your manufacturing system. It also positions you to determine operating parameters in a state of zero-losses including:

  • Profitability (Total Revenue – Total Cost in a state of zero losses)
  • Operating Cost (Operating Costs required in state of zero losses)
  • Throughput Capacity (Max Time Available x Weighted Avg Theoretical Run Rate)
  • Order Lead Time (Processing time for the sequence of value-added activities)
  • Working Capital (Total product in-process [value-added stages only])
  • Labor Requirements (Labor required in state of zero losses)
  • Energy Requirements (Energy required in state of zero losses)
  • Material Requirements (Minimal material required to produce demanded goods)
  • Others

Determining Theoretical Maximum Run Rates

Theoretical Maximum Run Rates can be determined in a few different ways. Its imporatant to determine your theoretical max at the bottleneck process step. Wikipedia defines the bottleneck as “a phenomenon where the performance or capacity of an entire system is limited by a single or small number of components or resources.” For all practical purposes, it’s the step in the process that constrains the throughput of the manufacturing system. If the bottleneck is a mechanical process, you need to calculate the machine’s cycle times from step 0 to step 0. It’s important to capture the full cycle. Then you can estimate how many units can be produced in a given timeframe such as seconds, minutes, hours, or even longer. If it’s a labor process, time and motion studies will need to be completed to determine the throughput rate per person and subsequently, the entire process step if multiple workstations are involved. A rule of thumb to include for time and motion studies is a fatigue factor which varies based on the intensity and duration of work being done. The other key factor is to assess throughput based on a speed that 50% of all well-trained people can achieve on a sustained basis. It is advised that an experienced Industrial Engineer be employed or contracted to help establish these rates as professional judgement needs to be applied. You get this wrong and you will be dealing with more employee grievances than you are with prospective customers if you catch my drift.

The alternative to establishing maximum run rates is by using empirically demonstrated rates. This process involves determining the rate from every production run and considering the max rate achieved as the benchmark (or standard) against which all subsequent runs are measured. The advantage to using this method is that it doesn’t require an Industrial Engineer to determine the Theoretical Max Rates. The other benefit to this method is that “standard” rates are based on demonstrated performance, which removes all debate about rather or not the rate is attainable. This is the method applied by the Factory Operating System (fOS) so that Theoretical Max Rates can be defined organically. As run data is captured in the fOS, the system keeps track of the maximum rate achieved for each product and production line.  With this method, the fOS learns the ‘definition of perfection’ for your manufacturing system using a form of artificial intelligence. As production records are broken, the standard is updated accordingly and best-practices are shared across the network.

Continuous Improvement should be baked into the way any manufacturer does business. In any truly competitive landscape, the best performers win – eventually. Therefore, it’s imperative to strive to get better everyday in order to increase competitiveness and stay healthy as a business. As Toyota has cleverly made into it’s slogan, we should all be “in pursuit of perfection”. The Percent Perfect Methodology® defines perfection for all manufacturers in the same way; putting all manufacturers on the same playing field regardless of industry, product, location, or other attributes so that everyone has an equal shot at World-Class execution. The fOS helps manufacturers to determine perfection for their specific operating parameters and then measure actual execution against OP on an ongoing basis.

The fOS automatically performs the first phase of the Percent Perfect Methodology®. It helps you to define and maintain a current definition of perfection for your manufacturing operation. The optimal approach for implementing the fOS would be to assess where you have WIP buffers in your manufacturing process. Then use the fOS to track efficiencies in between WIP buffers. You’ll quickly realize that WIP builds up because process throughputs are imbalanced. The fOS will help you see where efficiency losses are occurring so that stations can be balanced and WIP can be eliminated; creating more of a continuous flow operation over time.

A manufacturing efficiency expert such as those at Manuficient can help you to Define Perfection for your operation and initiate your journey to OP.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

 

The 8 Lean Wastes and Their Potentially Disastrous Effects – Inventory

Inventory – any materials or other resources stored or staged until demanded. In this series titled “The 8 Lean Wastes and Their Potentially Disastrous Effects”, we examine case studies for when companies, government organizations, or entire industries have allowed a specific type of waste to escalate to a disastrous effect. In this post, we review the waste of Inventory to understand what causes it, how to see it, and how to eliminate it. Lean.org defines inventory as “materials (and information) present along a value stream between processing steps.”

Jump to:

The 8 Wastes and Their Potentially Disastrous Effects:

Defects | Overproduction | Waiting | Non-utilized Talent & Ideas | Transportation | Inventory | MotionExcessive Processing

Case Study:

In 2007, Toyota issued a massive recall that affected 9 Billion vehicles worldwide. The recall was triggered by several reports of gas pedals “sticking” and causing unintended acceleration. At the time of the incident, dealerships across the US were holding substantial amounts of inventory, which could not be sold until they were all serviced to minimize the risk of further unintended acceleration issues. A study was conducted to estimate the losses associated with all of this inventory that was placed on “hold”, which revealed that dealerships were losing the staggering amount of $2.5 Billion per month in combined income.

Corrective Action:

In response to this issue, Toyota conducted an investigation to identify the root cause of the unintended acceleration and concluded that the configuration between the floor mat and the gas pedal was defective. They also began to experiment with an alternative supply chain model with the Toyota Scion where a base unit would be built to about 70% at the factory, then buyers would be allowed to customize how the vehicle would be finished. Finally, the base unit would be shipped to the buyer’s local dealer to complete the final manufacturing steps; a process known as Late-Stage Customization. This kept inventory low for the Scion at the dealerships and allowed consumers more control over the features and functionality that would be included with their vehicle. Unfortunately, the Scion did not perform well in the market; however, I don’t think the supply chain model was the problem. It simply isn’t a very good looking car.

Interesting Fact:

Even though Toyota distributes vehicles all over the world, the only reports of unintended acceleration came from the United States. Also, there was never a definitive conclusion for a mechanical failure that was causing the problem. However, once the floor mat / gas pedal configuration was changed, no further issues were reported.

For more details on this case study, check out the 24/7 Wall Street article at the following link:

http://247wallst.com/autos/2010/01/29/toyota-dealers-face-2-5-billion-monthly-loss/

This case study exposes one of the many major problems with building and carrying inventory. Building inventory has the same issue issue as batching, which is a form of inventory in itself. When there is a quality defect that needs to be contained, many times the entire batch needs to be recalled and investigated due to limited granularity in traceability.  This requires the manufacturer to cast a wide net instead of being able to pinpoint the specific units that are affected by the defect.

Another major issue with carrying inventory is that it enables poor manufacturing execution and erodes operational discipline. Part of the equation for determining how much inventory you need is how unreliably your factory performs. In other words, being unreliable means you need to maintain higher inventories to meet service expectations. The path of least resistance is to build inventory as opposed to addressing your factory’s reliability issues. A little trick to kicking off a lean implementation is to cut your finished inventory gradually and challenge your teams to maintain service levels with lower inventory stocks. This will require improving factory reliability and becoming more lean in the process. Finally, inventory hurts your factory’s lead time on special order and rush items. This is because orders often need to wait in inventory buffers in between process steps before the next value-added step can be completed.

The Factory Operating System (fOS) at factoryoperatingsystem.com also helps you see waste from inventory, which often manifests itself in the form of unreliability. In the fOS, unreliability shows up as downtime, rate, and yield losses. By addressing these issues, you can increase plant reliability and subsequently reduce safety stocks. When inventory is reduced, working capital is freed up to be invested in other more important matters. The fOS also allows you to quickly estimate the savings to be gained in just one click by driving out efficiency losses. This powerful functionality is made available to everyone from the shop-floor up to be used for justifying continuous improvement ideas.

A manufacturing efficiency expert such as those at Manuficient can help you to improve the detection and elimination of inventory waste, resulting in significant cost savings, lead time reduction, and quality improvement for your operation.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.

How to Do a Stress Free Lean Implementation

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Lean is said to be the “Machine that Changed the World,” which a fantastic book written by Jim Womack, Dan Jones and Daniel Roos. According to Wikipedia, “Lean manufacturing or lean production, often simply “lean“, is a systematic method for the elimination of waste (“Muda“) within a manufacturing system.” We are now learning that Lean has applicability across far more industries than just manufacturing such as healthcare, finance, education, and many others. However, implementing lean has been a major challenge for business leaders across all sectors, including manufacturing. A study released by McKinsey stated that “70% of Continuous Improvement initiatives fail”. This is a striking statistic considering how popular Lean and other Continuous Improvement initiatives are.

If you go into any of those factories where Lean has failed (and even some where it has succeeded), you’ll quickly find that it generally leaves a bad taste in people’s mouths. Be it because some companies have gutted workforces and administrative jobs under the guise of Lean or that people had to give up things that they held sacred in the name of cutting waste…many people harbor a disdain for Lean. How did an initiative designed to improve product and process quality turn into such a reviled and despised creature?

In conducting and studying many examples of Lean implementations I’ve determined that three key ingredients are needed for success. Those ingredients are:

  1. Technical Expertise. Lean isn’t that hard to learn but somebody needs to know what they’re doing in the beginning at least. This could be an inside or outside person or group. Eventually, everyone needs a strong lean competency and it needs to become a requirement for staying with the company or getting promoted
  2. Commitment. Leaders need to visibly show their commitment and make decision consistent with a Lean culture.
  3. Motivation. If the people at the top or bottom don’t want to do it – it won’t happen. A Lean implementation requires substantial changes in behaviors, the slaughter of sacred cows, and debilitating power struggles. It’s not easy for anybody.

In all reality, the last item trumps the previous two. Let’s face it, people will eventually do what they’re motivated to do as long as management gets the heck out of the way. Do you really need an engineering degree to do 5S or make a few changes to reduce waste and inefficiency? The answer is no. So …the easy way to implement Lean is by pairing the implementation with things people are motivated to do such as:

  • Look good in front of their bosses and peers
  • Get recognized for a job well done
  • Compete and win
  • Have input on the way things are done
  • Prove themselves by getting results
  • Be judged fairly
  • Help others
  • Be a valued contributor to the business
  • Remain gainfully employed
  • …the list goes on and on.

So, to implement Lean, you need to motivate people to eliminate waste and be more efficienct; then give them the tools and support to do what they will be super-motivated to do. To do this, follow these steps:

Step 1Implement OEE. This will tell you and everyone else exactly how much efficiency loss you have, what types of losses you have, and where the biggest opportunities for improvement exist, etc. OEE will serve as your scoreboard for how good everybody actually and undoubtably is. It also puts everyone on the same playing field in terms of measuring productivity. [Week 1 – 8 but continue tracking perpetually]

Step 2Start highlighting success stories for people doing things better. Share Personal Records, Record Breaking Weeks for the team, Best-Practices, Top Performers for the Day or Week, and so on. This will create a culture that feels like winning…and send a message that winning means getting better, which means…increasing efficiencies. All of a sudden, getting better is starting to feel “good” and perhaps even “fun and exciting”. [Week 6 – 15 but continue into perpetuity]

Step 3Provide a continuous stream of tools and techniques for getting better. Teach people root cause analysis, value stream mapping, SMED, kaizen events and anything else they are clamoring to know by this point in the process. You should also consider taking engineers, managers, and key personnel to other factories who have a really good Lean program so they can benchmark ideas. These factories love to show off the great work they’ve done to implement what a vast majority of companies struggle with. [Week 10 on]

That’s it. Pretty easy right? Well there are always varying levels of depth and complexity of tools that can be applied but you can cross those bridges when you get to them. It’s important to follow these three steps in sequence and allow time for each step to take hold in the organization. Most companies try to implement lean by doing step 3 and then step 1 or they just start of with a massive cutting of headcount. Implementing OEE is not as easy as this article makes it sound and neither are the other 2 steps. Fortunately there’s a tool that virtually automates the first 2 (and most difficult) steps called the Factory Operating System (fOS) at www.factoryoperatingsystem.com. This is the best tool out there for implementing Lean or any other Continuous Improvement initiative. In this system, calculating and tracking OEE requires less than a minute per production run to input data and it spits out OEE by line, shift, person, team, product, timeframe, or any other way you want to slice it. It also highlights top performers, record breaking weeks, personal records, and other success stories across your operations chain of command. It’s super-powerful and it’s free, which makes it really great!

Implementing Lean can be a great step toward reducing operating costs, increasing capacity, reducing lead time, improving product quality among many other wonderful things. Don’t make the mistakes most companies make by failing to motivate your people before slamming them with tools, jargon, and complex ideas that will just scare them away. Let the motivation come first, then they will be a) creating their own tools and b) asking you for more tools and techniques to get their systems to operate more efficiently. This way you create a demand for Lean instead of pushing it on people and creating a painful experience for everyone that probably won’t even sustain results. A manufacturing efficiency expert such as those at Manuficient can help you to implement Lean in a non-abrasive way that systematically encourages your people to do better everyday.

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Copyright © Calvin L Williams blog at calvinlwilliams.com [2015]. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Calvin L Williams with appropriate and specific direction to the original content.