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Practical Tips to Create Spare Capacity and Slash Your Lead Times

Intuitively, we all know that lead times increase if you receive more orders. To understand the magnitude of this effect, we need to look at the utilization level. The utilization level is the ratio between the demand and the effective capacity. Or stated otherwise, if your utilization level is for example 90%, then your resources will be busy during 90% of the time, and be available for additional orders during just 10% of the time. As a rule of thumb, the lead time is inversely proportional with the available spare capacity. So, if you can double your spare capacity, your lead time will typically halve. This effect can be quite dramatic. For example, suppose you have a utilization level of 95% and a lead time of four weeks. Now, if you could lower your utilization level to 90% by creating some additional spare capacity, then your lead time would halve to two weeks. If you could lower your utilization level further to 80%, then your lead time would drop to just one week. So, by simply adding 15% spare capacity, you could reduce your lead times with a factor of four!

There are many techniques to create additional spare capacity at only a minimal cost. In this blog article, we will provide you with several tips on how this can be accomplished. These tips often boil down to making your resources more productive. It should be stressed that making your resources more productive is not the same as reducing costs. To reduce cost, you would need to make your resources more productive, and then fire the surplus resources. However, this would lead again to a high utilization level, and a long lead time.

Tip 1: Invest in training

Investing in training your work force is crucial to increase the productivity. We often underestimate how poorly trained some people are. For example, we’ve recently had an encounter with a planner who didn’t know that Excel has a search function. As a result, he had to manually search his planning list row by row to answer questions about specific orders. Similarly, it is unfortunate that many office workers are unable to make a pivot table or create a macro in Excel.

One study found that employees of companies who provide sufficient training (ca. 40 hours/year) are approximately 20 percent more productive. Training is therefore one of the biggest levers for increasing productivity. So, start by mapping out the training needs in your company and train your employees. And yes, all Excel users who can’t create macros will probably benefit from some training.

Tip 2: Use two screens

Employees who process a lot of data can increase their productivity by 5-10 per cent by using two screens. By splitting different applications across the two screens, it becomes easier to use data from one source (e.g. emails, Excel) into a second system (e.g. ERP). Using two screens can also reduce data entry errors by a third.

Tip 3: Eliminate pallet trucks

Hand pallet trucks are a popular means of transport on the shop floor. However, a lot of time is often spent searching for the pallet trucks or for returning the pallet truck. There are two solutions for this: give your pallet trucks fixed parking spaces, or even better, eliminate the use of pallet trucks all together. You can often do this by using alternative means of transport, such as roller conveyors or by simply mounting wheels under the material bins or by using pallet undercarriers.

Tip 4: Don’t release production orders with missing components

A lot of time is often wasted when orders are released prematurely before all the necessary components are available. Employees search endlessly for the missing components and supervisors lose time trying to find out where the components have gone. This can easily be solved by only releasing orders once all the components are effectively available. In one case, we have seen a productivity increase of up to 15 per cent as a result.

Tip 5: Do not trust round numbers

Production speeds are often set at round numbers such as 1,000 strokes per minute, 20 metres per minute… But what are the chances that the optimal speed is exactly 20 metres per minute, and not 21 or 22 metres per minute? Round numbers point at non-optimised production rates. If you see such a round number, ask if the speed can also be set to 21, and a day later to 22, etc. until you notice that the highest achievable speed has been reached. Before you know it, you may have increased the output of a bottleneck machine by 10 percent or more.

Tip 6: Invest in cross-training

We already discussed the impact of training on productivity in tip 1. A special form of high-impact training is cross-training. There are several important advantages to cross-training.

Many high-mix-low-volume (HMLV) production environments are characterised by varying bottlenecks. Cross-trained employees can easily be moved to another workstation, allowing the bottlenecks, and therefore the entire company, to process more orders.

Cross-trained employees have more insight in the work of their colleagues and can often contribute to improvements at other work centers. For example, by providing information in the right format or by packaging materials in the right way, the work of a colleague can often be made easier.

Tip7: Provide correct and complete information right from the start

A lot of time is often wasted on collecting the necessary information in the order processing phase. Missing or wrong information often leads to back and forth communication between engineering, sales and the customer, or even worse, to errors and, therefore, rework. You can avoid this waste by clearly placing the responsibility for providing correct and complete information to the source of the information (typically sales). The further down the chain the problems are discovered, the more time is wasted.

Creating standardized order forms, check lists and providing product training to the sales staff are often very helpful. For complex sales processes, it is advisable to involve engineering already at an early stage. This sometimes requires some extra effort on the part of the engineering department, but it avoids a lot of problems afterwards and is often an excellent learning moment for the sales people involved.

Tip 8: Reduce the work-in-progress on the shop floor

Having a lot of work-in-progress (WIP) on the shop floor feels good to many production operators, as it gives the impression that there is enough work available. However, having a lot of WIP is wasteful: WIP takes up a lot of space and results in greater walking distances, too much WIP also results in more searching, and the longer the goods remain on the shop floor, the more likely they get damaged or become obsolete.

By reducing your work-in-progress, you can eliminate these wastes and often significantly increase your productivity. We’ve seen examples of companies who reduced their WIP by 80% and got a productivity improvement of 20% in return.

There are many simple ways to reduce your WIP. If you use an MRP planning system, you can simply reduce the planning lead time parameters in the system to ensure that orders start later, thereby reducing the shop floor lead time and the work-in-progress. Another way is by physically limiting the WIP on the shop floor by restricting the number of carts or pallets that are circulating or by introducing a production control system called POLCA.

Interested in more tips for how to boost productivity without making a big investment? See this site for many more ideas:  https://www.sirris.be/tips-boost-your-productivity