What’s happening here? This contract manufacturer of control panels for the construction, medical, food-service, appliance and transportation industries is the largest manufacturer in its hometown. It has experienced a 30% increase in orders from its largest customer, a Canadian OEM of hydraulic lift equipment, yet earnings remain frozen. The CEO asked us to spend some time on the manufacturing floor and “tell me what you see.”
The Situation as observed on the shop floor:
Final control panels are assembled by four assembly lines of four workers each. Three assemblers work side-by-side on workbenches, passing the panel from one to the next and then to the fourth, who inspects and packs the panel. Shelves above the workbenches hold supplies. Pre-wired sub-assemblies are on carts encircling the workbenches. However, for much of the time, half the assemblers are not at their stations and appear to be working on other things nearby. The company had hired a consultant before this who focused on balancing these lines, but implementing all his recommendations has resulted in negligible improvement. What’s happening here?
The problem is not here. Assemblers cannot assemble what they don’t have, and the carts containing sub-assemblies have an abundance of some sub-assemblies but are missing others altogether. This is why some final assemblers are wandering looking for work; they are awaiting the sub-assemblies they are supposed to affix to the final frame. Thus the real problem lies in the separate department that feeds this one, where the sub-assemblies are made. There, two problems exist: (1) The pace of sub-assembly production does not match the needs of final assembly production in timing or in proper array of pieces, and (2) the pace of sub-assembly production is itself terribly inefficient, even though these good employees are working as fast as they can. The sub-assembly process consists of moving parts through operations in steps, or batches. All parts must be finished before the entire batch enters Step 2, and so on. Each step is performed as quickly as possible, but this is like running a mile in a series of sprints, with much wasted time between each. Worse, just past the mid-way point, six of the eight sub-assemblies must move through the same machine – exactly equivalent to bringing six lanes of traffic down to one. And when the bottleneck is over and six lanes open up again, traffic is sparse; most of it is still stuck, back behind the bottleneck.
Management, to account for the 30% increase in orders, had added an equivalent amount of labor to the lines across the board, from sub- through final-assembly. But the single bottleneck alone in the sub-assembly area wasted every dollar that had been added to payroll. Worse, although the company was meeting the customer’s delivery schedule, it was doing so only by consistently paying overtime and weekend labor to complete final assemblies when sub-assemblies were finally ready. A. Stout & Associates revamped these operations to eliminate not only the bottleneck but also wasted “sprint” time. Production of five of the eight sub-assemblies was re-engineered into efficient cells in two weeks. The production of sub-assemblies was then tuned to the needs and pace of final assembly. And as is often the case, as an unmeasured bonus, employees’ morale and creative involvement in their work rose dramatically.
Bottlenecks were eliminated and a dysfunctional department was transformed into a team in both performance and morale. The time to deliver some sub-assemblies improved from three days to less than three hours, and the remaining sub-assemblies improved from two days to less than 10 minutes. Earnings returned on the increased sales to such a degree in just the four remaining months of the year that employees across the business were rewarded with year-end bonuses when it had looked as if none would be possible.