Getting Up the Profit Hill Faster
By Gary Mintchell, Editor In Chief
Manufacturers have an array of good tools to help them implement proven operational excellence strategies.
Manufacturing is a complex operation. There’s more involved than just bringing raw materials in the front door, performing some work and shipping finished product out the back door. The complex organization of people, machinery and equipment required for production needs visionary and skilled leaders. Theorists have developed methods for improving operations, and suppliers have rushed to provide tools to help leaders implement them. Some of the tools even help leaders sustain their advantages after the initial rush of implementing change.
The goal of manufacturing is to produce finished goods for sale by the company in an efficient, cost-effective and timely manner within the quality parameters set by customers and the regulatory decrees set by governments. The complexity of manufacturing demands study and reflection to keep production lines moving. One of the biggest challenges is finding where the problems are that cause reduced output of finished goods. Hence, a fable:
A plant manager of a manufacturing enterprise promised to take his son’s Boy Scout troop on a hike in the woods and hills. Once they had parked at the beginning of the trail and prepared for the trip, the boys self-organized a line for the hike. The fastest boys went first, then the slower ones. Finally, at the end of the line was a chubby, out-of-shape kid. During the morning, the troop establish a pattern. The fast kids take off at a rapid rate and soon the boys are spread over a long area of the trail. Then the first ones must stop and wait for the rest to catch up. With every stoppage, their frustration grows. This leads to grumbling and complaints to the slow ones to “speed up.”
As the plant manager contemplates the process that evening, it occurs to him that this is similar to his plant. Some machines speed along and produce great amounts of parts, but the number of finished products doesn’t increase. That number is constrained by the slowest machine. Only by putting all attention on the slowest process can the amount of finished product be increased.
The next morning, the troop leader reorganized the troops. He put the chubby kid at the head of the line. The troop was not going to go further than he could go anyway, so this way, they could maintain a steady pace. And by giving this boy special attention, he was encouraged to pick up the pace. Previously, he was so discouraged that he actually got slower. In this manner, the troop reached its destination more quickly than it would have, and with much better spirits.
This fable is paraphrased and condensed from a novel by Eliyahu Goldratt and Jeff Cox, “The Goal: Excellence in Manufacturing.” This 1984 book describing the workings of the Theory of Constraints has become a classic, and has been updated and reprinted many times. Some consultants continue to argue the superiority of Lean Thinking, overall equipment effectiveness (OEE) or Six Sigma over the Theory of Constraints. Practitioners have discovered that using all of these manufacturing strategies can lead to operational excellence in manufacturing. These strategies apply equally well in just about every type of manufacturing.
The trick in using the Theory of Constraints is, of course, in finding the real constraint. Dennis Cocco, chief technology officer of Activplant, a London, Ontario, Canada-based factory software supplier, says, “If the downtime of a machine does not affect the number of products produced at the end of the line, then it should not be the focus of the study.” He advises finding the places in the production line where a stoppage—even if only for 20 seconds at a time—does affect final production tallies. Activplant, like many other automation suppliers, has developed tools to assist manufacturing leaders to find and correct production problems.
Maryanne Steidinger, Chicago-based discrete industry marketing manager of Simatic IT for automation vendor Siemens AG says, “ ‘The Goal’ was MES.” Steidinger is a proponent of OEE as an analysis tool supplemented with a manufacturing execution system (MES) application as an automated data collection and presentation tool. “OEE is a way to manage individual assets,” continues Steidinger. “You can compare different machines or lines and look at efficiency and identify bottlenecks. It’s the proactiveness that OEE provides that is so valuable. Coupling OEE with report tools merging data from other sources allows you to be in control.”
Another MES supplier sees similar customer uses for its tools. Claus Abildgren, production management marketing manager at Wonderware, in Lake Forest, Calif., says, “Customers are focused on making sure information on its biggest problems get to first-line operators so that they can find a solution. Several companies are creating an intuitive front end to the MES to aid decision making. For example, on a pharmaceutical packaging line for vials, a traceability application pointed out that the company had lost three hours of production out of 24 because of microstops. They went to work on the accumulators and balanced the line. This lost time that they didn’t even know they had cost a lot of money.”
Activplant’s Cocco is not as sanguine about OEE and MES. He began analyzing production processes in a similar method to that found in “The Goal.” His questions were, “Why does some downtime matter more than others?” and “How can you find the critical constraint that has direct impact on total production throughput?” He soon realized that there are many obstacles to collecting the data necessary to really determine the true constraint.
“Some companies go with a totally manual data collection system,” says Cocco, “and some go crazy on automated data collection. We believe that either extreme leads to problems. Asking operators to write down the reason for every stoppage is unrealistic. They may not know the true reason for the machine stoppage. If it’s not operator related, they may not even record it. A potentially larger problem is if the stoppage is only 20 seconds or so. They probably don’t even record it. After all, we all remember a big stop, but who remembers such a short one? An automated system requires pre-determined reasons for downtime. It’s hard for the programmer to guess what every possible reason might be.”
Cocco developed an algorithm that looks at a minimum number of inputs from each machine or process in the production line, figures out the constraints and then displays the operation blocking the line for all to see. He used the technology to found Activplant, and the product is Throughput Analyzer. After leaders see where the constraint is, then methods such as a Lean Manufacturing event can be used to fix the problem. Then the next constraint is highlighted for fixing.
“The biggest problem in trying to discover the constraint is that no one thinks that they are the problem,” says Cocco. “But if their station is the one in red on the display that everyone sees, then it’s obvious where the problem is. Now, steps can be taken to fix it. Perhaps a group of operators need to meet to share best practices. Perhaps work along the line needs to be balanced. The key factor is that if you clearly see the problem, you can fix it.”
Sustaining a productivity victory can sometimes be harder than fixing the problem in the first place. People tend to fall back into their old habits. Cocco believes his analyzer and the display help prevent regression. If that station becomes the constraint again, well, everyone knows it. The problem is always highlighted.
Victory Industrial Products LLC, located in Batavia, Ohio, designs and manufactures custom accessories, such as enclosures and fuel tanks, for large industrial power generators. Victory had undergone high double-digit growth in its business for the past several years, and past due orders had reached an unacceptable level. WHI Capital Partners, a Chicago-based private equity firm, acquired Victory, looking to capitalize in a market where few strong niche players existed. As Bob Carter, Victory chief executive officer, explains, “It’s a great time to seize the market, and that’s what we’re doing.”
The right goal
WHI Capital Partners had big plans for growth that included a new, larger building, and was expecting more work from the production force. Rapid growth made it nearly impossible to fill all the orders on time before the sale; after the sale, executives knew that something had to give. The new owners had worked with Definity Partners, Mason, Ohio, at another company, and hired this Lean consulting group to work with Victory in every department to improve efficiency. Early objectives were to improve assembly department efficiency by 20 percent, optimize plant layout and work flow, and create enclosure build work instructions.
It was recognized early in the initiative, however, that a change in the original focused-effort goals was needed. Instead of focusing on the efficiency of any particular department, a focus on plant-wide management systems was required. Without the appropriate management systems, any efficiency gained in individual departments could not be leveraged completely. So Definity Partners started work in final enclosure assembly. Changes in workflow were implemented, as well as basic communications systems and work instructions. To synchronize all plant-wide operations, changes to master scheduling quickly followed, along with systems and tools to regulate work-in-process (WIP) inventory. Soon, enclosure assembly WIP was eliminated and as throughput increased, the “bubble” shifted to engineering.
The engineering department adopted scheduling tools that allowed the proper transition to manufacturing, and balanced the workload within the department to increase design engineering capacity. With increased engineering capacity, the fabrication department came under fire. Plant layout changes were instituted that split the department assets between enclosure assembly and weld departments. This allowed greater management span of control and reduced transportation waste.
As operations became more synchronized, it became evident that the data used to load the master schedule was inaccurate. Therefore, closed-loop tools to better load the master schedule were implemented, making it possible for manufacturing to control loading in accordance with demonstrated departmental efficiencies.
Next, changes were made to human resources systems, such as compensation and training that would allow better testing and orientation of new hires, and advancement through more in-depth training, particularly in weld technology.
As manufacturing operations improved, attention turned to the sales engineering group. As growth was the objective, a quote volume increase was required. Soon, the department was organized into work cells, and the work areas of complimentary functions such as purchasing and technical support were arranged to promote information flow. Next, sales tools were implemented to decrease price variability, and product pricing models were analyzed and adjusted to fit the priorities of the company as well as feed cost data into the new cost accounting system.
The results of the Lean implementation were impressive—$4.5 million in past due orders were eliminated. On-time delivery increased from 30 percent to 90 percent of orders. Assembly department throughput increased by more than 100 percent. Work-in-process inventory decreased 22.9 percent. Employee turnover was reduced by 71 percent. The estimated payback of the approximately $500,000 investment was less than six months.
Save the company
“You couldn’t rip this software away from us for anything,” declares Paul Colella, supply chain manager for Eberhard Manufacturing, of Strongsville, Ohio, a manufacturer of industrial and vehicular components. His reference was to a software product from called EasyLean from Infor Global Solutions, an enterprise software supplier based in Alpharetta, Ga. Some would think that using software for Lean Manufacturing is an oxymoron—or worse. But Eberhard managers found themselves in a situation in which a traditional Lean approach wasn’t going to cut it.
New manufacturing managers at the 150-year-old plant recognized that in order to remain competitive, they would have to look at some leading-edge techniques. But the average tenure of employees at the plant was 25 years, and they were deeply traditional. Managers began a traditional Lean approach, but found hurdles in organizational inertia. It was difficult to convince the employees that what they had been doing for years was not competitive in today’s manufacturing environment.
About a year into the project—with progress painfully slow—the company’s largest customer came in for a meeting with the senior management team. “If you don’t improve lead times and deliveries, we’ll begin looking at a process of separation,” was the gist of the meeting.
“We knew then that we had to move quickly. We no longer had time for an involved, traditional, Lean process,” says Collela. “We were using the Infor Visual Business Solutions software already, so when its company consultants came in and suggested we look at this EasyLean software, our interest was piqued. This application simply plugs into the existing Visual Business Solutions package, so implementation wouldn’t be as difficult as starting from scratch. We weren’t sure software could do Lean, but we decided to see a demo.”
The consultants modeled a factory in the conference room using Legos and the software with a demonstration that was enough to convince Eberhard management to give it a try. “We’re three years into adoption and have seen some substantial results,” Collela reports. “We have doubled inventory turns and reduced lead times from an average of eight weeks to five days for the majority of our repetitive items. Since we didn’t have time to deal with culture change, we used the algorithms and calculation features of the software for scheduling, but the reports could be created in the same output style as before, so that workers weren’t confused. That meant that we didn’t have to obtain 100 percent top-down buy-in for the project.”
The EasyLean software forces Eberhard into a continuous-improvement mode. “We can now have conversations with our customers if we see an order come in that is out of ordinary. Is there a spike in need, or was there an order entry mistake somewhere? If a spike, then we can talk about how to handle it. At the end of 2006, the single largest order in company history came in. We were able to push it through with relatively little pain. Previously, we would have had to increase capacity temporarily. Today, we’re well on our way to becoming a flexible, nimble, competitive company poised to face Asian competition.We can compete not only on price, but now also with delivery and quality.”
Customers’ reactions today are “Wow, look at the new Eberhard,” Collela observes.
Operational excellence strategies such as Lean Manufacturing and Six Sigma need not be confined to discrete manufacturing. Process manufacturing operations such as those found in the pharmaceutical industry also can be greatly improved when managers think about their operations and applying leading-edge tools to efficiency problems.
Michelle Adkins, industry operational excellence consultant for Austin, Texas-based automation supplier Emerson Process Management, has seen it happen. She has witnessed pharmaceutical industry adoption begin with Six Sigma programs, then move on to adoption of Lean Thinking, and eventually merging the two strategies into a hybrid of sorts, from her office in Royersford, Pa. She sees them as complementary strategies, as Six Sigma focuses on variability while Lean focuses on waste.
She begins with a client by interviewing employees to define a process map. Clients need to define what they want out of the process before proceeding to train some of their employees. The Emerson OpX Advantage program uses a six-step, data-driven methodology that proceeds from initial assessment through a detailed study, report and recommendations, project implementation and results analysis with an on-going control feedback loop to assure continued benefits.
Adkins’ experience and practice centers in pharma. The important thing in pharma manufacturing is deviation, that is, things that will hold up products from being released. This often centers around paperwork. “We have a saying in pharma that there are two products—the drug and the paperwork,” she quips. “There are lots of documents, so we look at the batch records to analyze them and then make them more user friendly. Perhaps instead of just long lists in text, we will put some text in boxes and so forth. These print documents must be taken around the plant for review and approval by many people. Sometimes, there are people who spend all their time running around seeking people. Some plants even draw a ‘spaghetti chart’ that traces the travels of these people. Some have even moved offices to shorten the trips. We can do a value stream analysis and they’ll say, ‘Oh my gosh, we’ve got a lot of people doing non-value-add work.’ ”
One place, please
An MES application—in this case Emerson’s ComplianceSuite—can interface to the batch records and to enterprise and laboratory information software to pull information into one place. At one client who had a mix of Emerson DeltaV controllers and third-party programmable logic controllers in a manual and automated process, she determined that the first order of business was good data management. That can be labor intensive, so automating it into a historian such as PI from OSIsoft, a San Leandro, Calif., software provider, which integrates with ComplianceSuite, has worked well. Adkins has seen client benefits range from $300,000 to $500,000 per year on the low side, to one client that saved, conservatively, $3 million per year. “It just depends on where they started and how much automation they want to put in.”
There is no doubt that implementing proven strategies can have significant impact on the bottom line in manufacturing. Help in the form of software tools and consultants can be a boost for getting started.