Time is the most important resource we have. It is possible to make more money, but it is not typically possible to make more time. How we spend time has the most impact on business. To the extent it is spent in the highest impact areas, you will achieve a high return on your time. Is it possible to create time? The answer is yes.
Years ago, I was working with a manufacturing company. The machine productivity was near the bottom of the competitive landscape. We knew this because the machines were benchmarked on a regular basis so companies could see the productivity of their machines relative to others. These machines ran 24 hours a day, 7 days a week, 52 weeks a year. To increase production, adding shifts was not an option. To produce more, the machines had to run faster.
If you think about it, the effect of running a machine faster has the impact of creating time. Here are a few steps you can take to increase production:
Ask the operator
Back to the company described above – the new head of operations toured the facility, speaking with each of the operators along the way. When he reached one of the machines, he asked the operator if the machine could run faster. The answer was yes. He went on to explain that he had not run it faster because no one had asked him. So the head of operations asked him to run the machine faster and there was an immediate jump in productivity. This one seems like a no brainer, but you might be surprised to find how often this scenario exists.
Ask the operator – part II
Your operators know where the bottlenecks exist or what causes the machines to go down. What mechanisms exist in your current operation to raise the issues and get them quickly resolved? Having a short-term incentive program that rewards people for achieving good production targets will reinforce the need to increase machine productivity.
Downtime can be planned or unplanned. Unplanned downtime arises from a failure or breakdown. Planned downtime usually arises from scheduled maintenance that results in the machine not operating for some period of time. In either case, production is lost. Effective preventative maintenance minimizes unplanned downtime, as well as the length of planned downtime, thereby maximizing productivity.
Scheduling and transitions
Do your machines produce multiple types of products? If so, scheduling production becomes critically important. Production can be laid out in blocks such that sales and operations agree the level and timing of production is appropriate. This allows for transitioning the machines from one product to another in the most efficient manner possible, allowing the machines to maintain a high level of productivity.
High return capital investments
Most companies have more capital projects than funds available. Prioritization of capital becomes necessary. There are two types of capital that need to be considered:
- Maintenance. This involves capital expenditures that are needed to keep the business running without making any improvements to the operations. It just keeps the wheels on.
- Discretionary. This type of capital spending improves the operations. It may be increasing the current operations. Or, it may be a strategic investment that improves the business or gets into new markets.
After you set aside your minimum annual maintenance capital, prioritize discretionary capital based on strategic importance and impact on the business. A simple payback is an easy way to prioritize. Payback can be calculated as follows:
- Incremental annual production multiplied by product margin divided by cost of the project.
- If you have many projects with less than a year payback, you have lots of opportunities. Just make sure to track the expected outcomes to make sure they are achieved quickly before moving to the next project.
Don’t forget to involve sales
As production levels increase, your sales team will need to have channels in place to move the product. A sales and operations meeting that meets weekly is an important complement to the daily operations meetings you likely already hold. The point of the sales and operations meeting is to discuss production for the coming week, customer concerns or trends, holes to fill in the production schedule, and upcoming projects that will increase production capacity.
Inventory: The cash hog
One of the biggest hogs of cash in your business is inventory. Too frequently, inventory is the dumping ground for production in excess of demand. If your business is seasonal, having this type of strategy may make sense to meet peak demand. However, for many, the amount of inventory is consuming cash that can be used in other areas of the business, such as the high return capital projects described above. Alignment between sales and operations minimizes the need for inventory build up. Would you rather your cash be spent on inventory that collects dust or high-return projects?
The methods outlined above give you a roadmap to creating more time in your manufacturing operations – more production, typically at a lower cost per unit. What is holding you back from taking action?
Heidi Pozzo works with leaders and businesses to achieve high performing status. To contact her, visit www.PozzoConsulting.com or call 360.355.7862.