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When
we were kids, lots of us had security blankets that protected
us from the imaginary monster that lurked under our beds. This
practice was generally accepted as something we would grow out
of, along with the occasional thumb sucking that added to its
power. If we didn’t overcome the habit, the dental bills for
correcting our teeth from the effects of thumb sucking could
be substantial. Consider that in today’s world of global
markets, demanding customers, and fierce competition, similar
practices exist in many industries. Many manufacturers are
holding on to security blankets that they need to put aside
before their own version of thumb sucking puts them out of
business.
Every
manufacturing operation tries to achieve predictability. Being
able to plan and follow a plan has been the dream of many
production managers; as well as the source of many sleepless
nights for those whose plans went awry, as they often do.
In
the days of mass production planning’s goal was high volume
efficiency, the cornerstone of Alfred Sloan’s creation of
the “industry of industries”: the automotive industry of
today. Then, the security blanket was machine efficiency and
achieving economies of scale was the dream of every production
person; and their worst nightmare was realized when
competition from Japan started taking market share.
Toyota
altered the landscape by introducing efficient mass
production, known as JIT, and a new view of how to manufacture
started emerging. As lean thinking, in the form of some
derivatives of the Toyota Production System, took hold, it
challenged the effectiveness of machine efficiency. In its
place predictability and stability were achieved by adhering
to a pacing measurement, called “Takt” time.
The
purpose of Takt time was to maintain an efficient flow of
production, based on careful line balancing so that each
operation took the same amount of time. Thus, the hand off
from one operation to another was smooth and “efficient”.
In Lean, machine efficiency gave way to operation efficiency.
A new name perhaps, but the security blanket remained the
same, being “efficient”. And volume is still driving
decisions in many boardrooms.
Suggesting
less efficiency is blasphemous since no cost accountant,
production manager, CFO, CEO, stock analyst, or investor worth
their salt would support higher costs from inefficiencies.
Except that they do without knowing it.
The
domestic automotive industry, from Tier two to Dealer, had 2 ½
inventory turns in 2002. Not much has changed because the
number of automobiles on dealer lots still exceeds 70 days. In
fact, when considering the over production that sits unwanted,
true capacity utilization in the automotive industry has been
estimated to be less than 50%. None of those “worth their
salt” would consider that efficient use of capital. But they
have supported even encouraged, greater volume, bigger plants,
and more efficiency while racking up over $100 billion in
inventory throughout the supply chain along with nearly $50
billion in rebates to try to move the inventory. Many other
industries are similarly affected. The “efficiency”
security blanket is starting to smell and it may be time to
get rid of it. Worse, the thumb sucking practices are
entrenched: practices like building to forecast, batching
production, building bigger plants, and squeezing costs out of
the supply chain without equitable distribution of the
profits.
Let’s
replace it with something more effective. In fact, let’s
replace it with “effectiveness”. Being effective means
having the flexibility and agility to respond to changing
customer needs without being saddled with the mandate to
maintain efficiency. Being effective could save manufacturers
the unnecessary investments in capital equipment, raw
materials, plant space, inventory, and overhead while
increasing responsiveness, customer loyalty, and long term
profitability. It could turn unprofitable companies into
profitable ones, virtually over night.
Predictability
doesn’t have to run counter to effectiveness nor
flexibility. Reducing product delivery cycle time in a
flexible environment depends on a new awareness of
predictability. Instead of balancing through Takt times,
create a synchronous flow system that allows for seamless
resequencing, disciplined mixed model flow, visual pull
signals and a reduced planning cycle to improve responsiveness
through agility.
This
approach works just as well, and in most cases better, without
the rigidity of operation efficiency. Customer demand truly
drives the pull system of this type of flexible flow system.
Firm planning consists of meeting customer, financial, and
resource/material utilization goals while scheduling becomes a
simpler version of sequencing control.
Predictability
is focused on achieving consistent, predictable flow through
one operation on a flow path, usually described as a “pacer”
operation. The pacer is not necessarily the known bottleneck
operation since, in a flexible, agile operation, bottlenecks
move around. In fact, the pacer might not even be in your
plant because of how reliant some assembly operations become
on their network of suppliers and vendors.
Security
blankets are often accompanied by the habit of thumb sucking.
If you’re not flexible or if you’re working on efficiency
(machine or operation) chances are good you’re a thumb
sucker. If you’re not building to actual customer demand,
you’re probably a thumb sucker. Are you prepared to face the
orthodontist’s bill?
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