Increase factory output: Part 5 – Working Overtime

OK – let me say up-front where I stand on this: I’m not a big fan of overtime working, as it’s often practised. In my experience it’s often the wrong solution to the wrong problem. I’ve seen too much regular institutionalised overtime and it’s something that I’ve always tried to eliminate in every factory I’ve ever managed. When it comes to individuals’ pay I’d far rather that production operators  were far more productive and far better paid. In my view, low pay and low productivity go hand in hand and are not consistent with Value-Driven Manufacturing.

It’s a very complex issue, touching as it does on so many areas:

  • work-life balance
  • the written and unwritten contract of employment
  • power and politics
  • industrial relations

For these reasons, overtime working relates closely to the third principle of Value-Driven Manufacturing: Effective Leadership, based on strong values and beliefs. How and why overtime working is used (or not used) says a great deal about the culture of the organisation, its values and its leadership.

Don’t get me wrong – overtime working has its place. So when and how might overtime working make sense? Here are some thoughts –

1. When it’s a short term fix to provide valuable additional labour capacity. In other words, where it satisfies the basic principles of Value-Driven Manufacturing – it increases the value of the business and / or it delivers additional value to the customer.

2. When it makes more sense than the many alternatives, for example:

  • applying Lean principles to create additional capacity by reducing labour hours required
  • rescheduling / prioritising delivery dates
  • re-deploying staff from other areas (including Management and Admin)
  • employing additional staff (perhaps temporary, agency or subcontract labour)
  • flexible demand-based hours (eg annualised hours – but not “zero hours” please!)
  • automation

3. When it’s seen as part of a concerted effort to achieve an usually diificult / important / one-off challenge.

As always, this is my personal view – I’d be interested to hear of  other people’s experiences and opinons on this, so please feel free to log on and comment…

Value-Driven Manufacturing

I had the pleasure earlier this week of meeting with a highly impressive Operations Director, as we toured his plant in preparation for hosting a best practice visit next week. As always, we got to talking about what makes an excellent manufacturing business, and it turns  out that we share many common beliefs about this. Not surprisingly, they all revolve around concepts of value. I firmly believe that value is the key to business success, even more so in the current economic downturn. For manufacturers this translates into Value-Driven Manufacturing, which is based on three simple beliefs:

  1. The Goal is to maximise the value of the business
  2. This can only be achieved by delivering maximum value to the customer
  3. Success requires effective leadership, based on strong values and beliefs

Those are pretty strong statements so if you’re still reading at this point, I’ll assume that you don’t entirely disagree! Let’s look at what this all means in practice:

1. The Goal is to maximise the value of the business

Anything else is either subsidiary, irrelevant or “nice but useless”. Maximising value requires an excellent operating / management system. We’ve all heard of Lean and the Toyota Production System but many manufacturers don’t realise that this is only one part of the Toyota Management System. Here’s a challenge for you – put yourself in the position of a potential purchaser of your business, and walk the plant, trying to see everything through their eyes. Of everything that they see, what would genuinely cause them to pay more for the business?

2. This can only be achieved by delivering maximum value to the customer

Let’s be controversial – too many manufacturers are still internally focused and cost-driven, led by accountants who “understand the cost of everything and the value of nothing”. They use Lean and Six Sigma primarily as cost-reduction techniques. Do you understand your customer’s business / market / industry as well as they do? Do you understand how they add value for their own customers? Do you fully understand their needs and wants and are all employees engaged in delivering value? Do you regularly undertake “value-add” visits to your customers, and do you take your engineers and operators with you?

3. Success requires effective leadership, based on strong values and beliefs

Great leaders are believers – they passionately believe in what they’re doing and they inspire others with their values and beliefs. They’re humble, keen to learn and they expect excellence where it matters. Great leaders are rare but they exist in all walks of life and in all areas of business, at all levels. They need to be encouraged, developed and trusted to excel.

You can find other blog posts about Value-Driven Manufacturing here on the Manufacturing Times blog (helpfully categorised under “Value-Driven Manufacturing”!), and you can find out more about Value-Driven Business at www.ValueDrivenBusiness. co.uk.

Increase factory output: Part 4 – Increase labour productivity

Let’s look at how we get more from our people – labour productivity. The first step is to apply Lean to eliminate or reduce all of the non-value-added activities that waste people’s time and effort.

Then we need to motivate and incentivise people to maximise their output.

We need to establish performance benchmarks. We do this by determining the rate at which a competent trained operator can perform a task, working at a level that they can maintain over a full working shift and a full working week.

In a future article my colleague Jeff Holt will be explaining this in more detail.

Once we’ve established standard times for key operations we can measure actual performance against these.

The first step is to record the hours attended by each production worker over a given period (usually daily) and record the standard hours of work/product produced over the same period (often called the “Hours Recovered”). dividing the hours produced by the hours attneded gives a measure of performance. This can be analysed at various levels – by operator, by work centre, by department, and so on up to factory / plant level. Often, a reasonable target is to expect an overall level of performance for a team, cell or plant of about 75-80%.

Keeping a cumulative / Year to Date figure will tell you exactly what your true labour costs are. Just be careful when you’re calculating this – don’t try to average percentages (it doesn’t work!) but always divide the cumulative Hours Recovered by the cumulative Hours Attended.

A number of clients that we’ve worked with recently found that they appeared to be achieving performance levels around this figure. BUT – and it’s a massive BUT – the standard hours used in the factory weren’t the same as the hours used for costing / estimating / pricing!

Sounds obvious but many manufacturers don’t have this properly nailed down.

It’s simple, really –

Make sure that you can cost / estimate labour hours sufficiently accurately. Build in the appropriate performance factor (eg 75%).

Set these times as targets for production staff so that they know what to aim for. Don’t fall for the trap of either not giving targets or of setting higher targets “so that they work harder”! (if you can’t work out why this is, you might just be in the wrong job).

MONITOR performance daily, provide feedback and take improvement action as required.

That way you can be confident that you’re in control of your labour costs, and that you can achieve the margins that you plan for.

If you’d like some simple free spreadsheets that you can use to perform these calculations, email me at andyfromnicholsons@gmail.com

Increase factory output: Part 3 – targets, feedback, recognition and reward

In previous posts we’ve looked at the “technical” side of increasing output – the tools and techniques. Now let’s look at the “people” side of things – how to get more from employees.

 

Most of us want to know what’s expected of us, we like to have something to aim for and we like to feel we’re making progress towards a worthy goal.

 

Usually, it’s not difficult to provide all of those things in the workplace. But too many of us don’t. Here’s how:

 

  1. Agree on two or three important objectives that are relevant to the work team – probably based around quality, productivity and service.
  2. Find some simple ways to measure them.
  3. Agree on regular targets – monthly, weekly, per shift, per hour.
  4. Make sure they’re visible to everyone in the work area.
  5. Display actual performance regularly and visually (electronic display or hand-written whiteboard).
  6. Recognise good results immediately.
  7. Train, help and encourage the team to solve any performance problems.
  8. Find ways to recognise and reward those who contribute the most. Be creative!
  9. Actively manage the performance of those who don’t contribute.
  10. Lock in the improvements
  11. Celebrate success
  12. Keep at it!

Increase factory output: Part 2 – 5 money-saving tips for tackling machine bottlenecks

It’s easy to assume that a machine is a bottleneck simply because work stacks up behind it. It seems obvious – the machine cannot keep up with the required pace of production. So the Capital Expenditure request gets written or the owner gets his or her chequebook out, the new machine arrives and everyone’s happy. Everyone that is except all of the folk who had better things to spend the money on.

No-one wants to be the party pooper but here’s the Painful Truth: sometimes you don’t really need to spend all that money. In reality, the machine can often produce enough to keep up with customer demand.

In previous posts we’ve talked about Overall Equipment Effeciveness (OEE) as a great way to measure how much good quality output you’re getting from a particular machine or process. In fact we recommend that you consider measuring OEE regularly on all critical / bottleneck machines / processes.  But for the moment let’s just keep it simple and jump straight to some practical money-saving tips…

At this point if you’re well advanced with Lean and you’re regularly hitting OEE levels above 80% then you can stop reading now and instead go away and review progress against your policy deployment  goals. For the rest of us, read on for some practical money-saving tips…

Money-saving tip #1: measure how much of the available time the machine actually performs value-added work, i.e. producing output that the customer will pay for. You’ll be amazed! You spent all of that money and the **** machine is only working half of the time! Measure all of that lost time and what it’s spent on. Things like break-times, set-up’s and changeover’s, break-down’s, scrap and defects, running at lower speeds, not producing right first time, etc, etc, etc. Sounds familiar? Pick the biggest ones and get the team looking at ways of reducing them. Here are some examples…

Money-saving tip#2: look at staggered break-times, improved production scheduling, effective materials supply. In other words, make sure that you always keep the machine running and you always keep it fed with work. If this is a problem area for you, it’s time to learn about Drum-Buffer-Rope: aim to maintain a buffer of materials to feed the machine and feed it at the rate required to keep up with customer demoand (the “drum beat”).

Money-saving tip #3: if the machine needs a warm-up / start-up period, where possible make sure this happens before the start of the working shift. For example – if employees are on site and raring to go (*cough*) at 7.00 am, arrange for someone to come in earlier to warm up the machine. Same applies at the end of shift.

Money-saving tip #4: if you’re losing too much time on set-up’s and changeover’s, you need to apply SMED. In my humble opinion SMED (“Single Minute Exchange of Dies”) gives the biggest, quickest payback of all of the Lean tools and techniques. It’s easy to learn, easy to do and often gives dramatic savings. The first time you apply SMED it’s common to halve the time taken, usually with little or no cost. Excuse the shameless plug here but you can download our SMED training package and learn how to do it in less than 20 minutes for less that £20 (less than $30).

Money-saving tip #5: crank it up! You’ll often hear lots of “reasons” why the machine can’t run at its full rated speed. “It keeps breaking down”, “Quality deteriorates”, “We can’t keep up”, etc, etc. Try it! Measure it! Often the anticipated problems are far less serious than expected. If you do get problems, you’ll then know exactly where you need to focus some improvement effort.

If you’ve already bought that new machine when you didn’t really need to, well at least you’ll know better next time. If you’re just about to buy it, then before you do have a look at these tips. They might just save you a fortune.

If you’ve any examples of your own please submit them here and I’ll post the best one’s (sorry about the delay for moderation but I’m afraid it’s the only way we can avoid being hijacked by spam).

In future posts we’ll be looking at yet more ways to increase factory output so watch this space – or better still, sign up to receive new posts automatically by email. Until next time – keep it Lean…….

Increase factory output: Part 1 – tackle the true bottlenecks

Recent surveys of manufacturers confirm what we’re seeing at the moment – many are struggling to meet increasing orders. We’re being called in by more and more clients who simply can’t keep up! Sounds like a great problem to have you might say, but if you don’t take the right actions immediately to increase your manufacturing output you can find that you quickly run out of your customers, your cash and your sanity!

Time for some home truths.

Many manufacturers throw money and resources at the problem and end up killing their profits and running out of cash. We run a great factory simulation exercise – Factory of the Future – that illustrates this perfectly. Everyone’s working flat out but costs go up, quality goes down and delivery performance goes out of the window. Sounds crazy but those of you who’ve taken part will smile as you remember seeing it with your own eyes.

So how do you get it right?

Well, let’s not get into the finer points of Theory of Constraints at this point – let’s just keep it simple.

First of all we need to look at what’s holding us back. We need to identify our true bottlenecks. We all know that a bottleneck is that part of the process where the capacity / throughput is lower than anywhere else. But we often jump to conclusions about where the bottlenecks are, usually because we see lots of work building up behind them.

I’ve seen six-figure sums spent on increasing the capacity of “bottlenecks” that aren’t really bottlenecks at all so if you want to save your money – and perhaps your job – please read on…

I can’t emphasise this next point enough – WE MUST MEASURE THE TRUE THROUGHPUT at the activity / operation. Many times we find that we do in fact have sufficient capacity and that the problem is not one of capacity.

The next step is to look at how much time is available at the activity / operation and how much of this time is given to useful productive work. Then we can look in detail at the non-productive time, find the root causes and tackle them. Often we find that these revolve around poor planning of labour or poor production scheduling.

In a future post we’ll look in more detail at next steps. In the meantime if you’d like to read up on bottleneck management you might enjoy the classic book “The Goal” by Goldratt, written in the form of a story rather than a textbook. If you’re a UK manufacturer and would like our help have a look at our website page on how to  increase factory output.