The difference between Production Time and Time of Production
Production time covers the period from the moment of entry of the means of production into an enterprise up to the completion of the finished product (The Great Soviet Encyclopedia, 1979). Time of Production covers only and exclusively the time raw materials and semi-finished products undergo value addition by being processed. The difference between the two times is considered to be a waste of time and can most likely be assigned to one of the 7 waste categories listed hereafter. You can easily remember those by using the TWO DIME - acronym. Note that you can save considerably more than just two dimes by eliminating these 7 wastes.
E xcess Production
All the time a product or component needs to be transported from A to B to be further processed, is a waste of time. During the transport from one department to another, one factory’s facility to the next, the yet unfinished product does not get processed any further. It is only moved from one place to another without any value being added to it. Time of transportation and transportation itself is purely a cost and should be eliminated.
Every minute a product or component is waiting to be processed, is a waste of time. I’m sure whenever you sit in your car lined up in front of a red traffic light, you feel like you are wasting your time. And when the light finally turns green, the convoy slowly starts moving again until it’s finally your turn to move on. Could it be that the products in your production line feel the same? Imagine you sit on one of your products across the entire production process. How many times would you sit and wait until it’s moving on again? All these “invisible red lights” in the production process should be eliminated as they disrupt the continuous flow and result in a loss of speed and wasted time.
Over-processing occurs in at least four instances:
1) any time more work is done on a piece than what is required by the customer
Make sure customer requirements are clear and understood. If there is only one label needed on one side of the box, then don’t apply one on both sides of the box just out of a habit because other customers used to require one on both sides. As trivial as this example sounds, it safes you 50% of labels and labeling-time. Train your staff to watch out for this kind of things. It might also be possible to talk to your customer and discuss with him whether certain things are really necessary or could be eliminated.
2) each time a piece needs to be reprocessed due to whatever reasons (usually quality issues)
If for whatever reason you have to re-process goods, then you basically do part of the job twice. Needless to elaborate further on this, it can be addressed by reducing defects and quality issues.
3) when your production process contains redundancies
When you try to draw a clearly understandable process flow including all steps and options of your production process and layout without ending up with a wild labyrinth of overlapping lines you are likely to realize how complicated and rich in detail and options your manufacturing process is. It might also uncover process redundancies and inadequate process layouts.
4) usually, “using tools that are more precise, complex, or expensive than absolutely required” belongs into this waste category.
While this can be true as it is likely a waste of money, I think we also need to include the opposite into this waste category and say that using inappropriate and/or outdated tools can result in a considerable waste of time. Buying a hammer to crack a nut will not result in a waste of time, but trying to hammer a nail into a plank with a nut-cracker is likely to take a while. You can buy your secretary an expensive scientific calculator for just doing standard operations. It won’t be any faster to do the four basic calculations than it would with a simple calculator, it only cost you more money than would have been necessary. But saving money by not buying her any calculator will result in a waste of time whenever she has to do some calculation manually on a piece of paper.
Defects are definitely the worst waste a company can have. All the cost of raw material and processing has already occurred and then the product can’t be sold. Either the product needs to be reworked (over-processing) eating up the benefit margin in the best case, or it needs to be scrapped, making you literally losing money in a first step and causing additional cost when it starts to pile up as inventory. It’s relatively easy to avoid defects when your suppliers provide you with only first quality parts and you just assemble those to a finished product. It’s a bit different if you really produce the parts. Just ask some suppliers of the large car manufacturers whether they have defects in their production or not. Eliminating defects has a technical and a human aspect. Technically, the right tools in good condition need to be used and taken care of properly. The human aspect and impact on quality or defects is often underestimated. (See my article “The Challenge called Human Being).
Inventory is either capital standing still in case of raw material that does not get processed (transformed into sellable product), or an already occurred cost costing further more in case of defective product piling up. Note that raw material can become unusable (defective) over time and tacitly move to the second category. Unless you’re doing business in the wine or liquor industry, get rid of inventory. Neither raw materials nor finished products and for sure not defective products will gain in value over time. The earlier you dispose of them the better. Inventory is like a cancer growing slowly and finally getting out of control if not taken care of seriously. If you already have a lot of inventory, the first thing to do is to eliminate it and the second is to not let it grow again. Design and designate a clear zone/warehouse of a very specific size according to what you think is reasonable for your business for inventory and then strictly stick to this. If the space is full, there must be some old or obsolete materials or products pushed out before new materials/product can be taken in. This sounds simple, but it might be very challenging because business owners often see the money they spent to buy the raw material or the value of the finished product that they are now asked to dispose of. But if you let the inventory-cancer grow, it will suffocate your operation process, it simply stands in the way of efficient operation, and finally of your business.
Motion refers to human movement, means any movement done by humans to get their job done. Bending, stretching, reaching out for things and walking. Simple example: in order to be able to control how much paper his staff prints, a department manager places the printer in his own office even though he himself doesn’t use it much. The people who actually print are sitting 20 or more meters away in other rooms. Each time his staff hit “print”, they walk to and back from the Department Manager’s office. This is a waste of time. Work places should be set-up in a way that employees and workers need the least physical effort and motion to do their jobs. If you can get 500 employees to reduce their waste time through avoidable motion by only 1 minute each per day, you save 8.3 workman hours or more than one full time position.
Excess Production is that percentage of production you add as safety buffer to make up for defects. This is a double-edged sword. Not only do you “plan” for defects that eventually really will occur and result in re-work or scrap, you also may end up with first quality finished goods you can’t sell in case the planned defects did not occur. Aside from that, we can see that some of the 7 wastes are interlinked. For example, we can see a chain-effect in the case of Excess Production. If to guarantee delivery of a 100% of first quality product you need to produce 105% of product, then you also need to buy raw material for 105% of product. Assuming that your purchasing department adds some raw material buffer, you may end up buying raw material for 110% of product to make sure you can produce 105%. If for any case, neither raw material consumption nor production itself encountered any irregularities, you will have raw material and finished product left over in stock.
The 4 wastes Defects, Excess Production, Inventory and Over-processing are interlinked
If you have identified, addressed and eliminated the 7 wastes from your business processes, and that is not limited to just the production line itself, then you have made a big step towards Lean Manufacturing and towards improving the competitiveness of your business.
Written by: Niklaus Stucki
Bangkok, 24th January 2012
Published: The Nation, 30th April 2012