This article is the first in our four-part series detailing how to deliver on-time every time. Click here to read a holistic article which will walk you through the 4 steps to take – in the best sequence – to achieve high OTIF (on-time in full). The following instalments to this series will be uploaded to our blog page. For updates make sure you are following our LinkedIn.
Each article delivers value in its own right and cane be read as a standalone piece.
Whilst the focus of this article will be on manufacturing and production environments, it is important to note that the principles are just as valuable and applicable to projects organisations – anyone working in Project Management will also benefit from understanding that managing the release is the key to shorter lead-times.
Let’s begin by recognising the problem that needs solving. It is common knowledge that queues equate to delays; the shop floor is no exception to that rule. Large queues on the shop floor means that new orders being launched go straight to the back of the queue and become ‘delayed’; the bigger the queue, the bigger the delay. Whilst you can chop and change priorities at the front-end to ensure a particular order is able to flow through the system more quickly, that doesn’t change the fact that what lies behind it is a large queue of other customers’ orders. For the purposes of this article, it is worth noting that queues, lead-times, and Work-In-Process (WIP) are inextricably linked – they are bound together by cause and effect. When there are high levels of WIP, queues are high; when queues are high, lead-times are long.
You also know that consumers today expect goods and services faster than ever. Twenty years ago, customers would live with a Due Date Performance (DDP) of approximately 60-70% and ‘accepted’ lead-times of 5-6 weeks, but nowadays, market expectations are higher. You need to be achieving an on-time delivery of at least 80-90% of your orders and you need to push for shorter lead-times to keep your customers happy and hold on to your current accounts. So, you want to reduce the queues to reduce the lead-times. How do you do that? You reduce the WIP.
One argument you could make to avoid having too much work on the shop floor, is to make improvements to operations. If you create capacity and improve output, you can begin to complete more orders than you start. This will naturally reduce the WIP, so queues will drop and lead-times will improve – because you found more capacity. This works, but only to an extent. You must also factor in people’s choices. The larger the queues, the more choices people must make. Operators on the day shift can pick and choose the jobs they want to finish, potentially leaving the more difficult jobs to the other shift. For example, team leaders or managers can choose to batch an urgent job of Product A with a less urgent job to gain efficiencies, but the consequence is that the next jobs in the queue are held up as you pull the less urgent job forward. So, there are always choices made around priorities – what to do next, how to approach things, how to offload, how to resource the shop floor… these are all choices that production needs to make. That’s before the added disruption too much WIP creates physically; blocks visibility (and aisles!), demotivates the team, causes damage when jobs are left to get in the way of production facilities, and all the regular costs of having too many pallets and containers of parts on the shop floor. These choices hurt your capacity. We all know that the best way to maximise capacity is through working on the right jobs, in the right sequence with little or no downtime in between – ideally you don’t want to be making any choices on the fly!
So, one answer is to increase capacity to complete more orders than you start, but what if you look at it the other way? That is, don’t start too many orders.
Whatever the first operation in your flow is – whether that’s sawing, drilling, turning, milling, etc. – unless that first operation (Op 10) is also your bottleneck, you will have more capacity there than you will at the bottleneck resources downstream. When you have more capacity on non-bottlenecks, and your first operation is a non-bottleneck, the temptation (or the pressure) is to keep that machine running. After all, you are already paying for the operator, have already purchased the machine and let’s face it – most companies have a backlog or an order book they are trying to get on top of…
So, the temptation is to start an order as soon as you can; even if that is at a rate faster than your bottleneck can keep up with. If you are launching more jobs at a rate faster than your bottleneck can keep up with, you know what that will lead to – more (queuing) orders, higher levels of WIP and longer lead-times. So, you must take command of the only other control point that makes sense on the shop floor: the point you release the job and make it available for operations (Op 10). You need to scale that back to a level that supports low levels of WIP (i.e., not run the resource at 100%). This will lead to interesting questions around what to do with the remaining capacity and resources/what to do with the manpower, but the one thing that’s crystal clear is that the operation should not be cutting/drilling/sawing (whatever it is) to its maximum – that will only introduce work faster than it can be drained out the other end.
When it comes to software, this has interesting implications because most MRP/ERP systems require us to define lead-times for our works orders. You need to tell the system how long it should be on the shop floor, from when it should be started to when it should be finished. Usually the system works backwards; if an order needs to be completed by a given date, it needs to be started a certain lead-time before that. To calculate those lead-times, it forces us to answer the question of how much processing time – that makes sense, how much setup time – that also makes sense, and weirdly… how much time you need to allow for queueing… and we now know that the queues are up to us! The size of the queues you need to allow for is dependent on your release policy. With your current levels of WIP, your lead-times are likely longer than they need to be, and your on-time delivery performance is not as high as it could be. So, the ‘logical’ temptation here is to increase your lead-times on the system because your current ones are not sufficient to achieve an on-time finish. If you increase the system’s lead-time, you will have to launch orders earlier; and if you launch orders earlier, more and more jobs will need to be launched in parallel and you will flood the shop floor with more WIP. This means queues will rise and ironically your production lead-times increase. On-time delivery, in fact, will not improve as you have not solved the capacity issue that large queues cause, and all those choices and challenges will take effect. The on-time delivery will get worse!
So, you need to break the cycle. To break the cycle, the best thing you can do is to launch fewer orders, have fewer jobs being launched in parallel and reduce the number of choices to be made. Then, you can optimise your operations through only making the right jobs – in the right sequence with no gaps in between – lower levels of WIP so that fewer decisions need to be made and everyone can see what’s going on. This enables them to focus on achieving high levels of output and maximise the available capacity.
The only place you can do all that is at the point of release. So, our advice? Reduce the lead-times! Make sure you are properly controlling when orders are launched to the shop floor to maintain a good flow through the system, and don’t optimise any one work centre (unless it’s a true bottleneck) – especially those initial operations.
For help or guidance setting your lead-times and controlling your release points contact Goldratt UK.
If you are looking for a software to help you with your business improvement, Goldratt UK developed Ropeweaver. Ropeweaver is a tool designed to support companies’ native ERP/MRP systems. One of it’s functions centres around setting good due dates and ensuring you release orders to Production at the correct time. Have a read of our article ‘High OTIF, DDP, DIFOT… Whatever Your Measure Is, Here’s How to Deliver On-Time’ for a well-rounded idea of what Ropeweaver can do for your business.
By Phil Snelgrove, Lauren Wiles