DriveYourSucce$$

Should Mode Cycle Times be Your Manufacturing Benchmark Times?

Recently a customer of mine asked what they should use as their ideal cycle time in a particular manufacturing workstation. More importantly, they wanted to know which average was most indicative of a performance measurement, or benchmark time for a given work task. Would it be their mean (what we know as average), median or mode time? Surprised to hear that there are three possible methods of calculating average? Don’t be! While each method provides a different answer when determining averages, only one should be used to set your benchmark cycle time in a given production workstation. Only one points to the ideal performance measurement and only one should be used to track variances from task-to-task and from day-to-day. So, which one is it?

Cycle Time Tracking & Variance Analysis in Excel for Small Manufacturers

Most small manufacturers simply can’t afford to have an ERP system that tracks manufacturing cycle times and the variances between those times. However, even for those companies with the most up-to-date software, there are some inherent benefits of witnessing production happen in person. In fact, even the best software isn’t intuitive enough to show you how to eliminate idle time and increase production throughput. For that, you have to see work being done for yourself. With this in mind, I thought I would include a cycle time tracking excel sheet for small manufacturers with a built in graph that shows average, median and mode cycle times in a given production work station.

NRE Multiplier, Custom Designs & Customer Change Requests

What role does your NRE multiplier play with respect to better managing customer change requests on custom designs? Well, while there are varying opinions as to how a company should manage these changes, the best advice I can give is to first determine what your non-recurring engineering multiplier is, and then focus on the fact that any customer changes are exactly that, changes driven by customers who should cover those costs. By this I mean that once you’ve moved past the design phase, and have gone to full-scale production, any and all changes requested by the customer must be charged back to the customer in order to cover your holding costs of inventory. The best rule of thumb is to remember that these stop-and-go changes don’t just affect your production of their custom-made product, but that they ultimately affect your ability to service your entire customer base.

Protect Finished, Semi-Finished & Raw Material Inventory in Contracts

Are you a manufacturer of custom-made designs? Do you manufacture these custom assemblies based on unique customer requirements? More importantly, do your existing supply contracts protect your finished, semi-finished and raw material inventory once these customers need to make change requests and revisions? If you’ve answered "no" to this last question, then you’ve likely decided to rework this inventory at your own expense. In this case, you’ve allowed your customer to continually make changes, changes they should pay for, but don’t because your contracts don’t protect your inventory. It’s time this change.

Explaining Productivity Rates to Manufacturing Employees

Is it difficult to increase production throughput, or does it merely involve determining the company’s existing manufacturing productivity rates and eliminating the causes of lost time? Now, by no means am I implying that increasing production is easy. It isn’t. However, in a large number of instances, the problems manufacturers face isn’t increasing production levels, or outlining how this can be done, but instead, it’s in finding a workforce that isn't threatened by change, one that understands why reducing lost time and improving cycle times is vital to a better bottom line. So, what can you do to better explain productivity rates to manufacturing employees?

Meeting Customer Expectations on Product Designs: Don’t Complicate Things!

Does your enterprise have a hard time meeting customer expectations on new product introductions? Do you often find that your engineering department includes far too many "bells and whistles" and that these added features do nothing more than raise your prices so high, that your product offering is no longer competitive? If you’ve answered yes to each of these aforementioned questions, then it’s time to define how best to balance real customer needs versus expected customer needs. Your engineering department may think they now what your customers need, but are they basing these opinions on factual assertions, or on assumptions? More importantly, are they taking an approach predicated on dictating what customers need, rather than listening to what these customers want?

Sample Kan Ban Contract: Finished Inventory, Semi-Finished Inventory & Raw Materials Inventory

Today I decided to include a sample Kan Ban contract that specifies the liabilities for both a buyer and supplier as they pertain to the finished inventory, semi-finished inventory and raw material inventory within the agreement. These contractual agreements work when both parties clearly define these aforementioned liabilities and are willing to negotiate in good faith. However, it’s essential that these agreements are signed by both parties, as the amount of inventory needed to make these contracts work is quite substantial. Use properly, the Kan Ban agreement can help reduce the buyer’s inventory holding costs, while providing the supplier with consistent manufacturing volumes.

TOWS Analysis and Your Supply Chain: Lower Costs, Better Service!

Can a TOWS analysis help lower costs within your supply chain and be the catalyst to secure better service from your vendor base? When answering this question, think of how most companies apply a simplistic approach to reducing their supply chain costs. Think of how these companies rarely plan or come up with specific strategies. These are the enterprises that try to use fear and intimidation to threaten their suppliers with lost business. To these companies, their volumes are the only tool at their disposal and the biggest lever to bending suppliers to their will. Unfortunately, rarely does this approach work. However, a TOW analysis incentivizes companies to think outside the box by forcing them to consider more than just their volumes. So, how can a TOWS analysis help improve your supply chain?

Bill of Materials Essentials: Substructure & Subassembly Analysis

How important is it to properly manage your product's bill of materials? As a manufacturer, do you take the time to perform a substructure, or subassembly analysis in order to segregate your most common subcomponents and incorporate them in future designs? Do you understand the importance of isolating commonality at the part and raw material levels in order to reduce inventory skews, counts, costs and manufacturing cycle times? If you’ve answered "no" to each of these questions, then this is a definite must read. Identifying common subcomponents often holds the key to increased production throughput. So, what are the critical steps to performing a subassembly analysis?

Identifying Value-Add & Non-Value-Add Process Steps in Product Management

As a product manager, do you take the time to isolate those value-add (VA) and non-value-add (NVA) service features that may or many not be needed by your customers? Are you a manufacturer of custom-made parts who needs to weed out those processes that do nothing other than add unnecessary time and increase costs? More importantly, when trying to nail down those product and service features customers are willing to pay for, versus those they aren’t, do you take the time to isolate your value-add versus non-value-add business processes? If not, then this might be worth a look. We’ll explain the importance of isolating VA and NVA process steps within your product and service offering.

Define Your Inventory Carrying Costs on Custom-Made Products

Does your company manufacture custom-made products and if so, have you taken the time to define your inventory carrying costs on these custom designs? Perhaps you're unaware of how the carrying costs on one-off designs might differ from say, standard product lines. Sales of conventional product lines typically dictate that a company manufacturers a product, holds it in inventory and then proceeds to go out and make sales. However, for custom-made assemblies, it’s entirely different as your company might not order raw materials or start production until an order is received. In addition, your company must adjust its manufacturing schedules when confronted with customer change requests. Ultimately, it's the customers who must sign-off on these modifications before the product moves to the next stage of production. Either way, these changes directly impact your company’s carrying costs of inventory on these custom-made products. The question is, by how much?

Commitment to Dell’s “Push-Pull” is Paramount to Success

If you’re going to run Dell’s “Push-Pull”, then you must commit your company's resources to making it a success. Dell’s strategy isn’t merely an inventory and supply chain approach, but also a doctrine that dictates how your company goes about manufacturing its products, and what your marketing & sales strategies must be focused on to secure consistent customer demand. While an argument can be made that the Push-Pull strategy bridges the gap between Min/Max and JIT, it would be wrong to assume that it’s only focused on how a company manages its inventory. To make this strategy truly successful requires you commit yourself to a multipronged approach and one that impacts your company's entire operations. So, what does it take to make Dell’s “Push-Pull” a success?

Manufacturing Essentials: Marketing to OEMs with Dell’s Push-Pull

What are the most proactive marketing strategies for manufacturers selling to OEMs using Dell’s Push-Pull? When answering this question, think of how manufacturers must meet the OEM’s unique requirements. Pass initial qualification trials, secure approved vendor status and then move forward with providing the original equipment manufacturer with consistent, on time delivery of components and finished goods. The conventional approach was always to build first and sell later. However, this simply isn’t conducive to meeting a customer's specific requirements, requirements that often change at a moments notice. So how does Push-Pull empower manufacturers to better handle the customized needs of OEMs and what role should the company’s marketing play?

Increasing Manufacturing Capacity: Don’t Fracture Your Production Plans!

In one of my earlier posts entitled Reducing Product Cycle Times with Standard Parts, I discussed the importance of incorporating standard parts and sub-assemblies within overall designs of finished goods. Today, I wanted to elaborate on this premise by discussing how a company can increase manufacturing capacity by using standard parts and by eliminating those instances where it intentionally fractures its production plans. Now, what exactly do I mean by intentionally “fracturing” production plans? Well, sometimes the answers to increasing the company's manufacturing capacity lies in putting an end to bad manufacturing practices.

Manufacturing Capacity Planning: Stop Rationalizing Lost Time in Manufacturing!

One of the biggest mistakes my manufacturing customers make is to rationalize lost time. In fact, most seem to ignore the direct impacts of lost time on their bottom line. Worse yet, when they look to increase their manufacturing capacity, they forget the benefit of eliminating this lost time and how doing this can directly increase that capacity. Instead, they believe that the only way to increase capacity is to move forward on a capital expenditure on new equipment. Don’t make the same mistake. Take the time to eliminate the causes of lost time before moving forward with that new equipment purchase.

Use Stage-Gate Process & Improve Manufacturing Productivity & Throughput

A number of my customers are somewhat overwhelmed when it comes to discussing the steps needed to increase their manufacturing productivity rates. In fact, most are unaware of the simple approaches to determine those rates and how eliminating idle time helps to lower cycle times and increase production throughput. To alleviate these concerns, I always advise my clients use the Stage-Gate process to simplify their approaches. This allows them to systematically identify waste in all its forms and put plans in motion to reduce their impact. So, how does one use the Stage-Gate process to increase throughput?

Can Workflow Diagrams Help Improve Manufacturing Capacity?

Every manufacturer knows that reducing cycle times immediately increases production throughput and should, in theory, increase the company’s manufacturing capacity. Of course, this is only possible if the company has reduced cycle times in each production work cell and has accounted for that increase in capacity along each chain in the production process. To this extent, it’s not merely about reducing cycle times but also about reducing transit times between production work cells. This is where workflow diagrams come into play. They help to streamline transit times between work cells and when properly used, can indeed improve manufacturing capacity. It's about reducing the time it takes to move parts from one part of the production chain to the next.

Managing Customer Expectations: Explaining NRE Charges to Customers

Managing customer expectations is perhaps the single most important aspect of sales success and a vital step when it comes to discussing NRE charges with customers. If your company is in the business of manufacturing custom-made designs, then you know full well how important it is to charge for engineering time. After all, your customer is purchasing a part they likely can’t get from another company. So when it comes to explaining non-recurring engineering charges to customers, what’s the best approach? More importantly, how should your company manage your customer’s expectations when discussing NRE charges?

North American Manufacturing: Two Simple Strategies to Lower Costs

Being a North American manufacturer is no easy task. There’s the constant threat from low-cost overseas competitors, competitors who are smaller, nimbler, typically have lower material costs and always seem to take advantage of favorable labor laws. While labor costs aren’t the only factor of production, they are still an important advantage our overseas competitors exploit to their fullest. It’s no longer a question of whether we can level the playing field in this regard. Unfortunately, there's nothing we can do to lower our hourly rates. However, there are advantages we have that our overseas competitors don’t. It’s merely a question of using them. With this in mind, I thought I would write about the only two approaches companies have with respect to reducing costs in manufacturing. One is to reduce costs by lowering cycle times, thereby increasing production throughput, and the other is to simply reduce headcount. However, only one always wins out. Wondering which one it is?

Understanding Business Process Mapping & Workflow Diagrams

Do you understand the differences between business process mapping & workflow diagrams? More importantly, are you aware of how both can be used in order to streamline your operations, reduce redundant work tasks and improve your manufacturing productivity rates? Both of these are excellent tools to eliminate lost time and needless processes. One focuses on outlining a company’s processes and eliminating redundant operations, while the other focuses on identifying the least convoluted method to transport work from one production cell to the next. So, how can both of these tools help to improve how work is done?

Production Throughput: Inventory Holding Costs & Lost Time due to Material Shortages

Are you aware that your inventory holding costs include those instances where you must rush parts in because of a lack of available inventory? More importantly, do you track the incidences of lost time on the production floor due to material shortages? It’s amazing to think that manufacturers encounter lost time because of a lack of inventory, but they do. In today’s business environment, manufacturers everywhere are trying to reduce their inventory holding costs and for some companies, that means limiting the amount of inventory they hold. While running a tight inventory may seem like a good way to reduce costs, in reality, it does nothing more than increase holding costs and in the worst instances, increases lost time in manufacturing. 

Manufacturing Essentials: Sample Pareto Excel Chart for Lost Time Analysis

Every manufacturer understands how important it is to eliminate lost time. Isolating the causes of lost time allows manufacturers to reduce cycle times, improve manufacturing productivity rates and increase production throughput. To this extent, a number of companies use various approaches to identifying idle time. One of these includes using Pareto charts to isolate the causes of idle time and identifying the most egregious offenders. Therefore, I’ve decided to include a sample Pareto excel chart sheet for lost time analysis. The chart allows companies to identify causes of lost time and document their impact.

Reducing Production Work Cell Transit Times with Workflow Diagrams

Every manufacturer knows that there is a cycle time for the finished product, and individual cycle times for each operation. A finished product's cycle time also includes the transit times between production work cells. Lower the transit times, and the company has effectively increased its production throughput. Granted, some companies have effectively reduced their cycle times, and don't see any additional way to reduce them. However, what about using workflow diagrams that outline point-to-point transit times? Is there a way to reduce overall times by reducing the time it takes to move physical parts? Yes there is!

Manufacturing Cycle Times: Use Pareto Charts to Graph Lost Time

Increasing production throughput is fairly straightforward. Reduce cycle times, eliminate lost time and put plans in motion to improve the company’s productivity rates. Sounds pretty simple doesn’t it? Well, it’s much easier said than done. Manufacturers know that to successfully reduce cycle times takes a tremendous amount of time, effort and the follow through ability see strategies successfully enacted. However, one tool manufacturers can use to graph lost time and isolate its causes, are Pareto charts. Using Pareto charts can help the company reduce its cycle times by focusing in on those issues that cause the most downtime. In essence, it’s about isolating the worst offenders, determining their impact, and putting a plan together to reduce cycle times and increase throughput.

Standardizing Production Packages in Push Strategies: Using Dell's Approach

So, you’ve decided to emulate Dell’s success and are in the process of modifying your company’s production packages and assembly drawing within your push strategies. You know that to be successful means to standardize those packages as much as possible, while still being able to offer a custom-made, finished product. If your company succeeds, it will be able to streamline its manufacturing, reduce inventory counts & skews, all the while reducing its product to market lead times. It can be done. However, it requires your company define its push strategies in such a way as to streamline production & assembly outlines and drive customer requirements.

Emulating Dell: Outlining a Small Manufacturer’s Push-Pull Strategies

In my recent post entitled, Explaining Push-Pull Supply Chain Strategies for Small Enterprises , I outlined how Dell’s approach to supply chain management differs from Just in Time, or JIT. I made an argument that Dell’s strategy is ideally suited to small and medium sized enterprises because it matches their customers’ cyclical and seasonal demand patterns. However, I didn’t provide any insight into how companies can define their “Push” strategies relative to their “Pull” strategies. To clarify both of these aspects of Dell’s approach, we’ll review each in detail and provide insight into how small manufacturers can use a multipronged approach to ensuring their “Push-Pull” strategy is successful.

Explaining Push-Pull Supply Chain Strategies for Small Enterprises

What are push-pull supply chain strategies and can they help small enterprises looking to reduce their inventory holding costs? Well, when thinking of a “push” strategy, think of how businesses try and drive customer demand by getting customers to purchase the company’s products. In this case, the company has inventory and essentially pushes that inventory to customers. On the other side of the equation are “pull” strategies. In this case, the company relies upon customer demand to pull the company to procure inventory and ship finished products to its customer base. So, given these two scenarios, what are “Push-Pull” strategies and why are they combined?

Sample NRE Excel Pricing Sheet for Non-Recurring Engineering Charges

In my recent post, Charging Customers NRE: Non-Recurring Engineering Charge,  I discussed the importance of charging customers for engineering time on custom-made designs. After all, custom-made parts divert engineering and production resources from standard product lines. Companies must be willing to charge for custom designs in order to recoup the profit that can’t come from large scale production. In it I provided an overview of the steps I’ve used with my own customers when they’ve had to use engineering charges with customers. Today I thought I would outline those steps in a sample NRE excel pricing sheet.

Charging Customers NRE, Non-Recurring Engineering Charge

As a manufacturer producing custom-made parts, do you take the time to charge your customers an NRE? Do you understand the importance of using a non-recurring engineering charge to cover your costs of one-time or one-off designs? Perhaps you’ve rationalized that not charging for engineering time is a great way to improve customer relationships. Maybe your concern lies with customers who would be less inclined to purchase from your company if you were to charge for engineering time on custom-made parts. Maybe you're unaware of what it takes to charge for engineering and assume it's too much of a hassle. Regardless of the reasons why, not charging NRE does more harm in the long run and does nothing more than negatively impact your bottom line.

Manufacturing Essentials: Production Employees Must Operate Like Surgeons

What exactly do I mean when I state that production employees must operate like surgeons? Well, when you think of a doctor operating on a patient, think of how all their tools are in close proximity to them. Think of how efficient they are with their time and how everything they need is right beside them. Can they afford to wait? Can they afford to have periods where nothing is happening, when the patient is left idle, where they are unable to proceed because they lack the essential tools or information? Of course not! If that were to happen, the patient would die. It’s the exact same thing when it comes to manufacturing. Except, in this case, your company’s production employees must be given the necessary tools to complete the task at hand and be empowered to reduce the impacts of lost and idle time in production. In essence, they are operating against idle and lost time, constantly keeping it at bay.