Published in The Nation on April 30, 2012
By Niklaus Stucki
In this third article of a series, I will elaborate on my recommendations for Thai manufacturers: "take substantial efforts to adopt Lean Manufacturing or other modern production techniques" and "reduce overall production time to actual time of production by eliminating all waste times in between different steps of production".
A Chrysler Group SUV goes through the assembly line at the firm
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 Encyclopaedia, 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 seven waste categories listed below. You can easily remember them by using the TWO DIME acronym. Note that you can save considerably more than just two dimes by eliminating these seven wastes.
- Excess production
The time it takes for a product or component 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 waiting in front of a red traffic light, you feel like you are wasting your time. And when the light finally turns green, the traffic slowly starts moving again until finally it's 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 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:
- Any time more work is done on a piece than 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 habit, because previous customers required one on both sides. As trivial as this example sounds, it saves you 50 per cent of labels and labelling time. Train your staff to watch out for this kind of thing. It might also be possible to talk to your customer and discuss with him whether certain things are really necessary or could be eliminated.
- Each time a piece needs to be reprocessed, for whatever reason (usually quality issues);
When you re-process goods, you're basically doing part of the job twice. There's no need to elaborate on this; it can be addressed by reducing defects and quality issues.
- 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 realise how complicated and rich in detail and options your manufacturing process is. It might also uncover process redundancies and inadequate process layouts.
- Usually, "using tools that are more precise, complex, or expensive than absolutely required" belongs in 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 costs 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 costs of raw materials and processing have already been incurred, 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 lose money in the first step and causing additional costs when it starts to pile up as inventory. It's relatively easy to avoid defects when your suppliers provide you with only top quality parts, and you just assemble those into a finished product. It's a bit different if you really produce the parts. Just ask some suppliers of 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. We will look at this in a bit more detail in the last article of this series.
Inventory is either capital standing still, in the case of raw materials that do not get processed (transformed into sellable product), or, in the case of a defective product piling up, an already incurred cost that continues to grow. 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. If you already have a lot of inventory, the first thing to do is to eliminate it. The second is not to let it grow again. Design and designate a clear zone or 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 or 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, 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 documents are sitting 20 or more metres away in other rooms. Each time an employee hits "print", they walk to and back from the Department Manager's office. This is a waste of time. Workplaces should be set up in a way that requires the least physical effort and motion for employees and workers to do their jobs. If you can get 500 employees to reduce their waste time through avoidable motion by only a 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 a 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-working or scrapping, you also may end up with top quality finished goods you can't sell, if the planned defects do not occur. Aside from that, we can see that some of the seven wastes are interlinked. For example, we can see a chain effect in the case of excess production. If to guarantee delivery of a 100-per-cent first-quality product you need to produce 105 per cent of product, then you also need to buy raw material for 105 per cent of product. Assuming that your purchasing department adds some raw material buffer, you may end up buying raw material for 110 per cent of product to make sure you can produce 105 per cent. If neither raw material consumption nor production itself encounter any irregularities, you will have raw material and finished product left over in stock.
Four wastes - defects, excess production, inventory and over-processing - are interlinked.
If you have identified, addressed and eliminated the seven 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.
Niklaus Stucki is a business consultant at Freewill Solutions. A Swiss national, he has been living in Thailand for 16 years. He holds a Masters of Management in Organisation Development & Management and has 12 years of experience in the manufacturing/export sector. This is the third instalment in a four-part series.