FCP Process Consulting Services

1. You cannot produce more than the bottleneck. This includes the bottleneck of your department and the bottleneck of the factory.

2. Any output lost at the bottleneck for any reason is lost forever at the original price. The bottleneck does not have catch up capability. It usually takes overtime to make up the difference, unless it is a resource bottleneck.

3. Any action taken to improve the bottleneck is infinitely more valuable than anything you can do to improve other operations.

4. Never starve the bottleneck for work, and never overload it with work. If WIP builds up at the bottleneck well beyond its ability to catch up, back off the supply to it. This could mean stopping, or slowing down the input.

5. Know what your department’s bottleneck is, and make sure that anything needed there has the highest priority.

6. Keep adequate resources at the gate operations. Don’t loan people from the bottleneck area to other areas. Actually, the opposite should be true. Always try to look elsewhere for people.

How do you determine how much WIP you need in front of each operation to maintain maximum output without increasing cycle time? What are the dangers of allowing WIP levels to get too high? How much is too much for each area, or for that matter, how much is too little? Finally, what kind of controls can you put into place as a manager, to ensure that you are controlling WIP correctly?

The answers to these questions are really quite simple. Too often, we miss the answers by concentrating on what is not important. We compromise without sound analysis, rather than having a proven way to analyze the situation and determine the appropriate alternative. The sound way to answer those questions predictably in every case is Little’s Law!

The equation: CT=WIP/Output is the most profound, yet the most often ignored measurement tool in manufacturing. Cycle time is often thought of as being kind of important, but not as important as perhaps, meeting the shipping date of an order. WIP is considered important, but only from a dollar standpoint. Companies that have made a transition from a push system to a Fast Cycle system often feel uncomfortable unless they have lots of WIP everywhere. When things first start going really well, and WIP starts coming down, some operators will put “Low WIP” on their TAKT charts. Often, it only is on there because they are uncomfortable with the thought of only having what they need for one hour.

To calculate cycle time for a work center or a factory, you look at the output and the amount of work (WIP) there is. If a department has an hourly output of 200 widgets and there are 600 widgets in the area, their cycle time is 3 hours. They have 3 hours of work backed up. If that is normal for them, and they look around and suddenly see 2000 widgets in their area, they are heading for trouble. The supply to them should be stopped before the situation turns into a disaster. Here are the derivations of Little’s Law:

· To calculate cycle time, divide total WIP by the daily or hourly output.

· To calculate the output, divide WIP by cycle time.

· To calculate WIP, multiply output by cycle time.

The X Factor The X Factor is calculated by dividing the Total Cycle Time (TCT) by the total amount of Raw Process Time (RPT). RPT is calculated by taking the total amount of time the product (panel) is actually being worked on by anyone in that department. This means hands on time, and machine time. If all that was done to a panel were to load the widget on to a machine and then run the machine, the raw process time would be the sum of both. Total Cycle Time consists of RPT plus all of the time that the product is sitting around not being worked on. Waiting in a Dynaban adds to cycle time, as does the time a panel is waiting at the machine to be loaded. Neither of those times would be included in RPT. Consider the following scenario: Raw process time (total hands on time) for one department is 30 minutes and the average cycle time for that area is typically 6 hours. That makes the X factor: 6 hours divided by 30 minutes or 6 / .5 = 12X. The normal X factor of a company should be far less than 10X, and preferably 5X or less. With an X Factor of 12X, you can see that 12X for that department is excessive. That department is either letting product lay around unnecessarily for an inordinate amount of time and cherry picking good product for easy output, or they are maintaining too much WIP in their area, or both.

Using Little’s Law, you would look at your hourly output, which we’ll say is 30. With 6 hours WIP, (CT = 6 hours times 30 = 180 widgets) you quickly see what the problem is. The high X Factor indicates that there is too much product sitting around and/or the product is sitting around much too long. There are several reasons that an area will keep that much WIP in their area. First, the reliability of their supplier is low, and the second is that they, the customer are the bottleneck and therefore, there is a need to ensure that they do not run out of work if their supplier should go down. If that is not the case, they would want to keep a minimum amount of WIP in the area such as 60 widgets. That would give them a cycle time of 2 hours and an X Factor of 4!

The amount of WIP that you really need is really determined by the reliability of your supplier. If your customer can always supply you with product every hour, you only need an hour’s worth. If, on the other hand, your customer delivers every 1, or 2 hours, and sometimes as much as every 3 hours, I suggest that you insist on an input queue of 3 hours. It is sometimes impossible to insist on an input queue, mainly because your supplier may be slower than you, which means that you are always living hand to mouth. But if your supplier is the gate, you have to get used to the fact that you are only going to get what they can give you. If you are much faster, you will outrun your supplier.

When an area has an excessive X Factor, its problems are compounded when disaster strikes, which is not like saying “if” disaster strikes. Realistically, you know that it is going to happen, it’s just a matter of when. Keeping a lot of WIP around and then running into a rework problem can be a killer to any department. It’s better to have a steady rate of a little rework than have an occasional dose of a whole bunch of rework. If you get a quality problem, or an excessive amount of rework, and have a lot of the affected product in your area, you can find yourself in serious trouble. When management has a work center with a high X Factor, it should be an indication to them to get help there quickly. Find help, and work to minimize your WIP and smooth the output of product. Every manager and supervisor should know what the X Factor’s for their areas are. When they are excessive, work to get them to an acceptable level. This equates to understanding and applying the proper principles of production management.

As managers of the business, we have to understand that we cannot serve two masters, when one is competing with the other. It’s difficult to try to get a perfect report card for two measurements, when getting a high grade in one will cause you to fail in the other. We can’t say that we are looking after the interests of our customers and then we release an amount of product to the floor that exceeds our capabilities, and/or takes precedent over product already there. The product already there is also for a customer. Which master do we respond to, the one that pays more or the one that screams the loudest? Do we cater to the one that has the most influence with our executives, or the one that is easiest for us to work on? The answer is that once product is released, we do our best to keep it moving until it is finished. We know that prioritizing has a killing effect on productivity. If we have to prioritize, it should be prior to product release.

Once the product is released from the crib, we have to keep it moving. Setup avoidance is OK, as long as it is not taken to extreme. You can’t put off running a certain product because you are waiting for more of it to arrive so that you can run multiple lots. Accept the fact that you are going to have to do more setups in a Fast Cycle environment. The important thing is to reduce the time that it takes to do the setup. There are infinite ways of doing this, including modifying the machines, getting better ones and best of all, implementing setup reduction with multifunctional teams. Fast Cycle Production teaches team setup reduction. Don’t count on setup avoidance as a solution, unless it is accomplished through the creative release of product. Even then, the problem of keeping like lots together throughout the process creates another problem. It is acceptable to combine lots when the lots are in your Kanban, but to wait for one to arrive and ignoring product already there is bad practice.

I have heard managers urge their people to “Keep the WIP under control”, without really understanding what that means. Sometimes they think that keeping it under control means keeping plenty of it around and auditing it regularly. Improving their output isconsidered by some managers as a people thing. The belief among some is that people are their biggest obstacles to increased output. If managers can control the workers, they can improve output. Sadly, some of them come to believe that by monitoring individual output and pushing the people for more, they can increase productivity. Pushing for more output is not an acceptable definition of productivity. My experience tells me that the opposite is true. Proper management is the key to productivity. To control WIP, you keep the work moving, and only maintain the minimum amount of WIP necessary to ensure a steady output.

Understanding Little’s Law and using it properly is the key to WIP management. Little’s Law states quite simply, that the three most important elements of productivity are reduced cycle time, controlled WIP and improved output. You can safely put Little’s Law into the same category as Ohm’s Law. If we are to consider it a “Law”, we then have to conclude that it is always true. We then come to the conclusion in manufacturing that the three most important elements of manufacturing are Cycle Time, WIP and Output, with Cycle time leading the way. But we must always consider every variable in the equation.

Taking this further, we can then conclude that any decision that we make that increases cycle time has a high probability of being a bad decision, and anything that we do to reduce cycle time has a high probability of being a good move. We know this to be true if we have also considered the other two variables in our decision process. Examples of bad decisions are releasing more product than the process can handle, and releasing product that you know will come to a stop somewhere unnecessarily. Examples of good decisions are reducing setups or setup times, and not releasing product until you are sure that it can make the full trip. The best decision management can make is to insist that product be produced as fast as it can be produced with absolute attention to quality as a given.

Very often, there is a large amount of resistance to standard lot size reduction. This resistance would be understandable if all that we were trying to do was to reduce the lot size without regard to setups. In the 80’s, many colleges taught their industrial engineers that large batch sizes were necessary in order to increase output on machines that required long setups and to maximize machine utilization. Setup times on some machines took hours to complete, and the times taken were seldom challenged. The product they processed took seconds. It made sense to increase lot sizes in order to avoid setups. But setups were not considered a variable that could be improved, they were considered a given. By taking setup times for granted, and accepting them, the conclusions that were drawn from those assumptions were correct as far as they went. The trouble is that the thinking didn''t go far enough.

Along came the Just In Time revolution (JIT). A Japanese IE named Shingeo Shingo came up with a concept called Single Minute Exchange of Dies, commonly known as SMED. His belief was that large batch sizes increased cycle time unnecessarily because the first part out always had to wait for the last part out in order to be moved. The larger the batch size, the longer that first part had to wait for the last one. In Shingo’s mind, it was most important to reduce lot sizes, and in order to do that, setup time had to be reduced. Shingo proved that reducing the setup times could be achieved easily and effectively. He taught his students to work to both reduce the lot size and the setup time. Bottom line, Shingo knew that decreasing cycle time was the right way to go.

The result of this was the belief that cycle time really was important! Equally important was the fact that it became known that batch sizes had a huge effect on cycle time. Some of the side effects of reduced cycle time such as, improved quality and increased output were common with reduced setup times. The reason for this is that Shingo didn’t preach reduced batch sizes by itself, he advocated making reduced lot sizes possible, and he showed the world how to do it.

By making it possible to reduce batch sizes (setup reduction), reduced cycle time becomes a reality. Of course, you have to do it right and you have to make sure that you are picking a safe batch size. There are easy ways to calculate a safe batch size. If you make it too small, you decrease your output unnecessarily. Make it too large and you are not going to realize your potential.

So then, how is management to control the WIP in their area when they are doing everything that they ought to be doing, such as setup reduction and reduced batch sizes? They manage WIP by understanding what the optimum level should be and keeping it there. They need to have a tool that they can use that lets them know when there are problems with product moving from one area to another. Three very important tools that managers can use to help them control WIP are:

1. The aged WIP report – This report tells managers what lots are being set aside for whatever reason. Managers can then instruct their people to process the orders that exceed the maximum time in their area.

2. Total WIP report – knowing how much WIP that you have in your area and multiplying it by your normal hourly output will tell a manager what their cycle time is. If this calculation shows a high cycle time for your area, you have too much WIP.

3. Color coding of released product to insure FIFO movement of product through the line. Product with last week''s color should have priority over the product with this week’s color.

Too often, managers manage their WIP by instructing their people to “Get the old WIP out TODAY”! Instead, they should work to understand what caused the WIP to build up, and trying to make sure that the condition that caused the WIP buildup is fixed. In TAKT Meetings, I hear presenters reporting multiple lots of aged WIP in their areas and then quickly promising to have it out that day. This explanation often satisfies the managers in the audience, but it shouldn''t. Chances are good that the situation will repeat itself again and again, because just hearing the explanation should not be enough to satisfy an experienced manager. Understanding the reason is what is needed. The wise manager will want to know what (not WHO) caused the situation to exist in the first place and then try to find out how to keep it from happening again.

Supervisors should keep an open eye for excessive product in their areas. Middle managers should grade their supervisors on their abilities to keep their areas free of aged WIP, and their ability to move old product first. Manufacturing managers should constantly scrutinize the aged WIP reports and grade their supervisors and managers on their abilities to control WIP.

Insisting that people increase their output is like insisting upon world peace. It is not going to happen just because you demand it. You have to show people the right way to do things, and then put measurements in place that will ensure that you know that they are continuing to work on improving their productivity. You help them, not demand that they help themselves. Give them training, guidance, and good measurements, and then watch them fly!

When managing operators, supervisors want to make sure that their people understand what is expected of them. They give them the tools that they need to meet and exceed expectations. Get to know what their needs are, and what they do well through TAKT Management. Walk around and get to know and understand their needs. Recognize them when they exceed expectations, but don’t hand out praise frivolously. Recognize individuals in front of their peers whenever possible but never chastise them in public. When people need help, take them aside and level with them. They have a need to understand how they are doing, good or bad. Again, make sure that they know what you expect of them, and how you will measure them. What does all of this this boil down to? It means that you respect them.

Will all employees respond positively to this management philosophy all of the time? Sadly, the answer is not always yes. Occasionally, an employee will fail to meet requirements even when they have every opportunity to do so. It may be necessary to let them go, but it is only after they have been given every opportunity to improve to an acceptable level. When you manage in this way, it won’t make the other employees fear you. Rather, they will respect you even more because they know that you always do everything that you could do for them. They know that you manage them with a fair hand and you use good, sound measurements to ensure that they are following the good path.

Obviously, high output is important to many companies, but it is important to know that numbers by themselves are meaningless. Singularly, they leave out the details that are needed to sustain productivity. You need to know WHY! WHY were the numbers high? WHY were the numbers low? It’s not important to know that Fred produced more than John did unless you know WHY. It is not important to know that shift A produced more than Shift B unless you know WHY. WHY is more important than how much, but HOW MUCH and WHY is priceless.

Finally, a conclusion!

Quoting an unknown source, isn’t it amazing how it always seems that good managers have such good people? Or maybe, I stated the quotation incorrectly. Maybe I should have said, isn’t it amazing how it always seems that the best groups have such good managers? It’s kind of the chicken and egg thing. Good managers and supervisors do have other things in common. They always have the following attributes:

· They are consistent

· What is important to them today, is important to them tomorrow

· They are predictable

· Their answers to questions or situations involving their value set are predictable. You can pretty much predict how a good manager will respond to a given situation.

· They are fair

· They treat individuals with the respect that they would appreciate themselves. Respect yourself and respect others. It’s a two way street. Their people know what is expected of them, and how they are measured.

· Their value sets are sound and unshakable

· If they are doing the right thing, they don’t bend like willows and fold like accordions when challenged, and they are never transparent when passing on unpopular decisions to their employees. You can’t call it a value when it only applies occasionally, or when there is no threat.

Managing in a Fast Cycle Production facility may be different than managing elsewhere, but it shouldn’t be. Doing the right things and sticking to your guns when you are right may not always be the most popular thing to do, but when you are a manager, or even in your private life, it sure makes it easier to look yourself in the mirror and smile. The best senior managers that I have met aren’t looking for people that just take orders and go running off to complete them even when they know that it’s the wrong thing to do. They challenge the order, not in a disrespectful way, but by working to convince their boss that there is a better way and presenting good alternatives. They want people that will work to advise their boss when he or she is on the wrong path. These kinds of people have strong values and live by them. When you surround yourself with people like that, you have a much higher probability of success. When you lead by this example, you will be successful, I promise you.