Far too many companies think a large capital expenditure
is the ultimate solution to a lack of production throughput. Unfortunately, long
after they’ve made their purchase, they’re still left with the same issues that
plagued them in the first place: low manufacturing productivity rates, low
production throughput, constant work stoppages, inaccurate cycle time counts,
and an inability to track efficiency in work cells and work stations.
A Checklist Before Making a Capital Expenditure
Instead of working on these five aforementioned areas, companies simply assume that a one-time equipment purchase will instantly increase capacity. It rarely, if ever, works out that way. Granted, sometimes an equipment purchase is needed.
However, the focus must be to make sure that the company is ready for that purchase by optimizing its current production throughput and capacity. We’ll review these five aforementioned issues in detail and simplify them so that you know when and how to move forward with that all-important equipment purchase.
1. Productivity Rates: There are different approaches to defining productivity in manufacturing. First, you could track production volumes and their variances on a day-to-day, week-to-week and month-to-month basis. Second, you could track volumes emerging from different machines and locations on your shop floor. Finally, you could employ a more in-depth approach by tracking productivity at the source by analyzing work in separate work cells.
It’s this last method I prefer. Why? Because it allows you to witness production in person – as it happens. While you’ll be forced to analyze these rates in multiple work cells and stations, the benefits will allow you to isolate the root causes of downtime. In the end, that will help you define your benchmark cycle times.
The three steps, example and video are from the post: Simplifying Lean Manufacturing: Work Cell Output, Cycle Time Variances & Production Volumes
2. Production Throughput: There are far too many issues to consider when tracking a company’s throughput. Manufacturers that produce custom-made product offerings in low volumes can’t possibly attain the same level of throughput as companies that manufacture high volumes of products from a fixed bill of materials. One company must constantly reinvent the wheel, while the other has a repetition and statistical processes on its side.
The solution involves defining your throughput as it pertains to your company’s specific market and product portfolio. Start by tracking customer orders, volumes produced and units shipped on a monthly and quarterly basis. Next, try to account for the cyclical and seasonal nature of your business.
3. Work Stoppages & Idle Time: Just as there are multiple issues that can affect throughput, there are just as many issues that cause work stoppages and downtime. The idea isn’t just to be aware of why downtime occurs. Instead, the focus must be to define these issues in terms of their costs. Simplify your analysis by applying a monetary value to work stoppages. How much lost time did occurred and what was the cost? Measure this in terms of units, sales, gross profit or wages. Regardless of how you measure it, make sure your analysis has meaning.
4. Inaccurate Cycle Time Counts: Don’t simply rely upon the cycle times emerging from your MRP system. Don’t just go with the times being tracked through work orders. Instead, define your benchmark cycle time and then track the variances from those times through your work orders. Far too often I see companies who take the cycle counts emerging from their MRP system as doctrine. A manufacturing resource planning software can only track times – it can’t tell you what your ideal time should be.
The table, graph and video are from the post: Cycle Time Tracking & Variance Analysis in Excel for Small Manufacturers. It includes a sample excel sheet that allows you to track your own cycle times and graph them to identify discrepancies.
5. Setting up a Lean Work Cell: For whatever reason, companies seem to be intimidated with the idea of lean manufacturing. Some overuse the term. Some treat it as a one-time affair, while others see it as a catch phrase. I myself am not a black belt in Six Sigma. The truth is I’ve never had to be. Instead, I apply simple and straightforward approaches when looking to help my customers define their current throughput and capacity.
Once you've successfully checked all of these five issues, then it might be time to move forward with an expenditure on equipment. However, be sure to become an expert in these areas before moving forward.
To read about moving forward with an equipment upgrade, please see: What's Involved in Making a Decision on a Capital Expenditure?
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