Lean engineering is an effective way to boost efficiency and profitability. However, as with all manufacturing principles, it requires maintenance and support.
The Lean engineering consultants at Campbell Corp. specialize in identifying pain points and streamlining production, and this starts with an honest look at your daily operations.
Would Your Operation Benefit From Lean Engineering Consulting?
While we believe every manufacturer could benefit from Lean support, there are some tell-tale signs that it’s time to call a consultant. Here are some issues to watch for.
Low EBITA Relative to Your Industry
This concept is straightforward; if you’re making less money than your competitors, you’re either not charging enough, or your competitor is outperforming you. This is a dangerous place to be because, as your competitors continue to improve their processes, they will be able to:
- Charge less and maintain their healthy margins
- Take away from your margins as you work to match their price
The solution to this is to do what you do better without compromising safety nor quality.
Long Lead Times
There are several facets to lead time. The first is your quoted lead time. If your lead time is longer than your competitors, you might be losing revenue from lost sales and not know it. Are you meeting your quoted lead times? If not, you might be paying a financial penalty and at best you’ve experienced a ding to your reputation. Another facet of lead time many people don’t consider is your customers’ desired lead time.
Could you sell more if you could deliver it more quickly? Reducing lead time has powerful impacts on a manufacturer, beyond the reduction in time from order placement to shipment.
Large Inventory of Work in Progress
Work in Progress impacts lead time. If there are 100 units on the floor at various stages of manufacturing, 100 units need to be completed before the 101’st unit will be ready to ship. If each unit takes an hour to manufacture, that’s 101 hours of lead time for the 101’st unit.
What happens if you reduce that 50%? Obviously, it’s only 51 hours for the 51’st unit to be ready to ship. What does that do to your bottom line?
Let’s say a unit costs $200. On average, each unit of WIP is 50% complete. If you have 100 units on the floor at $200 each, you have $20,000 in WIP. If only 50 units are on the floor, you have only $10,000 in WIP.
High Rate of Defects
Most manufacturers are very good at detecting defects prior to shipping, but defects detected internally are just as damaging to a manufacturer. Sometimes defects are unrecoverable, and the product must be scrapped. Other times, it requires re-work.
In either scenario, a manufacturer is losing valuable production time to produce more product to make up for product scraped or to rework product to bring it into tolerances or specifications. Root Cause Analysis can help identify the causes of defect, and Lean can help increase quality.
More Material Handlers Than Operators
I write this tongue and cheek, but excessive forklift operators and material handlers transporting your raw materials and Work in Process is a sign of an inefficient layout which unnecessarily bloats your Work in Process, detracts from your bottom line, and increases your lead time.
Frequent Break Ins
There will always be code reds to accommodate a good customer or job with a high margin, but frequent break ins are a sign that the total residency time on your floor may be too long. This is a result of inefficient processes and too much Work in Process.
Missing KPI’s / Goals
The old adage of “You can’t fix what you can’t measure” is true in manufacturing operations. If you’re not measuring the proper “METRICS”, which is an acronym for Measure Everything Relating to Customer Satisfaction, you may not be meeting the needs of your customers. Establish, measure, improve, and track the metrics unique to your business that relates to safety, lead time, on time delivery, quality, and cost.
Low Utilization of People or Equipment
Part of my assessment when I visit a manufacturer for the first time is to consciously observe how many operators are actually transforming raw materials to finished goods; that is how many of them are adding value to raw materials. Inspections, looking for a tool, discussing a clarification with engineering or sales, and a myriad of other activities add no value to your customer and they are not willing to pay for it.
Similarly, I observe the number of critical pieces of equipment operating and idle. Change over, maintenance, breakdowns, lack of an operator, are all among
Unleveled Shipping Cadence
Do you ship 50% or more of your monthly sales in the last week of the month? I know that sounds ridiculous to most, but I know It’s hitting home with at least some of the readers. I’ve had clients ship up to 80% of their monthly sales in the last week of the month. This is indicative of out-of-control manufacturing.
Dependence on “Tribal Knowledge” or the “Magic Midas Touch”
Do you have processes or equipment that performs better when a certain operator is at the helm? There shouldn’t be magic or insider knowledge to any aspect of your operations. If there is, the processes is designed poorly, the process isn’t document well, or both. This unnecessarily makes you vulnerable to an employee’s health and vacation schedule as well as the employee quitting or retiring.
Utilization of Batch Processing
Of course, batch processing is a necessary constraint to some processes and with proper planning can be accounted for a Lean single piece flow environment. However, batch processing when it’s not necessary is against the fundamental principles of Lean and can contribute to several of the main wastes. It builds WIP. It can replicate defect undetected. It can increase Lead Time.
Interested in Lean Consulting?
Every manufacturer has unique pain points in their daily processes. Our Lean manufacturing consultants are here to identify your wastes, so your operation can become more profitable. Email us today to discuss your Lean evaluation, or call us directly at (414) 421-7601.