What’s happening here? A 120-employee, Midwestern manufacturer of wood cabinets and specialized furniture for commercial and residential use has been in business three decades but, in the last three years, has not made a profit. The cause is hardly declining sales. In fact, the business grew so much that it added onto its original building twice. But since the second addition in 2006, the downturn of 2008 has applied pressures that have eliminated profit. The owner has brought in multiple consultants to rationalize sales, update the business software, and make suggestions to improve production efficiencies. Still, no profit.
The Situation as observed on the shop floor:
The business’s equipment is up to date with technology. The automated equipment includes a panel saw, a CNC (computer controlled) router, two edge banders that laminate any visible edges with the same material and color of the face, and laminating rollers. All this is in the original, front building close to the incoming power. In the first addition, now the middle building, are manual table saws. In the next addition, the farthest building, the pre-cut pieces are assembled into the actual cabinets. There are as many as 20 jobs of various sizes going through the shop at one time. Shipments are most concentrated at the end of the month. Once the cabinets are assembled in the back area, they are put on pallets and driven by forklift back through the automated equipment area near the CNC router. There, the loaded pallets are lifted to a second story, where the color and finish are applied. This requires stopping the CNC router while the lift is completed. The finished product eventually retraces its steps back down to the ground level, headed either to some further assembly or to packing/shipping. This again stops the CNC router.
The real barrier to productivity is actually the fastest, most impressive, most expensive machine on the floor: the panel saw. Yes, the bottleneck and interrupted productivity of the CNC router are instantly obvious; indeed the router, when its records are checked, has less than 50% usage. BUT the panel saw – purchased at the recommendation of an equipment salesman -- cuts, dados or rabbets in straight lines at speeds so impressive that it is spewing out cut pieces five times faster than the next fastest operation in the plant! Some of the pieces can go straight to the assembly area, as they require no further work before assembly. Others, however, require edge banding or cut-out work on the CNC router. But which pieces are which? Because the panel saw is so fast, pallets loaded with its cut pieces are everywhere. Workers in the next operations must search through them and set individual pieces along a wall as sides, shelves, tops, bottoms and backs – sorting them according to what further operations are required. This is chaos. Unproductive, needlessly disorganized work is in abundance, and the capital expenditures it took to build these additions and to purchase the panel saw are the very reasons there is no profit. In fact, providing more “elbow room” also exacerbated operations by increasing walking distances between stations and workers. As is so often so tempting to do, each major expenditure had been looked at automatically – and independently -- as an “improvement” without assessing how it would alter the entire manufacturing process. Improved ROI comes only from improving the seamlessness of process, because every needless delay costs money somehow. “Better” space or equipment can often throw profits into reverse.
The solution was to give to the panel saw only work that required no further work before assembly, and to give to the CNC router all the work that required holes, windows or contours cut in before final assembly. Because a CNC router can also cut in straight lines as a panel saw can, there was no reason for the router to be receiving pre-cut pieces from the panel saw. This allowed us to disengage the dependent relationship between the router and the saw and to create two independent lines that feed final assembly: one directly from the panel saw and the other from the CNC router. The speeds of both paths were adjusted to the speed with which cabinets can be assembled. Unnecessary stacking and sorting were eliminated, dramatically increasing the router’s uptime, and other improvements were made to reduce distances between workers and work stations.
Within the first four months alone after these improvements were made, the average revenue per hour of work from every employee increased from $79 to $120. The business made a very large, but proprietary, profit for the first time after four years.