Production management is crucial especially in the era of the employee market and global competition. Its effectiveness significantly affects the company’s costs and profits. Although the exact guidelines of an experienced consultant would suggest after a detailed analysis and mapping of the company’s business processes, there are universal rules that we will share in this series of articles.
The problem of conversion and size of a lot does not only concern large-scale production. If you produce individually on request (eg on the basis of a drawing from the customer), you also set the machine, eg a CNC milling machine for various products. But from the beginning:
Each conversion is expensive …
… even if it only costs you a moment. Often, it also requires special skills that all production employees do not have. It happens that waiting for the right person creates bottlenecks. And this in turn the delay in delivery to the customer. Often the quality of retooling has a significant impact on the number of production errors that arise later in the process.
Our example company produces 3 products:
|Product||Changeover time||Production time 1 piece|
|X||1,5 h||0,5 h|
|Y||1 h||0,2 h|
|Z||0,3 h||1 h|
For simplicity, we assume that:
- each product is made on one resource with one operation,
- the company is working on 1 shift,
- the employee actually works 7.5 hours (0.5 hour for access to the workplace and breakfast break).
How much does the changeover and production time cost?
Let’s take the market:
1 h = 78 zł
Wait a minute! Production so expensive ?! Let’s calculate exactly:
- machine leasing
- employee’s time
- part of the annual costs of servicing the machine
- the cost of maintaining the hall and installation, tax for the ground, heating, etc.
Please note that we neglect the raw material costs and potential shortages (discordant items). I think that PLN 104 is an understated cost of the working hours of the production resource …
Let’s assume that our company has accepted 10 orders:
|Order No.||Product||Order quantity|
See what happens to the costs and deadline if we process these orders in two ways:
Solution 1. Without optimization and matching of production orders
I simply trade orders in production orders and give them for production.
|Order no.||Product||Quantity||Change costs||Costs all pcs.||Total time of completing the order||the total cost of the contract|
|1||X||3||117 zł||117 zł||3||234 zł|
|2||Y||2||78 zł||31 zł||1,4||109 zł|
|3||Z||10||23 zł||780 zł||10,3||803 zł|
|4||X||2||117 zł||78 zł||2,5||195 zł|
|5||Y||1||78 zł||16 zł||1,2||94 zł|
|6||Z||5||23 zł||390 zł||5,3||413 zł|
|7||X||11||117 zł||429 zł||7||546 zł|
|8||Y||3||78 zł||47 zł||1,6||125 zł|
|9||Z||10||23 zł||780 zł||10,3||803 zł|
|10||X||1||117 zł||39 zł||2||156 zł|
|Suma||772 zł||2 707 zł||44,6 h
|3 479 zł|
Solution 2. Simple assembly of production orders
And now in an optimized production schedule with the aggregation of orders (we assume that the terms allow it):
|Order no.||Product||Quantity||Change cost||Cost all pcs.||Total time of completing the order||The total cost of the contract|
|1||X||17||117 zł||663 zł||10 h||780 zł|
|2||Y||6||78 zł||94 zł||2,2 h||172 zł|
|3||Z||25||23 zł||1 950 zł||25,3 h||1 973 zł|
|Suma||218 zł||2 707 zł||37,5 h
|2 925 zł|
Let’s find out both solutions in terms of completing the entire order basket:
|Solution 1||Solution 2|
|Production time||6 bussines days||5 bussines days|
|The cost of PLN||3 479 zł||2 925 zł|
The solution of 2 visas is PLN 554 and one business day. So it’s not enough that we produce cheaper, we make potentially less mistakes in retooling, we still get an additional working day on production. On such a small scale you can not see the effect yet. But let’s count how much is the percentage of time and money saved? Reply:
And we must remember that we have used a very simple method, without advanced optimization of the entire chain of operations, raw materials, logistics, assembly, semi-finished and replacement trees, etc. And here is a very important question:
How much is your 16% annual savings worth in your company?
In real life, the key isthe ability to simulate and compare different variants.. After selecting the optimal variant, we issue orders for production. Production uses raw materials and produces products. But what about the effects? In the end, to keep improving (LEAN) you have to measure the effects.
Check and optimize
Unfortunately, many companies still do not measure the effects of implementation. Of course, there is a brigadier / manager who writes a number of gaps on a paper order, so that his boss could get nervous afterwards. Often a tool is missing that easily tracks the full tracebility of each product and each batch. And it not only calculates remuneration based on real efficiency (eg taking into account complaints), but also can indicate with which of the technologists (engineers) preparing the production is associated with the most problems. The same applies to setters or other services specialized in conversion.
Production management in 2017
In 2017, the three most-requested functions were among our clients:
- -Minimation of total production time by effective time
- -Minimization of production costs
- -Minimization of inventory
We implement them thanks to the optimization engine, but a few-man production company calmly cope with the owner’s cunning. In larger organizations without a good tool it will be difficult to predict the risk of optimization and measure their effects.
Thank you for reading my article and I invite you to the discussion in the comments. In the following parts of the cycle “Production management” me and members of the OptiMES team will discuss, among others matters related to fire policy, employee motivation, periodic technology validation, waste, TPM and bids. Wait a minute, but what does the offer have to do with it? We will answer the answer soon.