Productivity, performance and machines

How to achieve productivity improvements, on-time delivery, and other Lean Flow tools for machining operations

By Preston J. McCreary

Today’s productivity improvement goals, and the significant disparity in wages between U.S. manufacturing and lower-cost countries, require shops to use as much of a machine operator’s idle time as is possible. Machine cell design needs to create as much opportunity as is possible for one person to run multiple machines, converting any wasted idle time during the machine cycle into valueadding work on another machine.

To use that idle time, we cannot return to large-batch manufacturing on inflexible machines that produce at high speeds, but are difficult to setup. We need flexible machines and operators who can run more than one machine — often, different types of machines.

Lean Flow machine cells are not a series of similar machines arranged in a functional layout. The Lean Flow machine cell may be a mixture of CNC and traditional manual machines arranged in the order required to flow materials through the processes required to complete the product. Operators therefore may be operating a CNC lathe and a milling machine, or a horizontal machining center and a drill press, or a lathe operation, some minimal cleaning process, and assembly and packing. Operators move from machine to machine according to the work that needs to be performed to keep the product flowing. Machinists in many companies have the capability, skills, and training to run different types of machines. Often though, employers have not created the expectations that machinists/operators need to run multiple machines at once.

The key to productivity gains (sales shipped per employee-hour paid) is not maximizing the machine utilization at a process level, unless the process is a capacity constraint. If the Lean Flow design calculations require only 50% of a lathe’s capacity, then it’s fine for a machine to be idle while an operator assembles and packs product. The focus is on the output of the cell, line, or ultimately the factory, not minimized to the output of the machine or process.

Tool and machine design technology improvements are always important as potential productivity opportunities, but the focus on these types of productivity improvements can be overemphasized at the expense of the basic Lean Flow principles. Instead, the focus should be on getting the machinists/operators to be as productive as possible, using all of their idle time.

Reduce leadtime to the minimum possible level to meet customer demand and optimize on-time delivery. Make the entire company as flexible as possible to be able to change swiftly from one customer need to another. Then, use the savings and increased revenues generated from the Lean Flow activities to pay for new technologies to further improve productivity.

This new-technology capital must be spent on the processes that will provide the overall greatest reduction in the leadtime, inventory, and product cost. Remember: volume drives down cost much faster than saving labor at one process. The way to increase volume is to meet or exceed customers’ expectations.

Another focus of Lean Flow is improved on-time delivery performance. This is key to improving sales, reducing costs, improving customer satisfaction, and growing the business and its revenues. In today’s global markets with the wide array of product choices, customers will not continue to purchase from companies that cannot deliver product as promised. U.S.-based companies have a geographical advantage to be able to supply product in the U.S. market, the world’s largest consumer market. Without excellent on-time delivery, that advantage is lost to global competitors.

How do Lean Flow companies improve on-time delivery performance while reducing inventories and cost? By using a pull system to ensure raw/purchased material and finished goods inventory (FGI) availability. The pull or kanban system brings material into the factory based on consumption from the on-hand inventory, not a forecast. Therefore, material availability is not driven by a guess at future needs but what is used right now.

Known consumption is a much better indicator of what, and how much, material should be replenished than the forecast (aka an educated guess.) Kanban works the same way for finished product, assuming that finished product is held in inventory: build additional FGI when some is shipped,

not based on forecasted sales. In addition, by dramatically reducing leadtime the machine cells can respond to new customer requirements in a timelier manner. This ability to respond quickly is made possible by linking processes in cells, by controlling the inventory between processes with engineered queues (called inprocess kanban or IPKs), and by making sure that product is built in quantities as close to the customer demand as possible. This eliminates the waste of overproduction as well as the loss of machine capacity producing unneeded product.

Machine-focused Lean tools
Another commonly used tool in a machining environment is 5S. 5S is easy to implement in assembly operations, with most assembly lines being able to be organized in a few days. Machine cells require a greater level of detailed study and organizational effort to organize the machinists’ tools, fixtures, jigs, clamps, vises, gages, and tooling used by the machines (milling cutters, boring bars, drills, facing/turning tools, end mills, etc.), and miscellaneous stuff needed in a machine process. The reward here is a more organized process that is a more productive process, thus eliminating waste.

TPM (Total Productive Maintenance) is a Lean Flow tool that focuses on increasing the efficiency of machine processes to maximize the output rate, to achieve optimal running conditions. To achieve this goal, machines need to produce at the specified design rates. If a machine is producing half of the output it was designed to achieve, and that design rate is realistic, then labor resources and probably tooling are being wasted. Also, asset capital is wasted when machines run inefficiently (not producing at design specified operating rates), and additional machines are required to meet demand. In addition to wasted investment capital, labor costs are wasted when machines do not run at designed output rates.

In a machine cell environment, if one machine goes down unexpectedly the whole cell could shut down. There is very little inventory in the cell to buffer for unplanned downtime. The minimal inventory designed in the cell maintains a flow and deals with imbalances of work content time between processes. The amount of WIP or product in the factory controls WIP inventory levels and leadtime. There is not enough inventory designed into a Lean Flow cell to buffer for a machine process to be down for hours, or days, or weeks. So, TPM is critical to keeping machines up because one machine down means all of the machines in the cell will be down in a very short period of time.

Setup reduction is a necessary Lean Flow tool for reducing long setups that extend leadtimes and increase batch sizes. Large batch sizes extend leadtime even more and cause additional excess inventory and wasted capital investment. Setup reduction also increases the percentage of machine uptime, therefore increasing the achieved rate of output for each of the machine processes. This makes the machine and the operator more efficient.

Lean vs. eOQ

A Lean Flow factory strives to run a mix of products every day, or every few days, to meet actual customer demand. This keeps inventories low, but requires cycling through the different products or components more often than may be normal under current environments. Setup reduction is a necessary Lean Flow tool for reducing long setups that extend leadtimes and increase batch sizes. Large batch sizes extend leadtime even more and cause additional excess inventory and wasted capital investment. Setup reduction also increases the percentage of machine uptime, therefore increasing the achieved rate of output for each of the machine processes. This makes the machine and the operator more efficient.

When designing a Lean Flow factory with machining processes, the differences between Lean concepts and the EOQ formula have to be addressed. What a disaster this old technology has been for Western economies. Even if you do not use this formula, so many companies think this way at the operations management, planning, and production levels that the result is as if the formula is in use.

he premise of EOQ is to set the production quantity to minimize the total cost of setup and inventory-carrying cost. However, the inventory-carrying cost is always understated, the costs of order management, setups, and other elements are always overstated, and the EOQ turns out to be a ridiculously high production quantity — weeks, months, or years of products produced in a single batch.

Also, the EOQ does not address the reality that if you cannot supply product to your customers because the machines are not being operated to meet customer demand, then the setup cost per piece is meaningless. The greatest potential cause for an increase in setup cost is reduced volume or sales. Lose sales to the competition because of long leadtimes and wasted capacity, then expect to watch setup costs to skyrocket!

The EOQ results in large quantities that waste machine capacity, making product that is not required now, and therefore wastes capital on more inventory and machines that would not otherwise be required. As an example: if an EOQ calculation determines the quantity to be 500 pieces, and the cost of machine setups is $500, the setup cost per piece is $1. If the cost of the part is $50, the setup is 2% of the part cost. If the order quantity is reduced by 50% to 250 pieces, the setup cost in the EOQ jumps to 4%.

This is a false assumption, because the fixed costs did not increase per product shipped. Also, it assumes that there are no reductions to setup times, that TPM did not improve the operating rates of the machines, and that there is no benefit to getting products out to customers on time. To reduce the overall cost of the product, focus on on-time delivery performance, and watch sales revenues easily increase by 5-10%. Do this while utilizing the working capital (cash, inventory and receivables) better, and leverage the fixed costs across the increased sales. An incremental, 10% increase in sales from improved on-time delivery and reduced leadtimes will make the product costs drop like a rock.

Lean Flow is different in a machining environment than in assembly, and definitely more complex, but it can provide greater benefits and a higher return on the investment. The focus for the Lean Flow implementation team and management must be to break down the paradigm that Lean Flow is for assembly operations, and that machines require a different set of manufacturing principles. The Lean Flow tools are the same, some of the applications change, the complexity is higher, and the transformation process takes longer — but the benefits are significant.

The question is not whether a machinebased manufacturer should adopt a Lean Flow business strategy, implement Lean machine cells, and drive to eliminate the waste. The question is: What will happen to the business, sales, customer satisfaction, and profitability if you do not implement a Lean Flow business strategy?

Preston J McCreary is a consultant and partner with FlowVision, LLC. Contact him at [email protected], or tel. 303-886-2852.

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