Improving processes

Profits

1

THE GOAL

Making our factory financially viable

Ron McFarland, Tokyo, Japan [email protected]

2

Cash

Four ways to make money

Reduce waste and

manage expenses

One

Year

1. Increase gross profit

2. Increase the speed funds are

returned to cash

3. Increase sales volume/per cycle

4. Expense control and budgeting

How money is made


Problem of balancing production line capacity

to market demand

EXAMPLE: Market Requirement (60 pcs/hour) & six (6) processes F

lu

ctu

atio

n tim

e

(+ o

r –)

Faster than

average

(- min.)

Slower than

average

(+ min.)

Balanced maximum capacity: 10 min/process

Actual time for a particular production run.

Actual

(33 min total,

+/-0 min)

Actual 13 min

(46 min total,

+6 min)

Actual

(56 min total,

+/-0 min)

Actual 13 min

(69 min total,

+9 min)

Actual 10 min

(10 min total,

+/- 0 min)

Actual 13 min

(23 min total,

+3 min)

Actual

60 pcs in

69 min

(+9 min)

3

10

min

ute

lin

e


Balanced capacity to requirement

Two problems of balancing capacity at every work center (processing unit)

#1-Dependence of processes #2-Fluctuation susceptibility

Then

Process

#2

Then

Process

#3

First

Process

#1

Wait or inventory buildup Wait or inventory buildup

4

each run each run each run

Rarely exact time each run

Dependent Dependent


Two problems must always be looked at

5

There are too

many people wait

for more work.

There is too

much inventory

in the system.

Completed

work

Incoming

work

build up

I can’t

keep up!

Completed

work build

up

Incoming

work

I don’t

have

enough

work.

Some other work must be

found to keep him productive.

He needs support.


Slowest process at beginning of production

Six processes to be completed in an hour F

lu

ctu

atio

n tim

e (+ o

r –)

Faster than

average

Slower than

average Capacity as follows:

1st process – 15 minutes

2nd process – 13 minutes (2 min wait for second lot)

3rd process – 10 minutes (5 min wait for second lot)

4th process – 9 minutes (6 min wait for second lot)




Actual

41 min total

(+11 min)

Actual

51 min total

(+11 min)

Actual

59 min total

(+9 min)

Actual

66 min total

(+6 min)

Actual

14 min

Actual

30 min total

(+10 min)

Actual

100 pcs

66 min (6 min

late)

Note: 87 min

on second lot

if no

fluctuation

Actual

11 min

Actual

8 min

Actual

7 min

Actual

10 min

Actual

16 min total

(+6 min)

Actual

16 min

6

Current bottleneck


Slowest process at end of production

Six processes to be completed in an hour


Actual

26 min total

(-4 min)

Actual

36 min total

(-4 min)

Actual

51 min total

(+1 min)

Actual

68 min total

(+8 min)

Actual

8 min

Actual

15 min total

(-5 min)

Actual

100 pcs

68 min 8

min late)

Actual

11 min

Actual

15 min

Actual

17 min

Actual

10 min

Actual

7 min total

(-3 min)

Actual

7 min

Capacity as follows:


2nd process – 7 minutes (1 min inventory build up after first lot)

3rd process – 9 minutes (3 min inventory build up after first lot)

4th process – 10minutes (4 min inventory build up after first lot)

5th process – 13 minutes (7 min inventory build up after first lot)


Flu

ctu

atio

n tim

e (+ o

r –)

Faster than

average

Slower than

average

7

Current bottleneck

Ron McFarland, Tokyo, Japan

[email protected]

Slowest process in center of production

Six processes to be completed in an hour


Actual

27 min total

(-3 min)

Actual

44 min total

(+4 min)

Actual

56 min total

(+6 min)

Actual

62 min total

(+2 min)

Actual

10 min

Actual

14 min total

(-6 min)

Actual

100 pcs

62 min late

(+2 min)

Actual

13 min

Actual

12 min

Actual

6 min

Actual

17 min

Actual

4 min total

(-6 min)

Actual

4 min



2nd process – 9 minutes (3 min inventory build up at second lot)

3rd process – 15 minutes (7 min inventory build up at second lot)




Flu

ctu

atio

n tim

e (+ o

r –)

Faster than

average

Slower than

average

8

Current bottleneck

Fix the

bottleneck


[email protected]

Finding the strongest & weakest links

9

Raw

material

input

Finished

product

output

Strongest link: 1-Fastest to complete batch among all processes.

2-Chance of over producing and building up excess

inventory just after this process.

Weakest link: 1-Slowest to complete batch among all processes.

2-Chance of building up excess inventory just before this process.

3-Overall, if this point is supported, the entire line will greatly strengthened.

Fix weak

link first!


It has the most influences on the capacity

of the entire production line.

Bottlenecks (constraint) in production

10

Improving non-bottlenecks

reduce process time but increase

waiting time (little advantage).

11

#4 - Strength

constraint factor

Find long-term method of

improving weakest process,

the bottleneck/constraint.

#2 - Decide

countermeasure

Put extra effort (uptime)

in the current process.

#5 - Evaluate

Improvement

Learn amount of improvement.

#1 - Identify

Where is the work being held up

(inventory buildup), the bottleneck

and its degree of fluctuation (+/-)?

Steps for finding constraints

Continual

advancement

#6 – Market demand

Confirm the market is there to take

extra product. Then, return to #1.

#3 - Subordinate other

factors

Avoid all activities that

adversely influence bottleneck.

12

Increase

deliveries/sales

Reduce material

purchase cost

Reduce staff

Reduce

transportation

expenses

Reduce

inventory

Too many random requests

He doesn’t know what to do,

so he does things the way he always has

or what’s easiest.

GOAL #1

GOAL #2 GOAL #3

GOAL #4

GOAL #5

Do nothing

Put most

energy on

GOAL #1


Reduce

inventory

Common order of attention

#1 – Control

expenses

#3 – Reduce

inventory

#2 - Complete &

deliver product

Bottlenecks

& waste

creation

13

Reduce waste &

manage expenses

Deliver product

& make sales


[email protected]

Best order of attention

#3

Control

expenses

#2

Reduce

inventory

#1

Complete

& deliver

product

ROI

ROI

ROI

14

Increase

deliveries

& profit

Deliver product

& make sales

Reduce

inventory

￥

Budgeting &

control expenses

Note if shipments

are increased (#1),

urgent orders will

decrease which

saves money.


Total effectiveness

#3 - Control Expense #2 – Reduce Inventory

#1 Ship products

15

Deliver product & make sales

Reduce inventory

#1 Focus on completed product and serving the customer first.

#2 After that, address the inventory issue.

#3 Lastly, control costs and expenses.


[email protected]

Greatest challenge

16

Our #1 goal is to

control expenses!

Our #1 goal is to

increase deliveries,

and sales!

￥

Finance

Marketing

PROBLEM:

Finance sees the value through good profit margins.

Marketing sees the value through satisfied customers.


[email protected]

Non-urgent shipments have the highest ROI because they can

positively influence both expenses and inventory levels. They

are the most powerful business solution.

17

Why shipments are the top GOAL

Transportation

methods can be

improved and

many expenses

will go down.

The long-term

health of the

company will

improve with more

shipments.

Inventory levels

can be better

controlled over

time and will go

down.

If cutting inventory levels or expenses are the #1

GOAL, the long-term health of the company will suffer.


Rules for handling bottlenecks

18

1. Do not waste any of the bottleneck’s time (no stopping for lunch

breaks).

2. Check incoming items for defects before starting bottleneck

process.

3. Delay bottleneck process for items not needed soon. It must be

part of current demand first, and then for stock and future demand.

4. Never deliver less than what the bottleneck process is capable of

handling.

5. Consider outsourcing part of the bottleneck process.

6. Consider rapid preventive maintenance to keep the uptime as high

as possible on bottleneck process.

7. Consider old, not used equipment for bottleneck support.


[email protected]

Costly situations

19

1. A non-bottleneck process supplies too much to a bottleneck

process. (excess stock waiting)

2. A bottleneck process waiting to receive from a non-bottleneck

process. (lost time of total production)

3. A non-bottleneck process supplies too much to an assembly

process while a bottleneck process does not supply enough.

(excess stock waiting)

4. Over-production of finished products with no market (excess

finished stock)

5. Putting attention on improvement in non-bottleneck processes

and ignoring bottleneck.


[email protected]

Categories where time is used

20

#3 and #4 are

often ignored!

Study where time is

used throughout

production.

1. Parts waiting during production set-up process – If it is the

bottleneck process, can the set-up time be reduced?

2. Parts being processed in work center – If it is the bottleneck

process, can the processing time be decreased?

3. Parts waiting in line during a given process – If it is a bottleneck

process, can the amount of items in the batch be reduced?

4. Parts waiting for another item so it can be assembled – Can the

assembly items be delivered more evenly?


[email protected]

Handling urgent problems – being prepared

#2 #3 #4 #1

#2 #3 #4 #5 #6 Solve #1

Time Index

10

Time Index

100

21

Expected production delays

Prepared with output protection

Solve

1. ANTICIPATE POTENTIAL PROBLEM OCCURRING:

2. PREPARE ACTION PLAN BEFOREHAND:

3. DETERMINE WHO TO TALK TO BEFOREHAND:

4. AT NEWS OF PROBLEM EXECUTE ACTION PLAN:

1. SHOCK OF NEWS:

2. STUDY WHAT TO DO:

3. CONSIDER WHO TO TALK TO:

4. HAVE DISCUSSIONS:

5. PREPARE ACTION PLAN:

6. EXECUTE ACTION PLAN:

10th

the time

& cost

required


[email protected]

Handling urgent problems – being prepared

#2 #3 #4 #1

#2 #3 #4 #5 #6 Solve #1

22

Unexpected production delays

Prepared with output protection

Solve

1. ANTICIPATE POTENTIAL:

2. PREPARE ACTION PLAN BEFOREHAND:

3. DETERMINE WHO TO TALK TO BEFOREHAND:

4. AT NEWS OF PROBLEM EXECUTE ACTION PLAN:

1. SHOCK OF NEWS:

2. STUDY WHAT TO DO:

3. CONSIDER WHO TO TALK TO:

4. HAVE DISCUSSIONS:

5. PREPARE ACTION PLAN:

6. EXECUTE ACTION PLAN:

What could go wrong?

Where could it go wrong?

When could it go wrong?

Who should I share information

with so they can be prepared?

To prepare, ask...


[email protected]

How to reduce semi-finished inventory


Actual

26 min total

(-4 min)

Actual

36 min total

(-4 min)

Actual

51 min total

(+1 min)

Actual

68 min total

(+8 min)

Actual

8 min

Actual

15 min total

(-5 min)

Actual

100 pcs

68 min 8

min late)

Actual

11 min

Actual

15 min

Actual

17 min

Actual

10 min

Actual

7 min total

(-3 min)

Actual

7 min



2nd process – 7 minutes (1 min inventory build up after first lot)

3rd process – 9 minutes (2 min inventory build up after first lot)

4th process – 10minutes (1 min inventory build up after first lot)



Flu

ctu

atio

n tim

e (+ o

r –)

Faster than

average

Slower than

average

23

Weekly

production

status

Communicate status!

Focus all

attention on

the bottleneck


[email protected]

Keep customer informed of status

Flu

ctu

atio

n tim

e (+ o

r –)

Faster than

average

Slower than

average

24

Weekly

on-time

status

Capacity as follows: 1st process – 15 minutes

2nd process – 13 minutes (2 min wait for second lot)

3rd process – 10 minutes (3 min wait for second lot)





Actual

41 min total

(+11 min)

Actual

51 min total

(+11 min)

Actual

59 min total

(+9 min)

Actual

66 min total

(+6 min)

Actual

14 min

+3 min wait

Actual

30 min total

(+10 min)

Actual

100 pcs

66 min (6 min

late)

Actual

11 min

+5 min wait

Actual

8 min

+3 min wait

Actual

7 min

+3 min wait

Actual

10 min

+7 min wait

Actual

16 min total

(+6 min)

Actual

16 min

Just finished

Bottleneck

What is

the order

status?


25

Keep customer informed of status

Closer & faster

communication

Customer

Currently over half the overseas customers are angry about deliveries.

Current response Ron McFarland, Tokyo, Japan

[email protected]

26

Is it an urgent order? Is it a lost sale?

Customer

Rescheduling for urgent orders is very costly!

Is it worth it?

When the customer is angry and wants faster deliveries…..

the direct sales person must discuss the situation with production

manager, and they should make a decision.

1. How old is the order? It is extremely old?

2. What are the most urgent items needed?

3. What is the minimum required by customer?

4. Will the direct customer buy somewhere else if he has to wait?

5. Will the direct customer lose customers, or is he just low on

stock?

Sales

Production


27

Production Management Errors

1. A process standing idle is always a major waste.

2. Efficiencies in each process are the best guide

to performance and profitability.

3. Leads times can always be calculated and

assured.

4. Reducing set ups reduces costs.

5. Process batch quantity is always equal to

transfer batch.

6. Flow depends mainly on physical layout.

Costly production

mistakes


Production Process example

Work centers along the MCS production line

#2 #3 #4 #5 #6 #7 #8 #1

1. RAW MATERIALS: Average receiving time_________ fastest___slowest___

2. ¼ SEMI-FINISHED: Average processing time_______ fastest___slowest___

3. ½ SEMI-FINISHED: Average processing time_______ fastest___slowest___

4. UNPACKAGED FINISHED: Average packing time____ fastest___slowest___

5. INSPECTED: Average inspection time_____________ fastest___slowest___

6. LABELED/PACKAGED: Average packaging time_____ fastest___slowest___

7. CARTONED/SHIPPED: Average carton packing time__ fastest___slowest___

28

Note: Transportation time could be added with fastest and slowest time requirements.


29

#4 - Strength

constraint factor

#2 - Decide

#5 - Evaluate

Improvement

#1 - Identify

#3 - Subordinate

factors

Steps for production constraints

Improved

deliveries

#6 – Market demand #1 – What is the #1 MCS

constraint and why?

#2 – What is the

countermeasure?

#3 – What do you

want to do but must

avoid now?

#4 – What long-term

measure can be applied?

#5 – When will the

measure be evaluated?

#6 – Is there enough demand

for this extra capacity?


[email protected]

30

#1 - Identify

Steps for MCS constraints example

1. What is the #1 MCS constraint, and what is the fastest completion of a batch?__________

2. Why is that the constraint?______________________________________________________

3. Where is the constraint on the production line (beginning/middle/end)?_______________

MCS

improved

deliveries

What causes

partial

shipments &

slows order

deliveries?


[email protected]

31

#2 - Decide

#1 - Identify


MCS

improved

deliveries

1. What is the countermeasure? ____________________________________________________

2. Who will be the key people to perform this new countermeasure?______________________

3. Who is needed to support this decision?___________________________________________

4. How will this countermeasure influence other parts of the production line?______________

Quick Action

Plan


[email protected]

32

#2 - Decide

#1 - Identify

#3 - Subordinate

factors


MCS

improved

deliveries

1. What other activities do you want to do but must avoid now? _______________________

2. Who is needed to support avoiding other processes?______________________________

3. List items that must not influence #2’s performance._______________________________


33

#4 - Strength

constraint factor

#2 - Decide

#1 - Identify

#3 - Subordinate

factors


MCS

improved

deliveries

1. What long-term measure can be applied?_____________________________________________|__

2. How can this constraint be strengthen?_______________________________________________|_

3. What performance protection plans are there to react quickly to adverse changes?____________


34

#4 - Strength

constraint factor

#2 - Decide

#5 - Evaluate

Improvement

#1 - Identify

#3 - Subordinate

factors


MCS

improved

deliveries

1. When are improvements evaluated? ______________________________________________

2. How are improvements measured?_______________________________________________

3. Who is responsible for measuring improvements?__________________________________


35

#4 - Strength

constraint factor

#2 - Decide

#5 - Evaluate

Improvement

#1 - Identify

#3 - Subordinate

factors


MCS

improved

deliveries

#6 – Market

demand

1. Do backorders (over 120 days) still exist? _________________________________

2. Is there enough demand for this extra capacity?_________________________________

Now, we can

accept new

customers!!!


[email protected]

Where we are-----Where we will be

36

1. What is the bottleneck now?

2. What is the solution…..What do you want?

3. Who is primarily responsible to do what is wanted?

4. How do we get to what we want?

5. What support or recourses are needed to achieve what is

wanted?


With full

attention to

bottlenecks..

The GOAL – Making

the factory financially viable

37

You will Achieve

Financial Goals

Thank you Ron McFarland, Tokyo, Japan [email protected]

Business

Improving processes